China Bids on Greece’s Real Economy
June 29, 2011
While debt-ridden Greece struggles to get its head out of the troubled waters of economic, financial, and now social turmoil, one of the few hands reaching out to help is not only from the expected European Union-International Monetary Fund tandem – but from a far less expected and more recent friend: China.
On June 13, 2011, Standard & Poor’s lowered the Greek sovereign debt to a CCC rating, the lowest in the world, reactivating the call from both the eurozone and the IMF for further austerity measures. Amid angry public protests, on Wednesday the Greek Parliament approved a highly unpopular austerity package that paves the way for international lenders to release the next aid payment under the country’s €110 billion bailout granted last year (about $161 billion). In the lead up to Wednesday’s decision and in a desperate attempt to prevent the bailout of their neighbor, other European countries (led by France and Germany) were asking private creditors, mainly banks and financial institutions, to “voluntarily” participate in a second bailout of additional billions of Euros. Despite what many see as a lifeline for Greece, many worry the real challenge is ahead.
As the world watched Greece fall into a vicious cycle of default, distrust, high interest rates, and an uncontrollable debt crisis, China continued to give the country its vote of “interested” confidence, urging Chinese businesses to seize investment opportunities in the floundering nation.
While the crisis has scared most investors out of the country, representatives of more than 60 major Chinese companies flocked to Athens earlier in June to attend the Hellenic-Chinese Business Forum where they met representatives of 187 Greek enterprises to explore new opportunities in business cooperation. And, while the rest of the world is, understandably, worrying about this unprecedented financial crisis and about Greece’s solvability, China is bidding on its real economy.
What is interesting about China’s involvement in Greece is that it is putting the financial crisis aside (or using it as an opportunity) to focus on the flagships of Hellenic industry. China views Greece as a great “gateway” to the continent and the Balkan Peninsula where Chinese exports have proliferated in recent years. Since the beginning of the crisis, China has confirmed multibillion euro accords with Greece to boost cooperation in fields such as shipping, tourism, and telecommunications. With this business move, China is acknowledging Greece’s ancient know-how and economic potential, taking advantage of what made Greece famous for centuries: its unrivaled cultural treasures, its position as a maritime trade hub and an entry point to the rest of Europe, and its unequaled experience in shipping.
Shipping is undoubtedly one of the most important sectors of the Greek economy, dating back to ancient times. According to the Bureau of Transportation Statistics, the Greek maritime fleet is still today the largest in the world, with approximately 18 percent of the world’s maritime fleet. China, as a country of traders, is understandably interested in being part of this world’s first seagoing merchant fleet, as well as investing to help Greece improve its situation as a country with ports of origination or destination. Tourism, the other jewel of Greece’s economy, with its more than 17 million tourists per year, is another undisputable asset of the Greek economy.
However, China’s new investments in Greece are not without risks. If this injection of new capital is perceived by Greeks as a welcome vote of confidence and celebrated in the short term, one cannot ignore the potential risk of tension that this increased participation of Chinese firms in the Greek economy may cause in the medium and long term. In Greece itself, one of the most probable sources of tension will certainly be the completely different approaches to labor relations that the two countries take. Outside of Greece, it will be interesting to see how Greece’s neighboring countries perceive China’s new position as an investor and growing economic player within Europe, using Greece as, what some are calling its “Trojan Horse” to better penetrate the European market.
Yet, in a climate of growing social anger and discouragement, distrust of the financial and political systems, and highly unpopular austerity measures that reinforce people’s feelings of unfairness and vulnerability, Chinese investment in the real economy is a refreshing reminder that sustainable economic prosperity is also about producing goods and services, developing trade, improving infrastructure, and building on people’s expertise and experience.
Véronique Salze-Lozac’h is The Asia Foundation’s director for Economic Reform and Development Programs. She can be reached at VSalze-Lozach@asiafound.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.
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