Building bridges between China and CEE

Balancing Sino-Croatian ties amid competing EU and BRI rules

Kristijan Kotarski, an assistant professor of International Political Economy, University of Zagreb, Croatia

The European Commission and the High Representative of the European Union for Foreign Affairs and Security Policy recently called China a "cooperation partner" as well as "systemic rival" promoting alternative models of governance. By doing so, they have set out an overarching framework for China-Croatia economic and political relations, notwithstanding the fact that China has refrained from promoting alternative models of governance.

This has raised several competing questions for Croatia, as it is a European Union member state as well as one of the 15 EU countries which have joined the Belt and Road Initiative.

It is important therefore to analyze the range of policy options and financial resources available to Croatia as a member of the EU and the BRI. First, the EU's overall funds for infrastructure and economic development offered through European Structural and Investment Funds are much larger and cheaper for the recipient countries, especially since they come in the form of grants as opposed to loans. But those grants are regulated via a clear set of administrative rules, while Chinese diplomacy is more flexible but also more opaque.

Also, investor-state dispute settlement procedures between two EU states are more precise because of the existing bilateral investment treaties, especially if their claims are brought under the auspices of the International Centre for Settlement of Investment Disputes. So the Belt and Road Initiative should have coherent procedures related to investment disputes between China and EU countries.

Besides, EU countries are guided by their adherence to the EU's rules on state aid and government procurement. Now, the EU has added a common screening procedure to assess whether foreign direct investment from third-party countries constitutes a strategic and public security threat.

So it is important for Croatia to boost the EU's common negotiating position so as to ensure transparency, reciprocity and nondiscrimination when it comes to market access and legal security. Only this can lead to fruitful outcomes in the long run: leveraging common resources and boosting economic exchange.

But despite the aforementioned frictions which should be handled within the EU-China negotiating forum, there is a plenty of space for improving Sino-Croatian trade ties through Central and Eastern European countries' joint initiatives, and bilateral summits between Croatian and Chinese leaders.

Croatia's exports to China, however, are still meager, just more than $150 million, while imports total over $1 billion. Croatian stakeholders are also to blame for missing out on the opportunity to cash in on the further opening-up of the Chinese market and not taking joint initiatives with other CEE countries to pool resources.

And although Chinese FDI in Croatia has increased in the past two years, Croatia can still take new measures to attract more FDI, by eliminating red tape and administrative inefficiencies for instance.

Narratives vs actions in EU-China ties

Iulia Monica Oehler- incai, a senior researcher at the Institute for World Economy of the Romanian Academy

China has been advocating a community with a shared future for mankind and win-win cooperation on the global front. This has made China's development model gain more and more supporters worldwide, which even the US and the EU have come to realize. China is also building up on its competitive advantages to become a fully developed nation and a world leader in science and technology by 2050.

But despite these facts, many have called the China-proposed Belt and Road Initiative a "debt trap" and the 16 1 mechanism a "Trojan Horse".

The EU wants to deepen trade ties with China, as underlined in the "EU-China－A Strategic Outlook" document issued last month. But since it also sees China as a "systemic rival" promoting alternative models of governance, it can make large concessions only in some areas while making smaller ones in others, and no concessions at all in sectors of national security.

Still, the CEE countries are ready to intensify cooperation with China. Most of the euroskeptics among the CEE countries are trying to evolve and shed their status as dependent market economies and have a stronger voice inside the EU, so they can strengthen trade and investment ties with China.

All the CEE countries participating in the 16 1 mechanism have signed memorandums of understanding with China in order to jointly advance the Belt and Road Initiative. It's true that the 16 1 mechanism needs more substance in terms of implementation of large-scale projects. Even the CEE countries have strong critical voices against China, which cite the difference between the expectations and achievements of the 16 1 mechanism. But more people-to-people exchanges, the China-CEE Investment and Trade Expo in Ningbo, Zhejiang province, and a more intense direct contact with Chinese high-quality and innovative products have already become a reality.

The "new centrality of the Mediterranean" in the global maritime traffic is also due to China's presence in the region. Similarly, the North Adriatic Port Association, Via Carpathia (a planned transnational network connecting Klaipeda in Lithuania with Thessaloniki in Greece), the Three Seas Initiative (a forum of 11 CEE countries and Austria to establish trade connectivity through the Adriatic, Baltic and Black seas), the EU's Danube Strategy and other projects might be better off with China as their partner. China's active presence in the region is not against European unity. On the contrary, China needs a united and prosperous Europe. It is ready to develop infrastructure linkages both on land and at sea, a precondition to economic growth. China, as the "world's factory", has the capability and willingness to also build mental bridges. China's narratives have been always accompanied by constructive actions. This does not mean that it wants to replace the existing partnerships but to complement and even strengthen them.

So far, so good for Sino-Serbian ties

Dusan Prorokovic, executive director of the Center for Strategic Alternatives in Belgrade

China-Serbia cooperation has been gaining momentum. In the economic field, two more major Chinese investments have been made in Serbia since the last 16 1 summit.

In addition, Hisense has bought Slovenian electronics equipment manufacturer Gorenje and relocated the entire production unit from Slovenia to Serbia. Chinese projects in Serbia are starting to be measured not in millions but in billions of dollars.

Chinese investors are looking at Serbia as a desirable destination. And the measures taken by the Serbian government to attract Chinese companies are producing results. Also, new forms of cooperation are being discussed in areas such as energy (wind parks), infrastructure (railways and highways) and agriculture, as well as investments in greenfield projects.

The Serbian people, too, support further intensification and expansion of relations with Beijing. And Serbia supports Chinese initiatives in international organizations.

