Debate: What China’s new Silk Road means for Europe

Map of China's Belt & Road initiative
Europe sits at the end of Eurasia's largest infrastructure project (source: macpixxel for GIS)

China’s Belt and Road Initiative (BRI) is the biggest infrastructure project in human history. This overarching program – which includes overland routes through Central Asia in the Silk Road Economic Belt, plus a seaborne component called the Maritime Silk Road that skirts the southern rim of Asia on the Indian Ocean route to the Middle East and Europe – is central to China’s ambition of becoming the preeminent world power.

Its completion, planned for the 100th anniversary of the founding of the Chinese People’s Republic in 2049, will cement Beijing’s influence over the huge Eurasian continent and parts of Africa, containing some 65 countries and more than 4 billon people.

The terminus of the BRI’s overland and maritime segments is Europe, which has had “virtually zero” influence on the mammoth project. The passivity of one of the world’s biggest economic, political and strategic players mirrors China’s own passivity when challenged by the West in the 18th and 19th centuries, as Prince Michael of Liechtenstein, the founder and chairman of Geopolitical Information Services (GIS), noted in a recent analysis.

To discuss the new Silk Road’s implications of this project for Europe, GIS brought together leaders from Polish business and politics for a debate at the Warsaw headquarters of the daily newspaper Rzeczpospolita on Nov. 20, 2017. The distinguished panel of speakers included:

  • Ryszard Czarnecki, vice president of the European Parliament
  • Grzegorz Kurdziel, management board member of Poczta Polska SA
  • Cornelius Ochmann, director of the Foundation for Polish-German Cooperation
  • Radosław Pyffel, Polish representative and alternate director at the Asian Infrastructure Investment Bank (AIIB)
  • Karol Zarajczyk, CEO of Ursus SA, a Warsaw-based tractor and agricultural machines manufacturer
Terminus of new Silk Road rail route in Duisberg, Germany
April 11, 2017: Container from a China Railway Express freight train is loaded onto a flatbed trailer at the Duisburg Intermodal Terminal in Germany (source: dpa)

From the standpoint of European politics, the Silk Road projects are both a portent of China’s growing influence in Europe and a challenge, said Mr. Czarnecki. He cautioned, however, that Europe does not have the alternative of shunning closer relations with Beijing. “This kind of opening could be an economic win-win, if it is not a one-way ticket,” the European Parliament member noted. “But it’s important that the benefits are mutual.”

The German experience shows that Europe’s biggest problem in dealing with China is short-termism, according to Cornelius Ochmann. Beijing views the BRI’s 32-year time horizon as a relatively short time, he said, while “Europe has no long-term plan at all.” The European Union must realize that it is not the main partner in the Silk Road. “This project is about strengthening Asian infrastructure,” he said. “Europe is literally at the end of this infrastructure, and it should consider the implications of this.”

For companies like the Poczta Polska, the Polish postal operator, the BRI could determine their future growth prospects. E-commerce and postal packages are a trillion-dollar market, and Poczta Polska is planning on five-fold growth in this segment over the next five years, leveraging Poland’s position as main EU country of entry on the BRI’s planned east-west rail corridor, according to management board member Grzegorz Kurdziel. Competition is fierce, especially from global carriers such as DHL and UPS. That forces smaller operators like Poczta Polska to build alliances. “If necessary, we must use Chinese partners to compete,” Mr. Kurdziel said. “If we don’t, our competitors will just use them against us and take the business.”

Europe is seeing a reversal in the economic pecking order, with investment and influence spreading from east to west

The downside of such relations was explained by Ursus CEO Karol Zarajczyk, who competes head-to-head with Chinese manufacturers in African markets. “Frankly, we see more risks than opportunities,” he said. “We’ve seen how ruthlessly the Chinese compete in Africa, and there is no way their firms will give Western competitors business.” According to Mr. Zarajczyk, Europe is now seeing a reversal in the economic pecking order, with trade, investment and influence now spreading from east to west, rather than from west to east as in the 1990s. The only way Europe can stay in the game is to “compete as a single unit” and drop its ban on public assistance to exporters, Mr. Zarajczyk said. If not, its manufactured goods cannot to compete on equal terms in markets like Latin America.

While these points were acknowledged by Mr. Pyffel, Poland’s representative on the AIIB, he noted that Chinese plans and the Western response had already gone “beyond the discussion stage.” At this point, China’s expansion is irreversible – the main question is “whether we take part or not.” He noted that when China found itself in an analogous position in the 1990s, it was careful to protect its internal market. Europe would also do well to take a pro-active role in developing business strategies to get the most benefit from BRI, as Poczta Polska was now doing. “Otherwise, when the next BRI summit is held in 2019, Chinese bureaucrats will be the ones coming up with ideas,” he said.

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