China eyes new markets in Eastern Europe

BELGRADE: In an attempt to secure business ties and increase political influence, China is on a charm offensive in Eastern Europe — where the European Union and Russia are also vying for sway.
Chinese Prime Minister Li Keqiang, accompanied by 200 corporate executives, met the leaders of 16 Central and Eastern European countries Tuesday for a two-day summit being billed in China as an opportunity to deepen ties to the region and boost relations with the EU.
The Asian economic power is interested in energy, infrastructure and other big projects to fuel its economy at a time when labor costs are rising at home, risking crimping its exports, its traditional economic strength. Chinese investors hope to boost their presence in the region where Western companies may be reluctant to take financial risks.
Li said that closer ties would bring massive Chinese investments and open up large Chinese markets for central and eastern European goods. He sought to alleviate fears voiced from some in the EU that China's regional deals could contravene the 28-nation bloc's strict financial and trade rules.
"Everything will be conducted in accordance with the policies that are valid in the European Union," Li said at the opening of the meeting. "China supports the European Union, EU integration processes and a strong euro."
The timing of the China summit — the third such in three years — is significant as it comes while Russia, the traditional regional powerbroker, is struggling with deep economic problems partly caused by crippling Western sanctions over Moscow's role in Ukraine.
Only a few weeks ago, Russian President Vladimir Putin announced that Moscow is spiking a multibillion-dollar gas pipeline project for southern Europe that was to pass through several east European countries, which was to bring them hundreds of millions of dollars in transit fees.
Putin argued that the EU's opposition to the South Stream pipeline — which would have run under the Black Sea to Bulgaria, Serbia, Hungary and further on to Europe — meant Russia had no other choice but to scrap it.
The 16 European countries at the summit all share a former communist past. Some, like Bulgaria, Romania, Poland and Hungary, are part of the EU. Others, like Serbia and Bosnia, would like to join, but are still influenced by Russia.
"The difference between the Russian and Chinese approach in the region is that Russians are more political, while Chinese are more commercial," said Serbian economy analyst Miroslav Prokopijevic.
Unlike Moscow, which is applying a combination of economic and political pressure on the regional governments, Beijing sees its increased economic influence in the area as a chance to boost ties with the EU.
With Western Europe struggling with economic stagnation and the Russian economy collapsing, some of the eastern European countries have been looking to China for commercial deals.
In the first 10 months of 2014, bilateral trade between China and central and Eastern European countries reached $50 billion, up 10 percent from the same ten months of last year, with the pace of growth accelerating, according to the Chinese Ministry of Commerce.
A number of Chinese banks have set up branches in the region and the first $500 million phase of the China-Central and Eastern European Cooperation Fund — totaling $10 billion in offered loans — has been deployed successfully, it said.