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    China Business
     Oct 14, 2010


China steps up role in Europe
By Antoaneta Becker

LONDON - China's increasing financial involvement in debt-ridden European nations has divided observers, inviting comparisons on one side to a Chinese Marshall Plan for Europe, and to a Chinese communist takeover of the continent on the other.

During his week-long tour of European capitals, Premier Wen Jiabao spearheaded an intensive Chinese diplomacy seeking to win skeptics and defuse fears of Beijing's growing international clout.

On his stops in Greece, Belgium, Italy and Turkey, he held talks about bolstering market access for Chinese companies into Europe, signed investment deals and talked long-term action plans for China presence in European countries. The message

 

delivered was unequivocally that China is now an important player on the European financial and economic arena.

Veronique Salze-Lozac'h at the Asia Foundation compared China's "rescue plan" for struggling European economies to the Marshall Plan of the 1940s, saying it marked a turning point in recognizing China as a key world player.

"Like the Marshall Plan in its time, China's offer to help Greece is not about altruistic solidarity, and is far from selfless philanthropy," she wrote in a report last week. She said it amounted to "a clever and enlightened economic and financial strategy".

On his very first stop in Athens, Wen pledged renewed commitment to Europe's financial stability and described the European Union and China as "passengers in the same boat".

"We hope that by intensifying cooperation with you, we can be of some help in your endeavor to tide over difficulties at an early date," Wen said in a speech to the Greek parliament. "China will not reduce its euro-bond holdings and China supports a stable euro."

Wen Jiabao offered to buy more Greek government bonds when Greece returns to borrowing on the international debt markets. He also proposed to set up a US$5 billion fund to support the upgrading of Greece's merchant fleet with Chinese-made ships, and pledged to support more Chinese investments in the Greek economy.

This comes on top of existing agreements to lease and operate the country's main port for 35 years and to build a logistics terminal to connect with southeastern Europe. As Greece is preparing to sell off state assets to raise much-needed cash, China is discussing further investments in the country's railways, telecom and construction sectors.

Beijing's foray into Greece has raised hackles, with some observers reviving the phantom of a China threat.

"It was Winston Churchill and Harry Truman who took steps to prevent a communist takeover of Greece; it is Wen Jiabao who now makes the running by promising to buy Greek bonds when they are once again offered on world markets and to help that bankrupt nation's recovery with investments in its economy," Irwin Stelzer, director of economic policy studies at the Hudson Institute wrote in the Sunday Times in Britain.

Greece is hardly the only European country where officials are looking at China as the possible underwriter of their countries' economic recovery. Earlier this year, Beijing bought 400 million euros (US$558 million) of Spanish government debt. Portugal and Ireland, both threatened with debilitating debt or bailout costs, are also said to be courting Chinese lending.

By wooing individual indebted European countries, China is seen by some as implementing a "divide and rule" strategy in Europe where talk about coordinating a new united EU policy on dealing with the economic giant has so far failed to produce a coherent policy framework.

The Chinese "complain that it is too difficult to deal with Europe that speaks with so many different voices but in fact they have managed to use this to their own advantage, playing different members off one another," said one EU official based in Brussels.
Chinese experts say Europe has the same reasons for deepening relations with China as Beijing.

"For Europe, China is a bargaining chip that increases its clout versus the US," says Zhang Guoqing, pubic policy researcher with the School of Government at Beijing University. "Europe is clear that while some people in Washington are preparing to wage a trade war with China, this is their opportunity to boost trade and investment from China."

Zhou Hong, director of the Institute of European Studies at the Chinese Academy of Social Sciences, says China meant well in Europe but acted rashly.

Beijing acted "without thinking through the reactions from the European side", she said in an e-mailed comment. Before rushing into these investments, China should have consulted Brussels, mindful that such Chinese investments may be regarded as "an intrusion into the European rules of the game".

But China is "almost always condemned whether it does something or if it does not", says Duncan Freeman, researcher with the Brussels Institute of Contemporary China Studies. Whether seen as a Chinese Marshall Plan or as a communist takeover, both are an exaggeration of what China has done in Greece and of the effects its investments will have in the country, he asserts.

"It is not China but the European Union and the IMF [International Monetary Fund] that hold the real power of making and breaking Greece," Freeman says.

(Inter Press Service)


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(24 hours to 11:59pm ET, Oct 12, 2010)

 
 



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