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Ernesto Gallo

Tutor of business, law and social sciences at Kaplan International College, Affiliated Faculty at University College London

Giovanni Biava

Independent Analysts, Energy consultant, eXelen srl

The G20 in Hamburg (7-8 July) will probably be remembered mainly for the riots running on the streets of the wealthy German harbour city. In addition, despite the number of issues on the agenda (the global economy, migrations, the much-debated climate change, and so on), the outcome of a global summit was highly disappointing.

Hamburg’s vague concluding statements contrast with the growing assertiveness of China’s state-owned companies in many geopolitical scenarios. This is particularly interesting because over time it risks triggering big political earthquakes, especially in regions where China has to face competition from other significant international players such as in Central Asia, the Middle East, and South-Eastern Europe.

In Central Asia, China now holds a strong foothold in the biggest and richest country, Kazakhstan, where 25% of the crude oil production is firmly in Chinese hands. In 2009, Chinese companies completed an oil pipeline connecting Kazakhstan with Western China, and simultaneously investments have multiplied in other sectors such as mining, construction, transportation, and gas. For the last few years China has been competing with Russia for Kazakhstani trade and investment opportunities. The same applies for all the other former Soviet Central Asian Republics, such as Turkmenistan which is increasingly becoming essentially a Chinese gas appendage, with a whopping 78% of its gas exports going directly to the Eastern power. As the Silk Road Economic Belt keeps moving westward, the question of the effects this region may assert on the international balance of power grows ever more poignant. How will China and Russia accommodate their interests in the region? Will the West, and especially the USA, which in the 1990s had invested in the region’s energy resources, come back to the fore? Furthermore, it’s likely that new players will take interest in the region, with Turkey, Iran, and especially India all possibly looking to take part. New Delhi could perhaps emerge as a sort of ally for both Russia and the West, as well as acting as a counterbalance to China, which has massively invested in India’s main opponent, Pakistan.

As for Pakistan, Prime Minister Nawaz Sharif may be stepping down after the recent judicial investigation into his family’s dubious assets overseas in a scandal related to the Panama Papers from back in 2016. Some analysts believe this could be a blow to China’s massive projects in the country, but this seems unlikely as Nawaz’s suspicious credentials have been well-known for some decades now. In fact, Chinese investments may actually flourish under a more credible Prime Minister. With that said though, Beijing’s problem in the whole of Central Asia, from Astana to Lahore and the Caspian to Xinjiang, is its weak soft power, at least compared to other countries such as Russia, India or even the USA. Few Central Asians speak Chinese, or are even familiar with Chinese culture, so Beijing must prioritize this aspect of influence over the region. Local evidence suggests that Russia remains more popular, at least in regards to the areas controlled by the Soviet Union.

In the Middle East, China’s presence is even less visible and mainly limited to the economic sphere. That said, China is by far the biggest trade partner of the region’s two heavyweights and opponents, Saudi Arabia and Iran. So far, Russia and to a lesser extent the West have carried the burden of trying to end the war in Syria, defeat ISIS, and stabilise the region. China has reaped impressive economic rewards and might benefit even more from the reconstruction of Syria and, hopefully sooner, the ravaged Yemen. Chinese companies can offer massive infrastructure potential to a region where population is sparse and the quality and quantity of roads and railways is very poor. However, again we must question China’s political goals in the region. Will Beijing be willing and able to undertake initiatives to support its companies and defend its trade? Compared to the USA and Russia, whose presence in the region dates back to the Cold War, China is a relatively new entrant and still needs to build up its own reputation.

A third setting where China’s economic presence has been constantly growing is that of South-Eastern Europe. Countries such as Serbia and Greece have found in Beijing a crucial interlocutor after their wars and economic crises. China sees the Balkans as a key link between Germany and the Middle East. The 350-km high speed railway between Belgrade and Budapest will prove to be an important asset to Chinese trade in the region. Interestingly, China is also active in EU Member states such as Romania and Bulgaria. In Romania, China’s private group CEFC is a major investor in the Rompetrol Group, an energy company which is controlled by Kazakhstan’s KazMunayGaz International, an interesting case of East-West co-operation in a strategic sector. In Bulgaria, Chinese investments are directed mainly to updating an ageing railway sector. Greece and Macedonia are also of strategic interest to China because of their position as a crossroads for the transit of goods from Central Europe, especially Germany, to the Mediterranean and the Middle East. Chinese companies’ activities contribute to the region’s economic growth, but we must also consider Beijing’s positions on issues both regional (e.g. the persistent tensions between Greece and Macedonia) and global (e.g. the problems engendered by Montenegro’s recent accession to NATO).

While the European Union remains inward-looking and internationally weak, China will have to accommodate its momentous rise with the interests and values of emerging powers, such as India and Turkey, as well as more traditional big players like Russia or the United States. A fast-changing world requires strong international co-operation and dialogue that features more than just twenty leaders and their countries. In order to achieve universal advancement, collaboration should now move from the world of trade and investment to the sphere of politics; however, in these times, this may prove to be a challenging task.

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