China eyes Europe's ex-communist East

Chinese Premier Wen Jiabao ends a four-nation European tour with a two-day visit to Poland starting Wednesday, focused on a high profile regional trade and investment summit with 16 fellow premiers.

Having already inked an accord with Iceland on cooperation in the oil-rich Arctic region and opened the Hannover Messe -- the world's leading industry and trade fair -- with German Chancellor Angela Merkel, Wen will now turn his attention to the Europe's up-and-coming ex-communist East.

Premiers from Albania, Bulgaria, Bosnia and Herzegovina, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Romania, Serbia, Slovakia, Slovenia and host Poland are to attend the unprecedented Poland-Central Europe-China trade summit Thursday in Warsaw.

Three hundred Chinese firms and 450 companies from across the region, including 300 from Poland, are also due to attend.

China invested a modest $821 million (622.44 million euros) in the region between 2004-10 with annual averages doubling in recent years, according to a recent report by the Central & Eastern Europe Development Institute (CEED).

Warsaw-based economist Witold Orlowski believes that with "mountains of euros and dollars they really want to spend," the Chinese are eager to capitalise the region's stability, growth and competitive prices to gain "perfect access to the West European market" -- still Beijing's top export destination.

The EU's imports of Chinese goods have quadrupled over the decade spanning 2000-10 and were worth 243.8 billion euros ($321.57 billion) in January-October 2011 alone, according to Eurostat data.

And while the recent hike in Chinese investments in debt-stricken eurozone countries has caused concern, their non-eurozone central and eastern EU and non-EU neighbours alike are rolling out the red carpet.

Chinese expert Cui Hongjian confirms there is ample interest in the region "due to low local labour costs and preferential policies."

The head of the European department of the China Institute for International Studies -- a Chinese foreign ministry think tank -- told AFP that "comparatively speaking, China has fewer political contradictions with central and eastern European countries (than with the West) and feels comfortable cooperating with them."

For China, "Europe is one market and one production site," observes Orlowski, a consultant for PricewaterhouseCoopers and former Polish presidential advisor.

But despite it's full pockets, he insists China still has a lot of homework to do before it can invest in Europe with the kind of savvy displayed by Japan.

So far, ex-communist Hungary, which joined the EU in 2004, hosts telecoms equipment provider Huawei, China's largest to-date investments in the region. It expects to see turnover more than double to three billion dollars in this year over 2011.

The Bank of China has also been using its base in Budapest as a trampoline to invest across the region since 2003.

Last October, the Polish capital Warsaw hosted its first major Chinese trade congress. Local media now suggest the Shanghai Electric Group is one of two Asian investors vying to build and manage a new coal-fired electricity plant in Poland, worth an estimated five billion zloty (1.19 billion euros, 1.56 billion dollars).

Meanwhile in January, Chinese machinery group LiuGong agreed a deal with the Polish Treasury to acquire Poland's bulldozer firm HSW as well as its distribution branch Dressta for an estimated 56 million euros ($72 million).

But Beijing's first step into the region's public works sector suffered a major flop last June when Poland dropped the first Chinese firm to win a major deal in the EU.

Construction on part of the A2 highway linking the Polish and German capitals Warsaw and Berlin came to a grinding halt after contract winner COVEC -- the China Overseas Engineering Group -- failed to pay Polish subcontractors.

The project was crucial to Poland ahead of the Euro 2012 football championships starting this June. With less than 50 days to go until kick-off, it's far from finished.

"If the Chinese want to participate in Europe's infrastructural market, obviously they should learn how to operate here," Orlowski told AFP.

"It seems that they were sure it was a similar game here to what they've learned in Africa," he added.

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