As leaders meet for the Sixth Summit of China and Central and Eastern European Countries, also known as 16+1, the seventeen participating nations won’t be the only ones watching.
Speaking in Budapest on Monday, Chinese Premier Li Keqiang said that China’s Belt and Road initiative (BRI) will expand to include all 16 central and eastern European countries, bringing billions of dollars of investment from China to the region.
During his speech, Li announced agreements with Estonia, Slovenia and Lithuania, three deals that will bring the total number of countries included in the Belt and Road to 70, Caixin reports, citing a Chinese government-run website devoted to the initiative.
China’s renewed focus on expanding economic clout in the region will also be closely scrutinized by Brussels. As Michael Marray writes in The Asset on Wednesday, a lull in Chinese M&A activity may be about to end, and with it the relative calm in China-EU relations.
As tensions between the EU and China over state-owned company-led infrastructure projects continue to fester, China has signaled it is ready to give the green light to private company overseas expansion. Despite an ongoing crackdown on overseas M&A, Beijing has indicated that investment related to BRI, including in the manufacturing sector, will be encouraged.
2016 saw a growing pushback from EU countries against a wave of Chinese M&A deals in Europe, as Marray recounts, culminating in Germany blocking the takeover of chipmaker Aixtron. Germany’s finance minister also caused some consternation when he publicly criticized China’s trade and investment policies during a trip to Beijing.
The growing concern in Europe is increasingly focused on the role the state plays in private companies. Founding president of the Berlin-based Mercator Institute for China Studies, Sebastian Heilmann, argues that private companies which dominate China’s push to develop strategic industries do not operate within a competition-driven market economy system.
“In the past, party cells and committees were predominantly found in state-owned companies,” Marray quotes Heilmann as writing. “Today, more than two-thirds of private companies, Chinese and foreign, host such organizations. CCP cadres not only sit on work councils, but they increasingly fill leading positions in personnel and government relations departments, all the way to executive and supervisory boards.”
The goal of all of this, Heilmann says, is to align political with commercial goals. The Chinese market, Beijing has concluded, is too irresistible for foreign firms not to fall in line. But for foreign political leaders, including those in the EU, it may be a different story.