Europe must retain united front as #Chinese expansionism intensifies

With China pouring ever more cash into European infrastructure, time is of the essence for the EU to finalize plans for its foreign direct investment (FDI) screening framework. At present, only 15 out of 28 member states have FDI controls in place. The absence of bloc-wide legislation is allowing China to invest in, infiltrate and even unsettle EU member states with alarming alacrity.

As Beijing continues to throw significant capital at its ambitious Belt and Road Initiative (BRI), there is mounting evidence, from Djibouti to Sri Lanka, of how such allegedly benign investment can quickly turn into political influence and expansionism. The EU must act quickly to follow America's example with regards to screening Chinese FDI, before the bloc ends up with Djibouti-style problems in its own backyard.

A string of ports

Europe has seen such an incredible influx of Chinese capital of late that a staggering 10% of European port capacity is now controlled by Beijing. As well as owning stakes in the bloc’s two busiest harbours, Rotterdam and Antwerp, China retains shares in ten other European ports. The Chinese acquisition in 2016 of the Greek hub Piraeus made it the fastest-growing port in the world, although it also brought allegations of human rights abuse concerns and tax fraud.

Despite the bad press, Greece is so pleased with the situation that it is considering selling the nearby Elefsina port to China as well. Meanwhile, Italy’s hardline government is hoping to replicate and even surpass Piraeus’ success in Trieste, and could even become the first G7 country to join the BRI before the year is out.

Investments already paying off?

This substantial Chinese investment into the EU—€30 billion in 2017—has prompted the bloc to begin developing a robust FDI screening protocol for all member states. The damage, however, may already be done, with several EU countries siding with China over their neighbours.

In 2016, Hungary and Greece prevented the EU from condemning Beijing’s South China Sea trade spat with the Philippines, while the next March, Hungary refused to denounce the Middle Kingdom for its detention and torture of lawyers. Similarly, the Czech Republic’s previously scathing attitude towards China’s human rights record has vanished after an influx of Chinese money into the country, with the Czech government and media now taking pointedly pro-Chinese stances.

But perhaps most eye-catching of all, Greece blocked an EU statement criticizing Chinese human rights violations in July 2017, resulting in the bloc’s first ever failure to deliver a unified statement at the UN Human Rights Council. One EU diplomat called this failure to agree on a joint position “shameful”, while European Commission President Jean-Claude Juncker indicated it should serve as a catalyst for reform within the EU.

Troubling precedents

A change in FDI screenings is particularly necessary given that examples from around the world suggest that the ultimate consequences of becoming deeply indebted to Beijing may extend far beyond softening policy positions. The diminutive nation of Djibouti in the Horn of Africa is often held up as the archetypal example of Chinese neo-colonialism in practice, despite the Asian superpower’s vehement protestations to the contrary. With one of the world’s most impoverished economies and few natural resources to speak of, Djibouti retains pride of place in China’s African aspirations due to its commanding position over the Bab-el-Mandeb Strait, a narrow strip of water through which as much as 20% of global trade transits annually.

This strategic location makes it clear why China chose Djibouti for its very first overseas military base, opened in July 2017. Although Beijing has tried to downplay the outpost’s importance by referring to it as an “overseas logistical supply facility”, there is little doubt about its real purpose. Satellite imagery has revealed the numerous military attributes of the base, including an “unprecedented four-layer security ring” and three underground floors which can house up to 10,000 soldiers. China didn’t even wait for construction to be completed before conducting live-ammunition drills onsite.

The establishment of the Djibouti base has raised eyebrows in Washington and Brussels for a number of reasons. Not only is it incredibly close to Camp Lemonnier, the only American military base in Africa, but the Chinese are also believed to be ramping up control over the nearby Doraleh Multipurpose Port (DMP).

It’s rumoured that Beijing enjoys exclusive access to at least one of the port’s berths, while Djibouti’s forcible seizure of the port from Dubai-based company DP World after just 12 years of a 30-year contract was interpreted by Washington as a precursor to gifting it to China. The Doraleh port debacle has raised concerns that Djibouti might try something similar with Camp Lemonnier halfway through its own 20-year lease—or with the French and Italian bases nearby.

Conquest by commerce

While Djibouti might be the most glaring example of China’s recent expansionism, it’s far from the only one. Last December, an insolvent Sri Lanka was forced into handing over control of the Chinese-funded port of Hambantota. Elsewhere, recent analysis by the Center for Global Development (CGD) concluded that eight nations around the world, from Tajikistan to the Maldives, were in severe risk of falling into exactly the kind of “debt-trap diplomacy” that has ensnared Sri Lanka. The West isn’t immune to such machinations, either; NATO member and EU candidate Montenegro featured on the CGD’s list of the eight most vulnerable countries.

As EU member states like Italy and Greece forge closer financial links with China, the bloc itself risks falling into such a debt trap. It is particularly imperative, at a time when the Union is strained by pressures from Brexit to the rise of populism, that the bloc not be divided over the question of Chinese investment and influence.

To counter snowballing Chinese expansionism the EU’s diplomats must work together to put in place a framework which ensures that Europe doesn’t harbour its own Hambantota or Doraleh. China’s first overseas military outpost is unlikely to be its last, but Europe would do well to make sure it doesn’t become the next t

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