Belt and Road Initiative in Europe: Reaching Beyond Asia
This is part of our special feature on Europe-China Relations.
In 2017, China-EU trade increased by 15.5 percent compared with the previous year. China-Europe freight trains ran 1,000 times, with a sharp increase by 158 percent. The trains have dual directions, transporting small commodities, textile, and electronic products from China to Europe, and carrying cars, milk, and red wines from Europe to China. The running of freight trains is a vivid microcosm of China’s Belt and Road Initiative (BRI) in Europe. BRI is conducted to enhance connectivity and boost trade and infrastructure construction in Eurasia. It is economic, rather than political or military. Instead of building a revisionist alliance, BRI seeks to create a flexible economic network with shared opportunity.
Hit by the sovereign debt crisis, Europe has proven eager to obtain China’s support in terms of spurring trade and investment. Yet, when BRI was proposed in late 2013, European countries had a lukewarm stance. They showed some interests after March 2015, when some European countries joined the Asia Infrastructure Investment Bank (AIIB). Despite this change, attitudes towards the BRI still vary among European countries.
German chancellor, Angela Merkel, has shown support for BRI, but German media coverage is quite negative. Some reports regard BRI as a geopolitical plan, which would pose threats, while others argue that BRI is too ambitious. German media also cares about whether China’s economic activity is complying with EU rules and standards. French President, Emmanuel Macron, also supports BRI, but he has insisted that Belt and Road should not be a one-way street aiming to build a hegemony. In his eyes, shared participation is vital. Uneasy about BRI, Philip Hammond, UK finance minister, has claimed that China is exploring BRI as a tool to project rules, norms, and standards that are not of a European style. In the Czech Republic, the media pays attention to Czech’s limited export volumes to China. The government there is willing to participate in BRI, while the public is quite distant. Hungary’s decision makers tend to focus more attention on the 16+1 initiative than BRI. In Italy, discussion is more than action with regard to BRI, which is followed mostly by academia, think tanks and the press. Generally, BRI is welcome in Italy, but it is worried that BRI will promote Piraeus as a transportation hub and focuses on the railway routes between Greece and Central-Eastern Europe, which would overshadow Italy’s strategic status. Italian business circles are active in following the progress of the initiative and are keen to learn about new opportunities, while environmental NGOs care primarily about the environmental implications of ports construction.
The financial implications of BRI have also been noticed. Infrastructure projects like ports and railways in Europe under BRI requires investment and financing, which will create close ties between China’s central bank and European counterparts. To lower transaction cost, “offshore RMB hubs” will be established. It is argued that European countries might compete with each other to attract money from China, which will divide Europe and hamper the unification of their common position toward China, and risk inviting China’s economic penetration. This sort of concern exaggerates BRI’s financial impact and underestimates the institutional cohesion and soundness of the European financial system. Besides, closer financial linkage does not necessarily mean penetration or cause division in Europe. It is common among European countries to have different preference regarding a specific outside country or agency, regardless of the tightness of financial ties.
There are some anxieties about the Central and East European 16+1 framework between China and Central and Eastern European countries. This framework is thought by some to represent political involvement of China in this area, bringing about divisions among European countries. There is also suspicion about China’s BRI’s transparency and sustainability. Time will testify China’s strategic intention in CEE, which is merely a platform for economic cooperation without political penetration. Does China have the strength and resources to penetrate into so many countries all over the world? Absolutely not. If BRI is deployed as an ambitious political plan, as imagined by some pessimists, then China would be exhausted both politically and economically, which would be disastrous for China’s development.
However, despite the many criticisms, BRI is generally viewed by European leaders as offering opportunities. European countries are catching up rapidly with the pace of BRI cooperation. Their attitude change from reluctance to activeness derives from their observation of BRI’s running situation in Asia. They watched and waited, until they witnessed real economic benefits gained by BRI participants. BRI is reaching out of the region of Asia. Europe has been involved in this gigantic cooperation movement. Two pillar regions of BRI – Europe and Asia, have been both activated.
Economic Attribute and Impetus
Although there are still controversies over BRI among European politicians, the economic attribute of BRI will gain momentum driven by mutual demand and will contribute to a trans-regional cooperation model. BRI itself was born against the background of China’s increasing manufacturing overcapacity, incurred by the huge domestic economic spur plan, which served as a countermeasure to the 2008 economic crisis. Chinese products and industrial capacity had to find outlets overseas. BRI was initiated to meet the urgent economic demand of China. Provided with abundant funds and mature infrastructure industry, China is capable of materializing BRI. Some countries have big gaps in infrastructure construction. BRI can be a reciprocal cooperative framework for these countries. The economic attribute of BRI in Europe is being manifested by current cooperative progress. Economic impetus will inevitably push forward BRI cooperation.
