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 Premier Li Keqiang had been expected to put a figure on China's
contribution to the EU's 315 billion euro fund at an EU-China summit
on June 29, part of Beijing's efforts to become a more advanced
economy and not just the world's factory floor.
Li made a pledge to invest in the European fund, which aims to
reverse the dramatic fall in European investment since the 2008
global financial crisis, but he created some confusion by also
talking about an additional China-EU co-investment fund.
"China wants to invest between 5 to 10 billion euros initially. The
question is how to do it," said one person close to the discussions,
who declined to be named.
A second person said the investments would be "in the billions" and
added that the goal was to agree the scheme at a meeting in Beijing
in late September between European Commission Vice President Jyrki
Katainen and Chinese Vice Premier Ma Kai.
The Chinese pledge follows decisions by EU governments to join the
Chinese-led Asian Infrastructure Investment Bank (AIIB), in defiance
of Washington.
One of the obstacles is the design of the EU fund, known formally as
the European Fund for Strategic Investments (EFSI), which relies on
guarantees that are designed to attract investors by covering any
initial losses should a project fail.
If China were to put its money directly into the fund as a
guarantee, that would have a multiplier effect by attracting more
investment. But under the rules of the fund, China would have no say
in choosing the kind of technology projects that Chinese companies
could invest in.
China's money could also be lost and need to be replenished if
projects fail. For the moment, the fund's guarantees will come from
unused funds of the European Union's budget.
Other ways would be to invest in projects chosen by the fund's
board, known as platforms, that are defined by the type of economic
sector chosen. That would allow China to go into the kind of digital
projects they are looking for.
Another option would be to create a vehicle linked to the EU fund,
possibly what the Chinese premier was referring to, but that would
still need collateral to go to market to issue bonds and raise
capital. The EU has little spare cash.
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"INFINITE OPPORTUNITIES"
Chinese officials in Brussels last week said there was no doubt
China will eventually invest in the fund. This time, Beijing wants
to work closely with Europe to avoid past project failures in places
such as Poland and Greece.
"We are ready to invest because there are infinite opportunities. We
can build a digital Silk Road, a Silk Road in cyberspace," Lu Wei,
China's top Internet regulator, told European technology executives
in Brussels. He led a delegation of Chinese technology companies
including ZTE, Tencent and Alibaba to find ways to invest in Europe,
mainly through the EU's EFSI fund.
Beijing wants to focus on digital projects to gain technological
knowledge, part of a grander plan to link Asia and Europe under the
"One Belt, One Road" initiative, to create a modern Silk Road to
boost trade and extend China's influence.
China sees an opportunity as the European Union wants to radically
digitalize its industry and public services, promoting Beijing's
so-called Internet Plus plan, whereby everything is connected to a
super-fast broadband network infrastructure.
Chinese investments in European digital infrastructure would likely
come through joint ventures and public-private partnerships to also
develop the next generation of mobile technology, called 5G, which
would enable a one-hour video to be downloaded in about six seconds.
($1 = 0.8988 euros)
(Reporting by Robin Emmott; Editing by Paul Taylor and Ken Wills)
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