China has invested heavily in Europe, particularly in the wake of the global financial crisis of 2008 when the region was strapped for cash.

This means that Chinese firms are now shareholders in many key European infrastructure projects. These include ports, wind and solar farms, telecommunications, airports - the list goes on.

But there are growing fears that Beijing could use its strategic investments to further its own political ambitions. A recent dispute between the Baltic nation of Lithuania and Beijing shed light on potential reactions from China.

It’s led European governments to step up their scrutiny of Chinese investments and attempt to figure out how to redesign their relationship with Beijing.

Dr Yu Jie from Chatham House told CNBC that we’re going to see more frictions regarding Chinese investment in Europe looking ahead.

Watch the video above to find out more.

#CNBC #China #Europe #Business

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This is Europe's second largest port and 1 of many examples of China's strategic investments in the region.

With its deep harbors and close proximity to 1 of the world's busiest sea routes, the port of Antwerp-Bruges in Belgium is an important part of the country's economy.

Chinese firms have a 20% stake in container terminals across this port in Antwerp, and 90% in its sister port of Bruges.

Chinese investments in Europe have accelerated in the period after the global financial crisis of 2008, when the continent was strapped for cash.

But there's been a realisation in recent years that these investments have poured into critical sectors, such as tech and energy, and that is now pushing the continent to reassess its own policies.

The Port of Antwerp-Rouge is 1 of the largest ports in Europe.

So evidently the trade Far East-Europe is important to us as well.

And if you look on the total volumes handled in this Port of Antwerp-Rouge, which is about 290 million tons, China represents around 6.5% of that.

So say about 20 million tons of the cargo passing through the port, so originating from China or going to China.

But if you only look at the containerized part, then China has become our first trading partner.

I was wondering whether you have felt any sort of pressure from European politicians to reduce the importance that China has for this port.

We are the port authority, but we do not make policy.

Nobody likes to rely too much on 1 player, whether it's a supplier or a customer.

I wouldn't say there is a pressure from the EU or from the political side to do less with China.

But There is, I think, a reasonable request to think on how we can reduce our dependence.

China's Costco shipping company and China Merchants Group, both state-owned multinationals, have stakes in the container terminals of the port of Antwerp, Bruges.

Both did not reply to a CNBC request for comment.

Together with Hutchison Port Holdings, a private company headquartered in Hong Kong, they represent the main players of Chinese investments across European ports.

Here's A map showing where Chinese firms have been shareholders of European ports.

For instance, Costco is a majority shareholder of Piraeus, Greece's biggest port.

More recently, Germany controversially allowed Costco to buy a minority stake in the port of Hamburg.

This was lower than the planned 35% position, but it sparked some infighting within Germany's governing coalition.

China's export-oriented economy, so by having the access of the port, that would enable China to ship their products and manufacturing goods around more easily.

Key to that is its Belt and Road Initiative, which was launched in 2013 to develop infrastructure globally that would support trade.

After the Belt and Road Initiative, we have seen an acceleration of acquisitions in ports and the facilities of port.

So that is really for a trade and economic reason.

But I think there's also a slightly bigger political question.

If China would like to practice the so-called economic statecraft by using its financial resource to extend the political influence and acquire facilities like ports and facilities like infrastructure, would be a way of exerting that political influence as well.

Economic statecraft is the use of financial, regulatory or economic tools to achieve a certain goal.

And there's growing concern in Europe that China might use these strategic investments in the continent to exert political pressure.

In fact, the EU started legal action against China at the World Trade Organization in 2022 after Beijing imposed trade restrictions on Lithuania, a Baltic nation that in 2021 allowed Taiwan to open a de facto embassy in its capital.

China does not recognize Taiwan's independence and interpreted Lithuania's decision as a threat to its political stance.

China's mission to the European Union office was not available for comment when contacted by CNBC.

However, I had a chance to speak to the Minister of Foreign Affairs of Lithuania and asked them if he has seen any examples of China exerting economic coercion in Europe.

Well we were 1 example not using an investment but you know Lithuania made a decision to establish stronger economic ties with the island of Taiwan.

China did not want to force us to change our position and they use economic leverage.

They did not have an investment, we had some substantial trade.

So in order to coerce us to change the course, they stopped the trade completely.

We have seen, essentially, since the sovereign debt crisis, China buying ports, utility companies.

There's been a huge investment from China in Europe.

Luc Carnot from the Pointe du Vent, where Bruges shares similar views.

Of course, there is a reason for concern.

We have seen that China uses its political power to have impact on the economy.

