Beijing via Warsaw: The growing importance of China – CESEE relations

Perspectives Internationales 05/12/2012 0

In April 2012, in Warsaw, a meeting between Wen Jiabao and the leaders of 16 post-communist European states resulted in an action plan for adding impetus to the already expanding cooperation between what in the official documents is referred to as Central and East Europe (CEE) – in practice the group of 16 also includes countries from the Western Balkans – hence the use of the term Eastern, Central and Southeast Europe (CESEE). This article examines the development of China’s Warsaw project, and discusses how the strengthening of the China – CESEE link could influence the Sino-European affairs at large.

Background

China and the countries of Eastern, Central and Southeast Europe (CESEE) – or the countries of post-communist Europe, are not unfamiliar with each other. Throughout a good portion of the twentieth century, China’s ties with Europe took place on the eastern side of the Iron Curtain. In the years of the Sino-Soviet alliance, China had friends in USSR and its satellite states. Its only genuine follower in terms of ideology was Albania under Enver Hoxha. In the post-Mao era, China normalized its relations with the Communist countries in the Eastern Bloc, but also with Yugoslavia (previously considered an enemy due to the Tito-Stalin split).

             Nonetheless, the fall of Communism in Europe, combined with the post-Tiananmen anxiety in Beijing, had changed the course of the relations between Beijing and the CESEE. During the 1990s, the majority of the former Communist countries in Europe embarked on a comprehensive political and economic transformation based on the ideals of liberal democracy and free markets. They also nurtured strong anti-communist sentiments, which painted (and often vilified) China and its Communist leadership as the ideological arch-enemy (the best example of this being Vaclav Havel). In addition to the discursive discrepancy, most of the CESEE countries became part of a new US-dominated security configuration.[1] Finally, during the 1990s, many CESEE countries were approached by the Democratic Progressive Party (DPP)-governed Taiwan and were offered investment deals in exchange for recognizing the island’s independence – the most illustrative examples being Latvia and Macedonia. Both of them established full bilateral relations with Taiwan, attracting the scorn of the Mainland.[2]

         However, in less than a decade, the relationship between China and the CESEE underwent complete reversal. The accession of eight of the CESEE countries to the European Union in 2004, and of two more in 2007, a period when the EU-China relationship intensified, resulted in a renewed relevance of China for CESEE. Furthermore, the rapid ascend of China on the global stage, especially in the light of the global financial crisis, had additionally motivated the CESEE leaders to reposition themselves. As a result, the anti-communist sentiment had been toned down, and all countries in the region now embrace the one-China policy. The economic ties between the two sides constantly increase and have become the cornerstone of their cooperation, overshadowing political questions.

The new China-CESEE picture

Mutual interest is an important driver of the contemporary 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 growing involvement of China as an alternative of traditional economic powerhouses and investors, of course is not a reality exclusive to CESEE, as China is increasingly considered as an important alternative for overcoming the financial crisis virtually in every corner of the globe (China’s Export-Import Bank has even outspent the World Bank). However, the China-CESEE cooperation is still a developing story, and is broader than just cooperation for overcoming the crisis.

Over the span of just two to 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.  A report by the Central & Eastern Europe Development Institute (CEEDI, 2012) in the ten post-communist member states of the EU reveals that  in 2010 only the Chinese foreign direct investments has increased  by more than 100% (from slightly less US $ 400 million to more than US $ 820 million (see CEEDI, 2012). From 2004 to 2010 in total, the volume of Chinese investment in the 10 countries has increased by more than 20 times (from about US $ 43 mil to more than US $ 820 mil). The report by CEEDI (2012) also summarizes the trend of Chinese investment in the region – Chinese mainly invest in the secondary sector, and especially in automobile manufacturing, the chemical industry, energy and infrastructure – this also goes for the countries that the CEEDI does not cover (Southeast Europe). 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. A paradigmatic case has been the failure of the China Overseas Engineering Company to complete the A2 highway in Poland in time for the European Football Cup; with smaller scale fiascoes happening in other areas. Overall, it is said that Chinese companies are not yet ready to compete on the European market or to fulfill European standards; and they cannot easily build on their experiences in Asia, Africa, or Latin America.

