Enter the (limping) Dragon. China and the 1+17 format

Several years ago, China announced the launch of the 1+16 initiative, which was later transformed into the 1+17 format. The format was intended as a platform for cooperation between the Central Eastern European, the Baltic and the Balkan countries with China. It was supposed to be a spectacular, “Enter the Dragon” coming of China into Europe. Almost a decade later we can see that the ambitious plans have not been realized and China is far from being a key player in our region.

Central Eastern Europe has long been excluded from the Chinese opening-up strategy. Our region has been one of the very few places in the world that has not been reached by any substantial investments from China – and it remains so. Central Eastern European countries are hardly known in China. In 2015, that is briefly before we observed a short-lived fashion for China in Poland, Salvatore Babones from the University of Sydney bluntly summed up the situation: “If a Chinese businessman discovers that Poland is known for its apples, and Latvia for its trees, we could already consider this a progress”. As it seems, this proverbial Chinese businessman remains unaware of either Poland’s or Latvia’s resources, though it cannot be denied that the Chinese perception of the region has slightly changed. For start, China was impressed by the way that Central Eastern Europe coped with the economic crisis of 2008 – having emerged from it in a comparatively good shape.

Following the initial talks in Budapest (2011), China launched in Warsaw the 1+16 format (2012), engaging in cooperation 16 Central and Eastern European countries, among which are 11 EU members and five Balkan countries. The intentions seemed clear: Beijing was set to establish an outpost in the EU; it hoped to win contracts and new markets and to find a place where an open-up strategy (zou chu qu) was to be realized. In addition, the Chinese elite envisaged the Central Eastern European countries as being instrumental in improving the EU’s perception of China (as it happens, buying political good will is a constant, if disguised, motive behind Beijing’s activities). In establishing the 1+16 initiative, Beijing tapped into the previous experiences with African and Arabian states – China wanted to create a platform for small and medium size countries, which could be dealt with at once – during summits at which all participants are present. Such approach has two great advantages. Firstly, this set-up supports the Sino-centric system, with China at core and other countries orbiting around it. A similar structure centering on China – tianxia (literally “all under the heaven”) – has operated in Eastern Asia in the pre-colonial times and it is exactly this system that China wishes to replicate in contemporary global politics. Secondly, it was assumed that Eastern Central Europe, the Balkans and the Baltic countries can be treated in a similar fashion to the Third World countries or, as the modern nomenclature wants it – to the developing countries. Description of the 1+16 initiative presented by the Chinese leader, Xi Jinping, as the cooperation with the Global South was symptomatic of such attitude. However, this nomenclature was quickly abandoned, for the Chinese soon realized that the region they were trying to woo does not take such classification kindly. It may be worth adding that average businessmen were reluctant to follow suit. A story shared by Jakub Jakóbowski, the Centre of Eastern Studies’ analyst, is a good illustration of that process. As the story goes, a meeting with Chinese businessmen, who came to Warsaw in the early days of the 1+16 initiative, was widely attended by their Polish counterparts, who hoped to establish profitable relations with the guests. The Chinese offers: chemicals, industry, plastic and other “dirty” sectors were met, however, with a baffled rather than enthusiastic reaction of Poles who astutely observed that as the EU member, Poland would not profit from the proposed business; moreover, importing the offered products to the EU was actually illegal. Now it was the Chinese’s turn to be surprised – having just returned from Iraq and Mozambique, where their propositions were very well received, they expected a similar reception in Poland. 

This anecdote encapsulates the problems and pitfalls that the 1+16 format carried from its inception or, to put it more diplomatically – it shows the challenges that came from mixing up so many diverse countries. Diversity was the main characteristic of the set up – whether it was analyzed from the perspective of political geography (vide the exotic mix of the Balkans, the Baltic states, Central Eastern Europe), of culture (vide the wide range of confessions from Catholicism, Orthodox Church to Islam, as well as various levels of secularization), of law (vide EU members and non-members), of politics (vide supporters and opponents of Russia, as well as all those who take some position between the ends of the spectrum). The mere assortment of states showed China’s poor understanding of this part of the world. What unites Bosnia and Hercegovina with Latvia? Has Poland got something in common with Albania? But the judgement of China should not be too harsh, for while they had been developing bilateral relations with countries from the specific regions, for instance Hungary (Central Eastern Europe), Serbia (the Balkans) or Latvia (the Baltic states), China had no experience of regional politics. Importantly, the situation did not change even after the 1+16 format was born, for the plethora of summits, fora and meetings brought meagre results.

