REBECCA WARREN

Rebecca is a Warfare Officer in the Royal Navy, currently studying at the UK Defence Academy and King’s College London. Her Masters by Research is examining China’s use of economic power in the international system, with particular focus on the Belt and Road Initiative, you can follow her on Twitter here.

Two thousand years ago, the Silk roads brought caravans of silk and spices, Arabian horses and precious stones from the East to a Roman Empire eager for exotic luxuries. Today, a new network of Silk Roads is forming between China and Europe, but its cargo is very different. China’s Belt and Road Initiative (BRI) promises technology, trade deals and infrastructure investment. In return, it demands more than money. Behind promises of win-win cooperation, China is using the BRI to exert power. This article looks at some of the areas where the BRI is giving China influence within the EU, and its potential consequences.

Trade, Power, and Strategy

From its Central Asian roots, the BRI’s most recent expansion has been into Europe. The BRI is ostensibly about trade, but while China is the EU’s largest source of imports it accounts for only 20% of total EU trade, and is the EU’s second largest export market, at just 11% of the total. Individual country figures are even smaller; Germany, the EU’s largest exporter to China, only relies on it for 7% of its exports. Even if the BRI were to double these figures, something that no commentators suggest, at an individual country level this would not have a huge impact.

However, the BRI is about more than trade. The true aim of the scheme is an extension of Chinese power and influence. One Asian financial specialist I interviewed likened it to a game of Go, where China is steadily placing counters across Asia and Europe. To Western eyes, it is easy to interpret comments such as this as evidence of a ‘master strategy’ in Beijing, with the aim of extending Chinese influence in a series of carefully planned steps. Yet beyond dramatically overstating the foresight of Chinese strategy, such an approach also under-rates the role Western disorder has played in allowing China to extend its influence.

A core tenet of Chinese philosophical tradition is an emphasis upon pragmatism and taking advantage of situations as they unfold. As Francois Jullien has argued, ‘the Chinese general projects and constructs nothing…there is not even an ‘end’ set up in the distance as an ideal’.[1] The BRI can thus be interpreted as an opportunistic use of Chinese capital to exploit the West’s failure to deliver the benefits of globalisation equally to regions which feel left ignored by European and American policy makers.

 

Europe and China

One pivotal Go counter was placed in Eastern Europe. The European Land-Sea Express Route through Hungary, Serbia and Macedonia is a key BRI rail link. In a move widely believed to breach EU tender regulations,[2] Hungary awarded the contract for this direct to China. The project was heralded as bringing economic benefit, but the trade route it enhances is used for more Chinese goods than Hungarian, and it connects no major Hungarian cities. Hungary is paying for it, using Chinese loans. These are at a favourable interest rate – but only if Chinese firms, not local ones, are employed. Although the EU investigated the contract in 2017, it remained with China. While Hungary celebrated the deal, it is hard to see from this how it can provide long term benefit. As many have wryly remarked, win-win seems to mean that China wins twice.

At the other end of this rail link is another Go counter, in the Greek port of Piraeus. This is a pivotal maritime hub for the BRI and, since 2009, majority owned by Chinese firm COSCO. Profits have soared since COSCO’s acquisition, and it is now the seventh largest EU port. But there are problems. Greece was recently fined EUR200m by the EU anti-fraud office for allowing Chinese importers to conduct tax fraud through Piraeus. Some fear that China could block access to it in a conflict, not only for warships but for logistics and troop movements.[3] These concerns may be excessive; the government, not the port, grants diplomatic clearance for access, and although COSCO owns Piraeus, the harbourmaster is a Commodore in the Hellenic Coastguard. But China’s financial hold over Greece may influence its loyalties, as is being seen elsewhere.

On the far side of the world Go board, China has a string of counters in the South China Sea, another key BRI maritime route. In 2016 an international court ruled that China’s territorial claims here had no legal basis. Donald Tusk called for a robust EU response. However, Greek and Hungarian arguments in favour of China led to only a lukewarm statement from Brussels. Similarly, both countries refused to endorse EU condemnations of China’s human rights actions in 2017, the first time the EU had failed to present a consensus at the UN Human Rights Council. Chinese influence has not just helped to perpetuate human rights abuses but also seemed to be undermining the EU’s position.

In 2019 China placed another Go counter in Italy. In signing an MOU for trade agreements to boost its still struggling economy, Italy ignored accusations of breaching EU trade rules in favour of the seductive power of Chinese finance. There was rather less media coverage of Luxembourg signing a BRI co-operation agreement, but this is potentially a very influential move for China. Luxembourg’s status as a cross-border business hub outweighs its size and it is well-placed to take on some of London’s financial responsibilities within the EU after Brexit. The Luxembourg Financial Centre’s website proudly calls itself “China’s bridge to Europe and the World.”

 

The future of China-Europe relations

Having established itself in Western Europe, China is now considering its next move. Go relies on encircling an opponent, and China may be hoping that Brexit will allow it to do so. In 2017 David Cameron, who had courted Beijing for trade deals while Prime Minister, took on a lead role in a BRI investment fund. Gordon Brown referred to the BRI as “the big economic idea of the century.” In 2018, Theresa May expressed concerns about the BRI during a visit to Beijing, but by April that year she was discussing “how best we can cooperate on the Belt and Road Initiative.” Given that some suggest that the BRI might benefit the European economy more than free trade agreements[4], it is easy to see why a UK struggling towards a Brexit settlement is attracted to it.

Go is a game for two players, and so far we have only seen China’s moves. What of Europe? Backlashes against China are increasing. German Chancellor Merkel warned against Chinese investment undermining the EU’s China policy. Greece rejected COSCO’s EUR580m investment in Piraeus on environmental grounds. The most effective results seem to come when the EU acts collectively. The 2019 annual EU-China summit secured a number of surprising concessions from Beijing, notably on WTO industrial subsidies. This unity reflects French President Macron’s words beforehand, when he warned that China had been taking advantage of a divided EU. “The time of European naïveté is ended,” he said. Whether this is true however remains to be seen, given Eastern Europe’s receptiveness to Chinese investment and the still unresolved issue of Brexit and the UK’s future relationship with the EU.

In the ancient Silk Road era, Chinese trade underpinned the Roman Empire’s economy. Now, as China revives the Silk Roads for the 21^stCentury, Europe is again looking east for wealth. But these modern Silk Roads are about power as much as trade. How the balance of that power will lie in the future depends on Europe’s ability to look beyond its internal problems and present a united front to the East. With Brexit on the horizon and many European countries already involved in the BRI, that remains a challenge.

 

[1]Franҫois Jullien, A Treatise on Efficacy, (Honolulu: University of Hawaii Press, 2004): 39.

[2]United States-China Economic and Security Review Commission. Hearing on China’s Belt and Road Initiative: Five years later.One Hundred Fifteenth Congress, Second Session. (Washington, 2018): 97

[3]Ibid., 34.

^[4]Alicia Garcia-Herrero. Recent Developments in Trade, Investment and Finance of China’s Belt and Road.(Hong Kong: HKUST Institute for Emerging Market Studies, 2018)

Image: world leaders at the Belt and Road Forum in Beijing, April 2019, via Kremlin.ru.