Austria and the People’s Republic of China (PRC) established diplomatic relations in 1971. Being a neutral, but Western-oriented country, Austria took this step earlier than many European countries—a fact Beijing continues to acknowledge. In the 1970s and 1980s, however, concrete cooperation took place in only a few areas, chief among them the railway sector, with Austrian companies providing knowhow for the construction of locomotives. Relations deepened in the mid-1990s, which was reflected in regular mutual state visits. Still, while Austrian heads of state travel frequently to China and Chinese President Hu Jintao (in office 2002–12) visited Vienna in 2011, President Xi Jinping (in office since 2013) has not yet visited Austria.
To promote its strategic interests such as multilateralism, respect for international law, and mutually fair competitive conditions in Europe and China, Austria largely relies on the leverage offered by the European Union (EU). Former conservative chancellor Sebastian Kurz (twice in office between 2019 and 2021; at the time of writing in January 2022, the chancellor is Karl Nehammer, also from the People’s Party) has argued that China is too powerful to be ignored and cooperation should be promoted in areas of mutual interest. Kurz also stressed the need for unity among EU member countries, supporting the European Union’s tougher stance on China—notably, the threefold characterisation of the PRC as a partner, an (economic) competitor, and a systemic rival outlined in the draft strategy paper ‘EU–China: A Strategic Outlook’ (2019). Austria also endorses the European Union’s Europe–Asia Connectivity Initiative and its Global Gateway Initiative as means to offer Asian partners alternatives to China’s Belt and Road Initiative (BRI) for infrastructure.
In April 2018, the largest ever Austrian delegation of politicians and businesspeople visited China. It was led by President Alexander Van der Bellen and Chancellor Kurz. During the visit, a strategic partnership and several economic agreements were signed. Yet, the Austrian Government made clear it had no intention to sign a far-reaching memorandum of understanding (MoU) on the BRI like the one signed by the Italian Government in 2019. However, during the visit, Austria’s Minister of Transport, Innovation, and Technology signed an MoU with his Chinese counterpart regarding cooperation in science and infrastructure building, including collaboration on the planned railway connection from the Piraeus Port in Greece to Vienna, which is being promoted by China as part of the BRI. Based on an MoU signed in 2011, way before the launch of the BRI, this new document represents only a vague agreement at the ministerial level but is portrayed by Beijing as a sign of political support for the BRI. Chancellor Kurz attended the Second Belt and Road Forum in 2019, stressing the need for upholding the rule of law, transparency, and human rights, in bilateral talks with the Chinese leaders. In a position paper published in April 2021, the Federation of Austrian Industries, an influential chamber of commerce, similarly argued in favour of reciprocity between Europe and China in regard to investment laws and market access.
Even though it is not a member, Austria is strategically and directly affected by the 16(17)+1 Platform, which was established by China in 2012 and includes 11 EU members (Lithuania left in May 2021) and four (potential) candidate countries. Since 2013, cooperation has grown considerably in Central Eastern Europe and the Western Balkans—Austria’s ‘near abroad’. Austrian companies—notably, banks and insurance companies (for instance, Erste Bank, Raffeisen, and Bank Austria), as well as construction companies (such as Strabag), and retailers (including Billa and Bipa)—have strong economic interests in the 16(17)+1 region. Austria is in many of these nations the top investor or at least among the top three, and Austrian business leaders have been vocal in calling out untransparent public tendering in EU candidate countries—in particular, in relation to Chinese actors.
Current Economic Relations
Trade: China is Austria’s fifth-largest trade partner and, since 2020, the second-largest import partner, with a share of 7%, surpassed only by the dominant Germany (35%) and slightly ahead of Italy (6.3%). In 2020, imports from the PRC amounted to 10.1 billion EUR (up 300 million EUR from 2019), and exports were 3.9 billion EUR (down 500 million EUR from the previous year). Austria has traditionally had a trade deficit with the PRC. The main export products to China are machinery and vehicles, electrical and electronic equipment, optical and medical apparatus, and pharmaceuticals, while the key import goods are electrical and electronic equipment, machinery, apparel, textiles and footwear, furniture, optical and medical apparatus, toys, games, and sporting goods, and plastics.
Tourism contributes about 6% of Austria’s gross domestic product. In total, in 2019, Austria welcomed 32 million tourists, two-thirds of whom came from Germany. The number of Asian and, in particular, Chinese tourists has increased dramatically since 2009. In 2018, one million Chinese tourists visited Austria, well ahead of South Koreans (327,000), who ranked second among Asian visitors.
Investment: According to Austrian sources, as of the end of 2020, Austrian companies had invested a total of 4.6 billion EUR in the PRC and Hong Kong, while firms from China and Hong Kong had invested 2.8 billion EUR in Austria. These amounts are comparatively low; Germany, the leading investor in Austria, invested 49 billion EUR (as of 2020) and Russia about 21.3 billion EUR (as of 2020). So far only a few acquisitions involved sensitive targets, with FACC and Diamond Aircraft the most noteworthy. FACC is an aerospace and defence company (in which the state-owned Aviation Industry Corporation of China acquired a 91.25% share in 2009), and Diamond Aircraft builds planes and drones (and was acquired by Wanfeng Aviation Industry, a private company, in 2017). Other internationally well-known but strategically non-sensitive firms acquired by Chinese companies include Atomic (skiing) and Wolford (hosiery and lingerie).
