Analysis: Cypriot dependency on China hampers a coordinated EU response to Hong Kong

After two weeks of mass arrests in Hong Kong under the National Security Law, human rights activists last week were shocked to learn that extradition treaties between the People’s Republic of China and Cyprus and Belgium have quietly come into force, following Beijing’s decision to ratify them in October 2020 after a two-year delay.

Yet the muted response from both the Belgian and Cypriot Governments, who have shown publicly neither surprise nor an immediate desire to suspend these treaties appears once again to reaffirm the influence of Chinese state backed investment in Europe.

Taking the case of Cyprus, the small Mediterranean island has been awash with Chinese investment in its real-estate market since the announcement of a golden-visa scheme for investors back in 2013. Under the scheme, Chinese Communist Party apparatchiks and businessmen have been able to buy citizenship in exchange for investing 2 million euros in real-estate.

According to a report by Al Jazeera, between 2017 and 2019 482 Chinese nationals bought citizenship under the scheme. Notable individuals include Chen Anlin, a CPPCC member in the Huangpi district of Wuhan and a director at CECEP Central China Industry Development, a subsidiary of the state-owned China Energy Conservation and Environmental Protection Group, who was granted citizenship in 2018; Fu Zhengjun, who was a member of the municipal committee of the CPPCC for the city of Jinhua from 2011 to 2017, was granted a Cypriot passport in November 2017; and Zhao Zhenpeng, a member in the local CPPCC of Binzhou, obtained his citizenship in February 2019.

The success of the scheme saw it account for 5% of Cyprus’s GDP in 2017 and encouraged the Cypriot Government to relax the rules around ‘high risk’ individuals. This in turn led to the European Union pressuring Cyprus to finally scrap the scheme in October 2020.

Of course, not all Chinese state backed investment has come into the country through its golden visa scheme, even if it has certainly made Cyprus a more attractive place to invest. Lawrence Ho, the Hong Kong billionaire, announced in January 2018 a 100-million-euro investment in a five-star hotel and housing complex on the island as part of Europe’s biggest integrated casino resort. The Hong Kong based ‘China Glory National Investment’ also announced the 290 million euro purchase of the Venus Rock Golf Resort project in Ha Potami in November 2019, as part of a plan to invest 1.5 billion euros in Cyprus.

In just six years, Chinese foreign direct investment into Cyprus jumped from $94.95m a year in 2012 to $845m a year in 2018. Last year, Chinese investors pledged to increase investment in Cyprus to reach over $1 billion euros.

Chinese investment has not been limited to property and the tourism industry. In 2015, Yanggu Xiangguang Copper bought a 22% stake in copper mining company Atalaya Mining Plc for 96.2 million euros. Huawei has announced that Cyprus and alongside Greece will take the lead in its 5G rollout in Europe, with the company investing in telecoms infrastructure on the island. While a multinational conglomerate led by China Petroleum Pipeline Engineering signed a landmark deal in November 2019 to build a 290-million-euro terminal for the import of liquified natural gas for electricity generation.

Over the years Chinese state-owned enterprises have submitted a number of bids to buy a majority controlling stake in Hermes Airports that runs Larnaca International Airport and the Port of Limassol (Cyprus’s main port) to expand the Belt and Road infrastructure China controls in the Mediterranean as the gateway to Europe.  

As with other parts of Southern Europe this large inflow of Chinese investment came after the Cypriot Government accepted in March 2013 strict terms set by the Troika (EU Commission, European Central Bank, and International Monetary Fund) for a 10-billion-euro bailout. In the case of Cyprus, the price of the bailout aside from austerity, included shutting the country’s second largest bank and imposing an unprecedented haircut on bank deposits, with 6.75% levy for deposits under 100,000 euro and 9.9% levy for those with over 100,000 euro.

Following this dire economic situation, it is little wonder that Chinese investment alongside any foreign investment has been so warmly welcomed by the Cypriot Government. With the influx of investment buying strong support from the EU Member State, including Cyprus joining the Belt and Road Initiative in April 2019.

This investment has also seen Cyprus staunchly defend the Chinese Communist Party in a year when its gross human rights abuses have become frontpages news, not least as a result of the introduction of the draconian National Security Law in Hong Kong. The Cypriot Foreign Minister in June 2020, is alleged by Chinese media to have told EU colleagues when discussing the need for a robust response ‘that Hong Kong affairs are internal affairs of China and should not be interfered with by foreign countries.’

Not simply advocating a position of neutrality when it comes to dealing with the Chinese Government, the President of Cyprus, Nicos Anastasiades, in December 2020 described China as a “trusted” and “good friend”. This view was reiterated in a visit this month by Foreign Minister Wang Yi to Cyprus, in which the Cypriot Foreign Minister reaffirmed Cyprus’s strict adherence to the one-China policy, its support for international cooperation under the Belt and Road Initiative, and its support of the EU in advancing its relations with China.

For what appears to be a small amount of money in terms of China’s burgeoning economy and a modest level of investment compared to the amount Cyprus’s neighbours in Southern Europe have received, the Chinese Communist Party has managed to co-opt and shore up a loyal ally in the Cypriot Government.

In terms of the EU’s approach to China, this has ensured a sympathetic voice in the room, championing a closer relationship and the signing of an EU-China Investment Partnership, cautioning against a firm and coordinated response to the crisis in Hong Kong, and no doubt a government willing to veto any attempts by the EU to sanction Chinese officials guilty of human rights abuses.

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