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don’t have funds for such an increase
or they don’t want to do it. So, why did they buy the company in the first place?” Vanicek added.
Different values
In the Western Balkans, Chinese banks have become an important source of finance for coal-fired power plants in particular, as other partners such as the EU and multilateral development banks are increasingly unwilling to finance fossil fuel projects. This has raised concerns about the ability of the region – which contains some of Europe’s most polluting power plants already – to meet EU emissions standards as countries aim for accession to the bloc.
This conflict came out into the open over plans to expand Bosnia’s Tuzla thermal power plant, a project worth BAM1.5bn (€870mn) that will be mainly financed under a €614mn state-guaranteed loan provided by China ExIm Bank. The contractor for the works is China Gezhouba Group.
The project prompted criticism earlier this year from the European Commission both because it entails burning coal and because it is financed by a Chinese bank. Enlargement Commissioner Johannes Hahn criticised Bosnia’s decision to extend a sovereign guarantee, warning that the EU will monitor such issues closely when deciding whether to grant the country candidate status.
“Issues like environmental impact assessments, state aid + public procure- ment procedures will certainly be closely looked at during the opinion process,” Hahn tweeted.
The Bosnian Federation's Prime Minister Fadil Novalic, however, said the entity had no alternative because it risks power shortages by 2027.
Changing policy in a changing world
The former socialist countries are by no means the only world region targeted by Chinese investors. Aside from developed regions such as Western Europe, Beijing has also been highly active in Africa, again focusing on major infrastructure projects. China has emerged as the
single largest financier of African infra- structure, financing one in five projects and constructing one in three, according to a Deloitte study. In September 2018 President Xi Jinping announced a fur- ther $60bn funding package for Africa.
But here again there has been controversy. The Deloitte study
says, “While China’s infrastructure investments on the continent have assisted a number of African states
to overcome their dependency on conditional foreign assistance and follow a non-interference clause, a frequent criticism is that such projects have produced little real benefit for local economies while increasing
their debt burden.”
A report from the Financial Times poured doubt on the benefits of Chinese investments in two high-profile and expensive rail projects in east Africa. The economic viability of the lines,
one from Djibouti to Ethiopia, the other across Kenya from the port of Mombasa to the capital Nairobik, is in question.
The report quoted Xi as saying in September 2018 that “vanity projects” must be shunned in favour of more carefully conceived initiatives that address proven economic bottlenecks.
The RHD/MERICS study doesn’t consid- er the declines in Chinese outward FDI in 2017 and 2018 to be a blip, but rather a “new chapter” in the pattern of invest- ment. The turn of the page was driven largely by the policy line from Beijing.
And while there are reasons for the investment fall-off that can be seen
in the destination countries – political backlashes against Chinese investment, investment motives that don’t line up with market reality – according to RHG and MERICS, “The main reasons for this continued slump are still to be found at home: In 2018, Beijing maintained its tight grip on outbound capital flows;
it pressured highly leveraged firms to sell off overseas assets; and it reduced liquidity in the financial system amidst a broader clean-up of the financial sector, thus drying out financing channels for overseas investments.”
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