China eyes new markets in infrastructure, renewable energy and agriculture in Eastern Europe

BUCHAREST, Romania – China is on a charm offensive in Eastern Europe, an attempt to secure business ties in a region where the European Union and Russia are increasingly jostling for influence.

Chinese Prime Minister Li Keqiang, trailed by a cohort of 300 corporate executives, met the leaders of 16 countries in Bucharest, Romania, on Tuesday.

Analysts say the Asian economic power is interested in energy and raw materials to fuel its economy and in cheap labour at a time when wages are rising at home. Coupled with a strengthening national currency, China’s growing labour costs risk crimping its exports, its traditional economic strength.

“Our co-operation has political and economic significance. The onus is upon us to translate the blue print into reality,” Li said after the meeting.

Closer ties would bring “massive investments and will lead to a growth in trade,” Li said, adding China was interested in investing in infrastructure, renewable energy and agriculture.

The timing of Li’s visit is significant, coming just two days before the EU is due to sign economic and political partnership deals with several countries in the region.

The 16 European countries at the summit all share a former Soviet communist past. But today, they are a varied group. Some, like Romania, Poland and Hungary, are part of the EU. Others, like Serbia, would like to join the EU but are still influenced by Russia, the region’s long-time dominant power.

With Western Europe struggling with economic growth and Russia accused of bullying governments in the region, some of the countries have been looking farther away for commercial deals.

“Everyone is looking for investment and financing commitments from China,” said Timothy Ash, an analyst from Standard Bank in London. “The Chinese want trade access and are particularly interested in the agricultural sectors in the region.”

For China, establishing stronger relations now could provide it with a gateway to markets in the EU, the world’s largest economic bloc.

“The world has changed and will no longer be as it was before the crisis,” Hungarian Prime Minister Viktor Orban said at the summit. “China will have a decisive role in this new world.”

Li reiterated China’s offer of a $10 billion credit line for countries in Eastern Europe, a pledge first made last year in Poland and received with some skepticism by analysts, who say the real impact will be in trade and investment over the longer-term.

So far, trade volumes between China and the region are modest, but growing.

Poland, the Czech Republic, Hungary and Romania together imported goods from China totalling 31 billion euros ($42 billion) in 2012, while their exports to China last year reached just 4.5 billion euros ($6 billion). In the first eight months of 2013, Hungary’s exports grew almost 14 per cent.

China’s relations with the region were generally strong during the communist era. And apart from the occasional rows over meetings with the Dalai Lama and crackdowns on Chinese immigrants, Eastern European countries are less critical of China’s human rights record. Both tend to prioritize economic pragmatism.

At the summit, China announced a string of preliminary business deals.

It said it intended to invest in nuclear and wind energy in Romania and resume imports of beef and pork. It will also help refurbish railway lines between the capitals of Hungary and Serbia, hopefully cutting travel time between Budapest and Belgrade from around eight hours to less than three.

Last year, China’s Great Wall Motors inaugurated a factory in Bulgaria, becoming the first Chinese automaker to assemble cars in the EU, while China’s Changhong consumer electronics company produces around 1 million LCD televisions a year in the Czech Republic.


Gorondi reported from Budapest, Hungary. Christopher Bodeen in Beijing contributed to this report.