During the last 16 + 1 summit in Sofia there much talk about the development of good relations with China. Ritually, speakers expressed the wish for strengthening relations, which should develop the EU’s poorest member states and regions. For their part, Chinese speakers offered assurances as to Europe’s significance for China. In view of the above, the European Union should be satisfied with the the OBOR initiative and satisfied the 16 + 1 cooperation framework. The problem is that Brussels is rather unhappy with China’s OBOR initiative, while none of the sixteen cooperating governments is thrilled.
No multilateral governance aspirations
The members of the 16 + 1 cooperation framework are competing for Chinese investment but no one is quite satisfied with the result. Regionally too, the OBOR vision is not transformational. China is pursuing short and long terms objectives in logistics, without disrupting the current multilateral status quo in Eastern Europe. Opinions to the contrary are not evidence-based.
In the Bulgarian capital, the Chinese premier Li Kequiang shied away from any aspiration to bolster the 16+1 group institutional competencies. The premier focused instead on ongoing projects, making clear that this policy forum remains a dependent variable to Chinese foreign policy, with no decision-making or even agenda-setting capacity. The group is so powerless that could not even determine the date of their next meeting (Justyna Szczudlik, 2018).
For Beijing the 16+1 initiative is chiefly a form for asymetrical bilateral cooperation with each of the 16 states seperately, including 11 EU member states. The realization of OBOR as a vision will inevitably entail cooperation with a number of international organizations, as it involves over 100 countries. True, China has a bird’s eye view of Europe that goes beyond Brussels and remains inclusive of the UK. However, it is clear that Beijing views Brussels as a partner that is keen not to antagonize, especially amidst an emerging trade war with Washington. In Sofia, Li Kequiang explicitly appease anyone who feared that China has leadership ambitions in Eastern Europe, days before the EU-China trade talks in Beijing (16-17 July).
From an EU perspective, the fear of Chinese influence in Central Eastern Europe is unfounded. Neither the level of investment nor the relatively weak level of cooperation between the 16+1 framework partners would justify fears of geopolitical competition. Specific bilateral relations with Poland, Hungary and Serbia appear to have much greater overall significance than the 16+1 forum. In substance, the concept of a “comprehensive strategic partnership” is more far-reaching than multilateral cooperation.
Of “Marshall Plan” fantasies
Even in a bilateral framework, there is no “Marshall Plan” that could be seen as antagonistic to Brussels. Significantly, all countries in Eastern Europe have an enormous trade deficit with China; for example, Serbia buys 63 times more products than its exports to China. The cumulative amount of all Chinese Foreign Direct Investment (FDI) in Poland from 2000 to 2016 amounts to merely €936 million, of which more than half (€474 million) in 2016. That is less significant than the €2bn invested in Hungary, or Chinese flagship infrastructure projects in the Balkans, such as the €580 million highways between Macedonia and Montenegro or the €689 million highway from Bar to the Serbian borders (Agnieszka Ostrowska, 2017).
The significance of this investment has been exaggerated. Indigenous national narratives of “third way” foreign policy reflect local aspirations more than Chinese foreign policy. Public opinion in Serbia seems to believe that investment from China, especially in infrastructure, is at par or more significant than investment from the EU. That is not true. China’s main objective in Serbia is to develop a logistics hub for Chinese goods in Southeastern Europe, which may compete with other logistics centers in Norther Europe (Georgi Gotev, 2017), but is not a logistical game-changer.
Hungary and Poland too present Chinese investment as a force that is “counterbalancing” EU influence. However, the weight of China is nowhere near the significance of the EU; it is sobering to consider that merely the trade turnover between Hungary and Poland is far more significant than trade with China for both countries. The bottom line is that Chinese and Russian investment in Hungary predate membership of the EU and represent no more than 3% of FDI in the country (Veronika Jóźwiak, 2017). And although the Polish government suggests that Chinese investment can play a key role in risky infrastructural investment, like a new airport and connected new railway lines, the truth is that previous experience is not encouraging. The COVEC highway construction experience has proved problematic.
From a Chinese perspective, the 16 CEE countries are significant for trade transit. Land transport corridors to Western Europe pass. In the south, Chinese products make their way from Greek ports, through the Balkans, to Austria and Germany. From the East, Chinese products make their way from Poland to Germany and across the ports of Baltic States to Scandinavia and Western Europe. The development of this logistical infrastructure is significant for CEE countries not because it links their economies to China, but because it allows them to modernize existing infrastructure to EU levels.
