November 24, 2015 / 12:01 PM / 3 years ago

China proposes joint financing firm with central and east Europe

SUZHOU, China, Nov 24 (Reuters) - China on Tuesday proposed setting up a new multilateral financing institution to support project lending in central and eastern Europe, as it looks to strengthen its influence in a region seen as a gateway to the European Union.

The proposal, floated by Chinese Premier Li Keqiang during a summit in the city of Suzhou with leaders from 16 Central and Eastern European countries, came with few details.

Central and Eastern Europe represent a key part of China’s “Belt and Road” strategy to carve out new overseas export markets between Asia and Europe for its companies as the domestic economy slows.

But out of the countries represented in Suzhou, only Poland has signed up to be among 53 founding members of the China-led Asian Infrastructure Investment Bank, set up to be a rival of the World Bank that will be the heart of China’s “Belt and Road” initiative when it begins lending next year.

“China respects the standards of the European Union and wants to find more avenues and agile methods to give financing support to big projects,” Li said.

Li suggested setting up “a 16+1 multilateral finance company” to finance trade and investment, reducing financing costs and removing the need for governments to provide guarantees.

China’s investments in the region have so far been mostly in infrastructure and energy projects carried out by Chinese companies that are financed using loans issued by Chinese state-owned banks.

Its ramped up presence in the region also comes as a weakened Russian economy steers central and eastern European leaders out to search for new strategic partners.

Last week, China’s Vice Commerce Minister Gao Yan said Chinese companies have invested more than $5 billion in CEE countries and 16 CEE countries have invested more than $1.2 billion in China.

In 2014, the trade volume between China and CEE countries reached $60.2 billion, up from $43.9 four years ago.

Last year, China said it would create a new investment fund of $3 billion targeting central and eastern Europe and signed an agreement to construct a high-speed railway linking Serbia and Hungary.

Separately, China signed deals with Hungary and Serbia on Tuesday on the construction and renovation of a rail link between the Serbian and Hungarian capitals.

Li said construction of the railway would start this year and be completed within two years. (Editing by John Ruwitch and Sanjeev Miglani)

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