The 16 + 1 initiative: judged too quickly?

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The 16 + 1 initiative is seen as a Chinese Trojan horse awaiting entry into the European Union

The 9th largest country in Central and Eastern Europe Mountain peak in February of this year President Xi Jinping highlighted the growth in trade between China and the countries of Central and Eastern Europe (CEECs), his intention to import more than $ 170 billion in goods from the region and the continued promotion of the vaccine cooperation. At the same time, six of the twelve participants EU member states sent their ministers, not heads of state, as representatives to the top. This may indicate the different levels of importance the two groups have placed on the cooperation, with China hoping the framework moves forward as Central and Eastern European countries grow increasingly unhappy with the outcome of the ‘commitment.

Created in 2012, the Sino-CEEC cooperation is an initiative to promote economic and trade cooperation between China and the 16 Member States, namely Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary , Latvia, North Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia, with Lithuania having recently left the partnership. Central and Eastern Europe is located at the crossroads of Europe and Asia, a strategic location between Russia and the Middle East. Its geopolitical importance was first drawn to Halford Mackinder with his Theory of the Heartland: “He who rules Eastern Europe controls the Heartland; the one who governs the Heartland commands the Île-du-Monde; he who governs the Island-World commands the World.

Central and Eastern Europe is located at the crossroads of Europe and Asia, a strategic location between Russia and the Middle East. Its geopolitical importance was first brought to attention by Halford Mackinder with his Theory of Heartland.

A little different cooperation

Cooperation has faced heavy critical over the years, with European diplomats considering it as a Chinese tool for divide and rule. On the other hand, there has been growing discontent among the countries of Central and Eastern Europe over the mixed outcome of their economic engagement with China, thus reducing China’s influence in the region. Ten years after its creation, the question surrounding the 16 + 1 initiative remains the same; is it used as divide and impera tool from China, or is it just practical cooperation receiving unwarranted attention?

In a way, it is an important platform for promoting the Belt and Road Initiative. The countries of Central and Eastern Europe act as a strategic link between Western Europe and Asia, thus making the 16 + 1 initiative conducive to the success of the BRI. The difference is in the structure and in the fact that China does not have as much control as it usually does with partner countries. In addition, the BRI mainly focuses on the digital sector, connectivity-transport and energy, while the 16 + 1 is multisectoral and multi-actor.

The depth of China’s geo-economic influence

Despite the funding provided by the European Union and international financial institutions, there remains a funding gap in the countries of central and eastern Europe which cannot be filled without acquiring resources from third countries. This is where China comes in, present an attractive package devoid of any institutional obstacle and with rapid implementation.

Politicians on both sides tend to inflate the impact that Chinese investments have had in the region. The majority of member states have had relatively low trade with China, its unbalanced nature creating a growing trade deficit worth US $ 75 billion.

In terms of infrastructure development, China-CEEC cooperation has been divided due to EU membership. The five non-EU countries, Serbia, Albania, Macedonia, Montenegro and Bosnia and Herzegovina, warmly welcomed the Chinese-funded projects worth around 6 billion euros. Loans from the Exim Bank of China have been used to finance highways, coal-fired power plants and railways in the Western Balkans. The reason for the popularity of the Chinese funding model is the dark nature of funding from the European Bank for Reconstruction and Development, the World Bank, and the Russian Line of Credit to Serbia.

On the contrary, none of the infrastructure projects announced for the remaining 11 EU member countries went beyond paper and political declarations. Projects signed in 2013 have not even started, the Belgrade-Budapest railway being the only exception. Chinese investment remains modest at 3% of China’s total FDI in the EU in 2019, a level still well below the weight of the region in the EU’s GDP. While China has successfully secured tenders for infrastructure development projects, it may act simply as an entrepreneur but not as a lender or investor.

The reason for the popularity of the Chinese funding model is the dark nature of funding from the European Bank for Reconstruction and Development, the World Bank, and the Russian Line of Credit to Serbia.

The reason for the reluctance of member states is the incompatibility of the Chinese funding model with EU law. Second, unlike its counterparts in the Western Balkans, Chinese investment is just one more option for EU countries, and not their saving grace, as they have an attractive alternative in the form of loans. cheap and transparent from EU countries. European Investment Bank.

The table below shows how, although there are generous amounts of investment, FDI is not synonymous with a real inflow of capital. All Chinese companies are considered part of Chinese direct investment. This implies that when a Chinese company acquires a multinational, the branches of this multinational present in the countries of Central and Eastern Europe would henceforth be considered as Chinese investments.

Source: Center for Asian Studies in Central and Eastern Europe

Why PECO?

Cooperation is seen by many as a tool to divide the EU. Doubts have arisen because China offers loans, not investments. Loans are provided by public institutions which generally require sovereign guarantees, thereby transferring the investment risk to the borrowing country. A classic example is the motorway project in Montenegro, who has overwhelmed the country with massive debts to China which represent more than a third of the Montenegrin government’s annual budget.

A larger part of the initiative includes person-to-person participation in tourism, cooperation with think tanks, forums of young leaders and translations of literature. It grants direct access to the people, thereby helping China to build relationships with future decision-makers. There has been increased participation of the Chinese Communist Party in China-CEEC relations at the local level. Direct contact with these parties helps the CCP bypass diplomatic channels and official government contacts.

The EU has made its voice heard on its reservations about the initiative and its lack of transparency by calling on the 16 + 1 participants to ensure that the format “allows the EU to have a voice in its relations with China” and does not compromise national and European interests. They also materialized their concerns by formulating a filter mechanism assess future FDI in EU Member States. Although China is not the only investor in the EEC region, this step has been interpreted as being created mainly to more closely control future Chinese investments. The EU has also criticized the Western Balkan states, warning them that enhanced cooperation with China would move them further away from the prospect of EU membership. In addition, attention should be paid to the discrepancies in selection processes countries of central and eastern Europe.

The EU expressed reservations about the initiative and its lack of transparency, calling on the 16 + 1 participants to ensure that the format “allows the EU to have a voice in its relations with China” and does not not compromise European interests.

Accusations of the region being a ‘Trojan horseemerge from fears of China’s growing political influence over participating countries. In July 2018, former EU Commissioner for European Neighborhood Policy and Enlargement Negotiations Johannes Hahn warned against China’s turning the Western Balkans into Trojans that would eventually become members of the EU. In June 2017, Greece blocked an EU statement to the UNHRC which criticized China’s human rights record. A few months ago, Hungary refused to sign a letter denouncing the torture of lawyers detained in China. Although this is an alarming incident, these events have been individual cases rather than a common trend. On the contrary, the countries of Central and Eastern Europe are increasingly skeptical about their cooperation with Beijing. This can be seen by the way most of these states are taking strict measures to boost their 5G security and Romania cancellation of the nuclear reactor agreement.

Therefore, the accusations of a Trojan horse reinforce the feeling that, unlike their Western counterparts, the countries of Central and Eastern Europe are unreliable and unable to promote EU interests when engaging in external relations. It is ironic to criticize the states of Central and Eastern Europe for doing precisely what Germany and France are doing: pursuing their national interests when they engage with China. It is imperative to curb this mistrust, and the internalized east-west divide or the European Union could weaken, causing more problems for itself than China would..


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