The report analyzes the territorial dispute between the Republic of Slovenia and the Republic of Croatia in the context of the development of the main energy projects in Eastern Europe.
Abstract. This paper aims at explaining the nature of Chinese engagement in Central and Eastern Europe (CEE) through the lens of Beijing’s Belt and Road Initiative (BRI) and its impact on the ground in Poland. The author argues that at the moment cooperation with China neither poses a serious political threat per se, nor represents a source of sustainable economic growth in the region. In the case of Poland, although intensification of political contacts has been taking place since the establishment of the BRI, the underlying problems of Sino-Polish cooperation remain the same. In other words, the trade deficit has been growing steadily; while the most needed greenfield investments have been minimal. The importance of China for the region is still marginal in comparison to Western Europe. It is crucial to point out that cooperation should be continued but it should focus more on areas that would actually be profitable for the CEE economies in the longer perspective, bearing in mind each economies’ comparative advantage (e.g. food processing or aviation industry in Poland). When it comes to long-term risks, the biggest threat might come from potential Chinese acquisitions of European know-how in sensitive sectors, such as high-tech or telecommunications. This way, CEE countries should cooperate closer with the rest of EU in order to pressure Beijing to open up its domestic market, while closely monitoring Chinese investments in Europe in sensitive sectors.
1.Background - Chinese changing international role and domestic needs
Since its inauguration in 2013, the Belt and Road Initiative (BRI), also known as the New Silk Road or One Belt, One Road (OBOR), has become one of the main points of reference for those examining the changing international role of China. As a project aiming at reviving both maritime and land routes along the historical Silk Road, it is set to create a new global value chain, based on connectivity between states and economies, under Chinese guidance. It has also started to be seen as Xi Jinping’s main foreign policy tool, helping the Chinese Communist Party (CCP) to pursue both domestic and international goals. There have been plenty of reasons leading to the creation of BRI as a foreign policy tool, but most of them have been actually linked to the domestic problems China has been facing in the past years. The urgent need to deal with the issue of steel overcapacity or to gain international expertise when it comes to development of crucial industries (e.g. high-tech and innovations), which could enable China to maintain steady growth, are just two examples of problems that the current elites in Beijing have to deal with. BRI has been partly designated to be a one-fits-all strategy that could at the same time help China grow domestically, build a positive image abroad, and serve as a tool for expanding its overseas interests. As one can see, this kind of an overarching project does appear extremely ambitious and most probably unattainable in the nearest future, if ever. At the same time, the overwhelmingly positive narrative on BRI, created and disseminated by Beijing over the last three years, has been met with a serious backlash coming from the international community, especially from the Western world. Coupled with Chinese growing assertiveness on the international arena, BRI has been largely perceived in the West as China’s “master plan” to economically dominate developing states in need of capital through massive investments. Yet, these projects come at a price, since they mean extensive lending from the Chinese state-owned banks. Beijing, in turn, is seen to be aiming at extending its political influence in many parts of the so-called developing world, which are perceived to be prone to outside influence, given their weak international positioning. For many observers, the same logic applies to Chinese growing interest in the Central and Eastern Europe (CEE) region.
2.Chinese engagement in the CEE region
Although Chinese interest in the region has been a relatively new phenomenon, it has already become a source of anxiety for the so-called “old” European Union (EU), e.g. in countries like Germany and France. Given the CEE countries’ relative economic backwardness vis-à-vis Western Europe, Chinese growing engagement in the region has been regarded by Brussels as an attempt to destabilise the EU from within. In the eyes of Western EU leaders, access to the European market through less developed member states is Beijing’s main interest when it comes to the CEE. The region has been perceived as the “blind spot” of the EU, enabling China to enter the internal EU market, gain access to relatively cheap and qualified labour force, and gradually create its own sphere of influence.
