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ВНЕШНЕЭКОНОМИЧЕСКАЯ ПОЛИТИКА КНР
DOI: 10.24411/2618-6888-2020-10017
K. Zakic
ECONOMIC OUTCOMES OF THE 17+1 PLATFORM FROM THE CHINESE POINT OF VIEW1
Abstract. Central and Eastern European countries (CEECs) had generally good diplomatic relations with the People's Republic of China in the late 1980s due to similar patterns of development and political systems. Circumstances changed somewhat during the 1990s due to the political and economic transformation in Europe, which placed some strain on this relationship. The CEECs were preoccupied with their transition from command to neo-liberal economy, while at the same time endeavouring to accede to the European Union (EU). Co-operation between the two sides changed direction once more after the global financial crisis in 2009, which resulted in greater Chinese presence in the region, both on the political and the economic level.
The 17+1 co-operation platform (formerly known as '16+1') was officially established in 2012 with the primary aim of improving China's
1 The paper presents the findings of a study developed as part of the research project entitled 'Serbia and challenges in international relations in 2020', financed by the Ministry of Education, Science, and Technological Development of the Republic of Serbia, and conducted by the Institute of International Politics and Economics, Belgrade.
bilateral relations with each of the CEECs. Late 2013 saw the creation of the Belt and Road Initiative (BRI), which the 17+1 platform was subsumed into.
The main aim of this paper is to present the results of economic co-operation between China and member countries of the 17+1 co-operation platform from the Chinese point of view. The paper will use data from the Chinese Statistical Yearbook, and, in summarising the results achieved, will examine the views of Chinese authors. The main parameters that will be analysed are trade, foreign direct investments, and Chinese investment in development projects in the CEECs.
Having quantitatively and qualitatively analysed Chinese official data and positions on economic co-operation between China and the CEECs, the author concludes that China has every reason to be — and indeed is — satisfied with the results achieved. Some aspects of this collaboration (trade and development projects) have been more successful than others (foreign direct investment), but the overall results are good.
Keywords: 17+1 platform, China, Central and Eastern European Countries, economy, results, Belt and Road Initiative (BRI).
Author: Katarina Zakic, Ph.D. (Economics), Research Fellow, Centre for Belt and Road Initiative, Institute of International Politics and Economics (Belgrade, Serbia). E-mail: katarina@diplomacy.bg.ac.rs
К. Закич
Экономические результаты работы платформы «17+1»: взгляд из Китая
Аннотация. В конце 1980-х гг. страны Центральной и Восточной Европы (ЦВЕ) имели с Китайской Народной Республикой в целом благоприятные дипломатические отношения в силу сходства моделей развития сторон и их политических систем. Ситуация несколько изменилась в 1990-е гг. по причине политических и экономических преобразований в Европе, спровоцировавших определенную напряженность в отношениях государств ЦВЕ и Китая. Страны Центральной и Восточной Европы встали перед сложной задачей перехода от командной экономики к неолиберальной, одновременно стремясь войти в состав Европейского союза (ЕС). Направление сотрудничества сторон вновь изменилось после глобального финансового кризиса 2009 г., в результате которого произошло расширение китайского присутствия в регионе как на политическом, так и на экономическом уровне.
Платформа сотрудничества «17+1» (ранее известная как «16+ 1») была официально учреждена в 2012 г. с главной целью улучшить двусторонние отношения Китая с каждой из стран ЦВЕ. В конце 2013 г. была провозглашена инициатива «Пояс и путь» (ИПП), в которую была включена и платформа «17+1».
Основная цель данной статьи — охарактеризовать взгляд китайской стороны на результаты экономического сотрудничества КНР и стран-участниц кооперационной платформы «17+1». В статье используются данные Китайского статистического ежегодника, а при обобщении достигнутых результатов рассматриваются подходы китайских авторов. Основными сферами, подвергнувшимися анализу, являются торговля, прямые иностранные инвестиции и китайские инвестиции в проекты развития в странах ЦВЕ.
