China’s “One Belt, One Road” initiative aims to develop a string of ports, logistics hubs and other infrastructure from Asia to Europe.
Since 2010, China has infused Europe with a lot of cash, and Greece is one example of a European country that has increased economic ties with China to improve its economy. What happens in Europe matters to America because the U.S. depends on the European Union for much of its commercial activity, and most of the members belong to the North Atlantic Treaty Organization (NATO) which provides collective security. The West should cautiously accept Chinese financial investments in Europe as future military decisions may be held at risk to align with Beijing’s interests.
China is motivated to conduct financial transactions abroad to boost its economy and spread its influence throughout the globe. Since the European Union (EU) has been suffering from debt crises and high unemployment, it is in need of foreign backing. Beijing has been actively investing in energy, real estate, agriculture and food, and other sectors in many European countries, becoming China’s second largest trading partner. Since America has a strong trading relationship with the EU, third-party transactions that take place there could directly affect U.S. economic conditions.
Most recently, the China Ocean Shipping Company closed a deal with Greece to own a majority stake of its largest port, Piraeus. China plans to transform the harbor into a key Mediterranean hub by developing a railway from the dock to other parts of Europe, serving as a gateway for Chinese products into Europe. Alibaba, a Chinese online retailer, is working with Athens to boost electronic trade by increasing accessibility of Greek products to other markets. Hopefully, the increasing economic ties between Beijing and Athens will result in more jobs and growth for Greece, a country in dire need of both with an unemployment rate of 25%. Greeks should take advantage of the increase in trade routes to increase exports such as olive oil and wine, and work with China and other foreign investors to identify other ways to stimulate growth in the economy.
Some Greeks fear that that they will suffer job cuts and decreased wages now that China has privatized most of the port. Sadly, Greece has no other option but to accept foreign investments to improve its economy — its creditors require the creation of a privatization fund of 50 billion euros ($55 billion) as a result of its third bailout agreement. Money for the fund is to come from either selling its assets or profits generated from managing assets. Greece’s creditors claim the fund acts as an insurance policy that its debt will be repaid, but Athens is in the difficult position of having to sell its resources to investors – resources that could potentially help the economy grow if managed well. It is important for Beijing to be sensitive to the fact that Greeks no longer have any say in their economy and to not abuse capitalism by implementing fair labor and wage practices. It is up to the Chinese to gain the trust of Greek citizens and it is up to the Greeks to adapt and make the best of the current situation by ramping up productivity and increasing exports.
Some argue that closer economic ties between members of the European Union and Beijing will allow for better cooperation between China and the West. Beijing’s investments in Europe could improve the international economic system by increasing worldwide demand and by creating more jobs and stronger economies. However, others believe Beijing’s true intention is to spread influence on a weakened and divided continent, Europe.
China’s surge of financial investments in Greece and Europe could result in unintended security concerns in the future. If European countries become too economically dependent on China, they may side with Beijing when it comes to NATO security concerns involving China or its allies including North Korea and Russia. No real voting takes place at NATO because the alliance only makes a decision when every member collectively agrees. This means it would take only one country to withhold support on a path forward to prevent an action by NATO that is not in the interest of China.
Furthermore, Beijing likely will feel the eventual need to protect its commercial assets in Europe by developing military capabilities and becoming more involved in military missions abroad. Djibouti is one example of a country that has received several Chinese financial investments to develop a port and railway connection. Now Djibouti will be home to China’s first overseas naval base with the deployment of thousands of troops and military staff. Russian and Chinese navies even conducted a military exercise in the eastern Mediterranean last year, Joint Sea 2015. Such activity will likely increase as Beijing’s economic stake in the region grows, especially as the eastern Mediterranean becomes a new source of oil and gas.
The West must tread cautiously when accepting Chinese economic deals. Right now, China is using its financial soft power to help European countries such as Greece improve their economies, but it could evolve into flexing military hard power. Beijing will likely secure its financial assets militarily, just like it did with its first naval base in Djibouti and with the Russian-Chinese naval exercise in the eastern Mediterranean last year. If NATO countries are dependent on Beijing to stay economically afloat, that could sway discussions when attempting to make decisions to support the West’s security interests that involve China or its allies.
SOURCE: LEXINGTON INSTITUTE