CHINA-CESEE COOPERATION

Back in 2012 in Warsaw a meeting of China with the leaders of 16 post-communist European states resulted in an action plan for adding impetus to the already expanding cooperation with Eastern, Central and Southeast Europe (CESEE).

CESEE covers the following countries: 11 EU Member States  (Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Romania, Poland, Slovakia and Slovenia) and five countries from the Western Balkans region which are potential candidates or candidates for EU membership (Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia).

Mutual interest is an important driver of the Sino-CESEE relationship. China needs new destinations for its accumulated wealth; the countries of CESEE need new businesses and inflow of capital, as many of them are being neglected by Brussels and the traditional sources of help, which now aim to raise funds for patching the holes in the Eurozone and saving the large economies of Western Europe. The China-CESEE cooperation is still a developing story, and is broader than just cooperation for overcoming the crisis.

Over the span of just three years, the economic cooperation between China and CESEE has dramatically increased, and a much broader cooperation in several other fields has been announced. While the total trade volumes are rising (and many European countries had managed to reduce the chronic deficit and increase their exports to the ever-expanding Chinese market), the core of the economic relationship between China and CESEE however, has been investment, and in particular, Chinese outward investment in CESEE.

Chinese investments in the region are especially in automobile manufacturing, the chemical industry, energy and infrastructure. The investments often take the form of mergers and acquisitions of successful regional businesses.

The economic cooperation between China and CESEE, nevertheless, is still far from smooth or living up to the expectations of the both sides. The managerial culture gaps and the diverging visions of running businesses in general, as well as some institutional constraints and human errors, have often led to cancellation of projects and loss of resources.

China’s political ties with the region are not exclusively rooted in crisis-inspired investment opportunities. In addition to doing business, China also aims to build steady comprehensive strategic partnerships (as well as steady two-way economic partnerships) and enhance its soft power in Europe.

China Action Plan for CESEE 

1. Establishment of a Secretariat for Cooperation between China and the 16 participating CESEE countries, based with China’s Ministry of Foreign Affairs. The Secretariat was officially established on September 6, 2012, in Beijing, in the presence of the National Coordinators of all 16 European countries, and China;
2. Establishment of a US $10 billion special credit line for the CESEE countries;
3. Setting up an investment cooperation fund between China and CEE countries with the goal of raising US $500 million in the first stage;
4. Increase of the total trade volume between China and CESEE to US $100 billion by 2015;
5. Stimulation of Chinese enterprises to invest in special economic and technology zones in CEE;
6. Exploration of potential financial cooperation such as “currency swap, local currency settlement for cross-border trade, and establishment of bank branches in each other’s countries”;
7. Establishment of an expert advisory committee on the construction of transportation network between China and CEE countries (e.g. regional highway or railway through joint venture, joint contracting and other means);
8. Expansion of cultural cooperation;
9. Provision of scholarships to the CESEE countries and support of the Confucius Institutes and Confucius Classrooms programs, and invitation of Chinese language students to China;
10. Establishment of a tourism promotion alliance between China and CESEE countries, coordinated by the China Tourism Administration;
11. Establishment of a research fund on relations between China and CESEE;
12. Hosting of the first young political leaders forum of China and CESEE .

Such cooperation between China and its partners is already taking place in many corners of the globe. Several core priorities of China’s foreign policy are reflected in some of the planned measures – such as the internationalization of the Renminbi, the boost of China’s soft power through cultural, educational and research cooperation as well as people-to-people communication, but above everything – the seeking of new deals overseas. One especially important point is the exploration of opportunities for cooperation in the transportation sector China has already profiled itself as infrastructure builder elsewhere (with all shortcomings taken in account), and an eventual project in CESEE might be seen as an extension of the high-speed rail under construction in Central Asia, and eventually in Turkey (where China has a multi-billion deal to construct a high-speed rail across Anatolia); it had also acquired major ports in Greece, that if connected to a modern land transportation network, might form a significant Chinese-run trade corridor in Europe.

The plan for cooperation is being implemented in a rather technocratic manner, and without any excessive pomp.

The relative lack of attention to these new developments is also to a great extent a function of the Brussels-centric view of the Sino-European affairs, dominant in the discourses on the both ends of the relationship, as well as the tendency to omit the countries that are not part of the EU (yet) from the analysis. In this sense, it is important to see how the new China-CESEE arrangement could affect the development of Sino-European relations; but also to challenge the way we think not only of Sino-European affairs, but European politics in general.

The first and most striking aspect in this story is that Warsaw (with all its symbolical load), rather than Brussels, is the focal point of China’s CESEE endeavor. This multilateral forum that involves 10 member states, one future member state, three candidates, and two potential candidates, happens completely outside the EU framework, and moreover, it is asymmetrical in the sense that it is convened and moderated by Beijing, while the European countries are followers in the process. It is “business as usual”, without any conditionality or traces of the normative charge typical for EU’s external relations.

Part of the news about this development is that soon we might see at least one part of Europe having a more consolidated approach to China, but then again, this is very likely not to going be the position that the EU tries to promote. This might not be a fulfillment of an eventual “China Lobby” in Europe (comprised of countries that due to their dependence on China, act as its right hand in the Council of the EU), but will certainly strengthen China’s presence as a relevant actor inside Europe. In practice, Chinese projects that do not fulfill EU standards – the biggest concern by far – would sooner or later meet the EU regulations and might not be able to circumvent it (especially if it comes to large-scale projects such as nuclear plants or regional railways). Yet, Beijing will still have more space to maneuver in the relations with countries that are not Union members yet.

Finally, when talking about the future of the China-CESEE, against all said above, one has to weigh other arguments, as well as sound reasons for skepticism, such as the potential weakening of the position of the CESEE countries once they diverge extremely from the position of Brussels on China; the intra-CESEE and intra-European competition for Chinese investment in general; an eventual exhaustion of the cooperation; etc. One also must not forget that the core of the Sino-European relationship is still the link between China and the European Union as a whole; with an equal importance of the “special relationships” between China and Western Europe, and in the first place, Germany.

However, even with all these arguments in mind, the development of the Beijing-Warsaw link has a huge potential to affect the development of the Sino-European relations. As of now, it calls for closer attention by both policy-makers and analysts.