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A BRIEF INTRODUCTION TO CHINA’S RECENT FOREIGN INVESTMENT PROJECTS

Updated: Apr 15

Since the 70’s the Chinese government has successfully expanded its economy and political ties with other countries, up to the point where the PRC became the world’s second-largest economy and one of the most influential and powerful forces in the geopolitical structure and international organizations. After the Chinese economic reforms during Deng Xiaoping’s mandate, the government’s five-year plans gradually focused on accelerating the urbanization process and opening the country to the international market. The evolution of the Chinese economic system led to stronger ties with western countries and fierce economic advancement. Five-year plans still pertain to the economic growth of the country, as we can observe in the latest globally extended international trading plans, which now mostly concern high-tech industries and facilitating commercial routes’ access.


PRC’S MOST RECENT PLANS

2024 is a significant year for the People’s Republic of China, as it marks the conclusion of the first decade of the Belt and Road Initiative, the Chinese government’s project aiming at the expansion of its economic influence around the world, and it leads another globally important project to its end: the Made in China 2025 project, which was conceived in 2015 as a plan to surpass western countries in high-tech manufacturing. This article aims to dive into China’s recent projects to strengthen its commercial bonds with the West and to impose itself as a leading country in the tech development industry.


MADE IN CHINA 2025

The project, started in 2015, consists of upgrading by 2025 every aspect of the Chinese manufacturing industry, ranging in between 10 different sectors: advanced railway transportation,  aerospace equipment, agricultural machines, biopharma and high-tech medical devices, energy equipment, high-end computerized machines and robots, maritime equipment and high-tech ships, new energy and energy-saving vehicles, and new generation information technology. China’s principal resolutions also include embracing a new sustainable development policy and stopping relying on international technology research. To reach these goals, the government invested in both state-owned and private companies through different subsidies, such as low-interest loans, tax breaks, and investments in foreign companies, to gain more information. By 2020, the capital raised for the government guidance funds established to help domestic companies amounted to 627 billion dollars (Congressional Research Service, 2023). To reach those goals, the government and state-owned entities also invested in building new technology development centres, while giving companies targets to increase the labour productivity, lower emissions and energy consumption, and grow sales. Although it may seem like a smooth process, the problem is that even with the government’s subsidies, not many companies will be able to achieve the agreed targets (The Centre for Economic Policy Research, 2023). Indeed, not many manufacturers increased their productivity, so just some selected companies will receive the aid, as many small companies do not meet the standards to be the powerhouse of this project. (Institute for Security and Development Policy, 2018). The expected results due next year are not yet completely met because the project has encountered many obstacles in its journey: not many industries were able to raise their production level to compete with western giants, and the western governments restricted their trading relationships with China.


THE REACTION OF US AND EU

Western countries’ reaction was unsurprisingly distrustful, as proven by the hostile behaviour of the White House: the US’s government has been very sceptical and cautious about the project, worried about possible ill-intentioned manoeuvres by Beijing, that is accused by Washington of trying to steal and use western sensitive data, as we saw happening when the US declared that “Huawei and ZTE threats to national security due to the potential for Beijing to use their networks for spying or sabotage.” (Council of Foreign Relations, 2019). Another not-so-convincing influence for western governments is the fact that China encourages its companies to invest abroad but doesn’t guarantee the same freedom for the foreign companies that want to buy and invest in China. Beijing explained that they’re just imitating what other countries did to improve the tech industry, giving considerable state support to research and development, like South Korea did in the Twentieth century, and supporting native industries like the US has been doing for many years. The growing concern of the American government led to trading friction between the West and China: since Trump’s mandate in 2018, the government has applied extra tariffs on different goods bought from China. Many European countries, especially Germany and France, have expressed their concern about China’s investments in Europe, claiming a “stealth” of sensitive technology and an unfair investment system that allowed China to invest in Europe but didn’t allow other countries to invest in China. Other smaller countries, like Greece and Portugal, highlighted that “restricting outside capital could hamper their economic growth”, but the UE still urged China to widen  foreign access to its national market and to cooperate on investment agreements (Council of Foreign Relations, 2019).


THE BELT AND ROAD INITIATIVE IN EUROPE

China’s presence in Europe is still well welcomed by countries with a less stable economy, especially in the Balkans, where China’s presence has become more and more persistent. Given their political history, these countries have not abandoned the idea of getting close with the CCP while working on EU membership.  The strongest deal that Beijing has arranged is in collaboration with Montenegro, in which China has invested a considerable amount of money in infrastructure building, research and education partnerships, upgrading the country's railway network, and developing its energy sector. The bold initiative of this newly independent country took a sensitive turn because the money lent by the Chinese government equals a quarter of the GDP of Montenegro. The country borrowed almost 1 billion dollars from the Chinese EXIM bank, to be used mostly for the great project of the Bar-Boljare Highway, Montenegro’s “project of the century”, for the reconstruction of the Pljevlja coal-based thermal power plant, and academic collaborations. Owing such a large quantity of money to Beijing, Montenegro has reached out to French and American banks to reduce the interest loan of the EXIM bank from a 2% rate to a 0.8% one. (European Council on Foreign Relations, 2022). Even though the EU is trying, through the New Economic and Investment Plan for the Western Balkans, to reduce the risk of contracting such debts with non-western powers, Beijing’s investment plans are still appealing to south-eastern European countries, as demonstrated by the construction of the Pelijesac Bridge in Croatia by the China Road and Bridge Corporation, and by the Summit held in Bulgaria to celebrate the BRI 10th year initiative (IFI, 2024).


WHAT ABOUT ITALY?

Speaking of Italy, the BRI agreement that was subscribed to in 2019 by Giuseppe Conte, the at-time prime minister, is now probably not going to be renewed by the current Premier, Giorgia Meloni. The main reason that led Meloni’s government to uncertainty is the little growth that Italian exportations towards China have faced (+27% between 2019 and 2022) compared to the increase of Chinese exports in Italy (+82%). Another key factor in the possible slackening of Chinese-Italian ties is the recent stabilization of Euro-Atlantic relations thanks to the election of a Democrat president in the USA and NATO’s members cohesiveness since the start of the Russian invasion in Ukraine. A steadier bond between Italy and the US is obviously issuing the renewal of the BRI in Italy, which could be an obstacle to further cooperation between Beijing and Rome, as the Chinese ambassador in Rome, Jia Guide, stated in a recent interview (ISPI, 2023).



Bibliography

•“Is ‘Made in China 2025’ a Threat to Global Trade?”, Council of foreign Relations, 2019.

•“La questione del rinnovo del memorandum sulla Belt and Road Initiative”, ISPI, Guido Alberto casanova, 2023.

•“Made in China 2025” Industrial Policies: Issues for Congress”, Congressional Research Service, 2023.

•“Made in China 2025”, Institute for security and Development Policy, 2018.

•“Mapping China’s rise in the western Balkans”, European Council on Foreign Relations, Vladimir Shopov, 2022.

•“The actual effect of China’s “Made in China 2025” initiative may have been overestimated”, Centre for Economic Policy Research, Lee Branstetter & Guangwei Li, 2023.

•“The Future of the Belt and Road in Europe How China’s Connectivity Project is Being Reconfigured across the Old Continent – and What It Means for the Euro-Atlantic Alliance”, IFI, Nicola Casarini, 2024.

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