Проведя количественный и качественный анализ китайских официальных данных и позиций по экономическому сотрудничеству между Китаем и странами ЦВЕ, автор приходит к выводу, что Китай имеет все основания быть удовлетворенным (и действительно удовлетворен) достигнутыми результатами. Некоторые аспекты этого сотрудничества (проекты в области торговли и развития) были более успешными, чем другие (прямые иностранные инвестиции), однако результаты этого взаимодействия в целом весьма успешны.
Ключевые слова: платформа «17+1», Китай, страны Центральной и Восточной Европы, экономика, результаты, инициатива «Пояс и путь» (ИПП).
Автор: Катарина Закич, доктор философии (экономика) (Ph.D. (Ec.), научный сотрудник, Центр инициативы «Пояс и путь», Институт международной политики и экономики (Белград, Сербия). E-mail: katarina@diplomacy.bg.ac.rs
Introduction
The history of diplomatic relations between China and Central and Eastern European countries (CEECs) has for decades been one of peace and co-operation. China established close relationships with some of these nations (Albania, Hungary, and Yugoslavia) as early as in the aftermath of World War II, whilst contacts with others may not have been as friendly but nonetheless always remained cordial (as was the case with Czechoslovakia). These bilateral relations saw many shifts throughout history, but
one thing was always certain: there were never insurmountable or threateningly serious disputes. This is likely one of the many underlying reasons why the traditionally good relationship between China and the CEECs improved again significantly in 2012 with the establishment of the 16+1 platform.
At the time, China was committed to pursuing its Going Global Policy, which constituted the first official declaration of the country's resolve to invest abroad. The policy was closely fulfilled, as was in previous times the Open Door Policy. Whilst the Open Door Policy allowed foreign capital to enter China, the Going Global Policy worked in the opposite direction: it allowed China to deploy its capabilities to invest in foreign countries, showcasing its determination to assert its economic presence beyond its borders. Its cautious moves to initially invest into geographically and culturally close nations (those of South East Asia) and those with which it had especially good political relations and needed their natural resources (such as Africa), proved unerring.
The CEECs, on the contrary, were not China's first choices when it came to investment. China was primarily interested in Western Europe and the United States, where Chinese firms could acquire companies operating in established markets and possessing excellent know-how, good management, skilled workforces, and stable purchasing power. These reasons were too attractive to be overlooked. This persistence paid off, and, in 2016, China saw record-breaking levels of outward investments worldwide. At the same time, China was able to increase its global trade on an unprecedented scale. It soon became the world's second largest economy, not only demonstrating its resilience in difficult times such as during the financial crisis and the SARS pandemic, but also improving its performance.
Why did China turn its attention towards the CEECs, and why did it choose this time to do so? The main reasons for the Chinese presence in Central and Eastern Europe (CEE) are:
• A sizeable market with a population of 129 million people;
• Reasonable opportunities to realise Chinese investment projects in these countries;
• CEECs are a bridge towards the European Union (EU) as most are EU members but not the bloc's top economic performers, meaning they
are easier to co-operate and negotiate with, and the remaining countries are also in the process of joining the EU;
• Members of this platform, except Greece, are all former socialist or communist countries that had been co-operating with China for many decades, mainly in the diplomatic sphere.
The timing was also important. China saw the situation at that time as a 'window of opportunity' that could be utilised [Liu. China-CEEC..., p. 10]. After the financial crisis broke out, the EU put all its efforts into addressing the issues faced by its members that needed the most help, namely Greece, Portugal, Spain, and Ireland. The new EU member states, mainly CEECs, did not receive attention immediately after the crisis began. This also meant that all new members' investment projects were postponed. Countries that had recently embarked on the EU accession process were also told to be patient and wait for the crisis to die down. These messages from the EU were received in the CEECs with concern, and, in some cases, resentment, as such response had not been anticipated.
