China policies keep Europe firms from Belt and Road, report says

European companies have been largely excluded from President Xi Jinping’s Belt and Road Initiative due to the dominant role of China’s state-owned enterprises and opaque bidding processes, the European Chamber said, raising questions about the country’s commitment to opening the program to the world.

A small number of European companies in China are involved in BRI, the European Union Chamber of Commerce in China said in a survey of its members released Thursday in Beijing, with transparency topping the list of challenges European companies face. A slighter larger number of European companies have seen positive knock-on effects through access to new logistics options and increased trade flows with countries hosting projects, it said.

“One of the most notable aspects about BRI-related projects is that they are rarely transparent,” the report said, adding that the businesses had come up against challenges to participation since the program’s inception. Given Belt and Road’s scale, most respondents referred to their level of involvement as “crumbs from the table,” the report said.

Of 132 respondents to the European Chamber’s survey, just 20 indicated they had bid on at least one BRI-related project, with seven bidding as direct contractors and 13 as subcontractors. Most of them have participated after being pulled in by Chinese business partners or the government. All but a scant few have played niche roles, like providing certain technology, it said.

More than half of the respondents said there was insufficient information available to European companies seeking to make bids, and nearly 40% said that procurement systems for BRI-related projects weren’t transparent enough.

“China’s colossal national champions—boosted by state-aid and cheap financing—are securing an unusually large proportion of contracts when compared to multilateral development schemes,” said European Chamber president Joerg Wuttke. “Europe needs to determine how to respond to this export of the China model to shield itself from market distortions and stay competitive in third-country markets.”

Opening Up

The report comes as BRI, Xi’s signature trade and infrastructure initiative, has attempted to clean up its image after criticism that it’s a debt trap for poor countries and allegations of corruption. While he has advocated for the program to be more open, the European Chamber said it was not yet an inclusive, open global initiative.

Improving the quality of the projects is critical in order to “prevent ‘promise fatigue’ from once again becoming endemic in the international community,” it said.

China’s government clearly took note of some negative perceptions of the BRI during the initiative’s first half decade and “took corrective action,” the report said. Roughly a quarter of all respondents indicated that the BRI was changing, trending toward improvement rather than worsening across various aspects of the initiative.

Italy became the first Group of Seven country to sign up for BRI last March. As of June, China had established third-party market cooperation mechanisms with 14 developed countries including France and Japan. Third-party market cooperation—signing up a developed nation to help build infrastructure in a Belt and Road countries—is the focus of the next phase of BRI to de-politicize the project and bring in more stakeholders, Bloomberg reported.

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The cooperation paper is chiefly a political declaration by two governments, Wuttke said. In terms of business, “it has yet to produce any new opportunities for that country’s companies, and hasn’t driven the openness, transparency and accountability that we enjoy in multilateral finance schemes or schemes run by OECD member countries like Japan,” he said.