The Maltese government is making the right choice by tapping into Chinese investment, and the political risks of such links are “very, very small”, according to an expert on China’s economy.
“There is a lot of Chinese capital that is looking for an investment market and not finding much because of the overall global situation. So the eagerness of the Maltese to attract investment is very correct,” said Arne Westad, a professor of International History at the London School of Economics.
Prof. Westad was in Malta this week to deliver a lecture organised by the LSE in collaboration with St Martin’s Institute of Higher Education.
Entitled ‘How can Europe handle China? The politics of global power shifts and their consequences’, the lecture was given more local significance after the Maltese government signed the biggest investment agreement in history with the Chinese.
Through this agreement Chinese State-owned company Shanghai Electric will be acquiring a 33 per cent shareholding in State energy provider Enemalta for €100 million.
China can only rise with the rest of the world. It cannot rise alone
The company will also spend €150 million to acquire a majority stake in Enemalta’s newest plant – the BWSC power station – that will be hived off to a separate company. Shanghai Electric will also fork out the €70 million required to convert the BWSC plant to run on gas.
China is heavily investing overseas in various sectors, especially energy and power, metals, transport and real estate.
Only recently, Beijing signed €17.5 billion worth of trade deals to back major UK infrastructure projects and also signed business deals worth about €3.6 billion with Greece covering areas including exports and shipbuilding.
But the Enemalta deal led many to question whether there were risks in allowing the Chinese government to have such stakes in Malta’s energy provision.
Prof. Westad believes that, while there are always some political risks when privatising utilities, the risks are not greater because the investor is China.
“In Malta’s case, political risks are very, very small. If Malta had been the Philippines or another country close to China and with overlapping claims and conflicts it would be different a story.
“If the Chinese are made to follow the same practices as everyone else I think the political risks will be very, very limited,” he said.
While China had problems of business management – primarily dealing with corruption and bad governance – the main Chinese companies that invested abroad had a better record as they had to clean up their act, he said.
For this reason it is important to have EU and local institutions ensuring that minimum standards are respected by all investors, including the Chinese that have a reputation for cheap labour, he argued.
“Whether or not a company is private or State-owned it should not matter”.
“We have to put aside the idea that State-owned companies are a different animal from private companies. Their business practices don’t tend to differ,” he said.
Prof. Westad’s message was that the EU need not fear China.
“There are challenges but the big story is still a positive story... China can only rise with the rest of the world. It can not rise alone,” he said.