BORITI, Georgia — Two neighbors, Murman and Natela, sit together sipping coffee as the early autumn sun sets over the village of Boriti, in Georgia. Just a few kilometers away, the newly built East-West Highway roars with traffic.
The question — whether the new highway is European or Chinese — is met with confusion.
“The road is built by those who pay, so it’s European,” argues Murman, 47, who has been working on the construction of the road since day one.
“But it’s built by the Chinese, so it’s Chinese,” replies Natela, 52.
The debate may be a local one, but it has international implications.
As Brussels gears up to challenge Beijing in the funding and construction of global infrastructure, it’s running up against an uncomfortable truth: Not only do its efforts sometimes overlap with its rival’s; many of the projects it is funding are being built by Chinese state-owned companies.
Since the beginning of 2019, Chinese companies have been awarded more than €1 billion worth of contracts for EIB-funded projects in countries outside the EU, such as Georgia, Senegal, and Tunisia.
This represents roughly 13.1 percent of the total value of third-country contracts attributed to the EIB on the EU’s Tenders Electronic Daily (TED) portal. By comparison, companies from the EU have won 15.7 percent of the total value of contracts, including tenders won by consortiums that involve EU companies.
In some years, such as 2019 and 2024, Chinese firms won a greater share of EIB-funded contract value than EU companies. Chinese firms win around a third as many contracts as EU companies, but these contracts are typically high-value.
Take the road outside Boriti, part of the E60 European Transit Road which links Europe with Asia. The stretch near the village, known as the Rikoti Road, navigates steep, mountainous terrain and is one of the most challenging sections of the highway.
Funding for its construction came from the Asian Development Bank, the World Bank and the EIB, which contributed €399 million. But the contracts went to five construction firms — all of them Chinese state-owned enterprises.
In 2018, for example, the China Road and Bridge Corporation (CRBC) signed a €300 million contract to build the Ubisa-Shorapani section near Boriti, which is almost entirely funded by an EIB loan.
The numbers above do not reflect the full scope of EIB-funded contracts. For instance, a €154 million contract secured by CRBC earlier this year for an EIB-funded rail bypass in Serbia is listed on the TED portal, but not included in TED’s aggregated data for EIB-funded contracts.
“There’s a tension between the rhetoric that this is a European offer and the fact that Chinese companies are building some of these projects,” said Chloe Teevan, the head of digital economy and governance at the European Centre for Development Policy Management, a think tank.
The CRBC did not respond to a request for comment.
Global Gateway vs. Belt and Road Initiative
When European Commission President Ursula von der Leyen unveiled Global Gateway in September 2021, it was a direct response to China’s international infrastructure ambitions.
Beijing’s effort, the Belt and Road Initiative, had set off alarm bells in the West, where it was seen as locking in Chinese strategic interests and creating debt dependence in the countries where the infrastructure was being built.
“We want to create links and not dependencies!” von der Leyen announced during her 2021 State of the Union address.
“We are good at financing roads,” she added. “But it does not make sense for Europe to build a perfect road between a Chinese-owned copper mine and a Chinese-owned harbor.”
Today, the bigger challenge is that it’s very often Chinese firms that are building the roads the EU is paying for.
In addition to the EIB, the EU funds infrastructure through the bloc’s national governments, as well as the European Bank for Reconstruction and Development (EBRD).
While the EBRD isn’t technically a part of the EU, 54 percent of its shares are held by the EU, the EIB and EU national governments. The rest is divided among 44 other countries. The U.S., the U.K., Japan, and Switzerland combined hold 33 percent. Russia holds 4 percent, and China less than 0.1 percent.
Over the last five years, however, Chinese firms have won 13 percent of the total value of public-sector projects funded by the EBRD. EU contractors were awarded 35 percent of total value across the 38 countries in which the EBRD operates, 13 of which are EU member states.
In addition to this, Chinese firms have been awarded contracts for private-sector development projects funded by the EBRD.
