China will pledge a multibillion-dollar investment in Europe's new infrastructure fund at a summit in Brussels later this month, in Beijing's latest round of chequebook diplomacy to win greater influence. While the exact amount is still to be decided, the pledge marks the latest step in Beijing's efforts to shape global economic governance at the expense of the United States. The move follows major European Union governments' decision to join the Chinese-led Asian Infrastructure Investment Bank in defiance of Washington. Beijing's pledge towards the European Fund for Strategic Investment is expected to come with a request for return investment in its "One Belt, One Road" infrastructure drive - building major energy and communications links across Central, West and South Asia to as far as Greece. "China announced that it would make 'X' amount available for co-financing strategic investment of common interest across the EU," a draft communique read, adding that agreements would be finalised at another meeting in September. An EU diplomat said the Chinese contribution was likely to be "in the billions". EU and Chinese officials have said Chinese banks are looking mainly at telecommunications and technology projects. Premier Li Keqiang, who will attend the Brussels summit, will agree with EU leaders the €315 billion (HK$2.7 trillion) fund will "create opportunities for China to invest in the EU". If sealed, the deal will be a success for European Commission President Jean-Claude Juncker, who faced scepticism last year when he proposed the fund, because EU governments are putting in little seed money. France, Germany, Italy and Poland will each contribute €8 billion; Spain and Luxembourg have pledged smaller amounts. The bloc is relying mainly on private investors and development banks to fund projects from airports to flood defences, that are together worth €1.3 trillion. A big Chinese investment may raise questions about the governance of the fund, which is so far strictly a European institution. An EU diplomat said it was not known if Beijing would seek representation commensurate with its stake. Inviting China into an EU fund could cause friction with Washington, which is wary of Beijing's rising influence and upset that Europe rebuffed its calls to stay out of the AIIB. China is already testing US dominance in Latin America, offering the region US$250 billion in investment over the next decade, while Chinese firms have also poured money into Africa to guarantee commodity supplies in exchange for building new roads, hospitals and rail lines. The US complains that China and its firms are wielding influence partly through corruption and turning a blind eye to labour and environmental standards and human rights. Similar criticisms have long been levelled at Western multinationals in developing countries. Alessandro Carano, an adviser on the fund, defended the decision to welcome Chinese investors. "The purpose is to mobilise the liquidity in the market. We don't differentiate among the owners of the funds," he said. In return for its investment, China wants a quid pro quo with Europe, whereby European firms and governments would take a greater interest in President Xi Jinping's "One Belt, One Road" initiative. China is creating a modern Silk Road Economic Belt with railways, highways, oil and gas pipelines, power grids, internet networks, maritime and other infrastructure links. "We are looking for ways to build up synergies between the 'One Belt, One Road' initiative and the Juncker plan," China's ambassador to the EU, Yang Yanyi, said. The commission is also exploring whether the EU can become collectively a member of the AIIB, since the bank is open to "economic entities". Meanwhile, an EU diplomat said the European Investment Bank had quietly been giving Beijing advice on governance standards and best practices in setting up the AIIB. "That has largely paid off so far," he said.