If you look on the control they want to take in certain businesses, we should not be naive at all.

But then again, it's not by running away and start to shoot from the side that will solve the problem.

It's by talking openly and pinpointing the issues that we can make steps forward in mutual understanding.

China's strategic investments in Europe go far beyond ports.

They include electricity firms, wind and solar farms, airports, soccer teams, the list is vast.

And this wide network of investments is adding to the concerns that China might use them to exert politica pressure.

This chart gives us an overview of China's investments in Europe geographically and by sector.

The real estate market in the UK, for example, is flush with Chinese capital.

Besides luxury housing in central London, Chinese stakes in the country include distribution centers, retail parks and trading estates.

Since 2021, Chinese investments accounted for 20% of international buyers in home sales above £10 million.

Up until 2017, we have really seen a wave of Chinese stay-at-home enterprises and private companies to invest in Europe.

They naturally consider European countries a safe place to park their money.

I think also given the political ambience between China and Europe has now turning much cooler, and also brought down by the pressure from the United States.

And we have seen far less and quite reticent move from the Chinese side, and particularly on stay-home enterprises.

Investment flows from China and Europe reached a peak of almost 60 billion euros in 2017, but it has dropped in recent years.

It seems to be picking up again following the pandemic, but is still far from the historic highs.

Well, 1 of the reasons is the increased scrutiny by European authorities.

There's of course quite a lot of investment also from the United States.

Why is Chinese investment particularly difficult?

The biggest worry comes from the sheer power of an amount of investment that is able to buy up industries, sectors.

And then We have to understand how PRC is functioning.

It's a super centralized country where the decisions, they boil down to a couple of people.

So the same person could be making decisions on the military scale, political, geopolitical, economic, trade, whatnot.

In 2022, the Italian government candid the sale of a military drone company, Alpi Aviation, following an investigation that the buyer, Mars Technology, was a shell firm of 2 Chinese state-owned enterprises.

In the Netherlands, the government pressed with export restrictions on certain semiconductor manufacturing equipment in 2023, which aims to curb China's access to the critical technology.

We're going to see more and more frictions regarding the Chinese investment in Europe.

And I think that process will become even more difficult.

And that would actually not just be continental Europe, and that would include the UK as well, which already set quite robust defense measures regarding screening on the Chinese investment coming to Europe.

Data from UK authorities show that between April 2022 and March 2023, more than 800 deals were referred to the government under the National Security and Investment Act, which allows politicians to call in acquisitions that could harm national security.

More than 40% of the call-in notices involve investments from China, the highest compared to any other nation.

EU policymakers here in Brussels are also looking at toughening up their investment rules even further.

In fact, that's part of a broader drive looking at how to become less dependent on China, thus reducing Beijing's leverage on the block in the event of any rocky patches in their relationship.

China is the EU's biggest supplier for several critical raw materials, such as lithium, which is used in the production of batteries.

And this matters because the EU has strict climate ambitions and without China's resources, the EU could struggle to achieve them.

The worry comes from the fact that the de-risking mantra in Europe could be influenced by the US and become more of a national security issue, rather than what Europeans really have in mind, that is more like, well, excessive dependence, especially on decarbonisation.

That's worrisome because we really want to decarbonise.

It remains to be seen how both the EU's and the UK's relationship with Beijing will unfold, but Alicia thinks it will be a lot more restrictive.

And seeing China move up the ladder in sectors where the EU had a comparative advantage, whether it's wind turbines or solar panels before the European sovereign crisis, for example, This is the key.

For Europe, our de-risking is becoming an economic need.

So just finally explain to us, what can the Chinese authorities do in that regard?

To start, China doesn't think Europe is a big competition to them.

So they're not taking this seriously, which is good for us.

They actually don't think we can respond to their very fast innovation.

They feel that they're moving into digital industrialization, that we have nothing to do on that front.

And therefore, they're not getting ready.

While Western officials are conscious it is not in their interest to cut ties with China completely, it is clear they have become more skeptical about closing deals with Chinese firms.

But with the volatility of the presidential election in the United States, reducing Europe's appetite for Chinese capital may be trickier than expected.

Let me just get your thoughts on 1 final topic, which is the election in the United States.

How could that impact this conversation on de-risking from China if, say, President Trump returns to the White House.

The only thing that's going to happen is that everything I said is going to be much faster because Europeans will be forced in a way that will be much harsher than under Biden.

So It doesn't change the direction, it only changes the speed.

And I think Europeans will feel indeed so threatened that they will go alone.


