"A piece of candy perhaps?"
No wonder Ukraine's President Viktor Yanukovich was sniggering at the 610 million euros – which he called "a nicely wrapped piece of candy" – offered by the EU to upgrade the economy to Brussels standards and to accept a free trade agreement he refused to sign last week at the EU Eastern Partnership meeting in Vilnius, Lithuania.
(Read more: Ukraine and EU fail to salvage trade pact)
This hopefully temporary break between Ukraine (which did not participate at the Bucharest summit with China) and the EU had prompted a wry commentary from one of Kiev's influential papers (The Weekly Mirror): "Today, Ukraine does not need perspectives, it needs money."
What China offered Ukraine is only part of what it could bring to central and east Europe. Despite notable economic progress over the last two decades, this area is still far behind the rest of its EU partners. Beijing can help with badly needed investments in roads, railroads and ports, as well as with energy generation based on coal, nuclear, solar and wind technologies. In all these areas, China is offering favorable financing conditions and a proven engineering and construction know-how.
China's investment and construction companies have also been well accepted by many countries in that area. A 1.5 km bridge over the Danube in Serbia, using nearly half of local content and manpower, and costing 170 million euros was mainly financed by China and is affectionately called the "Chinese Bridge."
The positive experience with this project has led to many other deals involving Chinese companies, ranging from highway construction to railway modernizations and power plants.
Some investment thoughts
First, ignore the widely publicized chitchat that China is trying to divide and break up the EU. These are sour grapes from some rich EU countries running to Beijing to sell what China does not need and does not want, and then coming back empty-handed as a result. They are now accusing Germany of leading a "pro-China" group, because Germans stayed the hand of an EU trade commissioner who – pushed by these disappointed salesmen to China – wanted to unleash a trade war with a 47 percent import tariff on Chinese solar panels. Germany urges a negotiated settlement with China – and there is nothing wrong with that.
Second, with a well-educated and a relatively inexpensive labor force, central and east Europe needs modern infrastructure and a rejuvenated capital stock to enhance its competitiveness and become a true economic powerhouse. Tied up in austerity knots and in endless fiscal consolidation, the EU Commission and EU countries cannot provide investments this developing part of European economy badly needs. But China can do that – to mutual benefit.
(Read more: China plenum to 'surprise' on reforms: Stephen Roach)
Third, China is not in the business of dispensing some politically motivated charity. These are all hard-headed deals providing China with access to what it needs in exchange for Chinese finances and technological expertise.
Fourth, China is diversifying its markets and asset purchases. At the moment, central and east Europe is a small part of that, but it is in the area of Beijing's policy concern. In the year to September, China's foreign currency reserves increased by a whopping $376 billion. But, over that period, China's purchases of the U.S. Treasury debt rose only by a puny $40.2 billion. What did China do with the rest?
Fifth, licking their wounds for grossly mismanaging Ukraine and the whole half-baked concept of Eastern Partnership, Herman Van Rompuy, President of the European Council and José Manuel Barroso, President of the EU Commission, wrote a vacuous commentary in a French center-left daily Le Monde last Wednesday (November 27, 2013) whose only merit was a good title: "The future of Europe is in the east."
I agree with that title, and I think investors should be encouraged that China is beginning to contribute to the formidable economic potential of the "young" Europe in the east.
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Michael Ivanovitch is president of MSI Global, a New York-based economic research company. He also served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia.