China enters Europe through small countries

Published: 6 July, 2011, 04:56

The Celestial Empire is quietly buying European countries’ bonds

By Vladimir Skosyrev

The People’s Republic of China is quietly purchasing bonds of distressed European countries. China is setting up its lobby in these countries in order to block criticism of its human rights violations and improve export access to the continent, according to the European Council on Foreign Relations. But Nezavisimaya Gazeta’s (NG) sources suggest that Beijing’s increased level of activity in the Old World is driven by a desire to decrease its dependency on the dollar and the US market.

China can rely on the small EU countries – especially Malta, Cyprus and Greece – to block any unanimous EU decision aimed against its interests. Worse yet, argues the European Council on Foreign Relations, an influential think tank, China “is acquiring Europe in cunning ways by purchasing its debt, investing into its strategic sector, and taking advantage of the in-house differences generated by the financial crisis.”

In its report, which will be published in July, the council underscores that the lack of unity in the EU is playing to Beijing’s advantage. It is working separately with each member of the bloc, wittingly buying the member countries’ securities instead of Eurobonds – as “it knows that bilateral communication with the European states is more advantageous than supporting multinational initiatives.”

This policy will yield political dividends in the future, even after the decision-making procedure in the EU changes in 2014. With its sights set on the future, Beijing is creating “a type of a Chinese lobby, consisting of small member states.” In this lobby, Malta, Cyprus and Greece are most inclined to promote China’s aspirations.

The Malta Independent noted that the report’s authors pointed to Malta as a state helping China block any action on behalf of the EU on such issues as Tibet and human rights – just as they did two years ago.

However, Malta is not alone. It is only one of the 12 states – the “compliant mercantilists” – that are avoiding political confrontation with China for the sake of their business interests. This group presumes that good political relations with China will lead to profits in trade.

On the other hand, while making political concessions to China, the above-mentioned countries are not averse to resorting to protectionist and anti-dumping measures against Chinese goods. They also oppose the idea of giving China the status of a market economy.

In a report published by the council in 2009, it was stated that in order to gain China’s backing to turn Malta into a Mediterranean shipping center, Malta had even spoke in support of the removal of the EU arms embargo on China.

In the new report, the think tank predicts that China’s direct investments into the EU will reach $1 trillion by 2020. The problem Brussels is having is with the fact that there is no control system that would give updates on the purchase of European countries’ debt by foreign states. Meanwhile, it is impossible to determine the extent of China’s entry into the European economy, because four-fifths of China’s export capital to Europe travels through Hong Kong and such offshores havens as the Virgin Islands.

In an interview with NG, the deputy director of the Moscow State University’s Institute for Asia and Africa, Andrey Karneyev, said that it is incorrect to view China’s actions in Europe as something insidious. China is sitting on a large bag of money; its foreign exchange reserves exceed $3 trillion. Naturally, it is using the surplus liquidity to expand the consumer markets for its goods, gain certain political advantages, and minimize Europe’s criticism of its human rights violations.

This is a pragmatic approach. Purchasing Spain’s debt cheaply, for example, could lead to China’s profit in the future, as the debt’s value may rise.

Another reason for Beijing’s increased level of activity in Europe and its acquisitions of the euro is to safeguard itself in case of a dollar collapse. China believes that the US dollar holds much too large of a share in its foreign currency basket, concluded the expert.

http://rt.com/politics/press/nezavisimaya/china-countries-foreign-e...

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Comment by youhavetoforgiveme on July 6, 2011 at 3:37pm
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