After the collapse of the world socialist system in Central and Eastern Europe (CEE) fall outside the priorities of China’s foreign and foreign economic policy because of the transition of the countries of the region to Western democracy and market economy, as well as their course towards joining the EU and NATO. China considered CEE as the ideological, political and economic periphery of the Western world and did not see prospects to compete with the EU in the region.
However, since 2011, China’s interest in CEE has increased significantly. The countries of Central and Eastern Europe firmly entered in Euro-Atlantic structures began to viewed by Beijing as a convenient channel of trade and investment of China’s expansion in the EU area, as a “testing ground” for testing the mechanisms of such expansion and a potential tool for creating a supportive attitude toward Chinese initiatives in the EU institutions. Rapprochement between China and the CEE countries has caused concern in Western Europe, which began to suspect that Beijing wants to achieve greater political influence, driving a wedge between the Charter members and new members of the EU.
During the 4th Summit of Central and East Europe + China (CEEC) in December 2015 Prime Minister of China Li Keqiang announced plans for a twofold increase of Chinese investments in 16 European countries, as well as trade turnover with these States, which at that time was $45.5 billion.
The CEEC group (“16+1”) is a new platform for cooperation created by the joint efforts of China and CEE countries. Chinese President Xi Jinping said that Beijing regards the cooperation between China and 16 CEE countries as an important intermediate stage in the implementation of the “Belt and Road” initiative in the European economic system .
The total trade turnover between CEE countries and China reached $60 billion. This is 10% of China’s trade with the European Union. China concentrates in Eastern Europe mostly on large transport projects: railways, port and logistics complexes, etc. If you look in terms of imports and exports of each of the countries of Eastern Europe, the share of China varies mainly in the range of 5-10% .
The format of “16+1” prepared the transition to a more focused and integrated strategy “One belt, one road” and successfully “fits” into its main components – the project the Silk Road Economic Belt (SREB) and the 21st century Maritime Silk Road (MSR), aimed at the development of new land and sea transportation and logistics, retail and manufacturing systems linking China with Europe.
In SREB format CEE countries play a key role and within the framework of the MSR – quite an important transit role in the development of the “Sino-European” trade an d investment ties, and in the future – in the formation of a wide Eurasian “economic space” and “zone of political stability”.
The supporting structure of the SREB is the development on a new technological and organizational-legal basis of the traditional areas of “Sino-European” transport and trade relations with the addition of their investment cooperation.
The Northern route includes land international transit to Western Europe from China and other countries in the Asia-Pacific region (especially South Korea and Japan) through Russia and Kazakhstan along the Trance-Siberian Railway and Kazakhstan railway with an exit on the European part of Russia in region of Urals. In the future, the Northern route will most likely retain its leading position. Its capacity can significantly increase after modernization of the Trans-Siberian and the Kazakhstan Railways, and the release of the Trans-Siberian railway from the area of passenger traffic.
The degree of coordination of transport and harmonization of customs and other border procedures is increasing. Since June 2016, all freight trains from China to Europe had a unified brand of “China Railway Express”, which symbolizes the regularity and consistency of rail transportation in the framework of the SREB .
The Northern route is potentially the most promising for both the development of multi-modal communication between China and Europe, and for creation on its basis the economic, industrial, informational, and other “belts”. New opportunities for such development create taken at the meeting of “16+1” in November 2015 in Suzhou “Suzhou provisions on cooperation between China and countries of Central and Eastern Europe” and “Medium-term plan of cooperation between China and CEE countries)”. These instruments significantly extend the range of sectors, including all types of infrastructure, particularly, aviation and ports, transportation, agriculture etc.
China, as always, need new markets and resources. In November 2016, the Chinese government announced plans to invest €10 billion in the CEE countries. Premier of China Li Keqiang announced at the summit of “16+1” held in autumn of 2016 in Riga on the establishment for funding of joint projects of the special Fund on China-Central and Eastern European Fund. He served Sino-CEE Financial Holdings Ltd, a company opened by one of the largest Chinese banks – Industrial and Commercial Bank of China and China Life Insurance and Fosun Group. The aim of the Fund is to attract financing for projects in Central and Eastern Europe at least €50 billion. Premier Li Keqiang told reporters that “among the countries of Central and Eastern Europe and China there is a huge untapped potential for the development of economic cooperation”. With this mind, the parties must work on a comprehensive platform for trading and ensure that none of the countries left out of these plans for cooperation and development .
Hungary as the first strategic partner of China in CEE
The first European country which began the practical measures to the implementation of an ambitious Chinese globalization project of the Great silk road was Hungary. Foreign Minister Wang Yi and Minister of foreign Affairs and trade of Hungary Peter Siyarto signed the Memorandum of understanding on the construction of SREB and MSR within the framework of the initiative “One belt, one road”. Stressing the primacy of Hungary in the implementation of the project in Europe, Wan Yi promised role of “locomotive and development leader” and noted: “History will show that it will be a wise and correct choice” .
Hungary does not have direct transport links with China, but is the first and still the most active partner of China in CEE. It accounts for over 30% of Chinese FDI in the region. Its is an observer in the AIIB and remains the only country in CEE, formally joined the SREB project. The Memorandum was signed with the Hungarian initiative “turning to the East”. The government of Viktor Orban signed in May 2017 a strategic partnership agreement with the Chinese company Bohong Group Co. – one of the largest manufacturers of automobile exhaust systems in the world. At the Hungarian plant Bohong in Hungary 1,200 people work, but after signing their number will increase considerably. Chinese business is interested in financing the construction of high-speed railway, which connects Budapest and Belgrade and will cost €2.6 billion.
