Written by Dragan Pavlićević.

The 3^rd Meeting of Heads of Government of China and Central and Eastern Europe (CEE) Countries, held in Belgrade on December 16-17, marked a new phase in the relationship between China and the CEE under the so-called 16+1 platform. While the previous two Meetings in Warsaw (2012) and Bucharest (2013 ) were mostly concerned with establishing the general orientation and framework of the relationship, this year’s coming together of the 16+1 leaders in Belgrade crowned a fruitful 2014 that realised many of the initiatives specified in guiding documents put forward in Warsaw and Bucharest.

On a multilateral level, following the first Ministerial Meeting on Economic and Trade Promotion, China and CEE initiated a China-CEE Investment Promotion Contact Mechanism and established a Permanent Secretariat for Investment Promotion in November 2014. In the same month, the establishment of the China-CEE Associaton for Promotion of Agricultural Cooperation in Sophia was announced. China Exim Bank-driven China-CEE Investment Fund, with USD 500 million available for investment in the region over the next few years, was established in early 2014 and concluded several investment deals in the energy sector by November. On the bilateral level, numerous agreements have been struck, from China’s estimated EUR 6.5 billion investment in two new nuclear reactors in Romania, EUR 1 billion loan arrangement with Montenegro to construct a highway, and various initiatives on provincial and municipal levels.

During the Meeting, Premier Li noted that almost USD 8.5 billion have been already activated from China’s USD 10 billion credit line for CEE countries. Li announced an additional fund of USD 3 billion to facilitate further investment through public-private partnerships and a contribution of another USD 1 billion to the China-CEE Investment Fund. A cherry on top was provided by further agreements concerned with the construction of a Belgrade-Budapest High-Speed Railway (HSR), signed by the representatives of China, Serbia, Hungary, and Macedonia. The project has now been expanded to include an upgrade of a section of Macedonian railway that will bring closer to completion a now official vision of the trans-Balkan high-speed railway connecting the port of Piraeus and European markets. Many other projects are reported to be in different stages of negotiation and development.

Despite the general success of the Meeting, there were setbacks as well. The signing of the two agreements on HSR appear to be a face-saving exercise: the final contract – previously expected to be signed in Belgrade – did not materialise since the involved parties could not reach an agreement on the modality of financing. There were also loud calls from the CEE countries to diversify investment mechanisms, including initiating joint ventures and PPPs, a proposal that may not be as appealing to China. Additionally, the Prime Ministers of Croatia, Bulgaria and Poland were absent, suggesting that the priorities for some CEE countries may still lie elsewhere.

Recent developments under the 16+1 framework call into question the widely-held view that China-CEE cooperation is more of a “rhetorical talk show” than substance. The total share of the CEE in overall Sino-European trade volume is indeed quite modest, and China’s investment in the CEE countries is much smaller than in the so-called EU15 group of developed economies. However,the trade volume grew from USD 8.7 billion in 2003 to USD 55.1 billion in 2013 and is now expected to double within the next 5 years. China’s investment in CEEC increased from less than USD 100 million to about USD 5 billion over the same period and is likely to remain on the steep upward trend given the finances available and number of projects in the pipeline.

There are precedents that suggest that a substantial growth in economic cooperation can indeed be sustained and intensified into the future. China’s success with other multilateral initiatives may be a telling sign of where the 16+1 platform is headed in the coming years. For example, the trajectory of Sino-African economic exchange was similarly underestimated in the early 2000s when the initial Forums on China-Africa Cooperation were held. However, China’s trade with Africa grew from USD 10.6 billion in 2000 to USD 210 billion in 2013. Investment has grown at about 53% a year since 2001, facilitated by the same policy tools – such as China-backed regional development fund and cooperation on major infrastructure and energy projects – as envisioned under the China-CEE cooperation framework. China has subsequently become a very influential regional actor.

Furthermore, within the CEE countries, China’s financing of major development projects is largely perceived as a key contribution to the CEE countries’ development and, together with 16+1 platform, as improving the standing of the CEE countries within or vis-a-vis the EU. In a series of opinion pieces published in the run up to the Meeting, leaders of the CEE countries appeared locked in a competition to capture China’s attention, hard-selling their respective countries as the most welcoming of and suitable for China’s investment and projects. Therefore, a scenario of rapidly growing cooperation between China and CEE over the next decade, economic and otherwise, is not only easily conceivable, but probable.

Given such prospects, it is inexplicable that the China-CEE relationship should develop without the involvement of the EU’s formal institutional structures. A suspicion that the 16+1 platform is a Chinese instrument to weaken the EU for China’s benefit probably explains the EU’s lack of a clear and vocal position on the matter, as well as reported pressure from Brussels on the CEE countries to moderate their involvement with China. Of note, the European External Action Service has not even issued a statement regarding the Belgrade Meeting, despite 11 of the EU’s current members and 5 EU-aspiring countries taking part in it. Yet, it appears obvious that Brussels should seek an active role in the development of China-CEE relations in order to ensure that developments within 16+1 fit well with the EU’s goals and policies.

On several occasions prior to and during the Belgrade Meeting Premier Li addressed the views that China-CEE cooperation may be utilized by Beijing to split the EU for China’s benefit. Li stated that “China supports the European integration process”, “China’s cooperation with the 16 CEECs will not result in fragmenting the European Union”, and that ”China-CEEC cooperation is undoubtedly part and parcel of China-Europe cooperation”. Li also expressed his hope that the 16+1 groping’s development goals will be aligned with the China-EU 2020 Strategic Agenda for Cooperation.

Although China missed an opportunity to give substance to such rhetoric by ensuring participation of a high-level EU representative in the proceedings of the Belgrade Meeting, the openness and the spirit with which Li addressed the uncomfortable question of China’s intentions behind the 16+1 initiative should be lauded and taken as a standard for Sino-EU communication on the topic in the future. It is now time for the EU to hold Beijing to its promise of being a benevolent and cooperative regional player by requesting and then fulfilling the role of an eager and constructive actor in the further development of China and CEE’s ties.

Dragan Pavlićević holds a PhD from the University of Nottingham’s School of Contemporary Chinese Studies. Dragan researches both China’s domestic politics and foreign relations, and has published analysis of China’s current affairs for Serbian and international media. Image Credit: CC by /Flickr.