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Interview: Russia’s business and investment opportunities in Africa

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With new trends and directions in global business, African countries have to look to the Eurasian region as a huge market for exports as well as make efforts to consolidate and strengthen economic cooperation, says Tatiana Cheremnaya, the President of ANO “Center for Effective Development of Territories” and Head of the working group on public-private partnership “Business Union of Eurasia” in this wide-ranging interview.

She further discusses Russia’s economic relationship, challenges and untapped potential business and investment opportunities with Africa. She spoke recently in this interview with Kester Kenn Klomegah, an independent research writer on Russian-African affairs in Moscow.

How important is Eurasian market for African countries?

The Eurasian marketplace, in scale and capital intensity, is huge. It includes some countries of Europe and post-Soviet countries and rather fast-growing Asian countries. It is obvious that the interest among African countries for access to these markets is enormous both in the context of just entering the market of a particular country and implementation of joint interstate projects. In this case, first of all, we are talking about high requirements in the implementation in Africa of infrastructure projects, including roads, bridges, pipelines, electricity and the search for alternative sources of energy, communication, without which it is impossible to imagine a dynamic and systematic development of the economies of African States.

The implementation of such projects can be possible with the introduction of public-private partnerships. Here you can define several main points of contact between the Eurasian and African companies:

1. The implementation of joint projects in the framework of BRICS. We know that the unit includes one African country – South Africa. Today in the framework of the unit formed the New development Bank BRICS, the funding of joint transnational projects. In 2016, the Bank has approved the financing of the first investment projects in the BRICS countries totaling more than $1.5 billion.

2. Joint cooperation between the units of the Eurasian Economic Commission and the African Union. It is qualitatively new direction in the cooperation between the two blocs was laid in July 2016, when in Addis Ababa in Ethiopia, the delegation of the Eurasian Economic Commission held talks at the African Union Commission. It is worth noting that the African Union itself includes the 54 African States, and in the area of Eurasia includes 89 countries. The scale of the Eurasian-African cooperation is evident.

3. Giant cross-country infrastructure projects, which can be safely attributed to the project Great Silk Road. Here the role of the Eurasian economic Union and the project “Economic Belt Silk Road” is the formation of a common economic space, institutional capacities mates, and the possible components of a proactive commercial and economic strategy of Russia and its Eurasian Economic Union partner. Project financing is also being implemented in the framework of interstate financial institutions creates a system of regional-global financial institutions with total capital to date $240 billion Asian Infrastructure Investment Bank, development Fund of Silk Road.

How challenging, of course, is this market?

Of course, to enter the Eurasian markets from Africa is quite difficult. Here we are talking primarily about the high-tech, and the competitiveness of African business. That is, on one hand, we have a cheap labor force, good climate, really good opportunities all appearing for business development on the African continent. But, on the other hand, it often happens that a business can’t compete with the Eurasian giants. However, in time within such a community as BRICS, or the cooperation between the Eurasian economic Union and the African Union, can be reached certain agreements on implementation of joint projects and the release of African companies into the Russian market, what needs to be done.

Do you also think that industrialists and business directors from the Eurasian region can cooperate with other foreign investors on projects in Africa?

Of course, we can talk about cooperation between the African and Eurasian investors. Generally, in the age of globalization, cooperation is a basic and necessary condition for the development of cooperation among countries and enhanced the pace of development of the economies of some African countries gives reason to predict the emergence of truly important and profitable joint projects.

It is worth noting that according to the World Bank, in 2013, among the 50 economies that have improved their economic performance since 2005, about a third owned by the countries of sub-Saharan Africa. Studies conducted over the past three years also show that Africa today is no longer perceived as a backward region. It becomes an attractive investment and Eurasian countries see it as a place for prospective business.

It is worth noting that the basis for cooperation, for example, Russia and Africa are already actively created. So, in 2014, the visit of the official Russian delegation to Zimbabwe, where they discussed a number of key bilateral agreements designed to provide preferential treatment to investment from Russia. Russian companies interested in developing major infrastructure projects in the African region, primarily in the mining industry, and have the necessary experience, technology and expertise for the development of industrial and infrastructure projects.

