Chinese arrival on the Adriatic: Dubrovnik 16+1 summit

(Krystian Maj/KPRM, Public domain)

Croatian tourist pearl, Dubrovnik, hosted the 9th 16+1 summit of the Central and Southeast European (CSE) countries and China. The idea was born after the first Economic-Trade Forum in 2011 in Budapest.

The Chinese side feels that such meetings have a great significance for promoting a stable and long-term development of 16+1 cooperation, as well as the relationship between China and Europe. The members of the initiative are: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Montenegro, Northern Macedonia, Poland, Romania, Serbia, Slovakia and Slovenia. Since the Dubrovnik Summit Greece is the 17th member. The aim of the initiative is to deepen and intensify the cooperation of the CSE countries with China in the area of trade and investment, transport, finance, agriculture, science and technology, health, education and culture. China considers this cooperation as an integral part of its megaproject One Belt One Road, one of the most ambitious projects in the world.

In recent years, China’s platform meetings with 16 CSE countries have been attracting a lot of attention, especially in Western Europe. Many European analysts and policy makers have expressed concern about the potential risks of growing Chinese presence in the CSE, claiming that Beijing’s main involvement in the region is a part of its long-term strategy of undermining EU unity, as well as competition rules. Sometime ago, China has decided to finance and build roads, railways, power plants and other infrastructure elements needed by the CSE countries. The action of this initiative, however, began to spill over into political and strategic spheres, causing distrust among some Western European countries suspecting the real Chinese motives. The Chinese increased interest in the CSE could be seen as a purely pragmatic attempt to diversify international trade links region. At the same time, from the perspective of Berlin and Brussels, this new trend coincides with the political turnaround in some European countries, particularly Poland and Hungary.

The Chinese project of the Pelješac Bridge in Croatia is described as an example where the interests of China and the European Union overlap. Various countries look differently at this initiative. Thus, as the Financial Times wrote, it represents ‘opening to the East’ for Hungary, and for Serbia to establish a “reliable friendship”, and for Poland as a “huge possibility”. For Croatian government, the event has been seen as a chance to attract more Chinese investments.

The Chinese Prime Minister Li Keqian addressing participants of the Dubrovnik Summit said “We all have the need for trade growth and our economies are linked,” and added that cooperation is the main goal of this gathering. He also commented on the construction of the Pelješac Bridge, saying it was a “bright example that could inspire us for further cooperation. The bridge is a Croatian project, funded by the EU and build by a Chinese company. This is the proof of an open and transparent partnership.” According to Li Keqian enterprises of this magnitude “have shown that they are very active and fertile, and China wants them to ease bureaucracy.”

Since more than a thousand entrepreneurs arrived to Dubrovnik, Chinese trade minister Zhong Shan stressed he believes in free trade, while the EU is seeking reciprocal access to its Chinese market firm. “The road is a new technological revolution and that is what defines our times,” Li said, adding that Beijing also wants cooperation in the field of education and strengthening of imports, especially of agricultural products. “Projects like the Pelješac Bridge can be an inspiration for future cooperation,” concluded the Chinese Prime Minister.

President of the Croatian Chamber of Economy Luka Burilović and Economy Minister Darko Horvat signed agreements with Chinese summit participants. Mr. Horvat is sure that the agreements will be translated into investments. China is ready to invest in Croatia and thus enter the CSE market, Mr. Horvat said and added “There are over 360 companies from 17 countries with nearly a thousand participants, out of which over a hundred of banking sector representatives that have introduced new financing models, and the possibility of Chinese financial institutions entering Croatia has been opened so that projects for which we cannot obtain non-refundable support in the EC, may be financed and realized.”

“Our goal is to modernize the two largest Croatian ports and the railway network and we plan to allocate EUR3bn by 2030. Because of its geographic location, Croatia can be a key place in the exchange of 16 + 1 countries,” Croatian Prime Minister Andrej Plenković said. Croatian Railway Infrastructure has partnered with China Railway Eryuan Engineering Group Corporation and China Road and Bridge Corporation to cooperate in the field of transport, the Rijeka-Zagreb railway line and the Mediterranean corridor.