Furthermore, the development of proper relations between China and the region is impeded by several EU countries who are less than enthusiastic about China. Also, the European Commission is critical of the 1+16 cooperation, as well as some Western countries, who argue that the initiative undermines the unity of the EU. Intriguingly, those countries do not consider their own bilateral agreements with Beijing (made without any regard the position of Brussels) equally detrimental for the EU’s welfare. All in all, the initiative seemed destined for a quick death.

However, as it turned out, the announcement of the New Silk Road initiative (known as The Belt and Road Initiative) in 2013, gave the 1+16 group a new life. China renewed their interest and the 1+16 format was included into the New Silk Road, which became an umbrella project that includes various Chinese initiatives – bilateral and multilateral, old and new alike.[1] As a result, the relations between China and Central Eastern Europe intensified, as testified by the Suzhou summit (2015), where a new plan of cooperation was accepted. The plan included the establishment of a new bank for Central Eastern Europe and the development of infrastructure, logistics, industry and agriculture. The program mirrored China’s priority – supporting the infrastructural export. The objective is hardly surprising as China created the biggest infrastructural industry in the world and wants to maintain employment by selling infrastructural services. Central Eastern Europe is a perfect fit for such goals, as its one of the last regions in the world without substantial capital from China. The intended economic angle of the cooperation showed itself also on the personal level, as it was Li Keqiang, a politician responsible for the Chinese economy, not Xi Jinping, a man in charge of internal affairs, who was attending all relevant summits.

The perception of Central Easter Europe as a potential transit point for Chinese products was another reason behind China’s interest in the region, though the poor communication network, especially the lack of North-South connection, as well as the lack of electrification in some regions and the various types of traction in use, greatly impeded the realization of this plan. However, it was not only geography that attracted China to the region, but the lack of “history” as well – there was no conflict or dispute between China and the chosen countries and ideological criticism towards China was not considered a big issue. According to the Chinese, this factor was highly favorable and should not only minimize the local opposition towards cooperation with China but in fact warm the locals to this idea. The Chinese hoped that the prospect of grants, loans and investments will be enough to win the hearts of Central Eastern Europeans.

And indeed, some countries appreciated China’s efforts. One of the biggest and most relentless supporters of the cooperation with China has been the Hungarian prime minister, Victor Orbán, though his treatment of the relations with China is highly instrumental – he sees them as a means of securing a stronger position within the EU (NB, Orbán’s methods has been recently adopted by the Serbian prime minister). It was not only Hungary who hoped to reap the fruits of the closer cooperation with China – Poland as well has been bitten by the Chinese bug. Enthusiasm for entering the Chinese market was widespread in Poland and it peaked in the years 2015-2016. Plans or even an informal strategy foresaw that Polish business will start operating in Sichuan, Ningxia, Gansu or Qinghai, that is China’s less developed provinces, as yet unoccupied by Western investors. The plan seemed to make sense, at least on paper – it would have been much more difficult to put one’s feet in the Eastern and Southern China, where the Western companies have been investing for the last 20 years, than in the mainland and Western China. Mining, petrochemicals, biomedicine, pharmaceuticals, green technologies, agriculture, chemicals were considered the branches with great potential. The most promising of all was, however, trade. The great hopes entertained for cooperation in trade are best illustrated by the Changdu-Łódź rail connection that allowed the transport of goods in less than 2 weeks. The talks of this connection were ubiquitous – it was discussed, always positively, at every meeting, whether on a central or self-governmental level; communal or academic. The rail connection was referred to at any possible occasion, in every possible form and shape; it was evoked as the main achievement, or rather the greatest hope, of the Polish-Chinese relations, and its advantages were endlessly pointed out – that it was 4 days shorter than the connection with Duisburg, that is took 4 times less time than transport by sea and that it was far cheaper than the air transport. The transshipment gateway in Małaszewicze, close to the Belarusian border, was discussed as enthusiastically, even if less frequently. These specific projects were used to support the newly adopted geopolitical vision (promoted since at least 2015), according to which China’s involvement in Central Eastern Europe would become a strong impulse impulse for the region’s structural makeover. According to this view, the Chinese investments were to become the third biggest capital influx in the region (following the Western investments in 1989 and the EU investments after 2004). In a result, it was supposed to turn the disadvantageous geography of the region (similarly to the way China has dealt with its own geographical issues) and to create new North-South connections. The subsequent capital accumulation would allow the region to act independently. The expectations were high, but they began to fade around 2016 until they almost died.