Between countries today are considered joint projects that can participate in such major Russian companies as KAMAZ, Russian Railways, ALROSA, Uralvagonzavod and “Inter RAO”. In addition, to the infrastructure of the Russian-African partnership is also planned in other areas, such as automotive, agricultural production, implementation of joint projects in the sphere of development of agriculture, education and tourism.

Specifically, there is an investment in the republic of Ghana “One District, One Factory”. Opportunities to attract investment from the Eurasian countries have in most African States. For example, South Africa is the infrastructure in Zimbabwe and high-tech projects, and Ghana is the implementation of the “One District, One Factory”. All projects are very important for economic development of the African continent. But in each case for the investor is important, and profitability of such projects. For example, for the “One District, One Factory”, each individual plant will be measured from the point of view of expediency of investment of the investor. Here one should not expect miracles, but you need to work on each project with the Eurasian partners.

Do you think potential investors from the Eurasian region face competition for investment projects with other foreign players in Africa?

Yes, of course, investors of the Eurasian region are interested in implementation of joint projects. It is worth noting that today for the African continent, plays an increasingly important role in the foreign policy of the developed countries, is real struggle among the major powers of the world. For example, countries such as the United States, England, France, China, and India are gradually increasing its economic and political influence on the African continent. The interest of the developed world to Africa is, of course, largely from the increased need of their industry in the extraction of raw materials, which are present on the continent of Africa.

Furthermore, Africa is still untapped market for technology products and consumer goods. Also other Eurasian countries have interest in the continent; we can hardly compete with the leading world powers. Russian business is very interested in business development and their presence in Africa.

So in the near future can predict the development of the Eurasian-African cooperation in the field of business. In this situation it is necessary to search for effective forms of cooperation that have a solid foundation for the cooperation of business, addressing the goals and objectives of the Eurasian countries and Africa

So these Russian companies such as KAMAZ, Russian Railways, ALROSA, Uralvagonzavod, “Inter RAO”…how do you assess their influence or activities in Africa? What are their levels of operations in Africa? For instance, Russia Railways, how do you measure this company’s success as compared to China in Africa? China has completed railway lines in a number of African cities including Addis Ababa, Ethiopia.

With regard to the participation of Russian companies in infrastructure projects in Africa, they are already there and as I wrote, will increase significantly. So, for example, Russian Railways is increasing its influence and implementation of joint projects in the field of railways, as Africa is actually very poorly developed railway infrastructure. If we consider the railway infrastructure in Africa, we note, for example that Algeria has an extensive network of railways in the north of the country; the rail infrastructure of Angola was virtually destroyed during years of civil war; in Botswana, Chad, the Gambia and Burundi passenger railways in general no; in Ethiopia, Djibouti, Guinea, Ghana and the Congo, there is one rail that is in poor condition; railroad developed only in Egypt, Kenya, Namibia, Zimbabwe.

There has been much activity in the railway sector in East Africa. From an economic point of view, it is a very profitable business. On the one hand, there is access to global markets and with another – stimulates regional trade. The countries themselves certainly can’t afford to implement such capital intensive projects, so come to the aid of other countries. And if the past is largely in the construction of railways helped the European countries, now in road infrastructure often puts China. Of the ongoing projects, it is worth noting the railway Mombasa – Nairobi to Kigali (Rwanda) and Juba (South Sudan), the road between Addis Ababa and Djibouti. The construction financing deals with Export-Import Bank of China. Except for the road construction, China also supplies and most of the rolling stock, including locomotives.

But the Russian Railways company is also one of the participants of the market of road infrastructure projects in Africa. In particular, the Sudanese government suggested that Russia participate in construction of Trans-African railroad from Dakar (capital of Senegal), in Port Sudan in the Red sea, which would connect many countries from the Atlantic to the Indian Ocean. In the future, this railway will connect the capital of Senegal, with the port of Djibouti. The management of Russian Railways said that the company is interested in participation in infrastructure projects in Ethiopia. The Russian Railways, in fact, can become a consultant or general contractor of the project in Africa, as the team has the necessary experience and knowledge.

