After the catastrophic financial crisis erupted in 2008, the global landscape emerges unthinkable changes. The affluent industrialized countries devastated by the financial turmoil are stretching their scrambling-for-cash hands out towards the once poor emerging economies, primarily China, for rescue. The life-saving financial assets in the Oriental hands must shift quickly to the West, though resulting in the continual transfer of production and consumption to the East. In the eyes of the West, the Dragon, i.e. China, is both the reasons for the crisis and also one of the solutions.
The path has been defined: China will finance the Western world in exchange of assets. But, in practical terms, what is possible and profitable to do? To buy the sovereign debt of Europe may be a dream for EU member states, like a mirage in the desert. However, why should China buy something so risky, as showed in a depreciating currency and a framework of division amongst the European governments? Why not to use the reserves to reduce the burden of still a harsh welfare state rather than helping the over-consumption of other countries? In addition, buying debt of other countries might cause political tensions in domestic market: the last thing China needs.
Well, there’s another possible solution that might wipe out those doubts: China can choose to invest in such real assets as infrastructural networks. At first sight, this option seems reasonable: Europe needs to modernize its system, but has few resources. China may invest and jointly run the business. This is a great opportunity for China to heighten its global prestige. For the first time, the nation will be not only a contractor but also an investor, not only a source of labour force, but of capital. The solution both appears feasible and mutually beneficial: the investment from cash-flush China will reduce the unemployments in Europe, generating future but guaranteed profits.
Unfortunately, it failed to stand a a more analytical examination. If investments in infrastructures were automatically profitable, international capital would have flocked to them. Infrastructures such as communication and power grids are lucrative only when they are in operation. But social and legal constraints applied to western companies might prove to be an obstacle sometimes impossible to pass for Chinese investors. Unlike a mere product manufacturing and marketing, infrastructure such as roads, ports, power plant, railways requires social consensus in order to be built, including the approval for environmental impact, purchasing and/or expropriation of land rights, negotiation for pricing services, etc.
Chinese investors are not used to long and strenuous negotiations that produce limited results. China’s expertise proved good in Africa, where the socio-political conditions are very different. In Europe, crowded teams of lawyers are essential; in Africa it is more a matter of bilateral political agreements, a subject China has mastered since the early 50s’ under the unparalleled diplomatic skill of Zhou En Lai. George Osborne, the Chancellor of the Exchequer, amplified the hopes of the British Government, when he warmly welcomes Chinese investments in the infrastructures of his country. He forgot to mention that with really good profits in sight, he would not need Chinese funds, since many other financial providers could be ready. For China, it would prove naïve to venture in difficult and unexplored paths .
Holding the biggest reserves in the world can be a problem and its solution must be wise, prudent and problem-free, just the opposite of what the infrastructure development context of Europe has to offer.