China amended its large investment agenda even before the Covid-19 epidemic. Now, the Asian behemoth appears to be adopting less intrusive types of economic cooperation.
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| COSCO: The main player of Chinese BRI project |
After years of tension and uncertainty, Berlin has made a decision and has opened the door to Beijing. China, through the state-owned company Cosco (China Ocean Shipping Company), would have purchased 24.9% of the shares in one of the four main terminals in Hamburg’s port, one of the largest in Europe, from Hamburger Hafen und Logistik AG (Hhla), which is owned by the German city’s federal administration. The Asian behemoth would therefore have access to one of Germany’s most critical locations, courtesy to Chancellor Olaf Scholz (then-mayor of Hamburg), who agreed to sell the previously intended 35% share.
Despite resistance from six German ministries, the Bundestag, and the country’s security services, the chancellor goes straight. And he does it by guaranteeing the 24.9% that he will not enable the Chinese behemoth to influence terminal management or have a veto over strategic business or personnel choices. There is one more stipulation: Cosco would not be allowed to nominate members of management.
The Chinese behemoth isn’t just interested in the port of Hamburg. The Cosco group is the world’s fourth largest container shipping company, and it owns 40% of Vado Gateway, a deep-sea container terminal in the port of Savona Vado Ligure that is jointly managed by APM Terminals Vado Ligure Spa, an Italian company comprised of APM Terminals (50.1%), Cosco, and another Chinese company, Qingdao Port International (9.9%). However, Cosco’s footprint in ports across the world is extensive.
As a result, the Chinese behemoth also tiptoed into Trieste’s harbor. Hamburger Hafen und Logistik AG has acquired 50.01% ownership of the Julian port’s multifunctional terminal “Piattaforma Logistica Trieste” (Plt). This share includes the Chinese behemoth.
To soothe the uproar that emerged in the Bundestag, the German logistics and transport firm stated (on its website) the nature of the partnership with Cosco which – we read – “does not establish unilateral dependence”. On the contrary: “strengthens supply networks, secures jobs and encourages value creation in Germany”. As a result, as Hhla points out, the Chinese conglomerate does not have sole rights to the Tollerort Container Terminal, which is administered by a German corporation.
The topic is complicated, but specialists ensure that the presence of Cosco at the Julian port, even if tiny, should not pose any safety concerns. But how did we end up here?
To understand how Cosco reached Trieste’s port (by a secondary entry), we must go back to 2019, when Italy signed the Memorandum of Understanding with the People’s Republic of China. The yellow-green government, then in charge of Palazzo Chigi, opened the Italian door to the New Chinese Silk Road (Belt and Road Initiative – BRI), President Xi Jinping’s infrastructure mega-project.
The initiative, launched by the Chinese leader during his official visits to Kazakhstan and Indonesia in 2013, has a double thread: the terrestrial economic belt of the Silk Road Economic Belt and the maritime one of the Maritime Silk Road. Initially, the two routes were referred to as One Belt, One Road, and later came under the umbrella of the Belt and Road Initiative.
An all-Italian rarity
As a result, Italy became the first and only G7 country to sign this pact with the Asian behemoth. The signing of the Memorandum was preceded by a slew of commercial agreements, including one between the ports of Genoa and Trieste and the state-owned China Communications Construction Company (CCCC), that have piqued worldwide interest. The case of the Greek port of Piraeus, privatized in 2016 by the Chinese company Cosco, which controls 67% of the infrastructure, has alarmed the European Union and the United States, which are concerned about the growing presence of Chinese state-owned companies in foreign ports, with a particular focus on underdeveloped or economically troubled infrastructure.
Why is China focusing on Europe’s key infrastructure? The reasons are straightforward, and can be found primarily in the critical role that ports play in the Belt and Road Initiative, a project that intends to improve connectivity along the trade route and provide access to bigger overseas markets. Above all, it is a reaction to geopolitical and economic imperatives.
First and foremost, Beijing places special emphasis on the BRI’s water route because it provides a safe and protected path away from the political and military turbulence that may occur along the Central Asian land route (the route through which – inevitably – the New Silk Road passes terrestrial). Chinese corporations are steadily expanding their footprint in marine infrastructure from northern to southern Europe.