As for the Russian company “KAMAZ” it is necessary to note that “KAMAZ” works in countries on the African continent since the days of the Soviet Union, the machine “Soviet-style” still can be seen on the roads of Africa. The share of the African continent in the global economy in the near future will increase, and the management of “KAMAZ” seeks to take advantage of a favorable situation. The company “MAZ” – the Russian manufacturer of trucks – in November 2016 began to put Africa right-hand drive trucks. While we are talking only about South Africa, but in the future cooperation is planned with countries such as Botswana, Zambia, Zimbabwe, Mozambique and Namibia.

However, the Russian production is not always able to compete with the Chinese, because in many areas of work in Africa, China has the best position. But currently, Russia is strengthening its position in Africa, these projects that implement only experienced Russian companies.

How important is Russian Export Center for Africa? Which Russian products “Made in Russia” are being promoted in Africa market currently, again compared to India and China whose various products including consumer goods, pharmacy and automobiles very common in Africa?

The importance of the Russian Export Center is difficult to overestimate. Indeed, the Center is doing a great job for development, including the African market. According to the report of the Russian Export Center, export of Russian goods to the African continent increased by more than 50 percent in 2016. In Africa, the demand for Russian goods, while their exports to other countries, by contrast, only falls. Given that the difficult economic situation in Russia contributed to a significant decline in exports in almost all countries of the world, has shrunk by nearly a third to US$129,7 billion and in African countries we are seeing demand growth, contrary to the general trend of demand for Russian goods. The maximum growth of exports showed Algeria (US$556 million), Angola (US$298 million) and Egypt (US$178 million).

It should be noted that the attractiveness of African markets is associated with a low level of competition because the market is actually free for low-end products. As for China, here directly is not a competitor to Russia because Russia is a strong player and China is interested in markets with much greater capacity. For Russia as a country that traditionally exported only raw materials, Africa is a very good place to start. However, we know that African countries are fast growing. So, the International Monetary Fund (IMF) predicts by 2016 economic growth in Tanzania 6%, Zimbabwe 3%, while, for example, in the USA only 2%. That is, for Russia, the African market is very interesting and we can talk about expanding cooperation with African countries to export products “Made in Russia” in various segments.

So what are the key problems and impediments to developing practical and active Russian-African business, especially in the manufacturing and consumer sectors, not theories but real active bilateral economic cooperation? What should be done from both sides, from Russian side and from African side?

The problems of effective cooperation between Russia and Africa are political in nature. Thus, the strengthening of Russia’s position leads to the strengthening of its influence in the world, including in Africa and vice versa, sectional policy has significantly reduced Russian exports.

The second problem for the development of Russian-African business is the lack of competitiveness of Russia which allows working only in the low-budget segment. This is due to structural problems in the Russian economy, the need for modernization, the bulk of the products produced during the Soviet Union.

The third problem is the unwillingness of the African market to cooperate, due to the strong backlog of the country in socio-economic aspects, for example, we are talking about the lack of qualified personnel, low standard of living of the population and hence the low effective demand.

The fourth problem is competition from the United States, China and India as more developed countries with more advanced technological solutions, and from the European countries as the former “patrons” of African countries. However, these barriers can be gradually removed by constant open dialogue between African governments and Russia, as well as directly between interested companies of the two countries. For cooperation with Russia is necessary to develop competitive solutions in terms of infrastructure development and proposals for the supply of consumer goods, as well as the removal of bureaucratic barriers. African countries need not only steps on the path to economic growth, but also political decision-making directed at improving living standards and increasing the stability of the political and economic systems of African countries which could significantly reduce risks for investing in African projects.

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Can The Lessons of 2008 Spare Emerging Europe’s Financial Sector From The COVID-19 Cliff?

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The more we know about the past, the better we can prepare for the future. The 2008 financial crisis provides important lessons for policymakers planning the COVID-19 recovery in 2021.

Over 10 years ago, the world stumbled into a financial crisis that changed the very fabric of our societies.

A cocktail of lax financial regulation and casual attitudes toward debt and leverage led to a global fallout that few countries in the world escaped. Despite a decade of recovery, the scars of that era are still very visible. This was particularly true for many parts of Europe. And as is often the case in major disasters, both natural and man-made, the most vulnerable were hardest hit.

