“We really need a new word for crisis,” a Greek journalist told The Spectator magazine last week. “A crisis isn’t supposed to go on as long as this.”
It’s hard to disagree with that sentiment. But as Greece’s financial meltdown goes into its most acute phase yet – with last weekend’s referendum making an exit from the Eurozone look ever more possible – what is Beijing’s view of the drama in Athens?
Premier Li Keqiang toured Paris and Brussels last week, meeting the EU’s powerbrokers and prompting The Diplomat magazine to ask:“Can China save Greece?” But even if Li had a plan to rescue Athens, the timing of the stand-off between the Greeks and their creditors could not be worse.
As WiC pointed out last week, China has got some pressing issues of its own to deal with, primarily the cratering of its stock market. The fall in Shanghai and Shenzhen share prices has been so steep that even the China Daily was forced to acknowledge the seriousness of the situation, describing it in an editorial this week as a “mini-crisis”.
Li rushed home from Europe himself to oversee the government’s response.
This has meant that discussion of the Greek situation has been remarkably muted in China, with most online chatter lamenting the decimation of peoples’ stock portfolios instead.
Still, there is more awareness among senior leaders that the instability in Greece could damage China’s economy, as well as threaten one of President Xi Jinping’s top strategic priorities: his Maritime Silk Road.
What is China’s official stance on the Greece crisis?
Premier Li told local media that he didn’t want to interfere in an “internal affair” of the EU. But according to the Economic Observer, he then told his European counterparts that China “wishes to see Greece remain in the Eurozone and appeals to the international creditors and Greece to make an agreement as soon as possible and achieve active progress so that Greece and the Eurozone can both overcome this crisis. In this regard, China is ready to play a constructive role.”
Li added: “China always supports the integration of Europe and wishes to see a flourishing Europe, a united EU and a powerful euro.”
What China’s ‘constructive role’ might be is harder to determine. Beijing will steer clear of discussions about debt forgiveness, but it might offer to invest more in Greece itself and help to stimulate its economy. During last week’s visit to Brussels Li said that China would be happy to participate in the European Commission’s planned €315 billion ($530 billion) European Fund for Strategic Investment, citing infrastructure as an area where Chinese money could play a role.
Similarly, its new Asian Infrastructure Investment Bank (AIIB) could pump cash into Greece, the Chinese Academy of Social Sciences (CASS) postulated.
Why pour more funds into Greece?
The answer is a hefty dose of self-interest. Shanghai stockbroker Shenyin Wanguo compares the situation in Greece with the US subprime crisis of 2008. Like the financial chaos seven years ago, a Greek exit from the euro today could have a “severe impact” on the Chinese economy. The EU is China’s single biggest trading partner – with bilateral trade reaching $600 billion last year. Anything that destabilises the European economy is bad news for Chinese exports.
Shenyin also reasons that a Greek exit would lead to a further weakening in the euro itself, devaluing the forex reserves China holds in that currency (worth about $600 billion). And the greatest fear is of a domino effect: that if Greece exits the single currency, so too might Portugal, Spain and Italy, an outcome that would “see the world economy fall into long term decay”.
Is China heavily invested in Greece?
Not currently. Thomson Reuters data suggests that Chinese firms spent €18.9 billion on acquisitions in Europe in the first half of this year, but avoided Greece altogether.
According to ThePaper.cn, one of the few Greek acquisitions by Chinese firms was made back in 2011 when Fosun bought a 9.5% stake in luxury brand Folli Follie. But it also points out that a much larger deal has been under negotiation for some time, and this one reflects the broader geopolitical role Greece holds in the minds of Beijing policymakers. That purchase is for a controlling 67% stake in the country’s biggest port (near Athens) in Piraeus. The prospective buyer is China’s state-owned shipping behemoth, Cosco.
Currently Cosco already has some exposure to Greece. It has owned the management rights to two container terminals in Piraeus since 2008, increasing the volume of goods passing through them eightfold. A Chinese warship also docked in Piraeus in February.
