China’s misadventure in the region called Central and Eastern Europe

Navjit Singh | Updated: February 17, 2021, 1:54 IST

China’s misadventure in the region called Central and Eastern Europe. CEE, CEEC, 17+1.

For the first time, Chinese Communist Party premier, Xi Jinping has chaired the virtual meeting of 17+1 Summit between Central & Eastern European (CEE) countries and China, instead of his distant number two, Li Keqiang.

Chinese state media called it a “pioneering feat of great power diplomacy with Chinese characteristics”, but facts suggest otherwise. Long-delayed summit, growing division among CEE nations on Beijing’s increasing malicious geo-political activities, and frustrated CEE nations over China’s shallow promises on trade and investment are some of the instances showcasing that countries are losing confidence in China.

CEE group is facing ‘Promise fatigue’ from China on the accounts of unlevelled business playing field, and China not coming to keep up with its promises. EU claims that China may be implementing divide et impera – divide and rule – policy toward the EU through its investments in CEE nations. 12 EU nations are also a part of 17+1.

This year the summit witnessed absence from the head of states of six countries, namely Bulgaria, Estonia, Latvia, Lithuania, Romania, and Slovenia in the state-level summit which was graced by Xi himself. These countries decided to send ministers instead.

The recent 17+1 summit can be seen as a clear setback for China, which commenced with high hopes to economically develop the less-developed region of Europe against their advanced western neighbours.

Almost ten years and one pandemic later, the scholars are claiming that this region will again be the battlefield for new Cold War with the mere difference of leading countries involved. The growing scepticism towards China in CEE countries is not the entirely the result of sudden rise of expansionist China, but of failing infrastructure projects one after another in the region, China’s unkept investment promises, and the Russia factor.

This episode of another China-CEE failing relationship highlights a widening split taking place in Central and Eastern Europe where many countries have a soberer assessment of engagement with China, and are carefully positioning themselves between Beijing and Washington amid the deepening rivalry.

What is 17+1?

China-CEE or China-CEEC (Cooperation between China and Central and Eastern European Countries) is an initiative by the CCP to stimulate trade and investment relations between China and 17 countries of CEE which are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czechia, Estonia, Greece, Hungary, Latvia, Lithuania, North Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia.

The format of 17+1 (previously 16+1) mechanism was proposed almost 10 years ago, and was received with lot of enthusiasm & hope on both the sides. China, which became the world’s largest manufacturer and second largest economy, aspired to be a great power which wanted to inject capital in the CEE region to build infrastructure, revive old factories, invest in human resources, and local projects that western investors tend to overlook.

This narrative created the competition among fellow countries to become the “China’s gateway to Europe” which paved the way for China–CEE summits. The Prime Minister-level summit aimed to fill a gap of cooperation aimed to facilitate the flow of investments and trade for the economic development of CEE nations along with establishing strategic partnership between China and regional countries was inaugurated in Poland in 2012.

China always promotes bookish definition about the 17+1 concept which seems like music whenever it falls on ears, but never has articulated its purpose. The loose and undefined concepts regarding the mechanism created numerous perspectives about the ‘purpose’.

For US, 17+1 mechanism was China’s new weapon to influence geopolitics of Central and Eastern European region through proposing lofty infrastructure projects, and using its soft & hard power, together called as “Smart Power”, a term proposed by former US secretary of state, Hillary Clinton. For EU, 17+1 mechanism is formed to divide the union.

Therefore, both EU and US view the mechanism as a strategic intrusion of China into united Europe which pose serious security threats to region’s countries and their national interests. Suspicion approves when countries like Greece and Hungary, receiver of most China’s investments, have been blocking unfavourable EU resolutions on the China subject from past few years, causing fear inside EU that more countries will follow the suit.

On the contrary to above perspectives, it is just an annual summit featuring a plethora of unfulfilled promises and projects.

The CEE countries were in dire need of infrastructure and investments, and China’s intentions with 17+1 mechanism was to create an economic corridor between the China and CEE countries which would develop the region, facilitate China’s presence in the Europe and, and strengthen its bilateral connections, but China failed in juggling expectations and achievements.

The majority of Chinese investments were pouring only in six countries diplomatically close to China, namely Poland, Czech, Slovakia, Hungary, Romania, Bulgaria. This created a huge imbalance among 17 CEE countries.

Thus, the initial years of optimism changed into growing scepticism when the reality of mechanism uncovered. All those hopeful and appealing years of promises, proposals, and headlines returned back to haunt Beijing when the other countries acknowledged that investments were not arriving consistently. Discontent towards Chinese companies and regime is growing rapidly.

Chinese companies have been criticised for financing projects using Chinese loans, and employing a predominantly Chinese workforce. This causes fears about the emergence of “debt trap” policy in Europe.

