This briefing paper summarizes the views and comments of participants during the first China Observers in Central and Eastern Europe (CHOICE) International Working Seminar held on November 20-21, 2018, in Prague, Czech Republic (click here to download the text in pdf).

The event constituted of China experts and foreign policy practitioners[ from Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovenia, and observers and contributors from Brussels and Paris. Their aim was to discuss China’s involvement – economic, political or otherwise – in each of their countries, and help foster the region-wide debate on China’s presence and the real intent and activities of the 16+1 Initiative.

The event was organized by the Association for International Affairs (AMO), Czech Republic, as a part of ChinfluenCE, an international project mapping Chinese political and economic influence. The ChinfluenCE project and its extension in the form of a CHOICE platform are supported by the National Endowment for Democracy.

Introduction

In the second decade of the 21st century,
Central and Eastern Europe (CEE) has experienced increased influence of foreign
powers on its territory. Although China is a relative newcomer to the region in
both political and economic terms, its growing economic weight and resulting
clout makes it a serious regional contender whose influence on the CEE
countries’ politics and policies should not be underestimated. Changing
geopolitical contours, rise of political parties promoting illiberal ideologies
and shifting global economic balance all give China-established initiatives like
16+1 and Belt and Road (BRI) an extra advantage in penetrating the region both
economically and politically. Yet, in comparison to Russia’s presence, which
has been studied in greater detail, China’s actions and resulting influence in
CEE countries go largely unnoticed in the mainstream research arena.

The
China Observers in Central and Eastern Europe (CHOICE)
platform aims to counter this trend by establishing a consortium for
independent monitoring, evaluation and analysis of the actions and influence of
China in Central and Eastern European members of the China-proposed and
China-led 16+1 Initiative. Formed by local NGO practitioners, think tankers,
university experts on China and foreign policy practitioners, CHOICE consortium aims to
provide a platform for discussions and information sharing regarding best
practices and lessons learned from various China-related projects and
activities conducted by its members.

The goal of CHOICE is to critically assess
and analytically dissect 16+1, Belt and Road and other China-led initiatives in
Europe. It strives to construct an inclusive, multilateral regional strategy
which the 16 CEE countries can use to procure the maximum amount of benefits
from the 16+1 platform while simultaneously protecting their national interests,
safeguarding their values and maintaining the basic principles of their foreign
policies.

The International Working Seminar in Prague
consisted of a CHOICE platform closed-door meeting in concordance with the
Chatham House Rule. The meeting asked the sensitive question of what China
wants in Central and Eastern Europe, before turning to a proactive search of
what Central and Eastern European countries want from China

Six Years After Inception: Evaluation of the 16+1 Platform

The international workshop began with each
participant summarizing and assessing relations between their home country and
China. This was followed by the hosting Czech representative elaborating on
Czech-China relations. The first issue addressed was the U-turn in Czech foreign policy
towards China, which was described as a joint effort
pushed by several representatives of political parties (Czech Social Democratic
Party – ČSSD, Communist Party of Bohemia and Moravia – KSČM and a few members
of the Civic Democratic Party – ODS) and the Czech President Miloš Zeman. This
warming of relations was motivated by the political and economic interests of
several political elites, rather than a serious economic analysis of the
country’s needs. This was displayed in a map of elite connections among
politicians, lobby groups, businessmen, etc. which was prepared by ChinfluenCE
and revealed to the Czech and foreign public.

If
the Czech Republic continues its economic engagement with China at this pace,
however, the short and mid-term economic impact will still be negligible in
comparison to financial support and benefits coming from the European Union. While certain industries benefit from the officially announced
‘restart of the Czech-China relations’, it is minimal on the macroeconomic
scale. Though the Czech Republic increased exports of Czech goods to China,
China simultaneously increased its exports to Czechia, resulting in a
continuous trade imbalance. The Czech Republic is, and for the foreseeable
future will be, dependent on the German market and will have a West-oriented
economic outlook, despite promises of investment and loans coming from the
East. Non-West alternatives, such as China and Russia, are raised due to
economic interests of certain players and/or represent a card that the
leadership can play against Brussels.

The Czech case of elite political ties
dictating economic policy preferences is not unique among CEE countries. Bosnia, Serbia, Romania
and Hungary have all reported similar circumstances
with China
using friends in high places. China placed a
high-profile ambassador in Bosnia who has been actively fostering relationships
with local elites, giving her access to important information. In Serbia, 2017
presidential candidate Vuk Jeremić was reportedly supported financially for at
least €1.3M from Chinese donors in his presidential campaign. Romanian Prime
Minister Victor Ponta was another high-profile elite who, like Czech President
Miloš Zeman, showed heavy favoritism towards China and his term in power
coincided with a sharp increase in Chinese investment in Romania. Meanwhile,
Hungary’s Viktor Orbán has openly claimed that Hungary has ‘friends in the
East’ that he can turn to if he continues to be criticized by the West. Other
countries, such as Croatia
and post-Ponta Romania, are more concerned with striking a balance between deepening relations with China while avoiding falling out
of favor with the West.