However, Cosco’s bid to buy 67% of the Piraeus Port Authority was thrown into question when the left wing Syriza party took power earlier this year, opposing the former regime’s privatisation programme. Syriza’s early hostility may now have lessened, however. In March Greece’s deputy prime minister visited Beijing and said the deal would be completed “in weeks”.
That said, the final agreement still hasn’t been inked, and amid the current chaos, it is probably one of the Greek government’s lesser priorities at the current time.
Cosco will want to ensure it goes ahead though, given that it forms a key part of President Xi’s “One Belt, One Road” scheme. Inspired by the old Silk Road this plan aims to improve transport links across the Eurasian landmass, connecting a series of countries on routes that traverse land and sea, and boosting their trade with China.
Greece is an important stopping point on Xi’s Maritime Silk Road, with the People’s Daily commenting last month that the aim “is to turn Piraeus into a Chinese hub for trade with Europe”.
The state newspaper adds that the plans for Piraeus include improvements to local infrastructure, to boost its capabilities as a trans-shipment centre. High-speed rail investments are on the agenda too. Xinhua explicitly linked the Piraeus port project with a new bullet train route China will build between Belgrade and Budapest (the railway plan was announced late last month, even as the Greek situation worsened).
According to Oriental Daily, state think tank CASS has described Greece’s role in the One Belt, One Road scheme as “pivotal”. That being the case, CASS has also suggested that the AIIB could “pilot” new infrastructure lending in Greece, via renminbi-denominated loans.
If the AIIB does start to invest in Greece, might a wider Chinese spending spree ensue? ThePaper.cn speculates that Chinese entities have already told M&A bankers about their interest in Greek airports and power stations. The Guardian, a UK newspaper, has also claimed that Chinese interests would like to buy Thessaloniki port, as well as invest in Greece’s state-run rail network. It notes too that on a three-day visit to Athens last year Premier Li said: “The Chinese and Greek economies are mutually complementary. Greece is accelerating privatisation and infrastructure construction. China will encourage its well-established enterprises to play an active part in this process. China wants more cooperation with Greece in airport, rail, road and other infrastructure development.”
If Greece quits the euro and even leaves the EU (as some theorise), this would surely be a setback for some of China’s Silk Road plans. Some of the logic of controlling Piraeus and investing in its hinterland may diminish if Greece is no longer part of Europe’s trade bloc.
Or is this a buying opportunity?
Others see Greece’s straitened circircumstances as a perfect opportunity for China to get a stronger foothold in southern Europe. The Nikkei newspaper is suspicious about Chinese intentions, for instance, noting the significance of Greece’s geographic position as “the eastern gateway to the Mediterranean for Asian nations”.
Rather than helping Greece avoid crashing out of the European single currency, the Japanese newspaper thinks that Beijing views such an outcome as an opportunity.
“Chinese officials must be chuckling over fears Greece will exit the Eurozone,” it comments.
Why? Because it reckons a bankrupt Greece will have no choice but to sell China its ports and railways, as it becomes more dependent on Chinese financial assistance.
Nikkei even suggests that China and Russia might invite Greece to join their BRICS bank.
Japan, of course, is wary of China’s ascent to superpower status, and it often sees Chinese economic activity as part of a broader agenda for political mastery (Nikkei’s view that China wants Greece to exit the Eurozone is not widely shared outside Japan too).
From geopolitics to beaches…
Chinese tourists look set to become a crucial contributor of hard currency. Of course, Hellenic tourism bosses complain that visitors are already staying away because of difficulties in getting hold of cash locally. But the China Times doesn’t think that Chinese tourists will be put off by empty ATMs. As it points out, Chinese travellers not only carry lots of cash when they go abroad, they actually like to do so. According to Beijing Business Today more than 100,000 Chinese holidayed in Greece last year, up 40% from 2013. Based on current trends WiC suspects there might more Mandarin spoken in the Greek islands this summer, and a lot less German…
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