Imfino News

Vienna, August 3, 2018

Political Background

From April 7 to 12, 2018, Austrian Federal President Alexander van der Bellen and Federal Chancellor Sebastian Kurz, accompanied by a 250-member delegation paid the largest-ever state visit to China by Austrian officials. Christoph Leitl, president of the Austrian Economic Chamber, led a 170-strong business delegation. The fields of science and culture were also represented. On this notable occasion, Federal Chancellor Kurz made a decided commitment to Austria’s participation in the BRI. “We support the One Belt One Road initiative and are trying to forge a close economic cooperation. Austria has know-how and expertise to offer in many areas where China is looking for the same.” Following, a memorandum of understanding (MoU) was signed on Austria’s cooperation in the New Silk Road or BRI project. Despite remaining reservations about the still strongly protectionist nature of the Chinese market, Austrian officials expect future business opportunities to open up for Austrian companies. For more information on the state visit and its results, go to: https://www.federal-chancellery.gv.at/-/economic-relations-main-focus-of-state-visit-to-china

Areas for Austrian-Chinese Cooperation under BRI

In its policy report of June 2018 titled “Economic Policy Implications of the Belt and Road Initiative for CESEE and Austria”, the wiiw – Wiener Institut für Internationale Wirtschaftsvergleiche (Vienna Institute for International Economic Studies), an Austrian economic think-tank on Central and East Europe, CIS and the Balkans, laid out seven areas for potential enhanced economic cooperation between Austria and the People’s Republic of China. Following is a summary of these suggestions.

1. Enhancing transport infrastructure development

An infrastructure project under discussion is the possible extension of the Russian broad gauge railway from eastern Slovakia to eastern Austria. The ambitious goal is to establish a daily train connection between Austria and China. In the medium run, connectivity could be improved by modernizing already-existing railroad infrastructure from the Port of Piraeus via Belgrade and Budapest to Vienna, a project that was included in a MoU on the occasion of the recent Austrian state visit in Beijing.

A project that could create demand for future transport infrastructure could be the establishment of a joint logistics hub, located somewhere between Vienna and Bratislava, thereby making use of already-existing land, river and air transport capacities. The two cities and the surrounding metropolitan area would be ideal for the realization of such a project – due to their wealth, central location within the EU and access to the Danube and several major transport routes.

2. Travel options and tourism attractions

Chinese tourists currently account for 3% of all foreign guests in Austria, their number having tripled over the last ten years, securing China a place among the top 10 countries in Austrian tourism. This upward trend is expected to continue, particularly if measures are taken to facilitate travel between the two countries, for instance, by simplifying the visa process, offering more flight options as well as opening Trans-Eurasian railway routes, which are currently only for freight trains, for tourism as well. Also, efforts could be undertaken to promote Austrian and Chinese tourist attractions, for instance in the area of winter sports.

3. Providing equal opportunities for trade and investment

In 2013, the year when the BRI was announced, the EU and China launched negotiations for an Investment Agreement aiming at attracting and protecting investors into EU and Chinese markets and at securing access to both markets. The negotiations are still ongoing and, according to the European Commission, have advanced in some areas, such as expropriation and transparency, but are still in an initial stage regarding sustainable development and financial services. On the one hand, the implementation of the BRI seems to gain speed throughout Eurasia and Africa, while on the other hand, growing mistrust and fears associated with Chinese investments are voiced by the European public, in particular regarding public procurement procedures and the involvement of Chinese firms and workers in BRI projects.

Major goals yet to be achieved would be the conclusion of such a bilateral Investment Agreement on the principles of reciprocity and non-discrimination as well as a revival of the currently stalling trade negotiations with the ultimate goal of achieving agreement on issues from tariff reductions to non-tariff measures and product standards.

4. Chinese-Austrian Central European E-automotive Hub

Foreign investors in the CESEE-16 form an automotive production hub with the aim of maintaining their position in times of electric mobility. Austria is well-positioned for the further development and advancement of e-mobility technology and is therefore able to offer the Chinese access to the region. Great Wall Motor opened an R&D centre in Austria in January 2018 that will develop electric motors and related control systems through a total investment of EUR 20 million by 2020. In April 2018, Magna Steyr announced cooperation with Beijing Automotive Industry Holding Co., Ltd. (BAIC) in developing intelligent electric vehicles. In the long run, the company could use its manufacturing facilities in neighbouring countries (Czech Republic, Hungary, Poland, Slovakia, Slovenia) production sites for e-car components.

5. Cooperation in ICT still in the early stage

Telecommunications is an area where there is still a lot of room for improvement as far as cooperation between Austria and China is concerned. Overall, the ICT sector is not a high-priority area within the CESEE framework. Only the Bucharest (2015) and Belgrade Guidelines (2014) outline as a goal ‘to support closer cooperation in information and communications technology’. However, Chinese investment in the ICT sector is taking place and might be enlarged further. One possible area for enhanced cooperation is the G5 broadband expansion, which Austria strives to promote and where China has a leading role as developer of G5 technology. However, here, caution is also necessary – the cooperation must be set up in a way that ensures it will not end in competition.

6. A Sino-Austrian investment bank for the Western Balkans

With Vienna being the financial centre of Central, East and Southeast Europe, cooperation options between Austria and China might be extended to the area of finance. The Industrial and Commercial Bank of China (ICBC), the world’s biggest commercial bank, plans to implement a regional headquarter in Vienna. However, the issuance of a bank licence by the European Central Bank is still an unresolved matter due to unresolved issues of public interest.

Apart from this plan, a Sino-Austrian investment bank for the economically weakest part of the 16+1 region – the Western Balkans – could be established. Despite a number of active financial organisations in the region, there could be a niche for an investment bank that specializes in infrastructure investments along the line Piraeus–Vienna as well as the respective cross-connections along the route.

7. Why shouldn’t Austrian pupils learn Chinese?

Good understanding depends not only on goodwill, but also on the ability to understand what the other person is saying. Austrian schools should consider offering Chinese as a foreign language option on a large scale. Currently, only a few schools offer Chinese at all. Here, teacher exchange might be a way to build up the teaching capacities necessary for such an undertaking.

The full report with its recommendations can be accessed under: https://wiiw.ac.at/economic-policy-implications-of-the-belt-and-road-initiative-for-cesee-and-austria-dlp-4549.pdf