China has long tried to exert influence over Central and Eastern European countries through investment, hoping that the region would become a pivot point for Beijing to pivot to Europe. But analysis points to a lack of results in the investment arena, and China’s increasingly assertive stance in the international community is further tarnishing its image.
Lithuania on Saturday (May 22) formally announced its withdrawal from the “17+1” cooperation mechanism formed by China and 17 Central and Eastern European countries, saying it has brought no real gains and urging other members to leave as well, adding that the EU should unite to meet the Chinese challenge.
Lithuania’s move is the latest sign of deteriorating relations between China and CEE countries, but in the view of Andreea Brînză, vice president of Romania’s Asia-Pacific Institute, relations between China and most CEE countries had deteriorated before that.
There is a sense of disillusionment in the region because China’s economic promises have not been kept,” she told Voice of America. At the same time, EU-China and U.S.-China tensions have affected China’s relations with CEE countries, as some of them have decided to choose sides in this emerging conflict.”
Economic promises unfulfilled
China launched a cooperation mechanism with CEE countries in 2012, when it promised to finance the development of the CEE region. After Greece joined in 2019, the initiative absorbed a total of 12 EU member states and five Balkan countries, which are slightly less developed compared to Western European countries.
But the region quickly recognized that Beijing had failed to deliver on its promises. Data show that of the $129 billion in Chinese investment in Europe between 2000 and 2019, less than $10 billion went to Central and Eastern European countries. By contrast, Germany, Japan, South Korea and the United States are the most important investors in CEE.
At the same time, many officially announced projects have been seriously delayed or canceled, including the flagship project of the 17+1 cooperation mechanism, the Hungarian-Serbian railroad, which barely got off the ground after eight years, and Romania, which announced last year that it had canceled a deal with a Chinese company to build a nuclear power plant. .
A recent report also revealed that some officials have tried to exaggerate the impact of Chinese investments in CEE in order to cover up the lack of progress and calm national skepticism.
The report writes that CEE governments tend to paint an exaggerated picture of China’s presence in their respective countries. Official figures often include investment plans previously proposed by China but never implemented, infrastructure projects financed by Chinese loans and the results of international mergers and acquisitions.
This is largely for political reasons, as politicians on the Chinese side and in Central and Eastern Europe are interested in presenting success stories from the region to their constituents,” Tamas Matura, the report’s author and founder of the Center for Asian Studies in Central and Eastern Europe in Hungary, told Voice of America. Expectations of capital inflows from China have been very high since the cooperation began, and the actual results have been disappointing, so there is a gap that politicians are trying to fill.”
Indeed, this exaggeration has long fueled suspicions that China has succeeded in buying off CEE countries in exchange for trade and investment for political influence over Europe. But experts stress that China’s influence in CEE has never been as strong as many believe, and has been waning over the past few years.
Emilian Kavalski, a professor of China-Asia-Europe relations at Jagiellonian University in Krakow, Poland, told Voice of America, “Both the EU and China seem to be plagued by a common misconception that the participating CEE countries are allied with Beijing. The reality is much more complicated; most CEE countries are not allied with China, but rather find themselves awkwardly co-located with Beijing and trying to make the most of the opportunity. Initially, many of the participating countries were keen on Chinese investments, but when those investments failed to materialize, the annual summits turned into empty talk clubs.”
The latest “17+1” summit was held online in February after being postponed due to the outbreak of the New Coronavirus. As a testament to China’s strong commitment to the region, Chinese President Xi Jinping himself, rather than the usual Premier Li Keqiang, attended the online meeting.
On the other hand, despite China’s diplomatic efforts, Slovenia, Bulgaria, Romania, Latvia, Lithuania and Estonia sent only ministerial-level officials to the meeting.
Moving Closer to the West
The analysis also suggests that as China becomes more aggressive in its behavior on the international stage, the CEE countries will move further closer to the EU as a counterweight to China.
Sino-European relations have fallen off a cliff in the past few months. In March, after the EU joined the West in sanctioning a number of Chinese officials over human rights issues in Xinjiang, China then sanctioned a number of MEPs, European think tanks and academics. They had been active voices on human rights issues in China.
This angered even those in Europe who were neutral or moderate towards China, and negative sentiment towards China grew across the continent, culminating in the European Parliament’s high vote last week to pass a resolution freezing the China-EU Comprehensive Investment Agreement (CIA), which had been tentatively negotiated over seven years.
What is easily overlooked is that some Central and Eastern European countries are keen to defend human rights, with the Czech Republic, Slovakia, Lithuania, Latvia and Estonia among the few countries in the world with parliamentary support for the Tibetan group.
Most recently, Lithuania is considering opening an economic representation office in Taiwan to expand the country’s ties with Taiwan. Lithuanian government officials and parliamentarians have also called for support for Taiwan’s participation in the World Health Organization.
Lithuania’s decision confirms the country’s values-based foreign policy,” Valsky said. Lithuania’s departure from the 17+1 is not a surprise or a significant change and can be seen as a natural progression of a broad domestic dialogue about national identity and the role it should play in the world.”
Even for those Central and Eastern European countries that are considered pro-China, China’s closeness to them is largely based on good relations between their leaders. Budapest could reconsider its current pro-China stance if the opposition wins next May’s Hungarian elections, while the new government cabinet has already begun to revisit its huge debt from China after last August’s elections, which weakened the Socialist Democratic Party led by the president of the Republic of Montenegro.
Moreover, amidst criticism from the EU and the US over the past few years, CEE countries have become more wary of the political risks associated with their engagement with China.
While the EU accuses China of a “divide and conquer” strategy in Europe, the 17+1 mechanism does not operate as a collective, and CEE countries do not share a common position on China or China-EU relations. On the contrary, the EU has a greater influence on China-CEE relations.
Against the backdrop of heightened EU security scrutiny of foreign investment, Romania, Lithuania, Croatia and the Czech Republic are adopting varying degrees of scrutiny of Chinese investment; Poland, the Czech Republic, Romania and Estonia also plan to restrict Chinese telecom giant Huawei’s operations in their respective countries.
Matula said, “In the future, the EU’s position will carry even more weight in China-Central and Eastern Europe relations, as the region must choose between EU values and economic help and largely unfulfilled Chinese commitments.”