China's Expanding Reach And Growing Influence In Central & Eastern Europe
Aug 2, 2015 @ 11:49 PM
China's Expanding Reach And Growing Influence In Central & Eastern Europe
For the past couple of years, while everyone has been watching Vladimir Putin’s moves in Eastern Europe, China has been making increasing economic inroads on Russia’s periphery. Its economic dominance of Moscow’s traditional backyard, Central Asia, is well known, but less well known is its growing presence in other areas of Russia’s periphery, such as the Caucasus and Central and Eastern Europe (CEE). Beijing is pledging tens of billions of dollars of investment and aid and signing major cooperation agreements with everyone from the Republic of Georgia to Romania to Belarus, and in the process is gaining political influence and beginning to reshape the geopolitics of the region. This influence will come at the expense both of Russia and of the West.
The post-Soviet space has long been viewed as an intermediate zone between Russia and the West, and, given the renewed conflict between those protagonists, continues to be viewed as a field of great power interaction and conflict more than as a region important in its own right. The region’s “in between” status is particularly accentuated at present, and the interposition of a major external actor taking up a significant, independent role will undoubtedly add geopolitical complexity to the region, even if the interests of the powerful third party are purely economic. In the case of China, it is doubtful that its ambitions are limited to purely economic concerns, nor that China will be overly deferential to the interests of its erstwhile partner, Russia, when the interests of the two conflict.
Chinese investment from the Caucasus to the CEE states has been warmly welcomed. Georgia and the countries of Central and Eastern Europe have heretofore been highly dependent on investment and political support from Western Europe and the United States. The inflow of capital and technology from the West has been critical since the end of the Cold War. The economic downturn of 2008 and 2009 illustrated the vulnerability of these economies to such a high level of dependence upon the West – as Western economies struggled, trade and investment dropped significantly. Since then, Western European budgets, which have been significantly constrained by austerity measures, have not allowed for more than a trickle of the massive amount of infrastructure and other investments needed by CEE states, whose economies generally lag far behind those of their Western European partners. Lastly, Russian economic stagnation has also proved a drag on CEE economies. This situation has left the door wide open to Beijing.
In addition to the economic uncertainties, there are also political and security considerations that have made the region open to developing a strong relationship with a powerful external actor such as China. For those that seek EU membership, such as Georgia, there is concern that the EU may never ultimately allow Georgia to join, at least partially out of a Western desire not to further antagonize Moscow. Georgia feels that its longstanding aspirations to align itself more fully with the West are being stymied at a time when concern about aggressive Russian nationalism and revanchism is growing, underpinning Tbilisi’s search for powerful external partners with an obvious strategic logic. Enter China, which, in contrast to the West, has made Georgia feel wanted as a hub for China’s New Silk Road, and has doubtless provided hope that billions of dollars of Chinese investments will give Beijing an interest in supporting Georgian territorial integrity as well as stability in the region more broadly.
China’s investments and interest have been just as warmly received further west. In addition to the contrast between the meager trickle of infrastructure and other investment from their Western partners and economic largesse of Beijing, among CEE states which have in the past few years become EU members, resentment exists caused by the perception that Brussels sees them as decidedly junior partners and does not respect their views. The sense of marginalization within Europe stands in stark contrast to the expression of solicitous interest from Beijing. Signaling the importance Beijing places on its relationships in the region, the Chinese Foreign Ministry created a special secretariat for Central and Eastern Europe in 2012, and each year since 2012 China and its new CEE partners have held a summit in which Chinese investment in the region is discussed, known as the CCEE (China, Central and Eastern Europe) forum, facilitating China’s engagement with the region. At the first summit, held in Warsaw in 2012, China pledged a credit line of $10 billion for projects in central and Eastern Europe. Since then the amount of funding has grown substantially, and along with it, Chinese influence.
Beijing has multiple goals in this massive influx of investment. One is the extension of its New Silk Road economic belt to Europe, which is to facilitate the movement of Chinese exports to Europe. Another is to gain access to Western European technology and R & D through the EU’s back door, Central and Eastern Europe. China is also interested in energy resources, as well as in agricultural resources, given China’s lack of arable land. And given how deeply China is tied to the United States economy, and the sense of vulnerability this creates in Beijing, China sees its growing economic ties with Europe as a hedge against its over-dependence on Washington – hence the large purchases of European sovereign debt to balance Beijing’s massive holdings of US debt.
Chinese investment pledges are steadily transforming the economics and trade flows of the region, with China becoming an increasingly important trade partner. The EU has been China’s largest trade partner for some time. Research by both Chinese and American institutions estimate that investments from China globally will be somewhere between $1 and $2 trillion over the next decade (assuming that China does not experience a particularly hard landing in the meantime and remains capable of sustaining the level of investment it envisions). That number dwarfs investments from the US, Europe, or Western-led multilateral institutions, such as the World Bank and the IMF. China has already spent more than $2 billion in the small country of Serbia alone, mostly in infrastructure and energy.
