Chinese investment in EU-seaports: In search of tipping points

By Xiaoxue Martin, Frans-Paul van der Putten

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A Cosco container ship in the port of Rotterdam. ©Pexels

In short

Chinese foreign direct investment in EU seaports has become a topic of heated debate
This report analyses the impact on economic competitiveness and national security
No clear tipping point marking a decline in competitiveness could be identified, except in the case of the port of Piraeus
When it comes to national security interests, the risks outweigh the benefits
However, this does not mean that Chinese investments in European seaports should in principle be avoided or reduced

This report was originally published by the China Knowledge Network.

For years, European ports attempted to attract foreign direct investment (FDI) as part of a growth strategy. With foreign companies investing, owning and operating in the ports, new cargo flows were expected to follow, particularly from China, increasing the port performance and competitive position of the ports involved. However, research by Yang et al indicates that in the initial phase of Chinese companies' international participation, operational and investment experience in ports was crucial for their competitiveness. As these Chinese investments developed over the years, this experience played a less significant role in strengthening a port's competitive position, since Chinese companies had by then gained sufficient experience in handling international transactions. At some point in time, a tipping point occurred. The presence of such a tipping point means that an important characteristic and a significant contribution of Chinese FDI in seaports have weakened over the years. The declining contribution of FDI means that extra added value of Chinese FDI for seaports has become less significant over time.

However, next to effects related to competition and growth, these investments and the interests of the countries involved created dependencies that the EU felt uncomfortable with at a time of heightened tensions between the major powers. The new EU Port Strategy therefore also aims to strike a balance between pursuing greater competitiveness through investments from China and security considerations.

This report analyses the following research questions: how does Chinese direct investment in EU seaports impact the port’s competitiveness? Is there a tipping point where an increase in Chinese FDI no longer results in a significantly greater likelihood of attracting cargo flows? And finally, does strengthening competitive advantage through attracting Chinese FDI come at the cost of national security interests, or can they amplify each other?

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