Introduction
After a long disconnect, it seems that China and countries in Central and Eastern Europe (CEE) have rediscovered each other. The international policy community is impressed by some of the big developmental steps that have been taken to facilitate bilateral relationships between China and Central and Eastern European Countries (CEECs) over the past few years. This is particularly exemplified by the China-initiated ‘16+1’ process, which connects China and the 16 CEECs in a more institutionalized manner. 1 The 16+1 process was officially launched on 26 April 2012, when the leaders of the 17 participating countries convened at a summit in Warsaw, Poland. Since then, the process has been further developed in terms of its organization and substance. The leadership summit has become the signpost of the 16+1 forum, which was held in Bucharest, Romania, in November 2013; Belgrade, Serbia, in December 2014; Suzhou, China, in November 2015; and in Riga, Latvia, in November 2016; and most recently in Budapest, Hungary, in November 2017.
This new development is in sharp contrast to the lukewarm relationship between China and the CEECs during the majority of the Cold War period and in the post-Cold War era. There was a short honeymoon phase in the 1950s when they were members of the Soviet-led international communist family. With the Sino–Soviet rift in the early 1960s, relationships between China and the CEECs were quickly suspended and seemed to disappear thereafter. China was only able to sustain its relationships with a very small number of countries in the region. In fact, China managed to develop somewhat special relationships with Albania, Romania and Yugoslavia due to their more independent foreign policies and ideological variations with the Soviet Union. After the end of the Cold War, the two sides became preoccupied with their respective domestic transformations, with most of the CEECs undergoing regime changes and China deep in its economic restructuring. In the 1990s, China and the CEECs generally normalized their diplomatic relationships. China’s spectacular economic growth since the 1990s has caught the attention of CEEC governments and business groups. Most typically, the Visegrad Group countries, such as the Czech Republic, Hungary, and Poland, expected more economic potential for exports and investments in the emerging Chinese market. In China, the policy communities of governmental officials and analysts closely followed the comprehensive CEEC transitions. However, they were never each other’s strategic or practical priorities at the governmental level. Moreover, there was significant negligence and even prejudice and distrust in people’s mindsets on both sides. The Chinese side was interested in developing economic relationships with developed countries in the West and was concerned with strategic interests in its neighbourhood. To China, the CEECs were simply too far and not useful enough to fulfil its core national interests. China perceived the CEECs, particularly the smaller ones, as ‘minor, almost unimportant partners’.Reference Fürst and Pleschová 2 Indeed, it was difficult for the CEECs to attract China’s attention to their foreign strategies. The CEECs held a similar mentality, as most of the countries were interested in returning to the West with the practical aim of joining the EU for political and economic purposes and joining NATO for security purposes. China counted little in this calculation. Furthermore, references to ‘ugly Communist China’ were often used to negatively describe their Communist past and reinforce their new ‘democratic’ image. Thus, overall, the two sides paid little attention at the governmental level and showed little respect at the societal level to each other.
Things began to change after the turn of the century and the two sides have since rediscovered each other. As China started to become more zealous in the expansion of its foreign economic presence, most CEECs wanted to seize opportunities to develop relationships with major economic powers. This essay argues that China and the CEECs are attracted to each other on the basis of economic pragmatism and, to a lesser extent, political opportunism. Current China–CEEC cooperation is mostly promoted by China’s state-driven commercialism, focusing on the export of China’s manufacturing capabilities in infrastructural sectors and energy-oriented outbound investments in the CEECs. Although the CEECs generally welcome China’s economic presence in the region, this bilateral cooperation is impeded by a number of economic, normative and geo-political obstacles.
Central and Eastern Europe on China’s Global Roadmap
China initiated its ‘Go Global’ (or ‘Go Out’) strategy in the late 1990s. This strategy aims to encourage Chinese enterprises to actively participate in international competition through government-sponsored activities promoting trade and investment. It is widely believed that the Chinese government is strongly motivated to promote its economic expansion through its advantages in huge foreign reserves and strong manufacturing capabilities, particularly in areas of infrastructural construction and heavy equipment products. After the overall implementation of the Go Global strategy, it has mainly targeted the emerging and developing world, focusing on contracting infrastructural projects and outbound foreign direct investment, particularly in the energy field. Due to more stringent thresholds, Chinese businesses were initially less confident in reaching out to developed countries, only making several attempts to buy undervalued assets. Seizing the opportunity of the 2008 global financial crisis, the Chinese government began to take many more bold steps in its overall Go Global strategy, culminating in a number of impressive initiatives, such as the Asian Infrastructure Investment Bank (AIIB) and the BRICS process. These measures were finalized in the high-profile ‘One Belt, One Road’ (OBOR) initiative.
