Trophy infrastructure, problematic debt: China makes its way in Europe
Trophy infrastructure, problematic debt: China makes its way in Europe
BELGRADE, Serbia: Europe is distracted by internal discord over immigration and its tense relationship with Russia and the USA. UU Seeking to fill the vacuum, China is taking advantage of a historic opportunity to enter the heart of the West.
Agreement by agreement, applying the perfected experience in Asia and Africa, China is building parallel financial and commercial networks in Central and Eastern Europe to challenge the world order. He has taken positions in more than a dozen nations on the periphery of the European Union. Some, like Hungary, are smaller, more marginalized members. Others, including Serbia, are on the admission track.
Chinese workers established a road through the impassable mountains of Montenegro on pillars as tall as a 50-story skyscraper, part of an emerging corridor of motorways, ports and railway lines that describes a new Chinese trade route between the Greek Aegean coast and Latvia in the Baltic cold.
Chinese technology governs a new international money transfer system in Serbia. Chinese banks swallowed a new issue of the yuan-denominated bonds of Hungary. Outposts such as Košice, Slovakia, are now stops for freight trains from China.
Beijing offers of trophy infrastructure and financial lifestyles to troubled economies give those countries proposals that are not listening to Washington and Moscow, which in general see the region through prisms of national security. Nor are they listening to these proposals from Brussels, concerned to weaken the cohesion of the EU.
Aleksandar Vučić from Serbia and Chinese Premier Li Keqiang at a 2014 ceremony to open the China-Serbia Friendship Bridge over the Danube in Belgrade.
Photo:
Medin Halilovic / Agencia Anadolu / Getty Images
For European politicians, the Chinese alternative promises quick results and fewer problems with contracts and transparency than those normally found in the West. The problem is that China's package packages are orchestrated by the government and require loans from their banks to pay their contractors. Some countries, including Montenegro, are taking large amounts of debt in the process.
Most Chinese financial support in Europe is based on loans, which helps to turn nations into customers of Beijing banks. And with every achievement, Chinese companies that build infrastructure and sell software or services gain more credibility in the West. Extending its engineering and technological innovation capacity to the west helps China expand and modernize its economy, as well as strengthen its alliances.
Beijing applauded when Greece blocked an EU effort last year to condemn a Chinese crackdown on political activists. Politicians in Brussels suggested that Athens had become too dependent on China because a Chinese company run by the government runs Greece's main port. Greece described the proposed measure as "non-constructive and selective criticism".
The momentum is part of China's Belt and Road Initiative to develop commercial, financial and communication networks around the world, a strategy that emerged from the global financial collapse a decade ago, to diminish China's dependence on an economic order led by China. United States that he accused. the crisis. The main infrastructure is the initiative's business card.
Serbia is becoming China's closest partner in Central Europe. China designed and built Belgrade's first new bridge over the Danube River in seven decades, and helped modernize the electrical and telephone systems in the country. More recently, Serbia obtained a financial payment network from China UnionPay, owned by the government. The platform is Beijing's response to Visa and MasterCard, which provides Serbs with a way to use local credit cards abroad. It also gives the Chinese yuan a route to Europe.
UnionPay says its payment system in Serbia includes chips and other technology standards designed to guarantee "unblocked" international money transfers. That, in effect, could weaken a frequent US tool. UU It is sometimes used against Chinese companies (economic sanctions) by creating a parallel system of transferring money beyond the reach of the US. UU
"For Serbia, it is important that such an international player has chosen to cooperate with him," said Jorgovanka Tabaković, a leading national politician and governor of the National Bank of Serbia.
Regarding its influence in Central and Eastern Europe, China points to its investment in the region, noting that it is a fraction of its pan-European exposure. More generally, he cites a growing global responsibility to promote development and build infrastructure in much of the world. President Xi Jinping has said in a quote that Chinese officials have repeated: "No matter what stage of development you are in, China will never seek hegemony or participate in the expansion."
Beijing pledged almost $ 8.9 billion in loans for government-backed projects and other development assistance to all of Europe last year, compared to $ 4 billion in 2016, according to a tally of Wall Street Journal agreements cited in a compendium published by the Export-Import Bank of the United States.
Business partners
Europe's emerging economies are fast becoming customers of China.
PCT of imports and exports of China, 2016
That two-year count is only 7% of China's global total of $ 185 billion in loans and assistance for the period.
US officials have warned developing nations that China's reach has conditions. In a speech in Washington in October, Vice President Mike Pence said of China's infrastructure loans, "the terms of those loans are opaque at best, and the benefits invariably flow overwhelmingly to Beijing." Defense Secretary Jim Mattis recently raised similar concerns, saying that "" Massive debt accumulates in countries that the fiscal analysis would say they will have difficulties, at best, to pay in smaller countries. "
Outside Europe, China Infrastructure plan of $ 62 billion in Pakistan it is a factor in the country's debt, which helped cost the ruling party a recent election and led the country to an international rescue. In August, the new Malaysian Prime Minister, Mahathir Mohamad, ordered a Freeze the value of $ 22 billion in the construction of railroads and pipelines in China his predecessor had endorsed, citing inflated contract values and excessive lending.
Last year, Sri Lanka surrendered a port To the Chinese control to deactivate a debt bomb. Chinese public works and its large loans are synonymous with political activists in Angola, Zambia and Kenya.
Lu Kang, a spokesman for the Chinese Foreign Ministry, responded to US criticism of his loans by saying: "We have never heard of a single country." [falling] in "debt traps" because of its cooperation with China. "
In Europe, Montenegro faces financial challenges associated with an agreement between China's Export-Import Bank and China Road and Bridge Corp. to build its first highway. The government calls it "the greatest engineering construction challenge in the nation's history," due to the mountainous terrain of the country.
