CENTRAL AND EASTERN EUROPE IN CHINAS FOREIGN POLICY AFTER THE LAST EUS ENLARGEMENT

AUTHOR: JUSTYNA SZCZUDLIK TATAR

Keywords: China, Europe, European Union, Central and Eastern Europe, Sino-European Relations, EUs Eastern Enlargement, Chinas Foreign Policy, Chinas EU Policy

Outline The European Unions enlargement in 2004 aroused a considerable interest of China in the Central and Eastern European countries. Just before the enlargement, the PRC published Chinas EU Policy Paper a first such document in China. The PRCs approach to CEE is to extend its economic presence in the region, examine the European model of integration which could be used in Asia or inside China, and enter Europe through the eastern door. The 2009s events like rising Chinese investments in CEE as assistance in the global crisis, and Xi Jinpings visit to the three CEE countries, are evidence of the PRCs interest in Europe. Due to this fact, it is possible that Europe will be predominant foreign policy focuss of the upcoming fifth generation of Chinese leaders that will come into power in 2012.

The way forward The last round of European Unions enlargement in 2004 and 2007 brought significant change not only for the so-called old and new EUs members, but also for the non-European countries which perceive the EU as an important actor in the international arena. One of these states is China, an emerging power, whose main foreign policy goal is to regain superpower status. Has China acknowledged the EUs enlargement? Have its scholars and politicians been conducting research about this inspiring exercise of integration? Has China perceived the EUs enlargement as a chance or threat to itself? And, what is crucial for this paper, does

China have a clear policy toward the Central and Eastern European (CEE) countries 1 formerly a part of the Soviet camp, but now members of the rich club the European Union? And last, but not least, can the process of integration in Europe after the iron curtain collapse serve as a pattern for integration in Asia and inside China? This paper tries to propose answers to the above questions. Nevertheless, to truly understand Chinas present approach to the EU and CEE countries, one should briefly analyze the evolution of Chinese perception of Europe from the Maoist period till now, and then subject to scrutiny the present Chinese attitude toward the EUs eastern enlargement. The last two parts of the paper present theoretical assumption of Chinese policy toward CEE and the policy in practice. Chinas attitude toward the EU from ideology to pragmatism Chinese attitude toward Europe is (not reserved only for China) strictly connected with the directions of its foreign policy. From the establishment of the Peoples Republic of China in 1949, foreign policy has been mainly based upon ideology, and depended largely on Mao Zedongs visio n of Chinese interest and the course of international politics. In the first years of the PRC, China perceived Europe through the leaning to one side strategy ( yibiandao). It meant that China based its relations upon close ties with the Soviet Union (USSR) and the socialist block, and against the imperialist American camp. Western Europe was considered as a tool in the US hands. The European integration process, started by the establishment of the European Coal and Steel Community (ECSC) in 1952, was perceived by Mao as an evidence of the US weakening position. He believed that the ECSCs goal was to integrate Western Europe economically to avoid collapsing of the capitalist system imposed by the US on Europe.2

After the ideological dispute with the USSR that started in 60-ties, the PRC changed its strategy from yibiadao to anti-imperialism (fan di) and anti-revisionism (fan xiu), which meant fighting on two fronts. According to Maos theory of the intermediate zones (zhongjian didai) presented in 1946 and modified in 1963 as a theoretical explanation of the

In this paper the Central and Eastern European countries are referred to as new members of the EU after 2004 and 2007 enlargements: Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovakia, Slovenia, and Romania. 2 Song Xinning, Chinas view of European integration and enlargement, In: D. Sham baugh, E. Sandschneider, Zhou Hong (ed.), China-Europe Relations. Perceptions, policies and prospect, London & New York, 2008, p. 174.

