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September 15, 2019

September 11, 2019

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China’s Policies in Eastern Europe: the “16+1 Initiative”

April 18, 2018

Accession to the European Union has stimulated economic and political development in Central and Eastern European countries. However, especially after the financial and refugee crises, fluctuations occurred. Different voices started arising: Euroscepticism has spread at an increasing pace during past years in the region. China, the rising power of Asia, did not miss this opportunity and took advantage of it to launch a series of projects.

 

With the 16+1 initiative, started a couple years ago, China found a profitable market for its capitals: investments by economic powers capable of speeding up infrastructural and economic progress are warmly welcome in Eastern Europe. This was – and still is – a significant action that could actually produce effects outside Central and Eastern Europe. In fact, the project could give China and the 16 countries involved a trump card for the negotiations with the EU on several different issues. Thus, the 16+1 initiative shall be well-examined and fully understood in order to prevent future risks that the European Union might face.

 

At the economic level, improved relationships between China and Eastern Europe have big returns for both sides. Targeted countries (namely Hungary, Bulgaria, Romania, Poland, Bosnia and Herzegovina, Serbia, Croatia, Slovenia, Slovakia, Albania, Macedonia, Montenegro, Czech Republic, Lithuania, Latvia and Estonia) are less developed and do not have much economic power compared to the big Western European countries: a brand new and consistent investment plan by China is very welcomed. China’s ability to finance and build roads, railways, power stations and other infrastructure is what poor countries need. China makes big promises in this respect, gaining their trust on the economic ground. Even though most of the promises are not realised yet, some concrete steps have been undertaken. For example, Serbia, with whom China announced a “comprehensive strategic partnership” and “all-weather friendship”, received an estimated $1.9 billion infrastructure investment plan. Poland launched the “Go China” strategy aimed at incentivising Polish entrepreneurs to cooperate with Chinese business partners. Hungary, with whom China officially has a “high level of mutual trust”, has been promised an estimated $1.5 billion. The Czech president Milos Zeman described his country as “a gateway or the People’s Republic of China to the EU”. In addition to these steps, Viktor Orban, the Hungarian prime minister and one of the biggest supporters of China in Europe, said “The world economy’s center of gravity is shifting from west to east; while there is still some denial of this in the western world, that denial does not seem to be reasonable”. He openly stated that Hungary is giving priority to Chinese investments in the country.

 

From China’s point of view, the project is way beyond just contributing to these 16 countries’ economic progress. Going back to early 2000s, China’s entry into the World Trade Organisation (WTO) was a milestone for the country’s foreign trade policy. In 2002, with the introduction of the “Go Global” strategy, the government encouraged firms to explore the global market. Later on, in a very short period of time, China became an economic power in the Pacific by exploiting its potential, getting ready to compete with world powers. During the 2009 global financial crisis, China’s foreign trade slowed down. Still, negative effects on its economy were small compared to other countries. China took advantage of this scenario and during the post-crisis period, it steered its foreign strategy to Central and Eastern European Countries(CEEC) which were still suffering from the financial crises. China saw this situation as an opportunity to boost trade and investment ties with its former socialist allies. Furthermore, with the 16+1 initiative, China has been trying to expand the One Belt, One Road (OBOR) Initiative to Eastern European markets. The OBOR Initiative focuses on connectivity and cooperation between Eurasian countries. It is crucial for China’s global affairs strategy in order to have a China-centered trading network. Beijing’s One Belt, One Road initiative, in fact, could be the underlying rational of China’s infrastructural investment plan in CEEC.

 

Apart from economic goals, China has also political objectives. The 16+1 scheme does not allow its members to function as a regional bloc; rather, it organises 16 bilateral relationships with Beijing. Following this bilateral partnership strategy, it is easier for Beijing to implement the China-centric system. In fact, China creates some kind of a “competition” amongst countries to have more investment, putting China in a stronger bargaining position. The directives of these bilateral partnerships come from Beijing, with the secretariat and administrative staff being based in China’s Ministry of Foreign Affairs. This strategy puts the CEEC in a “recipient” position of the policies developed in Beijing, allowing China to use its ties for political ends. Examples of such dynamics can be observed during the 16+1 summit in 2016 in Riga: Li Keqiang invited the governments of 16+1 to collaborate on political issues and maintain regional stability and world peace. In addition, during an interview, Czech president Zeman declared that the Czech Republic had previously been too submissive to Brussels and cast the new partnership with China as a sign that his country was becoming fully independent again. Former Serbian president Tomislav Nikolic took a similar approach and declared that Serbia (which aspires to join the EU) as a free country and therefore he is not afraid to have a partnership with China.

 

Following these news, the EU started concerning about the collaboration between CEEC and China on two main points. First, there is the risk that the 16 countries raise their voices to negotiate positions against Brussels, maybe exploiting their stronger ties with China in order to receive more investments from EU. The second concern might be even tougher: by drawing relatively weaker countries by its side, China may aim to create an alternative pole composed of Eastern European countries. This could weaken weaken EU’s common China policy, undermining its effectiveness in relations with its second-largest trade partner. On this issue, Sigmar Gabriel (the former German vice-chancellor and foreign minister) called on Beijing to respect the concept of “one Europe”, adding: “If we do not succeed, for example, in developing a single strategy towards China, then China will succeed in dividing Europe.” In fact, the potential impacts of Beijing’s influence became clear when EU debated how to respond to China’s claims to maritime rights and resources in the South China Sea, judged were incompatible with international law. According to European diplomats, after three days of difficult talks among EU’s 28 members, the opposition (primarily Hungary and Greece) succeeded in weakening the statement to the extent that it did not mention China. The union is worried about the potential impact of the 16+1 initiative on future EU votes on similar issues. There are 11 EU members in the 16+1 initiative. Adding two more member states to the initiative, the block of 13 would be enough to defeat EU measures decided under qualified majority voting. Also, some controversies  that occurred during important projects (such as Hungary’s failure to open the high-speed rail line from Belgrade to Budapest, or Macedonia’s transport and Communication Ministry blocking the completion of highway amid allegations causing a huge budget loss) have made the EU become uncomfortable and triggered investigations on whether these projects violated the EU laws.

 

China’s latest strategy in CEEC has not been at the top of EU’s agenda so far - due to abundance of problematic matters – but it is a crucial issue that might negatively affect the future of the Union. It shall be analysed carefully in order to be able to compete with economic giants in this intercontinental trade race. This is another important problem in this stressful period for the EU but by cooperation between Member States and following a single strategy, it is a challenge that could be handled before turning into a threatening problem.

 

 

 

 

 

 

 

 

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