European Companies Not Profiting From China’s Belt and Road Initiative

European countries left our of China's Belt and Road Initiative.

China's Belt and Road Initiative. (Image: via Wikimedia Commons)

A survey by the European Chamber of Commerce has shown that China’s BRI (Belt and Road Initiative) is not benefiting European companies. The study indicates that China’s state-owned companies are favored over foreign competitors, with European companies often given short shrift in the bidding process. To date, only 20 out of 132 such firms said they have won a BRI bid.

Even more shockingly, just 10 percent of the companies bidding for BRI projects said that they learned of the project from a public announcement. “The vast majority were informed either by a [Chinese] partner company or [directly] by the Chinese government, meaning that they were essentially hand-picked…” the EU Chamber said in the report.

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Rebirth of the Silk Road 

The Silk Road of Ancient China was an influential channel for trade between East and West and was listed as a World Heritage Site on June 22, 2014, at the 38th World Heritage Committee meeting.

Xi Jinping first proposed a “New Silk Road” in 2013, later renaming it the “Belt and Road Initiative.” The project extended ancient trade routes via networks of upgraded railways, new maritime ventures, ports, pipelines, power grids, and highways.  Today, the BRI is the single largest infrastructure project in the world, with the aim of extending China’s trade capability.

European companies are being left out in the cold

Many companies are being left out of the billion-dollar contracts for constructing and supplying the new transport routes between Asia and Europe. Chamber President Joerg Wuttke said the survey showed that European gains from the BRI have been “quite insignificant,” with European companies tending to fill only ”niche” roles.

Joerg Wuttke said the survey showed that gains from the BRI have been 'quite insignificant.'
Joerg Wuttke said the survey showed that gains from the BRI have been ‘quite insignificant.’ (Image: Screenshot via YouTube)

Thus, companies outside China fear the BRI is little more than an attempt by China to monopolize emerging markets and many have pulled out of projects altogether even as new deals are being signed. European countries have sharply criticized China’s foreign policy initiatives for their lack of transparency and fairness in the bidding and procurement processes.

More than half of the companies surveyed said there were not many alternatives to these government contracts. The only chance to obtain a contract is partnering with Chinese firms needing technologies or practical experience that the Chinese side lacks, the report said.

The EU must take steps to protect the interests of European companies.
The EU must take steps to protect the interests of European companies. (Image: via Wikimedia Commons)

Furthermore, the report stated: “Smaller, less developed countries that are unable to set their own standards…will certainly come under considerable pressure to simply adopt Chinese standards.” This kind of strategy requires struggling countries to become politically and financially dependent on Beijing. Wuttke said the BRI appears to have a “spoke and hub model,” with China at its center.

The EU must take action now

The study suggests that companies receiving Chinese state backing in the domestic market retain an unfair advantage in international markets where competing firms are regulated by the free market and do not receive government aid. These advantaged companies are being shown further favoritism in BRI contract decisions.

The board asked the EU to think about how to deal with these market distortions. It only stands to reason that better ethical standards must be adhered to with regard to business administration while keeping a clear vision in mind for the future.

China’s BRI risks being a flop for European companies if the EU doesn’t step in with new proposals. It was decided that the EU’s own infrastructure initiative, the “connectivity strategy,” should be prioritized as an alternative.

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