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Forging a New “Eastern Bloc”

The China-led “16+1” initiative in Central and Eastern Europe (CEE) is crafting a soft version of the old East European bloc, this time under Chinese rather than Russian tutelage. A collection of sixteen bilateral, uneven relationships with China rather than a true regional organization, 16+1 undermines existing Euro-Atlantic alliances. It also reinforces tendencies toward crony capitalism in the participating CEE states, reversing the progress toward more open socioeconomic systems that these countries have achieved since 1989 under the EU’s normative guidance. Ultimately, CEE countries will have to choose between the EU regulatory framework, designed to secure a level playing field, and the “China model” of a politicized economy controlled by a party-state.

With the toppling of its communist regimes, Eastern Europe embarked on a transformation inspired most immediately by Western Europe’s example. As East European states entered the EU-accession process, the prospect of integration into an affluent and democratic Europe became a key driver of change. The slogan of the day was a “return to Europe,” suggesting that the old Eastern Bloc was a historical aberration caused by Soviet occupation: East European countries had always been part of “One Europe.” The unwieldy neologism Central and Eastern Europe (CEE) became popular as a means of stressing this conceptual shift. After 1989, many saw a chance to give to what the Czech-emigré writer Milan Kundera in 1984 had termed the “tragedy of Central Europe” an unexpected happy ending: a European (re)Union.1

Nearly thirty years after the fall of the Berlin Wall, however, the ideological and political landscape has changed dramatically. The 2008 financial crisis and the 2015 refugee crisis have left the EU reeling and have severely undercut the association of liberal democracy with societal well-being. Recent narratives depict a decadent, failing West and trumpet new opportunities in the orderly, rising East. In light of these new perceptions, the CEE countries have voluntarily joined a new regional grouping that again divides Europe into East and West—this time under Chinese rather than Russian tutelage. The new “Eastern Europe 2.0” is of course a much softer arrangement than the old bloc, yet it has already undermined the alliance system that in recent decades has guaranteed the region’s security and prosperity. In addition, it is politicizing the CEE economies and reinforcing their oligarchic elements through targeted elite capture and the export of the “China model.” [End Page 83]

In April 2012, China’s buildup of influence in the region took on institutional form as the “16+1” initiative, which brings together the People’s Republic of China (PRC) and sixteen postcommunist CEE states: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, and Slovenia. This grouping has received little attention in the West, and it is not widely known or understood even in the region itself. Yet in Beijing, 16+1 is considered a masterstroke of Chinese diplomacy.2 Beijing has managed not only to divide Europe once again, but also to herd together countries from Russia’s former backyard and current member-states of the EU without much protest from either. The EU, of course, is preoccupied with other problems, from migration to Brexit, but Russia’s tacit consent to this Chinese initiative can be explained only by a preexisting understanding similar to the two powers’ accommodation in Central Asia. The sixteen CEE participants largely form a geographic belt immediately adjacent to the post-Soviet space, but exclude Belarus, Moldova, and Ukraine, suggesting consideration for what Russia perceives as its primary sphere of influence.

Initially, the very vagueness of the 16+1 project may have helped China to pull off its surprising feat. The project’s early documents are full of lofty general terms such as “win-win,” “friendship,” and “harmony.” They contain no language that could be seen as problematic, and regularly stress compatibility with the “China-EU comprehensive strategic partnership.”3 There is anecdotal evidence that at least some CEE leaders did not fully understand what they were getting into.4

This initially unremarkable grouping took on new life with Chinese president Xi Jinping’s grandiose vision of the New Silk Road, which has grown into what is now known as the Belt and Road Initiative (BRI)—currently China’s paramount foreign-policy priority. Since the announcement of this endeavor in late 2013, the 16+1 initiative has effectively become the East European platform for its implementation. The annual 16+1 prime-ministerial summits now serve as just another forum for the BRI.5 In addition to these summits, 16+1 now includes under its umbrella a think-tank network, an annual meeting (since 2016) of CEE political parties with the Chinese Communist Party (CCP) international department, and annual China Investment Forums held in Prague. Also already organized or currently in the works are platforms, distributed across the CEE “partner” states, for China-CEE cooperation in areas from tourism and investment to local government. An annual meeting of 16+1 education officials was described in the Chinese press as having discussed the “harmonization” of educational policies, a term whose connotations of censorship are probably lost on most CEE participants.6

Perhaps counterintuitively, 16+1 does not function as a regional bloc through which the CEE countries can coordinate their policies toward China. Rather, it is a platform for sixteen bilateral relationships with [End Page 84] Beijing, ensuring China an overwhelming advantage in each such relationship. This arrangement is in line with the diplomatic thinking elaborated at the CCP’s Nineteenth Party Congress in October 2017: In place of alliances, the PRC seeks to establish a global “network of partnerships,” which taken together will make up a “community of human destiny.” Xi Jinping himself reportedly advanced this line of “partnerships, not alliances” as early as 2014, and the People’s Daily claims that China has already established over a hundred such bilateral relationships.7

