Enter the Dragon

15. 3. 2017

China’s unprecedented interest in Central and Eastern Europe is a great opportunity for structural development and a way to escape middle income trap for some countries. The success, however, is uncertain: the whole project may bring more bad than good for the region.

In regard of Chinese investments, Central and Eastern Europe is one the least affected regions in the world. The CEE has for long been absent and neglected in Chinese “going out” [zou chu qu] policy and the CEE countries still remain unknown, if not mysterious, for most of Chinese elites. Admittedly, Beijing initiated 1+16 formula in 2012, hoping to become a kind of foothold in the European Union—a good starting place for further expansion to the Western Europe (as well as a place to improve China’s image). This formula clearly did not work out, for grouping such different— on many levels from cultural to legal—countries must have been clumsy, and it indicated China’s lack of understanding and knowledge of the CEE region. Although China has developed bilateral relations with single CEE countries such as Hungary, Serbia, and Latvia (the most China-enthusiastic of all mentioned), when taken as a whole picture, the Chinese policy towards the CEE region cannot be considered successful. Naturally, in order to save face, Beijing did not admit the previous failure of the 1+16 formula—forums were organized and meetings were held—but the lack of substance, and perhaps a lack of enthusiasm in many CEE countries as well, was clearly seen.

This is supposed to change now with the inclusion of 1+16 format into the New Silk Road concept (the Silk Road [Xin Si Luo], or One Belt, One Road [Yi Dai Yi Lu], announced in September 2013 in Astana, has recently become China’s most important foreign policy project). As with other projects, 1+16 was simply incorporated into the New Silk Road agenda (the New Silk Road became one superstructure, an umbrella for several already existing or proposed projects and investments throughout the world). This move revived China-CEE cooperation and helped (perhaps) to conceal the previous failure of 1+16 formula. China considers CEE as a potential hub and, interestingly, more and more regional countries start to share this vision by believing in opportunities connected to it.

The “new spirit” in China-CEE relations was present at the November 2015 1+16 meeting at Suzhou, which saw adaptation of the “Suzhou guidelines,” plan for cooperation until 2020, proposal for creation of new infrastructure bank for CEE, focus on development of transport infrastructure, logistics, agriculture, and plans for closer industrial cooperation (in the spheres of manufacturing equipment for transportation needs). “The Chinese did their homework with CEE,“ says Radosław Pyffel, director of Poland- Asia Research Center (Poland’s only think-thank on Asia), who was present at 1+16 summit in Suzhou, “now the Chinese know what they want from our region and how to achieve it.” Chinese plans here basically center on business development and investment. Beijing hopes for a boost in Chinese infrastructure exports, which is an important domestic task, since China owns world’s largest infrastructure industry and needs to keep it employed—the CEE region is a good place for export sales. So is it business only?

Not quite. The Chinese plan of cooperation may shape the economic structure of the CEE region and create a new vision of development, something desperately needed when some of the CEE countries are still very poor, whereas others figure out how not to fall into the middle income trap. Moreover, China’s entering into CEE may change the geopolitics of the region. Jacek Bartosiak, a recently very popular Polish analyst from Washington’s Potomac Foundation, likes to point out that China’s interest in the CEE means a giant opportunity for the region to achieve „the third structural source of capital inflow” (after the first one in 1989 and second one in 2004), and the possibility of building a north- south transportation line (projects linking the Balkans with the Baltics, like Via Carpathia), which would help accumulate the capital in the region. According to him, the most important consequence of the Chinese projects in the region lies in overcoming structural obstacles that the CEE faces in the current EU-dependent development (“the Chinese would help us do what the Germans don’t allow us to do”). Bartosiak, evoking concepts of classical Mackinder’s’ geopolitics, goes as far as to predict that the New Silk Road will reshape the geopolitical fundaments of the world. According to this point of view, by building the transcontinental infrastructure for the economic integration of the Eurasia from within, China will shift the locus of geopolitical power away from the West and deep into Eurasia. In other words, China wants to overturn the global dominance of the Western sea-powers in favor of a continental power— China. This means reversal of the consequences of geographical discoveries and colonialism, or in plain language: the end of Western hegemony. Although this kind of prediction may seem exaggerated, even very down-to-earth governmental analysts, such as Marcin Kaczmarski from Polish Center for Eastern Studies (OSW), notice that the New Silk Road concept is “in the long term becoming an element of the construction of the Chinese international order, which is alternative to the one dominated by the United States.”