And Beijing has thought of everything to help the maritime route. The launch of the Maritime Silk Road was followed in 2016 by the establishment of the Asian Infrastructure Investment Bank (AIIB), an international institution with 106 members from various countries (including China, the main partner, India, Russia, and Italy) that has so far invested 39.44 billion dollars in 205 infrastructure projects.
The Chinese behemoth was able to spread broadly in Africa, Asia, and Latin America because to the significant economic contribution of the financial institution established to fund the infrastructure project. Cosco holds minority shares in the North Sea ports of Antwerp and Zeebrugge, as well as the ports of Las Palmas in the Canary Islands, Rotterdam in the Netherlands, Bilbao and Valencia in Spain, and Haifa in Israel. Of course, we must include the ports of Piraeus and Hamburg.
However, in recent years, Chinese interest in southern European ports has grown. Their allure can be traced back to a single event, writes Francesca Ghiretti in an IAI report: the enlargement of the Suez Canal and a rise in the amount of traffic to and from the Mediterranean, which corresponded with greater Chinese investment in marine infrastructure in southern Europe. The Suez Canal extension was completed in 2016, the same year Cosco purchased a stake in the Greek port of Piraeus.
However, the Chinese behemoths’ actions are not always obvious. One of the objections directed at the BRI is a lack of transparency regarding the megaproject’s true aims and objectives, which encompasses 147 nations, representing two-thirds of the world’s population and accounting for 40% of global GDP.
Above all, questions have been raised about the shadows cast by Chinese loans lent to unstable countries to construct roads, bridges, stadiums, and hospitals under the BRI banner, with significant economic gifts made under murky terms. It is the so-called “debt trap” that poses a significant threat to debtor countries. A method that permits various Chinese state-owned companies (SOE) who engage in BRI projects to penetrate the assets of nations that owe the Asian behemoth a lot of money. Several investigations, however, have revealed Beijing’s intention to restructure debts rather than delivering public infrastructure.
The opacity and ambiguity of the contractual conditions caused many to raise their eyebrows in 2019 on the occasion of the signing of the Memorandum of Understanding inked between Rome and Beijing, says Ghiretti in his article. However, as the scholar notes, “The Memorandums of Understanding between the ports of Genoa and Trieste and the CCCC were broad expressions of purpose. As in previous occasions, they had the potential to be a first step in boosting the CCCC’s presence in Italy and Europe. The agreements, we learn, limit the extent of the Chinese giant’s activity, which, like other topics, must secure contract awards through public bids “.
As a result, the national and European legislative frameworks limit foreign corporations’ capacity to buy assets in crucial areas of national economies. Furthermore, in Italy, the government has the Golden Power to oversee and possibly restrict entering foreign investments.
The new look of the Belt & Road Initiative
However, the surge of enthusiasm for Chinese generosity has been dampened by China’s economic and geopolitical troubles since the BRI’s inception. Even before the Covid-19 outbreak, the Asian behemoth shifted its strategy of huge investment, which piqued the autocrats’ interest and goals. According to statistics from the Boston University Global Development Policy Center, China reduced their money donations from 75 billion dollars in three years to 3.9 billion dollars in loans, a 94% reduction.
As a result, the fall in loans cannot be linked just to the economic instability created by the epidemic, but to a combination of geopolitical factors, internal economic challenges in China, and the implementation of laws designed by Beijing to limit and regulate investments overseas. abroad.
In recent years, the People’s Republic has proposed a new perspective on the intercontinental mega-project, adopting a more sustainable and cost-effective model: from infrastructure, Beijing has moved on to promoting agreements in sectors such as commerce, telecommunications, green energy, and academia.
China appears to be embracing less intrusive types of economic partnership in order to maintain trade links with nations along the New Silk Road, including Italy. Because Rome, under the leadership of Giorgia Meloni, has placed the decision to abandon Xi Jinping’s mega-project on hold.
Prime Minister Meloni, who, according to an unsubstantiated report published by Intelligence online, may visit China during the Third Silk Road Forum in the spring, has shifted her stance toward the Asian behemoth. From an anti-Chinese stance, the nationalist who sits in Palazzo Chigi appears to have altered her mind: maintaining good relations with China is now critical.
The author Serena Consul is an Italian prominent journalist.