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Chinese influence in Central Europe: exaggerated perceptions

Tamás Matura

Tamás Matura is Associate Professor at Corvinus University in Budapest and Lecturer at ESSCA School of Management in Angers, Paris, Budapest and Shanghai. Tamás is also Founder of the Central and Eastern European Center for Asian Studies and Founding Member of the European Think Tank Network on China.

This interview was conducted by Bertille Meauzé and Romain Le Quiniou.

Euro Créative: Since the outbreak of the Covid-19 epidemic, China’s image in the West has evolved quite negatively while Chinese diplomacy seems to adopt a much more assertive diplomacy, using propaganda tools. More than ever, high-level politicians in the West understand that China has a concrete international agenda and is able to generate a very influential foreign policy, including in Europe. As an expert on China’s foreign policy, such developments are evidently not surprising to you but how would you synoptically describe current Chinese foreign policy and its general perspectives?

Tamás Matura: First of all, we have to be very cautious about any assessment nowadays as due to the upcoming American elections, the whole international discourse, thanks in particular to Mr Donald Trump, is heightened. There is a lot of emotion and tension in international relations and discourses. But, if you monitor what is actually happening in reality, there is not too much to find and observe.

I think the Chinese foreign policy and in particular the Chinese Ministry of Foreign Affairs is in a « damage control mode » right now. They do reply, sometimes even quite harshly to ‘American provocations’– or at least to what they perceive as provocations. However, these are only vocal reactions most of the time. In addition, if you check what the Chinese have been doing on the ground in the past three or four months, they did not do too much to actively repel US actions. I personally think they regret what they started in India, in the South China Sea or vis-à-vis Taiwan. At the moment, they try keep a low profile waiting for the conclusions of the American elections next November.

Meeting between Trump and Xi Jinping – Source: Les Échos.

According to you, how is Europe – and in particular the European Union – perceived within this international strategy in China? Is the EU an important target with specific objectives and modalities?

Overall I would say that the Chinese seem to be disappointed about EU’s performances, and so am I.

I am afraid Europe is not important anymore… In the past ten to fifteen years, we have been observing the constant degradation of the level of importance of the EU from the Chinese point of view. Fifteen years ago, China was looking at Europe as a potential pole in a multiple world system to balance between the USA, China, Russia, Brazil, India and so on. Unfortunately, given how the EU, its leaders as well as its elite reacted to the global financial crisis more than a decade ago, then the Eurozone crisis, this perception has faded. According to my experiences, whenever I talk to Chinese colleagues they always say that the EU is of course a major trade partner for China, economically it is important, but the EU is not considered as a geopolitical or a political actor in the world or at least not a very important one. Overall I would say that the Chinese seem to be disappointed about EU’s performances, and so am I.

Even though generally Europe is not as important as it used to be for China, we would like to focus on Central and Eastern Europe which recently became regions of particular interest for China. We can of course illustrate this statement with the “17+1” diplomatic format which is linked to a bigger geopolitical project: the “Belt and Road Initiative”. Could you elaborate on the relations between China and Central and Eastern European countries?

In 2011, China officially started the 16+1 which became the 17+1 when Greece joined in 2019. At that time, there was a specific political and economic context. We should not forget that it was still the aftermath of the global financial crisis and the very beginning of the Eurozone crisis. The point was that, all CEE countries back then had to find new economic partners because trade was vital for their economies. For example, in Hungary, our trade/GDP ratio is close to 180%! CEE economies are very open and for that reason trade – both in terms of imports and exports – as well as Foreign Direct Investments are very important. Hence, most CEE economies are dependent on the inflow of investments by foreigners and evidently also very much dependent on the European market. In the case of most of Central European countries, the range of export dependence towards the EU is somewhere between 60 and 90 %. And then, because of the global, financial and the Eurozone crises, the markets suddenly dried up. No more liquidity, 25 % drop in exports, 30 % drop in direct investments…

Meeting of Ministers of Agriculture in 17+1 format – Source: Government of Poland.

