2022: Is China losing Central and Eastern Europe?

5 January 2022

2021 was the year of Chinese ‘wolf warrior’ diplomacy and what observers have characterised as the ‘bullying’ of countries unwilling to toe Beijing’s many lines. While this has led to souring ties between China and others within its immediate neighbourhood, Europe too found itself on the wrong side of Beijing’s new muscular diplomacy.

Here, 9DASHLINE invites a number of leading experts to consider if China is losing Central and Eastern Europe?

BEIJING’S HEAVY-HANDEDNESS CREATES ROOM FOR TAIWAN

Michael Trinkwalder, Mobility Security Analyst at A3M Mobile Personal Protection, and former YPFP Europe Fellow

When it comes to China’s relations with Central and Eastern Europe (CEE), 2021 was another year of losses, setbacks, and own goals. Governments in the region were already growing increasingly disenchanted over unfulfilled Chinese investment promises, but it was the emergence of Covid-19 that truly caused relations to deteriorate. In part, this can be explained by popular resentment of China’s initial mishandling of the pandemic. However, what turned a PR problem into a diplomatic disaster, was Beijing’s heavy-handed attempt to control the narrative on Covid-19 and its hyper-assertive ‘wolf warrior’ diplomats. Taiwan then seized this opportunity to launch a remarkably successful diplomatic charm offensive in Europe, with a particular focus on the CEE region. Unsurprisingly, Beijing responded with shrill rhetoric and threats of retaliation, thereby further damaging relations with the region.

Yet, as a result of the lack of Chinese economic engagement in the region, Beijing has struggled to lend credence to its bombastic threats of retaliation. Lithuania is a case in point. In 2021, the tiny Baltic nation became a prime target of Chinese ire when it not only pulled out of the Chinese-led 17+1 initiative but also permitted Taiwan to set up a de-facto embassy under its own name, crossing the reddest of red lines for the People’s Republic. However, since this is one of the rare instances where China lacks economic leverage, it has resorted to imposing extraordinarily draconian trade sanctions, which risks poisoning overall China-EU relations. Moreover, while they may not be quite as messy, there are concrete signs that further departures from the now 16+1 initiative are imminent. Even some of Beijing's closest allies in the region, like Hungary, are not immune to this growing backlash. With Hungary heading for elections, being pro-China could soon become a political liability. 2021 was a rough year for China-CEE relations, and unless Beijing reins in its wolf warriors and changes its tune, things are unlikely to get any better in 2022.

BEIJING’S SHRINKING FOOTPRINT

Zsuzsa Anna Ferenczy, Head of Associates Network at 9DASHLINE, and Non-Resident Fellow at Taiwan NextGen Foundation.

The past year has seen EU-China relations take a series of unprecedented twists and turns, deteriorating to their lowest point in decades. One of the most defining moments shaping the future of relations between CEE and China was Lithuania’s decision to leave the ‘17+1’ cooperation framework and to expand ties with Taiwan instead, a vibrant democracy with a similar history. This decision, perhaps unexpected at the time, should not be surprising. Since the establishment of the framework in 2012, Beijing has overpromised and underdelivered in CEE, with a sense of discontent intensifying across the region. China’s opaque, top-down response to the pandemic, its authoritarian turn at home and influence operations abroad, provocations in the South China Sea, and “military adventurism” across the Taiwan Strait have only amplified fears that the risks of closer cooperation with China outweigh the benefits.

Vilnius has sought to protect itself from Beijing’s divisive tactics designed to challenge its hard-won freedom. It was Lithuania’s choice to ‘lose’ China and to embrace a ‘27+1’ framework instead. Through this bold move, Vilnius has followed the European way, setting an example for the entire region. But while Vilnius’ worries are those of its neighbours as well, the way forward remains uncertain. CEE is home to diverse local realities, and China’s capacity to project its influence therein is shaped by different domestic dynamics and a multitude of actors, strengths, and weaknesses. One thing is certain: Beijing is contributing to the shrinking, not the expansion, of its own footprint in CEE, while at the same time facilitating the efforts of all EU member states to build their own collective resilience to withstand undue influence. Expect this trend to only strengthen in 2022.

EXPECT CURRENT TRENDS TO CONTINUE

Justyna Sczudlik, Deputy Head of Research, Head of Asia-Pacific Program and China Analyst with the Polish Institute of International Affairs (PISM).

