Chinese Investments and Involvement in Strategic Sectors and Infrastructure Development Across Europe: Europe's Hybrid Relationship with China Beyond the BRI—Introduction to the Special Issue

Research on the economic relations between the European Union (EU) and the People's Republic of China (China) has long been dominated by a focus on the trade relationship between both actors (Algiero 2002; Gaenssmantel 2012; Men 2013; Smith 2014; Heron 2007; Zhang 2014). This literature highlights that the trade relationship between China and the EU is highly institutionalized at the EU level and is managed through a network of high-level economic and trade dialogue as well as sectoral dialogues, working groups, networks, and platforms (Ash 2007; van der Harst 2023). However, the relationship is also at a member state (MS) level, which has its own trade relationships with China and its own concepts of sovereignty, human rights, and environmental standards (Goulard 2020; Cui 2018). This creates what Smith (2014, 39) calls the hybrid nature of the EU economic diplomacy in terms of its relationship with China. This hybrid nature creates a situation where the EU Commission depends on MS consensus and vice versa regarding policy action toward China (Freeman 2022; Woolcock 2012; Voogsgeerd 2023). This is particularly true with trade and investment regulations as common commercial policy is a Commission-level competence. At the same time, MS plays a major role in promoting or preventing economic relations with China (Gottwald 2010; Reilly 2017; Farnell and Irwin Crookes 2016; Liu and Zhang 2020).

A New China: China as a Major Investor in Europe

After the 2008 financial crisis, China and the EU economic relationship shifted, with the EU now seeing China as a source of investment rather than simply a source of cheap consumer goods (Clegg and Voss 2016; Meunier, Burgoon, and Jacoby 2014; Meunier 2014a, 2014b). However, from the onset of these investments, scholars began to focus on the clear difference in the investment pattern across member states. A comparison between Central and Eastern European (CEE) states to those in the West showcases a high level of Chinese investments and involvement in the former, in particular in strategic sectors and infrastructure development across in areas such as power plants, energy networks, renewables, construction or reconstruction of roads, highways, railways, and digital infrastructure (Matura 2019; Jacoby 2014; Liu 2013; Szunomar 2020, 2023).

With the launch of the 16+1 framework in 2012 and the Belt and Road Initiative (BRI) in 2013, there was an increased focus on Chinese investment in CEE (Zhao 2020; Pavlićević 2018; Bieliński, Markiewicz, and Oziewicz 2019). As most of the MS and non-MS in this region would be affected by the BRI, scholars believe that the investment pattern would follow the route of this huge infrastructure project (Brown 2020; Pacheco 2018). However, the COVID-19 pandemic and the Russian invasion of Ukraine in 2022 have brought into question the sustainability of the BRI in Europe, including CEE, and require scholars to understand Chinese investment beyond the BRI.

China and Europe Beyond the BRI

While the research on Chinese investment in CEE offers a rich empirical finding, it tends to focus less on the hybrid nature of the EU economic relationship. After the negotiation starting in 2014, the EU and China concluded in principle the China-EU Comprehensive Agreement on Investment (CAI) in 2020. Scholars again began to focus on the EU level of the hybrid relationship (Chen 2022; Casarini and Otero-Iglesias 2022; Xia 2021; Qian 2022). The objective of the CAI is to reaffirm China's and the EU's commitments under the World Trade Organization (WTO) agreements but to also improve the conditions for further trade and investment liberalization while maintaining standards on public health, social services, safety, environment, consumer protection, privacy, and data protection (Egger 2021). The development of the CAI was seen as the beginning of a new era in EU-China investment cooperation, which would hold to a new form of investment governance and advance the EU-China bilateral relations (Chaisse 2018). However, some scholars highlighted the underlying problem with the development of the CAI. Scholars such as Hooijmaaijers (2019) and Wu and Frøystadvåg (2016) have highlighted the negative reception that Chinese investment has had in several countries due to China's record on human rights, security concerns, environmental impact as well as the effect on employment and labor standards. While these concerns developed from MS level, the EU can effectively respond to them by developing investment screening mechanisms and other measures to oversee China's investment, which has created tension between the EU and China (Shen and Tian 2019; Su 2023; Zhang 2019). In 2020, the EU undertook sanctions against China due to the internment of Uyghurs and other Turkic Muslim camps in Xinjiang. China reposed its own set of sanctions against the EU (Godement 2022; Svetlicinii 2022). The result was that in May 2021, the CAI was frozen by the European Parliament. The scholarship focusing on the CAI offers a helpful oversight of the China-EU economic relationship at the EU level, but it tends to undervalue the evidence presented by the studies researching the regional or sectoral impacts.

