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John Ross: China` strengthening links with Eastern Europe

2016-05-17

By John Ross    Source: China.org.cn    Published: 2016-5-17

 

There has recently been a major increase in economic and diplomatic exchanges between China and Central and Eastern Europe. In March, Xi Jinping paid the first state visit by a Chinese president to the Czech Republic. In April, Poland`s Foreign Minister Witold Waszczykowski visited Beijing and specifically underlined the importance of China`s "Belt and Road" initiative. As Poland is the largest economy in Eastern Europe after Russia, the Polish government`s conclusions are worth looking at.



Polish Foreign Minister Witold Waszczykowski makes a speech at the Chinese Academy of Social Sciences on April 26, 2016. [Photo by He Shan/China.org.cn]


Foreign Minister Waszczykowski analyzed: "With regard to the economic aspect of EU-China contacts, I would single out the Chinese Belt and Road Initiative as the most promising platform for cooperation between Europe and the People`s Republic of China. Poland has high hopes for this major initiative…. The Belt and Road introduces a new dimension into Europe-Asia relations. If the initiative succeeds, it will work out a new formula for a strategic relationship between our two continents…"

 

Slawomir Majman, president of the Polish Information and Foreign Investment Agency, similarly analyzed China and Poland`s major common opportunities: "China`s initiative to strengthen the economy along the Silk Road is very much in our interest, because Poland is interested in operating in the Euro-Asia region, with our trade and investment, we are very interested to be much more active in Pakistan, Azerbaijan, Turkmenistan, and all the countries along the Silk Road." Consequently: "Why not develop arm in arm with Chinese partners."It is therefore worth analyzing what lies behind these recent developments, and taking a realistic look at both the potential and any possible problems in relations between China and Central and Eastern Europe.


Since the end of Communism, Eastern and Central Europe experienced drastic fragmentation. In 1989 there were eight Communist countries in Eastern Europe and the former USSR. By 2015 there were 27 internationally recognized ones. The former USSR went from 1 state to 15, Yugoslavia from one to five (six if the disputed status of Kosovo is included), and Czechoslovakia split in two.


The outcome has been dominance by Russian economic influence among individual East European states. Russia`s 2015 GDP of $1,325 billion at current prices is 69 percent of the former USSR and 5 percent larger than the whole of the rest of Eastern Europe outside the former USSR put together. Russia also dominates logistical aspects of the Belt and Road initiative. Goods can pass from China almost to the borders of Eastern Europe and vice versa exclusively on Russian territory. There are alternative routes via Central Asia but these involve several different states. The latter does not pose any great problems at present, as China has good relations with the Central Asian states of the former USSR, but strategic planning must always take into account possible negative developments which could create uncertainty in the future. However, China`s relationship with Russia firmly anchors the logistics for connecting China to Eastern Europe via the Belt and Road.


If Russia forms a firm land bridge for China with Eastern Europe, Poland is the key state in Eastern and Central Europe outside the former USSR – having 34 percent of the population and 38 percent of the region`s GDP – as shown in the Table 1. This far exceeds any other state. Excluding Albania, whose population is less than 3 million, Poland also has had the region`s most rapid economic growth – greatly aided by budget transfers from the European Union. It is for this reason that the strong support given by Poland to the Belt and Road initiative is so significant.


Table 1


Given that geopolitical relations between Poland and Russia are at present not favorable, the fact that Poland is not allowing such complications to get in the way indicates the great economic importance Poland is attaching to its relationship with China .


The reason Central and East European states are now paying major attention to China is clear. Immediately following 1989 their focus was almost exclusively on the EU in terms of hopes for membership and for economic growth. But since the 2008 international financial crisis, growth in most of Western Europe within the EU has been slow. Taking a five-year average, to remove the effect of short term fluctuations, recent average EU GDP growth has only been 1.0 percent and only 0.6 percent in the Euro area. It has therefore become important for Central and East European states to establish economic relations with more rapidly growing regions – and China is the world`s most dynamic major economy.


For China the attractions of Central and Eastern Europe are also evident. The IMF recently noted: "Economies in central, eastern and south-eastern Europe (CESEE) are poised to overtake the continent`s traditional economic powerhouses like Germany and France in terms of rate of growth … robust growth continued in most central and south eastern European economies… despite problems plaguing wider Europe such as deflation in the euro zone." The IMF predicted Eastern and Central European growth this year at 3-4 percent compared to 1.6 percent for the Euro area.


Very firm economic fundamentals therefore underpin China and Eastern Europe`s recent increase in mutual contact despite the considerable distances and geopolitical complications involved.


The author is a senior fellow with the Chongyang Institute for Financial Studies at Renmin University of China.



Key Words:China   Europe   cooperation  

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