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Beijing lays down a gauntlet to Brussels in the Balkans

EU and US must respond to China's growing influence at Europe's vulnerable back door

The opening in Belgrade in 2014 of the 1.5km-long Pupin Bridge spanning the River Danube, built by Chinese contractors and known locally as the Chinese bridge   © Anadolu Agency/Getty Images

This Friday China will gather 16 Central and Eastern European countries in Sofia, Bulgaria, for a summit that is both less and more than it seems.

It is less because the so-called "16+1" has, as a group, accomplished little of consequence since it was formed in 2012. But as a vehicle for bilateral Chinese influence in individual countries inside the EU and on its eastern borders, it is more important than its bland statements appear.

It is a serious Chinese power play to build a bigger economic and political presence in Europe and undermine EU unity. It warrants a stronger trans-Atlantic response from Brussels and from Washington.

At first glance, it is tempting to dismiss the "16+1" as a hollow talk-shop. Confusion about the group's purpose is evident in the struggle to describe it. It has been called a mechanism, a format, a framework, and a platform, among other things. It mixes together EU and non-EU members. To the extent the group agrees on anything, that is to tread carefully when describing its purpose. Almost every year, statements note that cooperation will be conducted in accordance with each country's "respective laws and regulations," an attempt to reassure Brussels that EU rules are not being undermined.

This week's gathering in Sofia is unlikely to break the mold, despite the expected presence of Chinese Premier Li Keqiang and a large Chinese business delegation.

But what all these labels for the "16+1" fail to capture is China's ability to effectively exercise its power bilaterally under the cover of a multilateral veneer. In statements, the grouping affirms its commitment to openness and transparency. In practice, however, China's checkbook favors governments where investment rules are less transparent and open. Most of the time, the 16+1 equals two: China and the smaller country with which it's negotiating.

It's an equation that has worked well for Beijing, which has used its economic power to divide the EU's current membership and deepen roots in candidate countries. In 2016, Hungary, Croatia, and Greece, which is an observer of the 16+1, helped soften an EU statement on China's claims in the South China Sea. Similar tactics have blocked criticism of China's human rights record. More recently, along with these countries, the Czech Republic has been skeptical of a proposed EU-wide foreign investment screening mechanism.

The "16+1" grouping has also become a bridge for China's Belt and Road Initiative. Like several other activities that pre-date the BRI, the "16+1" has been positioned under the BRI's ever-expanding banner. But unlike some of the BRI's more questionable additions, such as museums and marathons, the linkage is much clearer. Europe's markets are the prize at the end of China's longest overland corridors, which must pass through Central and Eastern Europe.

But the EU has not been easy to enter. Unlike other places China's BRI stretches, in the EU, China has a higher bar to clear and less leverage for negotiating. EU rules require that infrastructure procurement is open for competitive bidding. EU countries also have better access to alternative investment sources. China has been required to move away from its preferred approach, offering loans that require using Chinese firms, and compete more directly for contracts. It is struggling but learning.

The handful of Chinese infrastructure projects that have broken ground in the EU have generated controversy. Last year, the EU launched a probe into the procurement process for the Hungarian section of the proposed Belgrade-Budapest railway. Chinese groups are building the Peljesac Bridge, their first EU-funded project, which will link Croatia's mainland with an isolated peninsula, circumventing the need to drive through Bosnia and stirring up unresolved border issues. At Greece's Pireaus port, which is Chinese-owned and operated, EU investigators suspect Chinese gangs are underreporting the value of imported goods.

For each of these projects that did start, there are countless others that remain aspirational. For example, during his visit to the Czech Republic in 2016, Chinese President Xi Jinping proposed building canals linking the Danube, Oder, and Elbe rivers. If completed, they would allow ships to travel from the Baltic and North Seas to the Black Sea. The idea was not China's, nor was it new, having been proposed in various forms for hundreds of years. That sense of history and sheer scale seemed a natural fit for China's BRI ambitions, and the insatiable appetite of Chinese construction companies. But after some initial fanfare, little has occurred.

Facing greater scrutiny within the EU, China has trained its financial firepower on the five non-EU members in the "16+1." Collectively, the five non-EU economies (Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia) have a GDP that is roughly one-sixteenth of the 11 EU economies. Yet in 2016 and 2017, they received roughly half of Chinese investment across the 16 economies in transport infrastructure, energy, real estate and M&A deals, according to data collected by the CSIS Reconnecting Asia Project. By establishing a foothold in prospective EU-member economies, China is positioning itself for greater influence within the EU.

The European Union and United States could fashion a stronger response with a mix of carrots and sticks. They could make more infrastructure funding available for EU candidate countries that are willing to implement open tenders and meet certain quality standards. The pot could start small and grow after candidate countries demonstrate they can meet the agreed upon criteria. Violations would result in fund reductions or suspensions. Washington and Brussels could also increase technical assistance to help recipient countries evaluate investments and large infrastructure projects.

Admittedly, these countries - as either present and aspiring EU members - already receive substantial economic aid from Brussels, including for infrastructure. But this is a competitive situation in which resources matter much more than rhetoric. Criticizing China's approach without providing alternatives and extra assistance will change little.

During a time of escalating trans-Atlantic trade tensions, Central and Eastern Europe could even provide a common ground for economic cooperation. That will require the U.S. to pay more attention to these developments. The primary U.S. response to China's BRI is support for a "free and open Indo-Pacific" region, which misses a large sweep of the overland "Belt," that includes corridors stretching through central Asia into Europe. A stronger trans-Atlantic response to the BRI, forged on Europe's periphery, could be extended to third markets elsewhere, including central Asia and the Indo-Pacific.

As a Chinese proverb warns, "While keeping a tiger from the front door, a wolf enters by the back door." If the EU is focused on protecting its current membership, and the U.S. is focused on the Indo-Pacific, China will continue moving into the Balkans.

Jonathan Hillman is director of the Reconnecting Asia Project at the Center for Strategic and International Studies in Washington, D.C. Find him on Twitter @HillmanJE.

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