The Fast Growing Links Between China and Emerging Europe

E Europe

China’s relations with Emerging Europe are often overlooked, but they are set to take on much greater significance over the next decade as the economic and political linkages continue to grow between Beijing and the diverse countries that make up the region.

Below I provide a brief snapshot of what is happening in trade, investment and politics in five countries across the region. I plan to cover more of the region very soon, particularly Ukraine, where currently the situation is very unstable dynamic.

Bulgaria

Sino-Bulgarian ties have strengthened dramatically in recent years; trade between the two countries soared to EUR 1.9 billion in 2012. Inward investment by Chinese companies has also increased, most notably a deal between Chinese Great Wall Motors and Bulgarian Litex Motors, which allowed China to assemble its first cars in the European Union, a significant milestone, particularly after so many years of European car manufacturers investing in China. By 2015 the plan is for the plant to produce 50,000 Voleex, Hoover and Steed models for tariff free export across the continent.

Russia

Economic ties between Russia and China are dominated by hydrocarbons; China is the world’s biggest consumer of energy and Russia the biggest producer. The recent completion of an oil pipeline has helped to cement that relationship. But Russia has felt threatened by increasing Chinese dominance in Central Asia, a region it views as its own backyard. A wave of Chinese finance and investment in the region is threatening to displace Russian influence which has remained strong since the collapse of the Soviet Union.

Russian companies have become more active across the world, where their expertise in the oil and gas industries has given them a major advantage. As a result Russian firms have been active in Algeria, Venezuela and South Africa, but lack the strong state support or the international vision that Chinese firms have.

Poland

Poland has seen Chinese imports flood into the country with a total of €13.2 billion in 2011, making it the third largest partner in this regard. On the other hand Poland has not had much success in exporting to China, and the government and business will be looking at ways to redress this.

Chinese investment has also been successful in Poland, the Liugong Machinery Company from Guangxi Province purchased the formerly state owned Huta Stalowa Wola (HSW) Group, which specialised in building heavy machinery, such as bulldozers, cranes and wheel loaders.

Hungary

Chinese premier Wen Jiabao described Budapest as a pearl on the Danube, kind words, but there is substance behind them; Chinese companies have placed a great deal of money into the central European state. There are plans to turn the forgotten Szombathely airport into a major cargo hub, complementing the Chinese built logistics centre that already exists in the country. In addition there are now plans to build solar panels, critic acid plants and a whole host of other projects. Wanhua Industrial Group recently spent $1.6 billion on purchasing Hungarian biochemical giant, BorsodChem.

Serbia

China and Serbia have strong political relations, dating from a time when the Balkan state was internationally isolated in the 1990s, which has manifested itself in Chinese immigration to the country. Chinese migrants often sell consumer goods and set up small shops and restaurants across the country. Large Chinese companies have set up a major wholesale centre in Belgrade and telecom company Huawai has also been actively investing in the country.

The country also received a €1 billion loan from the Chinese EXIM bank to help upgrade the country’s national grid. Given this strong wave of investment I expect Belgrade to be the centre of Chinese influence in the Balkan region.



Categories: China Goes Global, Country Investment Analysis, Kula Ring Trade Blog, Silk Road

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