Sino-European relations after the Budapest ‘16+1’summit

By George N. Tzogopoulos

The more China and the EU are coming closer, the more patterns of cooperation will be invented, debated and possibly strengthened. With reference to Central and Eastern Europe as well as the Balkan Peninsula, two approaches have the potential to intersect. On the one hand, the ‘16+1’ mechanism reflects the will of Beijing to systematically enhance its presence in the region. The recent Budapest summit, where Prime Minister Li Keqiang participated and announced new ideas for collaboration, constitutes a characteristic example. 

On the other hand, the EU is closely monitoring the cohesion of states such as Hungary and Poland. That is because they are often challenging European guidelines on different fronts. It is also developing the so-called ‘Berlin Process’ in order to boost economic and human connectivity and possibly reinvigorate European integration in a period during which enlargement is out of the agenda due to the economic crisis and the impact of the Brexit negotiations.

A worker awaits the ceremony of the reconstruction of a railway line between Budapest and Belgrade, in Belgrade, Serbia, Tuesday, Nov. 28, 2017. [Photo: AP /Darko Vojinovic]

The attention is largely turned towards the Western Balkans because targeted countries are not EU-members. In particular, Albania, Bosnia and Herzegovina, Former Yugoslav Republic of Macedonia, Kosovo, Montenegro and Serbia all aspire to membership of the EU. Of course, all these countries are encountered with major convergence challenges in terms of living standards. The main reason behind this prosperity gap lies in the failure over the years of them to be competitive as they are lacking the appropriate factors and institutions needed for high levels of long-term productivity. So, a potential increase of investments is considered a vital requirement for catching up with the rest of the EU and improve living standards. 

Traditionally, the most important investors have been the Eurozone countries, including Austria, the Netherlands, Greece and Italy. China has been recently keen on join the list of investors by paying particular attention to the rollout of its Belt and Road Initiative. Statistics outline that the total trade volume between China and selected Western Balkan economies reached a level of €3.3 billion in 2015-16. Serbia accounts for almost half of that total trade volume. China’s ranking as a trading partner in 2016 after the EU-28 countries was as follows: third in Bosnia and Herzegovina, fourth in FYR Macedonia, fourth in Serbia, second in Albania, third in Montenegro and fourth in Kosovo. 

European critics of China believe that the Beijing administration is attempting to divide the EU by offering a model that substitutes European objectives. But more moderate voices downplay concerns and see that China is complementing and not competing with EU policies.  Chinese investments have no hidden objective to provide an alternative to the Western orientation of approached countries indeed. They are only functioning as a necessary source of project financing and diversification. This is positively seen by governments and public opinion in the Western Balkans region who are seeing their European dream fade away. Within this framework, schemes of engagement in the Western Balkans can possibly work as a model for the future evolution of Sino-European relations. 

The current moment is certainly delicate for Sino-European relations. China’s growing role is causing some alarm to the EU. The 2017 State of the Union Speech of President of the European Commission Jean Claude Juncker is signaling the beginning of a new attitude vis-à-vis China. The EU is developing a screening framework to better protect its strategic interests. Concerning the ‘16+1’ initiative, the European Commission is currently blocking an important Chinese plan aiming at constructing a high-speed railway between Budapest and Belgrade. The probe is looking into the financial viability of this $2.89 billion project. Western media such as the Financial Times see the delay in the construction of the Budapest-Belgrade high-speed railway an indication of China’s alleged failure in delivering what it promises

However, perspectives for the future remain promising. China and the EU are certainly disagreeing on the former’s presence in Central and Eastern Europe as well as in the Balkans. The new protectionism frame introduced by the European Commission could further perplex the situation. But the mutual need for cooperation can certainly bring the two sides to the negotiating table. Dialogue will thus be fostered in good faith. Differences between partners do exist. What matters more is the determination to bridge them and proceed.

(Dr George N. Tzogopoulos is a senior research fellow and advisor for EU-China relations at the Centre international de formation européenne, Nice/Berlin.)