By Wang Xieshu (The Bridge Tank and CEPN University Paris 13) and Joël Ruet (CNRS, CEPN University Paris 13, The Bridge Tank, Observatoire des Emergents Paris, “Global Vision” Program - Institute for Sustainable Mobility Renault-ParisTech).


Sintesi

Tale contributo analizza il rapporto fra l’imponente iniziativa One Belt One Road (OBOR) e le relazioni economiche e politiche fra importanti attori globali come la Cina, l’Unione Europea, la Russia e l’India. Viene sottolineato come il progetto OBOR abbia un significato molto più ampio del semplice rafforzamento dei canali commerciali fra Cina, Asia Centrale ed Europa, in quanto mira più o meno esplicitamente a costituire una strategia cinese alternativa a quella guidata dagli Stati Uniti attraverso il WTO e il Trans-Pacific Partnership Agreement. Nei paesi dell’Asia centrale l’OBOR si inserisce in una delicata dinamica di interazione fra potenze economiche che esercitano influenza sull’area: la Cina, orientata al commercio e alla costruzione di infrastrutture; la Russia, focalizzata sulla sicurezza militare; l’Unione Europea, impegnata sul fronte della formazione del capitale sociale e dei diritti civili. L’India ricopre un ruolo di partner strategico dell’iniziativa, ma anche di potenziale generatore di conflitto in quanto in collisione con il Pakistan, anch’esso coinvolto in OBOR, e in quanto promotrice di progetti autonomi di connessione infrastrutturale e commerciale in Asia Centrale. Infine la collaborazione fra Unione Europea e Cina attraverso il canale di OBOR avrà ripercussioni sul ruolo di entrambi gli attori nella cooperazione internazionale, principalmente in Africa e Medio Oriente. Tali attori dovranno stabilire nuovi equilibri e forme di relazione che massimizzino il bene comune di fronte agli interessi particolaristici.

 

 

With the Trump-governed US likely to withdraw from the Trans-Pacific Partnership Agreement (TPP) at a time when trade contents is deemed to radically change out of ecological transition (in its energy and green techs contents for instance), it becomes even more crucial for Europe and China to work together to safeguard the advances of globalization. The Chinese “One Belt One Road” initiative, further accelerated with the Chinese presidency of the G20 that just ended, advocates for more inclusive regional cooperation platforms and offers ambitious plans to further tighten connections across Eurasian and North African continents. Under this perspective, the EU-China relation will certainly face new opportunities and challenges.

 

The initiative and its developments

“One Belt One Road” is generally considered as an alternative strategy of China to compete against the US led global systems, symbolized by Word Trade Organization, International Finance Corporation, World Bank and TPP. “One Belt One Road” is the term officially adopted in 2013 by the Xi Jinping led Chinese government in defining its new foreign policy legacy. “One Belt” refers to the inland “Silk Road Economic Belt” trade, infrastructure and economic corridor, which departs from China’s westernmost region of Xinjiang, linking Central Asia, Russia, Middle East, to finally reach western Europe. “One Road” refers to the “21st Century Maritime Silk Road” that goes across South Sea, Indian Ocean to the Mediterranean Sea, connecting Eurasia and North Africa by ports. The initiative involves 65 countries and over 4 billion population. It is to be noted that the December 2015 China-Africa Summit offered to further extend it to Africa.
Under this initiative, four economic corridors were generated or planned at the stage: China-Pakistan Economic Corridor (CPEC), Bangladesh-China-India-Myanmar Economic Corridor (BCIM), China-Mongolia-Russia Corridor and a New Eurasian Landbridge. They all share the same logic of infrastructure-focused and trade-oriented regional “all-inclusive” collaboration.
Next, Asian Infrastructure Investment Bank (AIIB) and Silk Road Fund (SRF) were established with the aim of financially supporting concrete projects from the “One Belt One Road” initiative. Besides, China is also offering free loans for some public infrastructure projects. The Export-Import Bank of China finances long term private investments at low interest rates of 5-6%.
AIIB was founded in December 2015 with $100bn capital subscribed by 57 country members, with China having a far leading share of 29%, followed by India of 8.4% and Russia of 6.5%. Non-regional members add up to 25% of total capital, among which Germany as the biggest subscriber owns only a 4.5% share. Until now, $829mn investments have already allocated by AIIB to six projects, including a power grid project in Bangladesh, a national slum upgrade in Indonesia, a motorway and a hydropower project in Pakistan, a road improvement project in Tajikistan and a power plant in Myanmar. Nearly half of them went into the CPEC. It is also interesting to note that these projects are generally co-financed by AIIB and mainstream financial institutions, such as World Bank, Asian Development Bank, International Finance Corporation and other European development banks. Long term Competition involves projects based cooperation.
The SRF, founded in December 2014, is actually a more powerful tool than the AIIB. With a total capital of $40bn, its first $10bn is from the Chinese State Administration of Foreign Exchange (65%), the Export-Import Bank of China (15%), China Investment Corporation (15%) and China Development Bank (5%). Its investments actually amount to at least $3.25bn, including a $1.65bn financing for another hydropower project in Pakistan and participation in the ChemChina purchase of Italian tire maker Pirelli. In addition, it is said that the fund is considering an investment of between €5-10bn into the European Fund for Strategic Investments under the Juncker Plan. This is without accounting for “third party country bilateral funds”, such as a Sino-French fund of 300 million euro devoted to Africa.

