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China to Ramp Up Investment in Central, Eastern Europe

Chinese Premier Li Keqiang (r) speaks with Prime Minister of Latvia Laimdota Straujuma during China - Central and Eastern Europe meeting of heads of government in Belgrade, Serbia, Dec. 16, 2014.

China said on Tuesday it would create a new investment fund of $3 billion (2.4 billion euros) targeting central and eastern Europe, seeking to strengthen its foothold in the region as a door to the wider European Union.

China sees central and eastern Europe as a potentially lucrative market and bridgehead to the wider EU, drawn by relatively low wages, educated workforces and scope for development on the fringes of the bloc.

Chinese investments in the region usually come in the form of loans financed by China's state-owned banks for projects carried out by Chinese companies, particularly in the sectors of infrastructure and energy.

Chinese Premier Li Keqiang, however, addressing a summit in Belgrade with leaders of 16 central and eastern European countries said China was open to “new models of financing and investment”.

During the three-day visit, Li is expected to ratify a deal with Hungary and Serbia for Chinese construction of a high-speed rail link between Belgrade and Budapest.

“On the Chinese side we can create a new investment fund with a total value of $3 billion,” Li told the summit, in remarks translated into Serbian.

“We expect new ways of cooperation through private-public partnership, various leasing arrangements and that will make our cooperation more efficient, more productive, and by doing that all desires of EU member states for respecting of their rules will be fulfilled,” he said.

Li's host, Serbian Prime Minister Aleksandar Vucic, also alluded to the need to find new ways of financing, reflecting concern over debt levels in the region.

“Of special importance is diversification of the system of financing between interested parties, taking a step towards financing investment projects through concessions or private-public partnership,” Vucic said.

In 2012, China announced a $10-billion credit line for a region comprising some of the EU's newest members and others in the Western Balkans that are not yet part of the bloc but trying to get there.

On Thursday, Li will inaugurate a 170-million-euro Chinese-built bridge completing a highway ring-road around Belgrade. He said on Tuesday he hoped the high-speed rail link to Budapest would be completed within two years.

The projects fit with China's plans to expand its presence in Greece's main port of Piraeus, where Chinese global shipping carrier Cosco won a 35-year concession in 2009 to upgrade and run two container cargo piers, as a gateway to the Balkans and on into central Europe.

(1 euro = $1.2518)