Poland – the leading transit country and trade partner of China in CEE
June 2016, President of Poland Andrzej Duda and Chinese President Xi Jinping has signed an agreement, according to which countries are obliged to consider each other’s long-term and stable strategic partners. The agreement was signed in the framework of Xi Jinping’s visit to Poland.
Both countries pledged to strengthen cooperation in the political, economic, social, cultural and other spheres, coordination and cooperation in international and regional affairs and enhance the level of bilateral relations in such a way that they benefit both parties.
Duda said that Xi Jinping’s visit testifies to the intensification of bilateral relations both at the diplomatic and economic level: “I hope that Poland will become China’s gateway into Europe, not only in a symbolic sense, but, above all, in fact, from the point of view of the economy, which will be implemented joint investment, cooperation will be realized, which will make possible the use our port capacity” .
In turn, Xi Jinping said that during his visit to Poland the issues of the Sino-Polish cooperation plan were agreed upon, a committee for industrial cooperation and development in the areas of communication and information was established, and investments in infrastructure and logistics were strengthened. Chinese companies are in talks with the government of Poland on the investment in the production of diode lamps and coal mines. In 2016, Poland officially became the first country in the CEE member and founder of the China-initiated Asian infrastructure investment Bank (AIIB).
Czech Republic as a promising partner of China in CEE
The working visit of the Czech delegation to China (June 16-20, 2016) was full of meetings and talks with Chinese leaders and business. The Cabinet of Bohuslav Sobotka continues the policy of transformation of the Czech Republic to “platform” of China in Central Europe. Prague’s turn towards to Beijing began with the inauguration of President Milos Zeman and the starting of the Sobotka’s government.
The main purpose of the visit of the Czech delegation to China is to develop cooperation with China in aviation, healthcare and financial sectors. Chinese energy conglomerate CEFC bought a stake in the largest Czech air carrier Travel Service AS and the Czech brewing company Pivovary Lobkowicz. The airline owned by the Chinese 49,92% of the shares and brewing company – a controlling stake. Among the deals signed during the visit of Xi Jinping to Prague is the purchase of CEFC by a 50% stake in the Czechoslovak bank J & T Financial Group for €1 billion. Moreover, Mr. Zeman has appointed his economic adviser for Ye Jianming, Chairman of CEFC .
China is a support for Serbia
The importance of Serbia in China’s plans has increased significantly in recent years, both in economic and political aspects. Economically, Serbia is the fifth largest recipient of Chinese FDI in CEE countries after Hungary, Poland, Czech Republic and Romania, as well as a coordinator of cooperation on rail transport and infrastructure in the framework of the “16+1”. Politically, it firmly supports China’s stance on Taiwan and struggle with internal separatism in exchange for support Serbia on the issue of non-recognition of Kosovo’s statehood.
During the visit of Chinese President Xi Jinping in Serbia signed agreements in the field of construction, infrastructure, telecommunications, trade, defence, media, energy, trade and tourism. The sides attach great importance to the agreement on the design and execution of works on the construction of the motor road on the Surcin – Obrenovac corridor 10. The main document was an agreement on the establishment of a comprehensive strategic partnership.
China and Belgrade has also signed a Memorandum on the establishment of the Centre for cooperation in the field of transport and infrastructure between China and CEE countries. The ministers of culture of the two countries signed a program of cooperation in the field of culture and art for 2017-2020.
As Xi Jinping stressed, visit to Serbia and signed agreement “put relations between the two countries to a higher level”. He noted that “Serbia for China is a sincere friend and reliable partner”. This confirms the fact that Serbia was the first country in the region with which China has concluded a strategic partnership agreement .
Tomislav Nikolic handed to Xi Jinping the state award – the Order of the Republic of Serbia and stated that “China’s strong support for Serbia” when it is faced with political difficulties. Tomislav Nikolic expressed gratitude to the head of China for their support, recalling that since 1999 China has provided Serbia with humanitarian aid worth more than $32 million.
Trying to prevent the penetration of China into Europe from the East, in Brussels indicates that the volume of Chinese investment in CEE countries does not go to any comparison with the investments of Western European countries and primarily Germany, France and the UK. Chinese billions, according to research firm Rhodium Group, account for only 8% of the total investment in this European region in the last few years.
The EU expresses doubts in the format of “16+1” and sees in it a manifestation of active Chinese expansion. The USA through the security structures of NATO in control the political and military development of the 16 states. Although the United States expressed appreciation for the format of “16+1”, they are constantly increasing influence on Poland, the Baltic and Western Balkans. Germany considers CEE as its backyard and traditional sphere of influence. German government openly questioned the mechanism of cooperation between China and 16 CEE States, believing that it undermines the EU norms, which is unfavorable for European unity .
However, China is still ahead. At the moment the main beneficiaries of China’s interest in Central and Eastern Europe are Hungary, Poland and Serbia. Budapest and Warsaw received 40 and 20% respectively of all Chinese investment in the region and Serbia received two thirds of investments in Eastern European countries outside the EU .
Firstly, the CEE countries are gradually occupying an increasingly important place in the foreign policy priorities of modern China. Beijing vigorously pulls the CEE countries into the orbit of its economic and geopolitical influence through the mechanisms of “16+1”, SREB and MSR.
Secondly, it is obvious that the rapid rapprochement between China and the CEE countries raises certain concerns in the European Union, USA and NATO, which seek to maintain their influence on the states of the region. This is natural, because the CEE countries occupy a unique geographical position in Europe and have access to the Baltic, Black and Adriatic seas.
Thirdly, we can safely predict that China, despite of obstacles, costs and risks will continue to increase investment in CEE countries. Its competitive advantage in this way is non-interference in the internal affairs of the countries of CEE and an emphasis on mutually beneficial economic cooperation.