China Makes More Investments in Greece

Sources:
NYT: China, Looking for Investments, Turns to Europe
WSJ: Beijing Offers Support to Greece
China Daily: COSCO Acquires Rights to Athens Port

Since the global financial crisis, China has made huge investments in several European countries. Particularly, it has invested in those that were hit hardest by the financial downturn such as Greece and Spain. These investments are beneficial for both China, which has huge currency reserves, and the countries in which China is investing, which desperately need foreign investments. Haris Pamboukis, the Greek Investment Minister, recently said "the support of our Chinese friends is fortunate for us." But China is fortunate as well, as Greece's desperate need for financial support may benefit China financially and politically.

China has focused its investments in infrastructure; specifically, on ports in Greece and Italy along with highways between Eastern Europe, Germany and Turkey. Last month, Chinese Prime Minister Wen Jiabo visited Athens to discuss Chinese investments in Greece. Wen pledged that China would continue to buy Greek bonds and announced the creation of a $5 billion fund that shipbuilders could use, but only to buy Chinese ships. This summer, China's state-owned shipping giant Cosco acquired the rights to Athens' main port, Piraeus. Cosco signed a 35-year lease and paid $4.2 billion for the rights. Cosco is seeking to transform Piraeus into a much larger port to rival Rotterdam, which is currently the largest European port. It aims to double the traffic at Piraeus to 3.7 million containers by 2015. Cosco has also recently expanded in Italy, to the port of Naples. China has also purchased $625 million in Spanish debt, and other struggling countries such as Ireland and Hungry are hoping to persuade China to make investments there, too.

These investments may make China a more dominant player in Europe. According to one source, China is hoping to build a track record of investments that will eventually encourage Europe to support it in disputes with the World Trade Organization concerning trade and currency. Some analysts say that China is hoping to wield greater influence over the economic policies set in Europe. Investing in Greece could also be quite profitable for China. Haris Pamboukis, Greece's Investment Minister, stated investing in Greece is a good opportunity right now "because it has undervalued assets due to its systematic risk . . . [w]hen there is a crisis and risk, there is a very significant profit margin." China will continue to foster relations with Europe this week, as Hu Jintao, China's President, is scheduled to meet with officials in Portugal and France.

Discussion Questions: Should European countries be more hesitant about allowing China to make such significant investments? What are the possible downsides of these investments?