This was the moment in which China saw its 'window of opportunity' to invest in the region, correctly surmising that these countries needed investment but could not afford it. Moreover, opportunities for trade also looked good, which constituted another benefit. China also realised the opportunity would not remain open for long and it needed to act quickly. It is important to emphasise that, even though the 16+1 platform structure may have formally been introduced in 2012, the preparations for it ran from 2009 to late 2011.1
Countries that became members of the mechanism at the time were: Albania, Bulgaria, Bosnia and Herzegovina, Croatia, Czechia, Estonia, Hungary, Lithuania, Latvia, Montenegro, North Macedonia, Poland, Romania, Serbia, Slovenia, and Slovakia. Greece joined in 2019, and the platform's name was changed accordingly to '17+1'.
The first ever Summit of Prime Ministers of the 16+1 countries was held in Warsaw, Poland (2012). Before the summit, China's former Prime Minister Wen Jiabao had identified four key points for future co-operation: (1) respect and equality, with deepening mutual political trust;
1 The first China-CEEC Trade Forum took place in the Hungarian capital of Budapest in 2011.
(2) strengthening of economic and trade co-operation; (3) closer cultural and people-to-people exchanges; and, finally, (4) joint efforts of the two sides to inject new vitality into China-Europe relations [Wen outlines proposals...].
In late 2013, the newly appointed Chinese President Xi Jinping proposed establishing one or several international initiatives under what was at that time termed the New Silk Road or the One Belt, One Road (OBOR). The idea was to build a new network of countries that would co-operate on new infrastructural projects to better connect China with Asia, Europe, and Africa. In the meantime, the idea was elaborated on in many ways, and regional involvement was broadened. As the idea of the 16+1 platform proved similar to that of the Belt and Road Initiative (BRI), the earlier mechanism was subsumed into the BRI. All countries that are now members of the 17+1 platform are also involved in the BRI.
Literature review
For the brief literature review publishing's by China-CEEC Institute, will be used. This institute has disseminated much Chinese research into this platform and its results, challenges, and opportunities.
Chen and Yang were among first to analyse economic co-operation under the 16+1 umbrella. The authors examined the correlation between economic co-operation and trade and business environments in the CE-ECs. Their main conclusions were: co-operation between China and the CEECs almost exactly matches their (CEEC) business environment; co-operation in investments and people-to-people exchange is at an outstanding level, followed by political co-operation, whilst trade and financial co-operation could be improved [Chen, Yang, p. 17—18].
Similarly, in a recent paper, Lin discusses co-operation between China and the CEECs through the lens of three economic indicators (trade, outbound direct investment, or ODI, and development finance). The author concludes that the extent of trade between China and the CEECs corresponds to those countries' roles in global trade chains: the better a country is integrated into these networks, the greater its volume of trade with China. According to Lin, Chinese ODIs in the CEECs are strategic-as-
set-seeking, in contrast to ODIs from EU countries, which are efficiency-and market-seeking. Lin believes this explains why Chinese companies invest mainly in the CEECs' traditionally attractive sectors. Finally, Lin's view is that using state resources to finance development projects is the traditional Chinese way of investing, and that this as a win-win situation for both parties involved [Lin, p. 24—26].
Discussing the broader links between the BRI and the 16+1 platform, Liu states that 'China hopes to receive an integrated response from the CEE region regarding its regional policy' [Liu. China-CEEC..., p. 12]. Liu also emphasises that the stability and economic development of the CEECs will have a positive impact on the future development of the EU, and that these countries' co-operation with China leads them in that positive direction.
Examining Chinese investments in the Balkans as part of the 17+1 platform and the BRI, Liu states that, notwithstanding China's unprecedented economic presence in the Balkans, these countries remain more closely connected to the EU, meaning China's involvement should not be exaggerated [Liu, 2019]. Liu also believes Chinese companies currently prefer investing in the Balkans as the region is seen 'the gateway to the EU market and the land bridge between China's Piraeus port and Central Europe [p. 104].
Having reviewed the literature dedicated to 17+1 co-operation, we will now turn to the analysis.
