Wed, Jan 23, 2019 - Page 9 News List

Huawei scandal bares rift among Europeans chasing Chinese cash

By James Gomez  /  Bloomberg

An increase in cooperation would not only benefit China’s economy, but central and eastern Europe’s as well, he said.

“The development potential for bilateral investment in both directions is very huge and the prospects are bright,” he said. “Stable EU-China relations and their long-term cooperation are very critical to a peaceful and stable development.”

Chinese-backed infrastructure projects include a bridge to unite Croatia, a railway connecting Hungary and Serbia and a motorway in Montenegro. In the past year, Chinese firms also bought a copper mine and a steelmaker in Serbia and Slovenia’s largest appliance maker.

Even with the increased focus on the region, post-communist countries have a ways to catch up to the continent’s richer half in attracting Chinese cash, still dwarfed by EU funding and inflows from the West.

Between 2000 and 2017, Chinese foreign direct investments in the east totaled US$6.3 billion, compared with more than US$140 billion in western Europe, according to a Mercator Institute study.

Still, the signs of China’s influence are clear. Zeman, an enthusiastic promoter of Chinese investment in Europe, has said that scrutiny of Huawei might trigger retaliation. Orban opened the first 16+1 conference of central bankers in Budapest on Nov. 9 last year, which was attended by the People’s Bank of China governor.

The 16+1 format carries other risks, including financing. Chinese investments are usually accomplished through loans, as opposed to the EU’s funding through grants, which also raises concerns over graft and compliance with EU rules.

“Loans are given without public procurement proceedings, without tenders, so in this way they are not transparent and it may definitely breed corruption,” said economist Amat Adarov, at the Vienna Institute for International Studies. “And that is not consistent with European values and regulations.”

The plan to build a US$2 billion rail link between Budapest and Belgrade was twice rejected by EU authorities on grounds that the process violated rules and was not transparent enough.

The project, now at a standstill, might finally start up again next year, Adarov said.

“It’s not about the fundamental breaking up the European Union, but it’s about the erosion of its rules and standards and values,” Weidenfeld said.

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