Limitation of the Current Literature on Chinese Investment in Europe

The literature focusing on Chinese investment in Europe tends to focus either on the regional level or the EU level and is driven by a focus on a single policy, e.g., BRI or CAI. As a result, there is a lack of understanding of the aforementioned hybrid nature of the EU's economic relationship with China and a lack of focus on the interconnectivity of the European economy both within the EU and with its near neighbors. Overarching conceptions and analyses of the interconnections between investments in multiple sectors and the often cross-European nature and intent of Chinese construction projects and their (geo)political implications are underdeveloped. However, the debate on the impact of such engagements is still overshadowed by alarmist overtones and a tendency to provide simplified analyses and advice, lacking in-depth empirical knowledge. This lack of understanding of Chinese economic engagements also creates a challenge for creating and formulating appropriate policy responses—both at the national and sub-national level—to allow for a constructive engagement by Europe with a rising China.

Deepening Our Understanding of Chinese Investment in Europe

The above-mentioned lack of understanding has prompted the establishment of the China in Europe Research Network (CHERN). CHERN's Working Group I on Strategic Sectors and Infrastructure Development initiated this special issue that brings together leading researchers to develop an interdisciplinary, holistic, cross-sectoral, and pan-European understanding of the variegated impacts and strategies of Chinese investment in Europe. This special issue on Infrastructure Connectivity in Europe with Chinese Characteristics focuses on different aspects of European infrastructure, including the traditional as well as broader understanding of infrastructure, the Chinese state support given to Chinese actors in Europe, as well as the European response by both the state such as bilateral agreements and the EU level such as screening of Chinese investment. The special issue includes seven articles and is divided into two parts. The first part deals with the more general issues of Chinese infrastructure investment as a background, whereas the second part zooms in on a specific country, region, sector, or issue.

In part one of the special issue, the first article by Martínez-Galán and Leandro ("A Qualitative Cost-Benefit Analysis of the Maritime Silk Road in Europe: Who Benefits from the Initiative and Who Does Not") focuses on the volume and impact of Chinese investments in European seaports as part of the Maritime Silk Road (MSR). By carrying out a qualitative cost-benefit analysis (CBA) of participant and non-participant countries, the authors find that while the media have disproportionately stressed the negative effects of the MSR: (i) for China, MSR benefits largely outweigh associated costs; (ii) for participating countries, MSR benefits outweigh the associated costs only after cost mitigating measures are incorporated; and (iii) for non-participating countries, MSR costs outweigh associated benefits. The article highlights a common issue of the MSR investment in Europe: specific data for the MSR is often unavailable or disaggregated from the BRI data. The authors call for further research that will single out the MSR and, for this specific study, test the impact of including additional costs and benefits into the CBA model, as well as preparing a set of geographically and statistically representative surveys to understand MBRI investments in Europe and structured interviews with stakeholders to rank the costs and benefits identified, seeking to more soundly estimate the preferences associated to the model.

In the second article, Rech ("China's State Capitalism and International Responses: A Comparative Analysis of Infrastructure Investment Strategies") offers a model for analyzing the investment into Europe by China as part of the BRI focusing on transportation networks. The article analyzes China's approach of state capitalism and its infrastructure investment strategies and the response of the liberal economies such as the United States, Japan, and the EU, which have focused on connectivity and embarked on similar strategies. The author conducts a comparative analysis of infrastructure investment strategies framed through the prism of principles, priorities, funding, financing, governance, and implementation. The comparison of strategies highlights more commonalities than differences. The article identifies several instances in which liberal economies act in contradiction to their variety of capitalism. The results suggest that China has opened a window of opportunity for proactive infrastructure investment strategies, and major economies have responded in kind. With overlapping emphases in similar geographic regions, these strategies lead to competition. Consequently, recipient countries profit from an advantageous negotiating position when seeking to attract foreign direct investment in infrastructure projects. The article allows us to move beyond understanding the BRI investment in Europe in isolation and understand it as part of a wider global movement toward large-scale proactive infrastructure investment strategies by major economies. This article helps create a framework by which Chinese investment in Europe can be understood in a global context.

Rounding out part one, Lima da Frota Araujo ("Exploring Chinese Investments in Europe: Scope and Governance Dynamics") focuses on BRI investment in Europe, looking beyond the EU to understand the wider effect of China's investment on the continent. This study analyzes China's investments, identifying the main beneficiaries based on relative economic size and assessing the impact of governance indicators. The article uses panel data regression to examine the impact of Chinese investments in 15 European countries from 2011 to 2020. The author finds that those smaller economies and those with lower scores for voice and accountability received a greater proportion of Chinese investments relative to their economic size. These states are mainly outside the EU, such as Serbia, Belarus, and Ukraine. These findings suggest that China's investment decisions in Europe are not solely determined by governance indicators. Consequently, countries with lower scores have the potential to receive investments and foster economic growth, offering an alternative to conventional methods of attracting Chinese investments. This article helps us understand Chinese investment in Europe, shows that governance structures and levels of voice and accountability can affect levels of Chinese investment, and explains why Chinese investment differs across Europe.