Economic results of the 17+1 platform: data and findings
The economic results of this regional organisation can be measured by the volume of trade, foreign direct investments, and investment projects in its area of coverage. These numbers should give us some insight into the platform's state of development and provide a perspective of where it is going. This paper uses data from the Chinese Statistical Yearbook, and will as such present an analysis from the Chinese point of view.
Chinese statistical methods for calculating the indicators listed above differ from those used in the West. As such, we will first briefly explain these methodological differences before presenting the actual findings of the analysis.
1. Trade
According to the Chinese Statistical Yearbook, 'export commodities are calculated at the Customs of the countries (regions) of destination and the import commodities are calculated at the Customs of the countries (regions) of origin' according to instructions of the 'Harmonized Commodity Description and Coding System (HS) stipulated by the Customs Cooperation Council (World Customs Organization)and China's reality of imports and exports' (CSY, Brief Introduction, 2015). Even though China's calculations follow international practice, there are major differences between its figures and those produced by Western countries. Noting the significant discrepancy between US and Chinese trade volume data, the Congressional Research Service Report (Martin, 2018) goes on to say: 'The greatest discrepancy is in the "eastbound trade" data, which accounts for 80—90 % of the overall difference in annual trade balance...can be attributed to goods that "leave China, enter the commerce of intermediate countries or regions, and then [are] re-exported to the United States" ' [Martin, p. 7]. Other factors that compound this problem, according to the same author, are differences in official definitions of exports and imports, definition of territory, timing, declaration of country of origin, value differences in direct trade, and under-invoicing [Martin, p. 5—6]. Those factors also contribute to the major discrepancies seen in statistics of the volume of Chi-na-CEEC trade.1
What do Tables 1 and 2 reveal about the volume of trade between China and the CEECs? Firstly, trade has increased on both sides, but growth on the Chinese side has been far greater. Secondly, of the 17 countries, only five decreased their trade deficits with China between 2012 and 2018, namely Croatia, Estonia, Hungary, Latvia, and Lithuania (highlighted in green in Table 2). Thirdly, only one country, Slovakia, has a trade surplus
1 For example, the 2018 Statistical Yearbook of the Statistical Office of the Republic of Serbia reported that Serbian exports to China amounted to US$ 92mn, while Serbian imports from China were valued at US$ 2.16bn [Statisticki godisnjak, 2019, p. 302]. By contrast, Chinese data shown in Table 2 indicate that Serbian exports amounted to US$ 72.8mn, whilst Chinese exports to Serbia stood at US$ 223.87mn. For statistical purposes, Serbia considers the country of origin to be the exporting country, so that many Western multinational companies' products made in China and imported into Serbia are deemed to be Chinese exports (and not those of the country where the multinational is based). This consideration goes some way towards explaining the huge discrepancy in trade volume figures.
with China.1 Fourthly, countries with the greatest volume of trade with China are, in decreasing order, Poland, Czechia, Hungary, Slovakia, Greece, and Romania. It would appear, then, that countries of the Visegrad Group (V4) trade with China the most extensively. Fifthly, countries that have significantly increased their trade deficits with China are Albania, Bulgaria, Czechia, Greece, North Macedonia, Poland, and Serbia.
Even though a number of European researchers have examined the same issue using a variety of data sources, their findings on global trend trade have been similar to presented findings [Szunomar A. et al., p. 41].
Chinese authors who focus on this aspect of 17+1 co-operation are aware of the current state of trade relations. According to them, the growth of trade is a positive development, and the 17+1 initiative has allowed many new CEE products to find their way to the Chinese market. For instance, Chen reports that China's trade with Central and Eastern European countries increased by 28 % from 2011 to 2017. During the same period, the trade volume between China and the 28 EU countries only increased by 8.5 %' [Chen, p. 4]. Chen's view is clearly that China has significantly increased its trade with the CEECs, especially when compared to EU countries.