new strategies, there were intermediate zones between the imperialist and socialist blocks. One of these zones was Europe. Thus, Western Europe as rather independent from the US should have cooperated with China and the developing countries against both the USSR and the US. But after establishing diplomatic relations with the US in 1979, the PRC was to change the strategy and theory again. China announced the one line strategy ( yitiaoxian) in which Europe was an important element of resistance against the USSR. The new three worlds theory (sange shijie) said that the first world comprises of two superpowers the US and the USSR, while the second world is composed of Japan and the European countries. But the third world consists of the so-called developing countries of Asia, Africa, and Latin America. 3 Because China resumed diplomatic relations with the US, the three worlds theory was slightly modified. According to the new definition, the second and third world together with the US of first world should cooperate with each other to undermine the USSR. To sum up, Chinese attitude toward integrating Europe from the Maoist period was based upon ideology and perceived through Maoist theories. Beginning with the Dengist period, the Chinese position toward Europe and the European integration has been gradually changing from ideology to pragmatism and this approach is being continued by the succeeding Chinese leaders until the present day. Good examples of this process are two Deng Xiaopings statements. In 1974, after the Great Britain entered the European Communities, when he said this was a very important event which helped the western European people in the struggle against the hegemony. But in the statement given in 1985, there were no elements of ideology-tinged thinking, but only pragmatic arguments. Deng said: In our foreign trade , Europe plays a significant role. We are interested in European technologies. We count on support from Europe. We have been considering strengthening economic ties with Europe. 4

Chinese research about European integration started in earnest in the 1970-ties, but the real non-ideological studies were launched in the 1990-ties. Scholars not only have been studying various aspects of the EU but also providing the government with recommendations, which if coming from scholars from the leading think tanks are pretty often taken into consideration by Chinese decision makers and implemented. On the whole, Chinese leaders, scholars and
3

1974 nian Mao Zedong tichu huanfen sange shijie de lilun (2 yue 22 ri) (The Mao Zedongs three worlds theory from 22nd of February 1974), Xinhua Agency, 22.02.2009, http://news.xinhuanet.com/politics/200902/22/content_10839608.htm 4 Zhang Chi, Zhong Ou guanxi: guannian duili, pingwen fazhan yu quanmian huoban guanxi (China-Europe relations: confrontation, steady development and comprehensive partnership) In: Ye Zicheng, Li Hongjie (ed.), Zhongguo da waijiao: zhechongzunzu 60 nian (Chinas Diplomacy: 60 years of prolonged negotiations), Beijing, 2009, p. 243-245.

citizens have palatable view of the EU, with their opinions and arguments being rational and plausible, without emotions and ideological elements. They perceive the EU through the prism of politics/geopolitics and economy, which corresponds with the Chinese foreign policy goals.5 In the field of politics, China recognized the EU as an emerging pole ( ji) that facilitates modification of the international order from one superpower to many powers (yichao duoqiang) and from unilateralism to multilateralism. Moreover, the EU is perceived as a soft counterbalance to the US. Many scholars have long argued that the EU does not have any significant problems in bilateral relations with China, contrary to the relations with the US (e.g. the Taiwan issue). The third approach acknowledges the EU as a soft power entity bestowing normative solutions and patterns of integration.6 In the field of economy, the EU is recognized as a good place for Chinese export and direct investments. The common market and euro zone help China to increase its economical presence in the EU. The EU is also viewed as a source of high technologies which are crucially needed by the PRCs economy for its further development. Chinas view of EUs eastern enlargement from unilateralism to multilateralism EUs preparation for eastern enlargement aroused considerable interest of the PRC in the process and the CEE countries alike. Analysis of Chinese press articles, television programs, and scientific texts draw ones attention to the increasing number of publications about the EU itself and the enlargement process. 7 But the most significant example of Chinese engagement in the EU is Chinas EU Policy Paper, published in October 2003, the first such document in China. It says: The European Union is a major force in the world. The Chinese government appreciates the importance the EU and its members attach to developing relations with China. In 2004, the EU will be enlarged to a total membership of 25 countries. The new European Union would then cover much of Eastern and Western Europe - an area of four million square kilometers, a population of 450 million, and a GDP of over 10 trillion US

Zhu Liqun, Chinese perceptions of the EU and the China-Europe relationship, in: D. Shambaugh, E. Sandschneider, Zhaou Hong (ed.), China-Europe Relations. Perceptions, policies and prospects, London & New York, 2008, pp. 148-170. 6 D. Shambaugh, China eyes Europe in the world, in: in: D. Shambaugh, E. Sandschneider, Zhaou Hong (ed.), China-Europe Relations. Perceptions, policies and prospects, London & New York, 2008, pp.127-143 7 See: Jing Men, Chinese Perceptions of the European Union: A Review of Leading Chinese Journals, in: European Law Journal, vol. 12, No. 6, November 2006, pp.788-806; R. Peruzzi, A. Poletti, Shuangquan Zhang, Chinas Views of Europe: A Maturing Partnership, in: European Foreign Affairs Review, No. 12, 2007, p. 317-318.