Bilateral partnerships make it easier for the PRC to bypass existing alliances and realign countries as part of a new China-centric system. The 16+1 grouping cuts across EU boundaries (it includes eleven EU members and five nonmembers) and offers Beijing an alternative to dealing with the EU as a whole. Instead of bargaining collectively, CEE countries compete to become China’s favored “gateway to Europe.” In the ensuing race to the bottom, Czech president Miloš Zeman has publicly offered his country as an “unsinkable aircraft carrier for China in Europe,”8 while Serbian politicians have mused about standing out as the best student in China’s class in a way that would transform the “16+1” into a “15+1+1.”9 Such competition is partly a function of the 16+1 structure: The secretariat and administrative staff are based in China’s Foreign Ministry, while national coordinators—typically officials at the vice-ministerial level without relevant expertise or staff support—are responsible for implementing projects in the individual CEE countries.10 This setup effectively reduces the CEE countries to passive recipients of policies developed in Beijing.

Several 16+1 countries seem to have felt encouraged to symbolically distance themselves from their existing alliances. In a 2016 CCTV interview preceding Xi Jinping’s visit to Prague, President Zeman declared that the Czech Republic (a NATO and EU member) had previously been “too submissive” to Brussels and Washington. He cast the new partnership with China as a sign of his country’s becoming fully independent again.11 Also on CCTV, Tomislav Nikolić, then president of Serbia, declared before a March 2017 visit to China that Serbia (which officially aspires to join the EU at the earliest opportunity) is a free country and therefore not afraid to forge a partnership with China.12

The “China Model”

The web of activities making up 16+1 has produced few publicly available documents that are truly informative. In the Czech Republic, where the reorientation toward China has lately grown unpopular with the public, an initial public-relations blitz has given way since late 2016 to a closed-door approach. Today even top-level visits and new “coordination” mechanisms are often kept quiet. Czech journalists are now excluded from most bilateral events, leaving Chinese media coverage as [End Page 85] the only official source of information. It is therefore not easy to see how much of this activity is real and how much is empty ritual. Although the foundational idea of 16+1 was for the CEE countries to tap into China’s economic potential, mostly by attracting investment, the overall level of Chinese investment in the CEE region remains low in comparison both with other players’ investment in the CEE countries and with China’s investment in Western Europe.13 There is, however, one area in which China’s footprint is clear: The real impact of CEE “partnerships” with China has been a politicization of the economy.

China’s diplomatic efforts are meant to usher in “Globalization 2.0,” a concept widely discussed in the Chinese press and beyond. This would essentially entail internationalizing the “China model” (now often alternately described as the “China solution”) of state capitalism that combines select market mechanisms with overall control by the party-state. The BRI and 16+1 are both political projects aimed at shaping the economy (and by extension the politics) of participating states: In many democratic polities, these frameworks create enclaves that operate according to the PRC’s “model” of political deal making. Within these enclaves, Chinese politicians and businessmen can conclude deals with local counterparts while sidestepping the usual transparency and accountability mechanisms.

In the CEE countries, the “China model” is colliding with that of the EU. While the latter is based on regulation (sometimes perhaps excessive) designed to ensure fair and open competition, the China model spurns regulation in favor of ad hoc negotiation, preferably at the bilateral political level behind closed doors. One example is the upgraded Belgrade-Budapest rail link, a flagship initiative of both 16+1 and the BRI. The link is part of the Land-Sea Express Route meant to connect the Greek port of Piraeus, bought in 2016 by China’s Cosco Pacific, with Hungary. Shortly after the final agreements were signed at a 16+1 summit in late 2016, the European Commission initiated an inquiry into a suspected breach by Hungary of EU regulations mandating public tenders.14 Flouting EU rules has admittedly become something of a national sport under Hungary’s Prime Minister Viktor Orbán, but the pressure to do so extends to other countries as well. At around the same time in the Czech Republic, China reportedly demanded that it be assigned a contract without a public tender for new construction at the nuclear power plant in Dukovany.15

Ironically, this incompatibility with EU practices may actually be heightening the appeal of China’s initiatives for some CEE elites. The EU has pumped vastly more money into the region through its structural funds than China has invested, and the EU funds come as grants whereas Chinese investment materializes, if at all, in the form of acquisitions or loans. Yet while the EU funds come with strong transparency and accountability requirements, China’s money has “no strings attached.” This not only cuts down on paperwork, but also means that funds from Beijing can more readily feed into patronage networks.16 [End Page 86]

Since the 1990s, when privatization carried out under slapdash regulatory frameworks gave the advantage to a well-connected few (often old-regime insiders), many economic elites in the region have gained control over key sectors through backroom deals, political connections, and insider information rather than entrepreneurial and managerial prowess. These new oligarchs often find it easier to do business with their counterparts in China (and Russia), who share similar pedigrees and business practices, than to adapt to the strict EU regulatory regime.

