China to carefully handle complications among EU countries to push forward BRI projects

By He Zhigao Source:Global Times Published: 2019/4/24 19:58:41

Nation to carefully handle complications among EU countries to push forward BRI projects

Illustration: Luo Xuan/GT

Road and infrastructure connectivity is a crucial topic for the Belt and Road Initiative (BRI) and China-Central Eastern European Countries (CEEC) cooperation. Moreover, it is a major component of the China-EU Connectivity Platform and China-EU 2020 Strategic Agenda for Cooperation. 

The Hungary-Serbia railway is among the highlights of BRI infrastructure connectivity. It is the first railway China has jointly built with European countries and a key step for China to gain access to the European market. It also symbolizes the connection between the Trans-European Transport Networks and the BRI, which promotes transportation within Eurasia and more balanced development within Europe.

Ever since the signing of cooperation agreements on a railway connecting Belgrade of Serbia and Budapest of Hungary, the Hungary-Serbia railway has drawn the public's attention. However, the railway is being built at a slow pace. The stretch of rail in Serbia kicked off construction on November 28, 2017, while the section within Hungary has yet to see a brick laid. 

It is easy to connect this procrastination to EU foreign investment screening mechanisms, the confrontation between Hungary and the EU, and China-EU relationships.

The EU's probe into the Hungary-Serbia railway is focused on whether the project has violated tender laws, which require public tender for medium and higher value contracts, procurement rules and financial feasibility. The governmental agreement contracted Chinese-Hungarian Railway Nonprofit Ltd, which was founded by China Railway Engineering Corp, China Railway International Corp and Hungarian State Railways. 

From the EU perspective, the contract is against its tender law. However, just because the Chinese-Hungarian Railway Nonprofit Ltd was contracted does not necessarily mean the company will build the project. Though the EU has stressed that the nationality of investment parties will not affect the investigation result, China's increasing influence has put pressure on the EU. The new framework for the foreign investment screening process, which entered into force in April, citing national security, has more or less targeted China's BRI project and investment activity. 

The relationship between Hungary and the EU will affect the investigation result. First, Hungary is an EU member state. The EU will inevitably impose its policy authority on the country and require member states to comply with the EU laws and regulations on procurement. The bloc will conduct an investigation if it believes the Hungary-Serbia railway lacks transparency. 

Second, Hungary-EU relations soured over the EU refugee mandatory quota program. The intense relationship has had spillover effects on foreign investment projects in which Hungary has participated, which may already be viewed as a challenge and competition to the EU. 

Third, Hungary has many times gained help from the EU Cohesion Fund to build infrastructure. The Cohesion Fund has invested in railway modernization linking Hungary and Romania. There may be more to come, which means Hungary will likely maximize its benefits by choosing infrastructure projects that best align with national interests. 

It seems that the EU has applied double standards as well. For instance, an EU report, "State-Owned Enterprises in the EU: Lessons Learnt and Ways Forward in a Post-Crisis Context," admitted that state-owned enterprises (SOEs) have been resilient to economic crisis, with the profitability of SOEs in the energy and railway sectors remaining positive and stable throughout crisis. But Chinese SOEs, on the other hand, have received much scrutiny when entering the European market. The EU should not look at Chinese investment and infrastructure projects conducted by Chinese SOEs through colored lenses. 

EU law and policy have become a way to exclude other countries on unequal grounds in order to protect large multinational companies of EU member states. It only has negative effects on policy connectivity between China and the EU and hinders the economic development of the countries in need of infrastructure improvement. As such, it would be hard for China to provide public goods for EU regional development, even if China wants to. 

China and the EU committed to build their economic relationship on openness, non-discrimination and fair competition on April 9 as one result of the China-EU summit, vowing to provide each other with non-discriminatory market access. When consensus is reached, it will benefit both sides.

Connectivity has been replacing a geopolitical mind-set. Building infrastructure has become the priority of countries. The spillover effects brought by infrastructure can reduce the gap between CEEC and Western European countries. New businesses can be added to create jobs and elevate economies.

Chinese companies will need to fully learn local rules and laws and improve transparency while further developing the European market. In addition to the screening process at the EU level, each member state can have its own screening process for foreign investment. The EU and its member states may contradict each other. China has to carefully handle these complications. 

The author is a research fellow with the Institute of European Studies, Chinese Academy of Social Sciences.
Newspaper headline: Nation to carefully handle complications among EU countries to push forward BRI projects


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