Has China lost Europe?

12 min read

Chinese Premier Li Keqiang and European Council President Donald Tusk

In April and May, as Russia’s war in Ukraine entered its third month, China sent a special envoy to meet with officials in eight central and eastern European countries.

The timing was not coincidental: in the two months since Russia had launched its invasion, China’s standing in Europe had sunk to new lows.

European governments were dismayed by Beijing’s strengthened ties to Moscow and its tacit support for Russia’s aggression, and the Chinese leadership hoped to do damage control in a part of the continent where it believed it had special sway.

For a decade now, China has made the countries of central and eastern Europe one of its diplomatic focal points. Offering top-level access in Beijing and dangling huge trade opportunities, Chinese officials believed they could use this belt of smaller, post-communist governments as a counterweight to critical voices in the European Union and U.S. influence on the European continent.

And with the war in Ukraine bringing a chill over China’s European relations, Beijing assumed that a series of brisk meetings in the region—including in Budapest, Prague, Riga, and Warsaw—would help turn the tables it its favor.

But these efforts went nowhere. Instead, the Chinese ambassador and the rest of her delegation were rebuffed, with the Czech foreign ministry, for example, saying it used the meeting to express “reservations to current Chinese cooperation with Russia.”

Of the many important ripple effects of the war in Ukraine, the growing rupture between China and Europe is perhaps the least appreciated. In earlier years, the Chinese government viewed the European Union as an area of the world where it could pursue its economic interests with fewer of the geopolitical tensions that characterize its relations with Washington.

And it set out to use what it saw as its special ties with a large group of countries in central and eastern Europe, in particular, to cement this business-over-politics approach. For European governments that, like China, had transitioned to capitalism in recent decades, China was a powerful new partner that held out the potential of large-scale investment in their economies.

In return, Beijing hoped to find a backdoor to Europe’s vast markets, as well as gain new political leverage in its growing rivalry with the United States.

Today, however, Europe has become one of China’s biggest foreign-policy headaches. In part, the current situation is a result of economic miscalculations by both sides, which overestimated the potential benefits of the arrangement. But China’s increasingly rigid position on Taiwan has made things worse.

The Chinese government has retaliated against Lithuania for giving a small amount of symbolic recognition to Taiwan; and over the past year, it has made threatening noises toward other European governments over the same issue. Amid these souring relations, China’s support for Russia in Ukraine has brought its European troubles to a head.

The stakes are not small. The war in Ukraine has exposed how few allies China has and how badly the Chinese leadership miscalculated in pursuing close ties with Russia. Beijing’s heavy-handed efforts to gain leverage in Europe have also backfired.

Even as its economy and growing military strength guarantee it power and attention, its failed European project has underscored its inability to win durable partners among the advanced democracies—a pattern that seems likely to hinder its long-term influence in the world.

China’s Warsaw Pact

Beijing’s broader European strategy took shape a decade ago, when China launched its partnership with central and eastern Europe. Established in Warsaw in April 2012, the group quickly became known as the 16+1, because it consisted of China and 16 European countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, North Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, and Slovenia. (The group later grew to 17, when one country that wasn’t part of the old eastern bloc, Greece, joined in 2019. It fell back to 16 when Lithuania abandoned the pact in 2021.)

At the time, many China analysts saw this regional foray as a shrewd move—a successful prelude to its Belt and Road Initiative, which was launched the following year in an effort to promote Chinese business and political ties around the world. Under President Xi Jinping’s predecessor, Hu Jintao, China had sought to craft an image of itself as a peaceful, technocratic country whose main priority was integration into the global economy rather than projection of hard power.

Despite China’s size and authoritarian political system, many European leaders—along with major European companies such as Volkswagen and Siemens—saw China as a largely forward-looking country that was providing access to a vast market. And China’s strategic goals, such as reunifying with Taiwan and expanding power into the South China Sea, were far away from Europe’s core interests.

For both China and its European partners, the 16+1 group also seemed to make sense historically: the world’s second-largest economy and its European partners shared a socialist heritage. All were in various stages of market-oriented economic reforms. Moreover, 11 of these small countries were members of the European Union, so China could gain a toehold in the world’s largest trading bloc without having to compete directly with western Europe’s advanced economies.

Chinese-built factories in these countries would qualify as being inside the EU and hence given privileged access to the EU’s common market. And Beijing could more easily establish itself in these countries than in their more developed counterparts, such as Germany and Scandinavia.

