Today it became clear that the cooperation between Europe and China in the framework of the BRI can contribute both to balanced development of the partners and the risks of new challenges in the dialogue between the States-parties of the initiative. Thus, both sides of the dialog learned their lessons and mistakes and can implement new improvement in resolving the current problems and challenges in cooperation within BRI.
China is the founder and the main country of the Belt and Road Initiative. It is one of the most interested in implementing BRI country, but during period 2013 – 2020 it faced a number of challenges, which have to be resolved to fully enjoy the benefits and profits of the initiative.
Analyzing the possible challenges facing the mechanism of cooperation between China and countries of Europe, the article proposes a number of recommendations, made under the backdrop of many other conflicting realities with regard to harmonize the relation between countries-participant of the initiative, which can be implemented by Chinese side of the Initiative.
The PRC
To take into account the geopolitical situation in the CEE region and establish relations with other interested countries.
Analysis of China – CEE relations has shown that the basis of bilateral cooperation is not strong enough today. China and the countries of Central and Eastern Europe belong to different civilizations, they are geographically far from each other, and after the end of the Cold War, the former ideological unity between them disappeared.
Since three-quarters of the CEE countries have already become members of the EU, following the common European foreign and security policy, China needs to balance two areas – relations with the EU and diplomacy with each country separately. Deepening ties with CEE countries is necessary to promote the “One belt, One road” initiative, but the “triangle” of China – EU – Central and Eastern European relations should be taken into account when creating a cooperation mechanisms.
For example, the EU has a strong presence in the CEE region by promoting a set of economic rules. The US maintains a military presence there. Germany considers CEE as a region of its’ traditional influence. Russia also has important geopolitical interests there.
The EU expresses doubts about the 17 + 1 format and sees it as a manifestation of China’s “divide and rule”policy. The US, through the NATO security structures, firmly controls the political and military development of 17 States. Although the US has expressed a positive assessment of the 17 + 1 format, it is constantly increasing its’ influence on Poland, the Baltic States, and the Eastern Balkans.
Because of the Ukrainian crisis, the US-led NATO bloc strengthened its control over CEE. Germany sees CEE as its “backyard” and traditional sphere of influence. The German government openly doubts the mechanism of China’s cooperation with the 17 CEE States, believing that it leads to the undermining of EU norms, which is unfavorable for European unity.
The influence of Russia in the region should not be underestimatedas well. The Central Asian and Eurasian economic space is very important for Russia, which is leading the process of economic integration and has a deep traditional influence and real interests (many countries in Central and Eastern Europe are heavily dependent on Russian energy resources).
It is also worth noting that due to historical reasons (CIS countries used to be underthe pressure from the USSR) and the current Ukrainian crisis, the CEE countries have noticeably increased their sense of distrust towards Russia. On this background, the relations of comprehensive strategic partnership between China and Russia can also cause“psychological pressure” on the countries of Central and Eastern Europe to a certain extent. Therefore, China, in cooperation with the CEE countries, needs to find common ground between the interests of the Chinese side, the European, the Russian side and the CEE countries. It is very important to properly resolve the hidden problems and contradictions affecting the trilateral relations.
When China and CEE countries cooperate within the BRI, special attention should be paid to the existing mechanisms of cooperation within CEE, internal conflicts of CEE countries where, for historical reasons, national contradictions are huge, as well as to differences in the levels of development of CEE countries.
It is worth noting that political relations between China and the CEE countries remain“relatively slow” compared to economic relations. According to the researcher, this is due to the “superiority mentality” of some CEE countries towards China on issues of the political system, human rights, religion and other values. (In particular, Poland and the Czech Republic in 2003–2009 repeatedly criticized China on human rights issues and Tibet. In December 2008, during the Dalai Lama’s visit to Europe, Polish President Lech Kaczynski and Czech Prime Minister Mirek Topolanek met with him. As a result, this forced the Chinese government to keep its distance from the CEE countries in order to avoid political risks. This blocked China’s plans to increase the status of relations with the region in the overall structure of foreign policy.
Given the fact that 17 + 1 is an extension of China – Europe cooperation and the functions of the 17 + 1 format are limited, the agenda cannot be promoted indefinitely in all important areas. In this regards, to maintain the vitality of cooperation, it is necessary to increase the strategic height of cooperation. The UN, EU and OSCE platforms can be used to address the security issues facing the CEE region.
In China – CEE – EU relations, the principle of openness in order to take advantage of the opportunities to involve a third party in cooperation should be also adhered. In the 17 + 1 format, the mechanism for attracting observers should be widely opened, inviting countries, including the EU, international financial organizations and international organizations. The EU is an irremediable influence factor, through the 17 + 1 it is possible to promote mutual cooperation between China and the EU, while actively attracting important EU members such as Germany and France to become a third party to China – CEE cooperation.
In-depth analysis and harmonization of the legal framework for EU – China cooperation in the region.