It was a very natural reaction to seek for new economic partners. And of course, China was already high on the agenda for the whole world and CEE countries after two decades of reluctant relations with China turned back to it. At the very same time, China was in a very different economic position with abundance of financial liquidity, construction and other industrial overcapacities. Thus, China was in such position that it had to find new partners to export its excess. Between CEE countries and China, it was a natural match. The problem was that most of the Chinese promises, what we have been listening to for the past decade, turned out to be nothing less but a mirage. Up to today, these promises have not been materialized by the Chinese side, at least not in the EU member states of the region. The reasons are diverse and quite complicated.

Our countries are entitled to apply for non-refundable European grants, cohesion funds, EU infrastructure funds. Those are all free money. Why would we ask for a Chinese loan for infrastructure eventually built by Chinese companies? It is just simply not a good offer…

What I would like to emphasize is that what Central Europe needed and what China wanted to do in Central Europe were two very different things. Central Europe was interested in greenfield investments, creation of new jobs, research & development and innovation. Meanwhile, China was and is still interested in investments in the infrastructure. The Budapest-Belgrade railway line is one of the very few example where China succeeded. But overall, China has been quite unsuccessful, especially when it comes to CEE states which are members of the EU. One of the main reasons of this failure is the nature of the cooperation China is selling. Indeed, what China wanted to do – and still wants to do today – is to offer loans to get rid of its excess financial capacities and to build infrastructure in these countries. Why would that be a good opportunity for EU member states? Our countries are entitled to apply for non-refundable European grants, cohesion funds, EU infrastructure funds. Those are all free money. Of course, most of the European infrastructure used to be built by European companies be it the Germans, the Dutch, the French or the Austrians, but still it is non-refundable money! Why would we ask for a Chinese loan for infrastructure eventually built by Chinese companies? It is just simply not a good offer… China has been way more successful in non-EU countries and especially in the Western Balkans. But within Central Europe, it has been a long decade of constant disappointment for most of the countries and governments.

Is there a risk for CEE countries to be dragged in the middle of a geopolitical game between China and the West (and the US in particular) they cannot control?

Economically, I would not say that China is irrelevant but it is far from being very important.

I think geopolitics is not the right word because China has no real geopolitical interests or security interests in Europe or in Central Europe in particular. China is very far away and at least in the foreseeable future we cannot imagine a China with real security interests on the Eastern side of the Atlantic Ocean. However, when it comes to political interests, definitely, the answer is yes. In the past decade, Central Europe has been a battleground between Western Europe (or Brussels) and China. The main Western European accusation was and still is that China has been using Central European countries to divide and rule the EU or at least to disrupt its unity. It is thought that China has practically bought off CEE countries as it has invested so much and offered such lucrative businesses that Central European governments decided to sell European unity in exchange of these economic benefits. In reality, this argument simply cannot stand… There is no substantial amount of Chinese money in Central Europe!

If you check data and statistics, for example those created by the Mercator Institute in Berlin (MERICS), you can find that 95% of Chinese investments in Europe is to be found in Western Europe: 50 billion Euros in the UK, 22 billion in Germany, 15 billion in France or 16 billion in Italy. Compared to that, the combined amount of Chinese investments in Central Europe is somewhere near [XY1] 8 Billion. 8 Billion in 11 countries! To give you a more concrete example, in Hungary which is one of the most important partners of China in Central Europe and for which China is a major trade partner outside of Europe, the total trade volume with China is about 4 % of its total trade. Economically, I would not say that China is irrelevant but it is far from being very important.

One question remains though; why certain CEE countries are that close to China? I do not want to hide the reality. Hungary has been one of the few countries in Europe – or we should rather say the Hungarian government –  to help China. As an illustration, they blocked some European common statements on human rights issues or on South-China Sea and so on. Czechia is another example, and in this case to be more precise I should speak about its President Miloš Zeman who has been very supportive politically towards China, just like Croatia and Greece to a certain extent.

Xi Jinping et Miloš Zeman à Prague – Source : Kafkadesk.

