Belt & Road: China's Trade Superhighway | China vs Europe | DOCUMENTARY | Trade War | Economy

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Belt & Road: China's Trade Superhighway | China vs Europe | DOCUMENTARY | Trade War | Economy

Overland belts and maritime roads. That’s the simple way of describing a sweeping global infrastructure campaign that seen billions of dollars spent and hundreds of billions pledged to invest in transport pipelines power grids and ports In this Bloomberg special feature we examine criticism that China’s Belt Road initiative is recalibrating political and economic alliances and Beijing’s view that it’s just a means of spurring global development and trade The ancient four to Piraeus is in a hurry to be the number one port in the Mediterranean and in Europe propelling it on its journey. Its pivotal role in China’s Belt Road initiative from Greece to Germany Brussels to London will explore the European connections in China’s grand plan I’m Tom Mackenzie. This is Belt Road China’s trade Superhighway Costco is one of the world’s biggest shippers and port operators and that status has put it at the forefront of the Belt Road initiative China has called Piraeus a dragon’s head a strategic transit hub linking maritime and overland routes State owned Cosco took over management of Pier 2 in 2009 under a 35 year concession pouring millions of euros into upgrading infrastructure and building a third pier In 2016 Greece mired in its debt crisis sold a controlling stake in the Port Authority to Cosco for 370 million euros and a promise to invest at least 350 million more. Cosco cemented Piraeus place in Beijing’s new world order. The port has been a success The port has been a success Bloomberg Intelligence says Cosco was in the right place at the right time Piraeus handled more than 4 million 20 foot containers or equivalent last year making it the third busiest in the Mediterranean and number seven in Europe according to port economics That’s growth of almost 200 percent compared with a decade earlier The port’s managing director says getting to this point hasn’t been plain sailing This year for competitive business Everybody has to his best that in order to win the support of from a different carrier we get a benefit from a better world initiative But another financial support for sure whether we get is because of that one bad word or the initiative will create more trade opportunities. And this trade opportunity as a carrier and as a terminal we win the benefit from that Chinese investment has supercharged parade sport but China’s clout has also raised concerns that local businesses could be squeezed out Almost all of the companies that goes out of small and medium enterprises They listen to the fear They’re afraid that these huge companies will take their business from their hands Business groups say initial antagonism has largely turned to acceptance and the hunt for opportunity There are a lot of people that are unsatisfied because they thought we could also exploit this court martial cause there’s some people that they blame Chinese that they took advantage of the Greek crisis But on the other hand we very well know that the reason is is that they’re willing to find an investment in good price you go for it It’s a catalyst it’s an opportunity for all of us to start negotiating How will you invest by those who support. The supply chain and logistics are the hinterland. And hinterand is where we can invest where we can take advantage where we where we can use tools like creating clusters like creating growths of volumes in order to produce wealth But the Belt Road fueled push of Chinese firms across Europe has also stoked fears about China’s so-called soft power reach and geopolitical ambitions Chinese state owned firms now control around 10 percent of Europe’s container terminal capacity according to the International Transport Forum The European Commission says it welcomes the Belt Road initiative but with caveats There are two major issues which we want to make sure that that happens All those projects financed by China and the others should be economically and environmentally sustainable

And the second especially of course for tender should be competitive and open for everybody We want to be part of this project But all the concrete investments must be reasonable And there are other concerns beyond simply how investments are implemented The European Union in particular is very concerned about China trying to divide and conquer Europe through the Belt Road There are countries in central south Eastern Europe that are leaning forward because they haven’t recovered from the global financial crisis and as other countries have and they really want to take advantage of these Chinese offers for assistance and infrastructure development And so it’s those countries many of those countries that we see are susceptible to receiving the benefits of the Belt Road and then turning around and basically taking steps and actions that support China in other venues and in political fora And that’s where I think European leaders are growing concern In areas where you need unanimity voting inside the EU and which are sensitive to Chinese just need to own so to speak one government out of 28 to block common resolutions on a number of areas What do you say to those people who are concerned that aligning yourself so closely with Chinese state owned companies like Costco creates a dependency for a country like Greece For Greece in Greece as Greece we need the investments We need foreign investments. This investors who they have come from China they are mostly welcome for me If they could come from Germany it would also very Welcome or United States Coming up we go to Germany where the CEO of Siemens tells us why he thinks ignoring Belt road is more of a risk than getting on board And if you have a new initiative good or bad right or wrong Well precieve or not which covers 70 percent of the voting population you’d better take that city’s While Piraeus is China’s main maritime link into Europe Duisburg port here in Germany the world’s largest inland port is central to China’s overland ambitions. Every week trains loaded with Chinese goods arrive here and they lock into a logistical web that transports toys clothes and electronics to consumers across the continent Duisburg. Network of rail and waterways made the city an inland port. A nexus for industry. Its history is firmly planted in coal and steel with those sectors on the decline. The CEO of Logistics Hub Operator Do Sport is hitching his wagon to the Belt and Road Initiative. It began with a rail link from Hewlett Packard Manufacturing Center in China’s south western city of Chongqing It all started at least 6 7 years ago The first train was a dedicated train from Hewlett Packard into Duisburg And then we saw the chance with respect to this time table and hub positioning are acting from Duisburg to China and vice versa as the distribution hub for for Europe Since then the value of goods going between China and Europe by rail has surged as has the number of freight services according to the Center for Strategic and International Studies. With the Belt Road being a major driver Every week about 30 trains from China arrive here Duisburg The Chinese want to increase that number to about 50 by 2020 They also want to decrease the amount of time it takes It currently takes about 12 days to get from China to Germany They want to cut that down to 10 or fewer A fast route into Europe has become more important with the rise of industrial production in China’s south western regions Cities like Chongqing and Chengdu are far from shipping routes on the coast At the same time Duisburg seeks out projects with cities and companies linked to the Belt Road initiative to strengthen its business with hopes there will be knock on effects for its home city We have build partnerships strategic partnership friends and with China Immersion which is one of the biggest group We are very close to a strategic partnership with Cosco the Cosco group

