China’s presence on the global economic map has been steadily increasing over the decade, with it strongly establishing its trade dominance in the Asian market through tactical expansion across the South China Sea and the Indian Ocean. And the impact is now being felt in Europe, with the waves of bullish Chinese investment hitting strategic sectors on the continent.
Though the Chinese investments and acquisitions across Europe look seemingly unrelated, understanding the scenario behind it would help unravel the Chinese strategy of exerting control over the world’s transportation industry.
All was well with the Chinese export economy until the dying stages of the 2000s - until recession hit globally and sank many economies in the West, thereby pulling down the returns on domestic manufacturing investment in China. The introspection that followed led the Chinese to create a policy that could bolster the economic potential of their border regions to make them comparable with the highly developed East coast.
The One Belt, One Road project (OBOR) was officially launched in 2013 by Chinese President Xi Jinping with it being described as a domestic policy with geostrategic consequences rather than being touted as a foreign policy.
What began as an attempt to create a corridor from China to central Asia through infrastructure projects, has grown more ambitious and has encircled 65 countries across Asia, Africa, and Europe - all bearing the OBOR signage.
In essence, Europe is now the eye of the Chinese storm. In mid-2016, the Chinese ocean shipping giant COSCO acquired a controlling stake in the Greek port of Piraeus, marking the Chinese dominance in East European maritime territory. This was a deal made possible solely due to the sanctions imposed by the European Central Bank on Greece for it defaulting on loans. The Greek government that was thoroughly fed-up with the austerity politics of European creditors, chose to circumvent the situation and work with the Chinese instead.
Now Piraeus stands testimony to the Chinese grit, with it being transformed into a major transport hub, linking mainland Europe through rail and Eurasia through the ocean.
At a recently concluded economic summit in Budapest, Chinese Premier Li Keqiang launched a high-speed rail link project which connects Hungary and Serbia, with 85% of the construction costs being financed by China. The $3.8 billion project will eventually be the final cog in the wheel, with the network once completed acting as the gateway for Chinese goods to be shipped into Europe through the Piraeus port.
Nonetheless, this rapid exertion of Chinese credit on European nations would not have been made possible without the implicit approval of the political echelons. Viktor Orban, Hungary’s Prime Minister, has gone on record saying every European country would be willing to participate in China’s development plans and has remained a fierce advocate for intensifying ties with the Asian economic giant.
Though development in Eastern Europe looks good on the facade, all is not well politically with the EU-China relations, making this episode a sour affair for the richer West EU nations. The European Union fundamentally differs in matters of human rights, governance, and policy making from China, and thus the ramifications at the growing nexus between East Europe with China is clearly concerning.
The Chinese investment image took a hit when Switzerland accused HNA, a Chinese private conglomerate, of providing inaccurate information when it took over Gategroup, an air services company for 1.4 billion Swiss francs. The Hungary-Serbia rail network is also blighted with claims of it having violated EU laws that require large projects to be brought under a public tender.
The Chinese intervention is also escalating a rift between the East European nations with their richer Western counterparts. Hungary and Greece regularly block EU’s statements condemning Beijing’s human rights record or China’s claims to sovereignty in the South China Sea - a move which comes to prominence when the multi-billion dollar investments of China in the above mentioned countries are accounted for.
That being said, the transport players in the European market have been rather welcoming to the Chinese entry, since their presence as a strong exporter is driving up traffic for freight moving between Europe and Asia. The HNCA’s acquisition of a 35% stake in Luxembourg’s Cargolux, which helped stabilize the cargo carrier, and HNA’s acquisition of a 82.5% stake in Frankfurt-Hahn airport which created a greater cargo influx, are examples of how the Chinese have helped revitalize ailing companies and cargo stations in Europe.
But it pays to understand how the infamous Chinese creditor imperialism has worked across the world, to realize the risks that East European nations face if they default on loans. The Chinese have forced many small and impoverished nations to lease out strategic commercial ports and airports, and provide access to mineral resources after being caught in a spiralling debt bondage - Sri Lanka’s Hambantota port and Djibouti’s military base being examples. Kenya’s humongous debt to China could lead the way to its Mombasa port sharing the fate of Hambantota unless it gets saved by a miracle.
All these instances should serve as a warning bell to countries like Hungary and Greece to assess their options and make sure the relationship is symbiotic and not just serving the Chinese hegemony.
The OBOR project is gaining steam and China being a superpower is leaving no stones unturned to achieve global economic supremacy. It is thus important for Europe to understand the growing Chinese presence in its freight network, and exert caution as China looks to gain ground not just financially, but also geo-politically.
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