China, the 16+1 format and the EU

07-09-2018

Since 2012, China has engaged 16 central and eastern European countries (CEECs), including 11 EU Member States and five Western Balkan countries under the 16+1 cooperation format, which it has portrayed as an innovative approach to regional cooperation. Although framed as multilateralism, in practice this format has remained largely bilateral and highly competitive in nature. While in 2012 the CEECs had enthusiastically embraced this form of cooperation as a chance to diversify their EU-focused economic relations in the wake of the 2008 financial crisis, by 2018 some of them had voiced dissatisfaction with the economic results it had yielded for them. The 2018 Sofia summit guidelines for the first time stressed the need for a more balanced trade, reciprocity of market access and open tenders in infrastructure construction, thus echoing concerns the EU had repeatedly raised with China. Empirical evidence shows that China-CEEC trade had actually jumped prior to 2012, whereas afterwards it increased at a much slower pace, with Chinese exports to CEECs expanding much quicker than CEEC exports to China, thus generating an unbalanced trade that is heavily tilted in favour of China. Foreign direct investment (FDI) data reveal that while Chinese FDI is highly concentrated on the biggest CEECs, it accounts for an extremely low share of total FDI stock. Some smaller CEECs have started to attract Chinese FDI as well, although at comparatively low levels. Some of China's infrastructure construction projects in the CEECs have suffered setbacks in a regional environment governed by EU norms and regulations. The EU engages in the 16+1 as a summit observer, adheres to the principles of its 2016 strategy for China and works towards cooperation with China on physical and digital infrastructure - through the EU-China Connectivity Platform. It has added the Berlin Process to its Western Balkans policy and has issued a new strategy providing for a credible enlargement perspective for and an enhanced EU engagement with the Western Balkans. This updates an 'at a glance' note, China, the 16+1 cooperation format and the EU, of March 2017.

Since 2012, China has engaged 16 central and eastern European countries (CEECs), including 11 EU Member States and five Western Balkan countries under the 16+1 cooperation format, which it has portrayed as an innovative approach to regional cooperation. Although framed as multilateralism, in practice this format has remained largely bilateral and highly competitive in nature. While in 2012 the CEECs had enthusiastically embraced this form of cooperation as a chance to diversify their EU-focused economic relations in the wake of the 2008 financial crisis, by 2018 some of them had voiced dissatisfaction with the economic results it had yielded for them. The 2018 Sofia summit guidelines for the first time stressed the need for a more balanced trade, reciprocity of market access and open tenders in infrastructure construction, thus echoing concerns the EU had repeatedly raised with China. Empirical evidence shows that China-CEEC trade had actually jumped prior to 2012, whereas afterwards it increased at a much slower pace, with Chinese exports to CEECs expanding much quicker than CEEC exports to China, thus generating an unbalanced trade that is heavily tilted in favour of China. Foreign direct investment (FDI) data reveal that while Chinese FDI is highly concentrated on the biggest CEECs, it accounts for an extremely low share of total FDI stock. Some smaller CEECs have started to attract Chinese FDI as well, although at comparatively low levels. Some of China's infrastructure construction projects in the CEECs have suffered setbacks in a regional environment governed by EU norms and regulations. The EU engages in the 16+1 as a summit observer, adheres to the principles of its 2016 strategy for China and works towards cooperation with China on physical and digital infrastructure - through the EU-China Connectivity Platform. It has added the Berlin Process to its Western Balkans policy and has issued a new strategy providing for a credible enlargement perspective for and an enhanced EU engagement with the Western Balkans. This updates an 'at a glance' note, China, the 16+1 cooperation format and the EU, of March 2017.