There
is a significant amount of discontent expressed among many countries regarding
the EU’s handling of, and interaction with, the 16+1 platform and individual
nations within it. Several participants suggested there
were double standards employed by Western European states (namely Germany),
when assessing cooperation between China and Central and Eastern Europe. What
might be acceptable for older member states, might not be considered tolerable
behavior by new or accessing members, who are already frustrated by the absence
of a date for their accession to the EU. Moreover, China has often provided necessary
investment where the EU was unable or unwilling to, or where the EU was taking
too long to conclude a negotiation. There are numerous cases where Chinese
investment is simply offered at a lower price. This is particularly notable
among Balkan nations, who – in the words of one of the participants – “would
rather receive investment from the EU, yet when that investment does not
eventuate, they are forced to take Chinese money so they can provide their
citizens with much-needed development”, particularly in transport
infrastructure related projects.

Representatives of CEE countries expressed a desire to receive Chinese investment, however they often differed in their preferences of the type of investment, what it should look like, and where the investment should go. Furthermore, the history of the platform demonstrates that execution of Chinese investment in the way these countries would like is more often an idyllic fantasy than a reality. The first problem that many CEE countries encountered was the situation where China was quick to make grand promises of widespread investment, thus elevating hopes (perhaps CEE countries allowed themselves to become unrealistically optimistic), yet failed to deliver on many of these promises. This has led to much frustration among CEE countries. Macedonia, for example, was lobbying to become a hub for investment in tourism, yet received nothing substantial. Bulgaria began preparing to become a transport hub through which all of China’s overland goods would flow to the European market, but these plans fell through when China pulled out of the deal. Aside from one standout investment, the Baltic states reported negligible amounts of Chinese foreign direct investment. Lithuania was promised a hundred million EUR for 60 years, however they have seen little of it and are unsure about what will actually materialize.

Furthermore, there was a notable number of
complaints regarding the process, speed and quality of projects that were
followed through on. In Macedonia, Chinese attempts to
build two highways ended up in a scandal when wiretapped conversations
allegedly showed the contract to Chinese company Sinohydro was signed by the
former ruling party’s officials, despite another company offering a lower bid.
Problems with Chinese-built infrastructure are also occurring in Montenegro, as
a Chinese highway maintenance project has reportedly begun to collapse.
Moreover, there has been a lack of transparency in the deal-making and
construction processes. Serbians complained that they were completely in the
dark when China built the Pupin Bridge over the Danube in Belgrade. Chinese
workers were brought in for the project and no media were allowed on site.
Croatia is also experiencing uncertainty about quality and time surrounding a contract
for the Pelješac bridge signed in April 2018 that was promised to be finished
in 36 months.

It was noted that there might be two possible explanations for some of these problems: 1. a lack of diversification with
Chinese investment and, 2. China’s preferences are not
compatible with the drivers of CEE economies. These
explanations are supported by another claim that, in order for China to learn
from mistakes and improve at these projects, it must venture out from the
rigidities of its preferences. China could, for example, involve local
companies more, an action which would increase project transparency, provide
employment to locals and improve China’s public approval.

Despite these pitfalls, there was a general acknowledgement
that some of the problems with infrastructure rollouts have occurred because of
failings on both sides. It was accepted that the
structure of many of these states, such as issues with ruling elites,
contributed to this problem by not addressing an inadequacy of absorption capabilities.
Macedonia and Montenegro were prime examples.

Another major concern has been the lack of greenfield or
brownfield investment from China. Countries are looking
for these types of investments because they create tangible effects on their
economies in areas such as employment and growth. Chinese investors are more
interested in buying, obtaining management skills and developing brands, than
starting new companies which would benefit local employment. China is well
known for financing infrastructure on the condition that they employ Chinese
workers rather than local ones – Macedonia serves, once again, as a prime
example. Poland also desires greenfield investment but has received nothing
substantial. There are also issues concerning the unmatchable prices that China
has been offering to the CEE countries, with reports claiming that the only
reason China’s prices are lower is due to use of dumping strategies. In Poland,
a Chinese bid for a highway and a garbage factory was denied by the national
appeal chamber because the price was deemed too low to be reasonable.

Despite the common problems with Chinese
investment and infrastructure projects, there are some actors in CEE who are
satisfied with their Chinese investment and consider it a success. It was noted that China offers extremely low prices that are
unmatched by any other global actor. As the participant from Serbia mentioned,
China is regarded relatively highly by the Serbian government and business
sector. They have developed a good impression from projects like the Pupin
Bridge which is finished and operating without issue. Hungary’s perception of
China is also good; it has no issue cooperating with China and employs a policy
that was described as pragmatic-economic. In Estonia, the Chinese ride-sharing
company Didi invested € 85 million into the local taxi booking start-up Taxify,
positively impacting this industry. Finally, being a recent player and situated
far from Europe,
China does not carry the ethnic affiliations that some other investors may. This might be true in Bosnia, where China is the only investment
source that is not tied to an ethnic base and is thus generally perceived as “a
friendly superpower”.

