Triple Win? China and Third-Market Cooperation

There is therefore a mismatch in the goals pursued by China and other parties. China’s goal can be reached through market forces if foreign companies see an interest to contribute technology to infrastructure projects as subcontractors. On the contrary, the goals of the states that have sought third-party cooperation with China are more ambitious and political in nature. Inevitably, China’s goals are easier to reach.  
 
The France-China third-party cooperation is a good case in point. The June 2015 agreement with France was the first of its kind signed by China. The idea was backed very strongly by French President Macron during his January 2018 visit to China. As made clear in a Silk Road report published by DG Treasury, France seeks "punctual cooperation in third markets" rather than an MoU on the BRI, and attaches great importance to "governance principles" for connectivity projects. The 2015 agreement covers a wide scope, with an emphasis on a green agenda. The priority is on renewable energies and all projects that contribute to the fight against climate change, green agriculture and food security, railway projects, infrastructure and energy. 
 
In practice, it has not been easy for the two sides to agree on a joint list of projects. During the French Prime Minister’s June 2018 visit to China, a list of 12 areas/projects was proposed to the Chinese side. China responded with an alternative list of 12 initiatives. Today’s list has five projects and reflects the French resistance to China’s insistence that Africa should be prioritized for third-market cooperation, that nuclear energy should be included, or that projects inside the EU (an internal market from the perspective of all its members) should be considered. 
 
What is on the list? Although it was not published online by the French Treasury and the Chinese National Development and Reform Commission, the content is known.

• Two projects are being conducted in the energy sector.
  • EDF and China Datang Corporation aim at an overseas expansion of their partnership on the Chinese domestic market.
  • ENGIE and Tsinghua University’s offset Tusholdings have an agreement under which ENGIE will contribute to the optimization of smart energy services (storage, distribution) in Egypt and in Thailand.
• Three projects in the maritime economy have also been added to the list.
  • Bolloré builds the Tibar Bay Port in Timor Leste with China Harbor Engineering Company, a very rare example of a Chinese subcontractor to a European-led infrastructure project.
  • Bolloré Ports is in a consortium with China Merchants Group to manage the operations of the Tincan Island Container Terminal of the Port of Lagos in Nigeria.
  • On the list is also the Lekki port in Nigeria, whose container terminal, constructed by China Harbor Engineering Company, will be operated by CMA-CGM.

The political difficulties of working third-market cooperation with China should not hide the fact that European companies are involved as subcontractors in several Chinese infrastructure projects, providing niche technologies outside any policy framework. Alstom has contracts with Sinohydro to provide turbine generators to plants built on the Nile River in Uganda and also in Nigeria. Each contract is worth approximately 50 million Euros. This results in an international expansion of the activities carried by Alstom Hydro China on China’s domestic market. A similar pattern is followed by German companies. Siemens is involved in BRI projects in third countries, such as in Pakistan or Indonesia. Some sources mention a 3 billion EUR turnover from BRI projects since 2017.
 
Many companies use the political agenda to conclude their own MoUs with Chinese partners. On the list of 52 "third-market" projects agreed between China and Japan in October 2018, 21 are MoUs between companies. During Xi Jinping’s state visit to France last March, FIVES and China National Building Materials Group established a cooperation framework for energy savings in infrastructure projects in developing countries. Schneider Electric signed an MoU for the modernization of the factories of China’s Power Construction Corporation (PCC) in China and abroad, a deal valued at 6 billion EUR that covers digitalizing energy management, automation, and integrating the IoT into industrial processes. But MoUs are only broad cooperation frameworks, and each deal still needs to be negotiated on commercial terms. 
 
When European companies are willing to become the subcontractor that brings technology, third-market cooperation can rely on market forces and does not need political support. This limited market-driven involvement of European businesses in Chinese infrastructure projects is more in line with China’s terms of cooperation as defined by the State Council than with Europe’s ambitious goals to promote standards and norms. Projects supported and endorsed politically by the two sides also exist, but not as strategic initiatives spearheaded by political authorities. Rather, they reflect a rare convergence of companies’ market interests and states’ priorities.

Copyright : Yoan VALAT / POOL / AFP