EU Unveils Asia Infrastructure Plan Amid Concerns Over China’s Investment Model

September 20, 2018 Updated: September 20, 2018

BRUSSELS—The European Commission proposed on Sept. 19 a foreign policy plan to improve transport, energy, and digital infrastructure links with Asia but denied seeking to counter China‘s ambitions that have raised suspicion in Western countries.

The plan, which would be backed by additional funds from the EU’s common budget from 2021, private sector loans, and development banks, amounts to a strategic response to China‘s largesse in much of central Asia and south-eastern Europe, where Beijing has invested billions of dollars.

The Commission’s 13-page strategy did not specify how much the bloc would spend, but it is relying on a proposed 60 billion euro ($70 billion) fund that would act as an insurance for investors if projects fail.

That fund could raise more than 300 billion euros between 2021 and 2027 by attracting investors into projects by offering a guarantee to cover the costs if a project fails.

Although not all the money would be spent in Asia, the Commission’s strategy, once agreed by EU governments, would make spending on infrastructure projects in Asia official EU policy.

EU foreign ministers are expected to approve the plan at a meeting on Oct. 15, three days before a summit between European and Asian leaders in Brussels.

Since 2013, China has launched construction projects across more than 60 countries, known as the One Belt One Road Initiative (OBOR, also known as Belt and Road), seeking a network of land and sea links with Southeast Asia, Central Asia, the Middle East, Europe, and Africa.

EU foreign policy chief Federica Mogherini said the Commission’s proposal was not linked to any Chinese policies.

The Asian Development Bank estimates Asia requires more than 1.3 trillion euros a year in infrastructure investment, not all of which can be met by China, the Commission said.

“Our proposals, our policies, and our calendar are not determined elsewhere,” Mogherini told a news conference when asked if the plan was a challenge to Beijing. “It is not a reaction…to another initiative… be it in Beijing, Washington, Moscow, or Timbuktu.”

However, EU officials said they are concerned about what they see is a Chinese investment model which lends to countries for projects they may not need, or be able to afford, making them reliant on Chinese help once underway.

A Chinese-funded highway to link Montenegro’s Adriatic coast to its landlocked neighbor Serbia has so indebted Montenegro that the International Monetary Fund has told the country it cannot afford to finish the project.

Jan Weidenfeld, an expert on Europe-China relations at the Mercator Institute for Chinese Studies (MERICS) in Berlin, said the EU plan was “very much a response to Belt and Road.”

“The main message is that when you’re creating large-scale infrastructure projects, you need to abide by certain norms or standards, whether they be environmental or financial. The EU sees a window of opportunity to steer Chinese policies here,” Weidenfeld said.

By Robin Emmott