China’s investment outflows are growing fast, and Europe is one of their main destinations. Over the past year, China has targeted Central and Eastern Europe (CEE), which has received almost US$7 billion. The Balkan Peninsula, including the Greek port of Piraeus at its southern end, is now the new frontier for Chinese outbound direct investment. In the coming weeks, China will start building a high-speed railway connecting Budapest and Belgrade; it will later be extended to Skopje and Piraeus, where the China Ocean Shipping Company, or COSCO, has a 35-year concession to run two container piers. The new transport route could cut shipping times from China to inland cities of the European Union by one-third, to 20 days.
The investment foray into Eastern Europe and the Balkans is part of Beijing’s broader strategy to export capital and political influence along the planned Silk Road Economic Belt, and the complementary Maritime Silk Road.
At the third meeting of heads of government of China and 16 Central European countries, held in Belgrade in December 2014, Prime Minister Li Keqiang highlighted the role that the region would play in the transport corridors, pledging to inject more investment to boost infrastructure and improve sea and land connections between China and the region. During the Belgrade meeting China, Hungary, Serbia and Macedonia agreed to build a land-sea express route linking Piraeus – one of Europe’s largest container ports – with at least six Central and Eastern European countries, turning the facility into a Chinese hub for trade with Europe. The US$2.5 billion project is financed by soft loans from China’s Export-Import Bank, and will be built by the state-owned China Railway and Construction Corporation. Works on the line are scheduled to begin by the end of 2015, and should be completed in 2017.
The 370 kilometre railway between Belgrade and Budapest will significantly improve transport of passengers and goods, cutting travel time between the two capitals from eight hours to less than three. After further investments in the Greek and Macedonian portions of the line, a double track between the Mediterranean and the Danube will enable trains to run as fast as 200 kilometres per hour. By reducing shipping times, the new line will make Chinese products more competitive in the European market, helping to offset rising production costs.
Chinese goods are currently shipped through the Suez Canal, then in a wide loop through the Mediterranean, the Bay of Biscay and the English Channel to ports on Europe’s north-western coast, from where they are dispatched by road and rail to inland cities. Once the Balkan projects are completed, Chinese products will go from the Suez Canal – which recently doubled its capacity – directly to Piraeus to be loaded onto trains, cutting transit times from roughly 30 days to 20.
Piraeus is central in Beijing’s strategy of linking China with Europe. The Greek port is, in fact, the gateway between the Middle East, the Balkans and European markets – from a Chinese perspective, it is a unique entry point into the EU. Growing investment into the Greek port together with the overhaul of the transport system in the Balkans could make of Piraeus as big and strategic a container port as Hamburg, Rotterdam or Antwerp.
An earlier version of this article was published in World Review