Eastern stars

Will the New Silk Road Economic Belt provide a smooth or bumpy ride for Chinese investors through Central and Eastern Europe? Vanessa Ip reports

In 2013, Chinese President Xi Jinping announced his plans to establish One Belt, One Road (OBOR), referring to the New Silk Road Economic Belt that will link China with Europe through Central and Western Asia, and the Maritime Silk Road, which will connect China with Southeast Asia, Africa and Europe. Although China is still paving the pathways for ‘Belt and Road’, the plans provide a roadmap for how China hopes to improve its trade and investment links in Europe and integrate further into the global economy.

China is already on track to becoming one of the world’s largest cross-border investors with Europe emerging as a top destination for Chinese foreign investment. Investment in Central and Eastern European (CEE) countries is also far from going unnoticed.

Up until about a decade ago, the CEE bloc had been neglected by Chinese policy makers and investors, but following the 2008 global financial crisis, China began a new era of co-operation with CEE economies – a strategic move that would lay the foundation for the New Silk Road. The strengthening of bilateral and multi-lateral relations has led to vast increases in Chinese FDI. Trade volume between China and CEE countries reached over US$60 billion in 2014, from about US$44 billion in 2010.

Andrzej Blach, a Beijing-based partner and CEE Energy and Projects co-ordinator at CMS, says: “The One Belt One Road programme, which is being promoted by the Chinese government, is expected to bring a new wave of investment into many CEE countries, in particular in the energy and infrastructure area. The ‘16+1’ initiative, with 16 CEE countries and China being signatories, indicates a high level of government support for co-operation between China and CEE.”