Source: CC

The new, not-so-Silky Road

By Katarzyna Sidło, Political Economist, CASE

On November 5, the Summit for China and Central and Eastern European Countries (CEE), more commonly referred to as the 16+1 Summit[1], was held in Riga, Latvia. This was the group’s fifth gathering to discuss economic cooperation.

This year, the main theme of the meeting was transportation and inter-connectivity. Accordingly, talks about strengthening the “Adriatic-Baltic-Black Sea Seaport Cooperation” were at the top of the agenda. The Chinese Prime Minister Li Keqiang and his Latvian counterpart Maris Kucinskis also confirmed their commitment to create a new holding company (Sino-CEE Financial Holding Limited), in which both countries, as well as Poland and the Czech Republic, would be involved (although the role each country will play has yet to be confirmed). The holding company would control an investment fund of EUR 10 billion, designed for the purposes of attracting funding, of which officials expect to raise nearly EUR 50 billion. During the meeting, the group also touted the 28% increase in trade (up to EUR 56.2 billion) between China and the CEE 16 as compared to before the group was launched (although, admittedly, the trade balance has decidedly been negative for the CEE group, see below).

Amongst amicable talks on working towards common goals, widening cooperation and synergizing needs, and the general “welcoming”, “reaffirming” and “supporting”, the only sour note was Slovak PM reportedly being snubbed by his Chinese counterpart. This gesture is apparently China’s way of displaying displeasure with the Slovak president’s meeting with the Dalai Lama earlier this year; a seemingly insignificant, yet sobering reminder that China can be a petulant partner.

The CEE 16, as a group, is by no means the easiest partner either, as the individual countries seem to prefer bilateral solutions over the multilateral ones and oftentimes compete rather than cooperate with each other in search for FDI. Additionally, most members have to make sure the EU rules are being respected at all times, which can often create additional costs. There is also a pervasive distrust towards Chinese plans for the region that some of the Western EU members display. And then, of course, there is Russia, who does not like to be excluded from the goings-on in the region. In fact, directly after the meeting, Mr. Keqiang left for Moscow to hold talks with Russian President Vladimir Putin and Prime Minister Dmitry Medvedev.

The future of the China — CEE 16 cooperation will therefore highly depend not only on purely economic variables but also more political considerations. In what follows, diverse as the CEE 16 group is, it will fare much better in a bid to revive trade with China if the individual countries play as a team. Alone they are not equal partners in the relationship, but rather suitors left at the vagaries of the capricious bride-to-be.

[1] Countries include: China, Latvia, Poland, Estonia, Lithuania, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Slovenia, Croatia, Serbia, Bosnia and Hercegovina, Montenegro, Albania and FYRM.