China’s Go Global strategy, later specified by the OBOR initiative, is largely driven by domestic concerns, such as huge foreign reserves and, more recently, its economic and export slowdowns and excessive manufacturing capabilities. Under these circumstances, China is more compelled to speed up its foreign expansion strategy. In these waves, China’s ambition has recently begun to target developed countries in the West. Against this backdrop, the CEECs have drawn China’s attention. Although China has undergone dramatic changes both domestically and externally in the post-Cold War era, the CEECs have experienced even more fundamental transformations over the same period. Most of the countries in the region have more or less successfully completed their transitions from communist political and economic systems to liberal democracies and market economies. As a consequence, CEEC societies have been reformulated and foreign policy orientations have been redefined. As most of CEE is now an integral part of a wider Europe, the scope of this sub-region has essentially been redefined, reflective of a recasting of CEE that directly affects the CEECs’ relationships with China.
Since the early 2000s, China has gradually begun to discover the strategic value of the CEECs. The EU’s inclusion of the CEECs was definitely a key factor behind China approaching the region. So far, most CEECs have been absorbed into the West, either as members of the EU or NATO and usually of both. China has closely observed these developments. It was initially concluded that China should improve its political and economic relationships with the CEECs in the framework of its relationship with the EU. Immediately after the EU’s eastward enlargement, then Chinese President Hu Jintao visited Poland, Hungary and Romania in June 2004. During this visit, he made a speech at the Romanian parliament in which he provided suggestions on developing China–CEE relationships. This marked the beginning of Chinese top leadership’s strategic focus on CEE. In the eyes of Chinese policymakers, the CEE region is one of the areas with the greatest potential. As Chinese Premier Li Keqiang indicated, like China, the CEECs are newly emerging economies, currently coping with the tasks of developing their national economies and raising living standards. 3 Compared with typical developing countries of the third world, the CEECs have stable political and social systems, functioning market economies and rule of law, and high-quality labour forces. Collectively, the CEE region constitutes approximately one third of the EU’s common market. With that said, the CEECs still have much more room for development before they can catch up with their Western European neighbours. Specifically, they need to attract foreign investment, improve infrastructure, and raise people’s income levels. Equally important, they may collectively be the ideal gateway to advanced Western countries due to their geographical locations and, in particular, to the fact that most of the CEECs are now part of the EU.
The year 2008 was a turning point in China’s relationship with Europe, including its relationships with CEE. The global financial crisis, particularly the European debt crisis, strongly motivated both China and the CEECs to strengthen their mutual cooperation. Then Chinese Vice President Xi Jinping paid an official visit to Europe in 2009, which included trips to three CEECs, namely Bulgaria, Hungary and Romania. This visit was a clear sign of the Chinese leadership’s determination to develop relationships with CEE. On the Chinese side, CEE may be a valuable market for Chinese trade and investment. The CEECs are attracted to the potential for Chinese investment, particularly in the area of infrastructural construction. Since the European debt crisis, the EU and its member states in Western Europe have faced a number of pressing issues, such as economic stagnation, the Ukrainian crisis, the refugee crisis, Brexit and, most recently, political populism in Europe and its closest ally, the United States. The EU’s attention necessarily is focused on these issues. On some occasions, the CEECs have diverged acutely from their Western partners. For example, they differ on how to handle the refugee crisis and the future direction of the EU. It is now that China provides a new option for the CEECs’ external economic cooperation. This chance is even more valued by China as a window of opportunity to expand its presence in the region. The CEECs are generally positive about China’s initiative, as they see the potential for Chinese investment in their badly needed areas of infrastructural construction, such as transportation and logistics, and greenfield investment.