Doing business with China, however, has important political aspects to it. In 2010, for example, Hungary attracted more Chinese investment than the nine other post-communist EU members combined – arguably owing to the fact that Viktor Orban’s government made huge efforts to accommodate China on the international stage,[3] by evading the discussions on human rights and other contentious issues with Beijing; and by not meeting with the Dalai Lama. This has been a clear case of divergence from the official EU discourse on China, but also from the previous policy on China (Orban in fact had been on the China-bashing bandwagon, and had been one of the most significant anti-communist leaders back in the day). Nevertheless, Orban’s pragmatism has been an announcement of a broader trend, rather than an exception – since 2010, such behavior has become common for many other crisis-struck EU member states (including the ones of the “Old Europe”), which has ultimately led to the bifurcation of EU’s China policy.[4] The European Council on Foreign Relations (ECFR) had contemplated such behavior as “cash-strapped-deal-seeking.”

However, 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. In this respect, two countries are especially significant for their increasing cooperation with China: Poland and Serbia.

Poland, a country with strong anti-Communist past has become good friends with China under the Prime Minister Donald Tusk, who in 2012 announced that the bilateral ties between the two countries are “its highest level in history.” Again, in the case of Poland, the good political ties are accompanied growing economic ties. Currently, Poland is China’s biggest trading partner in the region of CESEE, with the total volume reaching more than US $ 9.5 billion/ Poland and China have worked towards establishing closer political and cultural cooperation as well; and have substantially increased the diplomatic activity on every level. The intensification relationship between Poland and China could be also seen as an effort by Poland, a player with already a growing importance in Europe because of its relatively steady economy, but also its significant role  in the NATO, to further advance its role in the region, at a time when China is in the spotlight.

Serbia, a EU candidate state, is China’s strategic partner as well. The two countries have worked hard to increase the mutual trade, as well as the political, military and cultural cooperation. One of the foundations of this relationship is China’s strong backing on the Serbian position on Kosovo and the Serbian backing of China on international stage (diverging from the official EU positions); an additional weight to the partnership is derived from Belgrade’s tendency to keep its non-Western friends close as a way to maintain its significance in the region. Finally, the Serbian relationship for China has a certain emotional value, due to the 1999 events, and the bombing of the Chinese embassy in Belgrade, a defining moment in the Chinese collective memory and the official national(ist) narration. Moreover, Serbia has its own Chinese minority comprised of migrant workers, which is also an important factor in the Sino-Serbian relationship.

The China – CESEE Platform for Future Cooperation

The dichotomy, and often the contradiction between the EU’s China policy on one hand, and individual members’ and associated states’ foreign policies towards China on the other, is nothing new to the study of Sino-European Affairs. However, what is new in the case of CESEE is the emergence of a new regional platform that involves 16 European countries and China. It is the brainchild of the outgoing Chinese Premier Wen Jiabao, a frequent traveler to European capitals, who at a meeting with the Heads of States of the countries of CESEE held in April 2012, in Warsaw, announced a comprehensive twelve-point action plan on the advancement of the relations between China and CESEE. The deepening of the cooperation between the two sides came as a follow up to other multilateral activities, such as the annual China – CEE business forum. The selection of Warsaw over Budapest (a previously important site for Sino-CESEE meetings) was at the same time acknowledgment of the strong relationship with Poland.

            The first of the twelve points (or the official term being “Measures”) proposed by Wen, was the 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. It was followed by the First Meeting of the National Coordinators the same day. According to diplomatic sources, the Secretariat by late 2012 is already working with a high pace, having convened on at least couple of occasions, on different levels.

            The other eleven points put forth by Wen were: 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 in 2013.

            Wen’s plan for CESEE certainly sounds somewhat familiar. 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.

Broader Implications?

Wen’s plan for engaging CESEE has its own “Chinese characteristics,” seen in the apolitical overtone, and the relatively low-key profile of the whole initiative. In fact, the plan for cooperation is being implemented in a rather technocratic manner, and without any excessive pomp. High-level representation was the case only in the April 2012 Warsaw meeting, and ever since, the platform functions on a ministerial or vice-ministerial level (however, with frequent high-level bilateral meetings). It has gained relatively limited media attention, and is yet to be a subject of thorough analytical inquiry.