Since the laws of the CEE countries are fully aligned with the EU in many aspects, the Chinese side should strengthen its knowledge and understanding of the relevant EU laws and regulations, which is a prerequisite for promoting the 17 + 1 cooperation. It is necessary to actively study the successful experience of the best Chinese enterprises in carrying out commercial activities in CEE, fully understand the hidden rules for investment in CEE countries and identify trade barriers.
An important role can be played by “outward-looking” Chinese enterprises. When investing abroad, they should follow international norms and market laws, pay attention to the international social responsibility of enterprises with Chinese capital. It is necessary to allow Chinese enterprises to thoroughly understand the local requirements of socio-economic development, diligently increase employment, emphasize openness and inclusiveness, the spirit of joint win-win cooperation, and eliminate doubts of the CEE countries about the feasibility of cooperation with China.
Europe should also be better informed about the goals, structure and significance of the BRI, both for the region and for individual countries.
The analysis showed that despite a lot of explanatory work from the Chinese side and the signing of relevant political documents, the European region lacks understanding that the BRI initiative reaches Europe: it is often mistakenly believed that it is intended only for China’s neighbors. In this regards, within the 17 + 1 mechanism, along with reaching a practical level of cooperation, problems have emerged that reduce the interest and expectations of European countries in the initiative, which is reflected in negative reviews of the initiative in the media and the lack of interest of countries in the implementation of infrastructure projects. In particular, the difference in economic opportunities and needs for cooperation among the 17 countries makes itself felt.
It is noted that on the background of China’s rapid rise and continuous increase in its international influence, assessments of the “One belt, One road” initiative and other aspects of China’s foreign strategy are affected by geopolitics or the “Cold War mentality”.
In this regards, the CEE countries’cooperation with China causes them to fear that their influence will be weaken and that China will use economic tools to “split” the unity of the EU. Due to this the EU is trying to minimize the impact of the PRC on the CEE region by tightening budget requirements, and as a result, small countries are afraid to take Chinese investment for infrastructure projects.
To address this challenge, the article recommends expanding the joint discussion of cooperation plans with CEE and EU countries. If specific economic plans are difficult to find, partners should offer the cooperation in other areas, in order to ensure equal participation of 17 countries in the construction of the BRI, supporting the balanced development of the existing mechanism of cooperation and not allowing these countries to lose enthusiasm in the absence of“big projects” (for example, together with Croatia, partners can train specialists in EU legislation, with Slovenia – share experience in environmental protection). Thus, the legal system, culture, education, science and technology are areas through which the BRI initiative can increase visibility for small and medium-sized CEE countries. On the Chinese side, it is necessary to transmit correct information to them, promote cooperation of research centers, organize international conferences, explain the ideals and practice of diplomacy of a large state with Chinese characteristics, and form a favorable public opinion.
Support for humanitarian cooperation should be provided through special funds.
Thus, the effective financial support mechanisms for the European (especially CEE) markets is needed. The governments of some of these countries cannot provide sovereign guarantees because they have exceeded the EU’s debt limit. For this reason, the countries of Central and Eastern Europe that have joined the European Union can not take preferential Chinese loans. In Europe, interest rates are low, and interest rates on Chinese commercial loans are higher, hence they are unattractive to CEE governments and businesses. To solve this problem, the creation of the 17 + 1 investment Bank and support of the creation of a regional multilateral international financial company of 17 + 1 should be discussed, as well as the experience of international financial organizations in the CEE region, adhered to a market orientation, and financial guarantees for bilateral cooperation should be provided.
To use the “One belt, One Road” as a framework for promoting practical cooperation between China and CEE
There is a need to link Chinese proposals with development projects that a particular CEE country is concerned about. (For example, Estonia’s plans to build a shale power plant in Jordan, which were slowed down by the fall in oil prices and the subsequent financial difficulties of the Estonian energy company. In 2016 The Chinese industrial and commercial Bank allocated money for this project, which was linked to the interests of China, since the construction contractor was the Guangdong heat and power engineering company).
European experts note that a promising direction is the construction of transport infrastructure, which, according to them, is relatively backward in CEE. In this regard, the study recommends to offer the CEE new comparative advantages of Chinese HSR (high-speed railway) and rolling stock for them and port mechanisms, along with the construction of airports. This will increase the level of industrialization in CEE countries, which is currently relatively low. Offering production cooperation in advanced industries, especially HSR, it will be possible to enter the European “outpost” through the Czech Republic and other countries with Chinese technologies. In addition, it is recommended that China can participate in the development of agricultural processing in CEE countries, where agriculture occupies an important place in the national economies. In this way, Chinese enterprises can help increase employment in CEE countries, which will improve the image of China in the region.
The strengthening of financial institutions and the alignment of the line of providing loans to CEE countries.
