EU and Chinese investment in the Balkans: a race for influence

The European Union (EU) claims to have a ‘comprehensive strategic partnership’ with China in the form of summits, ministerial meetings and sectoral dialogues as is outlined in the EU-China 2020 Strategic Agenda for Cooperation. This cooperation agreement was reportedly designed with the goal of improving transparency and guaranteeing non-discrimination, however recent Chinese deals, predominantly comprised of transportation, infrastructure and technology investments, do not seem to be living up to expectations of transparency or complying with European standards.

After the 2008 financial crisis, and the subsequent weakening of the Euro, China saw an opportunity to make significant investments into Europe. Between the years of 2008 and 2016 investments rates increased to record setting levels, reaching a record high in 2016 with China investing over 35 billion Euros into the EU. This marked a fifty fold increase from the 700 million Euros invested in 2008. The rate of investment has been dropping in subsequent years, to 16 billion Euros in 2018, however this is still a substantial amount of investment, and therefore influence, that China has been taking advantage of.

The largest foreign direct investment (FDI) that China has been involved with recently has been in Serbia, with the purchase of the Smederevo steel plant. This is just one of the many investments China has made into the Balkan region. Companies like Huawei has been investing significantly in improving telecommunications, while other investors work on the expansion of a thermal power plan in Kostolac. The majority of investments have been into the transportation and infrastructure industries, along with an interest in the merger or acquisition of brand names, technologies and market shares. As many of these investments have been more focused on countries with smaller economies, China has been able to hold a monopoly of sorts over infrastructure financing in these regions. In July of 2018, Li Kegiang, the Premier of the State Council of the People’s Republic of China confirmed that China intended to make a further 3 billion Euro available through lines of credit for projects related to infrastructure in the Balkans.

In a question posed to the European Commission (E-000488/2019) Swedish Member of European Parliament (MEP) Jasenko Selimovic of the of the Alliance of Liberals and Democrats for Europe (ALDE) asked “what specific action is the Commission taking to ensure that Chinese investments comply with EU standards and that they involve host state companies and workers”.

The question was responded to by Mr. Johannes Hahn, the European Commissioner responsible for the European Neighbourhood Policy and Enlargement Negotiations. His response emphasised that the European Union is “by far the biggest trading partner, investor and donor of the Western Balkans” and that their financing instruments and existing bilateral agreements are being applied to “secure full adherence to EU values, norms and standards”. Mr. Hahn also highlighted that the Joint Communication ‘EU-China — A Strategic Outlook’, issued in March, described a plan for more robust application of “existing bilateral agreements and instruments…also in the Western Balkans”. Another bilateral agreement referenced in Mr. Hahn’s response was the Transportation Community Treaty, which was recently ratified by all Western Balkan partners. This treaty “provides a new and binding regulatory framework on transport and transport-related legislation”. With particular regard to transportation infrastructure, “this includes compliance with the Trans-European Transportation Networks policy framework and the related technical interoperability requirements”.

While Commissioner Hahn’s response boasts high levels of EU engagement and investment in the Western Balkans, reports show that many of the states and industries in the region are still hungry for more capital. Going forward, the international community will have to pay close attention to the implementation and adherence to the treaties and agreements outlined in Mr. Hahn’s response. As many of these instruments and agreements have been in existence for sometime, one has to wonder why they are only just now being applied. Mr. Hahn also reported that there will be more fervent and stringent application of various existent agreements and standards, but as this has had only a nominal effect so far, why does he believe more of the same approach will have a different result?

Source : https://eptoday.com/eu-and-chinese-investment-in-the-balkans-a-race-for-influence/