Colombo, March 10:
By repeatedly abstaining from voting on the issue of the Russian invasion of Ukraine, China has indicated that it will follow its national interest in any crisis, even when one of the parties to a conflict is a close ally expecting automatic and full support. In the Ukraine case, the close ally is Russia.
The compelling reason for China’s cautious approach is that it has close and vital economic relations with both Russia and Europe, and indeed, with the US as well. This is why China is pressing for a ceasefire followed by talks in which the legitimate security interests of all parties are accommodated. China has followed this up by offering to mediate in cooperation with the international community. More immediately, however, China has offered humanitarian assistance to Ukraine to soften the blow dealt by the Russians. Foreign Minister Wang Yi has said that the Red Cross Society of China plans to send emergency humanitarian aid to Ukraine.
According to the Guardian, the High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell, has said that “only China can mediate.” The paper quoted Ukraine’s Foreign Minister, Dmytro Kuleba, as saying that “China is interested in stopping this war”. Chinese President Xi Jinping has called upon French President and the German Chancellor to exercise “maximum restraint” and said that China is “pained to see the flames of war reignited in Europe”. However, he took care to see that he did not identify Russia as the aggressor. This was to get Russia on board for any talks that might be held.
China’s Stakes and Clout
China has vital economic ties with the EU, Central and Eastern Europe (CEE), and Russia. That is the main reason for it to want peace in the region. But Western studies indicate that while the Chinese stake is significant and growing, it is also highly exaggerated because of an entrenched Sinophobia.
Sino-Russian trade has grown substantially, jumping in 2021 to a record US$ 146.9 billion. But Beijing’s trade with Russia is only 50% of its trade with the EU, and a fraction of its trade with the US. China’s relations with countries in the conflict zone – Central and Eastern Europe – have been growing. In 2012, China launched what is now called the “17+1” Cooperation Framework with 17 countries in Central, Eastern, and Southeastern Europe. They all come under China’s Belt and Road Initiative (BRI).
Writing in November 2017, Dr. Valbona Zeneli, Director of Black Sea Eurasia Program at the George C. Marshall European Center for Security Studies, points out that China’s interest in the Central and East European (CEE) countries is based on the following factors: (1) the existence of a need for big infrastructure development projects; (2) existence of low prices for acquisition; (3) prevalence of a high demand for preferential lending; (4) existence of cost-effective human capital, (5) existence of significant concessions for Chinese investors.
Other Western commentators allege secret ties with corrupt elites of these countries, a lack of transparency in dealings and an absence of Rule of Law in these countries as key factors enabling Chinese clout there.
In his 2021 paper (entitled A Research Report by the Central and Eastern European Center for Asian Studies) on Chinese investment in Central and Eastern Europe, Tamas Matura says that when both infrastructure projects and FDI figures are taken into account, Serbia shows the highest level (EUR 9.7 billion) of Chinese presence in the region, followed by Hungary (EUR 5.4 billion), Romania (EUR 2.8 billion), Poland (EUR 2.7 billion) and Bosnia-Herzegovina (EUR 1.9 billion).
However, according to a statement made by Peter Szijjarto, Hungarian Minister of Foreign Affairs and Trade in parliament in 2019, 11 out of 16 Chinese investments in his country were made by buying off international companies. According to UNCTAD, in 2016, Chinese outward investments was to the tune of US$ 183 billion overall. Out of this, the CEE got only 2.7%. In contrast, the EU as a whole got US$ 65 billion.
In 2016, the two-way trade between China and the CEE had reached US$ 58 billion, though the target was US$ 100 billion. 80% of the trade was with five countries, namely, Poland, the Czech Republic, Hungary, Slovakia, and Romania. On the other hand, China’s trade with the EU as a whole was at US$ 514 billion annually. In 2021, China was the second largest partner for EU exports of goods (10.2 %) and the largest partner for EU imports of goods (22.4 %).
Therefore, China’s economic ties with the CEE, EU and Russia are strong and vital for its growth. China would therefore like to do its utmost to ensure peace in the European continent as a whole.
The Downside
However, all is not well with Chinese investments in the CEE. According to a 2021 paper by Aarati Bansal of the New Delhi-based Observer Research Foundation, skepticism about Chinese projects has been growing because of unfinished projects and security concerns.
“Flagship projects like the Cernavoda Nuclear Power Plant or the Budapest-Belgrade railway, which could have brought influence and political and image gains for China, have been either abandoned after cumbersome negotiations or repeatedly delayed. A nuclear power plant and hydropower plant in Romania are yet to be completed. The Montenegro highway project too fell to Beijing debt-trap diplomacy. Even the landmark the Budapest-Belgrade railway, has not proceeded very smoothly; it took more than six years to start the project, it is being constructed in Serbia only and is still under negotiation in Hungary.”
“The Romanian government announced that it is considering banning Chinese companies from participating in infrastructure tenders after abandoning the Cernavoda Nuclear Power Plant deal with the China General Nuclear Energy Group (CGN) citing security reasons and cost concerns. The Czech Republic also kicked out CGN from taking part in the public tender to build the Dukovany Nuclear Power Plant on the grounds of national security.”
“Poland is now increasingly against Chinese investments in strategic infrastructure including ports and airports which was communicated by the President, Andrzej Duda, himself. Poland has been seeking to further US military presence in the country driven by its security concerns over Russia, focusing more its alliance with the West.”
“The NATO membership of CEE countries is proving to be a major obstacle for China’s digital silk road, blocking Huawei’s ambitions.”
Finally, Bansal says: “China’s primary goal behind BRI in CEE was to increase mobility and enhance overland connectivity with Western Europe. The impoverished and resource deficient regions of the CEE allowed Beijing cheap access to European markets. Therefore, most of the projects announced concerned transport, infrastructure, motorways, ports, and the rail networks which were to be crucial for the transport of goods between Europe and Asia.”
According to Tamas Matura, most of the projects (75 to 85%) are financed by Chinese loans, and the total value of the constructions add up to significant amounts compared to the GDP of the relevant economies. The level of loans offered by China may reach 18% of the GDP in Montenegro, 12% in Serbia, 10% in Bosnia-Herzegovina and 7% in North-Macedonia, he says.
Dr. Valbona Zeneli has pointed out that China’s bilateral deals might eventually mean that bilateralism will replace multilateralism in Europe to the detriment of the EU. It is also pointed out that Chinese aid recipient countries are not bound by progressive EU legislation. Chinese State Owned Enterprises allegedly employ few locals. Many projects lack transparency and public debate, and there is a lack of public and open procurement procedures, among other issues.
Course Correction Needed
Therefore, China has both clout to exploit and drawbacks to be corrected in the CEE region. China needs to build and improve its ties with the CEE and EU if it has to play a geo-strategic role. And for this it needs peace and order in Europe and Russia. Hence Beijing’s bid to be a peace maker in Ukraine. Its current neutrality paves the way for that role.
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