It is true that greater infrastructural projects such as the Via Carpathia Project – linking the Baltic States, Poland, the Balkans and Greece – are seen as part of the Chinese OBOR vision. However, the project is funded by the EU and other regional funds rather than Chinese loans. In the 16+1 summit in Sofia, it was announced that Chinese funding will finance the construction of a connection between Budapest and Belgrade, but this is not a “Chinese project” as such. In Montenegro, a Chinese-funded project aspiring to connect the Adriatic coast with Serbia is culminating into a public debt crisis. The country is nearing an 80% debt-to-GDP ratio and the IMF doubting the country’s ability to finish the project (Noah Barkin and Aleksandar Vasovic, 2018).
The Montenegrin case makes apparent that Chinese financing is not anything like a “Marshall Plan,” with favourable and subsidized rates commensurate with the perception of a geopolitically significant policy. China continues to invest more heavily in Europe’s biggest markets, including Germany, France, the UK and Italy. In Eastern Europe, investment takes more the form of mergers and acquisitions rather than greenfield investment with a substantial impact on the labour market.
Despite record levels of investment in Poland in 2016, only a $42 million investment for the construction of the Suzhou Chunxing prototype in Gdańsk is “greenfield.” The biggest share of Chinese FDI in Poland concerned the takeover of the Portuguese EDP Renováveis by the subsidiary China Three Gorges (CTG) – ACE Poland for $398 million and acquisition of the majority of Novago for $123 million by China’s Everbright International. China is not among the most significant investors in Poland or in the CEE region at large.
In 2017 alone, FDI in Poland alone was to the tune of $14,8bn with 256 distinct projects. Poland, the Czech Republic, Slovakia and Hungary have attracted nearly half of the Europe’s FDI industrial projects, of which very few are Chinese. Everyone in the region recognizes that the center of economic and political activity in Eastern Europe is Germany. Even populist parties are willing to make this realistic admission. In 2017 Poland was Germany’s 8th export and 6th import partner. That means that German exports to China were perhaps as if not more significant to the creation of Polish jobs. From a Polish or more broadly Eastern European perspective it is clear that China can in no way compare, let alone “counterbalance” the significance of the EU. Therefore, the significance of OBOR and the 16+1 initiatives is thus far more rhetoric than substantial.
China has no geopolitical weight in Eastern Europe
Because the 16+1 initiative has no substantial multilateral coherence, there is no mechanism of interest accommodation between CEE counties.
Even between the politically aligned Visegrad Four partners (V4), there is more competition for Chinese investment than cooperation. And the expression of national visions that could be realized with Chinese financing – such as the Polish “Trójmorze” (Trimarium) or “Międzymorze” (Intermarium) – have failed to excite regional interest. Clearly, Poland aspires to emerge as a regional leader in CEE but appears to be losing much of its clout under the current government. The Baltic States are not keen to follow Warsaw’s lead and are more interested in increasing their own slice of the pie of Chinese FDI. This trend shows that there is no danger of the CEE 11 that participate in the 16+1 framework of becoming a Chinese “interest group” in Brussels. The 16+1 initiative is not by any means an alternative to EU membership.
And it is clear that China’s special military relationship to Moscow means that for CEE there is little alternative to a Euro-Atlantic worldview. Joint Sino-Russian maneuvers in the Baltic Sea in 2017 have hurt China’s interests in Eastern Europe; the same can be said of the presence of a Chinese army unit in Minsk on the occasion of Belarus Independence Day in June 2018. Finally, China’s overall activity in cyberspace is considered unfriendly.
Overall, there is a less positive view of China and the 16+1 initiative in CEE; for China, the significance of the region never had the geopolitical significance imbued by regional actors. China has always been a transactional rather than transformational actor in the region, despite OBOR’s obvious significance. China welcomes the realization of national aspirations through its own plans, but does not endorse them. Speaking from Abu Dhabi, President Xi Jinping admitted that China needs to take onboard the development objectives of its partner countries, safeguarding its reputation. “Our enterprises must give greater importance to their good reputation in their going-global activities, while seeking their investment returns,” President Xi said. These remarks apply fully to 16+1 initiative. If this principle does apply in the future, China would become a partner for the EU. However, a Chinese “counterbalance” is no more than a fantasy in the minds of politicians in CEE that has little to do with Beijing.
Andrzej Filipowicz, PhD, is a Senior Researcher, New Silk Road Research Group.