In parallel, we have to emphasize that in most of these cases political support does not imply the support by the nation itself. If you check Eurobarometer data, you may see that for example, 50% of Hungarians have a very negative view about China. The same goes for Polish people. The same for Czech people as the Czech society is the most anti-Chinese in all Europe as 69 % of the population has very negative views about China. This is more or less true for most of CEE countries. In addition, if you check what Central European non-governmental political parties say about China both on the right and the left side, both Conservatives and Liberals, they are very suspicious about China. It is not a surprise, as right wingers hate the Communists while Liberals and Left wingers hate oppression.

As such, for most of those CEE countries, the pro-Chinese attitude is actually a one-man show. It is Viktor Orbán Prime Minister of Hungary, it is Miloš Zeman President of Czechia. It was Victor Ponta when he was Prime Minister in Romania, it was – to a certain amount of time the previous Polish governments but Mr Kaczyński, the real ruler of Poland, is not a fan of foreigners and Communists, so he has a problem with China. And finally, it is of course Aleksandar Vučić, former Prime Minister and now President of Serbia… CEE-China political relations are based on individual relations. Even when it comes to Greece with the previous SYRIZA-led government: they were supportive of China for economic reasons but also to annoy the Germans, or Western Europe and Brussels in general. But it was not an indigenous or a genuine love towards China.

One thing is crucial to understand regarding CEE-China relations, the political gestures or gifts that some Central European governments have been offering to China are political by nature but not economic. Even the Hungarian government, as far as I see, has never dared to do anything to help China for something which could have hurt the EU and in particular German economic interests. Most certainly, Hungarian authorities have been very much supportive towards China on issues regarding human rights, South China Sea, Xinjiang, 5G (so far it is a political issue) which are not detrimental to Germany or the European Union – until now. But when it comes to economic issues, even the Hungarian government falls in line with the European unity. For example, look at how most CEE countries voted regarding anti-dumping measures against China. Hungary always voted with the Germans! And never against Europe or in favour of China!

Regarding Chinese strategy towards CEE countries, is there any differentiation to make between sub-regions such as Visegrád 4, Balkan or Eastern Partnership countries?

At the beginning of the cooperation, one of the first thing Chinese had to learn was that this region is far from being homogeneous. The most obvious difference has to do with EU membership but the region is also diverse politically speaking and language wise. When this whole process started, I had the impression that China looked at the region as a post-communist Europe in which countries must be very similar to each other. After a while, they realized that tremendous differences exist between these countries.

However, they still stick to the 17+1 format today even though Visegrad 4 countries for example tried to convince the Chinese to focus specifically on the V4 as the core of the region. The V4 is by far the biggest economic partner of China in the region, but the Chinese have been reluctant to change their fundamental attitude. It makes sense from their point of view because this whole cooperation can be seen as a “transaction costs reduction” mechanism. Indeed, the Chinese Primier is able to meet seventeen prime ministers or presidents of the region once in a year which is very convenient. But still, in the past five or six years they have developed a so called multi-layered attitude in the region because they do understand the differences between those sub-regions now.

Czechia, Poland, Hungary and Slovakia, the four countries of the Visegrad Group – Source: EURACTIV.

One of the main division line is obviously between CEE countries which are members of the EU and those which are not. Overall, China has been more successful in the Western Balkans. This is probably due to the fact that EU standards and the acquis communautaire do not apply there and thus the cooperation is way more flexible. But definitely, China does make difference between the Baltics, Visegrád countries, Eastern or Western Balkans today.

Let’s now enter into more details and focus on a specific thematic, namely economic relations. It is undeniable that economic relations between CEE countries and China have extensively increased over the past few years (commercial exchanges, FDIs, etc.). However, these relations appears to be quite imbalanced. One concrete example being displayed in a recent policy paper published by CHOICE says that Visegrád countries import for almost 70 billion dollars while they export only 9 billion dollars to China. Is this imbalance proving that China-CEE relations is a one-way cooperation? And if yes, what could be the potential consequences of it in the future?

When it comes to trade, I would say that the situation is not good but at the same time it is not dramatic either.

I am afraid that trade imbalances vis-à-vis China is not a Central European spécialité. Half of the world has the same problem, countries generally import a lot from China and barely can export. In Europe, France, for example, has a huge trade deficit with China, something around 30 billion euros. In Central Europe, Poland has the largest trade deficit with China, well over 20 billion Euros. One of the few countries in Europe, with a relatively balanced trade with China is Germany. It is explained of course by the fact that the German economy and in particular its industry can find its ways into China as the Chinese demand high-quality industrial German products. But, for the rest of the world including Central Europe, this is indeed a very typical problem..