Chinese researchers do note there are trade issues that need to be addressed, such as the huge trade imbalance that has been causing CEECs significant trade with China. Measures they propose for achieving greater balance include decreasing tariffs, ensuring CEEC products are better represented in the Chinese market, lowering regulatory requirements, developing free trade zones [Liu. China-CEEC..., p. 16], lifting China's embargoes on some products (such as Polish pigs), and exporting to China greater quantities of superior-quality products such as environmentally-friendly equipment and anti-pollution devices China urgently needs [Liu. China-CEEC... , p. 19].
1 Interestingly, Slovakia exports cars and food to China; automobile exports are the main reason for the country's good performance. Nevertheless, the Slovak Government and economic analysts are dissatisfied with the results even though they are better than those achieved by other CEECs.
2 That being said, we should be aware that the starting point of trade volume in the EU and the CEEC with China was not the same, and that should be also taken under consideration.
Table 1. Chinese trade with 17+1 countries (2012-2014, USD 0000s)
Year 2012 2013 2014
Country Export Import Total Export Import Total Export Import Total
Albania 34 391 14312 48 702 32 460 23 484 55 944 37 827 18 932 56 759
Bih 4671 2330 7001 9133 2088 11 221 28 398 3724 32123
Bulgaria 105 457 83 889 189346 111 698 95 674 207 373 117 806 98 486 216 292
Czechia 632 304 240 699 873 003 683 780 261 492 945 272 799 290 298 669 1 097 959
Croatia 129 983 7451 137434 138 994 10 427 149 421 102 733 10 066 112 799
Estonia 123 354 13 577 136 932 110 982 19 958 130 940 114610 22 550 137 160
Greece 359 317 42 730 402 047 321 898 43 327 365 224 418 561 34 567 453 127
Hungary 573 797 232 310 806 107 569 228 271 515 840 743 576 417 325 990 902 407
Latvia 131 271 6883 138154 137 427 9916 147 343 131 670 14 691 146 361
Lithuania 163 043 8950 171 992 168 618 12 479 181 096 165 829 15 749 181 578
Montenegro 14 576 2202 16 778 8638 1614 10 253 15 707 5356 21 063
North Macedonia 8875 13 978 22 853 6348 10 797 17 145 7666 9058 16 725
Romania 279 718 97 957 377 675 282 254 120 750 403 004 322 318 152 067 474 384
Poland 1 238 646 199 690 1 438 336 1 257 488 223 180 1 480 667 1 425 680 293 474 1 719154
Serbia 41 288 10135 51 422 43191 18013 61 204 42 456 11 274 53 730
Slovakia 242 303 365 523 607 826 308 444 345 816 654 259 282 850 337 608 620 457
Slovenia 156 664 25 603 182 267 183 281 30 280 213 561 199194 33146 232 341
Total 5 607 875 5 874 668 6 474 419
Source: Chinese Statistical Yearbook for 2013, 2014, and 2015.
Liu also notes that there are problems with the current transport channels that are also affecting trade such as: lack of cargo, railway technology and standards, the electrification level, and transport efficiency of the Central and Eastern Europe railway [Liu. Europe and the "Belt and Road" Initiative..., p. 62—63].