dollars. Despite its difficulties and challenges ahead, the European integration process is irreversible and the EU will play an increasingly important role in both regional and international affairs.8 Most Chinese scholars highlight primarily the effects of enlargement for the EU and CEE countries seen from Beijings perspective. They point out the right strategic decision to integrate CEE with Western Europe, using language like westernization (xi xiang), back to Europe (huigui Ouzhou) or building big Europe (da Ouzhou). The eastern enlargement is recognized as an improvement of CEEs economic and political status. After the CEE counties entered the EUs legal and economic system, the process of integration is quicker, development disparities between Eastern and Western Europe are decreasing and relations with old Europe are closer.9 Thus, overall, the eastern enlargement is perceived as positive for China. Therefore, scholars and political leaders are underlining the beneficial impacts of EUs enlarged area, increased number of its population, higher GDP, and the emergence of the worlds largest single market which will as a whole by covered by the euro zone in the future. According to Chinese analysts, from the geopolitical perspective, all these elements are proof that the EU is emerging as a pole (ji) in the international arena, as well as an independent economic and political entity. In their view, this leads to building the multi-polar international defined by relations based on multilateralism. Furthermore, Chinese scholars are rather broadly analyzing the positive and negative effects of enlargement on China. They do this predominately through the prism of economic potential. The positive impacts of EUs enlargement are often presented in the form of increasing the demand for Chinese imports. This is primarily attributed to the improvements in the standard of living in the CEE countries, import tariff exemptions, or duty reliefs in CEE after their EU accession (before the accession they were higher than in the EU). Thus, the developments are seen in the context of increasing Chinese exports to these countries as well as harmonizing standards for the imported products.10 After the enlargement, the European Union is Chinas biggest trade partner.11 But the potential negative results remain as follows: relatively high

Chinas EU Policy Paper, Ministry of Foreign Affairs of the Peoples Republic of China, October 2003, http://www.fmprc.gov.cn/eng/topics/ceupp/t27708.htm 9 Zongguo dui Oudongou guojia zhengce yanjiu baogao (Report on Chinas Policy toward Central and Eastern European Countries) in: Xiandai Guoji Guanxi, no. 11, 2003, pp. 1-10. 10 Li Xin, Kong Ping, Oumeng dongkuo yu woguo de duice (The EU eastern enlargement and Chinas countermeasures) in: Beifang Jingmao, no. 9, 2004, p. 69-70. 11 Yang Liming, Oumeng dongkuo hou shichang juda dui zhongguo maoyi shi huo shi fu? (Is the huge market after eastern enlargement of the EU Chinas misfortune or happiness?) in: Renmin Ribao, 29.04.2004, http://www.people.com.cn/GB/guoji/1030/2475477.html.

probability of increasing antidumping measures; difficulties in export of Chinese textiles, shoes, and agriculture products by extensive usage of clearance procedures 12; competitiveness of the rather cheap CEEs products due to similarities of CEEs and the PRCs economy structure, which could seriously hit Chinese exports to Europe. 13 Chinas policy toward the CEE countries economy first! Among Chinese papers about the policy toward worlds areas, there is no specific document explicitly about the CEE as a factor of Chinas foreign policy. Furthermore, if one goes through the largest Chinese database CNKI, which contains millions of books and articles alter alia about Chinese politics, international relations etc., one will only find materials about Chinese policy toward CEE after the latest EU enlargement. The lack of official document defining Chinese policy toward CEE does not mean that the PRC is in any way neglecting this region. Since the largest EUs enlargement in 2004 Chinas policy toward Central and Eastern Europe has been based upon the Chinas EU Policy Paper. Furthermore, the relevant recommendations, which can be perceived as advice for Chinese authorities, are presented in the 2003 Report on Chinas Policy Toward Central and Eastern European Countries, by the leading China Institute of Contemporary International Relation (CICIR) and published in one of the most influential journal Contemporary International Relations (Xiandai Guoji Guanxi). The Chinese policy toward CEE could be perceived through the three primary areas: economy the most important dimension of the PRCs influence on Europe; politics at present playing a supportive role for achieving economic goals; education and culture seen as soft power tools, with the predominant aim to warm relations with the region and create positive image of the PRC.14 Looking through the prism of these three areas, China s policy agenda can be defined as follows: In the field of economy:

