October 3, 2014, by editor
Perspectives on CEE-China Cooperation
Written by Dominik Mierzejewski.
There is a common perception that China’s policy towards the European Union is largely based on bilateral relations with member states. Relations between Beijing and Brussels are centred around the EU-China Summits and a strategic partnership agreement signed between the two sides in 2003. However China’s new 16+1 initiative aimed at Central and Eastern European (CEE) countries has caught the attention of the very institutions that the initiative bypassed. Why might this formula be an interesting case study? What intentions lie behind the scenes? To what extent may China play a constructive/deconstructive role in the region? Moreover, from the EU’s foreign policy perspective, should China’s activities in its eastern neighbourhood be more closely watched?
How does and what does China play for the CEE in Europe? First, China’s foreign policy seems to be still based on Deng Xiaoping’s principle of “crossing the river by feeling the stones”. The 16+1 formula of CCE-China relations is comparable to other similar formulas, for example, the Lusophone countries plus China forum. By examining the form of its relations with these states, and other groupings like the China-Latin America Permanent Forum, China gains experience on how to deal with particular groups of countries. More to the point, China’s decision to open Secretariatsshould be viewed as coordinative bodies within the decision making process of China’s foreign policy. The increasing number of interest groups such as state-owned enterprises (SOEs), local governments and private entrepreneurs acting outside China’s borders has become a challenge for Beijing to control.
The second Beijing perspective should be in the understanding of the differences in governance between EU members and non-member states. This will serve as a comparative case study of investment in the EU and it’s neighbourhood in the Western Balkans. China’s relations with the former Yugoslavia during the Cold War were one of the most important in the former Communist bloc. Given this history, and China’s contemporary interests, the Western Balkans might be perceived as an entrance point to the EU market. One can draw attention to the joint project between Serbia and Hungary sponsored by China. Due to its overproduction of steel (200 million tonnes a year) China will try to invest in a high-speed railway between Belgrade and Budapest. An interesting point was made by PM Wen Jiabao in 2011 when he stated that Central Europe will play a “bridgehead” (桥头堡) in the expansion of Chinese companies in Europe. Even at local government levels of cooperation, Chinese delegations use this expression to describe the role of particular regions in China’s foreign policy in CEE countries.
Through the 16+1 Beijing hastried to build a platform for comprehensive relations with CEE states. In September 2014, the China-CEE Countries Education Policy Dialogue was convened in Tianjin. As mentioned by Vice Minister of Foreign Affairs Wang Chao, responsible for China-CEE policy cooperation, the second important pillar for China is laying the foundation for a way of diversifying its investment policy. In similar fashion to the education forum, an investment forum was held in Ningbo (Zhejiang province) in June 2014. As supported by Minister of Trade Gao Hucheng, within the global economy there are places of turmoil and instability, however, relations between CEE countries and China remain stable. What should be noticed is that he also highlighted that “the level of development of China and CEE countries is close and both sides are at the key period of their transformations.”This assumption implies that China is interested in post-socialist development in Central and Eastern Europe. A notable point of interest is that the majority of Chinese researchers involved in Central European studies are interested not only in economic transformation, but also in political movements such as the Polish Solidarity Movement in the 1980s or minority problems like ethnic conflict in the former Yugoslavia in the 1990s.
Shared opinion within Central and Eastern European countries suggests the perception that China will be the number one economy in the world and China’s investments (green field or brown field), acquisitions or other types of business activities will sooner or later be profitable. The EU members of 16+1 assured Brussels that all such activities will be conducted according to regulations and standards laid out by the European Commission. However, the problem within this formula is that it is a regional grouping consisting of EU members, and non-EU members (Bosnia-Herzegovina, Serbia, Ukraine, Moldova and Belarus), although in the long run it is possible that a number of these states will become EU members. The second important issue for CEE countries is that relations between China and Western European countries are still far more intensive than of those with CEE countries, though some have said that the 16+1 formula will narrow this gap. Apart from defining the role of institutions such as the China Development Bank, Central European countries should be more interested in making close relations with bodies like the China Investment Promotion Agency (商务部投资促进事务局) and China Investment Promotion Centre (中国国际投资促进中心), which has already opened in Germany. An important role is played by a newly establish institution China-CEE Investment Cooperation Fund (中国—中东欧投资合作基金), which is governed by EXIM Bank and in late August 2014 bought 16% of shares in the Polish Energy Partner (PEP) Company, run by Polish millionaire Jan Kulczyk. This amount, equal to $150 million, will aid financing the construction of 380 megawatts of wind farms by 2016.
