Chinese Investments into European Digital Platforms: What are the Future Alternatives?
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Professor, Rector of the Estonian Business School
The increase of the importance of China in global economy and politics is strongly connected with developing of digital platforms. This is reflected in the painful reactions of the United States in regard to the digital infrastructure company Huawei and the social media application TikTok. It is necessary to pay more attention to China’s investments into the European digital platforms and into platform-type companies in the wider sense.
These investments cannot be treated as simple economic transactions, because the business models based on platform logic make profit from the network effect and asymmetry of information, which enables to increase market concentration by “locking up” the users. The article points out that China’s investments in the EU mainly focus on the energy, transport, finance and technology sectors, which are characterised by platformisation. Platform-type business models not only create preconditions for the emergence of strong market concentration, but also contain serious political and social risks. Therefore, it is necessary to think of alternative solutions.
The best way for future mapping of possible alternatives is to proceed from planning of scenarios, which brings out the positive and negative aspects of different choices for policy makers. This article uses the global lines of power scenarios prepared by the Foresight Centre as the basis for simulating the possible future scenarios of China’s investments.
Using the global lines of power scenarios prepared by the Foresight Centre, four different alternatives for Chinese investments in the future were described. In these scenarios, the main key factors are the extent of cooperation in the EU and the capability to develop infrastructure, including the digital infrastructure, in the widest sense. The cooperation within the EU may become closer or weaker in the next 15 years.
Infrastructure is increasingly becoming a geopolitical instrument and the effectiveness of its use directly proceeds from the platformisation described above. The key question during the next 15 years is: to what extent the EU will assume the leading role in developing the digital, energy and transport sectors, or if mainly the private sector, the cities, China or the United States will contribute to the development of European infrastructure.
The scenarios mostly predict that it will become more difficult for China to invest into the EU platforms, but there will be different reasons for that, from the improvement of the EU’s position to its lagging behind globally. Only in the case of one scenario, it was possible to speak of the strong continuation of Chinese investments during the next 15 years, but this took place only in certain regions of the EU that do not have strong cooperation with the USA.
It may be concluded from this that China’s investments in the digital platforms of the EU will in the future be mostly influenced by structural factors, and not current political decisions. If that assumption does not hold true, this treatment has not managed to adequately perceive the numerous possible future developments that influence China’s investments into European digital platforms.