From an investment perspective, the government’s full attention seemed to be on New York last week, where ministers took part in the Capital Link Forum, which gave them the opportunity to speak to US-based investors about the country’s prospects. Finance Minister Euclid Tsakalotos also reportedly held a number of private meetings with financial institutions and investors on the sidelines of the gathering on the other side of the Atlantic.
Closer to home, and amid less publicity, another meeting took place recently which could also have significant implications for investment in Greece. Deputy Prime Minister Yiannis Dragasakis met Chinese Vice Premier Ma Kai in Athens on December 7, with the latter calling for closer cooperation between the two countries in all areas. Ma suggested that China’s Belt and Road Initiative, which seeks to enhance maritime and road connections between Asia and the rest of the world, provides an opportunity for Sino-Greek cooperation via large projects, financial institutions, trade and even cultural exchanges.
Dragasakis informed the visiting official that the Greek government is interested in finding more ways to work together, which has been the current government’s position for some time. The question, though, is whether Athens really has a clear idea of what it wants to gain from China and, if so, whether it has a clear strategy to achieve its goal.
These are two fundamental issues addressed in a report published by the Athens-based Institute of International Economic Relations (IIER) on December 5. In the study, authors Plamen Tonchev and Polyxeni Davarinou examine the history of Sino-Greek relations and Chinese investment in Greece. Apart from stressing the growing interest in Greece from China, they also highlight the continuing obstacles that Chinese investors face.
“There is ample room for improvement in the way foreign investment capital is attracted and utilized, e.g. in terms of state structures, licensing procedures, services provided to foreign investors and evaluation of the benefits to be drawn from investment projects in Greece,” Tonchev told Kathimerini English Edition when asked about the key findings of the report.
“Secondly, there seems to be a bit of a misconception about what China can do for Greece. While the volume of Chinese investment capital will most probably continue to grow, it will still be a tiny fraction of the overall investment gap the Greek economy is facing. Hence the question we raise in our report: to what extent can Chinese investment alone help Greece crawl out of its current fiscal and socio-economic quagmire?”
There is no clear figure for the level of Chinese foreign direct investment (FDI) in Greece since the concession deal for shipping giant Cosco to manage the Piraeus container ports was signed in 2008, partly due to differences in methodologies. According to the IIER report, the Rhodium Group places the total volume of Chinese FDI since then at 840 million euros, while the Bank of Greece suggests it is 582.2 million. The Chinese Ministry of Commerce sees the level of investment in Greece at 1.3 billion euros, while the American Enterprise Institute puts the figure at 5.7 billion. Either way, it is clear that investment from China is still at a relatively low level but is rising and has the potential to make a discernible impact.
“So far, Chinese investors have prioritized three sectors that relate closely to the Belt and Road Initiative, namely transport, energy and telecommunications,” says Tonchev. “I assume that these sectors will remain strategically important for Chinese SOEs (state-owned enterprises), which seem to coordinate closely with the Chinese government. At the same time, private corporations and individual citizens are likely to turn to tourism and real estate.”
Apart from Cosco’s investment in Piraeus, which is seen as an anchor project for China’s presence in Greece, the report highlights a series of other ventures, such as China State Grid’s purchase of a 24-percent stake in power transmission operator ADMIE; Sky Solar Holdings and Shenhua Renewables putting their money into the energy sector; Huawei, ZTE and PCCW Global investing in Greek startups and developers; and Fosun participating in the long-awaited redevelopment of Elliniko.
Real estate is another budding area. Some 850 Chinese citizens have bought property worth a total of around 500 million euros in Greece by making use of the Golden Visa program, which gives buyers a five-year residency if they spend more than 250,000 euros.
Tonchev suggests there will be continued Chinese interest in the public enterprises Greece has to sell off as part of the asset development plan agreed with the country’s lenders, the terms of which stretch beyond the end of the third program next year. “In a way, Chinese corporations are making the most of what we call in our report ‘the belated liberalization’ of the Greek economy,” he says.
Nevertheless, Chinese investors have encountered several problems in their attempts to put money into Greece, including a lack of transparency in the tax system, complicated legislation, political instability and misguided expectations on the Greek side.
The report also underlines the lack of proper assessment of foreign investment in Greece, such as a public service to evaluate the number of jobs being created even though they exist in other countries, for instance France. “The drivers for China’s growing presence in Greece relate to strategically important objectives and a sophisticated analysis,” write the authors. “What is less clear is whether Greece has a coherent long-term strategy on how to deal with Chinese investment.”
This leads Tonchev to describe Greece’s approach to the subject as “half-baked” in the sense that Athens has begun to embrace Chinese investment but is not clear on what it aims to gain from it or how to maximize its potential. “Since mid-2016, we have witnessed a spectacular U-turn in the government’s attitude towards China, which is now seen as a strategic partner of Greece, on a par with the EU,” he says. “In addition, the Greek economy needs significant volumes of investment capital in a number of sectors and not only in those prioritized by Chinese corporations.”
The report concludes with a series of proposals for Greek authorities. They include inviting Chinese investors to diversify their portfolios by contributing to the revival of industry, agriculture and other sectors of the national economy and making a better assessment of the long-term socioeconomic impact of investment of China. This appears sound advice as Greece emerges from economic turmoil and goes in search of foreign capital that can help fuel a recovery.