Discussing Future of 16+1: Seven Possible Scenarios

In the
second part of the meeting, the organizers presented the panel with seven
hypothetical future scenarios of the 16+1 platform and participants were asked
to choose which they believed was most likely and/or most desirable. It then
turned into an insightful discussion about whether there is any hope for the
platform to benefit CEE and, if so, what conditions would need to change for
these benefits to be realized.

The scenarios put forward were:

  1. Gradual dissolution – the platform will dissolve slowly as neither side is interested in cooperation or continuation.
  2. Merger – the platform will be incorporated into BRI, where the countries will be on par with each other and CEE countries will lose their competitive advantage.
  3. Empty shell – the platform will be kept alive, but bilateral relations will be preferred (essentially similar to the current arrangement).
  4. United we stand – the 16+1 evolves into a fully-fledged platform with the full commitment, cooperation and participation of all 16 countries.
  5. A platform of platforms – the 16 countries form smaller coalitions with other like-minded countries within the platform, increasing the speed of cooperation.
  6. Europeanization – the platform expands to include more EU countries and becomes the primary negotiating platform between Europe and China.
  7. Counterbalance to the EU – the platform is used to increase pressure on the EU to give CEE countries more autonomy in dealing with China.

The ‘Empty Shell’ scenario was resoundingly
chosen as the most likely. There is a belief that China will continue to develop
bilateral relations with CEE countries while using the 16+1 platform as a
convenient way to save time by conducting all these negotiations in one place
at one time, every year. Serbian leaders place very
little value in the platform as they see their relationship with China in
bilateral terms. Hungarian leaders also believe that the platform is
essentially a group of bilateral arrangements.

Others
argue that the platform has been an empty shell (dead letter institution) since
the very beginning. They believe that from the start
neither China nor Europe knew what the platform really was, and this resulted in the
six-year absence of virtually any tangible benefits.
Some note that the platform is designed so that it will never fail, however the
extent to which it is alive is another question. In the Baltics, Estonian
officials suspect that the value China holds of the platform is decreasing, as
they have observed a drastic decline in Chinese officials’ communicative
preparation with Estonia before recent platform summits compared to that of
earlier years.

Another criticism of the platform’s
effectiveness focuses on the lack
of policy and planning between the EU and 16+1. It is
believed that this lack of cohesion with the EU leaves CEE in a position with
little leverage over China and therefore, the formation of a partnership with
the EU is vital for the future of the platform. EU involvement could also provide the
helping hand CEE needs to pressure China to play by the rules when dealing with
smaller nations on issues such as transparency and legal regulations. Interestingly, this might actually be what China wants, as there
was a
suggestion that China is using the platform to form closer links to European
countries like Germany. However, closer EU engagement
would have to arrive without the perceived double standards addressed earlier,
otherwise it is unlikely many countries would be interested. Several parties also noted
that they could see the platform merge into the BRI as it would be easier for China
to sustain one format rather than two. This possibility was even preferred by a
minority of members.

One
of the benefits of 16+1, according to most members, was the opportunity it
gave smaller countries to have a ‘seat at the table’ to negotiate with China. However, the experience from the past six years shows that merely
having this seat does not guarantee success. Part of the problem is the varying
and diverse interests between member states. This roadblock was universally
acknowledged and led to a general agreement that active cohesiveness by all 16
countries was necessary for the development of the platform. For example, the platform might make some progress if every nation
demanded that for any infrastructure project to be accepted, EU standards needed
to be adhered to. However, it was mentioned that if governments were left to
their own devices, they would lead each other to a race to the bottom regarding
regulations.

A
strategy designed to maximize negotiation and coordination suggested that every
CEE country should attempt to put some significant meaning into the platform. Finally, it was agreed that more effort should be allocated
towards considering what China’s true intentions behind its involvement in the
platform were.

The briefing paper is available for download here.

Author Details
Ivana Karásková is the founder and coordinator of CHOICE and China Research Fellow at the Association for International Affairs in Prague. She pursues her PhD at the Faculty of Social Sciences, Charles University, where she also lectures on Chinese foreign policy, China’s geopolitics and security in Northeast Asia. Josh Hickman works at the Association for International Affairs (AMO)’s project ChinfluenCE an international project mapping Chinese influence in Central and Eastern Europe. Josh studies at the Australian National University where he focuses on the rise of China and its global impact.
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Ivana Karásková is the founder and coordinator of CHOICE and China Research Fellow at the Association for International Affairs in Prague. She pursues her PhD at the Faculty of Social Sciences, Charles University, where she also lectures on Chinese foreign policy, China’s geopolitics and security in Northeast Asia. Josh Hickman works at the Association for International Affairs (AMO)’s project ChinfluenCE an international project mapping Chinese influence in Central and Eastern Europe. Josh studies at the Australian National University where he focuses on the rise of China and its global impact.