China’s Silk Road – a challenge for Europe

China is delighted with the withdrawal of the US and NATO countries from Afghanistan. Beijing now has the opportunity to close the last gap in its megaproject New Silk Road (Belt-and-Road-Initiative, BRI) launched in 2013 and to move goods between East and West via Afghanistan’s transport routes.

The BRI aims to stimulate freight traffic between Western European countries and China with trucks and railways through Central Asia and with container ships on the Indo-Pacific routes.

The corresponding infrastructure expansion is (pre) financed by China, the partner countries agree to the infrastructure expansion planned by Beijing on their respective territories. The People’s Republic is also planning investments in agricultural, industrial and raw material projects – this is more than a glimmer of hope, especially for poorer Asian, African and European countries.

After having covered the 10,000-kilometer route, around 60 freight trains from China now arrive at the Port of Duisburg every week. Last August, the Wilhelmshavener Jade-Weser-Port was inaugurated as an official part of the BRI. Overall, China is planning to invest around four trillion US dollars in its mega-project in around 100 countries with around four billion inhabitants.

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The purpose is clear: Beijing wants to strengthen its role in international trade. It’s about well-developed transport links, new sales markets, access to raw materials and the outsourcing of excess capacities. In addition, China wants to strengthen its geopolitical position, not least in military terms. Well-developed new deep-sea ports in the Indo-Pacific region would allow China, for example, to modernize existing shipping routes and above all to outdo its competitor India.

Several countries regret their deal with China

All this called the USA, Japan and Australia on the scene: In 2019 they started the counter-initiative “Blue Dot Network”. The Europeans were only able to agree on an “EU strategy for cooperation in the Indo-Pacific region” in April 2021 – an overdue decision if the old continent is not to be overrun by the BRI.

The commitments of European companies in Central Asian countries are so far manageable, on the one hand because of politically sensitive constellations in these countries, on the other hand because the corresponding markets are considered to be less profitable. The latter also because companies from the EU have to observe comparatively strict environmental requirements and high regulatory standards. They quickly fall behind compared to China.

A coordinated cooperation strategy could actually noticeably improve the competitive position of European companies – especially since several BRI partner countries have regretted having agreed to the deal with China. The initial euphoria about the prospect of Chinese investments has given way to clear disillusionment in Sri Lanka, Malaysia and Thailand, for example, but also in Italy.

The disillusionment results not least from the fact that many partner countries had to borrow heavily from China in order to be able to co-finance the infrastructure investments. Beijing uses the “debt trap” to swear the financially dependent countries to its geostrategic interests. In addition, the partner countries do not have a real say in the specific structuring of infrastructure investments in their own country. Beijing dictates what to do and how.

EU wants to promote partner autonomy

In addition, China only invests if Chinese companies and workers implement the projects. This means that the domestic job gains hoped for by the partner countries are significantly lower than initially thought. Against this background, is the EU strategy for Indo-Pacific cooperation suitable to form a counterweight to the BRI and to slow Beijing’s geopolitical advance – and thus the geopolitical disempowerment of Europe?

The answer is: yes, but only if the fine words are quickly followed by concrete actions. The dissatisfaction of many BRI partner countries forms an ideal breeding ground for forging new alliances and creating alternatives to China’s activities. The Europeans should take advantage of this momentum now. The basic idea of ​​the EU strategy is quite convincing: The EU member states want to increasingly act as cooperation partners in the Indo-Pacific region, for example with free trade agreements, in development cooperation, in joint measures to combat the climate crisis and with regard to the consequences of the corona pandemic.

In principle, in contrast to Beijing’s practice, observance of human rights should be given high priority and the autonomy of the partner countries should be promoted. The plan is to conclude ambitious trade and investment agreements in Africa and Asia, using the agreements already signed with Japan, South Korea, Singapore and Vietnam as a model. Regional stability, prosperity and security in the partner countries are at the center of the EU initiative

All of this is intended to create an antipole to China’s economic expansionism – in trade policy as well as in technological, political and security policy areas. However: The EU strategy for the Indo-Pacific region has so far been kept very general, and concrete next steps are largely lacking. In fact, it was quite a feat to unite the majority of the EU states that were heterogeneous in their assessment of the New Silk Road behind this strategy. While Italy, for example, has distanced itself from the BRI, Greece and Hungary continue to advocate China’s mega-project.

The EU must act together with the US

The very general nature of the EU strategy makes it difficult to implement the projects quickly and effectively in the Indo-Pacific region. The security alliance recently announced by the USA, Great Britain and Australia, within the framework of which Australia no longer purchases nuclear-powered submarines from France, but within the framework of the alliance, has once again made the importance of this region clear – especially for the USA in its power struggle China.

Ultimately, the European Union can only succeed in working together with the USA to put China’s geopolitical claims in their place. The billion-dollar infrastructure initiative for emerging economies that was approved at the G7 summit in June could provide a basis for this.

It should be noted, however: China is indeed a competitor, but also a partner. The EU would be well advised not to jeopardize the positive effects of economic ties with China. When it comes to Beijing, it should be resolute but moderate in tone and avoid unnecessary confrontations.

In short: the European Union’s new Indo-Pacific strategy is a difficult balancing act. It currently seems uncertain whether it will succeed.

The author: Renate Schubert is professor of economics at the Swiss Federal Institute of Technology in Zurich and at the Singapore ETH-Center.

More: What the nuclear-submarine dispute says about Europe’s strategic autonomy.

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