16+1+1: Beijing wants Germany to align with its strategy in Eastern Europe

In the face of German and EU opposition, China is trying to redefine its key initiative in CEE.

During her tour of China in May, Chancellor Angela Merkel expressed concerns to Prime Minister Li Keqiang regarding Germany’s contribution to Beijing’s relationship with the European Union. This was interpreted as an indirect reference to Germany’s assessment of China’s involvement in Central and Eastern Europe (CEE) as a factor weakening procurement procedures and transparency in the EU. A week later, on 31 May, the head of Chinese diplomacy, Wang Yi, visited Berlin where he tried again to convince the audience that multilateral and cross-regional cooperation between China and CEE under “16+1” format plays a complementary role to, and has a positive impact on, the overall Sino-European relationship. The Chinese minister also declared that “16+1” helps to narrow internal gap and balance development between Western and Eastern Europe; time will show that “16+1” accelerates European integration.

To support this argument and smooth down the critical perspectives in leading EU capitals, Wang announced that China is intensively considering to invite EU and Member States  representatives for the next summit of the “16+1” leaders. Furthermore, to stress his good intentions, the head of Chinese diplomacy stated that “Germany and the countries of Central and Eastern Europe enjoy close ties, [therefore] we are actively considering opening up a tripartite cooperation with Germany in Central and Eastern Europe. We look forward to combining the advantages of economic complementarity of China and Germany with the development needs of the Central and Eastern European region, to jointly carry out concrete project cooperation […].

Searching for balance in a distorted relationship

This new repositioning of 16+1 towards Germany and the rest of EU signals profound worries in Beijing that the initiative in its present form might be doing more harm than good to larger Chinese interests in Europe. Before the techno-trade war with the US broke out, Beijing was hinting that the initiative might be slowed down, or even – as  has been speculated for months – gradually phased out or reshaped. Now however, in the midst of the growing trade conflict with the US, the recent Sino-CEE meeting in Sofia stipulated that annual frequency will be maintained, and Croatia will host the summit next year. In 2020, the role of host will again fall to China, for the second time in five years.

Such a scenario would confirm two modes of PRC’s involvement in CEE. First of all, it is a “learning by doing” process, that is, flexible testing of various political and economic solutions. An example might be an attempt to try and act outside the normal tender procedures in the EU, for instance by awarding the contract for the Budapest-Belgrade railway line modernization to a Chinese company without a public tender. When this blatant violation of EU procurement rules in a flagship China-CEE project provoked an investigation by the European Commission,  China changed tack and announced a new, this time open, tender in autumn 2017.

Secondly, from a strategic perspective, “16+1” is for China a tool for balancing (the Western part of) the EU. The political aspects of “16+1” are mostly demonstrated at the bilateral level, gaining political support from leaders of several individual CEE countries with very modest financial commitments to their countries (according to Bloomberg, China’s investment stock in CEE represents only 1.1% of total investments in the EU). Beijing established excellent political relations with the government in Budapest, which translates into Hungarian support for China’s stance towards the South China Sea and recognition of the market status of the Chinese economy.

Similar positions have been maintained for years personally by prime minister Orbán, who likes to use China as a tool to exert pressure on the EU. He demands infrastructure investments by putting the EU (and, in fact, separately Germany) before the alternative: “Central Europe must make progress with relation to significant handicaps within the field of infrastructure. We need resources to construct new roads and pipelines. If the European Union cannot provide funding, we will turn to China”, Mr. Orbán said in Berlin in January this year, acting in this regard as a self-appointed statesman of CEE. One may only wonder if this was consulted beforehand with other Central and Eastern European capitals.

