Chinese Ties with Eastern Europe

China has been lobbying hard with all other nations to co-operate in the Belt and Road Initiative (BRI). The BRI is the brainchild of President Xi Jinping. He believes that this transcontinental project will cement China’s place as a global economic power.

The Belt and Road Initiative is all about linking China, the most prominent exporter of goods in the world to Europe which is the second largest market for Chinese goods in the world. This increased connectivity is likely to bring down the transportation prices and thus allow China to capture more market share in the European nations.

Some European nations are skeptical about this project whereas others are welcoming it with open arms. The economically weaker countries of Eastern and Central Europe are reportedly very optimistic about the Chinese investments in their territory. In this article, we will discuss the implications of this massive project.

Why the Interest in Eastern Europe

China has traditionally been economically intertwined with Western Europe.

Countries like France, Great Britain, Germany, and Italy have been recipients of large amounts of Chinese investments. These countries have also been big markets for Chinese goods.

However, it seems like President Xi Jinping has decided to diversify to other European countries. There are multiple reasons for this sudden interest. Some of them have been listed below:

  1. Firstly, the Central and Eastern European nations are strategically located. They are the gateway to the more advanced markets of Western Europe. Hence, China cannot achieve the Belt and Road project without co-operation from these nations

  2. Secondly, these locations have a very poor infrastructure in place. The road, rail and air connectivity in these countries is dismal. This provides China the opportunity to build this infrastructure. Chinese firms see huge profits to be made by developing this region into a transportation hub

  3. Thirdly the human resources in these countries are cheap. Developing the infrastructure will not be an expensive proposition

  4. Lastly, these countries have very little access to finance. Hence, China can use its financing schemes to gain control over these nations and their governments.

The 16 + 1 Framework

As a result of the above-mentioned factors, China has been conducting conferences with 16 countries in the Central and Eastern European region. 11 out of these 16 nations are also members of the European Union. This is the reason why many critics are calling this move a sinister plan. They believe that China intends to divide the European Union and break it. This will make the Chinese economy more powerful in the global context as its major competitor will be eliminated.

Another theory is that Eastern European nations also have no intention of dancing to China’s tunes. They are just pretending to be interested in China’s offer. This gives them more bargaining power over Brussels.

The European Union is ready to spend a lot of money to ward off what seems like a Chinese economic invasion. Also, the European Union has support from the United States of America which is equally keen to keep the Chinese invasion in check.

The intent of all the players is not known. However, the stage is still wide open. Several different alliances are possible from this point and each one of them leads to a very different economic future.

The Controversy around Chinese Lending

Representatives of the European Union have been trying to stir up protests in these Central and Eastern European nations. They are mostly focusing on China’s tendency to indulge in predatory lending practices. Examples of Pakistan and China are often cited.

The Chinese are known to lend huge sums of money to build projects. Once the projects reach mid-way, the Chinese unilaterally change terms to their advantage. If the other party doesn’t agree further funding is stopped. A half completed project is useless and cannot generate any revenue. Hence, nations are forced to bow down to China’s will.

China has a reputation of decimating the economies of smaller nations for its own advantage. These tactics do not seem to be working. The central and Eastern European nations are tired of being neglected by the European Union and are actually looking forward to partnering with China.

Very Few Resources Have Been Committed

The 16+1 group has been functional for over two years. There have been several conferences and talks. However, very few resources have actually been committed on the ground. China has only sponsored one high-speed rail project between Hungary and Serbia. The work is going on from Serbia’s side. However, on Hungary’s side, the work has been stopped. This is because the project seems to have violated some norms related to the European Union public tendering process.

The project had started in 2014 and was supposed to be completed by now. However, it seems that political roadblocks will lead to delays of at least couple of more years. Apart from this project, the other European nations are yet to receive Chinese money.

There are concerns about a slowdown in the Chinese economy. Hence, China is likely to keep its investments within its geographical boundaries to improve its own GDP.

Regardless of the outcome, it is clear that all major economic powers of the world now see Eastern Europe as a strategic region. It is only a matter of time before this underdeveloped region sees rapid growth and development!

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