How is the New Silk Road working in Europe?
- Pablo Díaz Gayoso
- Mar 3
- 3 min read
The New Silk Road Initiative was Xi Jinping's letter of introduction to the world. In 2013 the proposal was presented in Astana, capital of Kazakhstan, by the supreme leader of the People's Republic of China. The plan was to plan the construction of the world's largest land and maritime trade infrastructure to date. This ambitious project sought to place China at the center as a country that enhances regional development. The Initiative also known as “One Belt, One Road” affects the economic, political, cultural and strategic areas of the countries located within the plan (71 between Asia, Africa and Europe). The plan is expected to affect around 4 billion people and generate around USD 21 trillion. Consequently, according to former Chinese Foreign Minister Wu Jianmin, it will be by far the largest and most ambitious project China has ever planned in its history and aims to re-establish the place China has traditionally held in geopolitical affairs since the time of the great dynasties.
However, 11 years after its inception, the Initiative is, at best, stagnant. Its penetration in Europe has not been as expected. Its success has been most notable in countries with the most authoritarian and/or weakest governments. Governments such as Hungary or Serbia have been the best implementers of the New Silk Road. Hungary is acting, as usual, as a dissident actor to the direction taken by the North Atlantic bloc. Both the United States and most EU governments have taken the policy of de-risking with China. In other words, they are seeking to gradually distance themselves from the Asian giant in order to diversify the sources that guarantee the critical production lines of their respective economies. China, which conquered the status of “factory of the world”, has for decades managed to be the main supplier of products to Western economies. Under the premise of “good, nice and cheap”, Made in China has dominated a large part of Western markets, thus creating a great mutual dependence. The COVID_19 crisis made it evident that dependence on China was elevated to a security dilemma because if the Asian giant coughed, the rest of the world would get sick.
Orbán's Hungary, on the other hand, has taken the “Opening to the East” path of strengthening its relations with China. The Central European country is home to Huawei's largest production hub, as well as to CALT, a giant dedicated to battery production. This situation gives China a strong position in the European market for the production of electric cars. The construction of a chemical industry hub is also planned in the country, filling the gap left by the reduction of Germany's dependence on China. In short, Hungary is weakening the Commission's commitment to strengthening the domestic industry.
On the other hand, Italy formally announced at the end of 2023 that it was withdrawing from the New Silk Road. This announcement takes on special relevance since Italy was the Western country with the strongest economy to be included in Xi's plans. The exit from the plan is argued in the imbalance in the trade balance. Italian imports from China have grown disproportionately compared to Italian exports to China. And high-level investments from China remain limited. That added to the fact that the regional dynamic is to disengage from China, the government headed by Giorgia Meloni had little incentive to maintain the pact reached by Mario Conte's previous executive in 2019.
Recently the United States and, later, the European Union have decided to take protectionist measures and have raised tariffs on electric vehicles from China. The Biden Administration has increased tariffs on imports of Chinese electric cars from 25% to 100%. U.S. sales are negligible and, with the new tariffs, are likely to remain so. However, the Alliance for American Manufacturing argued that the introduction of cheap Chinese cars could be an “extinction-level event” for the U.S. auto industry.
On the other hand, its European partner has been somewhat more moderate and the defense of the tariff hike has been more technical. The president of the European Commission, Ursula von der Leyen, said that Chinese competition was unfair since its industry is subsidized by the state and that this allows it to maintain artificially low prices. For that reason they are going to raise tariffs to 38% for electric cars, a measure of debatable compatibility with the spirit of the green transition and compliance with the 2030 Agenda. This new measure not only presents problems for the internal coherence of the EU and its objectives, but also puts the Union at risk of a trade war with China, a situation that it has always wanted to avoid.
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