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China’s One Belt, One Road Initiative And Europe Is Destination For Links From Asia- European Region 1-Austria, Belarus, Czech Republic, Estonia, Hungary and Latvia

ArmchairTechInvestor, June 8, 2018, by Brad Peery

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Below are summaries of the OBOR initiatives in the countries covered in European Region 1.

Austria

*Austria has a population of about 9 million. It is a landlocked country in the middle of Europe. It borders Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Italy, Switzerland and Liechtenstein. Austria is known for its political and economic stability, and is one of the richest countries in the world, having a per-capita GDP of more than $47,000.
*The Belt and Road Initiative: Country Profiles, Hong Kong Trade Development Council, May 17, 2018

**“According to the Central Bank of Austria, China’s total stock of FDI in Austria amounted to $773 million as of the end of 2017, a considerable increase on the $163 million recorded in 2009. With an Austrian FDI level of $3 billion as of the end of 2017, Hong Kong, however, was the largest Asian investor in the country overall.”

**“The China-proposed Belt and Road Initiative opens up opportunities for Austria and China to boost cooperation, Austrian Chancellor Sebastian Kurz told Xinhua. “I see transport, energy and telecommunications, sustainable technologies, rural development, financial services and e-commerce as attractive areas with special expertise” for bilateral cooperation within the framework of the Belt and Road Initiative, Kurz said.”
**Belt and Road Initiative spells opportunities for Austria-China cooperation, Xinhua, April 7, 2018

Belarus

*“Belarus is a landlocked nation. It borders Russia, Latvia, Lithuania, Poland and Ukraine. Due to its strategic location, it is an important trade and transport route in Eurasia. The country’s transportation infrastructure consists of a broad network of motorways, railways and air routes. The thoroughfares crossing the country – including two Pan-European corridors (II and IX) – are the most important component of the European transportation system.”

Belarus is a founding member of the Eurasian Economic Union (EAEU). It is not only as a gateway to the other signatories, Russia, Kazakhstan, Armenia and Kyrgyzstan, but also to the whole regional market. Each year over 100 million tons of European cargo cross Belarus. Russia and the EU receive 90% of the cargo.

***“Belarus is implementing over 30 investment projects financed by Chinese loans, worth about $6bn. The Great Stone Industrial Park is the largest of them. Lukashenka insists that only high-tech companies with guaranteed sales markets should become residents of the park. Currently, eight residents are registered within the park, including China Merchants Group, Huawei, and ZTE. An imbalance in Belarusian-Chinese trade, however, is raising concern within the Belarusian government. In 2016 it exceeded $2.5bn.”
***Belarus and One Belt, One Road, alternative oil, SCTO, Belarus state press digest, May 20, 2017

Czech Republic

*The inroads that China and Hong Kong are making in improving their trade are nowhere more evident than in the Czech Republic. “Hong Kong’s total exports to the Czech Republic surged by 27% to $826 million in the first eleven months of 2017, while its imports from the Czech Republic grew by 14% to $180 million”, with the trade deficit expanding dramatically.

****The Czech president, Miloš Zeman, a populist who was re-elected earlier in 2018. He is on record calling Xi his “young friend”, and Belt and Road “the most remarkable initiative in modern human history”. The following are some details of China’s involvement in the Czech Republic:
• In 2014, the Czech government proclaimed that the country would aspire to become “China’s gateway to Europe”;
o It broke entirely with the pro-democracy principles;
• By 2015, Zeman had named as his honorary adviser Ye Jianming, the chairman of a Chinese mega-company: CEFC, which had arrived in the Czech Republic promising billions of dollars of investments;
• CEFC embarked on a buying spree:
o Travel services;
o An airline company;
o A brewery;
o A football club; and
o A media group. I
o It also lost no time hiring scores of former Czech elected officials, who often double as advisers at various ministries, or indeed within the presidential castle.
♣ CEFC’s main investments in the Czech Republic weren’t economic, they were about buying up the loyalty of Czech officials.
o As time passed, actual investments remained negligible. The few deals that did materialize were mostly real estate acquisitions.
• In March, 2018, Ye suddenly ran into trouble in Beijing.
o News broke that he’d been arrested and come under investigation for financial irregularities.
o Prior to that, in November, 2017, the head of CEFC’s non-profit arm, the former Hong Kong politician Patrick Ho, was arrested in New York and accused of bribing presidents and government ministers in Africa.
• The result was that the heavily indebted CEFC would effectively be taken over by the Chinese state, together with its Czech acquisitions.
o So much for the hopes that the company would save the Czech economy as a private investor.
• Debates have ensued about the wisdom of tying the country’s future to mysterious Chinese entities and to the Communist regime in Beijing;
• Some of the metaphors Chinese media have attached to the Belt and Road project are revealing. They often call it “globalization 2.0”, or the “New World Order”.
o What that vocabulary struggles to mask is that the whole endeavor is driven far more by politics than by markets.
• Other problems are:
o Deals are negotiated at state-to-state diplomatic summits;
o Open tenders are shunned;
o Contracts are awarded by political fiat;
o Ostensibly commercial companies put former politicians on their payrolls by the dozen;
• As it turns out, CEFC’s main investments in the Czech Republic weren’t economic, they were about buying up the loyalty of Czech officials. What China has to show for itself in my country is hardly innovation. Rather, it has brought us a new take on age-old crony capitalism.
****China’s gift to Europe is a new version of crony capitalism, The Guardian, Martin Hala, April 20, 2018