The Chinese government also saw the 16+1 as a steppingstone to a broader economic deal with the EU itself. In 2013, the EU and China began negotiations for what became known as the Comprehensive Agreement on Investment. After years of discussions, the two sides finalized the deal in principle in 2020 with the aggressive backing of then German Chancellor Angela Merkel. On paper, it seemed that China might be on the road to a more long-term economic relationship with Europe.

By this point, however, the 16+1 had been hobbled by its poorly defined aims. For one thing, China and its European partners had entered the pact with radically different expectations. From the start, the project was largely a Chinese creation. China built a website to document the project and set up a secretariat staffed exclusively with Chinese foreign ministry officials.

By contrast, many of the governments in the region saw the relationship as merely a way to gain Chinese investment and trade, but didn’t share Beijing’s goal of reorienting themselves away from Brussels. China’s official rhetoric about the pact, drawing on the vague and clichéd language of Chinese government discourse, did little to clarify the aims of the group, stating blandly that it was “based on traditional friendship and shared desire of all the participants for win-win cooperation and common development.”

Tangible results were correspondingly meager. A basic problem was China’s assumption that central and eastern European countries formed a coherent bloc. The region covered by the 16+1 stretched nearly 2,000 miles, from Estonia in the north to Greece in the south, and included countries with hugely different economic conditions. Five of the 16 countries—Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, and Serbia—were not members of the EU and were largely poorer nations with lower standards of development.

What initially united these countries in agreeing to China’s overtures was the assumption that, in the aftermath of the 2008 financial crisis, a partnership with Beijing would mean an enormous injection of Chinese capital. The money would then revive old factories and projects that had found no Western investors. But few of these hopes have borne out. In 2013, for example, at a 16+1 summit in Bucharest, China, Hungary, and Serbia discussed a high-speed rail line between Belgrade and Budapest.

The $3 billion project, advertised as the most important Belt and Road initiative in Europe, was heralded as a symbol of China’s new partnership. A decade later, however, the rail line is still unfinished and has been embroiled in charges of corruption and lack of transparency. As the Romanian scholar Andreea Brinza put it, the 16+1 quickly became “an annual summit featuring a plethora of unfulfilled promises and projects.”

Broken Promises?

According to Chinese figures, trade between China and its European partners grew eight percent a year between 2012 and 2020 and surged even more during the pandemic. But the growth was starting from a very low base, and the results have been extremely modest. According to the Czech researcher Richard Q. Turcsanyi, China still accounts for less than two percent of the central and eastern European region’s exports and nine percent of its imports; Chinese foreign direct investment has had an even smaller impact, making up less than one percent of total foreign direct investment.

That, Turcsanyi has observed, means that central and eastern Europe “has the least Chinese presence when compared to any other region in the world when measured by its shares of economic interaction.” Given Beijing’s decade-long effort to cultivate the region, this is an astonishingly poor showing.

One reason the results were so dismal is that the Chinese approach left it up to Chinese companies to do the actual investing. Although many Chinese companies are state owned, they are still profit oriented. And for these enterprises, central and eastern Europe simply isn’t very attractive. Compared to western Europe, it is less densely populated, cities are dispersed across a large area, there is less infrastructure, and standards of living are lower. No wonder, despite Beijing’s rhetorical encouragement, few Chinese companies have taken up the call to invest in the region.

Seen broadly, China’s mishaps in Europe reflect an approach to policymaking that make sense in the Chinese context but does not always play well overseas, especially in advanced democracies, where governments are more directly accountable to their electorates. Many initiatives in China are often showy affairs that start with a bang and report creatively produced statistics. They offer a statement of intent rather than concrete plans. Content is added later, sometimes years later, or never at all.

Another problem was China’s mercantilist approach to foreign policy and trade—basing foreign relations on calculations of economic gain. All countries do this to some extent, but China is unusual among major powers in relying so heavily on economic ties to shape its foreign relations. Meanwhile, the projects that China has announced have often turned into boondoggles or dead ends. Along with the high-speed rail project, these include a $15.6 billion expansion of the Cernavoda Nuclear Power Plant in Romania, for which the promised Chinese investment never materialized.

In 2020, seven years after China had signed on to the deal, the project was taken over by a U.S. consortium. Partly because of the nuclear plant debacle, the Romanian government last year banned Chinese companies from participating in public infrastructure tenders. Other governments in the region have made similar moves, viewing Chinese bidding on contracts as harmful to their efforts to compete with more advanced industrial economies.

Arm-Twisting on Taiwan

But China’s eroding support in Europe has not been limited to economic failures. Many European governments have increasingly bridled at Beijing’s efforts to use its economic might to silence criticism of its own policies and human rights record. Nowhere has this coercive strategy been more pronounced than on the matter of Taiwan.