They have all very concrete intentions and you can imagine that part of these strategic partnership results from involvement here in Duisburg You’ve developed this relationship with your Chinese counterparts and that opens up other opportunities for you right across Europe Our clients are global so we have to check where we’ll be the new trading routes or how can we optimize the transportation chains That is the reason for instance why we are investing with the largest logistic group in Turkey. The Arcos Group 50 kilometre outside of Istanbul to build the airport Or why we are interested in and looking for a report investment in Trieste because I think Trieste would become a very important port in the maritime one belt one road link and then serving for the southern part of Europe The German Chambers of Commerce and Industry tells Bloomberg many members see indirect advantages from improved logisticsp owered by Belt Road initiative projects But only about 30 per cent see opportunities to profit directly at this point. There’s also a level of caution Some of our major players there are already involved but only a few and then I have to mention also that the risk of the complains about the bidding process and it is not yet involved that we can say it’s transparent it is inclusive it’s non discriminatory and it is respecting standards. What should be a good standard when it comes to public procurement tenders Well that’s interesting because in China the Chinese will stress that this is an initiative that is open to wall that it is transparent But the reality on the ground is different to that We don’t have an overview. Where is the next project and where can competitors participate. If there is the wish that all the German companies that other European companies can participate then we need more transparency and we have to sit on one table in order to discuss Siemens is one of the major German players that have embraced the initiative The conglomerate generated revenue of more than seven billion euros in China in 2017 about 9 percent of the total And it’s looking to deepen the relationship Like Duisburg the conglomerate is hammering out new paths for future growth after difficult times The global shift to renewable energy sources means Siemens Power Plants Equipment Unit once a flagship has suffered a protracted slowdown So we have a structural challenge to master and that means you master it by innovation But you also mastered it by finding new ways of doing business such as the Belt Road initiative We are over the almost 90 countries are being powered off and most of them don’t have a sustainable or reliable and affordable energy For these opportunities there Those with concerns about the initiative say that some of the Chinese companies that you’re potentially partnering with They don’t have the same levels of corporate governance in terms of standards that you do. There are concerns around transparency the susceptibility of some of these Chinese firms to things like corruption Do you expose yourself to risks and is it a price worth paying essentially? Well we obviously wouldn’t pay such a price at all because it’s just a no go I mean if that’s true for any economy in any country At all in this case if China wants to play an international role as the aspiration has been announced they need to a tier to international standards and should be any deficits do to the lack of experience how to handle it They’ve got the perfect partner with Siemens because we’ve learned the hard way. But we know it now Do you see China as a competitor or a partner for the European economy? Both. I think this is today’s world that is not seeing either your competitor or partner or somebody else. You can be either way depending on what value you can create to the specific project China has always been a long term thinker and I believe if the Western world doesn’t get it act together on how it designs free trade and how it interacts self in solving problems Maybe China just says well I’ve got 90 countries with 70 percent of the world’s population Maybe I just declare to be a to beat the new WTO So you need to be very mindful about what we deal with here because most of the economic and political power shifts go with the amount of people in a country. And if you have an

