China and Europe: What Was It? The Rise and Crumbling of the ‘16+1’ Format

If we analyse cooperation within the framework of 16+1 format and its accompanying projects under the auspices of the BRI by potential KPIs — the number of practice institutions, norms of practice and projects implemented, the scale will not be quite comparable with the alarmism of observers, writes Valdai Club expert Julia Melnikova.

In retrospect, the first half of the 2010s was one of the most productive periods in the development of European-Chinese relations. At the time, the European Union was looking for new growth points, having felt the opportunity and ability to diversify external relations after withstanding the economic crisis, and the PRC sought new markets for the accumulated capital and labour. Xi Jinping and his team chose a proactive course of action, which led, among other things, to the launch of a number of structural initiatives for cooperation with European regions. In particular, the possibilities of creating formats according to the “X + 1” model with the countries of Northern, Southern, Central and Eastern Europe (CEE) were considered.

The “star” of the “16+1” format as a mechanism for China’s cooperation with the CEE countries rose rapidly: in 2012, 11 EU countries joined it (Hungary, Poland, Lithuania, Latvia, Estonia, Czech Republic, Slovakia, Slovenia, Bulgaria, Croatia, Romania) plus five Balkan states. Greece joined in 2018-2019 — given that since 2008 the Greek port of Piraeus had been in concession with the Chinese transport company COSCO, which subsequently bought 67% of its shares, the event could have happened earlier, but required a final decision on the issue of renaming Macedonia. By this time, all countries in the group had also signed Memorandums of Understanding with China on cooperation under the Belt and Road Initiative: in 2015 — Hungary, Bulgaria, the Czech Republic, Poland and Slovakia, in 2016 — Latvia, in 2017 — Croatia, Estonia, Lithuania and Slovenia, and in 2018 — Greece. In the late 2010s relations between Brussels and Beijing, on the contrary, had started to worsen. The structure began to be rapidly politicised by the EU as a “Trojan horse” and an expression of China’s “divide and rule” policy.

As a result, Lithuania left the group in May 2021, followed by Latvia and Estonia in August 2022. Even though there may be no further decisive steps on the part of the remaining 14 players, cooperation is practically frozen. Naturally, several questions arise: What was it all about? Was it that dangerous? What does this mean for contemporary relations between the EU and China?

What was it?

The effectiveness and stability of associations determines the presence of regular and effective practices of interaction between their members. From a structural point of view, they are stimulated by the presence of institutions and norms of interaction. The theoretical justification for this thesis can be found in the communities of practice concept by I. Neumann, V. Pule, E. Adler and in the organisational theory of international relations. From the procedural point of view, they’re stimulated by interests, the need for resources created in the course of practices, and international relations.

The “16/17+1” format really claimed to create a network structure of interaction that could contribute to a meaningful consolidation of cooperation between the participants, primarily due to the regularity of the “synchronization of watches” and the updating of the normative agenda.

Since 2012, summits of heads of state have been held annually (although the summit did not take place in 2020 due to the pandemic, and in 2021 it was held online), and meetings of national coordinators have happened twice a year. The Secretariat of Cooperation between the PRC and the CEE countries, reporting directly to the Ministry of Foreign Affairs of the PRC, worked on a permanent basis. The peculiarity of its organisational structure is that the national coordinators of the European countries are not members, but dialogue partners of the Secretariat, which, of course, creates an asymmetry in the potential of participants to influence partnership processes. The secretariat holds meetings, as well as meetings with the ambassadors of the CEE countries in the PRC four times a year. This was also the case in 2013-2019 (the 2021 online summit produced only a limited “list of events” for the coming year). The summits produced Guiding Principles for Cooperation, which documented progress and outlined plans for the future. A similar scheme has never existed at the pan-European level. In 2015, the Medium-Term Agenda for Cooperation was adopted as a framework document for cooperation. Multilateral documents were supplemented by a system of bilateral Memorandums of Understanding on cooperation within the BRI. This well-structured dialogue, as well as the objective practical interest of the CEE countries in attracting the foreign investment, on which their economic growth historically depended, primarily affected the infrastructure, transport and energy sectors, as well as the readiness of the PRC to provide them. This endowed the format with great potential, creating the illusion of its separation from the pan-European agenda.