When the small nation of Montenegro approached the EUfor help paying off a nearly $1 billion loan to China’s Export – Import Bank (EXIM), borrowed to finance the construction of a large highway project, alarm bells were raised across Europe. The request presented the EU with a problem that members of the World Bank may soon find themselves grappling with – what to do about large loans for economically unviable projects already under construction as part of China’s BRI. The European Commission ultimately decided to reject Montenegro’s request, raising fundamental questions about the EU’s willingness to reckon with BRI’s expansion.
As BRI develops, the trade imbalance between China and CEE countries may grow noticeably. If imports from these countries do not increase, their debt to China will increase, this situation will not last long and will lead to a deterioration in the terms of trade and to friction. To avoid this, targeted incentives should be granted to products from CEE countries in order to expand their exports to China.
In addressing this challenge, China needsto coordinate its economic relations with the EU, taking into account that the countries of Central and Eastern Europe are more oriented towards the EU in economy, trade and politics. Experts believe that the emerging TTIP agreement, which will bring the newest market standards and trade rules, may cause a blow to interaction with CEE countries. It will have an impact on the rules that China wants to set through the promotion of the BRI initiative, on the ability of Chinese enterprises to enter Central and Eastern European countries with investment and trade.
The possibility of “financial exhaustion” should also be taken into account, since the development of trade and economic ties with CEE through the BRI will require significant financial support. In addition to support from international financial organizations, more funds will be required from the Chinese side. Now the global economy is at a low point, China is in a period of economic transition, and the demand for money has become even greater. When deploying the BRI projects, it is impossible to exclude the depletion of finances within the country, hence partners should be prepared for the possible negative impact on the economic transition.
To strengthen humanitarian exchanges with ordinary people in CEE in order to deepen their understanding of China.
The Chinese Government should be encouraged by its EU partners to become a participant in the OECD Arrangement on Guidelines for Officially Supported Export Credits. In particular, it is recommended that, in monitoring progress towards a Comprehensive Agreement on Investment, the European Parliament seeks to ensure that China’s participation in the OECD framework is a key objective of the EU’s negotiating strategy.
An analysis of the public opinion of citizens of CEE countries showed that in many CEE countries, understanding of China is limited, and this is unfavorable for the development of cooperation. The study, in connection with the solution of this challenge, recommends opening more Confucius Institutes in CEE countries and supporting cultural dialogues within the BRI project.
Particular attention should be paid to the “greening” of China itself and BRI in particular. Thus, despite the narrative promoted by the Chinese government of a “Green Silk Road”, the environmental impact of many BRI-related projects continues to cause controversy. This includes effects on host country ecosystems and their biodiversity.
An example is the construction of a dam in the Batang Toru rainforest in Indonesia. Its construction has had devastating effects on biodiversity, leading it to be legally challenged by the Indonesian Forum for the Environment (WALHI). The World Bank, meanwhile, has refused to fund the project over environmental concerns. Yet, in March 2019, the court in North Sumatra decided the project would proceed.
Another example of environmental concerns related to BRI infrastructure project is Montenegro’s Bar-Boljare Motorway. The construction began in 2015 by the China Road and Bridge Corporation (CRBC), a subsidiary of the majority state owned China Communications Construction Company (CCCC), and is funded by China’s EXIM Bank.
Environmental concerns are specifically related to the Smokovac–Mateševo section of this project, which cuts across the Tara River, through an area protected by a UNESCO Biosphere. The most visible consequence of the project is the need for rock excavation for a motorway tunnel, but other implications, such as water pollution and illegal landfills also emerged from an investigation by the Montenegrin NGO MANS.The European Parliament and European Commission have called on authorities to share more details about the project’s environmental impact with the public.
It is also advisable that host governments start implementing more transparent bidding processes for infrastructure projects, in order to reduce environmental damage and increase long-term net benefits. On the other hand, in order to assess the environmental sustainability of projects with more accuracy and transparency, banks involved in financing the BRI should rely on third party reports, rather than those produced internally.
In order to improve transparency, it would be useful for the Chinese government to create a public portfolio of BRI-related projects, which would make it easier to verify to what extent they are environmentally sustainable. China does not directly operate as a unified actor in BRI-related infrastructural projects, but different actors such as State-Owned Enterprises (SOEs) and banks contribute to the realisation and funding and these should be made to comply with environmental standards.
These implications are especially relevant on a global level as well. The COVID-19 pandemic should arouse awareness about the scale of the consequences that phenomena such as deforestation and habitat fragmentation have on our planet and lives. As underlined by a recent Stanford University study, deforestation and landscape fragmentation have been recognised as facilitating direct transmission of zoonotic infections, including the risk of pandemics.
To sum up, it is worth noting that althoughit is extremely difficult to implement these recommendations in practice, however, China started to implement them even before the official start of the initiative. Thus, their gradual implementation can in the near future eliminate the negative consequences of the problematic areas in the PRC – CEE – EU relations and reduce the risk of its inflaming.