China has also been happy to see some new political developments in the CEE region in recent years. It has witnessed the revival of nationalism and political pragmatism in Bulgaria, Serbia and the Czech Republic, and even populism and illiberal democracy in Hungary and Poland. Hungarian Prime Minister Viktor Orban stands out as a typical example, openly emulating the ‘illiberal states’ of Russia and Turkey. To a lesser extent, he has been echoed by the nationalist Czech President Miloš Zeman, who appreciates China’s success in boosting its economy while also stabilizing social order. These countries’ governments are more audacious in pursuing their independent foreign policy objectives and their own EU model of a more nationalistic basis, which are sometimes not quite in tune with those of their Western EU partners. This change would mean more opportunities for China’s involvement in the region.
Carving out Footholds in Central and Eastern Europe
China has made great strides in developing relationships with the CEECs as part of its OBOR initiative. It is evident that such fast development of China–CEEC cooperation is largely a Chinese initiative. The 16+1 Secretariat for China–CEEC Cooperation, for example, is a Chinese establishment hosted at the Chinese Ministry of Foreign Affairs. It communicates with national coordinators appointed by the 16 CEECs and also with relevant ministries and departments of the Chinese government. The Chinese initiative is also recognized for its efforts to kick off various projects of the 16+1 process, in business sectors, in exchange at the local level, and in cultural exchanges. In general, the Chinese government has successfully stepped into the region and established institutional ties with CEEC governments.
Indeed, China has made significant efforts to pave a way in CEE, appearing to be partly familiar and partly strange. In its endeavour, China’s approach to CEE is typical of its state-driven commercialism, marked by government-sponsored business activities and in a selected number of key sectors. The Chinese government dominates in this ‘economics first’ approach, playing lead roles at both the strategic and operational levels. At the strategic macro-level, China is inclined to promote regional grouping and select so-called ‘pivot states’ (Zhidian Guojia) in the region. At the operational micro-level, China’s state-driven approach is reflected in the government’s lead role in directing project operations, such as government-sponsored preferential trade and economic terms and big demonstration projects (Shifanxin Xiangmu).
China is used to dealing with countries of the same region as a group, most probably for convenience and efficiency. Regional grouping is mainly about collectively addressing a group of countries in geographic proximity. China practices this regional grouping strategy to develop relationships with the Association of Southeast Asian Nations (ASEAN) countries in Southeast Asia, Central Asian countries through the Shanghai Cooperation Organization, and countries in Africa and Latin America. China uses the same strategy with the CEECs. In fact, the eastern part of Europe is difficult to define. Depending on different criteria and preferences, a number of terms come to mind (e.g. ‘Central and Eastern Europe’, ‘East Central Europe’ and ‘East Europe’). Chinese policymakers have a clear definition for the CEECs, which are collectively understood as a special part of Europe that has sufficient justification to be treated as a bloc.Reference Zhu 4 In the Chinese mindset, ‘CEE’ is generally a political and geographical term. It covers all countries in the eastern part of Europe that were under communist rule during the Cold War and experienced transformation afterward. The countries of the former Soviet Union are purposefully excluded from this group, except for the three Baltic States, which are part of the CEEC category. This definition is based on several strategic considerations. First, the CEECs are aspiring and acceptable parts of the West. So far, the majority has been admitted into NATO and the EU and the others are eager to join the waiting list. This distinguishes the CEECs from the rest of the former Soviet republics, which are presupposed by Russia as being within its traditional sphere of influence. In fact, Russia and the West have long competed for influence in the former Soviet space. China understands the sensitivity of the region and has enough reason to treat the sub-regions of the former communist countries differently. The CEE region is a much safer playing field where China can be more confident in joining the competition. Starting with the China–CEEC Economic and Trade Forum in Budapest in June 2011, the regional grouping policy has been upgraded to the high-profile status of the 16+1 process since its first leadership summit in Warsaw in 2012.
At the strategic level, China has adopted a pivot state strategy. This refers to China’s practice of targeting several CEECs as its major partners in the region. In this regard, the Chinese government has officially designated Serbia, the Czech Republic, and Poland as its major pivot states. China has established strategic partnerships with the three countries, starting with Serbia in 2009, Poland in 2011 and the Czech Republic in 2016. Its strategic partnerships with Serbia and Poland were upgraded to comprehensive strategic partnerships in June 2016 and another one with Hungary was established in May 2017. It is noteworthy that in China’s diplomatic glossary, a comprehensive strategic partnership is the highest level of diplomatic relationship. Being its first strategic partner in the region, Serbia has been defined by China as its key partner in China–CEEC cooperation. During his state visit in June 2016, Chinese President Xi Jinping said that Serbia enjoys geopolitical importance and advantages and could serve as a key pivot state in China’s implementation of its OBOR plan in the CEE region. 5 Poland has also attracted China’s attention due to its core status in the CEE region. China is happy to welcome Poland as a founding member of the AIIB. It is a big and influential country in the region and its status as an EU member state further adds to its weight in wider Europe.