Striking parallels

Today, as countries grapple with the economic impacts of Covid-19, policymakers in emerging Europe must strive to remember the hard-learned lessons from 2008. In financial terms, the parallels between now and then are striking.

Back then, countries in Central and Southeastern Europe were among the worst hit. In the run-up to the crisis, big euro area banks bought up local subsidiaries. Backed by these parent banks, credit started expanding rapidly from a very low base. The credit boom was accompanied by climbing real estate prices and mounting personal and corporate debt. Aspirations to replicate the living standards of the EU’s wealthiest member states led to citizens and businesses shouldering more than they could handle.

Suddenly, the global crisis stopped capital flows in the region and turned the boom to bust. Credit growth went into reverse, real estate prices nosedived, economic growth stalled, and non-performing loans (NPLs) spiraled up. Over the next decade, much of the region would be caught between weak economic growth and lackluster financial sector performance.

Familiar feedback loop

Covid-19 is a strong contender for the worst economic shock in our lifetimes. In its aftermath, a familiar feedback loop is on the horizon: high leverage and depressed growth will amplify financial sector vulnerabilities in the months ahead.

True, banks in emerging Europe entered Covid-19 with stronger liquidity and capital buffers than before the global financial crisis, but they are far from immune. The longer the pandemic lasts, the more businesses and consumers are likely to struggle. Next come the debt defaults. Before the domino-chain of NPLs gains momentum and countries spiral into widespread financial crisis, policymakers must act. This means taking four overarching measures.

First, rising NPLs require a proactive and coordinated policy response. If banks resist writing down bad loans and continue to lend to zombie firms, the resulting credit crunch becomes longer and more severe. Policymakers were slow off the mark in 2008. Once they realised a coordinated response was needed, much of the damage was already done. In NPL resolution, the mere passage of time makes a bad situation worse, and policymakers and bankers need to respond early on to prevent the problem from spinning out of control.

Second, supervisors should engage with highly exposed banks and ensure that they fully provision for credit losses. An important lesson of the global financial crisis is that building bank’s capital is a requirement for resilient recovery. In this pandemic, banks have been asked to play an unprecedented role in absorbing the shock by supplying vital credit to the corporate and household sector. Policymakers should resist pressure to dilute existing rules. Soft-touch supervision doesn’t address the underlying issues and only kicks problems down the road. To credibly stick to the rules, regulators can conduct stress tests to identify undercapitalised banks.

Resolve, fairness, and transparency

Third, a timely and orderly exit strategy from debt relief and repayment moratoriums should be prioritised. Countries in Eastern and Southeastern Europe promptly introduced these plans when Covid-19 struck and to good effect. But prolonging such schemes comes with a hidden cost. It can weaken borrower repayment discipline, and give firms, that were already struggling before the pandemic, a fresh lease on life.

The question of when and how to phase out the measures does not have a simple answer. Nevertheless, the general principle should be to unwind them as soon as conditions permit. This could be done by gradually narrowing down the range of borrowers eligible for support so that only the viable enterprises are supported.

Fourth, distressed but potentially viable firms will need loan restructuring. To restore the commercial viability of ailing companies entails restructuring of their liabilities, matching payment schedules with expected income flows. Loan restructuring of non-viable borrowers, by contrast, will only lead to delaying inevitable losses.

There will be uncertainty about who can and cannot survive. An assessment will be needed to separate the lost cases and viable ones and everything in between. This will help release capital from underperforming sectors and propel more dynamic firms to drive renewed economic momentum.

We live in difficult times that require resolve, fairness, and transparency in policymaking. But these qualities are not easy to live up to in times of great uncertainty, heightened anxiety, and lack of access to relevant information. Fortunately, we can look to the past to glean lessons for the future. Now, it’s time we put them into practice.

Originally posted at Emerging Europe via World Bank

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The strategic thinking behind the EU-China investment deal

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Washington was understandably perplexed that a China-EU investment agreement was concluded a few weeks before the Biden administration, especially a  president who has been advocating for multilateralism and the restoration of trust and an alliance with the EU.