Another good example of how “16+1” is conducive to strengthening China’s regional clout is through the bilateral relations established with Czech ruling elites. Prague was selected as the center of European operations of the  powerful, at least till recently, CEFC conglomerate. After the detention of its boss Ye Jianming in February this year, a nominally private CEFC was eventually taken over by the state-owned financial giant CITIC ergo falling under the direct PRC control. What is more, President Miloš Zeman, who, together with the Social Democratic party, is the architect and political endorser of the Czech Republic opening to the PRC (and to CEFC), stubbornly maintains the missing Mr. Ye as his “economic adviser”.

Politics pursued bilaterally

The case of Hungary and the Czech Republic, as well as Serbia (to mention a non-EU member), illustrates that on the bilateral level of “16+1” China has achieved considerable political goals.

However, this cannot be said about the overall effect of forming a unified China-led bloc of post-socialist countries, which so far lacks both political substance and advanced economic content.

Instructive in this regard is the position of Poland which has gravitated towards more balanced attitude to “16+1” project and cooperation with China itself. The enthusiasm that could be sensed at the turn of 2015 and 2016 (with president Andrzej Duda’s visit to China and Xi Jinping’s re-visit to Warsaw within 6 months) has clearly toned down. This was demonstrated by halting the Chinese investment in the logistics center in Łódź by the former minister of defense Antoni Macierewicz in December 2016, as well as the non-accession of Poland to the Sino-CEE Fund in November 2017. Last but not least, Polish PM Mateusz Morawiecki missed the recent 16+1 Sofia summit in order to attend a pilgrimage gathering of the ultra-conservative Catholic radio station Radio Maryja.

Among the primary reasons of this balancing act is strategic and economic security (vis-a-vis the US), Warsaw’s growing trade imbalance with Beijing (1:12 in 2017) and undelivered promises of massive Chinese investments, despite their modest rise in recent months. This has been laid out by the finance minister Teresa Czerwińska: “We consider that some of the investments under the Belt and Road initiative could bring an added value for our economy. As for the flaws, I think it is too early to talk about them since the project was launched just a few years ago and developing infrastructure takes significant amount of time. What is obvious for me at this time is that the Belt and Road Initiative should not be a tool of increasing power and control by any country, but should serve all participants, promote cooperation, sustainable growth and balanced exchange of trade.”

In regard to cooperation within Sino-CEE multilateral agenda, it ought to be noted that Poland as a seat of the “16+1” coordinating mechanism for maritime issues is working with China on the development of transshipments capabilities and port infrastructure. In recognition of the promising cooperation, in June, Chinese naval frigate Binzhou visited in port of Gdynia to celebrate 100th anniversary of founding of the Polish navy. However, only a year earlier, Polish government denied Chinese navy port visit in the same port for unspecified reasons.

Killing two birds with one stone

The inclusion of Germany, the most vocal opponent of “16+1”, in the trilateral formula of cooperation with China and CEE would thus present a shrewd move on the side of Beijing, allowing the authorities “to kill two birds with one stone”. It would substantiate the goodwill towards the EU (a kind of alibi in the face of accusations that China’s actions undermine Europe’s unity) and at the same time impede the format operations without losing face to its founding members.

Yet such a move seems workable, if at all, only in a variant that would confer upon Germany the status of an observer, and not a full member, because it would complicate China’s relations with other European powers (e.g. France). The leadership of the key “16+1” EU members (which like Hungary, the Czech Republic and Poland are mostly skeptical of the “dictate from Brussels”) would probably treat Beijing’s co-optation of Berlin as another attempt to deprive them of subjective agency – not that they showed much of it, anyway.

However, with limited room for maneuver and a lack of imagination or any real alternatives, it can be safely assumed that Budapest, Prague and Warsaw would announce the establishment of a tripartite formula as progress, achieving the desired synergy between EU and Chinese projects.

Bartosz Kowalski is Assistant Professor at the Department of East Asian Studies of the University of Lodz and Research Fellow of its Centre for Asian Affairs.  He is the co-author of the forthcoming book China’s Selective Identities: State, Ideology and Culture (Palgrave Macmillan, 2018).