Case of Serbia, Hungary, and Romania

Labelled as “Chinese highway to nowhere”, Montenegro’s European Motorway XI links the Port of Bar with Serbia, which became the first victim of debt-trap increasing its debt-to-GDP ratio to 80 percent.

Serbia, which is one of the Chinese pillars in the 17+1 community, received a series of investments in infrastructure, industry, and energy sector. Railroad between Budapest and Belgrade proved to be a landmark for 17+1. Zemun-Borca Bridge, also known as the Pupin Bridge, was constructed by China Road and Bridge Corporation, and was inaugurated by Chinese Premier Li Keqiang in 2014. The bridge was nicknamed as the ‘Friendship Bridge’ was China’s biggest investment of 260 million Euros in Europe on one project.

The project characterised China’s modus operandi regarding its investment abroad – heavy loan from a Chinese bank, a workforce which is at least half Chinese, and full involvement of Chinese companies in construction.

In energy sector, Kostolac Thermal Power Plant Station and the Smederevo Steel Plant received the Chinese investments. 

Hungary is well-known for its traditional friendship with China which facilitated such investments in the form of Budapest-Belgrade railway, and the Huawei European Supply Center.

Although Hungary has not received much foreign direct investment (FDI) from China, it boasts a lot of 'firsts' as it is the first European country to sign an intergovernmental cooperation document with China on jointly promoting the Belt and Road Initiative (BRI). The first to set up a BRI working group with China, as well as the first CEE country to establish a Renminbi (RMB) clearing bank, and issue bonds in RMB.

It is also the first CEE country to host an official agency of the Tourism Authority of China, and the first European country to implement bilingual education in Hungarian and Chinese. 

Romania was also supposed to receive an important amount of Chinese investments, but nearly all of them are stuck in negotiation or have been cancelled. The Cernavodă Nuclear Power Plant, the Rovinari Thermal Power Plant, and the Tarnita-Lapuşteşti Hydroelectric Power Plant are the three most important Chinese projects, two of which are still under negotiation. The only big Chinese investment in Romania is the Huawei Regional Support Center.

China lacked a long-term strategy for developing the CEE countries. China treated all the 17 countries as one unit – which they are definitely not – like the European single market, and considered them as monolith. It did not acknowledge their diversity of visions, policies, perspectives, or backgrounds because China entered into not-so-economically viable region to eventually just gain influence geopolitically. China’s aim was to stretch its muscles of money power to gain leverage against US in the ‘great game’.

The Russian Factor

China ignored the ‘Russian Factor’ as mostly all the countries in the CEE region have a communist past under the shadow of USSR, especially those on the eastern flank. From the security perspective, these countries fear Russia, especially after Moscow annexed Crimea back in 2014, which makes them prone to side with the United States.

Many countries did not even know the proper intentions of China regarding the 17+1 mechanism, and Beijing kept everyone in dark about the ‘purpose’ as mentioned above. Lack of communication about the goals created panic among members as the trade-war took off.

China’s malicious activities in the region, and the subsequent pandemic made 17+1 economically dead. Beijing also tried to inject with its “Vaccine diplomacy”. China simply failed to deliver on its economic, investment, and trade promises which made the 17+1 attractive in the first place, but Beijing did not whole-heartedly address this problem which increased the disappointment towards China in CEE countries. 

When launched in 2012, the 17+1 mechanism was regarded as a Chinese tool to facilitate its access to the EU market. Over time, because the mechanism has failed to bring about promised outcomes, even China’s closest CEE friends have begun to rethink their relationship with China and the United States.

The changing perspectives of some 17+1 members may assuage the EU’s concern about China attempting to divide the Union as China seems to become less important for the CEE region. At the same time, the EU is in the process of changing its voting system regarding foreign policy decisions.

If there were a New Cold War between China and the United States, many EU countries from the CEE region might take a different position. This got demonstrated when many CEE countries allied on the US’ ‘Clean Network program’ with respect to the cyber policy to safeguard the privacy and data that could compromise national security against Chinese telecommunication giant, Huawei (on its 5G global rollout).

Tensions between China and the United States will continue to deepen even if they manage to reach a trade deal in future, owing to their competing geopolitical interests. Under the US global campaign, Huawei’s technology has become central to the concern of a potential “digital iron curtain”.

China is stuck in the middle of geopolitical and military tensions between US and Russia in the region which used to known as “other side of iron curtain” which today perceive Russia as a common threat. Economic prosperity will never be prioritised over survival and security of the State in the international system, as Liberalist seems to propound, and China’s failed adventure in CEE region making prospects where countries will cut tie from Beijing.

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