Some analysts argue the agreement is a big win for China by breaching the transatlantic partnership, while some scholars contend that Beijing has made historical concessions to Brussels, indicating the future lucrativeness of European business in China. Both are valid to some extent, but the strategic thinking of Beijing and Brussels behind the pact may have been overlooked.

Beijing’s strategic thinking

The EU has always been the favoured target for Beijing. Despite numerous rebrandings, the Belt and Road Initiative (BRI), the admittedly core economic, infrastructure and diplomatic policy proposed by President Xi in 2013, was initially intended to connect with the EU, facilitating Eurasian economic integration. According to Hellenic Institute of Transport, there was no regular direct freight service between China and Europe in 2008, whereas in 2019, 59 Chinese cities and 49 European cities in 15 countries have been linked by the BRI.

Also, although the EU is situated within Western democratic thought, the views of EU members regarding China are diverse and relatively different from the US and other English-speaking countries. Germany and France, the key pillars of the EU, still allow the usage of Huawei, whereas the US, Australia, Canada and the UK have variably banned it. Italy is the only one to endorse the BRI in the G7, a group of major Western democracies. The summit of China and Central and Eastern European Countries, known as “17+1”, has been held since 2012, gaining certain support from some EU members, in spite of Brussels’ aversion.

Probably, in the Chinese diplomats’ perceptions, the post-Brexit EU may become much more approachable and pragmatic to China, a mysterious rising land from the East, in that European continent nations with different linguistic and cultural backgrounds have been living together for millennial generations, leading to a more diverse and pragmatic approach to Beijing.

As for compromises Beijing has made, some of them, such as various reforms of state-owned-enterprises, would have been the essential component of the Chinese economic agenda, but the intriguing point is the timing and astonishing scope of concessions. After seven years of drawn-out negotiation, Beijing suddenly started pushing this pact at the beginning of 2020, when the Covid-19 broke out globally, and the Sino-American trade war further exacerbated, leading to China’s reputation plummeting in the West.

Through Sino-American relations, I doubt that Beijing may have noticed, as Professor Susan Shirk, former Deputy Assistant Secretary of State during the Clinton administration, pointed out, that even the American business community, benefitting enormously from the Chinese market, has not really “stepped forward to defend US-China relations, much less defend China”, which is rare in bilateral history.

Recently, President Xi Jinping even wrote a letter to encourage Starbucks’ former chairman Howard Schultz to repair Sino-American relations. Having observed this, Beijing thus decided to show a high level of sincerity and openness to European business elites, not only by economic reforms but also by promising to work on labour rights. The latter may not be a priority in Beijing, but Beijing conspicuously notes the ideological concerns of EU politicians in order to win the hearts and minds of Brussels.

Brussels’ strategic thinking

As for the EU, China has unquestionably been an attractive market. Calculated by purchasing power, China’s GDP has been de facto the largest economy for years. As the only positive-growth nation in 2020 among G20 members, China has the largest middle class, signifying potent consuming ability. Recent Chinese economic reforms primarily aim to promote consumption, which is the icing on the Chinese market’s cake, and this is also embedded in European views of China and the US.

The Pew Research Center has shown that more countries in Europe viewed China rather than the US as the world’s leading economy in 2019 and 2020. Also, more residents in Germany and France regarded US power and influence as threatening than China in 2018. Even with the new Biden administration, EU leaders anticipate a renewed trans-atlantic partnership but do not expect a sudden revolution of EU-American trade war, as bilateral trade disputes are structural and beyond Trump’s presidency.

More realistically, what is one of the major external concerns EU members face today? Back in the Cold War, the western expansion of the Soviet Union deeply disturbed European security, necessitating their consistent alliance with the US.

However, as Jonathan E. Hillman, a senior fellow at Center for Strategic and International Studies, wrote: “Russia has nuclear weapons but also a one-trick economy focused on energy exports, a rusting military, and a declining population.” In particular, Russia has been increasingly challenged to maintain traditional influence in Ukraine, Belarus and Central Asia, not to mention any comprehensive aggression to EU.

