Page 23 - bne magazine September 2021_20210901

bne September 2021
Cover Story I 23
Emerging European economies snapping up industrial and commercial
were already facing heavy debt
burdens before the pandemic. Now they have been placed under
new pressure as they struggle to boost spending to support their flagging economies and fund healthcare systems that are creaking under the weight of all the coronavirus (COVID-19) patients, just as tax revenues slump because of the economic shock of the pandemic.
Four countries were identified back in 2018 as most at risk from debt distress due to huge loans they took out to participate in China’s Belt and Road (BRI) initiative. bne IntelliNews looks at how those four countries – Kyrgyzstan, Mongolia, Montenegro and Tajikistan – have handled the crisis.
These four countries are not alone
in embarking on major infrastructure projects under the BRI (initially called One Belt One Road, or OBOR) launched by Beijing to create a huge web of land and sea trading routes, primarily from East Asia to Europe, but also linking in the African and parts of the Latin American continents.
Emerging Europe plays an important role in the BRI; the concept was initially launched by Chinese President Xi Jinping during a trip to Kazakhstan in 2013.
The Eurasian countries are part of a land bridge that links China to Europe, but the BRI also goes on through the Central and Southeast European states are also part of the transit routes as well as potential manufacturing hubs for Central and Western Europe for Chinese business.
The land bridge also has the added appeal of being on dry land and so well away from the sea lanes linking Asia to Europe, the main route in the transit
of goods, and ultimately controlled by the powerful US navy. China is playing a very long game to improve both its commerce as well as reduces its security pressure points should it get into a serious clash with Washington.
Enthusiasm for Chinese investment on the wane
Following the 2008 international financial crisis, Chinese firms started
assets in the region, and at the same time launched transport and energy infrastructure projects as part of the BRI. Back in 2012, China launched the 17+1 (now 16+1 after Lithuania pulled out this year) format for cooperation with the region.
While many governments in the region initially welcomed the billions of dollars flowing from Chinese coffers, especially during and immediately after the Great Recession, relations with some have since soured.
The collapse of conglomerate CEFC China Energy, which had bought up numerous companies in the Czech Republic in particular, caused Prague
to distance itself from Beijing as enthusiasm for China’s investment drive began to wane.
More recently, there were reports
of an exodus of Chinese investment from Russia, which failed to persuade China to finance construction of some major transport and energy projects. Meanwhile, Romania scrapped talks with China’s nuclear power company CGN in favour of a group of western companies for the project to expand its Cernavoda nuclear power plant. Lithuania took
the strongest stance against China in 2021, when it first pulled out of the 17+1 format, then announced plans to establish reciprocal diplomatic offices with Taiwan, causing China to withdraw its ambassador from Vilnius.
The worsening of relations is partly
a consequence of deals that collapsed or projects that have progressed too slowly – even the pro-Chinese Serbian government rebuked China Machinery Engineering Corporation (CMEC) for its work on the Kostolac B power plant – but it also comes in the context of China’s struggle for global supremacy with the US and Washington’s diplomatic offensive in the region. The latter has persuaded numerous Central and Southeast European states to sign up to a declaration on communications security effectively barring China’s Huawei from participating in 5G infrastructure projects.
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