Since the left-wing Social Democratic Party took office in 2013, the Czech government has made a big change in its relationships with China, adopting a much more pragmatic attitude. President Zeman attended the military parade at Tiananmen Square in Beijing in September 2015 in commemoration of the 70th anniversary of the end of the Second World War. This surprised the world, as he was the only leader of an EU member state on the scene. The bilateral relationship between the two countries has greatly improved, with a focus on the pragmatic cooperation of mutual interests. In this context, China has also defined the Czech Republic as one of its pivot states in the CEE region.
At the operational level, the Chinese government is accustomed to providing state-sponsored preferential trade and investment terms. In the past, it focused on some demonstration projects. At the first China–CEEC summit in Warsaw in April 2012, then Chinese Premier Wen Jiabao announced ‘China’s Twelve Measures on Promoting Friendly Cooperation with Central and Eastern European Countries’. 6 Most of these measures are economic in nature, such as government-sponsored loans for infrastructure construction, joint investment funds, and suggestions for the promotion of trade and investment from China to the CEE region. More specifically, Mr Wen announced a US$10 billion line of credit to fund infrastructure, technology and energy projects in CEE. It is reminiscent of what China has done to target countries in other regions, such as those in Central Asia, ASEAN, Africa and Latin America. In the framework of the 16+1 initiative, China has defined three potential priority areas for economic cooperation: infrastructure, high technologies and the green economy. The Chinese government boasts its capabilities in infrastructural construction and heavy equipment manufacturing. These capabilities have played essential roles in China’s rapid development in recent years, such as in the construction of its highway and high-speed railway networks, shipping ports and airports, and communication systems across the country. It is now eager to sell its capabilities abroad. In this regard, the China-proposed Hungary–Serbia railway project stands out as a typical example of a so-called ‘demonstration project’. This 350 km railway is mostly financed by the China Development Bank and is currently under construction by a consortium of Chinese, Serbian and Hungarian companies, representing a flagship project between the world’s second largest economy and the CEECs. After signing the deal, Chinese Premier Li Keqiang, called the project ‘A corridor between China and Europe’. 7 It is widely believed that this railway will be part of China’s ambitious plan to speed up delivery of its exports to Central Europe through Greece’s port of Piraeus, which is on lease by a giant Chinese shipping company. Furthermore, Chinese companies have won a number of deals on major projects, such as constructing a thermal power plant in Bosnia and Herzegovina, constructing a nuclear power plant in Romania, acquiring a steel plant in Serbia, and signing an express freight railway agreement with Poland. Overall, China has improved its economic relationships with the CEECs, making itself the most important Asian trade partner for the CEE region, particularly the Visegrad Group countries. Its investment in the CEECs is still minimal, but has notably increased.
Pitfalls on the Way
Although China strives to intensify its cooperation with the CEECs, it also faces a variety of obstacles. First, obstacles exist at the very practical dimension of the economic sphere. This complicates and is partially explained by some deep-rooted normative problems. Furthermore, China’s initiative in the region entails and may be inhibited by some geo-political implications.
Economic Pitfalls
China’s economic engagement with the CEECs largely follows its government-dominated practice in developing countries in Asia, Africa and Latin America. It seems that without referring to the specifics of the CEECs, the whole initiative in the CEE region is an experimental endeavour, if not an opportunistic one. This ill-preparedness is most evident in the failure of a Chinese state-owned construction company’s (COVEC’s) attempt to complete the construction of a 50-km long stretch of highway between Warsaw and the German border. The Chinese company won the contract from the Polish government in 2009 with an astonishingly low bid. However, it underestimated the difficulties of working in an EU member state. As the project progressed, COVEC was found to lack good planning, be ignorant of the strict regulations and labour standards applying, and to have poor managerial and financial skills. Foreseeing no possibility of finishing the project, the Polish government cancelled the contract and demanded compensation in 2011. 8 The whole story was considered a big blow to China’s ambition to export its infrastructural capabilities to the West.
