Chinese giants thrive as European firms battle belt and road entry barriers, report says

Wendy Wu

European firms are struggling to overcome entry-level barriers to China’s global infrastructure drive, despite Beijing’s promises of inclusion, according to an influential business group.

In a report released on Thursday, the European Union Chamber of Commerce in China, said European firms were interested in taking part in the Belt and Road Initiative but “have come up against a variety of barriers to participation, including, at the most basic level, being unable to access information on project tenders”.

“Although [the initiative] is heavily couched in language about cooperation and inclusiveness, the data does not appear to back this up,” it said in the report, “The Road Less Travelled”.

The chamber surveyed 132 firms and found that only 15 per cent had bid for belt and road projects. Those who did take part largely did so as subcontractors and playing “niche roles” as suppliers of specific technology or know-how that could not be met by Chinese companies.

These specialised areas included safety services and testing, inspection and certification, as well as shipping and logistics.

European companies were given “crumbs from the table, albeit pretty big crumbs”, the report quoted one business executive as saying.

Chinese Foreign Minister Wang Yi seeks Eastern European support for Belt and Road Initiative

One of the barriers to participation was the “vertical integration” of Chinese companies in the projects, ranging from project management to financing and materials.

The approach was “profoundly disconcerting” to European business because it prevented meaningful competition and raised doubts about transparency, quality and cost, it said.

“[The initiative] helps to shine a light on the tight coordination between [state-owned enterprises] under their managing entity, the State-owned Assets Supervision and Administration Commission, as well as the diplomatic support they enjoy when going overseas,” the report said.

But those respondents who did take part in the initiative said the quality of projects had improved after criticism of project sustainability and environmental impact.

“When it comes to the belt and road, China is showing the willingness and capability to adapt, which is a good thing,” chamber president Joerg Wuttke said.

European Union officials have also accused China of trying to use belt and road projects to gain influence on the continent, particularly through noncore EU members such as Greece and Poland.

So far 12 EU members – Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Italy, Latvia, Malta, Poland, Portugal, Romania and Slovakia – had signed up for the belt and road.

“Given that it abides by the one-China policy, in the many areas where the EU holds competency over member states, China should reciprocate and adopt a one-EU policy, rather than trying to divide the EU through bilateral deals,” the chamber said in the report.

China and EU may hold summit in Beijing at end of March, ahead of ‘17+1’ meeting

The EU responded to the belt and road by launching its own connectivity initiative in September 2018, but the chamber said the strategy had attracted little attention among businesses while China’s initiative was “fully developed and proactively seeks out partners and projects, delivers results quickly and is on the lips of leaders across the globe”.

“[It’s] China fast versus Europe slow,” Wuttke said.

“The EU needs to quickly deploy its own outreach and development work, and push its connectivity strategy as both a complement and credible alternative to the [belt and road],” the chamber said in the report.

The group of 17 central and eastern European countries and China, known as 17+1, was raising suspicion in the EU, the chamber said.

Wuttke said that in terms of investment flow to the group, “the only beneficiary that I know and that is very minor is Hungary”.

“It has been to many of them quite a disappointment between promises and delivery,” he said.

That disappointment is partly to blame for tension in ties between China and the Czech Republic.

Czech President Milos Zeman announced this week that he would not attend the 17+1 summit in Beijing in April, saying he did not think the Chinese side had “done what it had promised” on investment.

Wuttke said China had invested over 1 billion (US$1.1 billion) in the Czech Republic over the past decade but did not generate new business because most of the money went into existing facilities. Taiwan, however, had invested 14 billion there over the same time.

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