The Case of the Czech Republic

How have insider deals with Chinese business interests helped to bring about political realignment? Recent developments in the Czech Republic offer an illustration. Czech policy toward China, long influenced by the commitment to human rights and democracy of the Czech Republic’s first president, iconic dissident Václav Havel, abruptly changed direction with the 2013 election of Miloš Zeman to the presidency. Zeman offered his support for the ultimately successful efforts of the wealthy Czech financial conglomerate PPF and its consumer-credit subsidiary Home Credit to secure a national license for operations in China. The license was conditioned on a more forthcoming Czech attitude toward the PRC, which Zeman and a new government under his influence duly delivered, announcing a new China policy in 2014.

Late the following year, the Chinese company CEFC suddenly embarked on a week-long “shock-and-awe” shopping spree in Prague, bagging some prime real estate, the oldest soccer club in the country, and shares in two media conglomerates. After this, the Czech government publicly announced the appointment of CEFC chairman Ye Jianming as honorary advisor to Zeman—a position to which Ye had been quietly named earlier in the year. CEFC then set up its European headquarters in Prague, with Jaroslav Tvrdík, a former PPF lobbyist and defense minister in Zeman’s previous government, at the helm. Tvrdík simultaneously served as China advisor to both the president and the prime minister. CEFC’s Czech offshoot then started hiring top retired politicians and civil servants, and personnel rotated back and forth between the president’s office and CEFC.

Through this elite capture, CEFC leveraged a relatively minor investment into considerable political influence. Its further acquisitions mostly involved deals with local entrepreneurs connected to Zeman, Tvrdík, and their associates. At the same time, Zeman led the charge for a full reorientation of policy toward China (and, arguably to a lesser extent, toward Russia). After claiming to have liberated Czech foreign policy from EU domination, he traveled to Beijing to attend the August 2015 military parade and the May 2017 BRI summit. He described the New Silk Road as the “most fascinating project of modern history.”17 Although he keeps his distance from most Czech media outlets, he has [End Page 87] regularly appeared on the partly CEFC-owned TV Barrandov. When academics and journalists called attention to studies that connected CEFC and its chairman with Chinese military intelligence, the company responded with threatening notices from their local law firm, led by a close friend of the then–Czech prime minister.18 Although these threats subsided, commercial pressure on the media from companies close to the China lobby persists. Czech intelligence services have warned publicly about Chinese influence on local politicians, but the political establishment has chosen simply to ignore them.19

While EU economic integration has been driven by commercial factors, China’s “Globalization 2.0” is driven by political fiat. The collision of the two projects in CEE has generated friction: between open-tender requirements and contracts awarded through political deals; between economic competition and the collusion of economic and political interests; and finally, between democratic capitalism and a state capitalism dominated by shadowy networks of apparatchiki and oligarchs. Ultimately, the CEE participants in 16+1 may find that, despite all the talk of win-win, they will have to make a choice.

Martin Hala

Martin Hala is director of AcaMedia and of Sinopsis.cz, a website tracking topics related to China in the Czech Republic. He is coeditor of Investigative Journalism in China: Eight Cases in Chinese Watchdog Journalism (2010).

NOTES

This work was supported by the European Regional Development Fund through the Project “Creativity and Adaptability as Conditions of the Success of Europe in an Interrelated World” (No. CZ.02.1.01/0.0/0.0/16_019/0000734).

1. Milan Kundera, “The Tragedy of Central Europe,” trans. Edmund White, New York Review of Books, 26 April 1984, 33–38.

2. Kong Tianping, “The 16+1 Framework and Economic Relations Between China and the Central and Eastern European Countries,” CritCom, 14 December 2015, http://councilforeuropeanstudies.org/critcom/161-framework-and-economic-relations-between-china-and-ceec.

3. See for instance “The Bucharest Guidelines for Cooperation Between China and Central and Eastern European Countries,” 27 November 2013, http://gov.ro/en/news/the-bucharest-guidelines-for-cooperation-between-china-and-central-and-eastern-european-countries.

4. Personal communications with various Czech officials.

5. “Spotlight: China, CEEC Cooperation a Model to Advance Belt and Road Initiative,” Xinhua, 27 November 2017, www.china-ceec.org/eng/zdogjhz_1/t1514493.htm.

