Q&A: China and Europe Relations in BRI environment

 ‚óŹ Dr. Jasna Plevnik*

 

Q&A: China and Europe Relations in BRI environment

 

What is the New Silk Road or the Belt and Road Initiative (BRI)?

 

I am going to try to throw out some pointers. The New Silk Road comes from ancient Silk Road which was on shore unlike Belt and Road which is off and on shore.  China’s global project is about two international trade connections: The land-based "Silk Road Economic Belt" and oceangoing "Maritime Silk Road." It will stretch from Xi’an in central China through Central Asia to Moscow, Rotterdam, Athens and Venice.

Sometimes it seems to me the one world will not be sufficient for BRI development goals. There are people who fear it will fulfil all empty spaces of the world with new bridges, ports and highs speed railways.

The New Silk Road is very positive and optimistic project aimed to bring the world shared growth, development and connectivity. I understand it as a way forward that Europe needs to travel.  It offers many opportunities but they will not last forever.

 

Who stands for BRI?

 

The Belt and Road has highest political backing from Xi Jin Ping who presented it three years ago in Central Asia and since than it has been accepted by more than 65 countries and this acceptance   could turn The Belt and Road into a process that could become pivotal for economic and people to people connectivity among Asia, Europe and Africa. It does have support in Asia and in Europe and Africa. The project is backing by China’s top planning body, the National Development and Reform Commission.

 

When is possible to see full results of BRI

 

Like all of you I don’t have crystal ball. BRI has made a good start, but it implementation has to be considered in 20 to 100 years.

 

Is it the current world context supportive to BRI’s ideas?

 

We already live in the flows of universal reciprocity and it is very hard and dangerous to think about alternatives to the world shaped for more than twenty five years as interdependent. The future of economic globalisation depends very much on political decision of the United States of America’s, the EU’s and China’s liberal forces. The economic interdependence tissue is consequence of political decisions of big economic powers.

The crucial question is has the ideology and reality of economic interdependence strength to stay as the Zeitgeist of the next decade? There are many signs that next decade could be very different from last 25 years. Many people explain the result of US presidential election 2016 as an introduction to ending of current era of free trade agreements, promotion of “economic nationalism, andAmerica’s rejecting of globalisation. The first victim of  “America first” protectionism might be the Trans-Pacific Partnership trade agreement signed in 2015 but not yet ratified. TPP could be replaced with the Regional Comprehensive Economic Partnership (RCEP) thathas been under negotiation since 2013 and includes China that is not willing to see the end of globalisation.We are witnessing walls are going back in Europe and  the Middle East stands as an eternal “shatter belt part” of the world. And China has also experienced its share of geostrategic tensions and challenges especially in the South China Sea. The course of geopolitical events and driving forces behind them could move the world closer to a state of division, locking and exclusiveness. It is not just my fear. This summer World Bank’s President praised China for its commitment to international economic cooperation at a time when the West very clear rejects of globalization and multilateralism. Even IMF has fear that all those networks of interdependence could fall down to dust. Since 1990 a significant segment of workers of America and Europe have been left without prosperity and they blame free trade and abroad investments for that. The brave political measures to make   globalization more fair and balanced have not been taken yet. The governments can do much more to ensure the prosperity of free trade and globalisation be shared by all.

Besides of restoring of geopolitics and anti globalisation rhetoric in Europe and America there is a fierce competition among big powers for high value-added and high-profit business and it spills over to politics making the world more insecure place.

 

What is novelty of BRI?

 

PATTERN FOR SHARED GROWTH: The Initiative is a bold solution for improving state of multilateral cooperation between China, Asia, Europe and Africa through a new generation of multilateral cooperation based on high standards of coordination focused on shared development and growth policies among China, Asia, Europe and Africa. China has set up BRI as a pattern for shared growth and development through connectivity of infrastructure, multilateral trade and investment and this approach could be described as an extraordinary novum or novelty of BRI.

HELPING THE WORLD TO STAY GLOBALLY CONNECTED: The New Silk Road is set to stop anti global tendencies and for me that is a strong reasons to be supportive of it. The globalization has been a factor which facilitate the world and China’s growth enormously. Behind China is thirty eight years of reform and opening up with feeling stones strategy. China has power to awake the force of economic cooperation and help the world to stay globally connected. China uses BRI and other projects and the G-20 to fight a weakening of consensus about the benefits of cross border integration and free trade. It is also about preparing for more multipolar world order.  

