During his recent European tour, which included visits to Greece, Italy and Turkey as well as participation in the Sino-European Union summit in Brussels, Chinese Premier Wen Jiabao announced that the political and central bank authorities in Beijing were keen to extend a vote of confidence to Athens. Putting pen to paper, Wen’s assertion was followed up by stipulating that China would continue to be an investor in Greece in the coming years, either as a buyer of Greek sovereign bonds and/or in Sino-Hellenic joint ventures in sectors such as shipping, tourism, transport infrastructure, retail and green technologies. The emphasis here is on the word «continue,» which suggests that Beijing has not retreated from Greek bond purchases in the past. Rather, it intends to sustain and diversify its long-term investment strategy in Greece. As a matter of fact, Wen underlined that China is committed «very positively» to adding to its current holdings of Greek bonds. Between January and October 2010 alone, China spent approximately 420 million euros buying Spanish and Greek sovereign debt. The volume of Chinese foreign direct investment in Greece is even more pronounced. In 2009, China was the single largest foreign investor in Greece. This ranking was achieved on the back of the 3.4-billion-euro, 35-year land lease agreement by the state-owned Cosco shipping company for container terminals at the port of Piraeus. Since this landmark agreement, Sino-Greek business travel between Athens and Beijing has really taken off. Cosco wants to extend the investment in Piraeus by gradually relocating its logistics center from Hamburg in northern Germany to the southern shores of Greece. Furthermore, the Chinese shipping company is looking at the availability of additional container terminal capacity throughout the country. The Chinese investment offensive in Greece is part and parcel of a much larger regional strategy which the political authorities in Beijing are implementing through the vehicle of state-owned institutions and corporate entities that have deep pockets at their disposal. Some background information is appropriate here. For starters, the Chinese central bank authorities are seeking to diversify their foreign exchange reserves totaling approximately 2.1 trillion euros ($2.6 trillion), the largest in the world. Instead of investing these in low-yielding but ultra-safe US Treasury bonds, the People’s Bank of China is eagerly looking for long-term, institutional alternatives and providing state-owned companies with the investment resources they need when venturing abroad. Just consider some of the recent developments. In Africa, the Chinese investment strategy of the past five years has mainly focused on providing flexible loan facilities to individual countries in exchange for long-term agreements in the provision of raw materials and petrol resources. Many of these countries constituted investment destinations where the negotiating hand of the hosts was not very strong and their democratic credentials frequently in doubt. In the Middle East in 2009, China secured two major oil contracts in Iraq. In September of last year, the China National Petroleum Corporation (CNPC) started pumping oil from the al-Ahdab oil field outside Baghdad. In November 2009, the UK’s British Petroleum (BP) and CNPC signed a contract to develop Iraq’s Rumaila field, the largest oil field in the country. Rumaila holds the third biggest oil reserves in the world. And what about Sino-European ties? What is the approach being taken by Chinese investors across the Old Continent? A closer look reveals interesting patterns and approaches, in particular the extent to which China is using investments in Central, Eastern and Southeast Europe as a springboard to the European Union. Chinese companies are busy buying real estate, competing for public infrastructure contracts and investing in manufacturing products such as electronics, telecommunications and chemicals in Poland, Hungary and Serbia. The ultimate objective of this strategic quest to cast as wide as possible an investment network is to consolidate a foothold within Europe’s expanding single market. Chinese foreign direct investment in the largest consumer market of Central Europe, namely Poland, is expected to reach 500 million euros this year after 70 million euros in 2009. A Chinese consortium recently won the contract to construct two sections of a highway from Warsaw to Lodz. It was the first time that a non-Polish or non-European company was awarded a procurement contract in road infrastructure that is co-financed by the European Union in an EU member state. Furthermore, in 2009, China signed a memorandum of understanding to lend 1 billion euros to Moldova. Equally, China’s central bank agreed last year to a three-year currency swap of $2.3 billion to Belarus. Both countries are otherwise known to have considerable difficulties finding capital resources on international markets. Chinese financing facilities are currently also funding the construction of a bridge over the Danube River in Serbia. What is the bottom line of all these developments and prospects? For one, the Chinese dragon knocking at the doors of Athens, Budapest, Warsaw or Belgrade intends to stay and seeks to have impact. The hosts must therefore be prepared. They will face an armada of well-informed, articulate, state-dominated investors from the Far East with in-depth knowledge of the country of choice. It is thus absolutely necessary to have a negotiating strategy in place that can react to the specifics of Chinese demand and expectations, while also displaying a sense of reciprocal give-and-take that does not only curry favor to the arriving party. The Sino-Hellenic cooperation has the potential to become a win-win equation for both sides. Greece can only benefit from the Chinese investors’ vote of confidence at a point in time when Athens is trying to regain a credible foothold as a destination of foreign direct investment. For the authorities in Beijing, the move into Greece – and by extension into the neighboring countries of Southeast Europe – is a step toward advancing its reputation as a reliable investor learning to play by the existing rules and regulations, while simultaneously seeking to become a steady trading and financing partner in Europe, in particular with the EU. In a nutshell, as long as you open the door, the dragon on your doorstep will not breath fire in your face. *Jens Bastian is Alpha Bank visiting fellow for Southeast Europe at St Antony’s College in Oxford, UK and senior economic research fellow at the Foundation for European and Foreign Policy (ELIAMEP) in Athens.