Each year, the 16+1 summit has Central and Eastern European states clamoring for Chinese money.
It is that time of the year again when optimism about new investment in Eastern Europe is thick in the air. Expectation are high as the sixth “16+1” meeting will take place in Budapest this upcoming Sunday. Launched first in 2012, the “16+1” Cooperation Framework includes 16 countries in Central, Eastern, and Southeastern Europe. This regional approach brings together a very diverse group of countries between the two seas, from the Baltics to the Balkans.
A component of the Belt and Road Initiative (BRI), a brainchild of Chinese President Xi Jinping, “16+1” is a key part of the Chinese transcontinental economic and geopolitical vision, an updated version of China’s “going out” strategy that aims at integrating it more deeply in the world economic system, and eventually positioning China as a leader in that system. In reality, “16+1” was established before the launch of the BRI. After Europe was hit by the economic crisis, the CEE countries managed to keep their positive growth rates, and interaction with China started to increase rapidly.
The Chinese interest in CEE comes as no surprise as part of the overall strategy in Europe, through strategic investment undertaking in the core European Union countries, and big infrastructure development projects in its periphery. In the fast-growing CEE region, prices for acquisition are lower, demand for preferential lending is high, human capital is cost-effective, and concessions for Chinese investors are high. Plus, the strategic location is perfect.
The “16+1,” universally welcomed in CEE, is a framework of bilateral and multilateral initiatives concentrated in three main areas: trade, investment, and transportation networks. But where do trade and investment relations stand today after six years of a high political and economic engagement?
Bolstering trade relation between China and CEE is one the main objectives. While trade has increased significantly over the last few years, it reached $ 58 billion in 2016, far short of the objective to reach $100 billion. In reality, CEE-China trade increased much more quickly before the first summit, almost doubling from 2009 to 2012, going from $ 32 billion to $52 billion. CEE exports to China have increased, but the trade balance is heavily tilted in favor of China. Trade is highly concentrated on five countries — Poland, the Czech Republic, Hungary, Slovakia, and Romania — that constitute 80 percent of the total. As for the non-EU countries of the platform, considering their very small and underdeveloped markets of southeast Europe, trade exchanges have reached $3 billion in 2015, and half of it was conducted with Serbia, China’s strategic partner in the Balkans.
Compared to the overall Chinese trade levels with the EU as a whole, CEE constitutes just a small portion of the total of $514 billion yearly (with a positive trade balance of $174 billion for China). China is the second largest trade partner for the EU, constituting 20 percent of European imports and almost 10 percent of its exports.
It is still too early to quantify and qualify the overall impact of Chinese investments in the region, in terms of spillover effects such as SME development, job creation, and economic growth. All 16 governments are courting Chinese companies to invest in their markets.