The 16+1 platform is a case in point. The initiative was inaugurated by Beijing in 2012 and aimed at creating a dialogue mechanism for China and 16 CEE countries (both EU and non-EU). Since then, multiple high-level meetings have been held under the 16+1 umbrella, most notably the last summit in Riga in November 2016. The creation of the platform suggests to a certain degree that China perceives the region as a homogenous entity. This obviously far-fetched vision assumes that the sheer geographic proximity makes the 16 CEE countries share their interests as far as cooperation with Beijing is concerned. As a matter of fact, these countries often compete, rather than cooperate, in attracting Chinese investment. It is important to point out how the discourse on 16+1 has been blended into the OBOR rhetoric since the inauguration of the latter. The conceptual blurriness of both initiatives and their respective goals does not help in assessing their real impact on the ground. Although the intensification of political contacts between Beijing and the CEE countries after the establishment of 16+1 platform cannot be denied, it does not actually match the real level of cooperation on the ground between these states and China. As a matter of fact, probably the sole unifying element for all 16 CEE countries in their relations with the Middle Kingdom is their growing trade deficit. Given the above backdrop, the 16+1 platform seems to be more of a façade project for the countries in the region to deepen their bilateral ties with China through a multilateral mechanism. It might prove useful for smaller CEE countries but for a bigger regional player with leadership aspirations, like Poland, the platform seem to be rather problematic, e.g. in the context of competition for Chinese investments with other bigger countries in the region. Given the alleged inclusive nature of cooperation with China, no single leader among the 16 CEE countries can be chosen, thus further diminishing the bargaining power of the region when it comes to negotiating with Beijing.
3.The Belt and Road Initiative in Central and Eastern Europe – the case of Poland
As already mentioned above, since the inauguration of the BRI, the discourse on the project has somehow blended with the discourse on the 16+1 and the general Sino-CEE cooperation per se. Conceptual fuzziness of the BRI enables the Chinese actors, both politicians and investors, to present any type of Chinese engagement in the region as a part of the BRI success story. When it comes to Poland, the media hype surrounding Sino-Polish cooperation has created a false perception of the extent and nature of the existing relations between the two states. Yet again, despite numerous high-level meetings and agreements signed (e.g. during Xi Jinping’s visit to Poland in June 2016), the real impact of political cooperation between Warsaw and Beijing has a minimal effect on the Polish economy.
As far as BRI-related projects are concerned, given the lack of coherent data regarding all Chinese investments in Poland, and the vague definition of what constitutes BRI, it is rather problematic to distinguish what projects are actually parts of it. Generally speaking, in years 2000-2016 Poland was the second largest recipient of Chinese foreign direct investment (FDI) in the region (936 mln euros). Hungary was the only country in the CEE that received more Chinese FDI in the same period (around 2 bln euros). Yet, the level of Chinese FDI in Poland has to be put into perspective. For example, compared to the amount of investments coming from Poland’s biggest neighbour, namely Germany, the Chinese FDI levels appear minimal. Only in 2015 Germany invested in Poland over 27,3 bln euros.
Probably the best example of how the BRI discourse can be used locally to present Sino-Polish cooperation as a success story is the city of Lodz. Located in central Poland, it has been widely advertised as the regional hub for cargo trains coming from China to Europe and the future heart of the BRI infrastructure network. The city’s cargo train terminal does serve as the ending of the Lodz-Chengdu railway, but trains transporting Chinese goods for the European market usually go back to China half-empty. What is more, the existing infrastructure in Lodz is in need of an upgraded, e.g. when is comes it its logistic facilities and storage spaces. The majority of trade between Poland and China (as well as the EU as a whole and China) still takes place along the maritime routes, which present the best alternative for costly air transport. Beijing’s discourse on the BRI is based on an assumption that China will build a whole new network of railways that would make trains a real alternative for cargo ships. According to this discourse Poland would be the “heart” of the BRI in the CEE region, given its geographic location. For Beijing, there could be multiple “hearts” like this, but for the 16 countries in the region it also means growing competition for Chinese investments. The reality on the ground does not show many signs of any drastic changes in the existing patterns of goods exchange between the Poland and China. For Warsaw, the real advantage of being part of the BRI transportation and connectivity network (if it ever comes into being) would be to establish domestic logistic centres that would facilitate exports of Polish goods to China and create jobs on the ground (e.g. in sorting, storage, logistics). The former would be possible only if the Chinese government loosens its restrictions limiting market access for the EU exports. In order for that to take place, the EU needs to double its actions to pressure Beijing and to formulate a coherent strategy to balance the overall EU-China trade deficit.