In terms of a general trend, almost all of the CEECs have suffered considerable trade deficits in trade with China. This has become a concern raised by major CEECs, such as Poland. Moreover, China’s entry into CEE has inevitably entailed strategic worries of stakeholders in the region. The most immediate backlash comes from economic competitors, mostly from Western EU member states. Germany’s Committee on Eastern European Economic Relations, an industry body, alleges that state-owned Chinese companies secured contracts in the region ‘via price-dumping, aggressive financing, and generous risk-guarantees’. More noteworthy, Chinese economic activities in the CEECs are considered ‘market aggressive’ measures, which are by nature political strategies for the purpose of expanding its economic activities. 9
Indeed, most of the CEECs are now part of the EU common market. As a result, they have incorporated substantial EU legislative and regulatory rules and standards. In fact, the US$10 billion line of credit promised by China has turned out to be almost impossible to extend to the EU members of the CEECs because the funding is interpreted as violating the EU’s common market rule. Chinese analysts lament that the EU regulations have collectively hindered China–CEEC economic cooperation. Given the much-complicated situation of the CEEC EU members, China has recently dedicated much attention to the non-EU members of the CEECs in the West Balkans, particularly Serbia.
Normative Pitfalls
Chinese leaders like to claim that China and the CEECs have ‘traditional friendships’ and that there are no fundamental conflicts of interests, but solid foundations of cooperation. However, this description does not generally reflect reality. To some extent, this is wishful thinking. At the conceptual level, there is a sort of mutual understanding and trust between the two sides. In the mindset of many people in the CEECs, China is still a communist country. This reminds them of their own unhappy communist histories, which have left substantial legacies in their contemporary politics. Indeed, quite a few countries in the region have developed consistent moralist foreign policy orientations to promote human rights, democracy and rule of law in international relations. This directly affects their relationships with China. On the Chinese side, many people think that they understand the CEECs due to similar communist histories. The CEECs are generally understood as economically rigid and politically unstable. This mentality has translated into a number of sensitive issues in China’s relationships with the CEECs, such as Taiwan, Tibet, human rights, and the Chinese Diasporas in the CEECs.
State-sponsored Chinese commercialism focuses on building intergovernmental ties with the target countries while largely neglecting the peoples of those countries. It is true that China has attempted to get closer to the peoples of the CEECs by carrying out its public diplomacy under the name of ‘people to people’ exchanges. It runs cultural activities, such as the Confucius Institute, think tank networks, and forums for young elites. However, the real effects of these activities are minimal in changing the relatively negative mindsets of these peoples. Furthermore, the societies of the post-transition CEECs are now more or less politicized and polarized, similar to their Western European neighbours. On several occasions, China’s effort has been impeded by the government–society missing links in a number of countries in the region. In no country is this more evident than in the Czech Republic, defined as a pivot state by China. The Václav Havel legacies have substantial influence on young urban liberals, pro-Western conservatives, and the mainstream media in the country. Although the Social Democrat government has been more pragmatically business-oriented and has viewed China as an economic opportunity, the Czech media disagrees and openly disapproves the government’s choice of strategic partnership with China. The protests against President Xi Jinping during his visit in April 2016 reflected the limited political acceptability and soft power of China among the general public in the country. This disapproval is also common in other Central European countries and the Baltic States.
Geo-political pitfalls
China’s initiative in the CEE region is a primarily economic matter. However, it entails geo-political factors. There is notable internal heterogeneity within the CEECs. Except for their shared communist history, the CEECs have never been a unified bloc. In geographical terms, for example, the categories may include the Visegrad Group, the Balkans, the Baltics, and other peripheral states. They actually vary considerably from one to another in many aspects, such as geographical size, economic patterns, levels of development, and foreign policy preferences. In a study on the EU member states’ policy on China, the CEECs fall into different categories in terms of their attitudes toward China. The Czech Republic and Poland are defined as belonging to the so-called ‘assertive industrialists’, the three Baltic countries to the ‘European followers’ category, and most of the other CEECs to the ‘accommodating mercantilists’ category.Reference Fox and Godement 10 The relevance and accuracy of this kind of categorization is debatable. However, it demonstrates that countries in the region vary in their foreign policy orientations, including their China policies. This may undermine China’s approach to targeting the region as a unified group. It may also be problematic if China adopts the same policy approach to the CEECs.
