16+1 and EU’s concerns: Chinese “bull” in European china shop

It is the right time for Brussels to rephrase the well-known Russian saying: “An uninvited guest is worse than a Tatar” into “An uninvited guest is worse than a … Chinese.” They in Western Europe are really concerned: today, just like the Americans, the Chinese are trying to be present everywhere, but unlike the Americans, they are using soft force. The Europeans are worried as they believe that this expansion is a threat to their union.

Chinese gate into Europe

Unlike Western Europe, Central and Eastern Europe Countries (CEE) need Chinese billions. In exchange, they are ready to become a gate into Western Europe. Last year, Xi Jinping was welcome in Poland, the Czech Republic and Serbia. In the Prague, they even organized a parade in his honor. In exchange, the Chinese leader signed 30 contracts worth 9bn EUR.

The last China-CEEC summit has given rise to even more serious concerns. The 16+1 initiative was advanced after the first China-Central and Eastern European Countries Economic & Trade Forum held in Budapest in 2011. It comprises China + 16 European states (Bulgaria, Croatia, Slovenia, the Czech Republic, Slovakia, Latvia, Estonia, Lithuania, Hungary, Poland, Romania, Albania, Bosnia and Herzegovina, FYR Macedonia, Montenegro and Serbia). The organization is headquartered in Beijing and all of its secretaries are Chinese.

The last summit was attended by Prime Minister of China Li Keqiang and the presidents or the prime ministers of the 16 European members. In Budapest, Keqiang expressed hope that the 16+1 initiative will help the region to become prosperous. China’s One Belt One Road project is supposed to enlarge trade among Asia, Africa and Europe and to boost the development of the former Socialist camp.

Keqiang wants to see Europe prosperous and hopes that the initiative will expand cooperation between China and Europe and will help CEEC to enlarge their imports in China.

The host of the summit, Hungarian Prime Minister Viktor Orban said that the region needs external technologies and funds and China could help in the matter.

“We welcome the fact that as part of the new world economic order, China sees this region as one in whose progress and development it wants to be present," Organ said.

He pointed out the project to restore the railroad between Budapest and Belgrade, which is supposed to become part of the One Belt One Road and a channel for Chinese goods to Western Europe. The cost of the project is 2.4bn EUR, with 85% to be provided by Export-Import Bank of China.

According to Orban, cooperation with China is a great opportunity for CEEC to develop.

He said that Hungary will continue its policy to be open to the East and to enlarge its trade with Asia. “We see the Chinese president’s ‘One Belt, One Road’ initiative as the new form of globalization which does not divide the world into teachers and students but is based on mutual respect and common advantages,” Orban said.

According to him, Western Europe is losing its economic leadership to Asia and Pacific and this is a fact it can no longer deny.

According to FT, the Chinese promised CEEC $3bn. Orban is sure that Hungary has good chances in the European race for this money. But Hungary is not China’s only foothold in Europe. In Poland, the Chinese are negotiating projects to produce LEDs and to develop coal mines. In Bosnia, they are going to lent 613mn EUR to the coal-fired thermal power plant in Tuzla.

Politically motivated investments

Western Europe is worried to see these processes. Once the stronghold of democracy in Europe, CEEC are now being ruled by autocratic populists and this is a good chance for China to expand there.

The Western Europeans welcome China’s economic growth but they are concerned about its global ambitions as they know that its investments are politically motivated.

The Chinese are very active in CEEC. Last year, their trade with that region grew by 11% as compared with 2011.

According to CSIS, last year, the Chinese invested $15bn in CEEC economies. This is not much if compared with the EU’s investments: in 2014-2020, Poland alone will get 80bn EUR. But the Chinese have great plans.

Their key targets in the regions are Hungary, Poland and Serbia. The first two have so far received 40% and 20% of all the Chinese investments in CEEC, Serbia has gotten 1/3 of all the funds given to non-EU CEEC members.

The Chinese are also active in the Czech Republic. Bank of China and Industrial and Commercial Bank of China have a number of projects there. CEFC has bought 49.92% in Czech Airlines and a controlling stake in Lobkowicz Breweries, the fifth biggest brewery in the Czech Republic. CEFT is also the owner of Slavia Prague, the most popular football club in the country. It has also paid 1bn EUR for 50% of &T Finance Group, the biggest financial group in neighboring Slovakia.

EU’s fears

Once, former Czech President Vaclav Havel expressed support for Chinese dissidents and the Tibetans’ right to be independent. Today, Czech President Milos Zeman has appointed CEFC Chairman and Executive Director Ye Jianming as his economic advisor and dispelled a pro-Tibetan demonstration during Jinping’s last year’s visit to the Prague. Even pro-Western Czech Foreign Minister Lubomir Zaoralek said in 2014 that the Czech Government was against Tibet’s independence.

Andrej Babis will hardly act differently. He is a pragmatist and will hardly wish to spoil relations with China. Despite the European Commission’s warnings, few people in CEEC see China as a threat.

The Western Europeans warn their Eastern brothers that the Chinese have geopolitical ambitions in the region and will sooner or later ask something in exchange for their investments.

There are two reasons why Western Europe is afraid of China. First, China can use its influence in CEEC to prevent the EU from having a unanimous stance on China-related issues, like North Korea, the South China Sea and Taiwan. FT quotes a diplomat as saying that Hungary and Greece recently told their partners in the bloc that they would not support statements critical of China’s human rights record, which require unanimous agreement. The second reason is that members like Hungary and Poland may use their contacts with China in their disputes with Brussels. In this light, German Foreign Minister Sigmar Gabriel has even accused China of trying to ruin the EU.

There are lots of obstacles

Optimists say that Western Europe’s fears are exaggerated. China’s road to CEEC is not as easy as it might seem. And Western Europe is not the only problem. The EU has lots of rules and laws that may deny Chinese companies access to the European market.

During its Feb visit to Beijing, an EU delegation said that the EU welcomed any investment in Europe unless it was contrary to EU laws.

The EU’s rules may act as a strong barrier to China’s ambitions in CEEC.

“Chinese investment in EU members of the 16+1 has remained limited,” said Tamás Matura, an assistant professor at the Budapest-based Corvinus University. “Some countries have not received any new major Chinese investors in the last five years.”

In Bosnia and Herzegovina, Serbia and Montenegro, where there are neither EU funds nor EU rules, things are much better.

“There are no problems in our economic and political relations, we are always on the same side, and when China has something to say, we are always on the side of China,” Serbian President Aleksandar Vučić said in May.

Russia is also concerned about China’s expansion into CEEC as the Russians have close ties with some Balkan states. On the other hand, China is our strategic ally and we should be careful in our attitudes.

Sergey Manukov