Speaker 0: This is Europe's second largest port and 1 of many examples of China's strategic investments in the region. With its deep harbors and close proximity to 1 of the world's busiest sea routes, the port of Antwerp-Bruges in Belgium is an important part of the country's economy. Chinese firms have a 20% stake in container terminals across this port in Antwerp, and 90% in its sister port of Bruges. Chinese investments in Europe have accelerated in the period after the global financial crisis of 2008, when the continent was strapped for cash. But there's been a realisation in recent years that these investments have poured into critical sectors, such as tech and energy, and that is now pushing the continent to reassess its own policies.

Speaker 1: The Port of Antwerp-Rouge is 1 of the largest ports in Europe. So evidently the trade Far East-Europe is important to us as well. And if you look on the total volumes handled in this Port of Antwerp-Rouge, which is about 290 million tons, China represents around 6.5% of that. So say about 20 million tons of the cargo passing through the port, so originating from China or going to China. But if you only look at the containerized part, then China has become our first trading partner.

Speaker 0: I was wondering whether you have felt any sort of pressure from European politicians to reduce the importance that China has for this port.

Speaker 1: We are the port authority, but we do not make policy. Nobody likes to rely too much on 1 player, whether it's a supplier or a customer. Nobody wants to be too dependent on 1. I wouldn't say there is a pressure from the EU or from the political side to do less with China. No, that would not be correct.

But There is, I think, a reasonable request to think on how we can reduce our dependence.

Speaker 0: China's Costco shipping company and China Merchants Group, both state-owned multinationals, have stakes in the container terminals of the port of Antwerp, Bruges. Both did not reply to a CNBC request for comment. Together with Hutchison Port Holdings, a private company headquartered in Hong Kong, they represent the main players of Chinese investments across European ports. Here's A map showing where Chinese firms have been shareholders of European ports. For instance, Costco is a majority shareholder of Piraeus, Greece's biggest port.

More recently, Germany controversially allowed Costco to buy a minority stake in the port of Hamburg. This was lower than the planned 35% position, but it sparked some infighting within Germany's governing coalition.

Speaker 2: China's export-oriented economy, so by having the access of the port, that would enable China to ship their products and manufacturing goods around more easily.

Speaker 0: Key to that is its Belt and Road Initiative, which was launched in 2013 to develop infrastructure globally that would support trade.

Speaker 2: After the Belt and Road Initiative, we have seen an acceleration of acquisitions in ports and the facilities of port. So that is really for a trade and economic reason. But I think there's also a slightly bigger political question.

Speaker 0: If China would like to practice the so-called economic statecraft by using its financial resource to extend the political influence and acquire facilities like ports and facilities like infrastructure, would be a way of exerting that political influence as well. Economic statecraft is the use of financial, regulatory or economic tools to achieve a certain goal. And there's growing concern in Europe that China might use these strategic investments in the continent to exert political pressure. In fact, the EU started legal action against China at the World Trade Organization in 2022 after Beijing imposed trade restrictions on Lithuania, a Baltic nation that in 2021 allowed Taiwan to open a de facto embassy in its capital. China does not recognize Taiwan's independence and interpreted Lithuania's decision as a threat to its political stance.

China's mission to the European Union office was not available for comment when contacted by CNBC. However, I had a chance to speak to the Minister of Foreign Affairs of Lithuania and asked them if he has seen any examples of China exerting economic coercion in Europe.

Speaker 3: Well we were 1 example not using an investment but you know Lithuania made a decision to establish stronger economic ties with the island of Taiwan. China did not want to force us to change our position and they use economic leverage. They did not have an investment, we had some substantial trade. So in order to coerce us to change the course, they stopped the trade completely. And it tells you a lot.

Speaker 0: We have seen, essentially, since the sovereign debt crisis, China buying ports, utility companies. There's been a huge investment from China in Europe. Does this concern you?

Speaker 3: Well, in principle, it does concern me.

Speaker 0: Luc Carnot from the Pointe du Vent, where Bruges shares similar views.

Speaker 1: Of course, there is a reason for concern. We have seen that China uses its political power to have impact on the economy. Look at what's happening in Lithuania. I mean, you can't deny that. If you look on the control they want to take in certain businesses, we should not be naive at all.

But then again, it's not by running away and start to shoot from the side that will solve the problem. It's by talking openly and pinpointing the issues that we can make steps forward in mutual understanding.