Personally, instead of using theoretically vague language of geopolitics, I prefer to make use of dependency theory and Immanuel Wallerstein’s concepts of core, semi-periphery, and periphery. In this “world-system,” the Central and Eastern Europe countries form classical semi-peripheries: they must keep themselves from falling to the category of peripheral nations and at the same time strive to join the category of core nations; they are relatively developed and have diversified economy, but are not dominant in international trade and tend to export more to the peripheral nations and import more from the core nations in trade; finally, they act as a buffer between cores and peripheries. What is even more important, the formation of Wallerstein’s world-system (in the “long” sixteenth century 1450–1640), or the shifting of the global epicenter of power from continental Eurasia to maritime sea-powers, had pushed Central and Eastern Europe’s kingdoms out to the margins of Europe, and consequently to the margins of global world. However, contrary to what many Anglo-Saxon analysts tend to take for granted, Western dominance is neither natural, nor permanent state of global affairs. It is easily forgotten that until the 16th century (or maybe even until the 19th century) the global center of power has been in Asia, not in Europe. It was there, where most dynamic global empires existed, and it was the contact with Asia that gave West its power and dominance (as Indian historian K.M. Panikkar brilliantly showed in his forgotten book Asia and Western Dominance). Janet Abu Lughod in her thought-provoking book Before European Hegemony: The World System A.D. 1250–1350 went as far as to show that before the emergence of modern world system there was a pre-modern world system, which stretched across Eurasia in the 13th century. The Mongol Empire stitched together the Chinese, Indian, Muslim, and European regions in the 13th century. Only later, after geographical discoveries and colonialism, the global epicenter shifted in favor of Western sea-powers. So now, if China is able to overthrow the world system again, back to the dominance of Eurasia, then Central and Eastern Europe would be affected beneficially. In other words, the geopolitical result of successful implementation of New Silk Road means reversal of the negative consequences of geographical discoveries and colonialism.

But for now, these are only dreams. One must come down to earth. Firstly, the New Silk Road is far from being concrete. Its main objectives are not clearly defined and its nature is imprecise. Some Chinese analysts, like Shen Wei, say that this project is planned for generations and for decades—this kind of statement raises questions whether it is real at all. It may turn out to be a simple propaganda tool aimed at the domestic population without substantial effects on Chinese foreign policy. Secondly, there are objective problems that may be crucial obstacles to the development of existing railway connections between China and Europe (the core of the New Silk Road land section’s concept, or the One Road part), such as customs procedures, differences in railway systems, the lack of goods that could be exported to China, and the fact that it is still cheaper to send containers by sea. Thirdly, China is undergoing domestic turbulences: “waking up from the Chinese dream” as Bogdan Góralczyk, Poland’s top Old China Hand, summarized it. He writes that the stock exchange crash and mini-economic crisis from summer 2015 forced the Chinese leadership to turn to pragmatic economists like Chi Fulin again, instead of believing Liu Mingfu and other “dreamers’” tales of “post-American order.” Góralczyk suggests that the revisal of Deng Xiaoping’s “do not raise your heads” [bu dan tou] policy done by Xi Jinping was premature and Beijing now faces hard reality. It must return to low profile policy instead of challenging US leadership. Fourthly, CEE has no influence on the US-China competition/rivalry, it is only a spectator of it. So far USA “can live with 1+16” as Salvatore Babones put it, but should the Chinese influence increase, Washington may find Central and Eastern Europe —given its luck of political subjectivity—a good place to block China’s further development. Moreover, contrary to Russian expectations, CEE leaders should hope and pray (they can do nothing more) for peace in Asia-Pacific, for any deterioration in US-China relations, let alone conflict, means growing possibility of another US-Russia reset, which could effectively cancel the whole New Silk Road idea. In the unstable conditions of current global political situation nothing is sure and to be taken for granted. Fifthly, the CEE region is not a united entity. Central and Eastern European countries have different, or even contrary, interests that make establishing a common agenda on China very difficult. The very attitude towards Russia may dash all hopes for unification of the region under one idea—be it political or economic—and this is not the only example. This lack of unity vis–a–vis China means that rivalry for Chinese investments between CEE countries, not cooperation or partnership, is a more likely scenario. Sixthly, out of all CEE countries probably only Hungary, Latvia, and Serbia (as well as the Czech Republic and Estonia to lesser extend) have a comprehensive China policy (and even this is not certain), but these are national policies only, not regional. The CEE lacks any vision of cooperation, any clear idea of how the region sees Chinese plans, and what common policy are the CEE countries planning to conduct with regard to Beijing.

