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 While the exact amount is still to be decided, the pledge will mark
the latest step in China's efforts to shape global economic
governance at the expense of the United States, and follows major EU
governments' decision to join the Chinese-led Asian Infrastructure
Investment Bank (AIIB) in defiance of Washington.
It is expected to come with a request for return investment in
China's westward infrastructure drive - the "One Belt, One Road"
initiative - constructing major energy and communications links
across Central, West and South Asia to as far as Greece.
"China announced that it would make (X amount) available for
co-financing strategic investment of common interest across the EU,"
the draft final statement says, leaving the amount unspecified and
adding that agreements will be finalised at another meeting in
September.
An EU diplomat said the Chinese contribution was likely to be "in
the billions".
Asked about China's plans, Chinese Foreign Ministry spokesman Lu
Kang told reporters on Monday: "To my knowledge, China is still
conducting research. Currently, we don't have any details," Lu said.
The European Commission said that China had contacted the EU
executive about the fund but declined to give more details at a
regular news briefing in Brussels.
EU and Chinese officials have told Reuters that Chinese banks are
looking mainly at telecoms and technology projects.
Chinese Premier Li Keqiang, who will attend the summit in Brussels,
will agree with EU leaders that the 315 billion euro ($354.94
billion) fund will "create opportunities for China to invest in the
EU, in particular in infrastructure and innovation sectors".
If sealed, the deal will be a success for European Commission
President Jean-Claude Juncker, who faced scepticism last year when
he proposed the European Fund for Strategic Investment (EFSI),
because EU governments are putting in little seed money.
France, Germany, Italy and Poland have each announced they will
contribute 8 billion euros, while Spain and Luxembourg have pledged
smaller contributions.
The bloc is relying mainly on private investors and development
banks to fund projects selected from an initial list of almost 2,000
submitted by the 28 member states, from airports to flood defences,
that are together worth 1.3 trillion euros.
A big Chinese investment might raise questions about governance of
the fund, which is so far strictly a European institution. An EU
diplomat said it was not known whether China would seek
representation commensurate with its stake.
The decision to invite China into an EU fund could cause some
friction with Washington, which is wary of Beijing's rising
influence and upset that Europe rebuffed its calls to stay out of
the AIIB.
China is already testing U.S. dominance in Latin America, offering
the region $250 billion in investment over the next decade, while
Chinese companies have poured money into Africa to guarantee
commodity supplies in exchange for building new roads, hospitals and
rail lines.
The United States and human rights groups complain that China and
its firms are wielding influence partly through corruption and
turning a blind eye to labour and environmental standards and human
rights. Similar criticisms were long levelled at Western
multinationals in developing countries.
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EU-CHINA QUID PRO QUO
Alessandro Carano, an advisor to the European Commission on the
fund, defended the decision to welcome Chinese investors.
"The purpose is to mobilise the liquidity in the market. We don't
differentiate among the owners of the funds," Carano said. "China is
a big investor already. We don't want any prejudice."
In return for its investment, China wants a quid pro quo with
Europe, whereby European companies and governments would take a
greater interest in President Xi Jinping's "One Belt, One Road"
initiative.
China aims to create a modern Silk Road Economic Belt with railways,
highways, oil and gas pipelines, power grids, Internet networks,
maritime and other infrastructure links across Central, West and
South Asia to as far as Greece.
"We are looking for ways to build up synergies between the One Belt,
One Road initiative and the Juncker plan to invest in good
products," China's ambassador to the EU, Yang Yanyi, told Reuters,
describing the exercise like a "dating agency" to line up the right
European projects with Chinese money.
"There is a strong political commitment, there is common ground for
cooperation. China is in a position to invest."
Senior EU officials have already met with Chinese banks and
technology companies.
At one seminar attended by Reuters, executives and officials were
present from Bank of China, HSBC, China Construction Bank Europe,
Industrial and Commercial Bank of China (ICBC) and Chinese telecoms
companies Huawei and ZTE.
In addition, the Commission is exploring whether the EU could become
collectively a member of the AIIB, since the bank is open to
"economic entities" rather than just states - a term crafted to
enable Taiwan to participate, but which could create a loophole for
Brussels.
That would require some capital contribution from the small EU
external relations budget. It remains to be seen whether EU states
prickly about national sovereignty, such as Britain, agree to the EU
joining the bank.
Meanwhile, an EU diplomat said the European Investment Bank has
quietly been providing advice to China behind the scenes on
governance standards and best practice in setting up the AIIB.
"That has largely paid off so far," he said.
(Additional reporting by Michael Martina in Beijing, editing by
Sophie Walker and Peter Graff)
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