12

Che Huichun, Oumeng dongkuo dui ZhongOu jingmao guanxi de yingxiang ji duice (China-EU economic and trade relations after the eastern enlargement), 28.09.2007, http://xiamen.acs.gov.cn:8080/sites/xmwz/ktyjn.jsp?contentId=4011 13 Oumeng Dongkuo: jiyu haishi tiaozhan? (The EUs eastern enlargement: chance or challenge?), 30.04.2004, http://news.sina.com.cn/w/2004-04-30/03542436549s.shtml 14 Zhongguo dui Oudongou guojia zhengce yanjiu baogao, op. cit., Li Xin, Kong Ping, Oumeng dongkuo yu woguo de duice, op. cit.

pushing forward and promoting business, exchange visits, establishing cooperation fora etc. Its main goal is to upgrade the level of cooperation, appreciate partners, extend areas of cooperation and 'tie' CEE countries with China.

changing structure of trade with the CEE countries in a way that Chinese exports consist mainly of products with high technology input, thus helping the PRC become more competitive for CEE countries (high technologies and still lower prices);

implementation of the going out (zouchuqu) strategy by encouraging Chinese companies to invest in the CEE countries, increasing its own share in the CEEs economy;

close cooperation with CEE on the WTO forum; learning from the CEEs experience of economic modernization as well as integration process. This is seen as helpful in the implementation of Chinas western development policy ( zhongguo xibu de kaifa) to modernize the poor western part of the PRC.

concentration on Chinese foreign direct investments in the CEE countries as a way to circumvent the EUs trade barriers (e.g. antidumping procedures, high import tariffs, etc.);

using foreign chain stores in CEE to increase Chinese export to these countries (chains stores are the main clients of Chinese exporters); creating positive image of Chinese brands to be associated with high-quality goods and services; using Chinas foreign exchange reserves to invest on the CEEs market .

In the field of politics: intensifying mutual visits at high level, which could help create a positive political climate; the process of achieving economic goals should be widely supported by the Chinese authorities and diplomatic staff; using the ASEAN model of cooperation with CEE, considering establishing new forms of cooperation (e.g. regional forums, organizations or strategic dialogues) and taking advantage of existing organizations (e.g. V4); intensifying cooperation with parliaments, political parties and youth organizations; encouraging politicians, businessmen and tourists from the CEE countries to visit China in order to acknowledge the scale of Chinese reforms;

Chinese authorities should actively solicit support from the CEE countries to grant China the Market Economy Status, in rescinding anti-dumping procedures and weapon embargo.

In the field of education and culture: making strides so that both sides understand each other. China is aware that after 1989 many CEE countries have a hostile attitude to communist regimes; promote Chinese culture and learning Chinese language by establishing Confucius Institutes, promoting studies in the PRC, and taking part in cultural events in CEE as a way to better understand the Chinese characteristics. to explain continually Chinas stance and arguments on sensitive issues - Tibet, Taiwan, Xinjiang, and human rights. Central and Eastern Europe Chinas gate to the European Union? According to one influential Chinese scholar of international relations Yan Xuetong from the Qinghua University, the year 2008 marks significant changes in the international order, specifically the decline of the US superpower status and growing power of China. Yan believes that the existing international order described in China as one superpower, many great powers (yichao duoqiang) has been changing to superpower declines, great powers status is changing (yichao ruohua, duoqiang yiwei). He suggests that China should take advantage of the modifications in the international order and strengthen its position in the international arena. 15 Similar approach was announced by Hu Jintao during the 11th Ambassadorial Conference in Beijing in July 2009, where the Chinese president discussed the upcoming multi-polar world, the necessity for adapting to changes in the world order and strengthening multilateral diplomacy. 16 Observations of Chinese activities in Europe, especially in CEE, show that China not only pursues the theoretical assumptions of policy towards the CEE, but also seizes the opportunity to play an important role in the changing international system. China has been preparing a new foreign policy direction Europe which will be fully implemented by the next