This change of attitude should not be surprising for China’s great scheme showed cracks from the outset. The first and foremost problem of the New Silk Road project was its ambiguity, as neither the project’s aims nor its core were ever precisely set. The Chinese like to describe the project as a venture intended for generations; undoubtedly, this tag supports the popular, if unfounded, perception of the Chinese as long-term planners (clearly, the inability of the “farsighted” Chinese government to foresee the housing crisis in Hong Kong and the pro-China parties’ defeat in the local elections should cool down even the strongest exponents of such an attitude). Needless to say, the “generational” rhetoric is very convenient – who would remember in the years to come to hold the politicians accountable for their promises from the decades ago? – and most likely hides the project’s gaps, for if it is supposed to last generations, how specific it is actually? Grand words may serve well the propaganda’s aims, but they seldom help to achieve specific political objectives.

Another roadblocks to the closer cooperation within the 1+16 initiative were practical limitations such as the insufficient railway infrastructure between China and Europe, incompatibilities between the railway systems, customs procedures, a shortage of goods that could be exported to China and the low costs of maritime transport (it is cheaper to transport goods by sea rather than by rail). In addition, several Central Eastern European countries remain constrained in their dealings with China due to the EU membership, whether the limitations come in a form of trade barriers and visa policies or much serious issues, such as establishing Central Eastern European economies as the subcontractors of the German economy. The latter factor helps to explain why the cooperation between China and the Balkan states – mostly non-EU members – have worked out better than with those participants of the 1+16 initiative who belong to the EU. Also, it should be remembered that while China is represented by big, state-owned or oligarchic enterprises, the other side is represented mainly by small and medium-sized companies. The business structure and the dominance of Western companies in the market makes the cooperation with China very difficult. The problem was noted by Czech, Slovakian and Hungarian analytics, Rudolf Fürst, Richard Turcsányi and Tomas Matura, who showed, using their respective countries as examples, that 90% of Czech, Slovakian and Hungarian export to China comes from the multinational corporations. Thus, the respective governments in Prague, Bratislava and Budapest are unable to influence the trade relations with China, regardless the condition of their political relations. A similar situation can be observed in other members of the 1+16 initiative.

Another reason behind the diminishing enthusiasm for the Chinese model of economy was its noticeable slow-down after 2015, which caused people both in China and abroad to “wake up from the Chinese dream”, to use Bogdan Góralczyk’s witty expression. Last but not least, the situation was influenced by the trade wars with the USA. Originally, the Americans were willing to accept the 1+16 initiative, as its scale was limited. Yet though in the last years the scope of the initiative remained the same, the American-Chinese relations have undergone a radical change for worse, which in turn deteriorated relations within the 1+16 initiative.

As mentioned earlier, the group itself was superficially created and lacked the reginal identity. In truth, such identity does not exist either in Central or Central Eastern Europe, where the sub-divisions (the Visegrad Group, the Balkan states) remain very clear and made it impossible to create a unified front towards China. Conflicting interests are also noticeable with regards to Western Europe, dominates in all countries of the “sixteen”. Western European leaders loudly voiced their opposition to the Chinese initiative – they made axiological reservations and undertook political and legal actions (vide recommendations announced by the European Parliament in 2016). Ultimately, China has understood that the 1+16 initiative cannot be continued without the approval from Germany. The situation has clearly showed how difficult it is for “the 16” to adopt a common position regarding China, as there is no unity between them, no cooperation, no specific plans and no broader, shared vision for relations with China. As mentioned earlier, it is a natural consequence of the EU membership as it excludes some matters, e.g. legal issues, trade regulations, from the national control. On the other hand, the areas over which the states have authority, for instance, education or culture, are country-specific and devoid of any regional-wide agreement, so any related matters are discussed directly with China. Consequently, there are bilateral rather than multilateral contacts that dominate the scene which, in turn, induces the countries to compete for China’s attention rather to cooperate with each other. Indeed, the 1+16 becomes the scene of rivalry instead of the platform for collaboration. There is no united, regional position; instead, we observe individual, national approaches, among which Hungarian, Latvian, Serbian and Czech are the strongest; in addition, both Hungary and the Czech Republic, as well Poland, aspire to be the leaders in the relations with China. Yet, it is not those countries but China, who profits the most from those ambitions as China uses them to play out “the 16” by applying the “divide and impera” rule.