Overall, around 100 Chinese companies have a presence in Austria, compared with 650 Austrian firms in China. Austrian business leaders are well aware of the economic opportunities the Chinese market offers, but also know the risks involved in becoming dependent on it and the potential requirement to transfer parts of their intellectual property or technology to Chinese partners to maintain their market access or local partnerships. Among the leading Austrian investors in China are AT&S, a reputable producer of high-end printed circuit boards with production sites in Shanghai and Chongqing, and Plasser & Theurer, a global champion in the railway industry. AT&S announced in June 2021 plans to build a new plant in Malaysia rather than in China to diversify its production base, investing 1.7 billion EUR to this end.
Two large Chinese banks—the Bank of China (since 2015) and the Industrial and Commercial Bank of China (since 2018)—established their headquarters for Central Eastern Europe in Vienna, targeting large European and Chinese companies as clients and aiming to contribute to the implementation of the BRI.
Unlike in the neighbouring Czech Republic and Slovakia, in Austria, China is not a heated topic. A key reason is that bilateral political relations are currently frictionless. However, the lack of a critical public debate about the impact of China’s rise is surprising, as Beijing already plays a significant role in the 16(17)+1 region. Yet, this may change, as the coalition government of the conservative People’s Party and the Green Party promised in their coalition agreement to develop a China strategy (even though at the time of writing in January 2022, the strategy had not been presented). Such a strategy will be crucial to ensure a consistent policy towards the PRC, as different Austrian stakeholders have different economic and political interests in China. Depending on the content of the strategy and, in particular, how critically it addresses the human rights situation in China, controversies with the PRC could arise, as demonstrated by the harsh Chinese criticism of the new Swiss China strategy in March 2021.
In 2020, as part of its Covid-19 diplomacy, China donated 40,000 facemasks to the city of Vienna. Austria has not seen significant controversies regarding Chinese propaganda efforts within the country. The country’s two Confucius Institutes (in Vienna and Graz) keep a low profile and focus on Mandarin teaching and organising cultural events. Also, unlike certain other European countries like the Czech Republic, Poland, and Sweden, as of January 2022, the Austrian Government does not exclude any provider of 5G technology. Rather, it emphasises that telecommunication companies have the right to choose the most appropriate partners. The Chinese telecom companies Huawei and ZTE are already cooperating with leading Austrian telecom providers, and Drei, Austria’s third-largest firm, is owned by CK Hutchison Holdings Limited (Hong Kong).
Despite the growing economic exchanges, Austria does not face the risk of becoming economically dependent on China in the future. However, as many Austrian companies—notably, in the automotive sector—are suppliers for German firms, which in turn increasingly rely on the Chinese market, the quality of Germany’s relations with the PRC will have considerable spillover effects on Austrian business interests.
The Austrian Institute for European and Security Policy (AIES) closely monitors Austria’s relations with China and has also strong expertise on current events in Central Eastern Europe and the Western Balkans. The AIES is also a partner of the transnational think tank the Central European Institute of Asian Studies (CEIAS), with additional offices in the Slovakian capital, Bratislava, and Olomouc, in the Czech Republic. The Vienna Institute for International Economic Studies (WIIW) regularly publishes analyses of the economic relations of Austria and China with the 16(17)+1 region.
Books, Reports, and Scholarly Articles:
Breinbauer, Andreas. 2019. ‘The Chinese Belt and Road Initiative and Its Implications for Europe.’ In Emerging Market Multinationals and Europe: Challenges and Strategies, edited by Andreas Breinbauer, Louis Brennan, Johannes Jäger, Andreas Nachbagauer, and Andreas Nölke, 213–36. Cham, Switzerland: Springer.
Erlbacher, Lucas. 2021. ‘China’s Soft Power in Austria: Building on the Power of Nonchalance.’ In China’s Soft Power in Europe: Falling on Hard Times, edited by Ties Dams, Xiaoxue Martin, and Vera Kranenburg, 14–20. The Hague: Clingendael. Link.
Gerstl, Alfred. 2018. ‘China’s New Silk Roads: Categorizing and Grouping the World—Beijing’s 16+1+X European Formula.’ Vienna Journal of East Asian Studies 10: 31–58. Link.
Gerstl, Alfred. 2020. ‘Pompeo Goes to Vienna: No Consensus on China and Russia between the US and Austria.’ CEIAS Insights, 23 September. Bratislava: Central European Institute of Asian Studies Link.
Grübler, Julia and Robert Stehrer. 2021. ‘Economic (Policy) Implications of the Belt and Road Initiative for Central, East, and Southeast Europe.’ In China’s Belt and Road Initiative: Strategic and Economic Impacts on Central Asia, Southeast Asia, and Central Eastern Europe, edited by Alfred Gerstl and Ute Wallenböck, 212–28. London: Routledge. Zinkanell, Michael. 2020. ‘Disinformation during Covid-19 from a European Perspective.’ AIES Fokus 3. Link.
Cover Photo: Vienna, Austria. Credit (CC): Maria Eklind