15

Yan Xuetong, Shijie geju zouxiang ji zhongguo de jiyu (Direction of the world order changes and Chinas opportunities), in: Dangdai Yatai, no. 5, 2008. 16 Dishiyici zhuwai shijie huiyi zai jing zhaokai (The 11th Ambassadorial Conference started in Beijing), Ministry of Foreign Affairs of the Peoples Republic of China, 20.07.2009, http://www.mfa.gov.cn/chn/gxh/xsb/xw/t574427.htm

generation of Chinese leaders. The so-called fifth generation comes into power in 2012 and 2013. But, what should be strongly highlighted is the approach whereby China does not enter Europe by one big jump, instead will do so gradually and carefully. First of all, China goes to those countries where it has enough space to operate where economic assistance is needed, especially in the face of global crisis (the PRC is able to provide financial support using its foreign exchange reserves). In other words, China appears to have come to those countries from which others are withdrawing or do not see opportunities to make interest on their investment (the best example is Greece). Secondly, the PRC takes advantage of friendship with particular CEE countries (e.g. Hungar y, Bulgaria, and Romania). These states maintain good relations with China and rarely push sensitive issues like human rights, Tibet or Taiwan. Thirdly, China takes advantage of the lack of coherent EU policy and uses the charm offensive in CEE to try to circumvent EUs rules in order to tie these states with China. Fourt h, the PRC uses very similar instruments of its engagement in CEE to those it has been using for years in its traditional involvement areas in Africa, Latin America, and Asia. This policy is based on the so-called win-win strategy (shuangying), which could be paraphrased as we give you money and assistance; you give us market access and technologies in return. This policy is to be implemented gradually to avoid alarming concern over the so-called China threat. In connection with this strategy, the most proper direction for China is identified as CEE a gate to the whole Europe. Currently, China is focused primarily on economic issues; however Chinese authorities are also tasked with creating positive political climate for achieving the countrys economic goals. An example of this policy and announcement of future interest in Europe was the visit of the PRCs vice-president, and likely Hu Jintaos successor, Xi Jinping to Bulgaria, Hungary, and Romania in October 2009.17 These three countries were gingerly selected as relations with the PRC are their foreign policy priorities. The results of these visits were bilateral agreements and deepening of economic cooperation. China is predominately interested in CEEs potential manufacturing base for products, such as electrical equipment or textiles, and the sectors of distribution, construction, public service, mining and agriculture. 18 Yet another important aspect of Chinas vision of its economic

17

L.C. Russell Hsiao, Xis European Tour: Chinas Central -Eastern European Strategy, in: China Brief, Volume IX, Issue 20, October 7, 2009, p. 1-2. 18 J. Holslag, China builds a bridge across Danube, in: Financial Times, 27 June 2010.

development will be the transition from domestic to overseas manufacturing. CEEs new member states of the EU seem to be of particular interest in this regard. 19 A CEE country with the largest Chinese involvement is Hungary, with three thousand Chinese companies, including Lenovo along with other electronics manufacturers, such as Shanghais company SVA Group. Noteworthy is an agreement signed in 2007 to set up the China Brand Trade Center in Budapest to market made-in-China goods for Europe as an investment valued at 250 million Euro. Only in March 2008, 450 Chinese companies were established, but the target is about 2 thousand in the near future. This makes Hungary a market for China mainly in business, financial services and tourism. 20 Such a large commitment of the PRC in Hungary is the result of the supportive Hungarian foreign policy toward China as it aims to become European hub for China. An expression of strong ties between the two countries is the sole branch of Bank of China in Budapest in all of Eastern Europe and the, only one in the EU, Chinese bilingual school (there is a large Chinese Diaspora in Hungary numbering about 20 thousand people). Whats more, there is also a direct air connection between Beijing and Budapest and a history of regular visits of Chinese leaders in Hungary: Hu Jintao (2004), Wu Banguo (2007), Jia Qingli (2008), Wen Jiabao (2009), Xi Jinping (2009), and also visits of Hungarian prime minister to Beijing on average every 2 years.21 Romania is also of interest to Chinas diplomatic offensive as is, among other things, evidenced by the engagement of tens of Chinese firms in June 2010 in a round table discussion with Romanian officials at Expo Shanghai 2010, where they expressed interest in investing billions of Euros in the Romanian economy. The other examples are: the Development Bank of China that promised generous support for the wind energy projects in Romania or aa leading contractor promising to build a new thermoelectric power plant in the cost of 1 billion euros. Other Chinese companies have shown interest in investing in agriculture and the countrys mining sector. 22 Altogether, there are more than 8 thousand Chinese companies in Romania. Needless to say Chinas good relations with Romania are