One of the biggest dangers for the initiative is turning the region simply into a gateway for goods imported to Western Europe, with no profits for the countries of 16. Their location is advantageous, but geography alone does not guarantee any benefits – the goods have to be handled in, not only moved through the region to generate profits. China’s presence in the region does not automatically improve the region’s position. Despite the opinions of some analysts, the Chinese capital will not prevent “the 16” from falling into the middle-income growth trap, for to avoid this trap it is necessary to develop economies capable of providing advanced products and services. Not to mention that the level of Chinese investment in the region is not high and, apart from the Balkans, its volume is actually lower than the sum of Western capital, but also lower than the Japanese, South Korean and Taiwan investments. Undoubtedly, the political buzz around China’s presence in the region was considerable, but it did not translate into the more substantial economic engagement. China rarely showed stronger commitment and if that happened, it was to take over or build the infrastructure that was necessary for their own commercial interests. In truth, in terms of economy China behaves very selfish and takes care exclusively of its own interests (let’s note in passing that such attitude undermines the popular narrative about China’s ambition to create an alternative global economic order, for in order to realize such scenario, China would need to act more selflessly – a position China seems unable or unwilling to take at the moment). How to understand the contrast between the low level of Chinese investments and the high enthusiasm for China’s engagement in the region? It is the results of mutual misunderstanding. From the beginning China considered Central Eastern Europe and the Balkans an addition to their general European politics (China’s direct investments in Central Easter Europe constitutes 10% of their total investment in Europe); the Chinese were mainly interested in making infrastructural investments (with preference for government contracts), hence they tended to focus on logistics and construction industry. On the other hand, the Central Eastern European countries counted on greenfield investments, which would create new jobs and expand industrial production. In the light of such expectations, Chinese loans and grants turned out to be unattractive and the whole experience of cooperation with China unprofitable.

This ignorance of respective intentions was probably the logical consequence of the limited knowledge about each other. Distinct business philosophies translate into considerably different practices, to which the story of Covec is a clear testimony. Having accepted the contract for building the A2 highway in Poland, the Chinese company ultimately withdrew, following the problems with Polish contractors. What was the problem? The failure of the projects apparently came from miscommunication and mutual stereotypes – to put it simplistically: Poles believed that Chinese would build the road for the proverbial portion of rice, whereas Chinese were convinced that they would made a profit at the costs of ignorant natives, as they had made earlier in Africa. This experience had long lasting consequences, for it negatively influenced the perception of the Chinese in Poland and strengthened the existing anti-Chinese resentment. The latter had a dominantly ideological foundation and came from the sympathy for Tibetan independence and the lasting negative reaction to the Tiananmen massacre.

All those factors contributed to the limited impact that China’s presence had on the region; none of the prophesies foreseeing the structural change of the region, similar to those that took place after 1989 and 2004, was fulfilled.

Those developments led to a great disappointment with the 1+16 format and with the role of China in the region. Gains of “the 16”, especially the EU members, were insignificant and the exception of Hungary, whose position was unique also because of the Chinese minority in this country, seems only to confirm this rule. The project resulted in limited investments, the widening trade deficit (felt in particular in Poland), lack of a real perspective for entering Chinese markets and general disillusionment with China. More optimistic commentators emphasized the improvement of political relations, yet even in this area the real changes were scarce. In most cases, the region’s countries could count on a 15-minute-long chat with the Chinese prime minister that gave the pretense of communication, but was in fact a simple act of courtesy. The circumstances brought out a growing disappointment in the region, especially in Poland and the Czech Republic, who engaged politically in the project with China and could see no return on this investment. Subsequently, this disappointment led to the deterioration of bilateral relations. Neither the smaller countries of the 16, such as Macedonia, could feel fully satisfied, though – since their access to the Chinese capital was easier – their overall impression of the 1+16 format was better than of the other participants. Indeed, the Chinese offer had a bigger appeal to the Balkan states, for those developing countries urgently need – now as much as in the past – both foreign capital and technology. Meanwhile, the EU members were discontented as they came out empty handed – no technologies, no economic benefits, no markets opening were delivered by China. The 1+16 format turned out to be a project ill-suited for Central Eastern Europe and the Baltics, as it was tailored for China itself and intended for the countries of the Global South, while Poland, Hungary, the Czech Republic and the Baltic States, after decades of difficult transformation and multiple sacrifices, have finally managed to enter the Global North’s antechamber; it is not only the matter of mental identification, but a problem of different economic interrelation. The situation has not been helped by global developments and the growing American-Chinese rivalry, especially considering that the American government was quick to capitalize on Poland and the Czech Republic’s disappointment with China (though it should be remembered that “the American factor” came to play much later and was secondary to the ill-matched Chinese offer).