Lin comments that '[f]or smaller states, however, China's growing import demands of primary goods and resource-based manufactures, which are also the defining feature of China's trade relations with other developing countries, seems a promising new path to enhance the trade relation-
Table 2. Chinese trade with 17+1 countries (2015-2018, USD 0000s)
Year 2015 2016 2017 2018
Country Export Import Total Export Import Total Export Import Total Export Import Total
Albania 43 019 12 786 55 805 50 672 12 860 63 532 45 403 19 622 65 026 53 991 10 804 64 794
Bih 5998 5373 11 371 6413 4355 10 768 7882 5725 13 607 10 972 7740 18712
Bulgaria 104 326 74 831 179157 105 654 59 011 164 664 116 905 96 918 213 823 144025 114 643 258 668
Czechia 822 613 278 045 1 100 659 806 175 295 154 1 101 329 879 297 369 571 1 248 868 1 190 958 439 905 1 630 863
Croatia 98 556 11 179 109 735 101 724 16144 117 868 115 964 18 308 134 273 132 716 21 200 153 916
Estonia 95 329 23 496 118 825 96 417 21 179 117 597 100 635 26 034 126 669 103151 24 519 127 670
Greece 366 498 28 550 395 048 420 269 28 311 448 580 475 138 43 004 518142 649 832 56 251 706 083
Hungary 519 745 287 555 807 300 542 517 346 423 888 940 604 935 407 722 1 012 657 654 021 434 207 1 088 229
Latvia 102 251 14 459 116 709 106 272 13 221 119 493 114 824 17 724 132 548 116 609 21 305 137 914
Lithuania 121 090 13 879 134 969 129167 16 401 145 568 160 027 25 515 185 543 176296 33 004 209 299
Montenegro 13415 2427 15 842 10 835 3258 14 093 13 246 6640 19 886 17810 4174 21 983
North Macedonia 8653 13 270 21 923 9014 4671 13 684 7804 8669 16 473 10 574 4834 15 409
Romania 316 224 129 495 445 719 344 872 145 522 490 394 377 796 182432 560 228 450 711 216 785 667 496
Poland 1 434 487 274 195 1 708 682 1 510 002 253 772 1 763 774 1 787 305 335 351 2 122 656 2 087 621 364 537 2 452 158
Serbia 41 510 13 374 54 883 43 224 16 270 59 494 54 564 21 159 75 722 72 830 22 387 95 217
Slovakia 279 447 223 732 503 178 286 234 241 017 527 251 272 948 258 496 531 444 253 585 524 563 778 148
Slovenia 209 174 28 951 238 124 227 026 43 686 270 712 288 693 49 535 338 228 442 423 59102 501 526
Total 6 017 929 6 317 741 7 315 793 8 928 085
Source: Chinese Statistical Yearbook for 2016, 2017, 2018, and 2019.
ship in the short and medium-term. In the long run, it depends on the investment carried by Chinese multinationals in the region, as their European counterparts, to promote and develop bilateral trade in goods and services' [Lin, p. 10].
2. Foreign direct investments
The introductory section on foreign direct investments in the 2015 Chinese Statistical Yearbook defines 'overseas direct investment' as comprising the 'basic situation of domestic investors and overseas enterprises, investment, earnings and their distribution between domestic and overseas invested enterprises, import and export of commodities through overseas enterprises, approval of overseas enterprises'.
Lin notes that China established its system for calculating ODI in 2002, even though it used definition of FDI as employed by the International Monetary Fund (IMF). In that regard, Lin explains that '[a]s found in other countries, China's ODI statistics are limited to report direct investing destinations of Chinese enterprises, thus disguising round-tripping or trans-shipping FDI transactions. Taking into account the fact that 72 % of China's ODI in the world at the end of 2017 were concentrated in Hong Kong, Cayman Islands, and Virgin Islands, we may have very limited information about ultimate investing destinations of a big part of China's ODI, causing underestimation of Chinese ODI in CEE' [Lin, p.10]. This is, of course, the same reason for the underestimation of data on Chinese FDI in the CEECs, with the real values certainly being higher.1
A look at Table 3 shows that Czechia, Poland, Slovakia, and Lithuania have benefited the most from Chinese FDI in CEE. With the exception of Lithuania, the V4 group are again revealed to be the leading countries here. It is once again apparent that Chinese companies prefer investing into the more developed CEECs, and these are the countries that are EU members.
How do Chinese authors see this situation? Lin reports that, according to his research, Chinese companies tend to avoid investing in CEECs, ins-
1 This is again well illustrated by an example from Serbia. According to the National Bank of Serbia, in 2018 China invested EUR 190mn in FDI, whilst FDI from Hong Kong amounted to another EUR 457.6mn (see [URL: nbs.rs/internet/english/80/platni_bilans. html]), significantly higher than the values shown in Table 3.
tead preferring to engage in mergers and acquisitions, as they see these as safer options for starting businesses locally due to the various issues Chinese firms can experience in these countries, including due to political, financial, business-related, and cultural differences [Lin, p. 17—18]. On FDI, Lin concludes: 'In this context, China's future ODI in CEE countries would be largely shaped and influenced by policy coordination and bilateral political factors' [Lin, p. 18].
