'Good Friends Are There to Help': Chinese Investors Take Advantage of Greek Crisis

By Ferry Batzoglou and

With Greece desperate for solvent friends, Athens has been looking to Beijing for help in the fight against its crisis. But Chinese investors are setting tough conditions in return for their money, and many Greeks are unsure if the investments will be beneficial in the long run.

Former Greek Prime Minister George Papandreou with his Chinese counterpart Wen Jiabao in front of the Parthenon temple in Athens on Oct. 3. Zoom
AP

Former Greek Prime Minister George Papandreou with his Chinese counterpart Wen Jiabao in front of the Parthenon temple in Athens on Oct. 3.

Dockworker Nikos Georgiou first started unloading ships on the docks in the Greek port of Piraeus 24 years ago. Today the modern terminals, where in good years more than 1.5 million containers are processed, are proof positive that the economically devastated country is still capable of pulling itself back together. Nevertheless, there is little evidence of hope or confidence, at least among the dockworkers of Piraeus.

The Chinese have called the shots there for the last 17 months. The Chinese state-owned company Cosco acquired the rights to the container port for 35 years, with an option for an additional five years. The insolvent country is to receive €3.4 billion ($4.6 billion) in return, a significant contribution to Greece's battle against the crisis and a good omen for future financial support from Asia. But Georgiou takes a different view. "The conditions here are like something from the darkest Middle Ages," says the former dockworker.

Georgiou, 46, now the president of the influential dockworkers' union in Piraeus, says that the price for the China deal was too high for his fellow dockworkers. According to Georgiou, 250 people, or about one-sixth of all Piraeus dockworkers, have already been let go or forced into early retirement. Instead of employing experienced dockworkers at the going rate of €120 a day, Georgiou says that Cosco is only hiring unskilled laborers for €40-50 a day, without overtime pay for night or weekend work, of course, and certainly without any guarantee of employment. "The Chinese pay excessively low wages. If they didn't, they wouldn't be competitive," says Georgiou. "Meanwhile, we Greeks get the short end of the stick."

The union leader's concerns are understandable. In its search for solvent friends, the previous government under Socialist Prime Minister Giorgios Papandreou, which was replaced last week, hit pay dirt with the Communist leadership in Beijing. Now the world's newest major power, which has estimated foreign currency reserves of $3.2 trillion, is getting ready to snap up bargains in the upcoming privatization of Greek government-owned businesses.

Beijing the Highest Bidder

Cosco, for example, wants to acquire another 23.1 percent of OLP, the Piraeus port authority. Beijing is the highest bidder for shares in Athens International Airport, in which the German construction giant Hochtief holds a 40 percent stake until 2026. The Chinese submitted the highest bid but also set the most conditions, say officials in the prime minister's office. At issue is a 20-year concession contract for the airport for the period from 2026 to 2046, for which the Greek government is asking €500 million.

Beijing has acquired a ship-to-rail transshipment facility near Piraeus, as well as a packaging center, and Chinese buyers are also interested in other ports, like the one near Timbaki and a port in southern Crete. In Thessaloniki, Greece's second-largest port city, the sale of a container terminal to one of three Chinese bidders was temporarily halted in the face of strong public protests against the plan.

The politicians in Athens find it difficult to understand the public's concerns. They see Chinese investment as a potential solution to their financial problems. Eva Kaili, a member of parliament with the Panhellenic Socialist Movement (PASOK), hopes that the Chinese will ultimately prevail in Thessaloniki. "We mustn't be afraid of investors," says Kaili.

Former Minister of State Charis Pampoukis, who resigned with Papandreou, even sees the Chinese stake in the Piraeus container port as "China's flagship investment in Greece." He hopes that "the Chinese government will continue to encourage its companies to invest in Greece."

"Good friends are there to help when someone is in trouble," Chinese Premier Wen Jiabao told his then-counterpart Papandreou in Athens this summer. Papandreou was overjoyed and promptly had his officials sign two dozen preliminary agreements. "The Chinese are coming," the Greek papers cheered.

China's Gateway to Europe

It seemed to be a win-win situation for both sides. Athens would receive funds to plug its fiscal holes, while Beijing would gain new partners in the West and the access to a "gateway to Europe" for which it had been hoping.

Just how much of a blessing China's helping hands have been to date can be disputed. Whether all of the agreements have actually been implemented is just as unclear as the amount Beijing has invested so far in buying Greek government bonds. Wen Jiabao has repeatedly announced such purchases, but there is no precise information on exactly how large they have been and the total amount of Chinese investments in Greece to date.

"We are buying and holding Greek bonds," says a Chinese diplomat in Athens, "and we hope to buy more." When asked to elaborate, the diplomat smiles and says nothing.

Experts assume that China still has about 70 percent of its monetary reserves invested in US treasury bonds and only about 25 percent in euro-zone bonds, with the majority of those investments in low-risk German securities. Experts estimate that Beijing's purchases of euro-zone bonds from crisis-ridden countries like Greece and Portugal remain in the lower single-digit billion range.

Gao Xiqing, the president of the Chinese state-owned fund CIC, which invests the country's monetary reserves abroad, shares this assessment. "We are no white knights," Gao said in September on the sidelines of the International Monetary Fund meeting in Washington. "We have to save ourselves."

"No smart person invests in these kinds of bonds," Ma Weihua, the chairman of the partially state-owned China Merchants Bank, said at the World Economic Forum in Dalian, China. "We cannot sacrifice our interests to help others."

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