            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 what Timothy Garton Ash calls 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.[5]

            From the CESEE side of the equation, moreover, the regionalist impulse is quite surprising – even though multilateral forums and coordination groups concerned with other issues do exist, China’s effort to bring together all the 16 countries together is at least a respectable one. Even though these countries share similar historical legacies and are geographically close, the “post-communist” countries of Europe have rarely convened in such a roster – that would include the Baltic states, the Visegrad states, but also the post-conflict Western Balkan states. In fact, the close cooperation on such a broad level is so unusual that there is no suitable reference to these 16 countries with one name (except “post-communist Europe,” which would be unjust as there are other post-communist countries in Europe that are not part of this group, such as [part of] Germany or Ukraine, Belarus, Moldova, and Kosovo). The official documents use the name “Central and East Europe,” but this does not do justice to Southeast Europe, which has its own narrative in European politics. In fact, the involvement of the Western Balkans/SEE countries in this initiative is another development that might have certain side-effects – as these countries, still outside the European Union and seen as diplomatically irrelevant, might find their own path to the global scene precisely through the forum Beijing offers to them – or at least feel more confident, and ironically, more “European”, sharing the floor with the more respectable European brothers, such as Poland, or the Czech Republic, or Estonia.

            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.

Anastas Vangeli

 Anastas Vangeli (MA) is a researcher on Chinese politics, Sino-European affairs, and nationalism. He is currently a graduate student at the Renmin University of China in Beijing.

 

References

CEEDI, Partners or rivals? Chinese investments in Central and Eastern Europe (Warsaw: CEEDI, 2012)

“China to strengthen cooperation with Central, Eastern Europe,” China.gov http://www.gov.cn/misc/2012-09/07/content_2219364.htm

“China, Poland agree to deepen strategic partnership,” Xinhua http://news.xinhuanet.com/english/china/2012-04/26/c_123037803.htm

Pavlicevic, Dragan. The Sino-Serbian Strategic Partnership in a Sino-EU Relationship Context.  China Policy Institute no. 68 (University of Nottingham, 2011)

“The Minute of the Inaugural Conference of China-CEE Cooperation Secretariat and the First National Coordinators’ Meeting,” Chinese Ministry of Foreign Affairs http://www.fmcoprc.gov.hk/eng/xwdt/wsyw/t969491.htm

“The Inaugural Conference of China-CEE Cooperation Secretariat and the First National Coordinators’ Meeting Are Held in Beijing”, Chinese Ministry of Foreign Affairs http://www.fmprc.gov.cn/eng/zxxx/t969490.htm

Stefanie Bolzen and Johnny Erling. “Divide, conquer, aim East: China has a sharp new European trade strategy.” Die Welt, 11.11.2012 http://www.worldcrunch.com/world-affairs/divide-conquer-aim-east-china-has-a-sharp-new-european-trade-strategy/eastern-europe-beijing-foreign-commerce/c1s10100/#.ULxs7q4732Q (via Worldcrunch)


[1]     By 1999 when the NATO intervened in FR Yugoslavia (causing an outrage in Beijing because of the circumvention of the UN Security Council), and bombed China’s embassy in Belgrade, most of the CESEE countries had became fervent NATO supporters (and subsequently enthusiastic members) – this was the time when the relations between China and the West greatly exacerbated.

[2]     As a response to the Macedonian recognition of Taiwan, China used its mandate in the UN Security Council to block the extension of the mandate of the UNPREDEP – being the only second time in history when China actually voted against a Security Council resolution.

[3]       There is also a notable Chinese minority in the country, which is also seen as a factor for China’s kin towards Hungary.

[4]     In the summer of 2012, the European public was greatly shocked by the pragmatic attitude of the German chancellor Angela Merkel, during her visit of China, which was predominantly business oriented and omitted discussing the politically sensitive issues.

[5] The news about the cooperation between China and CESEE were also an inspiration for more China alarmism in Western Europe – for example an article by Die Welt argued that the new regional cooperation is part of the Chinese strategy to “divide and conquer” Europe.

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