Category Archives: One Belt One Road

Feb 2016

Issues shaping agenda of Sino-European relations

In 2015, Sino-European relations continued to improve. Yet, the two sides tend to focus on different issues. China has continued its policy of ‘upgrading’ (shengji) relations with the EU, initiated after the landmark visit by Xi Jinping to EU institutions in Brussels in April 2014. Beijing has committed itself to increasing the political and security elements of the partnership with Brussels, while continuing to foster economic and trade relations.

Europe has responded to this by stepping up its relations with Beijing in the monetary and financial fields of policy. Such upgrading was best epitomised by the decision by Europe’s four biggest economies – Germany, France, the United Kingdom and Italy – to join the China-led Asian Infrastructure Investment Bank (AIIB) as founding members in March 2015 – despite opposition from Washington. In 2015 we also witnessed a trend towards the re-nationalisation of the political and security elements of the partnership with Beijing. Away from Brussels, it is the most important capitals, in particular Berlin and – to a lesser extent – Paris, that are now driving forward the politico-security dimension with China.

Jean-Claude Juncker and Xi Jinping

Jean-Claude Juncker and Xi Jinping

The most important issues of the common agenda are: (i) China’s initiative called ‘One Belt, One Road’ and its possible synergies with Jean-Claude Juncker’s European Fund for Strategic Investments (EFSI); (ii) The bilateral investment treaty currently under discussion; and (iii) The decision by the EU as to whether – and how – grant China market economy status in 2016. There are also political and security elements of the partnership under discussion, including the prospect of joint peacekeeping operations, the stability in Africa and the Mediterranean, the fight against terrorism, cooperation in nuclear non-proliferation.

An expanded version of this interview was published in

Dec 2015

More than ever, all roads lead to Rome

As China’s Belt and Road Initiative unfolds, Rome has a pivotal role to play. In fact, the Mediterranean Sea, with Italy at its centre, sits at the end-point of the maritime Silk Road. Combining a land-based Silk Road Economic Belt and a sea-based 21st Century Maritime Silk Road, which connects China to Europe through Southeast Asia, Central Asia and the Middle East, the Belt and Road Initiative aims to boost connectivity and commerce between China and 65 countries traversed by this grand project.

China’s total financial commitment to the project is expected to reach $1.4 trillion (1.3 trillion euros). Beijing has already committed about $300 billion for infrastructure loans and trade financing in the coming years, a sum that includes a $40 billion contribution to the Silk Road Fund for infrastructure development and the $50 billion initial capital (to be raised eventually to $100 billion) allocated to the China-initiated Asian Infrastructure Investment Bank. In March 2015, after the UK lead, Germany, France and Italy joined the bank as a founding member.

The People’s Bank of China, through the State Administration of Foreign Exchange, which manages foreign exchange reserves, has invested more than 3.5 billion euros ($3.9 billion) in stakes of about 2 percent each in 10 of Italy’s largest companies: These include Monte dei Paschi di Siena, Unicredit, Saipem, Mediobanca, Fiat Chrysler Automobiles, Telecom Italia, Prysmian, Assicurazioni Generali, ENEL and the state-controlled ENI (oil and gas operator). This has made the People’s Bank of China the 10th-largest investor in Italy’s stock exchange.

Chinese President Xi Jinping and Italy's Prime Minister Matteo Renzi shake hands

Chinese President Xi Jinping and Italy’s Prime Minister Matteo Renzi shake hands

Alongside the bank, Chinese state-owned enterprises have been active in the Italian market. For example, in May 2014 Shanghai Electric Group bought a 40 percent stake in the power engineering company Ansaldo Energia for 400 million euros. This was quickly followed by China’s State Grid’s acquisition of a 35 percent stake in the energy grid holding company CDP Reti for 2.1 billion euros.

