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CEE: 17+1 summit reaffirms dwindling appeal of Chinese investment

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Enthusiasm for the 17+1 cooperation format with China is waning among the EU members in Central and Eastern Europe (CEE) due to unfulfilled investment pledges, and rising concerns over security and geopolitical pressures. As a result, Beijing will likely focus on fostering its relations with a handful of countries situated mostly outside the EU.

A virtual 17+1 format summit held on 9 February brought together China and 17 CEE countries. Chaired by China’s President Xi Jinping, the event focused on challenges presented by the Covid-19 pandemic, economic recovery as well as the development of closer transport and trade links.

The timing of the long-delayed summit suggests that Chinese authorities were seeking to build on the successful conclusion of negotiations over an EU-China investment deal and to boost support for the deal in CEE, given the need for approval by the European Parliament. Beijing also likely saw opportunities for vaccine diplomacy amid rapid vaccination progress in Serbia using the Sinopharm vaccine and a recent supply agreement with Hungary.

However, the fact that six CEE countries have delegated only ministerial-level representatives to the summit signals wavering support for the 17+1 platform. One source of the growing skepticism is unmet expectations for economic cooperation, the main objective of the 17+1 platform set up in 2012. Despite high hopes, China’s FDI levels in CEE have not grown significantly during the past decade and remain modest compared to Western Europe. Moreover, amid rising security concerns over investments and technology from China, many CEE countries are starting to limit China’s participation in strategic infrastructure projects. While trade volumes have grown substantially in recent years, the trade balance is overwhelmingly negative for CEE, and its exporters face multiple barriers to entering the Chinese market.

Geopolitical dynamics present additional headwinds for China in CEE. Amid rising tensions between Beijing and Washington in recent years, most CEE countries have been siding with the US, which is perceived as a traditional ally and a guarantor of security against unpredictable Russia, particularly in the Baltic States and Poland. Nearly all countries that belong to the 17+1 grouping have signed the US-initiated Clean Network initiative for the development of 5G infrastructure. In addition, 11 EU members of the 17+1 platform have joined the Three Seas Initiative, which can be seen as the US-backed platform to counterbalance China’s and Russia’s influence and investments in CEE.

Given the increasingly uncertain prospects of the 17+1 platform, Beijing will likely focus on fostering relations with a handful of allies in CEE, particularly along the route of China’s Belt and Road Initiative. Given its fraught relationship with Brussels and interest in alternatives to EU funding, Hungary will likely remain one of Beijing’s closest partners in the EU. China is also expanding its presence in Serbia and other Western Balkan countries, which hold slim chances of joining the EU in the near term and are lured by seemingly attractive financing proposals for infrastructure. Finally, China emerged as the largest trade partner of Ukraine in 2019 and there is considerable scope for deepening relations, particularly amid persisting tensions between Kiev and Moscow, and Western support tied to inconvenient demands for reform. However, there are concerns that the growing reliance on Chinese financing and (in some cases) technology come along with Beijing’s economic and political leverage.

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CEE: 17+1 summit reaffirms dwindling appeal of Chinese investment

Enthusiasm for the 17+1 cooperation format with China is waning among the EU members in Central and Eastern Europe (CEE) due to unfulfilled investment