MULTI–DIMENSIONAL OPENNESS:China’s BRI is not a one-state show.  It is transparent and it is not imposed to anybody. It is an invitation open to all countries along the New Silk Road. It is some kind of living project. The participants have opportunity to improve its mechanisms and even set new goals. The Belt and Road’s geographic scope will evolve over time. Even though Professor Justin Yafo Lin recently spoke of an extra “One Continent”. It could be about South America.

 

The ideas on stronger and shared development, the world connectivity and win- win formula sound nice but at the end of the day everyone wants to see the money.

 

China is backing the plan with considerable resources, setting up a New Silk Road Fund of $40 billion to promote private investment along the New Silk Road, The Fund is supported by the Asian Infrastructure Investment Bank (AIIB), the New Development Bank of the BRICS countries and The China Development Bank. It will invest almost $900 billion into more than 900 projects involving 60 countries to bolster the initiative. The Economist magazine reported that $1 trillion in “government money” would be spent on BRI.

In 2015 China invested $120 billion overseas in non-financial fields benefiting the economies of destination countries. The Export-Import Bank of China, has its Europe headquarters in Paris, lent more than $80 bn in 2015.  More than 1,000 projects financed by the Exim Bank were in 49 countries involved in BRI. If you look what is driving growth in Central Asia it is Belt and Road initiative. In Africa it is China’s investment in infrastructure.

Which projects are eligible for funds of the New Silk Road Fund and Asian Infrastructure Investment Bank?

 

The projects which are financially stable, environmental friendly and socially acceptable.

 

Is it BRI about establishing China’s own sphere of influence in Europe?

 

There is a lot of disagreement whether China’s offensive in Europe presents a hidden geopolitical strategy to challenge the current economic and political order or it is evidence of China's foreign policy choice to improve its economic cooperation with European states.

 Whether we agree on it or not I think it is not a geopolitical strategy. Though some of BRI’s corridors, particularly in Asia, could help China to upgrade security of its energy and resources supply or to counter geopolitical risks with regard to America’s pivot strategy on “Asia rebalancing”.

In a nut shell BRI has strong economic background but long term its implications could enhance China’s global influence. China has already brought many positive things in the global system. In global crisis 2008. China’s growth was driving force for the global recovery. China’ government spent trillions on stimulating the economy showing China is already a responsible global power. The AIIB includes many of Washington’s closest allies, as well as four of the five permanent members of the United Nation’s Security Council, half of the European Union, and all 10 members of the Association of Southeast Asian Nations.

China's “peaceful development” diplomacy is envisioned to oppose classical notions of the balance of power system and present a bolder platform for building a stronger interdependent world.

 

How China understands Europe within BRI?

 

China’s perception of Europe’s future is optimistic despite the Greek economic crisis, BREXIT, refugee crisis and terrorism. China was supporting Britain remaining in the European Union and wished that Greece remain in euro zone. London has been China’s financial service hub of Europe that offers easier approach to the EU’s single market. China's private banks established its European headquarters in London.

 Its European policy has three levels: bilateral with individual states, the EU level and the 16 plus 1 format for cooperation between China and Central Eastern European countries. The Region is included in all three levels. China’s   view on Europe is shaped by economy. The New Silk Road involves Europe in the fields of infrastructure, energy, trade and finance including the internationalization of China’s currency.

There is a growing China’s direct investment in Europe and it is about long term commitment. China’s goals are expansion to European Market, entering a new HT sectors, capital investments and acquisition of companies. It has different goals and business approach for every part of Europe. In finance China develops special cooperation with UK, France, Luxemburg, in high technology with Germany, Italy. The Chinese positioning in infrastructure is concentrated on the economic periphery of Europe, Greece Portugal, Central and East Europe, the Balkans.

 

How China views South East Europe countries within BRI?

 

In 2015 at Suzhou summit of PMs of China and 16 Central and Eastern European Countries agreed to develop their relation in sync with the Belt and Road Initiative. Hungary in 2015 and Latvia in 2016 signed Silk Road Economic Belt MoUs.

