China's Maritime Silk Road initiative increasingly touches the EU

15-03-2018

Five years since China launched its 21st Century Maritime Silk Road initiative, with the aim of improving its maritime links – on its own terms – with south-east and south Asia, east Africa and ultimately Europe, the country has made significant progress in gaining long-term control over strategic overseas ports. Moreover, the state-driven merger of two giant state-owned shipping conglomerates, China Shipping and China Ocean Shipping Company (COSCO) in 2016, and the subsequent debt-financed takeover of rival Orient Overseas, have brought China closer to global leadership in container lines, with it now in third place. China's massive push for the construction of large-scale, high-risk and debt-financed infrastructure along the Maritime Silk Road has raised concerns about white elephants being built, and host countries becoming overburdened from servicing their debts to China. The large numbers of such projects has seen some host countries forced to repay their loans by handing over the operation of strategic assets to China for decades ahead. Their experience suggests that, while host countries may never see the much touted 'win-win' results of these projects, China may be poised for double wins from them. Among the requirements applicable to securing loans for Chinese-funded projects is that engineering contracts be awarded directly to Chinese firms without public tender. While this requirement practically excludes other countries' contractors from participation, it also challenges China's repeated rhetoric that its initiative is open to third-party participation. In recent years, China has made major inroads into the EU by acquiring minority or majority stakes in port infrastructure of strategic relevance for China. Hence, China is increasingly able to shape outcomes in its interest from within the EU.

Five years since China launched its 21st Century Maritime Silk Road initiative, with the aim of improving its maritime links – on its own terms – with south-east and south Asia, east Africa and ultimately Europe, the country has made significant progress in gaining long-term control over strategic overseas ports. Moreover, the state-driven merger of two giant state-owned shipping conglomerates, China Shipping and China Ocean Shipping Company (COSCO) in 2016, and the subsequent debt-financed takeover of rival Orient Overseas, have brought China closer to global leadership in container lines, with it now in third place. China's massive push for the construction of large-scale, high-risk and debt-financed infrastructure along the Maritime Silk Road has raised concerns about white elephants being built, and host countries becoming overburdened from servicing their debts to China. The large numbers of such projects has seen some host countries forced to repay their loans by handing over the operation of strategic assets to China for decades ahead. Their experience suggests that, while host countries may never see the much touted 'win-win' results of these projects, China may be poised for double wins from them. Among the requirements applicable to securing loans for Chinese-funded projects is that engineering contracts be awarded directly to Chinese firms without public tender. While this requirement practically excludes other countries' contractors from participation, it also challenges China's repeated rhetoric that its initiative is open to third-party participation. In recent years, China has made major inroads into the EU by acquiring minority or majority stakes in port infrastructure of strategic relevance for China. Hence, China is increasingly able to shape outcomes in its interest from within the EU.