There are some extreme examples, Serbia for instance. The last time I checked numbers, Serbia imported 28 times more from China than it exported to China. Poland probably suffers the most in Central Europe. As I previously said, its trade deficit is over 20 billion euros which means that they import 10 times more than what they export to China. In the case of Czechia, Hungary and Slovakia the situation is not that severe. We, Hungarians, import four times more from China than what we can export. We import around goods worth 6 billion euros from China and export 1,5 billion.

The Hungarian or Czech situation is actually quite healthy. Let me explain why. We should not forget that most of the Central European economies are part of the global – and in particular the German – supply chain. Whenever we import something from China, most of it belongs to the category of accessories or parts of certain other products. So, when we import more from China, it should be seen as a good sign, a sign that our economy is healthy because it means that our industry keeps growing. Indeed, goods from China are then incorporated into high added-value products to be re-exported to Western Europe or the United States. So generally speaking, many Central European countries enjoy a net trade surplus which is characterised by a trade deficit with China and a trade surplus with Western European countries or other countries around the world.

In conclusion, when it comes to trade, I would say that the situation is not good but at the same time it is not dramatic either. China is the factory of the world and it is really hard to export any products to China. However, we may find some alternative opportunities as well, especially services and in particular travel services. Tourism has been a great opportunity in the past decade, thanks to the 16+1 cooperation framework. The awareness of Chinese people about Central Europe has been increasing. The number of Chinese tourists arriving to and visiting Hungary has tripled in the past decade. There are some CEE countries – for example Croatia – which complained about the high number ofChinese tourists. Croatia has been wondering whether it is necessary or not to put a limit on the number of Chinese tourists the country is able or willing to welcome each year. So these services can help a lot to balance a little bit the trade imbalance.

The old town of Dubrovnik and its narrow streets crowded with tourists – Source: Croatia week.

Another major topic of concern within the EU is telecommunications and 5G’s settlement, because of the potential threat to national security it could cause. The EU is supposed to decide on the modalities of such settlement and the involvement or not of the well-known Chinese company Huawei in September. What is the position of CEE countries in this regard, is there a consensus or a more case by case approach? Could CEE-China relations create some breach in a potential EU unity on this important matter?

Well, let me start with a short anecdote. A decade ago, French President Nicolas Sarkozy – who by the way has Hungarian origins – was really angry about the unity of Visegrád 4 countries on a certain issue. And he was cursing Central Europe for using its leverage within the European Union. However, I think that was a special case, because if you check on other cases, Visegrád countries are not on the same position every time. Actually, we tend to say that it is an ad hoc cooperation. So there are certain issues on which Visegrád countries tend to go and vote together but I think it is quite rare. In most cases, our interests and our attitudes are very different.

Americans will increase their pressure on Hungary and also on other countries to abandon Huawei as an important partner.

Regarding 5G, I think it is impossible to emphasise enough the importance of 5G for the global economy or  thechnology, as it may even have an impact on the question of who is going to rule the 21st century. So that’s a particularly important issue for Europe and also for the Central European countries. And here again our attitudes are quite divergent. Poland was one of the first countries in Europe to respond to American signals and more than a year ago the Polish authorities decided to detain two of Huawei’s employees in Warsaw. The charges were that they were spying on Polish national security matters. On their side, Czechia and Slovakia remained very cautious while at the very same time last November, the Hungarian Foreign Minister – Péter Szijjártó – announced that Huawei was more than welcome to deploy and develop the 5G network in Hungary. So there are big differences.

Still, I believe that 5G is going to be a watershed for Hungary in particular because as I just explained previously, the Hungarian Government has always been very cautious not to harm European economic interests. Regarding 5G, I think it is an issue for which it is very hard to distinguish whether it is a political or an economic matter. Actually, I consider it as a combination. It is very important economically speaking and it is very important politically speaking as well, and not only to the EU but also to the US. In addition, there is a third factor which is security.The US has been urging countries not to use Chinese technology. I am convinced this is going to be very hard for the Hungarian government to handle it because on the long run the Americans will increase their pressure on Hungary and also on other countries to abandon Huawei as an important partner.

