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International relations

Prospects for China money in central and eastern Europe chill

Doubts about Beijing mount as Xi prepares to host 17+1 summit

President Xi Jinping will host this year's 17+1 summit in Beijing for China's central and eastern European investment partners, but observers see anti-Chinese sentiment rising among them.    © Reuters

PRAGUE -- Chinese President Xi Jinping recently decided to personally host April's 17+1 summit -- a cooperation initiative between Beijing and 17 states in Central and Eastern Europe. While his presence would ordinarily be seen as a sign of the venture's significance and vitality, China's relations with its European partners are not prospering so well.

The annual summit was begun in 2012 to promote China's relations with Europe and extend its signature Belt and Road Initiative (BRI). Along with China, it now includes 12 nations in the EU and five outside. Southern Europe's Greece also joined last year when Premier Li Keqiang was host. 

On Jan. 12, Czech President Milos Zeman -- formerly one of Europe's loudest champions of closer relations with China -- announced that he will not be in Beijing for the 17+1 summit. He has been lambasting China for failing to keep its considerable investment promises. Indeed, between 2013 and 2019, Chinese investments and contracts in the Czech Republic were almost twenty-five times smaller than Italy's, according to the American Enterprise Institute's China Global Investment Tracker.

It is not just the Czech Republic. Political and public sentiment is increasingly skeptical around Central and Eastern Europe over how close relations with China should be. Analysts speak of a profound failure by Beijing to solidify relations through the 17+1 initiative.

Because of security fears, Poland, the largest country in the 17+1 group, has sided with the U.S. to prevent Chinese tech giant Huawei from developing its 5G network. The country's Cyfrowy Polsat, the largest satellite television network in the region, even canceled a contract last year for Huawei to create its billing system. Other countries in the region such as the Czech Republic and Romania might also back away from using Huawei equipment for their 5G network infrastructure.

Slovakia's new president, Zuzana Caputova, has been increasingly outspoken on human rights issues in China. Romania's government was reported this week to be reconsidering a Chinese partnership to build reactors at its Cernavoda nuclear power plant.

For many Central and Eastern Europe states, the disappointment with China simply comes down to money. Last year, the U.S.-based Center for Strategic and International Studies estimated in its Reconnecting Asia Project that between 2012 and 2019 China invested $15.4 billion in the 16 European states excluding Greece. Almost 70% of those deals were with the five non-EU member states, all in the Balkans -- Albania, Bosnia and Herzegovina, Serbia, North Macedonia, and Montenegro.

As a result, some see a chasm widening between EU and non-EU 17+1 members. Among the EU states, there is a "general realization that China is not going to be a new big investor in the region," said Richard Q. Turcsanyi, a program director at the Central European Institute of Asian Studies at Palacky University Olomouc in the Czech Republic.

One important factor is that most EU states already have good access to investment and loans from Brussels, making the non-EU states more amenable to Chinese investment. Last year, the Bosnian parliament approved an 870 million euro Chinese-funded thermal power plant, the country's single largest postwar investment project.

A Pew Research study in early 2019 found that of six Central and Eastern European countries surveyed, the median favorability of China (43%) was higher than the global median, but opinions varied greatly. For example, some 57% of Czechs viewed China unfavorably compared to only 20% of Bulgarians. Even in countries like Hungary, where China is viewed quite favorably, the study found antipathy has grown in recent years. 

It is generally said that anti-China sentiments increase the further west one goes in Europe. But Jukka Aukia, a researcher at Finland's University of Turku, has found that even in 17+1 Baltic states Estonia, Latvia and Lithuania, there are "some signs of frustration" over unmet investments despite there probably having been "realistic expectations."

There are also some more temporal reasons. A $1.5 billion loan from China to Montenegro last year for construction of a high-speed railway has pushed the national debt to 80% of GDP, up 17 percentage points from 2012. With Montenegrin land offered as collateral on a possible government default, there is much talk of the country falling victim to a so-called Chinese debt trap.

According to Turcsany, it looks like China has "missed its opportunity" in Central and Eastern Europe despite regional enthusiasm after the 2009 financial crisis and the lure of BRI riches. "China did not understand the political, economic, and social reality in the region," he said. He noted that Beijing has basically handled the region in the same way it has dealt with Africa, Latin America, and other parts of the developing world.

Tellingly, China typically invites presidents to the annual summits, yet most European presidents are symbolic heads of state with little political authority at home. There can also be confusion over political chains of command in Europe. After Prague's mayor rebuked China for its human rights record and prepared to sign sister-city status with Taipei, Beijing leaned on the Czech government without appreciating its negligible influence over the city administration. "It seems to me that Beijing is either incapable or unwilling to understand what factors contribute to public opinion in the West," said Aukia.

The Chinese do often see things differently. Some journalists and scholars attribute the shifting opinion in Europe to an American conspiracy or bad faith on the part of the Europeans. "The Czech Republic is being impacted by the U.S. in the name of security or ideology," Yiwei Wang, director of the Center for European Studies at the Renmin University of China, told the Nikkei Asian Review. "China is very disappointed."

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