Table 3. Chinese FDI in 17+1 countries (2012-2018, USD 0000s)
Country 2012 2013 2014 2015 2016 2017 2018 Total FDI by country
Albania
Bih 70 70
Bulgaria 747 165 219 14 133 9 66 1353
Czechia 2071 1099 3371 1627 1148 797 421 10 534
Croatia 289 21 2 10 37 615 974
Estonia 9 8 7 24
Greece 140 158 147 7 9 85 126 672
Hungary 615 311 45 317 325 148 131 1892
Latvia 2 10 4 16
Lithuania 8 22 1554 2372 20 3976
Montenegro
North Macedonia
Romania 456 135 21 204 711 272 1799
Poland 357 155 219 8227 585 289 247 10 079
Serbia 7 12 19
Slovakia 429 847 360 1071 66 44 2877 5694
Slovenia 269 86 6 3 55 37 421 877
Total FDI in year 5382 3055 4400 11 305 4126 4499 5212 37 979
Source: Chinese Statistical Yearbook, 2013—2019.
Liu notes that Chinese FDI has been increasing in the Balkans in recent years, observing that 'China expects the Balkan countries to join the EU as soon as possible to ensure that investments in the Balkans become "potential stocks." Whether it is doing business with the candidate countries or doing business with the EU, China benefits from the stability and prosperity of the EU's single market' [Liu, 2019].
3. Investment projects financed by loans in different fields
Many Chinese authors note that key areas of Chinese interest in the CEECs are infrastructure and energy, with China providing much-needed finance for projects that have remained unbuilt for a variety of reasons. As stated above, most CEECs joined the EU relatively close to the 2009 outbreak of the global financial crisis, which meant many infrastructure projects were placed on hold. Also, many Balkan countries outside the EU lacked the funds for new cycles of infrastructural development that could boost their economies.
As in earlier cases, China saw this as an opportunity to launch perhaps the most important part of its co-operation with the CEECs: ensuring its state banks extended development loans to finance these projects. The loans are offered under favourable conditions, with low interest rates, attractive grace periods, and at reasonable prices that the CEECs find attractive. In choosing this approach, China opted for the same financing model it had previously deployed in Africa, whereby it financed projects that at the same time employed Chinese state companies and their workers. China achieved this by bilaterally negotiating with interested countries and making sure that those conditions were non-negotiable. It proved a successful model for China as it was not only able to employ its surplus capital, but also generated work for the country's state companies and workers and helped them gain international experience and earn profits.
Yet whilst this approach may have been justified in Africa, where providing machinery and experienced workers was one solution to these countries' absence of expertise in infrastructure construction, the CEECs were a different matter. These countries lacked neither the knowledge nor the technology to undertake and complete these projects, and this was one of the reasons why China's policy was received negatively in Europe from the outset. It ought to be noted, however, that no better offers were forthcoming from any other side.
To the best of the author's knowledge, there is no official Chinese English-language register of loans, grants, or concessionary loans that could reveal information about 17+1 or BRI projects in the CEECs. For that reason, we can only give information that is available on the key infrastructure and energy projects financed by Chinese loans, concessionary loans, and grants.
Bosnia and Herzegovina may have entered into the largest number of agreements with China, but not all these projects were actually completed. Currently ongoing is construction of Unit 7 at Tuzla thermal power plant (worth EUR 722mn)* [Bugum]. Montenegro is building the Bar — Boljare motorway (EUR 689mn), and two motorway sections in North Macedonia, in progress Kicevo — Ohrid (EUR 580mn), and Miladinovci — Stip (EUR 306mn) [Dimohlea]. The greatest number of development projects are probably concentrated in Serbia. Firstly, the country is building Unit B at the Kostolac thermal power plant and expanding the nearby Drmno mine (EUR 715mn) [Ralev]. Serbia has also started construction on its section of the Belgrade to Budapest railway line, of which two segments will be built by Chinese companies and financed by loans (EUR 1.5bn), and one by Russian firms backed by Russian funding [Martinovic]. In addition, Chinese companies are participating in the construction of two sections of roads on Pan-European Corridor XI in Serbia (EUR 567mn) [Ki-nesko cudo...]. In January 2020, Serbia also signed a contract with China for the construction of a hot water pipeline to connect the Obrenovac thermal power plant and the New Belgrade heating plant (valued at EUR 193mn) [Kinezi ce graditi...].