In Uzbekistan, for example, the EBRD is providing at least €500 million in financing for seven wind and solar projects being developed by Saudi ACWA Power or Emirati firm Masdar, but which have been contracted to Chinese state-owned enterprises.
Though the majority of EBRD’s operations are geared toward the private sector, the development bank does not publish the results for these tenders.
“The EBRD permits participants from all countries to provide on equal terms goods, works, services or consultancy services for an EBRD-financed public sector project regardless of whether such country is a member,” the EBRD’s Balkan office said in a statement to POLITICO.
Unlevel playing field
China’s involvement in EU-funded projects hasn’t gone unnoticed by the European construction industry.
In 2020, the European Chamber of Commerce in China highlighted a “profound lack of European involvement” in Chinese-financed Belt and Road projects, which are often contracted to Chinese firms without tender.
The EIB, on the other hand, requires its promoters to award contracts through a competitive procurement process.
“We are not afraid of competition on a level playing field,” said Frank Kehlenbach, director of European International Contractors, an industry group. “But we will never be able to compete with these huge state-owned enterprises that work under the control and with the funds of the Chinese Communist government.”
In a statement, the EIB said “all companies, irrespective of their geography and without discrimination, are eligible and free to participate in EIB-led tender processes, which award contracts on the basis of a number of criteria, such as price offer and quality for end users.”
The EU has developed several instruments to address unfair competition in procurement. One of these is the Foreign Subsidies Regulation (FSR), which empowers the European Commission to investigate public procurement bids by foreign companies suspected of benefiting from state aid.
Since the regulation entered into force at the beginning of 2023, it has been used four times, all but one targeting Chinese companies.
One of the major catalysts for the development of the FSR was the awarding of a contract in 2018 to CRBC for the construction of the EU-funded Pelješac bridge in Croatia.
“The Pelješac Bridge scenario was one of the key moments for evolving the EU’s thinking about its competitiveness and economic security vis-à-vis China,” says Matej Šimalčík, executive director of the Central European Institute of Asian Studies.
The Austrian firm Strabag, which also bid for the contract, accused CRBC of price dumping and filed a complaint, but courts found no proof of illegal subsidies.
However, experts argue that state-owned firms like CRBC benefit from indirect state subsidies. CRBC, for example, has established a large portfolio of projects in Europe that are tied to loans from the Export-Import Bank of China.
The introduction of the FSR makes a repeat of the Pelješac case unlikely within the EU, but the regulation does not extend to EU-funded projects outside of the EU, including those that might be built as part of the Global Gateway.
A Commission spokesperson said there was a recognition of the issue.
“The EU is a firm supporter of equal opportunities and open competition,” the spokesperson said in a statement. “However there is a need to ensure a level playing field.”
“The European Commission is discussing these issues with the EIB and is working actively — also in the context of the Global Gateway initiative — to increase the engagement of European companies,” the spokesperson said. They added that the Commission was “exploring” options that would “ensure best price/quality ratio instead of a lowest price as an award criterion.”
However, Teevan cautioned that simply raising the bar may not be enough to deter Chinese companies. “There’s an effort to make it more complicated for Chinese companies to comply, but Chinese companies are getting better and they are investing a lot in ESG,” she said.
Meanwhile, said Teevan, the visible involvement of Chinese companies in the construction of its infrastructure project is undermining the bloc’s ability to take credit for the project it funds.
The Pelješac Bridge is once again a good example. While Brussels saw the bridge as an EU-driven development, Beijing advertised it as a “key strategic project” of the Belt and Road Initiative.
Chinese Premier Li Keqiang, attended the project’s opening ceremony virtually to describe it as “a new bridge to promote friendship between [China and Croatia].”
The confusion, as to whether the bridge was built thanks to Brussels or Beijing, would be instantly recognizable to villagers of Boriti in Georgia.
“How is this road European?” asks Omar, 67, who is being paid €11 per day to control traffic on the soon-to-be-finished East-West highway.
“Everything here is Chinese,” he adds. “The Europeans are paying, but the Chinese are building it.”
Reporting for this article was supported by a grant from Investigative Journalism for Europe (IJ4EU).
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