In the past 4 years, China has become the most significant new economic actor in South East Europe. The process of China’s growing economic presence in the Region have started in 2012 when China launched   new mode of economic diplomacy called „China and Central and Eastern European Countries” or “16 plus China”. The China’s banks established fund of 10 billion dollars for financing projects inside this framework. China initiated these new formats after an assessment that its relations with this part of Europe are in deep imbalance in respect with its economic relations with post-industrial Europe. The new diplomacy contributed to bilateral and multilateral relations between China and South East European countries and improved   people to people cooperation.

 

How South East Europe countries view BRI?

 

South East European countries are mainly interested in partaking in this new type of integration to become transit points of the Belt and Road and translate this into more jobs and benefits for people. In the Balkans a need for prosperity is so strong, some countries are on the edge of being economic failed, that even a membership in NATO is presented as a means for strengthening of economic development. The years of recession has made the condition of the poor in the Region much worse. There are no HSR connections. Traveling from Zagreb to Munich by train takes nine hours. And these problems are going to persist if the countries continue to follow an anti-regional approach.

 

Which Region’s country could take a lead in developing multilateral BRI diplomacy?

 

It seems Serbia has ability to take a leadership. It is already significant country in” 16 plus China” format. Like the UK that wants to be the best friend of China in the West Serbia wants to be it in the Balkans. In June 2016 Chines President visited Serbia and the strategic cooperation has gained a new dimension with signing of an all encompassing strategic partnership between China and Serbia. Beijing strongly supports Serbia’s policy towards Kosovo at international level.

 In 2014 Premier Minister Li Keqiang visited Serbia to attend the third summit between China and the Central and Eastern European countries held in Belgrade. The visits are marks of Belgrade's importance to China's diplomatic offensive to the Balkans. Serbia has become a centre for coordination of   all infrastructure projects under the 16+1 format

China considers Serbia as a strategic partner in its operations in the Balkans through its Piraeus hub. China's direct investments in Serbia are on rise and are about 3 billion dollars in 2016. China’s favourable loans to Serbia have grown remarkably since 2012. Many agreements have been announced and Memorandums of understanding signed.

In November 2016 China and Serbia signed in Riga an agreement on modernisation of the Serbian section of the Belgrade – Budapest HS railway after long and tough negotiations. Serbia wanted to find a best modus for financing this project and to increase number of Serbian companies involved in it. Serbia lacks fiscal resources to finance its infrastructural development and like most South East European countries it should be very careful with borrowing money from Chinese banks.

 

Is the New Silk Road initiative bringing risk for Europe and opportunities for China?

 

European countries are entering in a new era of Chinese capital and it requires of political leaders around Europe to adjust their economic policy towards China both to benefits of this next stage of economic integration as well as to minimize potential new risks.

There is a view that China will benefit disproportionately enormously in Europe with the Belt and Road project. Please, be very careful before reaching that kind of conclusion. European high technology companies could be inside new infrastructural projects of New Silk Road in Asia, Africa and Europe.   And Chinese exports to the EU is in a large percentage exports of Japan, South Korea and companies from the EU operating in China. In the largest category of Chinese exports to the EU - machines and electronics - Chinese entrepreneurs have a 10 percent profit from these sales and 90 percent belong to foreign companies in China. In textiles Chinese entrepreneurs gain is less than 5 percent.

The European Union wants Belt and Road to work because of its potential to bring more new economic opportunities. There is possibility that overproduction in China could put European Union producers in some sectors out of business.  President Juncker was twice this year in China to address this issue. I have no doubt that overcapacity is an essential factor in China’s economic diplomacy but don’t think it is the whole story on BRI.

 

How South East Europe could benefit from the initiative?

 

BRI could bring new dynamics for business and growth of jobs through prudent opening to the phenomenon of growing Chinese investment in Europe. BRI is an alternative to traditional Western sources of investment and trade. Europe is not superior to Asia.

The world has changed and the Region should do the same rejecting the battles of the past and adapting to the moment focusing on strengthening of its integrative power to benefit from this new “roads”. South East European countries cannot afford themselves to stand passive in the era of such vast and sweeping changes.  

 

What is the biggest risk for South East Europe?

 

It pains me to say but the biggest risk for the Region could be that it will not be capable to profit from the Belt and Road as developed economies of Europe and will miss out this shining moment of Europe China relations. In five or ten years people will talk about the success and benefits of the Belt and Road, and The Region could find itself in position to ask why did we miss it?

The main challenge of China's growing presence in South East Europe is not geostrategic but economic and a cultural. The civilizational and business culture differences could have impact on implementing aims of shared development and economic growth. South E