Consider the case of Lithuania. In deference to China, most countries in Europe and elsewhere have used the word “Taipei” to describe any Taiwanese representative offices in their countries, the idea being that it was acceptable to use the island’s capital rather than its proper name because the latter somehow implied statehood.

When Lithuania decided to flout this convention last year—allowing Taiwan to open a representative office that featured “Taiwan” in its name—Beijing responded with a total economic ban on the country. It not only cut off Lithuanian exports to China but threatened to ban any product manufactured in another country if the item contained a Lithuanian component.

At first, it seemed that Lithuania would find few supporters in Europe for refusing to bow to Chinese demands. That was especially true after China threatened to sanction international companies that used components made in Lithuania. Some EU countries— including Germany, which has a large trade with China—put informal pressure on Lithuania to back down on its pro-Taiwanese stance.

Gradually, however, European leaders found Beijing’s hardline behavior intolerable. In January 2022, Brussels launched a case with the World Trade Organization, accusing Beijing of engaging in discriminatory practices because it stopped clearing Lithuanian goods through customs and rejected import applications from Lithuania. It was amid these deteriorating relations that the war in Ukraine turned many European governments more decisively against China.

Russia Over Europe?

The Chinese government’s support for Russia in the lead-up to the invasion caught many European leaders by surprise. Just before the war began, China and Russia issued a joint communiqué that endorsed Russia’s call for NATO to be rolled back to 1997 borders. This action would have stripped countries such as the Czech Republic, Poland, Slovakia, and the Baltic states—all of them members of the 16+1 group that China was supposedly supporting—of NATO weapons and troops, leaving them as vulnerable as Ukraine.

Beijing’s behavior since the war began—repeating the Russian talking point that the invasion was provoked by NATO enlargement—has crystalized the growing unease in European capitals. In March, German Foreign Minister Annalena Baerbock said that the war showed that “one-sided economic alignments in fact make us vulnerable. Not just with regard to Russia.”

European frustration with China boiled over after a summit in early April between senior Chinese leaders and the European Parliament. The EU’s top representative for foreign affairs, Joseph Borrell, called it a “dialogue of the deaf.” These sentiments have been especially strong among the members of the 16+1, many of which are now on the frontlines of the face-off with Russia and have themselves benefited from NATO security guarantees.

Several European countries have now openly embraced Lithuania’s outspoken position on Taiwan. One is the Czech Republic, which is also one of the wealthiest countries in the region. In April, Czech Foreign Minister Jan Lipavsky demanded greater scrutiny of China’s support for Russia, accused China of having “bullied” Taiwan, and called for closer Czech-Taiwan relations. Latvia, Lithuania’s close neighbor, has meanwhile called on Beijing to “use more leverage in order to stop Russia’s aggression against Ukraine.”

Notably, the 16+1 itself has seemed increasingly moribund. Last year, six member countries decided against having their heads of state attend a virtual summit with Xi Jinping, sending lower-level officials instead. This year, the 16+1 summit did not take place, possibly because of the war in Ukraine.

Power, Not Pragmatism

China’s failures in central and eastern Europe highlight the country’s increasingly ideological approach to foreign affairs under Xi Jinping. Most of these failures were self-inflicted. China has long been suspicious of Western alliances, such as NATO, but its decision to openly endorse the Russian position went a step further, essentially telling countries in the 16+1 to abandon one of their key foreign-policy priorities.

People in the Chinese foreign policy establishment must have recognized how badly this would play in the region, but they were apparently unable to sway the Chinese leadership. Instead, Xi’s desire to strike a deal with Russian President Vladimir Putin, with whom he has strong personal relations, won out. This behavior is part of an overall sidelining of China’s foreign-policy experts in favor of ideologues closer to Xi.

In the economic sphere, investing in the less wealthy countries of Europe would have been a challenge under any circumstances. But China’s unwillingness to see troubled projects through to completion made the situation worse. Instead, the 16+1 summits continued, with the same broken goals listed on the organization’s Chinese website.

Beijing’s unyielding approach to Europe may not last forever. Analysts and officials in central and eastern Europe who have dealt with China say that its officials are now strong linguistically in the mosaic of languages and cultures that make up the region.

And the Chinese leadership is persistent—although its ambassador’s visit to the region last month was considered a failure, Beijing is unlikely to give up. Success, however, will depend on a return to more pragmatic policies. And with Xi Jinping likely to take another five-year term at a key Communist Party meeting this autumn, that sort of course correction may have to wait.

Source: Foreign Affairs

Tony Simon

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