The Moldovan Embassy in Beijing recently presented 20 projects in the post-Soviet republic for potential Chinese investment. Worth a total of $ 1 billion (880 million euros), Moldovan Ambassador to Beijing Dumitru Braghis told Chinese authorities that the key sectors to be seized are medicine, pharmaceuticals, IT, transport, viticulture and agriculture.

Braghis was enthusiastic that his country is a place with a favorable tax system and free economic zones, industrial zones and computer parks. Observers suggest that it is the relative scarcity of a viable regulatory regime and widespread corruption that are more attractive to Chinese companies and authorities wishing to locate near European Union markets and diversify away from it. dependence on Africa for raw materials and cheap labor.

Chinese presence in Moldova “well accepted”

Moldovan President Maia Sandu – a former Harvard-trained World Bank economist – defeated Russian-backed outgoing president Igor Dodon in an election last November for closer ties with the EU. But an ongoing energy conflict with Moscow and the EU’s failure to tie the conditions for political reform to promises of Moldovan investment funding have pushed the new government to Beijing. China has largely focused on the trade aspects of cooperation.

“Chinese investments represent a macroeconomic opportunity for Moldova, because Beijing is succeeding where the EU and Russia have failed due to geopolitical confrontation,” Michael Lambert, researcher at the Sorbonne in Paris, told DW.

“Beijing’s presence is well accepted both by Russia, as China is a key partner of the Kremlin, and by the EU, as Brussels’ policy has yielded little or no results in Moldova over the years. of the past decade, ”Lambert said.

Beijing and private investors are interested in agricultural resources as China has a demand for products such as wine and meat. “He is also interested in developing competitive businesses such as cognac, grains, tomatoes, honey and textiles, to name a few,” Lambert added.

China Energy would like to sign a cooperation agreement with the Moldovan Ministry of Economy and Infrastructure. Meanwhile, China Sinopharm International Corporation has also expressed interest in cooperating with a Moldovan company to implement a radiotherapy and chemotherapy development project.

Other companies interested in investment opportunities in Moldova are Great Wall Motors, China Overseas Economic Cooperation Corporation, Huawei and the China-Europe Association for Technical and Economic Cooperation, Braghis said.

“In addition, Moldova has an interesting and competitive tax system, similar to that of Georgia and Ukraine, which attracts Chinese companies looking for an economic outpost at the gates of the EU,” said underlined Lambert.

Neocolonial result for Moldova?

With the rise in wages in China, the relocation of Chinese companies to Moldova is an asset, analysts say, because Beijing wants to avoid locating all its companies in cheaper countries in Africa, and to diversify and secure its supply chain. .

“China has no military intentions towards Moldova and, from a political point of view, it remains focused on Central Asia,” Lambert said. “In short, Moldova is above all a medium for the diversification of Chinese suppliers of goods and an economic outpost close to Europe to produce food and wines in great demand in China.

But it could also mean that Moldova supplies China with raw materials and low-level processing, while China exports industrial equipment and consumer goods to China. Critics say that not only does the production of these goods create few jobs or add little value, but these products are also vulnerable to competition, protectionist policies and fluctuations in world prices.

Moldova started negotiations on a Free Trade Agreement (FTA) with Beijing in 2017. In 2015, SOE China Shipping Container Lines launched container transport services in the port of Giurgiulesti. The investment enabled the Moldovan capital Chisinau to export products abroad, which was vital as its economy suffered from the Russian embargo on wine imports from Moldova.

Under the previous government led by Pavel Filip, in March 2019, Moldovan authorities and two Chinese companies, China Hyway Group and China Railway Group Limited, were in talks to build 300 kilometers (186 miles) of highway at a cost of 400 million. of dollars (€ 344 million). But that remains without result.

Chinese companies heavily invested in Montenegro, especially in this road project near Serbia

The dreaded debt trap

But some believe that inviting Chinese investment could overwhelm the former Soviet republic with debt, as project money would be financed by Chinese bank loans.

The example of Montenegro cannot be ignored. The country now says it needs EU help to repay a billion dollar Chinese loan for a road project.

EU spokeswoman Ana Pisonero told RFE / RL that Brussels was concerned about “the socio-economic and financial effects that some Chinese investments may have,” as well as the risks of economic imbalances and “dependency. debt”.

China holds around a quarter of Montenegro’s total debt, which reached 103% of GDP in 2020.

Lambert minimizes such alarms. “Moldova’s debt is shrinking with the growing Chinese footprint, as Chinese companies provide more revenue than they absorb,” he said.

In fact, one of the advantages of China’s historically weak presence in the country is that it is not heavily indebted to Beijing. China had only invested $ 4 million at the end of 2018, far less than reported investments in other post-Soviet states. Kyrgyzstan and Tajikistan had attracted $ 1.4 billion and $ 1.8 billion in Chinese foreign direct investment, respectively, by the end of 2018.

Moldova relies heavily on Western funding, which has been cheaper and easier to obtain. He received aid of 100 million euros to help deal with the pandemic.

Neither Moscow nor Brussels

“To date, Moldova does not seem able to put pressure on the EU or Russia,” Lambert said. Ultimately, the question of an exclusive partnership with China rather than with the EU could arise, he explained, because a partnership with Beijing would be more beneficial than with the EU.

“Moldova will never be able to join [the EU], and a possible agreement with Moscow would not improve Moldova’s economic situation, “said Lambert.

Moldova is heavily dependent on Russian gas imports, which Moscow has used as leverage in its relations with Chisinau.

Gazprom said that if unpaid gas bills are not paid and a new contract is not signed by December 1, 2021, the Russian gas giant will shut down gas supply to Moldova.

Since September, Gazprom has reduced its exports to Moldova, with experts estimating a drop in supply of 35%. Gazprom is also demanding repayment of $ 700 million in suspected debt. Gazprom itself is a 50% shareholder in Moldovagaz, Moldova’s gas monopoly.

Moldova was receiving a € 60 million grant from the EU to help it cope with its energy crisis, Sandu said on October 27. But it’s not at all clear whether that will be enough to stop the country from moving further into Beijing’s warm embrace.