 

China, Russia and EU in Central Asia

Central Asia is at a very crucial location on the Eurasian thoroughfare. Central Asian countries have important energy and mineral resources. Their total reserves of oil and gas rank the 3rd in the world after the Middle East and Russia. Meanwhile, the economic level is much inferior to the EU zone and the Pacific economic belt, which seriously hinders deeper regional economic integration. In recent years, trade cooperation with China has greatly promoted energy production in Central Asia and led its rapid economic development. Since 2010, the Central Asian countries have become the world's fastest-growing economic region with an average economic growth rate of more than 7%. This policy gels with national policies of countries such as Kazakhstan or Azerbaijan to name a few.
China has long been a key driver of infrastructure investment and construction in Central Asia, investing heavily in the natural resource extraction of gas, oil, uranium, gold and copper. Chinese companies have built roads, railways, tunnels, power lines and refurbished oil refineries as well as special economic zones and are actively involved in agri-business and telecommunications investments. Railways is also a sector of Chinese interest. China’s strong economic engagement in Central Asia is ultimately based on the assumption that building up economic prosperity will result in political stability in the zone, including Xinjiang, the northwest frontier region and home to a sizable Muslim population.
During the BRICS summit in India in October 2016, Xi Jinping and Vladimir Putin stressed that no external power would be allowed to interfere in Central Asian affairs. With the deepening connections under “One Belt One Road” and increasing capital investment, China could challenge Moscow’s monopoly as security guarantor and increase direct engagement with Central Asian states in military spheres to protect its own interests. Meanwhile, Central Asia is the backbone of Moscow in confrontation with all major economic sanctions from the West. Russia could decide to concentrate its influence and strengthen its role as the dominant actor in Central Asia.
At the same time, the EU is also increasing its investment and engagement in Central Asia. The EU is allocating €245mn to regional cooperation projects in Central Asia in 2014-2020, a 74% increase compared to 2007-2013. Under this framework the EU provides support in areas related to border management, water security and drug prevention programs. The Investment Facility adds EU grants to loans provided by Financial Institutions up to €500mn per year. The EU is Kazakhstan's largest export market, mainly in oil and gas, presenting 36% in 2014, ahead of China (22%) and Russia (21%). It is also the largest foreign investor in Kazakhstan, representing over 50% of FDI in Kazakhstan in 2014. Kazakhstan acceded to the WTO in 2015 with EU’s strong support. Furthermore, the EU is supporting judicial reform in Kazakhstan and implementing the UN Development program to help Kazakhstan’s transition to a Green Economy Model.
Given the strategical importance of Central Asia, in the coming years, it is natural if we witness a heating competition among China, Russia and EU. Meanwhile, the three economic powers have quite different focuses: China is infrastructure and business oriented; Russia cares more about the military security; the EU is more invested in education and civil rights. The EU's strategy on Central Asia also provides opportunities of cooperation with China in areas such as connectivity, development assistance and the sustainable use of water and energy resources. With good design and open negotiations, different roles and charges can be divided among the three to assure collectively the stability of the region and its sustainable development.