Furthermore, geographically, China is distant, and the EU does not have fundamental military interests in South China Sea but rather seeks to maintain peace and freedom of navigation for their shipping and trade, notwithstanding Brussels’ political friction with Beijing. But the large-scale uncontrolled migration from Africa and the Middle East may well be the EU’s main worry. However, regardless of some Western media ostensibly branding China as a neocolonialist in Africa, China has essentially supported the African economy via the BRI investment, creating local employment and purportedly discouraging the flow of a certain amount of immigrants to Europe. So, realistically, by signing the pact, the EU may keep the door open to cooperate with China in Africa.

On the flip side, if the EU sides with the US to the exclusion of China, what will happen to the EU? Certainly, Brussels will be praised by Washington politically, while the business sphere may be a different story. The recent Sino-Australian trade disputes indicate that “in the world of international commerce, democratic and strategic friends are often the fiercest rivals”, argued Professor James Laurenceson from the University of Technology Sydney, as Chinese tariffs against Australian goods have brought opportunities to businesses in America and New Zealand. So, US corporations in China must be delighted to see business space left by the EU companies because of possible EU-China trade skirmishes.

Sensibly, the EU is adopting an independent foreign policy to maintain autonomy between China and the US. More notably, as a third party during the Sino-American power competition, having signed a deal with Beijing, Brussels may possibly request Washington to offer more, thus maximizing its geopolitical and commercial interests.

Conclusion

To conclude, both sides made pragmatic decisions to sign the pact. Professor John Mearsheimer, at the University of Chicago, argued a few years ago that liberal dreams are great delusion facing international realities. China has executed a realist foreign policy since Deng Xiaoping’s reform, and this time, the EU may have woken up, because this deal signifies that geopolitical calculation has overtaken ideological divergence.

Author’s note: First published in johnmenadue.com

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The Silk Road passes also by the sea

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On December 30, 2020, China and the European Union signed an agreement on mutual investment.

After seven years of negotiations, during a conference call between Chinese President Xi Jinping and Ursula Von Der Leyen, President of the European Commission, with French President Emmanuel Macron, German Chancellor Angela Merkel and European Council President Charles Michel, the “Comprehensive Agreement on Investment” (CAI) was adopted.

This is a historic agreement that opens a new ‘Silk Road’ between Europe and the huge Chinese market, with particular regard to the manufacturing and services sectors.

In these fields, China undertakes to remove the rules that have so far strongly discriminated against European companies, by ensuring legal certainty for those who intend to produce in China, as well as aligning European and Chinese companies at regulatory level and encouraging the establishment of joint ventures and the signing of trade and production agreements.

The agreement also envisages guarantees that make it easier for European companies to fulfil all administrative procedures and obtain legal authorisations, thus removing the bureaucratic obstacles that have traditionally made it difficult for European companies to operate in China.

This is the first time in its history that China has opened up so widely to foreign companies and investment.

In order to attract them, China is committed to aligning itself with Europe in terms of labour costs and environmental protection, by progressively aligning its standards with the European ones in terms of fight against pollution and trade union rights.

With a view to making this commitment concrete and visible, China adheres to both the Paris Climate Agreement and the European Convention on Labour Organisation.

China’s adherence to the Paris Agreement on climate and on limiting CO2 emissions into the atmosphere is also the result of a commitment by China that is not only formal and propagandistic. In fact, one of the basic objectives of the last five-year plan – i.e. the 13th five-year plan for the 2016-2020 period – was to “replace unbalanced, uncoordinated and unsustainable growth… also with innovative, coordinated and environmentally friendly measures…”.

In the five-year period covered by the 13th five-year plan, China reduced its CO2 emissions by 12% – a result not achieved over the same period by any other advanced industrial country, which shows that the policy of “going green”, so much vaunted by European institutions, has actually begun in China, to the point of making it realistic to achieve “zero emissions” of greenhouse gases by 2030, thanks to the decision to completely relinquish the use of fossil fuels in energy production.

President Xi Jinping has entrusted China’s policy of “turning green” to the Chinese government’s “rising star”, Lu Hao, i.e. the young Minister of Natural Resources aged 47, who has been chosen as the political decision-maker and operational driving force behind a major project to modernise the country.