initiative good or bad right or wrong perceived turn not which which covers 70 percent of the global population you better take that seriously If any European company can make a success of profiting from China’s Belt Road initiative it is Siemens. Infrastructure is in the company’s DNA and its ties to China run deep But that success will be dependent on European leaders and their ability to persuade China to make the initiative compatible with Western business norms. That’s coming up For many economies and businesses across Europe the Belt Road initiative can offer new directions for growth It also opens the way for Chinese companies However as we discover in this Bloomberg special feature there’s increasing pushback in the corridors of power in Germany France and across the European Union The Greek debt crisis provided an opening for China to Bolster its maritime links into Europe via the Pireaus port Winning over Europe’s lawmakers though is proving more of a challenge When the Belt Road initiative was first announced in 2013 We saw very strong support from Europe and I think there was huge amount of interest in how could European countries benefit We saw however in 2017 much of that enthusiasm began to wane You use doctrine constantly currently is that he has a constant offer to China to come and join and a constant wish to come and join offer to China to come and join and a constant wish to come and join And that’s even clear at the level of some member states But on So we set our terms at least on transparent terms Which is a condition that most Chinese projects accept those financed by EIB do not forfeit European Commission has been working on tightening investment screening and rolling out a coordinated approach across the block Currently fewer than half of EU member states have rules to allow review of foreign direct investments While these so of priority at the moment is to make sure that all those potential projects have a lillte playing field. That financing comes from the normal competition like what is the case here in Europe But there is obviously an appetite in the European Union now for greater oversight of Chinese investments. To what extent is that going to impact the Belt Road initiative There is a rising understanding amongst our member states that as much as we want to be open destination for friend or investments As we are for the most open market in the world We must know voice investing and for what purposes There are also moves to reduce unanimity voting to diminish members veto powers particularly on political and human rights issues We have seen efforts where China has gained strategic influence in countries through the benefits of the Belt Road to those countries building infrastructure and helping out with development assistance and then using that influence to as an advantage for China in terms of its international efforts or in a way that helps China politically For example both Greece and Hungary large recipients of Belt Road efforts by China stepped forward to block a statement in the EU that would criticize China in the South China Sea The EU is also sharply aware of China’s increasing investments in the nearby Western Balkans and Eastern Partnership countries It’s reaching out with a trans European network for transport done quote the European way Meanwhile infrastructure builders like China Communications Construction Company and their subsidiaries are forging ahead with deals in those regions In a rare interview with the Western media organization CCC C Chairman Leo Shi Tao told Bloomberg he sees potential in Europe despite tighter scrutiny of Chinese investments We have principal when choosing investments the project must meet the highest standards of environmental protection and bring benefit to the country’s economic and societal development and people’s livelihoods We’ve gone through experiences when governments change They put our projects on hold and review them again as long as they’re good for the country and they’re a win win Everyone will go ahead. Some media have different views but I think it’s because of a lack of understanding The European Union still hasn’t officially signed off on the Belt Road initiative They point to concerns around the transparency of the bidding process

around environmental issues. Are those concerns justified? We need to promote mutual understanding and in this respect we also need to work with companies in Western countries including those in Europe. If we can strengthen our cooperation I think transparency will increase. So we’re working with Europe on many projects I’m curious how do you respond to allegations of corruption and fraud that have been levelled at your company and some of its projects involved and linked to the Belt Road initiative We don’t allow and do not have any corrupt behaviors related to any official because we know that this kind of corruption is not going to help with the company’s sustainable development And as a listed company we’re subject to market supervision. If there’s corrupt behavior the company is finished on this. We are very clear Because critics of the Belt Road initiative still point to what they would say is a lack of transparency around some of the projects What they would say is lack of hiring of local labor versus Chinese labor. And then ultimately many of these projects leave the country’s heavily indebted to China That would be the criticism. There is some truth in that criticism On the whole I think the situation will become more transparent as the Belt Road initiative progresses on the issue of pushing up debt Some countries do have relatively higher borrowing I don’t think that’s scary as long as the country’s economy is growing enough to digest it It’s important to see whether the debt funded projects are good for the country’s economic development Of course, I think it’s necessary for developed nations to offer financial aid to countries that lack development capability. As for labor currently my overseas ratio is at least one to 10 in my company There’s one Chinese person employed for every 10 foreigners The labor cost of a Chinese employee is much higher than that for a local Many developing countries are still catching up and their cost of labor is lower than ours. Therefore from the company’s perspective we want to localize as much as possible hire local people and use fewer Chinese I can’t say there are no problems. All that we’re perfect But the reality is it’s not as people say either I think it’s because of a lack of understanding For both Europe and China the potential for business opportunities around the belt and road initiative are significant. Yet too often a lack of transparency is stoking concerns fueled by the fact that many of the big Chinese companies involved are state owned China needs to realize that the way that it sees its belt and road initiative is not necessarily the way other countries see their belt and road initiative This is very important for China. It is now present Xi Jinping flagship international program It’s embedded in the Chinese constitution The international community I think should look at the Belt Road initiative and figure out where countries can partner with China where they will maintain and meet the international standards that we hold so dearly and where they’re not. We ought to be stepping forward to put credible alternative proposals forward that maintain those high international standards that have transparency sustainability of projects and have the labor and environmental standards that we care so deeply about Europe’s leaders are trying to remain open minded about the potential opportunities around China’s Belt and Road Initiative But it’s clear that locking in full EU support will require Beijing to translate rhetoric into reality particularly around issues of transparency sustainability and inclusiveness Some European firms are hungrily eyeing dividends but those are likely still years away. I’m Tom Mackenzie. Thanks for watching