How China Blew Its Chance in Eastern Europe
Seven years on, the 16+1 project has largely flopped.
When it was launched by China and 16 countries from Central and Eastern Europe in 2012, the 16+1 mechanism sparked hope throughout the region that it could close the investment gap. The figures being bandied about were huge in 2012. Then-Chinese Premier Wen Jiabao announced a $10 billion credit line for Chinese investments in Central and Eastern Europe. One year later, memoranda of understanding for Chinese investments in just one country—Romania—topped $10 billion (8.5 billion euros).
But seven years in, as participants gather for the annual 16+1 summit in Croatia, those hopes are already faded. China failed to make its intentions clear, failed to deliver on many of its promises, and failed to offer the assurances its partners needed. In turn, the European Union—which includes 11 out of the 16 countries involved—has increasingly criticized China’s role on the continent. The failure of the 16+1 may offer a vision of the future of the Belt and Road Initiative, China’s grand geopolitical plan.
The EU saw the 16+1 format as an attempt by China to divide the union by offering investments to less-developed EU members in exchange for political influence. The launch of the Belt and Road Initiative in 2013 and the subsequent wave of publicity, as the program came to dominate both Chinese media and global worries about Beijing’s rise, added to these tensions. The EU started to feel under siege.
China’s intentions may have been good, but Beijing failed to communicate them clearly, leading to EU opposition toward the 16+1. China’s choice was a manifestation of its penchant for regional diplomacy, typified by other forums such as the Forum on China-Africa Cooperation or the Forum of China and the Community of Latin American and Caribbean States.
But China failed to articulate a clear vision on the nature of the 16+1 (whether it was just a grouping or an attempt to create an organization with permanent institutions) or its investment strategy and objectives in Central and Eastern Europe. Unfortunately, the message that came across on the ground was that the “win-win” language so often used by Beijing was empty sloganeering. Instead Chinese projects, in the EU’s eyes, were typified by more unequal strategies: the use of Chinese loans, which don’t have preferential interest rates; of Chinese workers, which represent at least 50 percent of the workforce on these projects; and of Chinese labor standards and environmental standards, both distinctly weaker than EU standards.
The 16+1 was a good idea, but the implementation was disappointing, with too much noise and too little action. In almost every 16+1 country, there were too many promises, negotiations, and meetings for too few final projects. The same is proving true for the Belt and Road Initiative. Many of the Chinese projects in Europe that have been under negotiation have either been canceled or delayed.
Romania, the second most populous country of the 16, is a good example. The most important Chinese projects there are the Cernavoda Nuclear Power Plant and the power plants in Rovinari and Tarnita-Lapustesti. In 2013, during the 16+1 summit that took place in Bucharest, China through the China General Nuclear Power Group agreed to invest in building two reactors at the Cernavoda Nuclear Power Plant, units 3 and 4, a project estimated to cost around 6.4 billion euros ($8 billion).
To respect the EU’s norms, the Romanian government organized a public call for competing bids in 2014, but the short time frame allowed only one company to register as a participant: the China General Nuclear Power Group. Since then, the tumult of Romanian politics has produced five prime ministers in quick succession. Meanwhile, the EU is unhappy about approving state aid for investments. These issues have complicated the negotiations between Romania and China regarding the Cernavoda Nuclear Power Plant, which are still ongoing—putting it well behind schedule
Then there’s the Tarnita-Lapustesti Hydropower Plant, a pumped-storage hydroelectricity plant, which was supposed to enhance the new reactors at Cernavoda. Then-Prime Minister Victor Ponta started a bidding process in 2015, but in 2018, Ponta admitted to me that the project is somewhat outdated and doesn’t deserve any further investments. It was actually shelved after the Ponta government fell in 2015, but it has been dusted off lately by the new government of Prime Minister Viorica Dancila—yet it needs a new bidding process before any work can start.
During the same 16+1 summit in 2013, another project was signed regarding a thermal power plant, Rovinari, with China Huadian Engineering. Only in the summer of 2017 did real negotiations start, but construction of the new units has yet to begun.
Things aren’t any better in the cases of Romania’s neighbors: Hungary and Serbia have been waiting for the construction of the Budapest-Belgrade railway since 2013. Initially envisioned as a high-speed railway, the Budapest-Belgrade line will be far slower than once imagined, with a maximum speed of about 100 miles per hour, a nearly 20 percent decrease. Since the project began it has been depicted as the crowning achievement of both the 16+1 and Belt and Road Initiative in Europe, but the delays in starting the construction cut its momentum and transformed it into a disaster for the Chinese initiative—which hasn’t been able to finish one large project in Europe.
Chinese private investment has been more successful, buying European companies such as Kuka, Daimler, Syngenta, Pirelli, and so on. But on the infrastructure level, China didn’t achieve its 16+1 or Belt and Road objectives. Even if some Chinese projects are completed in Serbia, Montenegro, and other Balkan countries, they lack the importance to sustain a success for the 16+1. Although the Pupin Bridge and the expansion of the Kostolac thermal power plant in Serbia, the highway in Montenegro, and the Port of Piraeus in Greece may polish the image of the Belt and Road Initiative in Europe, the 16+1 format seems to lack important promised projects.
Another example, though not at first government-led, is the work of CEFC China Energy, a private Chinese energy company from Shanghai that made investments in the Czech Republic, which were initially private. The Czech Republic now finds itself in a complicated situation. After the detention of CEFC’s CEO, Ye Jianming, his company ended up in the hands of the state, together with all its investments abroad. The Czech Republic is caught in an unusual situation: Many Czech companies are now owned by the Chinese state.
This gap between promises and delivery has affected the credibility of the 16+1 and of China’s status as a trustworthy investor in some of the Central and Eastern European countries. The yearly 16+1 summit has lost its shine, and a few prime ministers, like those of the biggest countries among the 16, Romania and Poland, have already started dropping the events from their schedule.
Ultimately, the failures of the 16+1 project may be overshadowed by much bigger concerns. As the contest between the United States and China heats up, the world is moving once more into divided blocs. The Huawei case was only the beginning of the new digital iron curtains falling across the world. And whatever their desire for Chinese money, the Central and Eastern European nations, if forced to choose between Washington and Beijing, will end up on the U.S. side—a choice made easier by the hollowness of earlier promises from China.