China has exploited a number of domestic governance deficits in Central and Eastern Europe (CEE), including the lack of transparency of intergovernmental agreements, the circumvention of national competition and public procurement law, as well as inconsistency with EU climate objectives. A Chinese investment pattern has emerged in the Western Balkans under the form of massive infrastructure projects, financed with loans from Chinese state-owned banks, negotiated behind closed doors, which are then implemented by Chinese contractors (often state-owned).
These findings came out of an expert workshop discussion organised by the Center for the Study of Democracy (CSD) on 26 January 2021. They were reflected in the presentation of Martin Vladimirov of a CSD policy brief, which analyses the patterns of Chinese economic influence in 12 Central and Eastern European countries and its effects on key governance issues. The workshop panel also included Max Zenglein, Chief Economist at the Mercator Institute for China Studies and Martin Hala, lecturer at Charles University in Prague and founder of Sinopsis.cz.
The CSD analysis reveals that around USD 14 billion in Chinese funds have entered the region in the form of grants, development loans, mergers, and acquisition of domestic assets and concession agreements over the last decade. On average, Chinese project-linked loans are estimated at 5.6% of GDP in the region. But for some of the smaller economies Chinese-led projects make up to around a quarter of the countries’ GDP.
Among the main conclusions from the online discussion was the need for the European Union to offer alternatives to Chinese investments, particularly in the Western Balkans region. The EU should put into action its climate and energy policy framework and engage in dialogue with China, to ensure compliance with higher competition, environmental and climate standards.
The economic and political impacts of China were defined as mutually independent, but not exclusive. Henceforth, an analysis of the impacts of Chinese economic influence should not only be conditioned to the scale of its economic engagement, but also in terms of the nature of Chinese investments. The experts highlighted that the EU should incentivise green energy in CEE, with both visible political commitment and scaling up of financing opportunities as part of the European Green deal, so as to avoid losing sight of its commitment to the region.