Furthermore, China’s projects raise questions whether it is a chance or a threat. Poland has its own bad experience with Chinese investments (a Chinese company, Covec, after disagreeing with Polish partners, abandoned the A2 highway; this action has ingrained itself in Polish social psyche and strengthened the anti-Chinese resentments, already present due to ideological reasons), and this experience is not an isolated one. The danger with Chinese investments lies in the very nature of it. China is not a charitable organization and cares for its own profits only: its strategy aims at choosing the best existing companies and taking them over as well as creating the necessary infrastructure for Chinese commercial purposes, it is not interested in large greenfield investments, so needed in CEE. This factor, combined with the general lack of CEE experience in making business with China (unawareness of Chinese business philosophy and practice, very different from European), makes cooperation with China risky on one ground. Unless the CEE region knows what to want and how to cooperate with China, CEE risks the following scenario: the Chinese would build railways, roads, bridges, and ports, using Chinese labor for Chinese capital, Chinese goods, and Chinese profits. In that case, ultimately, CEE would rather lose than win on cooperation with China. If CEE cannot handle Chinese investments properly, it risks following the example of Africa. So the final outcome of “Chinese entry” into CEE for the region depends mostly on its abilities to deal with China and with Chinese companies.

Finally, China’s entry into Central and Eastern European region politically means a structurally new situation. Regional leaders will now be forced to play their political games for their countries on three different boards. The first board is security. Here the most important task, despite different regional approaches to Russia, is to strengthen US military involvement in the region (or weaken US willingness to leave Europe and focus entirely on Asia-Pacific). The second board is economy, or European Union. The CEE leaders must keep, come what may, the structural and financial support from the EU, despite deteriorating conditions such as financial and migrant crisis, and steady dissolution of the Union. The third board is China entering Central and Eastern Europe. Here the challenge lies in making use of this chance to escape middle income trap instead of being exploited. These three boards sometimes overlap each other, sometimes are contrary to one another, and at other times are supplementary. In these conditions, playing the game requires not only political skills, but also, indeed, sophistication in the spirit of the Chinese game of Go [weiqi]. It remains to be seen whether the CEE leaders can master it quickly.

Michał Lubina

holds a PhD in political science from the Jagiellonian University in Krakow and is the author of “The Bear Overshadowed by Dragon. Russia-China 1991-2014”, the first book on contemporary Sino-Russian relations in Polish (soon to be published in English) as well as three books on Burma/Myanmar, including the only biography of Aung San Suu Kyi in Polish. He is also the author of Russia and China: A Political Marriage of Convenience – Stable and Successful (Budrich 2017).

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