The Belt and Road Forum for International Cooperation held in Beijing in early May 2017 was supposed to be an opportunity for policymakers from countries engaged with the BRI to strengthen their cooperation when it comes to join projects with China. Probably the biggest diplomatic event ever held by Beijing managed to gather 30 world leaders and representatives of dozens other states. 68 countries and international organisations signed BRI-related agreements with China. Among them were some Sino-Polish agreements, all of them of very limited importance. The Polish delegation led by the Prime Minister Beata Szydlo signed five agreements in total, their scope ranging from tourism to water management cooperation. None of them was related to any of the “grand themes” of the BRI, such as infrastructure or connectivity. This way, the reality yet again did not match the expectations created by the discourse on the Sino-Polish cooperation.
Sino-Polish cooperation does not take place in a vacuum. From Warsaw’s perspective, the main goal of deepening the bilateral relation is to balance the trade deficit. Yet, this task takes place in an extremely complex environment, both domestically and internationally. On the one hand, there is the domestic situation; competing political actors often use extremely biased and ideologically driven arguments to put forward their domestic agenda (e.g. the “China threat” discourse vs. treating China as the global protector of free trade and a virtually post-communist country). On the other hand, the international environment is also multi-layered and poses numerous problems when it comes to prioritising relations with Beijing and putting them on the right track. The ongoing crisis of the EU, the populist movements growing in power, or the changing role of Poland within the EU are just a few examples of challenges far more pressing for Polish elites than formulating a coherent China strategy. When it comes to Beijing itself, Xi will most probably continue his style of foreign policy, based on the BRI, aiming at extending China’s foreign influence and building a positive image abroad, no matter how hard it seems. Especially after the 19th Party Congress, China would double its efforts when it comes to implementation of the BRI, given that it has been included in the party constitution during the event. As far as international trade is concerned, Xi Jinping has already proved domestically not to be a pro-market politician. This contrasts with his anti-protectionist discourse on the international arena. So far it has not matched Xi’s position on the issue of imports from Europe to China. The EU has many times expressed “promise fatigue” regarding Beijing’s unwillingness to open up its domestic market for more diversified range of European products and services. The European Commission proposed in September 2017 to veto non-EU investments, which can be seen as an attempt to push for stricter oversight of Chinese acquisitions of European technologies and brands in sensitive fields. This proposal reflects the growing fear among many European actors of Chinese influence in the region. Thus, the Sino-CEE cooperation will continue, but in the context of troubled intra-EU relations as well as a growing uncertainty about the global balance of power as such.
* Chinese politics analyst at Asia Research Centre, War Studies University in Warsaw
 Christopher K. Johnson, President Xi Jinping’s ‘Belt and Road’ Initiative. A Practical Assessment of the Chinese Communist Party’s Roadmap for China’s Global Resurgence, Centre for Strategic and International Studies (CSIS), March 2016, p. 11.
 Angela Stanzel, Dividing without antagonising: China’s 16+1 problem, in Angela Stanzel (ed.), China’s Investment in Influence: The Future of 16+1 Cooperation, European Council on Foreign Relations (ECFR), December 2016, p. 3.
 Thilo Hanemann, Mikko Huotari, Record Flows and Growing Imbalances. Chinese Investment in Europe in 2016, Mercator Institute for China Studies (MERICS), January 2017, p. 10.
 Inwestycje zagraniczne, Polska Agencja Inwestycji i Handlu (PAIH), https://www.paih.gov.pl/polska_w_liczbach/inwestycje_zagraniczne [access: 13.10.2017].
 Justyna Szczudlik, Poland on the Silk Road in Central Europe: To Become a Hub of Hubs?, in Frans-Paul van der Putten et al., Europe and China’s New Silk Roads, European Think-Tank Network on China (ETNC), December 2016, p. 46.
 Xi says 68 countries, int'l organizations sign Belt and Road agreements with China, Xinhua News, 15.05.2017, http://news.xinhuanet.com/english/2017-05/15/c_136285719.htm [access: 16.10.2017].
 European business hopes China's new leadership can cure reform 'promise fatigue', Reuters, 19.09.2017, https://www.reuters.com/article/us-china-eu-business/european-business-hopes-chinas-new-leadership-can-cure-reform-promise-fatigue-idUSKCN1BU06R [access: 16.10.017].
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