Aware of the EU’s concern, both China and the CEECs are careful not to cross political red lines. The two sides emphasize the economic and cultural nature of the 16+1 cooperation, assigning no place to political or strategic matters. The 16+1 format has been deliberately kept little formalized, with China maintaining a small secretariat. In official documents, it has always been mentioned that China–CEEC cooperation is an appropriate part of and complementary to China–EU relationships. However, this does not relieve the suspicions of the EU and some of its Western member states, particularly major powers, such as Germany and France. In fact, some European leaders and analysts have considered China’s initiative in the CEE region to be a strategy to divide and rule Europe. For example, in September 2017, Sigmar Gabriel, the then German Vice-Chancellor and Foreign Minister, called on Beijing to respect the concept of ‘one Europe’. 11 The deliberate absence of norms and values in China–CEEC cooperation, or ‘de-ideologization’ as Chinese analysts call it, has the potential to undermine the EU’s unified role of ‘Normative Power Europe’ vis-à-vis China. An even worse suspicion is that there would develop a pro-China lobby within the EU. In its most recent communication regarding EU policy on China, the European Commission strongly proposed that the cohesion and effectiveness of the EU should be maximized in coping with China. 12 It is likely that this call for cohesion and effectiveness, made to all of its member states, particularly targeted those in the CEE region.
In geo-strategic terms, China is not a priority for the CEECs. Rather, most of the CEECs are small states, with limited global visions and interests beyond their own regions. Their EU memberships have further constrained their strategic calculations. The CEECs see themselves as part of a wider Europe and therefore the EU is their first priority. They also generally welcome a strong US power and presence as the major security provider in the region. They can’t ignore the Russian factor, either. A recent study in the West suggested that Russia has implemented economic warfare in the region to restore its influence by abusing capitalism and corroding democracy in the CEECs.Reference Conley, Mina, Stefanov and Vladimirov 13 Compared with these players, China, as a new player, does not provide the CEECs with an alternative, but constitutes a valuable complementary opportunity at most. China finds itself much more comfortable strengthening its economic and institutional ties in the West Balkans, the non-EU part of the CEE region. However, conditions there are unstable and much more vulnerable to the competition of outside players. A strategic rivalry is therefore more possible in the West Balkans.
Conclusions
China has surely become much more assertive in expanding its global power, largely through a series of government-led economically orientated initiatives. Its performance in CEE, however, suggests that this will not be an easy task. China–CEEC cooperation requires the pragmatic thinking of both China and the CEECs to strengthen their economic relationships and pursue mutual benefits. There is strong political will to develop such economic relationships, not only for China but also for most of the CEECs. There have been some meaningful outcomes for both China and its partners in the CEE region. In particular, China is happy that cooperation with the CEECs has been implemented as part of its highly anticipated OBOR initiative. However, much more needs to be done before the initiative’s promises and expectations are fulfilled. To this end, a number of obstacles have to be overcome at practical, normative, and geo-political levels. An emphasis on economic benefits alone cannot solve these problems. Successful cooperation depends on careful strategic planning and, ideally, a solid foundation of common values and norms. More fundamentally, sustainable cooperation in the economic sphere ultimately relies on a dynamic market force, rather than political will alone. Indeed, China has much to learn and change before it becomes a mature global power, reaching out to faraway regions such as the CEE.
About the Author
Weiqing Song is an Associate Professor of Political Science at the University of Macau. He holds a PhD degree in political science from the University of Siena, Italy and an MA in European Studies from the University of Leuven, Belgium. His research focuses on Chinese foreign policy, particularly in its neighbourhood and with respect to global governance. He also conducts research on European politics with an emphasis on the European Union and European foreign policy. Song is the author of China’s Approach to Central Asia: the Shanghai Cooperation Organization (Routledge, June 2016) and editor of China, the European Union and International Politics of Global Governance (Palgrave Macmillan, December 2015) and of China’s Relations with Central and Eastern Europe (Routledge, 2017). Song’s articles have appeared in various international peer-reviewed academic journals and edited volumes.