In March 2015, China National Chemical Corp bought a stake of 16.9 percent in Pirelli, the world’s fifth-largest tire-maker, in a deal worth 7 billion euros. Beijing has so far invested more than 6.5 billion euros in listed companies on the Italian stock market, a sum that corresponds to about 10 percent of total Chinese investments in European stocks.

In the past 12 months, Italy has been the top destination in Europe for Chinese outbound investment, surpassing the UK. The ancient motto “All roads lead to Rome” has never rung more true.

An extended version of this article (written with Rita Fatiguso) was originally published in the China Daily Europe

Oct 2015

China’s forays into the West

China’s outbound direct investments increasingly target the countries touched by the One Belt, One Road (OBOR) initiative. This is China’s biggest diplomatic project in decades. It combines a land-based Silk Road economic belt and a sea-based 21st century maritime Silk Road, which connects China to Europe through Southeast Asia, Central Asia and the Middle East, covering 55 per cent of world GNP, 70 per cent of global population, and 75 per cent of known energy reserves.

A study by Grisons Peak, a London-based boutique investment bank, published in June shows that the majority of 67 overseas loan commitments made by China’s largest policy lenders – China Development Bank and the Export-Import Bank of China – have been in areas interested in the OBOR project since its launch in late 2013. Loans for infrastructure projects contribute to upgrading the Chinese economy at a time of domestic restructuring of various sectors – including heavy industries involved in building and maintenance of transport and energy infrastructure, but also consumer goods. Trade financing serves to maintain existing, as well as find new, markets for Chinese products.

The stated aim of this grandiose project is to boost connectivity and commerce between China and 65 countries. China’s financial commitment is likely to reach up to $300 billion in loans for infrastructure and trade financing in the coming years – not counting the leveraging effect on private investors and lenders. This sum includes a $40 billion contribution to the Chinese-led ‘Silk Road Fund’ for infrastructural developments. Sitting at the end-point of the Silk Roads project, central and eastern Europe, the Balkans and the Greek ports have been so far the main beneficiaries of these funds.

In June, Hungary became the first EU member to sign a memorandum of understanding with China on integrating the ‘belt and road’ initiative with Hungary’s ‘opening to the east’ and ‘opening to the south’ initiatives. Poland is also considered a pivotal country for the OBOR project. Plans have been made for building a railway connecting the Chinese province of Sichuan with the Polish city of Lodz as well as for developing several Polish harbours such as Gdansk – all financed by soft loans from China. Other EU members have integrated China’s OBOR project with their own investment strategies or are in the process of doing so. For instance, in June China and France signed an agreement for prioritizing cooperation in third-party markets, including joint ventures and project financing.

At the last EU-China summit on June 29, 2015, Juncker called for the creation of synergies between his European Fund for Strategic Investments and China’s ‘belt and road’ initiative. Premier Li Keqiang replied to Juncker by making a multibillion dollar investment commitment to the EFSI, though no precise amount has been unveiled so far.

Juncker and Li Keqiang  at the EU-China Summit on 29 June 2015. Source:

Jean-Claude Juncker and Li Keqiang at the EU-China Summit on 29 June 2015. Source:

Totalling €315 billion, Juncker’s plan aims to relaunch growth and job creation in sectors ranging from innovation to research, education, and transport infrastructure. Policymakers in Brussels are identifying appropriate cooperation mechanisms between the belt and road initiative and Juncker’s fund. Ideas presented so far include the establishment of a China-EU joint investment fund, joint contracting and co-financing. European critics worry, however, that the initiative lacks transparency rules and the opaque financing deals may threaten the competitiveness of European companies.

Greater Sino-European connectivity will inevitably entail some economic and political costs for Europe – and the same could be said for China. Yet, the OBOR remains, ultimately, a great opportunity for a continent that is still struggling to recover from the crisis. What is urgently needed in Europe is a comprehensive response to the belt and road initiative. The focus should not be limited to economy and trade, but also include political and security issues.

An enlarged version of this article was published with the title China’s inroads into the West in The World Today