Poland arrested Huawei employees in Warsaw – Source: Jaap Arriens/NurPhoto for Getty Images.

All things considered, I think we need a joint European stance on 5G. We have Eriksson, we have Nokia, we have European technology, this is a strategic sector where Europeans should stand together and help each other to develop our own network, at least for the critical part of the infrastructure. And I think that Central European countries will join if there would be a European common understanding on this issue. Although, as long as Western European major countries cannot make their decisions, and let me point my finger at Germany in particular – where is still an ongoing debate on what to do with Huawei and 5G – Central European countries will either feel there is a big space to manoeuvre or feel they should keep a low profile as long as the big European countries or the US have not made their final decision.

In terms of bilateral relations, as you explained some countries such as Serbia or Hungary has important relations with China. Including in critical sectors such as transport or energetic infrastructures. Brussels and Western Europeans are afraid about the potentiality of a Chinese Trojan horse in Europe. How would you assess these considerations?

CEE countries must be more transparent about their dealings with China

To answer this question, maybe it is important to elaborate a little bit on how the Chinese usually think and behave. Here in the West, we have a  deductive mindset. It means that whenever we want to build something, be it a city, a company or an international cooperation, first we make very detailed plans, roadmaps, blueprints, financial and sustainability studies and when it is done, we present it to the public and we start to build it physically. The Chinese – or the East Asian people to be more precise – have a very different mindset, an inductive one. So when they have a general idea or a strategic goal, they immediately start to build it from the grassroots and then adapt continuously depending on how it evolves. The plans are less detailed in advance. I am not saying this one is better or that one is better, what I am saying is that these are very different approaches and when such concepts meet each other, there is a very big chance for misunderstandings.

The Belt and Road Initiative – also known as the New Silk Road initiative – and the 16+1 cooperation format are prime examples of this.,  Few years ago, the Chinese started to realise the economic opportunities – maybe some political opportunities as well –in Central Europe. So they had the idea to launch something specific with these countries. The problem is that in Western European countries, especially in Germany, the way of thinking is very different. Hence, when the Chinese arrived in Central Europe, Western Europeans wanted to know their intentions. They wanted to understand their plans and strategies. When they realised that it was not clear or evident, they got concerned. For them, the absence of concrete plans was the evidence that the whole project was secret and consequently malicious. Meanwhile, the Chinese simply had no idea what to do in Central Europe in detail. So when they started to build it they made a lot of mistakes. One of the first mistake was that they established the 16+1 cooperation without inviting the European Union. And naturally, it was a slap in the face for Brussels and Western European countries. Then, the Chinese adjusted their attitude and in 2013 for the first time, they invited European observers as well. And ever since, the European Union is mentioned in every guideline published after every single summit of the Heads of Government within the 16+1 format.

Meeting between Chancellor Angela Merkel and Prime Minister Li Kaqiang – Source: Handelsblatt.

I am not saying that China has never tried to use its connections in Central Europe to influence decision-making processes at the European level. Of course they have done so! This is diplomacy, every country does the same, to establish relations – whether economic, political or social – with other countries to influence them or a whole region. Of course, it is not a surprise that Western Europeans or the Americans have been concerned about such developments. 

Central Europe must learn how to handle this specific situation. CEE countries must be more transparent about their dealings with China, as the lack of transparency was another major issue, another major source for criticism. Though, to be very honest, I think this whole issue is about to fade away because of the disappointment of Central European countries regarding their relation with China. Actually, in the past year and a half, the major ongoing debate has been focusing on whether the 17+1 format has a future at all. Should we maintain it or is it becoming meaningless?

Evidently, we must pay attention to Chinese influence in Central Europe. But it is also the case in Southern Europe, just look at Italy, Greece or Portugal! Or look at how the United Kingdom, until recently, tried to get closer to China. I think the issue of Chinese influence in Central Europe has been tremendously exaggerated.. And once again, it is about to solve itself as the whole cooperation between China and CEE countries, in my opinion, reached its heights. And I don’t really see a potential way forward.

