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36 I Central Europe bne October 2019
chairman of CEFC, Ye Jianming, was being investigated in China for alleged economic crimes.
The deals to acquire stakes in both Rosneft and Rompetrol Rafinare’s owner, Kazakhstan’s KazMunayGas International (KMGI), fell through, while in Czechia the local regulator officially approved a takeover of CEFC by Chinese state-owned investment company CITIC in June 2018.
The debacle had political consequences in the Czech Republic, where CEFC’s con- nections to top politicians had previously raised concerns. Its investment drive was promoted by President Milos Zeman and his inner circle, who were keen to deal with Beijing. Zeman has been a regular visitor to the Chinese capital.
The implosion of CEFC Europe raised concerns over how stable and beneficial Chinese investments were and to what extent they were a political tool to increase Chinese influence in the Czech Republic.
More recently, fears that tech giant Hua- wei was being used by the Chinese govern- ment to spy on its customers added to the impetus for a tightening of restrictions on Chinese investments into certain sensitive sectors. Several EU countries have already introduced tighter screening for foreign direct investments, which RHG/MERICS’ report links to the slowdown in Chinese investment in the 28-member bloc.
There are also concerns in some coun- tries about Chinese investments in criti- cal infrastructure. Estonia, for example, has demanded more details on the financing of the planned Helsinki-Tallinn undersea rail tunnel linking its capital
to Finland prior to giving the green light for the €15bn project, as reported by local media in August. A few months earlier the project’s developer FinEst Bay Area Development had signed a memo- randum of understanding with China’s Touchstone Capital Partners, which is providing €15bn funding for the project.
Litex’s breakdown
Alongside CEFC’s dramatic collapse, sev- eral smaller deals also involving Chinese investors in the Central and Southeast Europe regions have turned sour.
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Bulgarian carmaker Litex Motors went bankrupt in 2017 after announcing
it would assemble cars from China’s Great Wall brand and sell them both in Bulgaria and the rest of Europe. The Chinese investors were working with controversial Bulgarian businessman Grisha Ganchev, with the support of Corporate Commercial Bank that col- lapsed in 2014.
An analysis from Bulgarian National Radio (BNR) commented that “Besides partnering up with dubious characters, Great Wall doesn’t seem to be very good at doing the math either.” It cited the heavy cost of transporting vehicle parts and aggregates from China to Bulgaria, as well as the small local market. Bul- garia, as the EU’s poorest country,
is dominated by second-hand cars.
Failing to take off
Meanwhile, the aviation sector appears to be particularly plagued by failed investments.
China’s SHS Aviation signed a 15-year lease agreement for Aerodrom Mari- bor in Slovenia’s second city in 2017, promising to turn Maribor into a hub for
of the president of the corporation Wang Jian, in an accident in France. Separately, the group has accumulated huge debts over the past years and cut its investment programme around the world.
However, the airport could get an alternative Chinese investor, given that the government has repeatedly extended the tender period. One of those interested is the UK’s Manchester Airports Group (MAG). It has said that it intends to bid for the concession in partnership with Chinese state-owned Beijing Construction Engineering Group (BCEG).
Also in the aviation sector, Czech media reported in June that the biggest Czech airline, Smartwings, is facing a serious crisis, after its Chinese co-owner disallowed an increase of capital stock for the second time.
The company wanted to compensate for the losses caused by issues with Boeing 737 MAX aircraft, which made up one-third of Smartwings’ fleet, by increasing its capital by CZK700mn (€27mn) or even by CZK1.4bn, according to information obtained by portal Zdopravy.cz in May. The planned
“The implosion of CEFC Europe raised concerns over how stable and beneficial Chinese investments were”
Chinese tourists. This never happened. Instead, SHS announced it was giv-
ing six months’ notice to terminate the agreement due to delays in expanding the airport’s runway. It argued that the concession agreement was “unsustain- able”. The airport has been temporarily placed in the hands of Slovenian state- owned consulting company DRI.
There was also Chinese interest in taking over the management of Plovdiv airport in Bulgaria. A consortium led by the Chinese group HNA won the 35-year concession contract for the airport, but decided against signing the contract. The Chinese investor apparently lost interest in the deal after the sudden death
increase was supposed to be made by two of the biggest stakeholders, Unimex Group and China International Group Corporation Limited, but the latter has so far not agreed to the hike.
“It is a serious situation for sure. Reluctance of the Chinese stakeholder signals it has a little faith in the company. Once you reject an increase of capital stock, you must count on the company’s end,” said J&T Bank chief analyst Milan Vanicek in a comment at the time.
“It remains unclear why the Chinese stakeholder rejects an increase, as there is an objective reason for it, which wasn’t caused by the carrier. Either the Chinese