China sees new $3 billion investment fund for central and eastern Europe

A worker walks past a propaganda slogan on a wall at a construction site in Beijing December 12, 2014. REUTERS/Kim Kyung-Hoon

BELGRADE (Reuters) - China said on Tuesday it would create a new investment fund of $3 billion (1.91 billion pounds) targeting central and eastern Europe, seeking to strengthen its foothold in the region as a door to the wider European Union.

The pledge comes on top of $10 billion earmarked in 2012 for investment projects in a region comprising some of the EU’s newest members and others in the Western Balkans that are not yet part of the bloc but trying to get there.

China sees central and eastern Europe as a potentially lucrative market and bridgehead to the wider EU, drawn by relatively low wages, educated workforces and scope for development on the fringes of the bloc.

Chinese investments in the region usually come in the form of loans financed by China’s state-owned banks for projects carried out by Chinese companies, particularly in the sectors of infrastructure and energy.

Chinese Premier Li Keqiang, however, addressing a Belgrade summit with leaders of 16 central and eastern European countries, said China was open to “new models of financing and investment”.

“On the Chinese side we can create a new investment fund with a total value of $3 billion,” he told the summit, in opening remarks translated into Serbian.

“We expect new ways of cooperation through private-public partnership, various leasing arrangements and that will make our cooperation more efficient, more productive, and by doing that all desires of EU member states for respecting of their rules will be fulfilled,” he said.

He said China would propose the creation of a coordination framework between China and the region, “to follow the rules of the market, coordinate financing arrangements and reach new models of financing and investment.”

Writing by Matt Robinson; Editing by Dominic Evans