 

China, India and EU triangle

The EU is China’s biggest trading partner and China is now the EU’s 2nd biggest trading partner behind the US. The strong economic connections between China and the EU are also manifested by EU’s participation in the One Belt One Road and AIIB projects, against the disapproval of the US. According to European Commission, the EU’s cooperation with China on its “One Belt One Road” initiative should be dependent on China fulfilling its declared aim of making it an open platform which adheres to market rules and international norms in order to deliver benefits for all. It is in the EU's interest to work with China to ensure that any Chinese involvement in these regions helps reinforce rules-based, commonly designed, governance and regional security.
The EU is India's largest trading partner, accounting for 13% of India's overall trade, ahead of China (9.6%) and the US (8.5%). The EU is also the largest investor in India and is the primary destination for Indian foreign investment. Given the significant potential in EU-India trade, the two parties have been negotiating an ambitious Free Trade Agreement since 2007, covering effective market access and investment. The EU’s relationship with India has evolved from providing traditional development assistance to a mutually beneficial partnership. Following the conclusion of the EU-India Science & Technology Cooperation Agreement in 2001 India became very active participant in the EC Framework Programs. The India-EU Joint Steering Committee meeting held in November 2015 in Delhi paved the way for a further strengthening of cooperation in research and innovation, and developing concrete solutions to social problems such as water, health, energy, ICT and climate change. A Partnership Instrument project supports EU-India cooperation on ICT standardization, and a new "Startup Europe India Network" initiative has been launched in 2016.
India appears as an active partner in the One Belt One Road initiative and the founding of AIIB. However, it remains suspicious of China’s motives in backing the project and raises concerns that China wants to use this greater connectivity as an influencing factor. Actually, India has its own regional infrastructure and transport connectivity plans. It launched its Connect Central Asia policy in 2012 to enhance trade and educational ties, and encourage more joint commercial and security initiatives with Central Asia. It is also building the North-South Transport Corridor, as part of its 2015-2020 Foreign Trade Policy, which will link St Petersburg with the Indian port of Mumbai via Europe and Middle East.
China’s close relationship with Pakistan through its strong engagement in the CEPC might cause tensions to the BCIM, given the long time conflicts between India and Pakistan. Moreover, the CPEC has also experienced issues over internal political rivalries and China has learnt that abstention from any involvement in the internal affairs of the countries in which it operates is no longer feasible. It will be crucial for China to well handle its relation with India in the One Belt One Road projects, especially with the EU behind it as a strong partner. Or else, India could play a passive role in the initiative and instead concentrate its efforts on its own regional and global development plans.

 

The new EU and China relation

The first joint assessment of the implementation of the EU-China 2020 Agenda took place in Beijing in April 2016, observing the new EU-China relation development. There is a renewed interest in the EU-China relation as more balanced partners in a multi-polar world. Behind the "One Belt One Road" initiative lie largely economic and domestic considerations, but there will be major geostrategic consequences. China now has good reason for more active participation in global governance, security and defense issues. The challenge and the opportunity for the EU are to channel China's participation into positive areas such as cooperation on peace in Africa and in the Middle East. This latter point is most likely the fiercest challenge if one considers the role of Russia in the Syrian crisis, notwithstanding the role of regional powers such as Iran, Qatar, and Saudi Arabia.
With its growing economic and political importance, China seeks a more influential position in the global governance. China plays an increasingly important role in international cooperation and has increasing impact on development in third countries. The growing importance of the G20 in the wake of the global economic crisis demonstrates the need to work effectively with emerging market economies to find solutions to global challenges. It is therefore important that the EU and China have channels to discuss their respective approaches to development cooperation. China strongly needs the EU, now more than any other time, to be a firm partner in its new geopolitical and economic strategies. The EU, while promoting multilateralism, could encourage China to adhere to more global standards and institutions, dialogue on growth strategies, climate change, energy, oceans and resource efficiency, as well as help to resolve China’s immense environmental problems. Good cross-institutional and cross-sectoral coordination is required in order to ensure that immediate interests are put behind the greater good.

 

Newsletter n. 5 | DECEMBER 2016 - Scarica il pdf

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