The Chinese answer to the evident failure of the 1+16 initiative was tripart. Firstly, by announcing the execution of over 300 hundred initiatives, they suggested that the program was actually a great success. It should be specified that this impressive figure encompassed a wide mix of initiatives: talks of the ministers of finance, exchange with the Food Standards Agency, foresters’ debates, academic conferences and the meetings of rural homemakers associations. In a word – the boasted list of 300 initiatives included all sorts of exchanges – from a ministerial to local level, but also of NGOs and other organizations. While the list could and should be approached with skepticism, it also testifies to multilayered encounters between the Chinese and people from Central Eastern Europe, the Baltics and the Balkans. Importantly, it involved various groups of people – not only politicians and businessmen, but also journalists, actors, musicians etc. Such meetings are not breaking news, but their significance should be appreciated.

Secondly, the Chinese decided to expand the group; by adding Greece and creating the 1+17 format, they gave hand to the strongest element of the initiative – cooperation with the Balkans. This move, similar to accepting India and Pakistan to the Shanghai Cooperation Organization in 2017, allowed China to play down other mishaps and problems afflicting the 1+16 initiative. 

Thirdly, China not only covered up the mistakes, but also learnt from them. A critical reflection on the failure of the 1+16 format led to its evolution. The biggest change lay in shifting the attention onto the EU, particularly to Germany. Western Europe, in the first instance Germany, France, Great Britain (until the Brexit) and Italy, have already been main partners for China. Actually, one of the objectives of the 1+16 format was to advance cooperation with Germany; one could even argue that from the beginning the 1+16 initiative was intended as China’s starter to their main dish of Europe.  Recent developments showed China that in this case the starter cannot be served without the main course, that is to say that the 1+16/17 format will not exist without the German support – hence the adjustments of Chinese politics. China’s priority shift was revealed in actions – it was Berlin, where the Chinese prime minister came to negotiate in response to the growing disappointment with the 1+16 format! After Li Keqiang invited the Germans to participate in the 1+17 format, the sequence of events looked sadly familiar – it was Berlin where the future of the initiative was decided on; “the 17” was just informed about the decisions. In fact, the 1+17 was used as a bargaining chip that was exchanged for the neutrality of Germany in the ongoing American-Chinese trade wars, as China was determined to prevent Germany’s support for the USA.

The transformation of the 1+16 format from the outpost to the Chinese pawn in the game Germany had impact on the “hard core of the EU”. Also,  the evolution of the 1+16 format demonstrated the Chinese diplomatic style: China moves forward within the created structures, when it sees the partners’ will to cooperate and stops, when there is none. Basically, China’s prime characteristic is adaptability – advancing there, where it is possible and leaving inaccessible destinations out. The execution of this strategy may appear unprofessional as hardly any of the various plans and initiatives launched to a great fanfare end up with tangible results. And yet, such approach allows the Chinese to remain flexible and responsive. The strategy fits well into tifa, that is “the guidelines regarding the country’s strategy”, meta principles underlying objectives of the Chinese politics, according to the formula: “following the Party’s line while staying flexible”. Tifa is a universal tool of the Chinese politics. It turns out that the 1+16 (17) confirmed the classic model of behavior of the Chinese on the international scene.

While writing this article, I relied on the following sources: the debate that took place in the Center for Political Thought in Cracow 23 October 2019, attended by Jakub Jakóbowski, Marcin Przychodniak and myself; analyses of the Centre for Eastern Studies (specifically, the texts by Jakub Jakóbowski and Marcin Kaczmarski), of The Polish Institute of International Affairs (in particular, the texts by Marcin Przychodniak, Justyna Szczudlik-Tatar, Artur Gradziuk), of the Center for Asian Affairs in Łodź (by Dominik Mierzejewski) and the writings by Adrian Brony and Bogdan Góralczyk, as well as the native analyses: Czech (by Rudolf Fürst), Hungarian (by Ágnes Szunomar, Tamas Matura), Slovakian (by Richard Turcsányi) and Chinese (by Kong Tianping, Liu Zoukai).

[1] NB, some of the enterprises were added the Belt and Road Initiative thereafter and contributed to its optimistic assessment.