ENTRY OF THE DRAGON: China looks to the West
Hailed as a civilizational power at its roots to market the Belt and Road Initiative, China is making changes around the world. In an effort to rekindle the Silk Road of the 220 CE which put China at the centre of the trade routes, the ambitious project was introduced by President Xi Jinping in 2013. The BRI is mostly a geo-strategic plan aimed at economic growth and development through the building of infrastructure, transportation projects and energy sustenance. It comprises of two initiatives- ‘Silk Road Economic Belt’ and ‘21st Century Maritime Silk Route’. Aimed at global dominance in what is being called as the Chinese Marshall Plan,its figures of investments ($ 1 Tn) are greater than the Marshall Plan (reconstruction of Europe) and has 71 countries party to the project.
As part of the endorsement of the BRI in Europe, China has introduced the “16+1". As the name suggests, it brings together 16 central and eastern European countries namely, Albania, Bosnia and Herzegovina, Bulgaria, the Czech Republic, Croatia, Estonia, Hungary, Lithuania, Latvia, Macedonia, Poland, Romania, Montenegro, Slovenia, Serbia and Slovakia. The choice of these countries as the hub of primary investment is interesting as 11 of the above countries are EU members and the other 5 are Balkan countries. The Initiative aims at mutually benefitting trade and economic cooperation. It remains one of the most important platforms for the Chinese to push their agenda of BRI. Such an Initiative may cause a decline in the prominence of the role of Western European countries and that of the European Union as a global force.
Although this initiative has been hailed as a pioneer of regional “South-South” cooperation in an increasingly multilateral world, the scope “ironically” has been limited to highly competitive bilateral trade. This will be deliberated upon in the further text. This is also evident from the amount of trade between China and CEE countries that took place post-2012. The CEE countries embraced the project in the wake of the 2008 Global Financial Crisis. While the to-and-fro exports between China to CEEC remained equal in the initial years of the Initiative, more recently there is a relative increase in exports from China to CEE countries. According to the European Commission’s Market Database, China ranks second highest with 25 barriers in place only after Russia.
According to Politico, “A survey by the consultancy EY said the Chinese spent €75 billion in European acquisitions and investments in 2016. Another study showed that China invested as much in Europe in 2016 as it did in the 10 previous years combined.”
As mentioned, the expansion of such an Initiative gives China the leeway into Europe hence bridging the distance between the East and the West. It values their geostrategic position as a bridgehead to the EU market and a crucial transit corridor for its Belt and Road initiative (BRI). What should be keenly observed is the fact that these countries have a lot in common as opposed to the Western European states. The Visegrád Group consisting of Hungary, Czech Republic, Slovakia and Poland, is a political union with a shared history, is commonly known for its Euroscepticism and has a raucous relationship with the EU.
At the same time, the entry of such a giant into the region questions the unity of the Union. This might prove to be a threat to the integration of Europe especially in the wake of a phenomenon like Brexit. Not only that, such a threat combined with another option available at hand raises concern for substitution by moving towards other global players to balance the EU. For example, Athens refusal to criticize human rights violation under Xi Jinping in June 2017 saw the undermining of efforts against Human Rights by the EU. Such a decision is a result of huge Chinese investments in a downtrodden economy.
While the opinions within the EU remain dissenting, it remains integral to point out that 27 of 28 members of the European Union signed a document denouncing the BRI for hampering free trade and giving preference to Chinese companies. Hungary, being the only exception to do so under the leadership of Viktor Orban. This comes in play after China agreed to weave Hungary’s National Development Strategy into the BRI. The five contracts signed by Hungarian enterprises in June 2016 within the fields of light industry, wine exports, meat exports, electronics and IT provide for various opportunities for further cooperation.
More recently on 23rd March, Italy agreed to join the BRI as one of the first developed countries. As part of the 29 deals signed during the Premiere’s visit to Rome, Italy shall provide access to the port Trieste which will enable maritime routes to Central and Eastern Europe.
The western response has come in various forms. We see an increased focus in the “Indo-Pacific” region by the United States of America, wherein it has plans of investing US$113 million as financial support for the regional countries. Similarly, there is an increase in the bilateral relationship between the USA and India, the only countries firmly opposing the Initiative.
Though the emphasis here has been on Europe, some cases have made countries involved question the no strings attached policies of China. Specifically, the cases of Sri Lanka (Hambantota port) and Pakistan must not be over-looked. All in all, it remains crucial to scrutinise the Chinese inflow of trade and investment owing to the geo-strategic location of the countries involved in the Initiative. A process such as that of FDI screening of investments that is in the talks provides a fruitful solution to counter China’s “divide and rule policy”.