The Geoeconomics of Chinese Bank Expansion into the European Union

Abstract

AbstractWe apply the concept of geoeconomics to the example of Chinese state-owned commercial banks based in Luxembourg and their financial activities in the European Union. The case study links the uneven relationship between China and Luxembourg to the field of international finance via large Chinese state-owned banks as important but analytically neglected actors. In doing so, we analyze how economic resources are used by, through and between nation states in the pursuit of their strategic goals. Starting from the observation that Chinese banking networks primarily provide a platform for the implementation of direct investments by Chinese companies, we identify important mechanisms and practices of Chinese banks, their anchoring in Luxembourg and the limited fulfilment of Western policy makers’ expectations from the presence of the Chinese banks in Luxembourg. Furthermore, we analyze instruments and strategies that define important aspects and dimensions of the concept of geoeconomics and complement them with the agency attributed to Chinese banks. An interesting paradox emerges from our analysis: while the geoeconomic power of Chinese banks’ activities is limited by the strict adherence to Chinese state development guidelines, the new organization of the Chinese banking networks in the EU suggests that they will be able to exercise their geoeconomic power in the future; with corresponding implications for local economies and economic development in Europe.