The Lyon-Wuhan freight train carries French wines and car parts to China. Such freight trains are increasing in both quantity and volume, although there are still some technical problems to be solved. The Chongqing-Duisburg route requires China to negotiate with relevant countries on customs, and the transportation cost problem still needs to be reduced. The influx of 300 tons of Chinese products into the European market is sharply contrasted by European export of a small quantity of high value-added industrial products. This contributes to the inadequate return cargo from Europe. This problem has been noticed and is being resolved. China-Europe rail freight is becoming attractive, and has some advantage in speed and cost, and will have great potential, given the fact that China is Europe’s fastest growing export market. A study by Kevin Smith (2017) demonstrates that the BRI, based on the reduction of transportation costs, would probably increase European countries’ trade by 8 percent, with landlocked countries benefiting most. It is also very conducive to Eastern European trade.
The German government hopes that BRI will alter the economic situation of the least-developed countries, abating refugee problems. It is also expected by Germans that BRI will facilitate German companies’ market expansion efforts in China, and that economic structural reform in the Ruhr Area could be accelerated.
In February 2017, both the Italian President Sergio Mattarella and French Prime Minister Bernard Cazeneuve, visited China with great interest in BRI. These two leaders presented to Beijing their own assets for participating in BRI. Both of them firmly stand by free trade. The involvement of European countries in BRI is driven by economic harvests like the benefits of investments and job creation. Of course, they are concerned about trade deficit as well. European structures and governments are recognizing the extensive gains of economic cooperation under BRI. A European Parliament Briefing Report issued in July 2016 argues that infrastructure construction along the land-based Silk Road Economic Belt might promote economic growth and stability in Eurasia. EU and China can utilize this opportunity to get access to new markets and energy.
Donald Trump’s trade protectionism and de-globalization inclination could bring China and Europe together. The Trump administration retreated from Paris Agreement and even considered retreating from WTO. Germany and Italy, together with China, support the tenet of free trade with a solid gesture of anti-protectionism. Trump’s disruptive diplomacy may prompt Europe to cooperate with China, with BRI fusing the two regions. Since coming to power, Trump has been creating turmoil in global trade, raising unilaterally customs towards products of other economies, with China as the primary target. Viewing China as one of its main competitors, the U.S. government is likely to treat trade campaigns against China as routine strategy. Based on the vast domestic market, China is able to fight back sturdily. Trump’s protectionism will force Beijing to reconsider the trade relations with Washington, and to alter China’s trade setup. The European countries are facing similar situation, although less serious. If these two parties collaborate closely, world trade structure could be rewritten to some extent.
There are some anxieties that under the framework of BRI, Chinese workers would enter Europe and endanger the job opportunities of local workers. But in fact, local workers could be hired for lower wages in some places, and Chinese workers, if working domestically would be more likely to earn a higher salary. Chinese investment tends to be viewed as a stimulating force for local economy. In Slovakia, there are also expectations about the BRI’s positive implications for revitalizing the southern Slovakian economy and adding Slovakia’s strategic status in transport. It is, however, often argued that although BRI is a beneficiary grand policy, countries do not always benefit equally. It will aggravate existing trade deficits of countries in the region with China, and distrust and dissent will emerge, generating detriment to BRI. Countries have diverse economic size, trade advantages, industrialization levels and economic structures. It is impossible to cultivate a trade system characterized by egalitarianism. As for trade deficits, these will change all the time depending on the scope and intensity of trade relations, and also the change of manufacturing and consumption structures.
“Its interest is even more relevant since the United States has become more unpredictable and is turning toward the Asia-Pacific region while ignoring Europe,” French former prime minister Jean-Pierre Raffarin argues, when talking about France’s response to BRI. This judgement clearly reflects the reality faced commonly by China and Europe. They are mutually needed. The change of the global situation has created a precious opportunity for the two parties.
Europe and Asia: A Comparison
BRI operates differently in Europe and Asia. Both regions have some specific advantages and disadvantages in fostering cooperation. Viewed from a broad perspective, Sino-European relations are not plagued by the notions of “peripheral relations,” “regional hegemony,” or “security dilemma.” Therefore, BRI’s real pure economic attribute is most easily embodied in Europe. Nowadays, BRI is reaching beyond Asia, accomplishing cooperation in Europe. The grand picture of BRI is unfolding.
