Beijing comes to rescue: China to inject billions of dollars into EU fund

[Shotgunner51]

Exactly. I guess, China's AIIB nicely fits with the new investment push into Europe. China has been placing the pieces slowly. The result will show itself much later, probably.

I don't think the investment would come from AIIB, which is designed for infrastructure projects within Asia, so the fund would come from other sources.

Background of EFSI

Let's explore on European Fund for Strategic Investment (EFSI). The fund was proposed last year by European Commission President Jean-Claude Juncker. Various EU sovereign governments have put in seed money, by now France, Germany, Italy and Poland have each announced they will contribute 8 billion euros, while Spain and Luxembourg have pledged smaller contributions. The bloc is relying mainly on private investors and development banks to fund projects selected from an initial list of almost 2,000 submitted by the 28 member states, from airports to flood defences, that are together worth 1.3 trillion euros.

For more info check:
EUROPEAN FUND FOR STRATEGIC INVESTMENTS (EFSI) - JUNCKER PLAN
- Programme from European Commission

What are the Opportunities for China and EU?

First of all, it is expected to come with a request for return on investment in EU's future infrastructure drive, particularly in the areas of broadband, transport and energy, offering new export opportunities for China's industrial sector. Similarly, as return for investment made in AIIB, European companies and governments want a greater interest in the whole "One Belt, One Road" initiative, in which railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece.

Also it would help China to diversify it's investment away from US T-bills which have no added value other than financial gains, if there is any gain so to speak considering the future uncertainty in dollar's movement vs euro and rmb. For eruo specifically, chances are on resolve of Ukrainian crisis hence normalization of trade with Russia, and on German bailout of PIIGS debts.

Senior EU officials have already met with Chinese banks and technology companies, that include Bank of China , HSBC (HSBA.L), China Construction Bank Europe, Industrial and Commercial Bank of China (ICBC) and Chinese telecoms companies Huawei and ZTE, etc.

Objection from US

The decision to invite China into an EU fund could cause some friction with Washington, which is wary of Beijing's rising influence and upset that Europe rebuffed its calls to stay out of the AIIB.

China is already testing U.S. dominance in Latin America, offering the region $250 billion in investment over the next decade, while Chinese companies have poured money into Africa to guarantee commodity supplies in exchange for building new roads, hospitals and rail lines.

The United States and human rights groups complain that China and its firms are wielding influence partly through corruption and turning a blind eye to labour and environmental standards and human rights. Similar criticisms were long levelled at Western multinationals in developing countries.

Alessandro Carano, an advisor to the European Commission on the fund, defended the decision to welcome Chinese investors. "The purpose is to mobilise the liquidity in the market. We don't differentiate among the owners of the funds," Carano said. "China is a big investor already. We don't want any prejudice."

 

[jhungary]

........What a fun way to say China come into the Rescue with 315 Billions.....That's almost 1/10 of what US Invest in EU.....

United States - Trade - European Commission

US direct investment is at 3.3 trillion Euro (1686 billions Inward, 1681 billions outward.)

How does it make sense?? If China is come to the EU rescue, then can anyone tell me what should US be called to EU??

 

[Shotgunner51]

........What a fun way to say China come into the Rescue with 315 Billions.....That's almost 1/10 of what US Invest in EU.....

United States - Trade - European Commission

US direct investment is at 3.3 trillion Euro (1686 billions Inward, 1681 billions outward.)

How does it make sense?? If China is come to the EU rescue, then can anyone tell me what should US be called to EU??

Well whatever the title says, that's subjective view, emotional if I might say, no attention deserved, only economic implications matter.

Just a minor correction for you on the numbers. The link reads as this, from US direct investment to EU was 1,651.6 billion (inward to EU, euro), from EU the FDI outward to US was 1,686.5 billion (outward from EU, euro), the balance was 35 billion (net FDI outward from EU to US).

 

[jhungary]

Well whatever the title says, that's subjective view, no attention deserved, only economic implications matter.

Just a minor correction for you on the numbers:

The link reads as this, from US direct investment to EU was 1,651.6 billion (inward to EU, euro), from EU the FDI outward to US was 1,686.5 billion (outward from EU, euro), the balance was 35 billion (net FDI outward from EU to US).

