China Becomes First Non-European Nation to Commit to the Investment Plan for Europe
At a time when China is staring down the barrel, it was recently announced that the country’s Vice Premier Ma Kai would commit China to the EC’s Investment Plan for Europe. Eponymously known as ‘the Juncker Plan’, after being announced by President Jean- Claude Juncker back in 2014, this initiative is seeking €315 billion to rebuild, develop and invest in Europe. The European Union will now be working closely with China on a multi-pronged approach to investing in the EU. Other participants include the Silk Road Fund from China, the European Commission and the European Investment Bank.
Details of Cooperation Between the EU and China
A Memorandum of Understanding has been signed between China and the EU for connecting the two territories with the Trans European Transport Network and the One Belt One Road undertaking by China. Among others, the regions will cooperate in infrastructure development, maintaining uniform standards, technological development and fostering a climate conducive to profitable business opportunities and economic growth. These mutually beneficial objectives will serve the interests of the world’s second-largest economy and the European Union well. With the recent equities meltdown in China, coupled with trillions of dollars wiped off global bourses, this ambitious undertaking has certainly buoyed spirits across Eurasia.
What Does the Investment Plan for Europe Hope to Achieve?
The investment plan for Europe is seeking to create more than 1.3 million jobs in future years, and it will look to add between €330 billion and €410 billion to the single European market. A big part of the problems being experienced in Europe is the lack of private investment, which is substantially below optimal levels. The 2008 global financial crisis has wrecked investments across Europe, with GDP growth in Q2, 2014 equivalent to the levels in 2007.
When viewed in perspective, investments in the EU have declined by €430 billion since 2007, with Spain, France, Greece, Italy and the UK accounting for three quarters of the drop. Analysts point out that in 2013 investments made up 19.3% of gross domestic product in Europe, meaning that the current level of investment in the European Union is between €230 billion and €370 billion below the norm. To rectify this situation, the Investment Plan for Europe is seeking to address the following 3 key areas:
1. Providing all necessary support for investment projects
2. Making intelligent use of the region’s financial resources
3. Strengthening the European Union and removing obstacles for investment
It is clear that government intervention is an integral component of the big picture, but encouraging private investors to drop anchor in Europe where near-zero interest rates and fears of a deflationary EU economy abound will prove a little more challenging. For now, the politicians and bureaucrats are rubbing shoulders with one another, but courting the private sector will be a little more taxing.