The road promises to link Central Europe to a port on the Adriatic Sea that looks to Italy. Montenegro already owes around $ 1.1 billion for the current job, which covers an average section of 25 miles to be completed by mid-2019. The cost exceeds the original plans in hundreds of millions of dollars due to currency changes not cutlery.
Unless the nation, known for cheap beach vacations, can provide another $ 1 billion for a next phase, the four-lane highway will end up in a valley of 100 farmers and a store in general.
The Greek port of Piraeus, photographed on September 15, is managed by the Chinese shipping company China Ocean Shipping (Group) Co.
Photo:
Kostas Tsironis / Bloomberg News
No data captures the breadth of economic integration in the region, including the private flows of investors who rushed after Beijing's official nod in favor of Europe. Some were designed as commercial intermediaries in the Chinese neighborhoods of the continent and others formed "friendship" associations to link with local businesses and the academy.
The oil company CEFC China Energy Co. accumulated an empire of $ 1.7 billion in property owned, brewery, football, banks and hotels in the Czech Republic, but fell in question earlier this year, when the Chinese authorities investigated the president of the company.
A senior CEFC executive in Prague said the plans were "being developed" for China International Trust and Investment Corp. to take over the group's operations in Europe, which would actually replace a private company with the international investment vehicle of the oldest line in the Chinese state.
Beijing has spoken of its advances as a restoration of the old commercial routes of the Silk Road, but the German politician Sigmar Gabriel sees great ambitions. "It is not a sentimental nod to Marco Polo, but represents an attempt to establish a comprehensive system to shape the world according to China's interests," he said when he resigned in February as foreign minister.
Throughout the east-west division of Europe, the Serbs, Slovaks, Croats and Czechs remain persecuted by the Cold War and the bloody break of the 1990s in Yugoslavia. These experiences partly cloud his views on the United States and Russia. China does not carry such historical baggage.
VIP service
Chinese President Xi Jinping has visited more countries in Central and Eastern Europe than leaders of the United States during his term.
Poland
Greece
Czech Republic.
Estonia
Poland
Greece
Czech Republic.
Serbia
Belarus
In the near future to Central Europe, a container of Chinese-made mobile phones or cars to be unloaded at the China Ocean Shipping (Group) Co. port in Greece could travel north through Macedonia and Serbia on highways and Chinese toll bridges and reach China. Engineering railway to Hungary. Warehouses managed by China have been proposed in Poland, Lithuania and Belarus. The item can be purchased on the website of the e-commerce company.
Alibaba Holding Group
Limited.
, which is expanding its data services in the cloud in Europe, as Internet traffic moves through the switches installed by Huawei Technologies Co. that dominate the region.
The rapidly expanding ties between China and Serbia range from visa-free travel between the two countries to mining, manufacturing and arms research.
Aleksandar Vučić, then Serbia's prime minister and now president, met with Chinese President Xi Jinping and his wife, Peng Liyuan, last year in Beijing.
Photo:
WANG ZHAO / Agence France-Presse / Getty Images
Serbia, a nation of seven million people with an economy similar in size to that of Vermont, projects political neutrality. Officials have called Beijing a "fourth pillar" of its foreign policy, along with Brussels, Washington and Moscow.
"We do not believe we should choose between East and West," Serbia's Finance Minister Siniša Mali said in written responses to the questions.
Serbian President Aleksandar Vučić describes Mr. Xi as a personal friend and has seen him five times in two years. Mr. Xi has met with President Trump three times. Their wives discussed bilateral relations in Beijing on October 29.
A survey conducted last year by the Belgrade Security Policy Center of the think tank found that Serbs see the United States as stronger militarily and politically than China, but not far ahead economically. In the survey, the United States follows China in technology and confidence as an investor.
East and West
A poll of 1,403 Serbs in 2017 found that they ranked the United States ahead of China in military and political power, but not as a reliable investor.
The nearly one-mile-long China-Serbia friendship bridge, inaugurated four years ago, was the first major piece of infrastructure built in Europe by a Chinese team. That led to commissions for its builder, China Road and Bridge, in Croatia and Montenegro.
Even before the dedication of the bridge, according to the terms sheet revised by the Journal, the clock marked an 18-year requirement for the Serbian Ministry of Finance to transfer millions of dollars each January and July to a New York bank account. York based in Beijing. The project lender, Export-Import Bank of China, up to $ 217.4 million plus fees are paid. The contract also stipulated that "goods, technologies and services ... would be purchased from China on a preferential basis" and that any dispute would be resolved in China.
China Railway Signal & Communication Co., in Belgrade, is working to obtain a railway upgrade of $ 3 billion to Hungary. Construction has been delayed on the Hungarian side because the EU contested an award without bidding to a Chinese contractor. Serbia, without the burden of such rules, accelerated approval to the same Chinese contractors for its share of $ 350 million.
Down the block from
Bank of China
Ltd.
the new office in Belgrade, an 11-story Chinese cultural and corporate center and $ 60 million for a government-owned construction business, is increasing on the former site of the Chinese embassy. The mission was destroyed in 1999 when US aircraft dropped five laser-guided bombs on it during the North Atlantic Treaty Organization's campaign to stop the Balkan conflict.
After making three arches on a plaque to the "martyrs" of the embassy, Beijing tourist Yang Xiaoyu said he was only 2 years old when the bombs fell. "I feel that our country was quite weak at that time," Yang said. "When we came here today and we remembered what had happened then, we felt that our country is getting stronger."
-Chunying Zhang contributed to this article.
Write to James T. Areddy in james.areddy@wsj.com
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