19

D. Rocks, K. Zachovalova, N. Saminather, The Chinese discover Central Europe, in: Business Week, 28 December 2006; K. Lisbonne-de Vergeon, Contemporary Chinese views of Europe, Chatham House, London, 2007, p. 14-15. 20 K. Lisbonne-de Vergeon, op. cit. 21 J. Fox, F. Godement, A Power Audit of EU-China Relations, European Council on Foreign Relations, London, 2009, p. 85 22 J. Holslag, op. cit., China promises investment of billions euro in Romania, 30 June 2010, http://www.actmedia.eu/top+story/china+promises+investments+of+billions+euro+in+romania/28268

also an effect of favorable Bucharests policy toward the PRC. 23 According to Fang Zhongping form CICIR, an expert on China-EU relation, Romania is an all-season partner that will support China whatever happens.24 The next country where China has been increasingly investing is Bulgaria, where the PRC intends to invest in products based on Chinese high-technology. It seems apparent that this approach is to provide advanced technology products and services (still cheaper than from Western Europe) instead of exporting cheap and low quality goods (e.g. textiles or shoes). For example, at the beginning of 2010, Chinese company Polar Photo-voltaics and Wiscom proposed to build a solar plant near Sofia. A representative of this company explains its motivation: we decided to invest in Bulgaria in order to prove our ability to deliver a product based on unique Chinese technology together with a proper financing scheme, so we can have an excellent, operating power plant under challenging conditions. We would like to gain experience working with Bulgarian partners and later increase the number of projects in the area.25 China is also interested in investing in the automobile industry in Bulgaria. Great Wall Motor, a Chinese car manufacturer, signed an agreement with Litex Motors worth 80 million Euros in November 2009. Under the agreement the Chinese car maker will pay 4 million USD for its share in the joint venture that will make sport utility vehicles that could be sold at a price of less than 15 000 USD, which could be perceived as a starting point of Chinese automobile expansion in Europe.26 Moreover, the PRC is considering establishing in Bulgaria a hub for Chinese exports to the rest of Europe. Recently, the Bulgarian Minister of Economy, Energy and Tourism Traicho Traikov confirmed that Chinese investors are interested in operating a Bulgarian airport under concession, a logical step since one-third of all imports of Chinese goods to Europe comes by air. Thus, some of this volume can certainly land in Bulgaria for purely pragmatic reasons. 27 Furthermore, the two countries made an agreement to establish a joint Bulgarian-Chinese industrial zone near Sofia. According to Bulgarian authorities, a number of Chinese companies from various industries such as

23 24

J. Fox, F. Godement, op.cit., p. 89 Ibidem, p. 26. 25 Chinese companies to build solar plant in Bulgaria, China Daily, 21.01.2010 , http://www.chinadaily.com.cn/bizchina/2010-01/21/content_9356764.htm 26 Chinese car maker Great Wall to start production in Bulgaria by end-2010, 24 November 2009, http://sofiaecho.com/2009/11/24/820167_chinese-car-maker-great-wall-to-start-production-in-bulgaria-by-end2010 27 Bulgaria: Chinese Investors interested to operate airports under concession, 30.06.2010, http://www.balkans.com/open-news.php?uniquenumber=62707

electronics, manufacturing of car parts and appliances, have already expressed interest in investing in the future industrial park.28 China has also been investing in Slovakia, which is an example of the growing interest in this country. A new production plant is to be built in the western Slovak town of Nove Mesto by Guangzhou Echom Science and Technology Company. The investment should reach about 29 million Euro and create 500 jobs. The new plant is to produce pressed plastic parts for TV sets. 29 Moreover, Jianghuai Automobile Co is considering building an assembly plant in Slovakia to take advantage of the countrys Euro zone membership, central European location and favorable business environment.30 China is also interested in investing in the Czech Republic (despite the fact that Prague has good relations with Taiwan). For example, Chinese electronics Manufacturer Sichuan Changhong is building a 30 million USD factory in Nymburk that will turn out 1 million flatscreen TV sets a year when it swings into full production. It has been granted 10-year tax holiday in the Czech Republic. According to a Chinese businessman involved n the region growing numbers of companies are starting to manufacture in Central Europe as an alternative to production in China, as the region offers a manufacturing base with wages still a fraction of those in Western Europe. Governments in the new member states are eager to attract the investment, often offering rich incentives to manufacturers who will create jobs..31 The rise in Chinese investments is also noticeable in Poland (despite the fact that Chinese investors rather often complain of difficulties and unfairness in the tender process). Here, China is mainly interested in the construction sector. In 2009 China Overseas Engineering Groups (Covec) bid won the tender for the construction of two parts of an expressway. What is interesting in this context is the fact that since June 2007 Covec has an office in Warsaw, which is the sole representative of this company in Europe. Moreover, the following Chinese companies have been operating in Poland: Suzhou Victory Precision Manufacture, which produces LCD TV frame parts; Yucheng Plate Making Group specializing in the production of rotogravure printing cylinders; and Nuctech, a company producing vehicle inspection systems.

