by Dr. Sebastien Goulard
The Covid-19 global pandemic has certainly had an impact on Sino-European relations. However, even if the BRI projects in Europe are slowing down, a Sino-European partnership remains a priority for both parties.
The 22nd China-Europe Summit
On June 22, 2020, European and Chinese leaders spoke by video conference about the future of their relationship. During this virtual summit, President of the Commission Ursula von der Leyen and President of the Council, Charles Michel, and President Xi Jinping and Prime Minister Li Keqiang, talked frankly and openly to each other. Disagreements persist between the two regions, particularly on the issue of Hong Kong , but China and the EU still consider themselves as partners and acknowledge their interdependence.
EU-China Comprehensive Agreement on Investment
Due to the Covid-19 crisis, the completion of the EU-China Comprehensive Agreement on Investment (CAI) has been postponed until the end of 2020. It is an extremely ambitious agreement on which China and the European Union have been negotiating since 2013. When it is signed, the agreement will foster trade between Europe and China and will facilitate investment in the two regions. This agreement has the potential to make the Sino-European relationship one of the main cornerstones of world trade.
This CAI will replace the various existing bilateral investment treaties between China and most of the EU members. With this new agreement, European companies will have wider access to the Chinese market, and will no longer be required to create joint ventures with local Chinese partners.
After signing this treaty, European and Chinese companies will enjoy the same rights in both regions. However, there remain several points that require further discussion. For example, there remains a degree of suspicion in Europe about the role of Chinese state-owned enterprises. Since June 2020, the European Commission has been considering limiting acquisitions in Europe by foreign state owned companies. Brussels, views these acquisitions as potentially distorting competition.
Another ongoing question concerns Huawei and the role of Chinese high-tech companies in the development of European infrastructure. For example, France may soon restrict the use of equipment manufactured by Huawei for its 5G network.
Each of these complex issues will need to be resolved prior to the completion of the CAI.
The BRI in Europe: some slowdown and a ‘wait-and-see’ approach
The current crisis has made global cooperation on the BRI and associated projects more difficult and especially so in Europe. One of the more closely involved European countries in the BRI: Greece, has delayed projects for about six months, as stated by Fotis Provatas, president of the Chamber for Greek-Chinese Economic Cooperation. Several key agreements, notably regarding agriculture and the banking sector have yet to be negotiated, and may not be signed before meetings can be held in September.
However, the pandemic is not the only cause of this slowdown. European leaders and the European Union are waiting for November and a potential change of the US administration before further developing their partnership with China. They are particularly attuned to the impact on Euroe of a possible Sino- American trade agreement.
Despite the current health crisis, several BRI projects in Europe are still making progress; in particular the Budapest-Belgrade rail line. This project is regularly castigated by European Institutions for not being sufficiently transparent , however in this case, it the European partners, and not the Chinese whose opaqueness is being heavily criticised.
On the drawing board since 2013, Hungary and Serbia have actively encouraged the building of a new, faster rail line to connect their respective capitals of Budapest and Belgrade, largely through the application of Chinese technology and Chinese investment funding. On the Serbian side, construction started in 2017, and should be completed by the end of 2020. In Hungary, on the other hand, the project suffered from considerable delay, in particular because the project did not fully comply with the applicable European Union regulations on public tenders . It was not until 2018 that a Sino-Hungarian consortium was placed in charge of the project.
After a long delay an agreement regarding the funding of the line was reached between China and Hungary in April 2020. According to this agreement, 85% of the finance package (estimated at €1.65 billion euros) would come as a loan from China at a 2.5% fixed interest rate. But details of the deal have not been made public. Indeed, in late March 2020 the whole agreeement was classified as ‘private & confidential’ for a period of 10 years by the Hungarian government
A lack of transparency on the part of a European state could weaken future BRI projects in Europe and project an avoidably poor public impression to the world of the new Silk Road vision. It is therefore necessary, 1) that China insists on making BRI projects even more transparent, and 2) that Europe adopts a common vision and a shared strategy on this particular issue. The BRI may be an opportunity for the members of the European Union and other European (non EU) states to fully participate in a mutually beneficial partnership with China.