The tributary system, originated from the Ming Dynasty, had a profound influence upon Asian history. Despite its collapse at the end of the nineteenth century and the robustness of sovereignty norms in contemporary world politics, Southeast Asian countries are still vigilant towards China. Sometimes, their officials, domestic public, mass media and intellectuals suspect the intentions of China’s economic endeavor, recalling the centrality of China as an empire in historic Asia. China and Asian countries are geographically near, adding to their fear of inequality, control, and domination while in Europe, such kinds of fear are diluted by distance. Very few European countries are worried about the possibility of being subordinate to China. There are very few security dilemmas between China and Europe. Asian countries have entangling relationships with outside powers. Some Southeast countries are inviting the U.S. to get involved in Asian affairs to counter the influence of China and Japan. This has resulted in occasional military and political antagonism. China-European cooperation under the BRI is kept clear of external intervention and interruption. European countries have a moderate development level. While in Asia, economies have divergent conditions. Political upheavals and regime changes will intensify the danger of BRI implementation in less developed countries. Christine Lagarde, head of the International Monetary Fund (IMF), has warned that in the wave of infrastructure construction, China’s BRI has the risk of adding to unstable states’ debt, which might be unpayable. Thus, the IMF seeks to use the China-IMF Capacity Development Center (CICDC) to assist the Chinese officials in lessening this sort of risk. Compared with Europe, Asia is suffering from some severe territorial conflicts like the Diaoyu Island dispute, South China Sea issue and North Korea. Confrontational statements and actions will suspend or postpone cooperative agendas.
BRI in Europe is not propped up by regimes. The annual China-EU Summit is of significance to gather the leaders and focus on topics of shared concern. China is developing the CEE 16+1 mechanism, demonstrating that in the context of Belt and Road construction, China has endowed the region of Central, Eastern and Southeast Europe with a sort of new significance, and has launched institution building to complement economic cooperation.
In comparison with Europe, the BRI in Asia has some advantages. It is braced by diverse regional regimes, including ASEAN+3, ASEAN+1, AIIB, East Asia Summit, APEC, China-ASEAN Free Trade Area, and so on. Although only the AIIB is designed specifically for backing BRI, leaders, ministers, officials, entrepreneurs, and civil society groups are meeting and communicating with a very high frequency and density under the multi-channel regional regimes. This enhances the possibility of policy coordination and concurrence of opinion. Since the 1997 Asian Financial Crisis, non-traditional security cooperation has flourished in Asia, coping with challenges like currency crisis, terrorism, drug trafficking, smuggling, transnational crimes, pirates, and other social security problems. Non-traditional threats, usually spreading across borders in a region, force Asian countries to fight back based on common fate and destiny. Cooperation movement in this field has tied countries together and help create a very favorable atmosphere for BRI deployment.
Chas W. Freeman, a noted U.S. diplomat, has the similar argument that BRI is non-coercive and market-directed consisting of no military elements. China-Europe cooperation under BRI will demonstrate the BRI’s economic attribute, rather than political or military intentions. The accomplishments will be solid evidence of the BRI’s true intention. Europe, ignored by the U.S., and China, annoyed by the U.S., have profound ground and vast space for collaboration. Of course, the non-political nature of intention does not mean that the BRI will not result in geopolitical change. Any large-scale economic plan will cause political repercussion and break existing regional equilibrium. If we distinguish intentions with outcomes, we should mention that only if China’s BRI seeks to change the political regime of relevant countries and tries to create an exclusive China-dominated regional institution, can BRI be called as intentionally geopolitical or penetrating. Otherwise, what we can find are just sporadic marginal happenings as outcomes. BRI’s success in Asia lies on China’s attractiveness as a huge market, the ascending industrial capacity, and the great demand of Asian countries in infrastructure construction. The success of BRI in Europe, on the other hand, depends on the reciprocity of cooperation, China’s institution building efforts, and the performance of rule compliance of all the parties involved.
Xinghua Liu is an Associate Professor in the Department of International Relations, Zhou Enlai School of Government, at Nankai University in China. He was a visiting scholar at the University of California, San Diego in 2016-2017. His research interests reflect Asia-Pacific Relations, internet and diplomacy, global governance, and international norms.This work is sponsored by the Asia Research Center in Nankai University.
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Photo: Beautiful Curvy roads on Old Silk Route, Silk trading route between China and India, Sikkim | Shutterstock
Published on June 5, 2018.