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The China/Central and Eastern Europe summit: a new vision of cooperation, old instruments

Analyses
2015-12-02

On 22-24 November, the fourth summit between China and the countries of Central and Eastern Europe in the ‘16+1’ formula was held. It saw the adoption of a plan for cooperation in 2016 (the ‘Suzhou Guidelines’), as well as a medium-term plan for cooperation up to 2020. The development of transport infrastructure in the region received the bulk of attention at the summit. The list of areas of cooperation was also extended: the importance of agriculture and logistics increased, and plans for closer industrial cooperation were announced. Beijing is trying to synchronise its cooperation with the CEE countries with the concept of the ‘New Silk Road’ as well as the Thirteenth Five-Year Plan, that is, with Chinese priorities in both foreign and domestic policy. At the same time, however, there has been no qualitative change in the instruments for cooperation, including the financial tools, which casts doubt on the prospects for the ambitious targets which were set.

 

The CEE countries’ role in the New Silk Road project

From China’s point of view, Central and Eastern Europe plays a specific role in the New Silk Road project, which envisages the construction of a number of transport corridors linking China with Europe. Three potential corridors to Western Europe pass through the CEE region: from the Greek ports via the countries of Southern Europe and the western Balkans; via Poland; and via the Baltic States. The construction of infrastructure connections took centre stage in both the ‘Suzhou Guidelines’ and the medium-term cooperation plan. The key objectives include the expansion of transport links across Central and Eastern Europe, including road, rail, aviation, ports, telecommunications and pipeline infrastructures. As part of the ‘cooperation between three port regions’, ports on the Baltic, Adriatic and Black Sea are to be expanded. Members of the ‘16+1’ also pledged to increase rail container flows and expand their logistical bases.

On the sidelines of the summit in Suzhou, additional agreements on transport infrastructure in the Western Balkans were signed. China concluded an intergovernmental agreement with Serbia and Hungary which gave detail to a previous, more general agreement in December 2014 to modernise the Belgrade-Budapest railway. The continuation of work to simplify customs procedures between China and Hungary, Serbia & Macedonia was also announced. It was declared at the summit that Serbia will coordinate cooperation in the field of transport and infrastructure by creating an association open to all interested parties. For Belgrade, cooperation with China is of priority importance in the development of transnational transport networks, which will enable Serbia to play an important role in the pan-European transport network. The meeting in Suzhou was also attended by representatives of Austria and Greece, the countries most interested in the expansion of the New Silk Road’s southern route into Europe.

Meanwhile, China has intensified its action to open up a northern branch of the New Silk Road via the Baltic states. In Suzhou, the development of Chinese-Latvian transportation and logistics projects was discussed (cooperation between ports, expansion of railways, a new air route between Riga and Chengdu), associated with the possibility of creating a transport corridor between Asia and Northern Europe with Latvia’s participation. A logistics and transport centre is expected to be created in Riga in 2016, which is intended to act as a logistics and transit cooperation HQ for China and the sixteen states.

 

China’s policy of rewards: the case of Latvia

The biggest surprise of the summit was the granting to Latvia of the right to host the next meeting in 2016; the Czech Republic, in particular, had led an intensive lobbying campaign in China to hold the next summit. Latvia has become China’s most important partner in the Baltic region, not only because of its economic profile as a transit country (with its well-developed ports and terminals, and its railways linking Latvia with Asia via Russia). Latvia also provides foreign investors with good financial conditions, and can offer some of them permanent residence on its territory (with access to the Schengen area); many Chinese investors have already taken advantage of this. Latvia can also ensure China good cooperation with Western partners (the EU, the Nordic region) but also has a tradition of cooperation with key countries in Asia, including in particular Kazakhstan, something which would significantly facilitate the construction of transit corridors.

The other countries in the region, Estonia and Lithuania, could offer China similar conditions, although only Latvia has adopted a strategy of building relations with Beijing without referring to human rights violations in China. Bilateral relations between China and Estonia had been developing well until 2011, when the country’s authorities hosted the Dalai Lama; China then halted the well-advanced procedure for the certification of Estonian food products on the Chinese market. The President of Lithuania met the Dalai Lama in 2013, to which China also reacted by freezing bilateral relations. The situation in Crimea and the mutual economic sanctions between the EU and Russia forced Baltic agricultural producers to seek new markets, and the large and stable Chinese market has become important and promising for them. This has resulted in Tallinn and Vilnius revising their policies towards China, and the adoption of the policy pursued by Latvia (whose products have obtained the relevant certificates) of not interfering in China’s internal policies, and agreeing to cooperate on terms set by Beijing. China appreciates this change in the other two countries’ policies, and is now increasingly open to economic cooperation with Vilnius and Tallinn. In doing so it is slowly replacing Russia, which has so far been the Baltic states’ traditional partner.