6. Tianping, “The 16+1 Framework”; Yang Yi, “Chinese Vice Minister Suggests Harmonization of Education Policies with CEE Countries,” Xinhua, 21 September 2017, http://news.xinhuanet.com/english/2017-09/21/c_136627559.htm.

7. Timothy R. Heath, “China’s Endgame: The Path Towards Global Leadership,” Lawfare, 5 January 2018, www.lawfareblog.com/chinas-endgame-path-towards-global-leadership; Zhong Sheng, “Zouchu yitiao guo-yi-guo jiaowang xin lu” [Embarking on the New Road of state-to-state contacts], Renmin ribao via Zhong Gong Wang, 24 November 2017, http://theory.workercn.cn/256/201711/24/171124073709299.shtml. [End Page 88]

8. Miloš Zeman, interviewed in Týden (then co-owned by CEFC China), “Zeman: Čína je pro exportéry nenasycený trh” [Zeman: China is an unsaturated market for exporters], Týden, 28 March 2016, http://www.tyden.cz/rubriky/domaci/politika/zeman-cina-je-pro-exportery-nenasyceny-trh_377377.html.

9. Quoted in Angela Stanzel, “Introduction,” in Angela Stanzel and Agatha Kratz, China’s Investment in Influence: The Future of 16+1 Cooperation (London: European Council on Foreign Relations, December 2016), www.ecfr.eu/publications/summary/chinas_investment_in_influence_the_future_of_161_cooperation7204.

10. See “Introduction of the Secretariat for Cooperation Between China and Central and Eastern European Countries,” 20 November 2013, www.china-ceec.org/eng/msc_1/mscjj/t1411097.htm; and “Introduction of National Coordinators” at www.china-ceec.org/eng/zdogjxty_1.

11. “Czech President Milos Zeman on China-Czech Ties,” CCTV, 27 March 2016, http://english.cntv.cn/2016/03/27/VIDErzRMqU3S6DkYaTnLx8es160327.shtml.

12. “Nikolić će biti počasni građanin Pekinga” [Nikolic to become an honorary citizen of Beijing], Danas, 28 March 2017, www.danas.rs/politika.56.html?news_id=342231&title=Nikoli%C4%87+%C4%87e+biti+po%C4%8Dasni+gra%C4%91anin+Pekinga.

13. Valbona Zeneli, “What Has China Accomplished in Central and Eastern Europe?” Diplomat, 25 November 2017, https://thediplomat.com/2017/11/what-has-china-accomplished-in-central-and-eastern-europe.

14. Zoltán Vörös, Who Benefits from the Chinese-Built Hungary-Serbia Railway?” Diplomat, 4 January 2018, https://thediplomat.com/2018/01/who-benefits-from-the-chinese-built-hungary-serbia-railway; “EU Investigates Chinese High-Speed Rail Project in Hungary and Serbia,” GB Times, 20 February 2017, http://gbtimes.com/business/eu-investigates-chinese-high-speed-rail-project-hungary-and-serbia. In November 2017 it was announced that a tender had been opened after all (Radomir Ralev, “China Offers 18-Yr Loan to Hungary for Overhaul of Rail Link to Serbia,” SeeNews, 12 January 2018, https://seenews.com/news/china-offers-18-yr-loan-to-hungary-for-overhaul-of-rail-link-to-serbia-597483).

15. “Čína chce Dukovany naservírovat na talíři. Požaduje zakázku na dostavbu elektrárnu bez výběrového řízení” [China wants Dukovany served on a plate. It demands the contract for the power plant’s annex without a tender], Hospodářské Noviny, 25 October 2016.

16. See Michal Makocki, “China in the Balkans: The Battle of Principles,” European Council on Foreign Relations, 6 July 2017, www.ecfr.eu/article/commentary_china_in_the_balkans_the_battle_of_principles_7210.

17. Jan Velinger, “Zeman Compares Silk Road Project to Post-War Marshall Plan,” Radio Praha, 14 May 2017, www.radio.cz/en/section/news/zeman-compares-silk-road-project-to-post-war-marshall-plan.

18. Robert Břešt’an, “CEFC stáhla z webu informaci potvrzující napojení svého šéfa na politické oddělení čínské armády” [CEFC took down from the web information confirming its boss’s connection to the political department of the Chinese military], HlídacíPes.org, 31 March 2016, https://hlidacipes.org/cefc-stahla-z-webu-informaci-potvrzujici-napojeni-sveho-sefa-na-politicke-oddeleni-cinske-armady.

19. Robert Břešt’an, “Ruská a čínská špionáž u nás podle BIS” [Russian and Chinese espionage among us, according to BIS], Sinopsis, 25 October 2017, https://sinopsis.cz/ruska-cinska-spionaz-u-nas-podle-bis. [End Page 89]