China's Xi weaves Poland into 'new silk road' plan

Chinese President Xi Jinping (left) and his Polish counterpart Andrzej Duda at the signing of a cooperation treaty between the two countries in Warsaw, on June 20, 2016.
Chinese President Xi Jinping (left) and his Polish counterpart Andrzej Duda at the signing of a cooperation treaty between the two countries in Warsaw, on June 20, 2016.PHOTO: REUTERS

WARSAW (AFP) - Chinese President Xi Jinping drummed up investment and trade with Poland on Monday (June 20) as the European Union's largest eastern economy eyes financing by the Asian giant.

Xi and Polish President Andrzej Duda inked a broad strategic partnership deal on political and economic cooperation, part of Beijing's much vaunted efforts of establishing land and sea links for European trade, known as the "Belt and Road" policy.

Poland is China's largest trade partner in eastern Europe and in 2015 bilateral trade reached US$17.1 billion dollars (S$23 billion), according to Chinese figures.

But there is a chronic imbalance in favour of Beijing and Warsaw's main objective is to change that.

Xi on Monday urged Poland to "fully take advantage of its position as a founding member of the Asian Infrastructure Investment Bank" (AIIB) to do business.

Launched by China in January, the AIIB includes several European countries among its members but the United States and Japan declined to join. It is viewed by some as a rival to the World Bank.

Calling the AIIB the "world's largest investment fund", Polish deputy prime minister Mateusz Morawiecki told reporters that Warsaw was discussing "massive investments" with Beijing.

"It is certainly still too early to say we've reached some kind of conclusion," he said, revealing only that "multi-billion sums" were involved.

The intensification of ties with Beijing is rooted in Warsaw's "need for capital and export markets beyond Europe, because of the upcoming decrease in EU funds and saturation of the European market," said Justyna Szczudlik, an analyst with the Warsaw-based Polish Institute of International Affairs.

The sides also concluded other lower level bilateral deals, including boosting Polish food products, notably apples, on the Chinese market.

The Chinese are interested in Polish food products, electronics, renewable energy technology, auto manufacturing and white goods. But a 2014 Chinese ban on Polish pork, imposed after an outbreak of African swine fever, remains intact.

Xi, who is on a three-nation tour, and Duda will attend the New Silk Road Forum 2016, an international trade fair bringing together Chinese and European entrepreneurs.

Poland's deputy development minister Radoslaw Domagalski said Warsaw was prepared to set up special investment zones "as gateways for Chinese capital into Poland."

A nation of 38 million people, Poland remains one of the EU's most vibrant economies, clocking uninterrupted annual growth since it shed communism in 1989. GDP is set to expand by around 3.7 per cent this year and next.

Poland wants to use the "train connection between the town of Lodz in central Poland with Chengdu in Sichuan province to export to China more Polish agricultural products" like milk, meat and apples, Professor Bogdan Goralczyk, an expert at Warsaw University, told AFP.

Xi and Duda will meet a freight train rolling into the Polish capital from China on Monday after a 13-day trip from Chengdu.

Trains began running between China and Poland in 2013. The journey lasts 11-14 days, a fraction of the 40-50 day transit by sea.

The rail link - one of the world's longest - is part of China's "new silk road", touted as a revival of the ancient Silk Road trade route.

Chinese activity in central and eastern Europe is rooted in the "16+1 Forum" for cooperation between 16 ex-communist eastern European states and China, launched in 2012 in Warsaw.

At the time, Beijing vowed to commit a total of US$10.5 billion in credit lines and funds to boost economic ties with the region, but analysts say the capital injections have been slow to materialise.

According to Poland's PAIZ foreign investment agency chief Bartlomiej Pawlak there are currently around 900 companies with Chinese capital registered in Poland, but he admits that so far, there has been a "lack of spectacular Chinese investment".