China and Europe: BRI and the 17+1 Initiative
Wang Yiwei
China’s internal market reform and China-EU cooperation concerning the reform of the open economy and the global governance mechanism will remain important issues with respect to bilateral economic and trade cooperation. The Europeans may worry that the agreement between China and the US will harm their interests. However, both sides have stated that China hasn’t promised the US any exclusive advantages and everything was done according to WTO rules.

Was it that scary?

In fact, if we analyse cooperation within the framework of the format and its accompanying projects under the auspices of the BRI by potential KPIs — the number of practice institutions, norms of practice and projects implemented, the scale will not be quite comparable with the alarmism of observers.

First, from an institutional point of view, all formats of interaction between participants are still negotiating mechanisms; that is, they do not imply strict obligations. Moreover, the EU has observer status in the group, which allows it to control the process and to draw red lines. The formats laid down in the Guiding Principles also included forums, trips, exchanges and expos; at best, they were dialogues at various levels, no higher than at the ministerial level.

Of the permanent structures created within the 16+1 framework, several associations for thematic cooperation can be noted: in agriculture with Bulgaria, in energy with Romania, in trade and economic issues with Poland and in tourism with Hungary. In 2016, Latvia was ready to become the coordinator of the group in the field of transport and logistics when, in the context of the Riga Summit, the declaration on closer cooperation between the parties in this area was signed, and Lithuania was ready to become coordinator in the field of financial tech. A related coordination centre was opened there in 2019, but did not become fully operational due to the pandemic. Also, regular practices include separate ministerial meetings to promote trade and economic cooperation and the mechanisms for maintaining contacts between investment promotion agencies.

Nevertheless, most of the projects were carried out on a bilateral basis or within the framework of common EU-PRC programs: platforms for the development of regional connectivity, the Smart and Secure Trade Lines Pilot Project, the Trans-European Transport Network, and the Dialogue on economic and trade issues at a high level.

From a normative point of view, both the Guiding Principles and the Memorandums of Understanding (most of which are not publicly available) were not legally binding either. Discursively, all of them supported the pan-European line, and the Medium-Term Agenda for Cooperation was considered part of the Strategic Agenda for Cooperation between the EU and China until 2020. It was not possible to update both documents in 2021, although the corresponding preparatory work was carried out. Within the framework of the Guiding Principles, no multilateral framework document has been signed that would fulfil the function of a framework (Hungary, North Macedonia, Serbia and PRC have signed a Customs Facilitation Action Plan, but it is not truly multilateral).

Project cooperation between the CEE countries and the PRC is legally regulated mainly by bilateral contracts, which means that it is limited by EU legislation in the field of foreign trade, foreign investment control and other activities of foreign enterprises in the domestic market. Accordingly, as this legislation has tightened, especially in 2019-2021 , fewer initiatives were included in the Guiding Principles. The Action Plan following the 2021 online meeting is very limited, and instead of the traditional “parties” wording, in relation to many projects “interested parties” was already written, which emphasises the erosion of consensus in the association.

At a practical level, the indicators of cooperation are decent, but not overwhelming. The format completed the task of attracting Chinese investment to the economies of the CEE countries and increasing mutual trade; however, the growth of these indicators was accompanied by an aggravation of the trade deficit for European economies: for many countries of the group, China is among the top five sources of exports but its position as an importer is not high.

As for investment, although within the framework of the format in 2014 a $10 billion line of credit was opened to CEE, and China launched two phases of the Investment Cooperation Fund, in 2014 and 2018. When compared with Chinese investments in large EU countries, these figures are not excessive. Cumulative Chinese FDI exceeds 1% of the total only in the economies of Hungary, Romania and Slovenia.