In part two of the special issue, Gottwald-Belinic and Sonora ("Chinese Investment Scope behind the "17+1" Initiative: Effects of Chinese FDI and BRI Investment on CEE Exports") examine China's increasing economic interest within the CEE region. By measuring investment over Chinese outbound foreign direct investment (FDI) and project investments in infrastructure, they try to capture the long-term incentive China might foresee in the region, promoting the investment as a form of long-term gateway access to the greater European Union. Using a gravity model, they estimate the export elasticity of Chinese FDI and BRI investments between 17 CEE countries and the Western EU countries. Their results demonstrate that FDI investment in CEE has mixed significance on CEE exports to the EU: Chinese FDI in CEE economies has a larger impact on CEE exports to Eastern EU economies than Western EU countries. This suggests export markets to Western EU economies are relatively mature compared to Eastern EU economies.

Duggan, Hooijmaaijers, and Santiago ("Chinese Investment in European Agricultural Infrastructure") zoom in on Chinese investment in the European agricultural infrastructure, which has become interconnected since the development of the single market and includes, among others, agricultural land, food production, food safety, agri-transport and logistics, and agri-research and development. As part of a broader state policy to increase Chinese food security, Chinese companies are increasing their investments in the foreign agri-food sector and increasingly acquiring companies in Europe. The article employs a governance analytical framework, focusing on five coherently linked analytical tools: problems, social norms, actors, nodal points, and processes. The authors claim that while Chinese private companies are driven by market forces rather than policy objectives, investment by state-owned enterprises (SOEs) aligns with the social norms used to deal with China's problem of food security and China's policy objective of upgrading the Chinese food system.

The article by Svetlicinii ("Chinese Investments in the European Energy Sector: From Merger Control to Investment Screening") discusses the application of the two regulatory frameworks of the EU to the Chinese investments in the energy sector: merger control focused on the protection of market competition and foreign investment controls based on the protection of security and public order. The article analyzes the application of the EU-wide merger control to Chinese mergers and acquisitions with a particular focus on the role of the SOEs and the evolution of the EU FDI screening framework aimed at addressing security risks associated with FDI in the European energy infrastructure and acquiring the associated critical technologies. The author finds that Chinese investments will appear under increased scrutiny as the member states continuously expand the coverage of the national FDI screening regimes. Without direct interdependence on the energy supplies, the EU-China energy relations will be prone to a more delicate calibration of the various interests involved. Therefore, the European governments and companies will have to balance between cooperating for the global good of climate change mitigation and competing for global leadership in green technologies and manufacturing.

Peragovics and Szunomaár ("The Great Connection: The Budapest-Belgrade Railway Project and Its Significance for Hungary's Foreign Policy Identity") investigate the significance of the Budapest-Belgrade railway project in the context of Hungary's foreign policy identity under the current political regime. The authors claim that existing explanations have so far failed to appreciate the project's symbolical importance for enacting and reproducing the Orban government's self-conception in foreign affairs. This self-conception is notable for locating Hungary at the crossroads, geographically and normatively, between East and West and for appraising the country as a great conduit between and across these spaces. By viewing the railway upgrade as an element of identity politics, the article moves beyond the literature's crude notion that this is a political project simply because it seems not to make sense economically. The authors conduct a discourse analysis to trace the meaning of the project in a set of chosen texts from key actors in Hungarian politics. Beyond appreciating the infrastructure project as a marker of identity, the article also shows that the Orban-government's emphasis on connecting distant worlds reveals a normatively Chinese approach to international politics in CEE.

Conclusion

By presenting an alternative to the mono-disciplinary, country- or sectoral-level approach, this special issue offers a broader, interdisciplinary understanding of the impact of Chinese investments in strategic sectors and infrastructure development across Europe, providing analysis of both connectivity and infrastructure and examining BRI- as well as non-BRI-related projects in a wide variety of sectors in Europe both within the EU and outside. Although our attempt contributes to a better understanding of the above-mentioned hybrid nature of the EU-China economic relations, future research may dig deeper into these issues by, for example, ethnographically investigating Chinese investments in Europe, that is, analyzing how Chinese investments into strategic sectors and infrastructure affects European societies and the European perception of China in Europe.