China’s gift to Europe is a new version of crony capitalism

My country, the Czech Republic, has bent over backwards for President Xi, with little benefit to citizens or the wider economy

The scrapping of limits on Xi Jinping’s presidential term last month drew attention to the profound changes the Chinese leader has imposed on his country’s political system. But the significance of this move is global – and it concerns Europe in many ways. China has identified a “window of historic opportunity” for itself across the world. To make the best of this, so its logic goes, the country must be united and disciplined under a strong leader and supreme commander. Xi has been compared with Mao Zedong in that he’s created an entirely leader-centric political system – but to think this has consequences only for China risks missing the wider picture.

In my country, the Czech Republic, we’ve seen up close how China intends to expand its reach. Central Europe is very much part of China’s ambition to “move to the centre of the world stage” – the expression used by Xi during last year’s Communist party congress. The basic tool China relies on is the Belt and Road initiative, a trade and infrastructure project spanning Asia and Europe which encapsulates the regime’s overarching foreign policy goals, in what Xi has dubbed the “new era”.

The Belt and Road initiative is often misunderstood in Europe, not least because it keeps changing its name from one confusing moniker to another. Originally called the New Silk Road in 2013, it soon changed its name to One Belt, One Road, only to be rebranded as Belt and Road, apparently because the word “one” sounded unduly hegemonistic. While layers of propaganda often make it impenetrable to outside observers, its impact is very real – and growing. The project has been showcased with pompous rhetoric and music videos, and more than 60 countries have agreed to join.

But how has it affected us Czechs? I run a project that monitors China’s attempts to build its “smart” power through a nexus of business, political and media networks. In Europe, there’s arguably no fonder ally of Beijing than the Czech president, Miloš Zeman, a populist who was re-elected earlier this year. He is on record calling Xi his “young friend”, and Belt and Road “the most remarkable initiative in modern human history”.

A tipping point came in 2014 when the Czech government proclaimed that the country would aspire to become “China’s gateway to Europe”. This amounted to a major foreign policy change. It broke entirely with the pro-democracy principles and support for Chinese dissidents of Václav Havel, the hero of the 1989 Velvet Revolution who went on to become president. Havel saw clear parallels between the past struggles of dissidents behind the iron curtain in Europe, and those of contemporary Chinese dissidents – in particular the Nobel peace prize winner Liu Xiaobo, whose Charter 08 declaration was directly inspired by Charter 77, the Czechoslovak anti-communist movement.

With Zeman, the contrast couldn’t be starker. Here was the Czech Republic displaying total complacency about a regime that not only imprisoned Liu but denied him external medical help as his health dramatically deteriorated (he died last year). However, things went much further than just political signalling. By 2015, Zeman had named as his honorary adviser Ye Jianming, the chairman of a mysterious Chinese mega-company: CEFC, which had arrived in the Czech Republic promising billions of dollars of investments.

CEFC embarked on what resembled a shock-and-awe buying spree, announcing it would scoop up stakes in travel services, an airline company, a brewery, a football club and a media group. It also lost no time hiring scores of former Czech elected officials, who often double as advisers at various ministries, or indeed within the presidential castle.

As time passed, however, actual investments remained negligible. The few deals that did materialise were mostly real estate acquisitions. Then last month, Ye suddenly ran into trouble in Beijing. News broke that he’d been arrested and come under investigation for financial irregularities. Prior to that, last November, the head of CEFC’s non-profit arm, the former Hong Kong politician Patrick Ho, was arrested in New York and accused of bribing presidents and government ministers in Africa.

Ye’s disappearance obviously raised eyebrows in Prague. Zeman reacted by sending three close colleagues on a strange semi-private fact-finding mission to China. They came back with the information that the heavily indebted CEFC would effectively be taken over by the Chinese state, together with its Czech acquisitions. So much for the hopes that the company would save the Czech economy as a private investor.

These awkward developments for Zeman have since prompted a debate about the wisdom of tying the country’s future to mysterious Chinese entities and to the Communist regime in Beijing.

It might have helped to look more carefully before accepting Beijing’s embrace. Some of the metaphors Chinese media have attached to the Belt and Road project are revealing. They often call it “globalisation 2.0”, or the “New World Order”. What that vocabulary struggles to mask is that the whole endeavour is driven far more by politics than by markets.

Deals are negotiated at state-to-state diplomatic summits. Open tenders are shunned. Contracts are awarded by political fiat. Ostensibly commercial companies put former politicians on their payrolls by the dozen. As it turns out, CEFC’s main investments in the Czech Republic weren’t economic, they were about buying up the loyalty of Czech officials. What China has to show for itself in my country is hardly innovation. Rather, it has brought us a new take on age-old crony capitalism.

Publication of this article: The Guardian, 18.4.2018