View attachment 229937

lol, I think we are a bit misunderstood here, what I said was US-EU direct investment, not solely the number US invested in EU.

Otherwise I would have said Chinese's 315 billions investment is less than 1/10 of what US invest in EU but not almost

Getting a bit lazy on my reply........sorry

 

[Shotgunner51]

lol, I think we are a bit misunderstood here, what I said was US-EU direct investment, not solely the number US invested in EU.

Otherwise I would have said Chinese's 315 billions investment is less than 1/10 of what US invest in EU but not almost

Getting a bit lazy on my reply........sorry

LOL ... Ok dude, you are pro so don't let me down bro!

Anyway don't confuse these terms for they are as different as like total bilateral trade volume vs trade surplus/deficit, or corporate top-line revenue vs bottom-line profit/loss, isn't that obvious? It's fair for EU having 35 billion euro net FDI outflow to US in presence of a sizable trade surpluses (93.3 billion on goods, 20.9 billion on services), and that the euro has slight YOY gain by ~2.5% on US$ by end 2013.

 

[jhungary]

LOL ... Ok dude.

Anyway don't confuse these terms for they are as different as like total bilateral trade volume vs trade surplus/deficit, or corporate top-line revenue vs bottom-line profit/loss. It's fair for EU having 35 billion euro net FDI outflow to US in presence of a trade surplus (on both goods and services), and that the euro has slight gain by ~2.5% on US$ in 2013 over the last year.

lol, I just come back from a bout of pneumonia that almost killed me..........

but yeah, EU is second largest import market to US after China

 

[Shotgunner51]

lol, I just come back from a bout of pneumonia that almost killed me..........

but yeah, EU is second largest import market to US after China

Pneumonia? That's bad, hope you get well soon!

Back to topic, no one is saving anybody these days, unless something of humanitarian nature, otherwise everything is business. Make deals, calculate return for investment, look for win-win synergy, no emotion attached.

 

[Jlaw]

Meanwhile, more and more European countries are likely to follow Hungary’s lead in officially signing onto China’s ambitious Silk Road project,

Hungary had a very bad experience with IMF. It's not surprising they want to be part of this.

 

[BHAN85]

If at all possible, I would personally prefer to work with the Germans or the French, Greece already screwed enough times. The Chinese has a saying "We are not afraid of godlike enemies, but we are definitely afraid of pig-like teammates." Or you know, in this case, PIIGS.

Save Greece is not a good deal for earn money in a short-tem.

It's a good deal from a psychological and marketing view, the best marketing campaign in order to start AIIB and BRICS bank.

Color revolution in Greece?

Too difficult for USA make a color revolution in Greece.
Greece has a ultra-left wing govern.

Greece is a double-edged sword.
Greece can be used by IMF and Germany puppets for threat and bully euro-zone.
But Greece can be used by China too.

 

[TaiShang]

Europe just got luckier. It happens Europe was not "old" at all, unlike how the US views it.

***

Exclusive: China to extend economic diplomacy to EU infrastructure fund

Sun Jun 14, 2015 7:37am EDT

Chinese Premier Li Keqiang delivers a speech with Chile's President Michelle Bachelet (not pictured) during an opening ceremony of a Chile-China economic forum in Santiago city, May 26, 2015.
REUTERS/IVAN ALVARADO

China will pledge a multi-billion dollar investment in Europe's new infrastructure fund at a summit on June 29 in Brussels, according to a draft communique seen by Reuters - Beijing's latest round of chequebook diplomacy to win greater influence.

While the exact amount is still to be decided, the pledge will mark the latest step in China's efforts to shape global economic governance at the expense of the United States, and follows major EU governments' decision to join the Chinese-led Asian Infrastructure Investment Bank (AIIB) in defiance of Washington.

It is expected to come with a request for return investment in China's westward infrastructure drive - the "One Belt, One Road" initiative - constructing major energy and communications links across Central, West and South Asia to as far as Greece.

"China announced that it would make (X amount) available for co-financing strategic investment of common interest across the EU," the draft final statement says, adding that agreements will be finalised at another meeting in September.

An EU diplomat said the Chinese contribution was likely to be "in the billions".

