China’s spending in Central and Eastern European countries is helping clear a path towards more investment in Western Europe, one former economic adviser to the Serbian government told CNBC on Wednesday.
Beijing’s interest in Central and Eastern Europe is “because they see big potential in their return regarding their path to the European Union,” Vladimir Krulj, also president of Serbia’s Komercijalna Bank, said. He explained that China was forging relationships with countries that were “more embracing (of) European values.”
China has pumped $9 billion into Central and Eastern European nations, according to state-run news outlet Xinhua. Sixteen countries in this region of Europe have signed up to China’s Belt and Road Initiative, a project to revive ancient trading routes.
Serbia is enabling a “more clear path for Chinese investment into Western Europe,” Krulj said.
He also expressed the hope that Chinese investment, by aiding Serbia’s economic growth, would “bring the bridges around … making Serbia being a part of the European Union easier.”
China’s gross domestic product data released Thursday beat expectations — and the government’s own target — by revealing 6.9 percent growth in 2017.
But China’s investment last year was focused on the more developed economies of Western Europe, according to a report by law firm Baker McKenzie out Wednesday. It showed that Switzerland, the U.K. and the Netherlands received the most Chinese capital.
The report said that foreign direct investment in Europe was up 76 percent to $81 billion due to the delayed finalizing of ChemChina’s takeover of Swiss agribusiness firm Syngenta. Otherwise, the figure would have fallen 22 percent to $30 billion.
European attempts to woo China could founder. “You see a clear pull-back in the desire of China to invest overseas,” Tim Gee, global head of mergers and acquisitions at Baker McKenzie told CNBC Wednesday. He attributed this to China’s intention to “exert some control over foreign exchange flows,” adding that future spending could focus on “real economy investments rather than hotels, resorts, entertainment (and) football clubs.”
“I wouldn’t overplay One Belt, One Road at the moment in terms of foreign direct investment,” Gee added, saying that the construction and infrastructure contracts the plan is currently known for “(don’t) translate into permanent capital investment into those countries.”
“I think there are still opportunities for investment of that sort (one-off contracts) in advanced economies which can support the development of construction in One Belt, One Road countries,” Gee said.
One way China could be clearing a path to investment ties in Western Europe