As for the BRI projects, the most consistently implemented is the development of the Greek port of Piraeus and the construction of the Budapest-Belgrade railway. Significantly, it was Greece and Hungary that in different years hindered the anti-Chinese initiatives of the EU. In 2016, Hungary and Greece prevented a direct mention of China in the ruling of the Hague Arbitration Court on the status of the South China Sea; in March 2017, Hungary blocked the adoption of the EU Joint Statement on human rights violations in China. In April 2018, the Hungarian Ambassador in Beijing did not sign a statement by his colleagues that “the BRI contradicts the EU’s desire for trade liberalisation and gives preferences to Chinese state-owned enterprises.” Greece in 2017 blocked the adoption of an EU declaration regarding alleged human rights violations in China in the UNHRC. Also in 2022, the construction of a bridge on the Pelješac peninsula in Croatia was completed, but the rest of the projects were not completed or frozen. This applies to railway projects in Poland and infrastructure projects in Romania, Bulgaria and Croatia. The idea of connecting the Three Seas Initiative with the Maritime Silk Road and routes in CEE, popular in 2016–2019, including the ports of Rijeka (Croatia) and Koper (Slovenia), was not even brought to fruition.

As for the Baltic countries that left the group, none of them has ever had projects under the BRI. In terms of turnover, the performance of Latvia, Lithuania and Estonia was also quite modest, which means that they could afford to earn political points by leaving the format without risking economic losses.

What does this mean for the European-Chinese relations?

Withdrawal of Latvia, Lithuania and Estonia from “17+1” as a desire to maintain “rules-based order” and the priority of relations with partners inside the EU, not outside it, is in line with the general trend towards the politicisation of relations between the EU and China.

Of the remaining 14 states of the format, there are several candidates for exit: first of all, the Czech Republic, which is not involved in BRI projects and openly criticises China’s foreign policy, and Romania, which has suspended its projects and the participation of Chinese companies in active tenders. Poland, which is politically close to the Baltic countries, is the main beneficiary in CEE of China’s projects to build railways and increase container traffic to Europe. President Duda visited the opening ceremony of the Olympic Games in Beijing in 2022 to personally discuss the prospects of joint projects, and it is in Warsaw that the 14+1 summit is planned to be held in 2023. So it is unlikely that Poland will follow the example of its neighbours.However, even if the “domino effect” does not take place, the 14 + 1 format can hardly be considered a factor in the future promotion of Chinese influence in the EU for a number of reasons.First, if earlier, even with not the highest efficiency of cooperation, there was the interest of the CEE countries in new projects, today this objective interest is declining not only in the region, but throughout Europe, also under the influence of disappointment from the lack of progress. In one of the earlier articles, we already wrote about the transformation of the Chinese policy of Germany, its rapprochement with the position of France that will stimulate actions to reduce interdependence.

Second, official Brussels has consistently advocated the formation of a single line in relation to Beijing and the minimisation of opportunities for individual countries to show initiative in this direction. Rhetoric is backed up by action: budget 2021-2027 implies an increase in spending on infrastructure and economic assistance to the CEE countries, and large European companies began to systematically squeeze out Chinese capital by participating in internal tenders in the Mediterranean and CEE.

Third, the crisis in the field of European security leads to the replacement of pragmatism and multi-vector policy in the EU policy with a value-oriented approach and the priority of transatlantic cooperation. Against the backdrop of competition between the US and China, many CEE countries, except for Hungary, will hardly want to oppose Washington and Brussels.

Accordingly, we can talk about the disappearance of another factor in maintaining constructive trends in relations between the EU and China. While decisive action on the part of the CEE countries does not seem highly likely either, the channels of interaction between them and China are becoming less and less feasible.

Conflict and Leadership
USA, Europe and Containment of China
Pascal Boniface
It’s in the interest of the European countries that Washington not take for granted an automatic solidarity in the event of war. Their interest is to avoid a new and uncontrollable escalation of tensions. The best way for the Europeans to prevent hawks from taking the lead in Washington is to tell America that their appreciation and behaviour depends on that of the US, writes Valdai Club expert Pascal Boniface.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.