In this context, Serbia sees the decision of the Italian government to join the Belt and Road Initiative as an encouraging sign.

In many European countries Chinese investors have been welcome but those countries' political relations with China have remained tight. But in Serbia, the opposite is true: political relations have been excellent but for long they have not been accompanied by deepening economic cooperation. As such, many in Serbia (which is a candidate for EU membership) feared the country would invite the wrath of the EU or its leading members－Germany and France. But after the recent visit of President Xi Jinping to Italy, Monaco and France, it seems China and the EU are moving toward building better political relations.

Recently, Steve Bannon, former White House chief strategist, told reporters in Rome that "China, and not Russia, is a fundamental threat to the Western world". And during the celebration of the 70th anniversary of NATO in Washington, came the message: "In order to survive the next decades, the Alliance must think more about the threat from the East."

China baiters will try every possible trick to pressure European countries to rejig their relations with China. Serbia is not a NATO member, but since it is surrounded by NATO members, it might be influenced by NATO's policies. So the US' NATO and China policies can have negative effects on Serbia.

It is therefore necessary to undertake regional political initiatives in a timely manner in order to amortize in advance any attempt to misuse NATO. Serbia has the capacity to do so, and with the diplomatic support of China, a series of new projects can be initiated in the Western Balkans to avoid negative effects. The bottom line is, we need to strengthen relations with China. And the fact that everything looks good for us now should not make us complacent.

Bulgaria-China relations gaining momentum

Evgeniy Kandilarov, an associate professor at Sofia University "St. Kliment Ohridski", Bulgaria

Thanks to the development of a multipolar model for international cooperation, and economic and information globalization, Bulgaria is now engaging with a much more complex world.

Since the importance of the Belt and Road Initiative will increase for the EU as well as CEE countries, especially Bulgaria, the Bulgarian government should assess the new geopolitical reality with all its possibilities, disadvantages, shortcomings, advantages and opportunities.

Traditionally, Bulgaria has seen itself as a bridge between Europe and Asia with a number of geopolitical and geo-economic advantages whose importance is expected to grow and thus attract more foreign investments. That's why Bulgaria can be a valuable partner in the 16 1 mechanism.

Although Bulgaria's "strategic geographical position" was often included in various official comments, until last year its importance in the initiative had not been highlighted. Bulgaria is part of the 16 1 mechanism, but until last year its participation was quite formal, often lurid and generally passive.

Another worrying fact is the lack of a practical and sustainable strategy for developing Bulgarian foreign policy and relations with non-EU countries. While expert and positive advice can unite the political elite, it is currently lacking. For example, Bulgaria's foreign policy priorities for the 2017-21 period focuses on Euro-Atlantic integration, without paying much attention to the rest of the world.

But following the last 16 1 summit in Bulgaria, there are enough reasons to believe Bulgaria has expedited efforts to strengthen relations with China, by implementing the commitments it made at the summit.

In March, Bulgaria's Cabinet approved the signing of a memorandum of understanding with China to establish a "Global Partnership Center" in Sofia. The MoU is expected to be inked at the eighth 16 1 summit in Dubrovnik, Croatia, on Friday. The Global Partnership Center will have various functions, including conducting and coordinating research to promote sustainable economic cooperation and partnerships between the 16 1 participants.

The center is also expected to help the 16 CEE countries to better understand the laws and regulations in China, as well as establish a network of contacts between institutions, trade and business associations, and enterprises from the CEE countries and China in order to facilitate business contacts and information exchange. That's why the Bulgarian prime minister said the Global Partnership Center will help more Chinese companies and investors to enter the European market by meeting the EU's requirements.

Seeking cooperation beyond cultures and borders

Katarzyna Anna Nawrot, a member of the Committee of Future Studies, Polish Academy of Sciences

The 16 1 mechanism was established in 2012 as a platform to promote cooperation between the 16 Central and Eastern European countries and China. But the 16 CEE countries have wide differences. To begin with, many of them are EU members while the rest are not. And although many of the CEE countries have a lot in common, they still have different historical backgrounds and cultures.

Also, the 16 CEE countries had no real cooperation among them before the 16 1 mechanism was established, except for bilateral relations and competition to get better deals with China. And their cooperation overlapped the interests of the EU and China.

So is there a common platform on which the 16 countries can seek real cooperation by shelving their existing differences? The EU-China cooperation mechanism can provide such a platform, as they seek more effective collaboration at the economic, political and people-to-people levels. The 16 countries could also seek dialogue and collaboration with China on issues such as security, environment, urbanization challenges, aging populations and deeper understanding despite their cultural differences, preferred economic systems, and even historical and territorial disputes.

In these uncertain times, the vision of looking beyond borders can lead to peaceful coexistence, development and economic progress.

But the policies of the 16 CEE countries toward China should not be inconsistent with the EU's common interest. The launching of "Trade, Growth and World Affairs" as a core component of the EU's 2020 Strategy indicates the importance of gaining access to the fastest growing world economies, China in particular. So there is a need for an elaborate strategy toward China as part of the common European vision.

To strengthen cooperation between China and the EU, it is necessary to strengthen common trust and understanding in the region. The initiatives taken in the field of culture and people-to-people dialogue, including EU-China cooperation on people-to-people exchanges, can help bring the countries closer.

European countries should work together for a more united, stable and strong Europe, in order to deepen cooperation with China. And the 16 CEE countries should act as a bridge between China and the EU, which will also help strengthen European unity. Multilateral and multiparty cooperation is also crucial for China, and only multilateral cooperation based on international rules can help build a better future for all.