China is losing Central and Eastern Europe (CEE) and this is an indisputable fact. But this process, which noticeably accelerated in 2021 and will presumably continue in 2022, is not a novelty. The problems have been snowballing. What to expect in 2022? In China, domestic issues will be predominant due to the upcoming Communist Party of China (CPC) congress in autumn, and questions over the future of President Xi Jinping’s leadership. In other words, Xi must be tough to show domestic audiences he is not bowing to foreign pressure and is satisfying nationalist sentiments. This means that the aggressive diplomatic course is likely to continue. In that sense, the process of China losing CEE is also expected to continue.

There is speculation that other CEE countries are thinking of leaving the 16+1 forum, however in a less spectacular manner (eg Estonia). Also, one should not expect significant improvements in Lithuania-China relations, but rather a continuation of the downward spiral. Suspension of diplomatic ties is not very hard to imagine. However, from time-to-time China may offer an ‘olive branch’ to ease tensions, or underscore any positive signal of cooperation with selected CEE countries that present a China-friendly course (eg Serbia or Hungary) to show Chinese people that their country has political friends in the region. CEE countries may also be less vocal in order to ease tensions with China under pressure from business groups.

China’s punitive campaign against Lithuania, including a message to multinationals not to use parts and supplies from the country because they may not be allowed to sell products in China, may have wider consequences. This example shows what kind of concrete coercive tools China may use, and not only against a country that angered Beijing. The fact that Lithuania has rather modest economic bonds with China does not mean Beijing’s room for retaliatory moves is narrow; interdependence of supply chains matters and China’s intimidation against one country might be deleterious for others.

The process of China losing CEE should serve as a loud wake-up call for the EU to be more cohesive and decisive in setting up new defensive measures, accelerating the reshuffle of value-chains, and strengthening cooperation with like-minded partners. China’s diplomatic ‘achievements’ in 2021, especially when it comes to CEE, may speed up work to adopt anti-coercion instruments, due-diligence mechanisms, among other measures. China’s hopes for the EU’s re-engagement with Beijing in 2022, such as unfreezing the EU-China Comprehensive Agreement on Investment (CAI), are fading.

NEW CZECH GOVERNMENT, NEW MOVES?

Filip Sebok, Analyst at MapInfluenCE and China Observers in Central and Eastern Europe (CHOICE) project, and China Research Fellow at the Association for International Affairs (AMO) in Prague.

The CEE countries have grown disillusioned with Beijing and it would require China to significantly change its approach to make its offer interesting again, especially among the EU member states. One potential game-changer last year was China’s offer of vaccines. However, cooperation was again limited to the ‘usual suspects’ of Hungary, Serbia, and other Balkans nations, while it failed to make a bigger dent in the EU member states. This mirrors the success of Chinese projects on the ground, which have also been mostly concentrated in non-EU countries. We will have to wait for the 2022 summit to see if China will put forward a new innovative agenda for the relationship to react to recent developments, but the odds are not too high.

Another bet for China is to expand its basis of political support within the 16+1 forum to include Poland. Indeed, throughout 2021 we have seen unusually frequent diplomatic contact between Beijing and Warsaw, and signs that China might be trying to reengage with Poland. As the largest CEE country in the format, Poland’s support may be crucial as it might also incentivise other countries to stay involved. Conversely, by playing the China card, Poland can signal its discontent with policies, such as over Nord Stream 2, to the US and other Western capitals. However, Poland clearly does not see China as a strategic partner but only as a tactical instrument. As China grows increasingly close to Russia, Poland’s biggest threat, it is unlikely that this view is going to change.

Finally, reactions of CEE states to China’s economic coercion towards Lithuania will be interesting to follow. By showing the potential costs, Beijing is also signalling to other CEE nations that they should not follow Vilnius’ example. While the crux is the Taiwan issue and not the decision to leave 16+1 per se, other CEE nations might reconsider their approach: it might be better to keep involved in a de-facto dead format, keep a low profile, and dial down the political capital spent on it, rather than rocking the boat and formally leaving. Here, the new Czech government and its decision are to be followed as the new foreign minister previously supported a coordinated “exit” of EU member states from the format.

DISCLAIMER: All views expressed are those of the writers and do not necessarily represent that of the 9DASHLINE.com platform. Image credit: European Union, 2021.