European Countries Choosing Chinese Investment Instruments: An Analysis

Abstract: This Masters’ thesis attempts to identify why European countries choose Chinese investment instruments despite their participation in the European single market and access to European Union (EU) resources and technical assistance. Since their inception in 2013, EU members as well as EU partner states in Europe have been divided on their approach towards joining the Chinese investment instruments- namely Belt and Road Initiative (BRI) and Asian Infrastructure Investment Bank (AIIB) - due to the absence of a common EU policy in this regard. This division contributes to weakening of the coherent and unitary actor position of the EU as a major economic power in the global arena whereas China increases its politico-economic influence. Thus, this research pursues to investigate the impact of particular institutional aspects which may have caused the change in EU member and EU partner states’ preference policies to approach the Chinese investment schemes in different manners. In order to attain this goal, this thesis resorts to mixed method nested research design based on two theoretical perspectives, rational choice institutionalism and sociological institutionalism, pointing to diverse institutional features that plausibly could have shaped and changed the direction of the EU member and EU partner states’ policies. The nested design at first conducts quantitative comparative analysis of EU members along with EU partner states in Europe and combines the outcomes with those from comparative case studies based on the preferences towards Chinese investment instruments of five European countries that faced economic crisis. The findings indicate that in the challenging reality of apparent internal division, EU members along with EU partner countries in Europe with smaller economy or financial hardship are attracted to BRI to propel their infrastructure and financial sector with hopes to acquire external funds in addition to EU resources. On the other hand, European countries with larger economic strength prefer AIIB membership subscription to further their investment opportunities in Asia. Both of these preferences are highly influenced by the bilateral relations between China and a particular European country.