China’s BRI Geopolitical Maritime Investments in the European Union’s Shipping Industry, European Union’s Reaction and Implications for South-South Relations

China is purchasing stakes in strategic ports across the European Union with varying dynamics observable in each deal including its latest purchase at Germany’s Hamburg harbor. China Ocean Shipping Company (COSCO) which is one of the world’s largest shipping companies has also purchased shares in sea ports in: Belgium, Spain, Italy, Netherlands and Greece. These maritime investments are in line with Chinese President Xi Jinping’s 2013 proposition to invest in a 21^st century Maritime Silk Road which is a part of the Belt and Road Initiative (BRI). Ten years ago, during a speech[i] in the Parliament of Indonesia, Xi Jinping emphasized that: “China cannot achieve development in isolation from the world, and the world also needs China for development. China is fully committed to the path of peaceful development, the independent foreign policy of peace and the opening-up strategy for win-win results.” The Chinese government perceives the 21^st Century Maritime Silk Road as encompassing two routes.[ii] The first route commences from China’s sea ports, crosses South China Sea, the Malacca Strait, the Indian Ocean and extends onwards to Europe. The second route commences from Chinese sea ports, crossing South China Sea, and extending to the South Pacific. After the Greek economic crisis, China saw the chance and took the risk to invest in Greece’s maritime sector. After the “China-Greece Maritime Cooperation Year” in[iii] 2015, just when the troika (European Commission, European Central Bank and International Monetary Fund) demanded privatization of the strategic sea port of Piraeus in Athens as a condition of a rescue plan for Greece’s economy, China Ocean Shipping Company (COSCO) took over Piraeus harbor in 2016. China acquired a 51% majority shareholding of the strategic Mediterranean Piraeus harbor in Athens which was recently increased to 67%.[iv] During a 2019 visit[v] to the Piraeus harbor, President Xi Jinping noted that Piraeus is “an important bridgehead and transit point” for the BRI.[vi]

A ship waiting to dock at Piraeus harbor. Photo by: John Njenga Karugia

Europe’s largest harbor, the Rotterdam harbor in the Netherlands followed shortly after. After China acquired a minority shareholding of 17.85% of the Rotterdam port in 2016, China Daily[vii] noted the strategic importance of the Rotterdam harbor due to its location “at the junction of the land-based Silk Road Economic Belt and ocean-going 21^st Century Maritime Silk Road” which are key trade routes for Europe, Africa and Asia’s population of about 5 billion people.

A section of the Rotterdam harbor. Photo by: John Njenga Karugia

In 2023, after heated debates amongst coalition partners of Germany’s current government, Germany approved China’s takeover of the Tollerort Terminal at its strategic harbor in Hamburg as a minority shareholder. Six federal ministries, Germany’s foreign intelligence services (BND), the European Commission, the USA and various analysts in Germany were against COSCO’s interests in Hamburg since it is part of Germany’s critical infrastructure.[viii] National security was cited as the key issue by German voices that were opposed to the takeover which almost collapsed. Security has been cited as a key concern across the EU since NATO military equipment pass through some of these ports.

A COSCO ship docked at the Container Terminal Tollerort. Photo by: John Njenga Karugia

In 2019, the EU established “a framework for the screening of foreign direct investments into the Union”. This post-Piraeus securitized framework[ix] states that the following factors may be taken into consideration by EU member states or by the European Commission:

1.   In determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission may consider its potential effects on, inter alia: 

(a)   critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure;

(b)  critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009 (15), including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies;

(c)   supply of critical inputs, including energy or raw materials, as well as food security;

(d)  access to sensitive information, including personal data, or the ability to control such information; or

(e)   the freedom and pluralism of the media.

2.   In determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission may also take into account, in particular:

(a)   whether the foreign investor is directly or indirectly controlled by the government, including state bodies or armed forces, of a third country, including through ownership structure or significant funding;

(b)  whether the foreign investor has already been involved in activities affecting security or public order in a Member State; or

(c)   whether there is a serious risk that the foreign investor engages in illegal or criminal activities.

China’s investment at the Hamburg harbor was additionally screened[x] by the German government in line with German jurisprudence[xi]  that regulates FDI flows into Germany. China initially wanted a 35% stake but after various federal ministries warned against giving China too much influence in Germany’s critical infrastructure, the German government limited China’s stake at 25%.[xii] Unlike Piraeus harbor where China is the majority shareholder, at the Hamburg harbor: COSCO has no power to veto any decisions; COSCO has no access to sensitive know-how of the daily running of the harbor and COSCO officials do not participate in the daily management of the port.[xiii] China’s Cosco Shipping Ports Limited (CSPL) will now control a 24.99% stake of Hamburg’s Container Terminal Tollerort (CTT).[xiv] For Germany, this deal strengthens global supply chains, secures jobs at Hamburg harbor and seals Hamburg’s importance as a strategic domestic and global port. China is Germany’s biggest trading partner and approximately 30% of the goods processed at the Hamburg harbor are exports headed to China or imports arriving from China. A key implication of China’s successful investments in the European Union’s (EU) maritime sector is the political leverage China will gain for future south-south maritime investment negotiations within the BRI. A profitable COSCO in Europe will be attractive to governments across the global south which will further increase China’s influence across the global maritime sector. A major risk will be that some countries might not screen China’s interests objectively due to inadequate screening mechanisms and due to influence that China already wields in these countries and regions. Another implication will be diffusion of the EU’s institutional reactions to Chinese maritime investments whereby China’s southern partners will develop similar screening mechanisms to attempt to secure their critical infrastructure in a similar manner that the European Union has done in reaction to growing Chinese investments within its territory. Meanwhile, China will continue churning out thousands of maritime professionals to run its strategic global shipping interests upon graduation from specialized maritime institutions of higher learning which include: Dalian Maritime University, Zhejiang Maritime International College, Qingdao Ocean Shipping Mariner’s College, Tianjin Maritime College, Guangzhou Maritime University, Jiangsu Maritime Institute and Shanghai Maritime University where I was privileged to be a visiting scholar.