European perspective on the BRI

Max J. ZengleinOctober 25th 2019

BRI as part of China’s global ambitions

▪ Anniversary targets drive economic policies

− 2021: Moderately prosperous society

− 2049: Strong, modern socialist country

▪ Impressive “to-do” list:

1

Domestic- 2020 targets

- Middle-income trap

- Environment

- Poverty

- Quality growth

Global- Belt and Road

- OFDI

- Going global by

companies

Technology- Innovation

- Made in China 2025

- Digital economy

- Defense technology

Geopolitical- Restore global

leadership

- Rival US

- Defense interests

BRI is part of a strategic network to build a competitive

economic system

2

Drivers of the BRI

3

BRI

Policy coordination

Infrastructure connectivity

Trade cooperation

Vision and goals

(„Vision and Actions“ 2015, „Maritime Vision“ 2017, „Progress, Contributions and Prospects“ 2019)

4

▪ Singing of FTA and BITs

▪ Develope new markets

▪ Secure energy

▪ Re-arrange global supply chains

around China

▪ Explore new investment opportunities

▪ Export overcapacities

▪ Singning of bilarteral MoUs

▪ Statements endorsing BRI on (sub-)regional

forums (e.g. 17+1)

▪ International BRI summits

▪ UN resolutionen

Economic development Geopolitical development

Taking stock after 5 years

▪Consolidation, expansion and counter actions

Putting it in perspective: Domestic investment dwarfs BRI

5

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

FAI in trillion CNY

Linking existing infrastructure together

6

Fostering demand for China’s tech giants

7

Powering up the BRI – and the energy sector

8

Flagship project: China-Pakistan Economic Corridor

9Source: NBS / *estimate

Tech aquisitions main focus

11

Investment in Central and Eastern Europe remains small

13

Focus on Europe´s periphery via infrastructure

14

0

14

43

80 17

9

0 0

20

46

0 0 10

54

73

3

0 0

17

70

0 096

0

10

32 47

71

42

43

11

69

2

24

22

81

11

26

27

37

42

11

29

51

8

56

87

0

11

99

5

27

55

81

24

21

32

FUNDS FOR INFRASTRUCTURE IN CEEC (EUR MILLIONS)

China (bank loans) 2013-2018 EU, EIB, EBRD funds 2013-2020

Build up of Chinese debt

16

35

Munich Security Report 2019

Source: Mercator Institute for China Studies (MERICS)27

Infrastructure funds and loans to the

Western Balkans, 2013-18, EUR millions

Share of commited Chinese infrastructure loans in relation to other externally

held debt, 2018, percent*

Source: Mercator Institute for China Studies (MERICS)28

363614 574

787

796344

850

2,244

00

0

1,275

1,6620

2,858

1,809

1,184

1,849

796

2,512

Committed Chinese infrastructure loans

Announced Chinese infrastructure loans

Committed European infrastructure

funds and loans

14 2039

12

Bosnia and

Herzegovina

Macedonia Montenegro

100%

Serbia

Source: Mercator Institute for China Studies (MERICS)29

MacedoniaAlbania Bosnia and

Herzegovina

Montenegro Serbia

Th in k tank s (M ac ed on ia): The CCP has promoted increasingly dense think tank exchanges between state-led Chinese institutions and partners from Macedonia as well as other Balkan countries, such as the China-CEEC Think Tank Network, and uses these exchanges to popularize Chinese core interests.

Ec on om y (M on teneg ro ): A EUR 809 m illion loan for the construction of the first stretch of a highway to Serbia has sent Montenegro ’s debt soaring to an unsustainable 80 percent of GDP, raising widespread concerns about Beijing subjecting Montenegro to “debt-trap diplomacy.”

M ed ia (Serb ia): The Communist Party of China (CCP) promotes “positive” China coverage through bolstering state media cooperation with Serbian media outlets, orchestrating, for example, joint symposiums on ‘sound journalism.’ Serbian media have also regularly published opinion pieces by Xi Jinping.

HOW DO THE EU AND

CHINA COMPARE ON

INFRASTRUCTURE

FUNDS AND LOANS IN

W ESTERN BALKAN

16+ 1 COUNTRIES?

HOW MUCH DO

W ESTERN BALKAN

16+ 1 COUNTRIES

OWE TO CHINA?

EXAMPLES OF CHINESE

INFLUENCE IN

W ESTERN BALKAN

16+ 1 COUNTRIES

* Most recent data from respective national banks: Bosnia and Herzegovina (2017), Macedonia (2018),

Montenegro (2017), Serbia (2018)

Source: Munich Security Report 2019, p 35 (based on MERICS research)