In parallel, some other countries have been much more cautious in their relations with China. It is the case of Czechia where some politicians  did not hesitate to clash directly with Chinese authorities on different matters. Do you expect some other countries to follow an opposition line? Especially when we know the pro-US attitude of many countries in Central and Eastern Europe.

China is very far away, people do not know it well, a lot of Central Europeans have prejudices and share stereotypes about the Chinese people. What we know about them is that they are the ‘commies’ and in Central Europe you do not make friendship with the ‘commies’!

It is true that several political leaders from different Central European countries have started to stand up against China while some other started to challenge their own governments and their pro-China policy. One example is the Mayor of Prague, Zdeněk Hřib and his diplomatic initiatives towards Tibet or Taiwan. Some similar developments are also going on in certain Baltic states as some politicians are becoming more vocal about their criticism towards China. In Slovakia, the current President, Madame Čaputová, also had some critical remarks.  Central European people do not really care about China, with a few exceptions – like the Czech people. China is very far away, people do not know it well, a lot of Central Europeans have prejudices and share stereotypes about the Chinese people. What we know about them is that they are the ‘commies’ and in Central Europe you do not make friendship with the ‘commies’!

China is not high on the agenda of Central European countries. It means that for Central European politicians, bashing China is not the most optimal way to gain political support from their constituencies. It is not worth the effort. There is another question though, how bashing China can be used to criticise your own government when you are in the opposition? This tendency has been going on in some of the CEE countries. In Hungary for instead some members of the Hungarian opposition parties have been criticising China not because of China itself but because they want to attack the Hungarian government. This is a potential source of increase in critical remarks about China in Central Europe.

Evidently, the main source of change regarding attitudes towards China is the US. We have already mentioned it for explaining Poland’s attitude. Indeed, Polish authorities, due to the long-standing and traditional alliance with the US, were among the first to reconsider their close cooperation with China. But I think it was an easy choice for them as China has not been able to deliver on its promises in the past decade. Then, why to maintain these close relations with the Chinese especially if the Americans – a relation which is much more important due to their high concerns about Russia– do not like it?

I think Hungary will probably remain the last bastion of China in the region as long as the current government is in power. The opportunistic foreign policy of the Hungarian Government includes close cooperation with China but also with Russia, Turkey, Belarus and even Brazil or Israel – at least with the Netanyahu government. It seems that Mr Orbán has also found a way to cooperate with Mr Trump. But let’s wait for the US presidential election because if Joe Biden wins and a new administration comes in the United States, then certain Central European countries, especially Hungary, may find themselves in trouble.

Signature of the agreement on the Belgrade-Budapest line with the Chinese authorities – Source: Chinadaily.

As a conclusion, we would like to know your personal opinion on the future perspectives of CEE-China relations? From what we have seen within your previous answers, you are rather pessimistic, right?

Yes, indeed, I am quite pessimistic when it comes to the long-term perspectives of the 17+1 cooperation because there is nothing left to speak about between China and Central and Eastern Europe. Our interests do not align as China has very different interests in Central Europe than what these countries actually want. There are some examples of concrete cooperation like the Budapest-Belgrade railway line. But even this project has been welcomed with strong criticism from experts who evaluate this project meaningless due to its high cost and that it only serves Chinese economic interests. It is really hard to point at some examples of substantial cooperation with China in any of the Central European members of the EU. This is bothering the Chinese and Central European governments as well.

However, I do not expect it to be abandoned or discontinued by the Chinese side. That would be a dramatic diplomatic defeat for Beijing. As for Central and Eastern European leaders, it does not cost too much to maintain the 17+1 and such a cooperation still offers a great opportunity for nice official photos when meeting one of the most important leaders of the world be it the Chinese Premier or even the Chinese President. Hence, they can show to their home constituencies that they are able to shake hands with such influential leaders. So I believe that 17+1 is here to stay with us but its actual importance cannot reach new heights or new levels.

Euro Créative team would like to thank Tamás Matura fort his interview.

Posted in English, Entrevues

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