The Disastrous EU Policy Imposed on Greece Has Chinese Investors Worried

The Global Times ran on Feb. 22 a commentary titled “A Greek crisis could impact China’s Market”, by Prof. Liang Haiming, chief economist of China Silk Road iValley Research Institute, a Guangzhou-based think tank.

While everyone is preoccupied by Donald Trump’s tweets, Liang writes in the Chinese Communist Party daily, there are “hidden dangers from Europe, especially regarding the Greek debt problem or even a fresh outbreak of Greece debt crisis, which could impact countries across the globe, including China.”

The Chinese expert on the Silk Road reviews the unsustainability of the Greek debt which could reach 200% of GDP with zero chance of the economy “growing” out of the crisis, contrary to what the country’s creditors assert. That, in his view, has “become a major hazard for this year’s global financial markets”. Furthermore if countries decide to leave the Eurozone it “would push the euro to the verge of collapse. Letting the euro fall to pieces would further hit international financial markets, including China.”

Liang also fears the Europeans will deal with the crisis by “introducing negative interest rates” and further quantitative easing, even though QE has failed both in the US and Japan.

China has developed close relations with Greece, in particular because the Port of Piraeus serves as the principal entry point for Chinese exports to Central and Eastern Europe. Beyond its purchase of a controlling interest in the Piraeus Port Authority, China is also encouraging Chinese companies and banks to invest in Greece.

Therefore, they have good cause to be concerned about the unsustainability of the austerity policy being imposed by Brussels. The latest statistics show that poverty in Greece increased by a huge 40% between 2008 and 2015, and food purchases fell by 18% from 2009 to 2016 and are projected to decline another 2-3% compared this year.

On Feb. 28, the Chairman of the China Development Bank, Hu Huaibang, was in Athens where he noted that his bank, one of the world’s largest development lenders, has prioritized the expansion of its activities in Europe, particularly in Greece. He met with the chairman of the Greek Public Power Corporation, to discuss cooperation between the two organizations for the development of energy projects in Greece and in the Balkan region.

While China has invested investments in Greece over the last five years than any other foreign investor, the Chinese are aware that their input could never suffice to turn around the Greek economy, let alone prevent the huge debt time bomb Greece’s creditors have created.