Jiang Jianqing Photo: Courtesy of China Europe International Business School

Editor's Note:

A bleak world economy and US protectionism have bound China and European countries closer together. As a key component of the China-proposed Belt and Road Initiative (BRI) and a bridge between China and the European Union (EU), and between China and Central and Eastern European Countries (CEECs), cooperation has come a long way. 

Against this background, the 2019 Symposium on Central and Eastern Europe was held on November 1 in Shanghai. Jiang Jianqing (Jiang), chairman of the SINO-CEE Fund, adjunct professor of finance with the China Europe International Business School and former chairman of the Industrial and Commercial Bank of China, who attended the symposium, answered questions from Global Times reporter Wang Jiamei (GT) regarding the challenges and future of China-CEEC cooperation.

GT: Could you introduce the progress of the BRI in CEECs?

Jiang: The BRI was put forward more than six years ago, progressing from its conception to the convergence of peoples, from top-level design to project implementation, and from vision to reality. Fruitful results have benefited the whole world, continuously injected new vitality into world economic growth, and gained recognition and participation from more and more countries.

At present, China has signed 197 cooperation documents with 137 countries and 30 international organizations. The deepening of political and non-governmental mutual trust and mutually beneficial cooperation has led to the enhancement of economic, trade and investment exchanges.

In 2018, China's enterprises invested $15.64 billion in non-financial direct investment in 56 countries along the Belt and Road, an increase of 8.9 percent year-on-year, accounting for 13 percent of China's total foreign investment in the same period .

CEECs, as important components of the Eurasian continental economic belt, have strong economic vitality and great market potential. They play a crucial, regional role in the construction of BRI.

The BRI in CEECs is seen as a historic opportunity and a project for the 21st century. In recent years, China has been deepening cooperation with countries in the region, and investment and trade exchanges have become increasingly frequent.

GT: What kind of role does the financial sector play in China-CEEC cooperation?

Jiang: To allow the financial sector to play a leading role, diversify the model for foreign investment, mobilize foreign investment and respond to initiatives such as the BRI and China-CEEC cooperation, we established a fund in 2016. The innovative financial model has bolstered connectivity, capacity cooperation and industry investment.

GT: What challenges have China and CEECs been facing in terms of investment cooperation?

Jiang: China-CEEC cooperation has great momentum and many opportunities. But trade and investment are still disproportionate. Thus far, bilateral trade is only 12 percent of the total trade volume between China and Europe, and outstanding investment is merely 2 percent of the total investment volume between the two. 

The potential is tremendous, but China and CEECs need to deepen their interactions and boost understanding to solve problems and challenges. There may be common problems brought about by globalization as well as regional and structural factors. 

In recent years, CEECs have relied on capital from the EU to develop their economies. CEECs, which are EU members, accepted EU money at a scale of 11 to 25 percent of their annual GDPs from the EU's 2007 fiscal year until its 2013 fiscal year. Over 80 percent of foreign investment in CEECs comes from the EU.

CEECs have become accustomed to receiving support from the multilateral development fund of the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank. 

Despite the advantages of long-term and low interest rates, such funds can hardly meet the needs of CEEC construction. CEECs have significant demand for commercial investment. However, mature investment models such as the public-private partnership and build-operate-transfer model were not well promoted. The region does not have enough attraction for commercial financial capital. Laws, regulations and supportive policies are needed for buildup and improvement.

Industries in CEECs have the space to develop and expect more capital. For instance, CEECs have superior conditions for agriculture and their food-processing industries have long histories. Their agricultural products are cost-efficient and diversified, but scattered and limited in scale, making them difficult to manage and integrate once investment kicks in. Additionally, industrial investment also faces risks from policy, the market and operations. 

GT: What is the potential for cooperation between China and CEECs?

Jiang: To deepen the cooperation between China and CEECs and promote the implementation of the BRI, China needs to innovate, strengthening the integration of its "go global" strategy with its "bring in" strategy.

China also needs to take into account the interests of the main EU members and the new interests of CEECs, and promote trade, investment and cultural-exchange cooperation between China and CEECs through incremental upgrading and structural optimization.

As for investment in key projects, China should focus on transportation infrastructure, power-grid construction and clean energy development. It should select a number of landmark projects, accelerate exports of infrastructure capacity and bulk equipment, and utilize successful projects as examples to demonstrate effectiveness.

In terms of investment and financing, China should explore its mode of commercial capital intervention and strengthen cooperation with international, multilateral financial organizations. It should also boost cooperation with large local banks or take the lead in organizing international bank syndicates to support related projects, thereby achieving risk and benefit sharing.

For industrial cooperation, according to the characteristics of industrial differentiation in CEECs, China should select industries with high complementarity, a strong driving effect and good comprehensive benefits. It should also carry out in-depth integration of the industrial chain, strengthen its docking with the Chinese market, further integrate channels, expand markets and realize a virtuous cycle of cross-regional market development and value creation.

China needs to encourage small, medium-sized and private enterprises to enter Central and Eastern Europe, and increase the coverage and penetration of industrial cooperation.

As for business and trade exchanges, relying on transportation facilities such as the China-Europe railway, China needs to enhance the construction of logistics parks, sales networks, trade centers and e-commerce platforms, appropriately increase the import scale of agricultural products from Central and Eastern Europe, and expand the export scale and market penetration of Chinese commodities.

In terms of tourism and culture, the tourism industry in CEECs, which has developed rapidly in recent years, plays an obvious role in economic growth and employment. It is the industry that local countries expect the most from. China needs to boost tourism cooperation to promote economic, trade and investment exchanges. China should also strengthen non-governmental exchanges between the two sides, including cooperation in culture, art, education, academics, sports, medicine and healthcare.