Amid China’s port buying spree, Europe needs to ensure its own interests are protected too

Europe is the prime destination for finished goods along the trade routes of China’s belt and road infrastructure plan, and crucial to the success of ‘Made in China 2025’. To ensure fairness, the Europeans must have a stake in the Chinese trade strategy

Daniel Wagner

Published: 9:30pm, 28 Mar 2019

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One of the primary objectives of the “Belt and Road Initiative” is to aid China’s transformation from a continental power to a maritime power. Much of Beijing’s investment activities around the world are consistent with that objective. India has already made its concerns about China’s plan for a line of Indian Ocean ports – the so-called string of pearls – clear to the international community. But Beijing’s investments in ports have stretched well beyond that.

Chinese interest in global ports is consistent with Beijing’s desire to tilt the global economic playing field in its favour, and promote the normalisation of commercial processes and standards preferred by the Chinese. For, another purpose of the belt and road plan is to bind consumer markets to Chinese exporters through its physical, financial and digital networks, which all lead back to China.

This is perhaps best illustrated by China’s port buying spree in recent years in Europe. In nominal terms, the European Union is the second-largest economy in the world, constituting about 22 per cent of global GDP. Europe will remain the most important destination for finished goods along the plan’s trade routes for the foreseeable future. For the “Made in China 2025” policy to succeed, Beijing must draw Europe into the Chinese economic orbit through the belt and road plan.

It is estimated that the Chinese state has at least a 10 per cent equity stake in ports throughout Europe (including in Belgium, France, Greece, Italy, the Netherlands and Spain), and a growing investment portfolio of at least 40 ports in the Americas, Africa, the Middle East, Europe, Asia and the Pacific. Beijing’s sometimes stealthy approach to investing has resulted in a 35 per cent stake in the Euromax Terminal at Rotterdam, a 20 per cent stake in the Antwerp Gateway – Rotterdam and Antwerp are Europe’s two busiest ports – and 100 per cent ownership of Zeebrugge at Bruges, Belgium.

While China extracts its pound of flesh from Europe in return for essentially making the continent the centrepiece of the belt and road plan, it is worth adding, in fairness, that a number of European ports have benefited directly from Chinese investment. For example, when China’s Cosco Shipping sealed a deal to take over Greece’s Piraeus port in 2008, fewer than 900,000 containers passed through its facilities.

By 2016, container traffic had surged to 3.7 million, and Piraeus also rose in container port rankings, from 93rd in 2010 to 38th in 2017. Chinese-backed ports will eventually connect to the maritime Silk Road, and become part of a network of freight lines along the Eurasian economic corridor. This will pull European economies into an economic ecosystem that extends from China to the Mediterranean.

Those familiar with how Beijing does business will know that “China Vision” – the country’s push to create an alternative world order in its image – is certainly at play with respect to infrastructure investment. According to the Reconnecting Asia database of the Centre for Strategic and International Studies, which tracks infrastructure projects in Eurasia, Chinese companies make up 89 per cent of contractors taking part in Chinese-funded projects, local contractors make up 7.6 per cent and other foreign companies, 3.4 per cent.

In contrast, for projects funded by multilateral development banks, 29 per cent of contractors are Chinese, 40.8 per cent are local, and 30.2 per cent are other foreign companies.

There is also growing discomfort outside China with the close funding arrangements between Chinese firms and government-controlled financial organisations. This stands at odds with the EU’s liberal notion of political economy, which depends on keeping a significant distance between the strategic objectives of the government and the objectives of commercial enterprises.

After the Chinese took over Piraeus, the Greek port has risen in container port rankings, from 93rd in 2010 to 38th in 2017. Photo: Xinhua

Beijing is gradually asserting de facto control and dominance over European ports just as it did over islands in the South China Sea but, in this case, it is adopting a divide-and-conquer strategy: preventing the EU from taking a common stance by offering substantial amounts of funding and investments to countries throughout the region. While Beijing’s actions in the South China Sea were judged illegal by The Hague, its actions in Europe are legal and, as noted, have delivered some economic benefits, even though the biggest net beneficiary will, of course, ultimately be China.

European nations should remember that President Xi Jinping’s goal of making China a moderately prosperous society by 2021 (when the country celebrates the 100th anniversary of the formation of the Chinese Communist Party) and a fully developed, rich and powerful nation by 2049 (when the country celebrates its 100th anniversary as the People’s Republic of China) require that Europe play along. Every European country that has already ceded ownership of critical ports to Chinese entities is doing just that.

As the Belt and Road Initiative cannot be completed without Europe’s participation, European leaders may want to consider taking a page out of US President Donald Trump’s playbook and finding a way to establish a more equal footing with Beijing. They, too, should have a stake in the initiative’s success. Cross-border investment is supposed to be a two-way street.

The EU should consider putting pressure on countries such as Greece and Hungary to agree to a common set of guidelines on screening how Chinese investments are made and how Chinese-owned assets are operated. The sale or lease of any asset – but especially strategically important assets – should follow guidelines adhered to by all EU states. Foreign entities should abide by the same rules.

More broadly, all EU members should take collective responsibility for protecting European interests, adherence to international law, and a regional and economic system which does not prioritise a China-centric view of the world, while ensuring that special advantages are locked in for China.

Daniel Wagner is CEO of Country Risk Solutions and author of the new book China Vision

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