Ukraine crisis significant for Chinese investment in Europe

14/03/2014

Beijing has made clear that it wants to retain good relations with the new, pro-Western coalition government in Kiev.

By Ivana Jovanovic and Drazen Remikovic for Southeast European Times in Belgrade and Banja Luka -- 13/03/14

photo

(From left) BiH Prime Minister Vjekoslav Bevanda, Chinese Premier Li Keqiang and Romanian Prime Minister Victor Ponta pose for a photo at a November summit in Bucharest. [AFP]

The Ukraine crisis is putting China on the horns of a dilemma between Russia on one side and the United States and Europe on the other, with potentially billions of euros of Chinese investment in Europe at risk.

Southeast Europe analysts and foreign policy experts say China has reason to act cautiously and avoid isolating itself from states that already are part of the European Union and others in the Balkans that are pursuing EU accession.

"The Chinese views of this crisis are extremely complex," Charles W. Freeman Jr., co-chairman of the U.S. China Policy Foundation, told SETimes. "I think the Chinese are probably counselling restraint in Moscow."

On March 2, Chinese Foreign Ministry spokesman Qin Gang urged all sides involved in the Ukraine situation to comply with international law and seek a political solution to their disputes through dialogue and negotiations.

"China is deeply concerned with the current Ukraine situation," Qin told reporters. He had been asked to state China's position after the Federation Council, the upper house of the Russian parliament, authorised President Vladimir Putin to use military force if he judged it necessary to protect Russian citizens and soldiers in Ukrainian territory.

Qin condemned the use of violence by all parties in the Ukraine crisis. China's state news agency Xinhua reported Qin said China had advised all sides in Ukraine to resolve their conflicts peacefully in accordance with the country's law, safeguard the legitimate rights of the Ukrainian people and re-establish social order as quickly as possible.

Qin emphasised that China was basing its position on the Ukrainian issue on the principle of non-interference in any country's internal affairs. Beijing continued to respect the independence, sovereignty and territorial integrity of Ukraine, Xinhua reported.

Continuing good relations and steadily expanding trade with both the 28-nation European Union and the United States are central to President Xi Jinping's strategy. China has significant investments in Southeast Europe, and all signs point to further development of its economic interests in the region.

"The political legitimacy of all modern Chinese governments rests on their continuing ability to provide economic growth and rising standards of living to their people," Ralph Winnie, head of the China program at the Eurasian Business Coalition, told SETimes.

In November, at the second summit of the prime ministers of China and Central and Eastern Europe in Bucharest, Chinese officials agreed to form a $10 billion credit line for projects in 16 European countries. The group includes Albania, Bosnia and Herzegovina (BiH), Bulgaria, Croatia, Macedonia, Montenegro, Serbia and Romania. China also committed to finance the modernisation of a rail line between Budapest and Belgrade.

Among China's investments in the Balkans is a 900 million euro highway construction project in Montenegro that will be financed by Chinese banks. In BiH, Chinese investors are building a power plant worth 150 million euros that is due to be completed in 2016.

In late February, China opened an office for Chinese investments in Zagreb, Croatia, which aims to attract investments in all Balkan nations.

Trade between China and Bulgaria has seen rapid growth in the past few years, rising from $984 million in 2010 to $1.895 billion in 2012, according to estimates from China's Ambassador to Bulgaria Wei Jinghua. The volume of China's investments in Bulgaria expanded from 14.4 million euros in 2012 to 77.6 million euros in the first half of 2013. The Great Wall auto plant in the village of Bahovista, near Lovech, is the first Chinese plant located in the EU.

After a recent visit to Beijing, Bulgarian President Rosen Plevneliev announced that two of China's state-controlled construction companies have made offers to build the Cherno More highway, which is planned to connect Black Sea coastal cities Varna and Bourgas.

Vladimir Milenkovic, director of the Serbia Investment and Export Promotion Agency, told SETimes that trade with China has increased in the past decade and now accounts for 7.2 percent of Serbian imports. The two countries signed a strategic partnership agreement in 2009, resulting in infrastructure and energy sector development backed by a loan from China's Export-Import Bank.

"China has a strong partnership with Russia, but it must be stressed that this country is almost always for a peaceful solution, which could be seen in their official stand about Ukraine," Milos Solaja, a professor at the Faculty of Political Science in Banja Luka and director of BiH's Centre for International Relationships, told SETimes.

"The summit in Bucharest shows that the Chinese expansionary economy in full swing. Economic objectives of a superforce must go out somewhere and China's economy has nowhere to expand except to the west," Solaja said. "But this cannot be achieved with weapons, and that is why China is forcing peaceful solutions, and in principle it will support Russia because of its Asian interests. And this will be China's balance between the East and West."

Ivona Ladjevac, a Far East expert and associate researcher with the Institute for International Co-operation and Economy in Belgrade, said southeast Europe is important to China because of its connection with the European Union.

"Contacts with some other markets are there as well, and one of these markets is the CEFTA [Central European Free Trade Agreement] countries, with which Serbia connects China and provides it with some economic benefits," Ladjevac told SETimes.

"China constantly insists on respect of international law and principles of non-interference in internal matters of third countries," Ladjevac said. "Since the situation in Ukraine is a bit confusing, the statements and position of China are confusing a bit as well. So we can hear statements of its foreign affairs officials saying that China hopes that some kind of balance will be found and that international law principles will not be damaged. And then the same officials' statements say that they do understand historical circumstances and processes that had been happening in Euro-Asia when it comes to the Russian position on Ukraine's situation.

"By strengthening relations between China and West Balkan countries, which means with EU countries as well, China contributes to improvement of relations between the EU and Russia, and eventually to a peaceful solution of the Ukraine crisis."

Beijing has made clear that it wants to retain good relations with the new, pro-Western coalition government of Ukraine in Kiev, Foreign Ministry spokeswoman Hua Chunying announced in Beijing on March 4th. China wanted to maintain and expand its existing strategic partnership with Ukraine on the basis of equality and mutual benefit, Xinhua reported.

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Hua told a daily press briefing that the Beijing government continues to monitor events unfolding in Ukraine and expressed hope that conditions are improving.

"We hope that the political process of resolving the crisis in Ukraine will continue to move ahead within the framework of the law," Hua said.

Correspondents Martin Sieff and Tzvetina Borisova contributed to this report.

In what ways can China play a role in helping to stabilise the unrest in Ukraine? Share your thoughts in the comments section.

This content was commissioned for SETimes.com.
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