Moreover, by 2018 the PEP Company plans to complete a gas pipeline between Poland and Germany to ship 5 billion cubic meters a year. In this context, if the Chinese fund will invest more capital it will be the external factor that brings Polish –German relations closer. Going even further, Chinese capital might be invested in V4 or Central European energy systems, such the North-South Corridor. A good example might be Croatia and Poland where both sides have built Liquid Natural Gas (LNG) terminals to strengthen North-South European energy cooperation. If China will be ready to think more in terms of cross-border cooperation, it might serve as a key factor in shaping the next stage of European integration. In case of the CEE region, Euro-regions should be considered as a place for future Chinese investment. Crossing the national border of, for example, the Carpathian Euro-region (between Poland, Slovakia, Hungary, Ukraine and Romania) China might invest its funds for the benefit of both sides. Furthermore, both sides should strengthen their relations between the V4 and China, with a good example of cooperation provided by Japan. In this area the Chinese government will avoid the accusation of being a divisive force in Europe. Though here the question remains unanswered whether Europeans are ready for a more federalist Europe. Apart from optimistic views coming from governments of CEE countries, the crucial problem of the economic structures of both sides remains unanswered. CEE economies are mainly driven by SMEs while China looks for big, national projects involving infrastructure or energy sectors, likewise being sponsored by state institutions such as the China Investment Corporation. Even in the Bucharest Declaration, signed in November 2013, only cooperation between local governments was mentioned – SME cooperation between Europe and China was noticeably absent.
Another issue of great importance are the relations with the CEE neighbourhood, for instance China’s activities in Belarus and Ukraine. Due to the increasingly fluid situation in Ukraine, China (among other states) can play an important role in shaping the region’s future. Under Xi Jinping’s leadership, Chinese foreign policy has arguably become more assertive. The key question remains whether or not China can stay true to its “non-inference” stance while its economic interests risk being undermined? In 2012 Ukraine became the fourth-largest arms exporter and sold weapons and military equipment to China for $700 million. The Chinese market accounts for 31% of Ukrainian exports. Regarding future cooperation, we need to be aware that a majority of Ukraine’s heavy industry, including the military industry, is located in the eastern part of Ukraine. In Donetsk and Dnepropetrovsk, intercontinental ballistic missiles, tactical ballistic missiles as well as radar and avionics systems are designed, while in Kharkiv and Luhansk battle tanks such as the T-34, T-64, and T-80UD are produced. Additionally, it is safe to assume that the production of the MBT-2000 main battle tank of the People’s Liberation Army is highly dependent on the diesel engines produced in Kharkiv. A factor that influences China’s stance is the geopolitical risk for the global economy and particularly for the economy of Eastern and Central Europe. In this context, it is worth mentioning that Chinese Vice Minister of Finance Zhu Guangyao at the International Monetary Fund was the first to back IMF support for the new government in Kiev.
The second important element in the CEE area are China’s economic and political activities in Belarus. Due to political reasons President Lukashenka of Belarus considers China a friend: “China’s investment has never had any political strings attached, therefore, we are more than willing to see China speed up its investment in Belarus on a larger scale.” One fine example of China’s investment activities in Belarus is the China-Belarus Industrial Park (中工国际工程股份有限公司). In 2012 Lukashenka signed the decree “On China-Belarus Industrial Park” and the Chinese company, Chinese Engineering Corporation CAMC, began its operations in Belarus. An important issue was declared at the beginning of September 2014 whereby the China-Belarus Industrial Park became part of the China Silk Road Economic Belt. Both sides set up the new mechanism between Belarus and the Xinjiang Uighur Autonomous Region within the Belarusian-Chinese Intergovernmental Committee (中国-白俄罗斯政府间合作委员会) (the first meeting occurred on 4 September 2014). An interesting issue is that the Chinese government has included Belarus as a part of the new Silk Road initiative, a belt of economic investment reaching from the Central Asian republics to the Caucasus and by including Belarus, this initiative now borders the states of Eastern and Central Europe.
As mentioned by some in Beijing, CEE-China relations are regarded as a “learning by doing” formula and should be understood as one of the mechanisms towards a more effective Chinese foreign policy – not only from an outside perspective, but also from within. Nevertheless, for the author the internal perception is far more important than that of foreign affairs. The Chinese are mainly driven by their internal oriented nature (内向性) and with CEE countries China hopes to learn how to avoid a transition into a multiparty system and instead activate their society in a one-party system.
Dominik Mierzejewski is a member of the Faculty of International and Political Studies, University of Lodz.
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