China will pledge a multibillion-dollar investment in Europe’s new infrastructure fund at a summit on June 29 in Brussels, according to a draft communique seen by Reuters — Beijing’s latest round of checkbook diplomacy to win greater influence.
While the exact amount is still to be decided, the pledge will mark the latest step in China’s efforts to shape global economic governance at the expense of the US, and follows major EU governments’ decision to join the Chinese-led Asian Infrastructure Investment Bank (AIIB) in defiance of Washington.
It is expected to come with a request for return investment in China’s westward infrastructure drive — the “one belt, one road” initiative — constructing major energy and communications links across Central, West and South Asia to as far as Greece.
“China announced that it would make (X amount) available for cofinancing strategic investment of common interest across the EU,” the draft final statement said, adding that agreements would be finalized at another meeting in September.
An EU diplomat said the Chinese contribution was likely to be “in the billions.”
EU and Chinese officials have told reporters that Chinese banks are looking mainly at telecoms and technology projects.
Chinese Premier Li Keqiang (李克強), who is to attend the summit in Brussels, is expected to agree with EU leaders that the 315 billion euro (US$353.5 billion) fund will “create opportunities for China to invest in the EU, in particular in infrastructure and innovation sectors.”
If sealed, the deal would be a success for European Commission President Jean-Claude Juncker, who faced skepticism last year when he proposed the European Fund for Strategic Investment (EFSI), because EU governments are putting in little seed money.
France, Germany, Italy and Poland have each announced they will contribute 8 billion euros, while Spain and Luxembourg have pledged smaller contributions.
The bloc is relying mainly on private investors and development banks to fund projects selected from an initial list of almost 2,000 submitted by the 28 member states, from airports to flood defenses, that are together worth 1.3 trillion euros.
A big Chinese investment might raise questions about governance of the fund, which is so far strictly a European institution. An EU diplomat said it was not known whether China would seek representation commensurate with its stake.
The decision to invite China into an EU fund could cause some friction with Washington, which is wary of Beijing’s rising influence and upset that Europe rebuffed its calls to stay out of the AIIB.
China is already testing the US’ dominance in Latin America, offering the region US$250 billion in investment over the next decade, while Chinese companies have poured money into Africa to guarantee commodity supplies in exchange for building new roads, hospitals and rail lines.
The US and human rights groups complain that China and its firms are wielding influence partly through corruption and turning a blind eye to labor and environmental standards and human rights. Similar criticisms were long leveled at Western multinationals in developing countries.
Alessandro Carano, an advisor to the European Commission on the fund, defended the decision to welcome Chinese investors.
“The purpose is to mobilize the liquidity in the market. We don’t differentiate among the owners of the funds,” Carano said. “China is a big investor already. We don’t want any prejudice.”
China aims to create a modern Silk Road Economic Belt with railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece.
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