EU and Chinese officials have told Reuters that Chinese banks are looking mainly at telecoms and technology projects.

Chinese Premier Li Keqiang, who will attend the summit in Brussels, will agree with EU leaders that the 315 billion euro ($354.94 billion) fund will "create opportunities for China to invest in the EU, in particular in infrastructure and innovation sectors".

If sealed, the deal will be a success for European Commission President Jean-Claude Juncker, who faced scepticism last year when he proposed the European Fund for Strategic Investment (EFSI), because EU governments are putting in little seed money.

France, Germany, Italy and Poland have each announced they will contribute 8 billion euros, while Spain and Luxembourg have pledged smaller contributions.

The bloc is relying mainly on private investors and development banks to fund projects selected from an initial list of almost 2,000 submitted by the 28 member states, from airports to flood defenses, that are together worth 1.3 trillion euros.

The decision to invite China into an EU fund could cause some friction with Washington, which is wary of Beijing's rising influence and upset that Europe rebuffed its calls to stay out of the AIIB.

China is already testing the United States' dominance in Latin America, offering the region $250 billion in investment over the next decade, while Chinese companies have poured money into Africa to guarantee commodity supplies in exchange for building new roads, hospitals and rail lines.

The United States and human rights groups complain that China and its firms are wielding influence partly through corruption and turning a blind eye to labor and environmental standards and human rights. Similar criticisms were long leveled at Western multinationals in developing countries.

EU-CHINA QUID PRO QUO

Alessandro Carano, an advisor to the European Commission on the fund, defended the decision to welcome Chinese investors.

"The purpose is to mobilize the liquidity in the market. We don't differentiate among the owners of the funds," Carano said. "China is a big investor already. We don't want any prejudice."

In return for its investment, China wants a quid pro quo with Europe, whereby European companies and governments would take a greater interest in President Xi Jinping's "One Belt, One Road" initiative.

China aims to create a modern Silk Road Economic Belt with railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece.

"We are looking for ways to build up synergies between the One Belt, One Road initiative and the Juncker plan to invest in good products," China's ambassador to the EU, Yang Yanyi, told Reuters, describing the exercise like a "dating agency" to line up the right European projects with Chinese money.

"There is a strong political commitment, there is common ground for cooperation. China is in a position to invest."

Senior EU officials have already met with Chinese banks and technology companies.

At one seminar attended by Reuters, executives and officials were present from Bank of China (601988.SS), HSBC (HSBA.L), China Construction Bank Europe (601939.SS), Industrial and Commercial Bank of China (ICBC) (601398.SS) and Chinese telecoms companies Huawei (002502.SZ), ZTE (000063.SZ).

In addition, the Commission is exploring whether the EU could become collectively a member of the AIIB, since the bank is open to "economic entities" rather than just states - a term crafted to enable Taiwan to participate, but which could create a loophole for Brussels.

That would require some capital contribution from the small EU external relations budget. It remains to be seen whether EU states prickly about national sovereignty, such as Britain, agree to the EU joining the bank.

Meanwhile, an EU diplomat said the European Investment Bank has quietly been providing advice to China behind the scenes on governance standards and best practice in setting up the AIIB.

"That has largely paid off so far," he said.

 

[cirr]

Maybe just a fraction of it. And for a good return. I read some Euro politician talking about his concerns of being divided by the US and China.

I think they do not need to be divided. Just getting off the yoke of the US is enough for a strong and unified EU.

Rapid accumulation of exchange reserves continues apace and the lastest figures show that China has again become the No. 1 foreign holder of US debts。

 

[TaiShang]

Rapid accumulation of exchange reserves continues apace and the lastest figures show that China has again become the No. 1 foreign holder of US debts。

It is a good idea to put the money in multi-purpose use, not simply for economic return, but also for geopolitical return. Europe has been under US hegemony for long; deep in the mind of many Euro-politicians, en equal relationship with China is worth getting rid of the US baggage a little bit.

 

[jhungary]

Pneumonia? That's bad, hope you get well soon!

Back to topic, no one is saving anybody these days, unless something of humanitarian nature, otherwise everything is business. Make deals, calculate return for investment, look for win-win synergy, no emotion attached.

yeah, made a big mistake by staying under the rain for 2 night in a row, and caught pneumonia on the process, well I got much better now. Thanks

And yes, back on topic.