 

The long-term vision of cooperation between China and the CEE region

One of the principal aims underlying China’s development of the ‘16+1’ format is to increase its soft power in Europe. This objective will be served by a range of activities in the field of public diplomacy which were proposed in the documents adopted in Suzhou. These include the organisation of joint projects in the fields of education, culture and the arts. China is also promoting cooperation between think-tanks, journalists and Sinologists. Beijing is aiming not only to build up its positive image in Europe, but also at trying to forestall any potential criticism that might arise in response to the Communist Party’s increasing control over the public space in China.

At the same time, China is trying to ensure that the ‘16+1’ format is not perceived by the European Union’s ‘old’ members and Brussels as an attempt to undermine European unity. The meeting in Suzhou was attended by representatives of the EU and the European Bank for Reconstruction and Development. Moreover, the speech by Prime Minister Li Keqiang expressed a readiness to synchronise the ‘16+1’s activities with key long-term EU strategies and Chinese-EU plans for cooperation, such as the China-EU Strategic Agenda for 2020, and the Investment Plan for Europe (the Juncker plan). This fits in with the Chinese desire to integrate the ‘16+1’ into a wider framework of cooperation with the EU, which could have synergic effects (including in the field of infrastructure development), and neutralise potential criticism from some EU capitals and institutions.

A qualitatively new step by China’s side is the attempt to synchronise cooperation in the ‘16+1’ format with China’s Thirteenth Five-Year Plan and long-term planning. The format for development presented in the medium-term agenda has been largely subordinated to the logic of China’s internal reforms, which are aimed at changing the country’s economic model and creating a society of moderate prosperity by 2020, as well as to the plan to expand transport links between the EU and China. In his speech, Premier Li Keqiang directly highlighted the opportunities flowing from synchronising the development policies of the region’s countries with China’s own development strategy, of which the ‘16+1’ format is to be an instrument. This means a fundamental change in China’s approach to Central and Eastern Europe. One way to overcome a major constraint for Chinese initiatives, namely their lack of adaptability to the economic realities of countries in the region, is to actively remodel their economic structures and strategies. This vision is reflected in the list of areas for cooperation which have been identified as priorities for the further development of the ‘16+1’ format. One important area for ​​cooperation, which only emerged at the Suzhou summit, is the development of industrial capabilities to manufacture the equipment necessary for the development of infrastructure and transportation, including equipment for power and construction, rail construction, equipment for the manufacture of ships, aircraft and cars, as well as chemicals, petrochemicals, steel and construction materials. Sectors related to the development of infrastructure and transportation will likely be one of the priorities of the Thirteenth Five-Year Plan, which may open up new possibilities for cooperation between enterprises in Central and Eastern Europe and Chinese business.

 

Prospects for implementation

China has presented a far-reaching vision of cooperation with the region in infrastructure, industry and agriculture, taking a step toward shaping the economic structure of the region and giving it a vision of development. At the same time, however, China did not make any qualitative change in the instruments at the disposal of the ‘16+1’; it merely announced the creation of new models of financing, and invited more Chinese and international financial institutions, including China’s largest bank ICBC and the Silk Road Fund, to engage with the region. At the same time, Prime Minister Li stressed that any preferential conditions would be linked to the purchase of goods and services from Chinese companies. In this situation, the implementation of China’s new strategy may face problems similar to those seen in recent years, i.e. questions related to the financing, coordination and attitudes of EU institutions and member states, and to EU regulations. In a situation where the ‘16+1’s multilateral instruments do not fulfil their role, there could be a boost in the significance of bilateral ties, or of instruments outside the format, such as the New Silk Road Fund.

 

Map

New Silk Road

 

Appendix

The ‘16+1’ format

During the inauguration of the ‘16+1’ format at the Warsaw summit in 2012, China presented its own definition of Central and Eastern Europe, covering 16 countries of the former communist bloc: Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Slovenia, Croatia, Serbia, Bosnia and Herzegovina, Montenegro, Albania and Macedonia. Thus, the Chinese concept of Central and Eastern Europe includes both EU countries and those Western Balkan countries aspiring to join the EU, while excluding other countries in the region, such as Belarus, Ukraine and Austria.