The fading “charm offensive”: Is China losing its game in Central and Eastern Europe?

The prime ministers of China, Hungary and Bulgaria at the China-CEEC summit in 2017 in Budapest. Photo: kormany wikimedia.org

In February, the Romanian government started discussions on a memorandum to ban overseas companies without an EU bilateral agreement from participating in public tenders. Once the memorandum is approved, it will affect Chinese infrastructure corporations working on highway and railway projects. Government officials have stated that the change aims to exclude firms not fulfilling EU standards. The decision came as a surprise to many since the Central and Eastern European region (CEE) has considerably tightened its links with Beijing. The region has even been labelled as a ‘Chinese Trojan horse’ bought ‘on the cheap’. CEE countries’ economic rapprochement with China has been viewed as an open door for Beijing’s divide and rule tactics towards the EU and its authoritarian agenda in the region. However, recent developments have shown that CEE countries do not seem to be as receptive to China as before.

The Chinese ‘trojan horse’ slowly backing out?

Western media has long viewed the area as a homogenous post-communist region, prone to democratic backsliding, elite capture and corruption. The region’s attempts to strengthen ties with Beijing have damaged its reputation and as a result, CEE has become a worrying topic for the West.

China’s ever-increasing relations with the CEE countries were largely framed within the 17+1 initiative, which includes China and 17 CEE countries. Currently, 11 of these states are EU members. The project was designed to enhance cooperation between Beijing and the region. While China vowed to invest, develop infrastructure and help boost regional economies, the 17 states promised to provide Beijing with cheap access to European markets.

The format was soon integrated into China’s wider Belt and Road Initiative, which was launched in 2013. Beijing’s emergence in the region intersected with democratic backsliding, particularly in Hungary and Poland. The 17+1 initiative has been widely seen as a forum providing China significant leverage over the region through incentives, such as investment, infrastructure and transport projects. As a result, the platform has drawn a large amount of criticism in Western Europe for allegedly promoting the authoritarian ‘China model’ in the region and eventually undermining EU cohesion. 

Cooperation backed by Chinese investment has developed steadily throughout the past decade. Nonetheless, it witnessed a significant decrease in 2020, when CEE opted for ‘social distancing’ from Beijing. China has sparked doubts among the region’s leaders due to trade imbalances, a lack of access to the Chinese market and unfulfilled promises regarding large-scale investment. Overall, their expectations did not match China’s intentions. The 17+1 summits were subsequently seen as “photo opportunities” rather than chances to bring about tangible results. They understood the high risks associated with cooperation with the Chinese Communist Party as well. One Romanian government representative stated that Beijing tries “to impose their own model” and “shows the same aggressive behaviour as Russia”.

The global pandemic, which is widely considered to have originated in China, has somewhat set the tone as well. Responding to this issue, in January 2020, Chinese President Xi Jinping announced the holding of 17+1 summits on an annual basis. Moreover, he made new promises to import more food products from the region and vowed that more Eastern European states, other than Hungary and Serbia, could receive access to Chinese vaccines. Nevertheless, it is uncertain if more summits and promises will change minds in the region. This was demonstrated at the 17+1 summit in February, which looked like more of an ‘11+1’ meeting. Despite Chinese pressure to send high-level decision-makers, six countries were only represented by ministers and not their heads of state. The countries that ignored the Chinese request were from the NATO 2004 enlargement countries, such as Bulgaria, Estonia, Latvia, Lithuania, Romania and Slovenia. While some CEE states, such as Hungary and Serbia, still remain eager to further deepen links with Beijing, the absences at the February summit show that the region’s ‘romance’ with China may be on the decline. However, attempts to deal with Beijing had started even earlier with the establishment of the Three Seas Initiative. 

The Three Seas Initiative – the end of the short honeymoon?

The Three Seas Initiative (3SI) was launched in 2015 by Croatia and Poland and aimed to boost interconnectivity by facilitating energy security, the digital economy and transportation along a north-south axis in Central and Eastern Europe. The name of the initiative was inspired by the Adriatic, Baltic and Black Seas that border the region. As a vital political platform, it encompasses 12 states and is backed by key actors like the European Commission, Germany and the United States.

Apart from its geopolitical importance in curbing Russian influence, the 3SI also seems to be a response to China’s Belt and Road Initiative, which is also active in the region. While confronting Chinese geopolitical aspirations, the project helped boost the economies of US allies and reduce China’s economic overtures in the region. The initiative is very specific and ambitious, as countries along the north-south axis are characterised by relatively smaller markets and levels of investment.

Even though the CEE countries are among some of the fastest-growing economies in the EU, the International Monetary Fund (IMF) revealed that weak infrastructure is further aggravating economic disparities between the EU’s East and West. This is why China set out to enter the EU through poorer countries under 17+1. Chinese-led projects and ‘easy’ investment opportunities in the region are not transparent and are linked to weak governance, corruption and cost overruns. Due to this, the 3SI initiative is deemed essential to post-communist countries’ reliance on “honest investments” rather than taking money from China.

In a recent paper, the IMF stated that the infrastructure gap in the region hinders economic growth and member states’ political commitment to the EU. While the ‘debt-trap’ diplomacy offered by Beijing has proven attractive for many CEE countries, the 3SI initiative could help close this gap and stabilise the economy in the region by creating proper living standards, high-quality jobs and countering economic contractions. 

While the global pandemic has demonstrated the instability of the Chinese chain supply, the 3SI project could enhance cross-border connectivity and prepare the region for more desirable supply chains. One way to curb Chinese advances in the region lies in the prevention of Huawei 5G infrastructure by promoting the “5G Clean Network Security” plan. This is currently favoured by most CEE states. For instance, Romania has already excluded Huawei from its national plans. Deals concerned with gas pipelines from Poland to Croatia and highways from Lithuania to Greece’s Aegean coast could alter Chinese ambitions regarding energy and transportation. 

Recent developments around the 17+1 and 3SI initiatives demonstrate that after a decade the region’s expectations do not align with Beijing’s real aspirations. Most CEE states have become aware that unconditional cooperation with China is risky and is not a ‘win-win’ strategy. Nevertheless, while the CEE region needs an economic boost, it might find it difficult to refuse any ‘alluring’ investment deals from Beijing. In this situation, the EU’s continued engagement with the region, backed by its consistent policy-strategies on China, remains paramount.

Soso Dzamukashvili is a contributing policy analyst at the Georgian Foundation for Strategic and International Studies. He holds an MA degree in Central and East European, Russian and Eurasian Studies from the University of Glasgow.

Eter Glurjidze is a contributing policy analyst at the Georgian Foundation for Strategic and International Studies. She is a postgraduate student at the Estonian School of Diplomacy and an alumnus of the North China University of Technology.

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Belt and Road Initiative, Central and Eastern Europe, China, Chinese investment, Three Seas Initiative