China’s European outreach takes smart eastern turn

By Jeremy Garlick Source:Global Times Published: 2016/6/17 0:48:01

Illustration: Liu Rui /GT

Chinese President Xi Jinping's visit to Serbia and Poland, made in conjunction with his trip to Uzbekistan for the latest Shanghai Cooperation Organization (SCO) summit, raises a question that tends to be ignored by observers who look mainly at China's relations with more prominent and powerful nations such as the US, Russia, Germany and Japan: Why is China apparently so interested in Central and Eastern European (CEE) countries?

The 16 CEE nations' collective total of about 120 million people spreads out over quite a large area, therefore doesn't look particularly significant, particularly since it is only slightly larger than China's most populous province, Guangdong.

In addition, these countries are not exactly economic powerhouses so far. If one takes raw GDP data, as gathered by the International Monetary Fund in 2015, Poland's roughly $480 billion (at current prices) pales into insignificance next to China's almost $11 trillion. As far as the EU is concerned, seven Western European nations all have larger GDPs than any of the 11 CEE countries which are EU members.

Even China's trade with CEE countries looks relatively small. According to Eurostat data, exports from the 11 EU members to China in 2014 constituted less than 5 percent of the EU-28 total, while imports amounted to just over 10 percent. Compared to trade with the 17 countries in the more developed Western portion of the EU, China's economic ties with the CEE appear rather weak.

However, the fact that the CEE countries are, as yet, still developing economically, when added to the relatively low level of trade ties with China, means that there is great potential for growth which can benefit all countries involved. Since China is itself clearly in the midst of a development process, there is also great potential for side-by-side synergistic economic growth with the countries of the CEE region.

There is a more significant reason why China is so active in the CEE countries. First and foremost, these nations provide an obvious endpoint to the "Belt and Road" initiative, via which China is seeking to improve trade and infrastructure across the Eurasian landmass. A glance at the map reveals that all routes to Western Europe, whether over land via Central Asia, the Middle East and Russia, or by sea through the Indian Ocean, the Red Sea and the Mediterranean, end up reaching and passing through the territories of the 16 CEE nations.

In fact, Serbia and Poland are particularly vital in this respect. Serbia lies north of Greece, on the land route from Athens up to Budapest. Since China is already developing the port of Piraeus as a major sea trade hub within the "Belt and Road" initiative network, the necessity of building a rail link which will connect the port to European markets is clear. It is also clear that such a rail link needs to pass through Serbia. This is why China has already begun work on constructing a high-speed rail link between Belgrade and Budapest, and this is also what makes Serbia such a crucial partner.

Poland, on the other hand, not only has some excellent ports on the Baltic Sea, but also has a long land border with Germany, meaning that it is very strategically placed in terms of trade with Europe's largest economy. A number of freight rail connections travelling from China through Russia also terminate in Poland, meaning that it could become a major terminus in the future for overland as well as maritime routes. The country is also a member of the Visegrad group of four Central European nations which also includes the Czech Republic, Hungary and Slovakia. Since Poland is by far the largest in the group and also hosted the first ever 16+1 forum in 2012, Beijing perceives it both as a trade hub and a potential leader of the CEE countries.

Thus Xi's visits to Serbia and Poland are far less surprising than at first sight might appear to be the case. Developing good relations with these two key members of the CEE club may turn out, in the long run and within the framework of evolving EU-China trade and investment ties, to be a very astute piece of geoeconomic diplomacy.

The author is a lecturer in international relations, Jan Masaryk Centre for International Studies, University of Economics in Prague. Follow us on Twitter @GTopinion

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