FocusOSA #7: China: Foreign Affairs

The 6th annual summit of „16+1” leaders, hosting China and countries of  Central and Eastern Europe (CEE) took place in Budapest on 27 November 2017. In the statement issued after the summit, particular emphasis was placed on achieving greater synergy between EU and Chinese projects in the CEE e.g. by means of the EU-China Connectivity Platform adopted in July this year, and attempts to extend it to the Western Balkans. In the context of a heated debate on the alleged function of “16+1” as a format dividing Europe’s coherence (voiced mainly by German authorities), it is a considerable progress. Although opinions in this respect are particularly sharp in capitals of Western Europe and Washington, it is a fact that existence of the format has already contributed to the intensification of Sino–CEE contacts on an unprecedented scale, both in a multi- and bilateral formula, as well as  inside the European “sixteen”, being confirmed by a list of over 200 various co-ordinating mechanisms, conferences and meetings. Therefore, it should not come as a surprise that “16+1” raises more and more interest (and concerns) of great powers and captures attention of the world’s media, which seem to have ignored or deprecated the meaning of this co-operation for a long time. 

In the document published after the summit in Budapest, as was the case of last year’s Riga statement, China voiced its support for Three Seas Initiative and the extension of Budapest-Belgrade railway connection with ports of Albania and Montenegro. It is the Western Balkans that appear to be the greatest beneficiary of Beijing’s offer addressed to the CEE in 2012. Most of the declared credit lines amounting to $10bn went to south-western Europe, particularly to the countries which were not bound by the EU law and regulations of the public procurement market. An instructive example in this respect is a project of modernization of the railway connection between capitals of Hungary and Serbia which, according to Viktor Orban’s claims, will finally enter the execution phase. The beginning of this China’s flagship infrastructural investment in Europe has been postponed many times since 2015 due to EU’s doubts concerning unclear financing methods and breaches of public procurement regulations on the Hungarian side of the project. Apart from legal conditions and the fact that EU funds, usually given in a form of grants, are simply cheaper for the EU part of the “16”, the factor affecting absorption of Chinese loans and credits by the Western Balkans was the fact that such countries as Serbia had very well defined goals concerning the Sino-CEE initiative from its very beginning. During the inauguration of the format in 2012, Serbia presented 15 (!) ready projects to China. Estonia and Latvia as transit countries have been also actively developing their infrastructural co-operation with China trying to turn losses after the sanctions imposed on Russia to their advantage. It ought to be noted that due to restrictions in transport and logistics Latvia loses 8% of its GDP annually.

Within five years since the establishment of the format, China has been enjoying particularly good relations with the most ‘revolving’ countries of CEE i.e. Hungary and Serbia (to some extent following the diplomatic practice of Yugoslavia); both demonstrating quite a sceptical attitude to the shape of the international order. The Western Balkans, labelled by many in the Western hemisphere as “a sick man of Europe”, are clearly frustrated with the transformation process, the side-effect of which is a high unemployment rate and depopulation. For Serbia, aspiring to EU structures, China is also an important pillar of foreign policy which generates measurable effects. The Chinese have built the first bridge on the Danube in seven decades, and in November started construction of a coal power plant in Kostelec – the first installation of this type in the Balkans over 30 years. Other projects co-financed by China in Serbia include transport infrastructure connected with Corridor 10 and 11 (e.g. Belgrad-Bar motorway), Belgrade motorway by-pass and already mentioned modernization of railway to Budapest. China enjoys considerable popularity in Serbia also thanks to the acquisition of ironworks in Smederevo, which apart from great propaganda significance (replacement of an American investor) helped to save 5,000 jobs. Yet one should take into account that this investment is slightly controversial in China, which itself has to cope with the problem of steel overproduction and the necessity to cut jobs in its metallurgical bases. Therefore, there are opinions voiced by some Chinese researchers indicating the need of slowing down the pace of economic involvement worldwide, which on the one hand leads to increasing risk for Chinese business (Libya, Iraq), and on the other hand, directs attention and resources away from solving internal problems, the list of which – as indicated by Xi Jinping at the 19th National Congress – is long.

In the statement concluding the summit, a “support for G20 consensus from Hangzhou” is also mentioned, in accordance with Beijing’s perception of Central and Eastern Europe in the perspective of the global South. Motives that can be attributed to the developing countries’ rhetoric also appeared in Viktor Orban’s speech, who stated that “16+1” platform, as an element of China’s global strategy within the framework of “Belt and Road”, offers a new approach in international relations, not dividing its subjects into “teachers and students, but creating foundations of mutual respect and benefits instead”. Earlier in October, President of Serbia and the leader of the ruling-party SPS, Aleksandr Vučić, declared the will to tighten relations with the CPC and follow Chinese developmental solutions.

The forum, as expected, turned out to be an occasion for the hosts to emphasise the significance of their relations with China. The minister of Foreign Affairs and Trade, Péter Szijjártó, talked about Hungarian export boom to China (in the first months of this year an increase of 26%, last year an increase of 25%), which means that Hungary may become a leader in this respect in the whole Central Europe. Premier Orban, in turn, praised the co-operation with China as a “win-win situation”, declaring that Central and Eastern Europe have become the most competitive investment environment on the continent. However, the Hungarian leader’s opinion should be confronted with data, according to an old Chinese proverb: “to seek the truth from the facts”. And those do not seem to be particularly optimistic.