Croatian Bank for Reconstruction and Development (HBOR) hosted a meeting of the Chinese Inter-Banking Association and the CSE countries, and all members signed the Initiative with the goal to help SMEs in such sectors as infrastructure, agriculture, tourism, energy efficiency, environmental protection, information technology and biotechnology. Furthermore, the Initiative emphasizes the importance and encourages members to exchange information and experiences on successful financing, as well as the risks minimization. HBOR also signed a EUR300m framework agreement with the China Development Bank for financing projects that fit into the usual HBOR’s purpose and funding projects of common interest.

All these contracts are mostly initiatives and general plans, but Croatian media and most political experts were expressing great expectations of the Chinese investors. They are delighted as Croatia finds itself in a Chinese One Belt One Road. But Croatia does not have long-term plans that would include all that the Chinese side offers these days. The European Union is urging Croatian bureaucrats to prepare a development strategy until 2030, but this is not made by top officials and civil servants. Questions over the business with China is practically non-existing in these strategies. The geo-political consequences of Russian and Chinese investments in Croatia are not mention to the Croatian public, although the major industries are now owned by Russians.

This might soon be the case with China too, following the breakthroughs in other Mediterranean countries, such as Italy and Greece. For now, there are many wishes for investments, but no tactics or strategies. For instance, the Croatian Ministry of Agriculture announced that Croatian milk and dairy products are opening door to the Chinese market, i.e. that Croatia will export milk and dairy products to China, and the export of tuna and poultry meat will be also increased. Last year, exports of goods amounted EUR133.4m, an increase of 19 per cent compared to 2017, while imports amounted EUR803m, an increase of 15.6 per cent. Croatian companies might be able to export more to China in the future, with some innovative export ideas, but for now the main export are products of raw or semi-finished products such as stone, leather, untreated wood and polymers, while it imports traditional Chinese consumer goods, technical and telecommunications equipment. And there is an evident growth of Chinese tourists.

Also Poland’s Prime Minister met with his Chinese counterpart. “The goal of Polish foreign affairs is to eliminate a gap in trade relations with China,” said Poland’s Prime Minister Mateusz Morawiecki. During his meeting with Chinese Prime Minister Li Keqiang Poland’s PM stressed that Chinese procedures of obtaining certificates for food products should be simplified at the central level. Right now Polish producers have to obtain these certificates at local levels and this means a lot of bureaucracy.

China is very interested in infrastructure projects in Poland but, as Mr. Morawiecki said, Polish experience is not the best one. China Overseas Engineering Group (Covec) was supposed to construct an A2 highway in Poland. The project was originally awarded to Covec in 2009, but construction work was halted after Covec allegedly failed to pay its subcontractors. Covec, however, was reported to have claimed that it was treated unfairly by Polish authorities and withdrew from the contract of its own accord. “So we are stressing that additional guarantees are necessary. I told Mr. Li that we are ready for Chinese infrastructure investment but on equal terms, without discriminating any of Polish companies,” added Mr. Morawiecki.

The culmination of Chinese investment in the EU was reached in 2016, largely through the takeover of companies, and the last two years have fallen in the number and strength of investments, which is attributed to more stringent rules in some EU member states, as well as increased capital controls conducted by Beijing. Until now, the EU has largely been defending anti-dumping measures, but it is not enough. Looking for a balance in economic relations, which requires greater opening up of the Chinese market, more stringent public procurement rules are being considered (which could make it difficult for Chinese companies to win big EU tenders, such as the Pelješac Bridge) and negotiate a reform of the World Trade organizations.

Vedran Obućina is an analyst and a journalist specializing in the Croatian and Middle East domestic and foreign affairs. He is the Secretary of the Society for Mediterranean Studies at the University of Rijeka and a Foreign Affairs Analyst at The Atlantic Post.

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