The emergence of geo-economic institutions: observations on European and Chinese development cooperation in Ukraine, Georgia, and Moldova 2014 – 2020

Abstract

The emergence of China as a major provider of development finance has garnered considerable scholarly debate. Chinese investments and their impact on recipient states have been extensively studied, mainly focusing on the Belt and Road Initiative (BRI). In response to the BRI, the European Commission recently announced its connectivity strategy, the Global Gateway initiative. In this context, and even before the announcement, little work has been done to map Chinese state capitalist development finance side by side with the European Union’s (EU) market-led, public-private partnership-oriented strategies, especially within Europe’s own neighborhood. Additionally, the literature insufficiently explains why development institutions (agents) would act geo-economically to enforce their most powerful member states’ (principals) international agendas. This lack of theoretical explanatory power poses a serious puzzle. Thus, we ask, how has EU and Chinese institutional investment cooperation developed (legally and financially) in the EU’s Eastern Partnership (EaP) region in the previous EU Multiannual Financial Framework (MFF) from 2014 to 2020? We argue that development institutions have acted in accordance with their principal’s policy goals by facilitating investment and institutional agreements and by offering beneficial cooperation conditions, so that the EU and China can direct investment in a geo-economic manner if they choose to do so. In the following, we find that European investment in the EaP countries Ukraine, Moldova, and Georgia, has been huge in absolute terms (amount invested) and strong in relative terms––through deeper economic cooperation––when compared to Chinese investment activity in the same countries. This development supports the EU’s aim of countering China’s increasing economic presence in the region. However, we find that this gap has been closing in total terms. Our study suggests that while China has not matched EU investment in the EaP region for the previous MFF, further research is needed to unpack individual sectors and their geo-economic implications for official development institutions and their respective states.