Trade plays no part of Geopolitics, it actually dangerous if the Chinese Government think this is actually the case, problem with trade is, everybody does it with everybody, and it's never about anything else but purely business.

It's probably wise to look at investment return instead of "Setting up shop" mentality to start trade relationship with a foreign country, with the recent move of Chinese Foreign trade I am indeed worry about the direction where they will go. Argentina and Venezuela have literally no return and have both been blacklist by majority of big bank. I am afraid if the Chinese intension is simply to spike Washington and established a foothold in South America, then there gonna be hell to pay to keep the shop open.

If I were China, I would probably invest in Brazil or Columbia or even Mexico, yes, China probably can't sway them politically but they are the actual country that showing return. Not Argentina or Venezuela.

 

[Shotgunner51]

yeah, made a big mistake by staying under the rain for 2 night in a row, and caught pneumonia on the process, well I got much better now. Thanks

And yes, back on topic.

Trade plays no part of Geopolitics, it actually dangerous if the Chinese Government think this is actually the case, problem with trade is, everybody does it with everybody, and it's never about anything else but purely business.

It's probably wise to look at investment return instead of "Setting up shop" mentality to start trade relationship with a foreign country, with the recent move of Chinese Foreign trade I am indeed worry about the direction where they will go. Argentina and Venezuela have literally no return and have both been blacklist by majority of big bank. I am afraid if the Chinese intension is simply to spike Washington and established a foothold in South America, then there gonna be hell to pay to keep the shop open.

If I were China, I would probably invest in Brazil or Columbia or even Mexico, yes, China probably can't sway them politically but they are the actual country that showing return. Not Argentina or Venezuela.

Actually you were right, it's just business.

• What is business? It is about material satisfaction, sense of security, spiritual satisfaction, good living experience. People will use whatever tools deem necessary, at lowest costs, for business gain. If you look at tribal wars since beginning of human civilization, and most wars, colonialism, slave trade, these were all merely business tools, just ugly and even inhumane. On cold war, it's all about business concepts, business ideology.

• The term geopolitics is such a big word that it is fashionable to talk about, but what is it exactly? It's nothing more than one of many tools for business, not the other way round. In the arena of geopolitics, hard power is about bending others for one's business need, while soft power is focused on influencing, the ideal negotiation strategy will use both in a harmonious way.

On the region of Latin America, again it's just business.

• Did you notice progress between China and Brazil, Chile, Columbia, Uruguay and Peru? Huge progress.

• If you talk about countries not so friendly with the west like Venezuela or Argentina, well see that as less competition on business for China which can then have better negotiation position. Mirror that to the Philippines, KSA, where others instead of China have better position to do business.

• About return on trade or investment, all countries have a lot more than fiat currencies to trade, you just need to look deeper.

 

[jhungary]

Actually you were right, it's just business.

• The term geopolitics is such a big word that it is fashionable to talk about, but what is it exactly? It's nothing more than one of many tools for business, not the other way round. In the arena of geopolitics, hard power is about bending others for one's business need, while soft power is focused on influencing, the ideal negotiation strategy will use both in a harmonious way.

This is what I am afraid of actually.

Many thinks money can buy you soft power, but in reality, most country will just take your money and go, and if another big enough offer string along, they will simply move on. Better yet, when you stop supporting them, they will simply turn on you

There is a reason why the aforementioned countries turned on the west, while Venezuela turn on US after they stop buying their crude oil (Which due to lower quality and harder to refine) to UK did not bail Argentina out of their financial crisis. Both country were friends, buddy even before said watershed event.

We also see this type of situation happened over and over again during modern US History, this is the believe US actually believe in during the greater part of 20s to 70s and we can see a string of country betrayed US range from Cuba in 1950s, Iran in 1970s, Afghanistan in 1980, Iraq in 1990. I just hope the polly in China can learn from this and stop thinking to use money to buy soft power.

After all, I do still paying tax to Hong Kong Government and indirectly paying for Chinese government, it's okay to use my tax money to build more business but I don't want to see what happened to US during 1950-1990 happened to China