Many projects are still being negotiated and it remains unclear whether they will actually be accomplished, but Chinese firms are actively pursuing these contracts. For example, in early 2020 China was at some
stage of negotiating no fewer than five energy projects in Bosnia and Her-
2
zegovina.
1 Construction work did start but was halted due to objections from the European Commission. Bosnia and Herzegovina is currently negotiating to resume the project.
2 Banovici thermal power plant, Gacko 2 thermal power plant, Dabar hydropower plant, hydropower plants on the Drina River (Buk Bijela, Foca, and Paunci), and four small-scale hydropower plants (three on the Bistrica River and one on the Janjina).
Lin says of China's development finance: 'The development finance in transport and energy is therefore considered as a toolkit to improve the trade and ODI relationship with China (...) In other words, Sino-CEE type South-South cooperation should not be subject to the same set of expectations as Western aid. Correspondently, evaluation standards should take into account mutual benefits' [Lin, p. 23].
Liu's view is that, China pays more attention to the Balkans, because its main interest now is to connect the Greek port of Piraeus with the EU by building more infrastructure [Liu. Europe and the "Belt and Road" Initiative ..., p. 104].
Both authors agree that China has been insisting on the mutual benefits of both parties, and that Chinese projects are offered under commercial terms and nominated by the CEECs rather than by the Chinese government.
Conclusion
China may be satisfied with the state of the 17+1 co-operation platform, but nonetheless believes there is still room for improvement. From the point of view of trade, the results are more than favourable for China as the platform has allowed it to improve its balance of trade, diversify its exports into the CEECs, and increase its volume of outward trade. At the same time, China is aware that the CEECs are dissatisfied with this situation, and that voices from those countries are increasingly calling for urgent changes. This is why China is exploring different ways to reduce the huge imbalance of this trade, but there is no easy solution, at least not in the short term.
Chinese foreign direct investments are slowly increasing, but still mainly come from Chinese state companies that primarily invest in traditional economic sectors. Chinese private investors remain hesitant to invest the CEECs for a variety of factors, with political and financial risk seen as leading issues. China is certainly dissatisfied with this aspect of its co-operation with this group of countries, one of the reasons being strict EU policy measures regarding Chinese investments in CEECs that are EU member states, which have been limiting Chinese efforts to invest there.
Apart from trade, China has achieved very good results with its development investment projects in the CEECs, especially in infrastructure and energy. These projects are financed by loans from Chinese state banks and constructed by Chinese state companies with the involvement of a Chinese workforce. China is pursuing these initiatives bilaterally with Balkan states without having to undergo complicated procurement procedures required by the EU of its member states. By doing so, China has amassed an impressive portfolio of investments in Europe, which would have been difficult to achieve had the projects been located within the EU.
From the Chinese point of view, economic results of the 17+1 platform could be improved further and there is enough room and opportunity for that. China is willing to discuss future co-operation, which can be improved whilst respecting the boundaries inherent to the CEECs' current environment. As discussed in the introduction, China's narrative has always been 'win-win' co-operation, together with the promotion of mutual respect and injection of a new vitality into Sino-European relations.
Is this the best China can do regarding economic co-operation with the CEECs? The answer is no. Is it enough at the moment? The answer is yes. Will it help in the future? Certainly, especially judging by current events, such as the Covid-19 pandemic and changes to international relations and international economics, with countries becoming increasingly exposed to risk at all levels and economic risks coming to the fore.
Библиогрфический список
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