Estonia

*Estonia as can be seen is the closest point of access to China in terms of rail connectivity. However, its not just China that OBOR connects. The South-East Rail section, when completed, will add countries such as Vietnam, Thailand, and Myanmar to that list, although there are serious infrastructure problems in linking these markets to China’s high-speed network.

*****“Among the three Baltic States, Estonia has the highest per-capita GDP. The Estonian economy largely relies on the sectors related to forestry, while its energy sector is based on oil shale. Estonia’s transportation abilities are enabling it to develop into an increasingly important logistics hub moving goods, knowledge and people in the east-west direction. Situated on a busy trading route between East and West, Estonia operates nearly 30 well-developed ports. Among them, the state-owned port of Tallinn is the largest.”

China’s OBOR Initiative reaches the markets of the EU by concentrating on Estonia and its infrastructure and logistics initiatives. Estonia, with a population of just 1.2 million, is among the smallest countries in the EU. China’s strategy has been to target Estonia as the nearest full EU member, and to take advantage of and help develop Estonia’s ‘smart’ IT driven interconnectivity.

Estonia has effectively become the world’s first ‘digital state’ where nearly all interactions between the government and its citizens are now online. This gives foreign nationals, with Estonian e-residency, access to the EU but without having to leave their homes. The current 10,000 e-residents are planned to grow to 10 million by 2025 and increase its services revenue. This speeds up the entire delivery and excise process and adds a digital layer of security, again a perfect match for China and the EU’s needs. This is one reason that Alibaba is interested in partnering with Estonian companies.
*****China Eyes Estonia as Smartest and Nearest Port for EU Access, Silk Road Briefing, July 20, 2017

Hungary

*”Hungary has been a member of the EU since May 2004, and it has adopted the EU’s common external trade policy and measures. A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters”.

******“The centerpiece of China’s OBOR initiative in Eastern Europe is a planned 220 mile high-speed Chinese-funded railway connecting Budapest, Hungary to Belgrade, the Serbian capital. In 2013 it was described by commentators as China’s “express lane” to Europe. The $3 billion investment is set to be the first part of a much larger rail route linking the Chinese-run Greek port of Piraeus with Europe’s heartland.

The Belgrade-Budapest railway has encountered EU delays and contractual problems. Work on the Serbian portion of the line should have begun in November, 2017. But progress on the Hungarian part, which started in 2015, has stalled. This largely comes down to European Union rules. Serbia is only a prospective member of the EU and only has to abide by a looser set of rules.
******China’s Relationship With Hungary Is Being Tested As The EU And Russia Apply Pressure, David Hutt, September 5, 2017

Latvia

Located between Lithuania and Estonia, Latvia provides a strategic location for business operations targeting developed economies of the EU as well as the emerging markets to its east. Latvia is also a natural gateway between the EU and Russia, and the other former Soviet states.

*“Latvia is the transport and logistics hub of the region, with three major, ice-free international ports –namely Riga, Ventspils and Liepāja – closely linked to the country’s well-developed rail, road and pipeline infrastructure. Meanwhile, Riga International Airport is the largest airport, serving about two-thirds of all flights in the region, whereas Ventspils is the busiest port.”

*******“In May 2018, several officials from Beijing showed particular interest in the Port of Riga. It was an opportunity for the Freeport of Riga Authority to present the Port of Riga as an effective transit hub for the transportation of Chinese container cargoes and as a good place for Chinese investment. The representatives of the city of Beijing were informed of the potential investment and cooperation opportunities in the Port of Riga.
*******Riga Port has the potential to become a significant transit hub for the New Silk Road, Embassy of the Republic of Latvia, June 4, 2018

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