Lu Hao has an impressive professional and political record: an economist by training, he was initially appointed First Secretary of the “Communist Youth League”, and later served as deputy mayor of Beijing from 2003 to 2008. Governor of the Hejlongjiang Province (where 37 million people live),he has been serving as Minister of Natural Resources since March 2018.

He is the youngest Minister in the Chinese government and the youngest member of the Party’s Central Committee.

While entrusting Lu Hao with his Ministerial tasks, President Xi Jinping stressed, “we want green waters and green mountains… we do not just want much GDP, but above all a strong and stable green GDP.”

A “green GDP” is also one of the objectives of the “Recovery Plan” drawn up by the European Union to help its Member States emerge from the economic crisis caused by the Covid 19 pandemic through measures and investment in the field of renewable energy.

“Going green” may represent the new centre of gravity of relations between Europe and China, according to the operational guidelines outlined in the “Comprehensive Agreement on Investment” signed on December 30 last.

China’s commitment to renewables is concrete and decisive: in 2020 solar energy production stood at five times the level of the United States while, thanks to Lu Hao’s activism, in 2019 China climbed up the U.N. ranking of nations proactively committed to controlling climate change, rising from the 41st to the 33rd place in world rankings.

On January 15, Minister Lu Hao published an article in the People’s Daily outlining his proposals for the upcoming 14th Five-Year Plan.

During the five-year period, China shall “promote and develop the harmonious coexistence between man and nature, through the all-round improvement of resource use efficiency…through a proper balance between protection and development”.

In Lu Hao’s strategy – approved by the entire Chinese government – this search for a balance between environmental protection and economic development can be found in the production of electricity from sea wave motion.

Generating electricity using wave motion can be a key asset in producing clean energy without any environmental impact.

Europe has been the first continent to develop marine energy production technologies, which have spread to the United States, Australia and, above all, China.

Currently 40% of world’s population lives within 100 kilometres of the sea, thus making marine energy easily accessible and transportable.

Using the mathematical model known as SWAN (Simulating Waves Nearshore), we can see that along the South Pacific coasts there are energy hotspots every five kilometres from the shore, at a depth of no more than 22 metres. In other words, thanks to currents, waves and tides, the Pacific has a stable surplus of energy that can be obtained from the sea motion.

Today, energy is mainly obtained from water using a device known as “Penguin”, which is about 30 metres long and, when placed in the sea at a maximum depth of 50 metres, produces energy without any negative impact on marine fauna and flora.

Another key technology is called ISWEC (Inertial Sea Waves Energy Converter). This is a device placed inside a 15-metre-long floating hull which, thanks to a system of gyroscopes and sensors, is able to produce 250 MWh of electricity per year. It occupies a marine area of just 150 square metres and hence it allows to reduce CO2 emissions by a total of 68 tonnes per year.

ISWEC is an Italian-made product, resulting from research by the Turin Polytechnic Institute and developed thanks to a synergy between ENI, CDP, Fincantieri and Terna.

Italy is at the forefront in the research and production of technology that can be used for converting wave motion into ‘green’ energy. This explains the attention with which Chinese Minister Lu Hao looks to our country as a source of renewable energy development in China, as well as the commitment that the young Minister, urged by President Xi Jinping, has made to promote an extremely important cooperation agreement in the field of renewable energy between the Rome-based International World Group (IWG) and the National Ocean Technology Centre (NOTC), a Chinese research and development centre that reports directly to the Ministry of Natural Resources in Beijing.

The cooperation agreement envisages, inter alia, the development of Euro-Chinese synergies in the research and development of essential technologies in the production of “clean” energy from sea water, as part of a broad Euro-Chinese cooperation strategy that can support not only the Chinese government’s concrete and verifiable efforts to seriously implement the strategic project to reduce greenhouse gases and pollution from fossil fuels, but also support Italy in the production of “green” energy according to the guidelines of the European Recovery Plan, which commits EU Member States to using its resources while giving priority to environmental protection.

The agreement between IWG and NOTC marks a significant step forward in scientific and productive cooperation between China and Europe and adds another mile in the construction of a new Silk Road, i.e. a sea mile.

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