28

Bulgaria Succeeds in Singing Up China for Joint Industrial Zone, 15.06.2010, http://www.novinite.com/view_news.php?id=117188 29 Chinese company plans 29 million euro investment in Slovakia, 11 March 2010, http://spectator.sme.sk/articles/view/38199/10/chinese_company_plans_29_million_investment_in_slovakia.htm l 30 D. Mihalascu, Chinese Automaker Jianghuai Plans to Build a Plant in Slovakia, 5 May 2010, http://www.autoevolution.com/news/chinese-automaker-jianghuai-plans-to-build-a-plant-in-slovakia-20099.html. 31 D. Rocks, K. Zachovalova, N. Saminather, op. cit.

According to Polish vice-minister of economy Rafa Baniak, the increase of Chinese investments in Poland is tremendous. At the end of 2008 its value was 200 million Euro but in June 2010 it was already about 400 million Euro. The Minister also highlighted that serious Chinese businessmen discover that Poland could become Chinas gateway to Europe and the European Union. (...) Many important Chinese companies are looking for space in Poland for their research and development operations. It is not a secret that today China produces not only cheap, but also good and modern products.32 Other areas of Chinese interest are the Baltic countries, with the noticeable diplomatic offensive primarily concerning Estonia. This is primarily due to the countrys geographical position, good transport infrastructure, as well as a large R&D potential. China is interested in investing in the port of Tallinn, which is a major transshipment port in this part of Europe. Moreover, China is counting on the fact that the port of Tallinn will become the logistics center and transit point for Chinese exports destined for Europe, thus the Chinese port Ningbo is interested in close cooperation with Tallinn. 33 As can be seen, China has been quietly entering Europe since the eastern enlargement, but especially from 2009, the PRCs engagement of CEE and the EU has become quite visible. It seems apparent that China is to continue this approach.

Conclusions Does Chinas economic expansion to Central and Eastern Europe have po sitive or negative impact on these countries and the European Union? The answer is both. Chinas presence in the CEE states could help them revive the economy during the time of crisis. Additionaly, influx of capital from China creates new jobs and increases optimism in the society. Furthermore, the CEE countries which attract Chinese investors to operate in Europe have been achieving one of the EUs foreign policy goals of engaging China instead of containing it. On the other hand, however, Chinas capital and engagement could mean competition to the European Union as a whole and might deepen the divisions in the EU as a whole. Moreover, Chinas skilful strategy could provide a competing model for development, which is easier to achieve than the EUs one without the conditions and restrictions often required

32

Baniak: coraz wicej chiskich inwestycji w Polsce (Baniak: more Chinese investments in Polan d), 28.06.2010, http://www.forbes.pl/artykuly/sekcje/wydarzenia/coraz-wiecej-chinskich-inwestycji-wpolsce,5118,1 33 L. Barauskaite, Chinese Foreign Investments and Economic Relations with the Baltic Sea Region Countries, Pan-Europe Institute, Turku School of Economics, June 2009, p. 16-17.

by the EU. This in turn may hamper the CEEs process of integration with the Western Europe. In order to take advantage of Chinese interest in Europe as well as to avoid undermining the process of the EUs integration, the European Union should predominantly outwardly as one entity, which calls for a formulation of coherent EUs policy toward China. This strategy should modify the current policy defined by J. Fox and F. Godement as unconditional engagement to, as they have suggested, reciprocal engagement 34 which is a kind of European version of Chinese win-win strategy of getting something in return for something. But this very pragmatic suggestion for the EUs China policy must be simultaneously complemented by a sound strategy of closer integration for old and new EU members. The rhetoric of being a member of one of the most integrated and richest clubs is not enough. The EU should consider using some incentives to bring CEE members to lean more towards Europe.

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