Speaker 0: China's strategic investments in Europe go far beyond ports. They include electricity firms, wind and solar farms, airports, soccer teams, the list is vast. And this wide network of investments is adding to the concerns that China might use them to exert politica pressure. This chart gives us an overview of China's investments in Europe geographically and by sector. The real estate market in the UK, for example, is flush with Chinese capital.

Besides luxury housing in central London, Chinese stakes in the country include distribution centers, retail parks and trading estates. Since 2021, Chinese investments accounted for 20% of international buyers in home sales above £10 million. Up until 2017, we have really seen a wave of Chinese stay-at-home enterprises and private companies to invest in Europe. They naturally consider European countries a safe place to park their money. From 2017 onward,

Speaker 2: I think also given the political ambience between China and Europe has now turning much cooler, and also brought down by the pressure from the United States. And we have seen far less and quite reticent move from the Chinese side, and particularly on stay-home enterprises.

Speaker 0: Investment flows from China and Europe reached a peak of almost 60 billion euros in 2017, but it has dropped in recent years. It seems to be picking up again following the pandemic, but is still far from the historic highs. Why? Well, 1 of the reasons is the increased scrutiny by European authorities. We see investments from the Middle East.

There's of course quite a lot of investment also from the United States. Why is Chinese investment particularly difficult?

Speaker 3: The biggest worry comes from the sheer power of an amount of investment that is able to buy up industries, sectors. And then We have to understand how PRC is functioning. It's a super centralized country where the decisions, they boil down to a couple of people. So the same person could be making decisions on the military scale, political, geopolitical, economic, trade, whatnot. So it all mixes up.

Speaker 0: In 2022, the Italian government candid the sale of a military drone company, Alpi Aviation, following an investigation that the buyer, Mars Technology, was a shell firm of 2 Chinese state-owned enterprises. In the Netherlands, the government pressed with export restrictions on certain semiconductor manufacturing equipment in 2023, which aims to curb China's access to the critical technology.

Speaker 2: We're going to see more and more frictions regarding the Chinese investment in Europe. And I think that process will become even more difficult. And that would actually not just be continental Europe, and that would include the UK as well, which already set quite robust defense measures regarding screening on the Chinese investment coming to Europe.

Speaker 0: Data from UK authorities show that between April 2022 and March 2023, more than 800 deals were referred to the government under the National Security and Investment Act, which allows politicians to call in acquisitions that could harm national security. More than 40% of the call-in notices involve investments from China, the highest compared to any other nation. EU policymakers here in Brussels are also looking at toughening up their investment rules even further. In fact, that's part of a broader drive looking at how to become less dependent on China, thus reducing Beijing's leverage on the block in the event of any rocky patches in their relationship. China is the EU's biggest supplier for several critical raw materials, such as lithium, which is used in the production of batteries.

And this matters because the EU has strict climate ambitions and without China's resources, the EU could struggle to achieve them.

Speaker 4: China is worried. The worry comes from the fact that the de-risking mantra in Europe could be influenced by the US and become more of a national security issue, rather than what Europeans really have in mind, that is more like, well, excessive dependence, especially on decarbonisation. That's worrisome because we really want to decarbonise. So it's not really about China. It could be any country in the world.

Speaker 0: It remains to be seen how both the EU's and the UK's relationship with Beijing will unfold, but Alicia thinks it will be a lot more restrictive.

Speaker 4: And seeing China move up the ladder in sectors where the EU had a comparative advantage, whether it's wind turbines or solar panels before the European sovereign crisis, for example, This is the key. For Europe, our de-risking is becoming an economic need.

Speaker 0: So just finally explain to us, what can the Chinese authorities do in that regard?

Speaker 4: To start, China doesn't think Europe is a big competition to them. So they're not taking this seriously, which is good for us. They actually don't think we can respond to their very fast innovation. They feel that they're moving into digital industrialization, that we have nothing to do on that front. And therefore, they're not getting ready.

Speaker 0: While Western officials are conscious it is not in their interest to cut ties with China completely, it is clear they have become more skeptical about closing deals with Chinese firms. But with the volatility of the presidential election in the United States, reducing Europe's appetite for Chinese capital may be trickier than expected. Let me just get your thoughts on 1 final topic, which is the election in the United States. How could that impact this conversation on de-risking from China if, say, President Trump returns to the White House.

Speaker 4: The only thing that's going to happen is that everything I said is going to be much faster because Europeans will be forced in a way that will be much harsher than under Biden. So It doesn't change the direction, it only changes the speed. And I think Europeans will feel indeed so threatened that they will go alone.

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China has invested heavily in Europe. Not everyone’s convinced it was a good idea