How A Rising China Complicates Europe’s Future

COMMENTARY Asia

How A Rising China Complicates Europe’s Future

Sep 23rd, 2021 5 min read

Commentary By

James Jay Carafano @JJCarafano

Vice President, Kathryn and Shelby Cullom Davis Institute

Oana-Antonia Colibasanu

Senior Analyst, Geopolitical Futures

Silviu Nate

Director, Global Studies Center at Lucian Blaga University of Sibiu, Romania

A farmer creating a flag of the Chinese Communist Party with corns and red peppers in Congjiang in China's Guizhou province on September 12, 2021. STR / AFP / Getty Images

Key Takeaways

Beijing’s relentless drive to transform itself into a global power places it in direct competition with the U.S.

Turkey sorely needs financial stability, and a partner like China could be highly interested in providing it.

The U.S. needs to remain engaged and keep NATO and the EU engaged in Eastern Europe. The U.S. needs to monitor how relations between Turkey and China evolve.

Beijing’s relentless drive to transform itself into a global power places it indirect competition with the U.S. That has affected both nations’ relations with regional powers, such as Russia and Turkey, and those effects will continue to ripple across Europe. Along the borderlands, from the Baltics to the Balkans, friction with China will only increase.

The China Problem

China’s economic diplomacy is the most astringent irritant in great power politics. Under the Belt and Road Initiative, Beijing established the 17+1 (now 16+1 since Lithuania pulled out in May) cooperation mechanism with Central and Eastern European countries stretching between the Baltic Sea, the Black Sea, and the Adriatic. Chinese investment has focused mainly on infrastructure such as the transportation, energy, and telecommunications sectors.

From 2009-2019, the arrangement has generated financial flows estimated at around $13.5 billion (two-thirds of this in the last five years). This figure includes not just foreign direct investment, but also development loans, grants, mergers, and acquisitions of local assets or through long-term concession agreements.

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The flood of Chinese cash has done more to raise red flags than GDP. Most recently, Montenegro became a posterchild for the “debt-trap” problem a country can face after taking up a large loan from China without necessarily considering a cost-benefit analysis of holding massive, unsustainable public debt. Today, Montenegro owes Beijing over a $1 billion—a debt that is one-fifth the size of the nation’s economy. Other countries in the region, such as Bosnia Herzegovina, have also taken Chinese loans translating into significant national debt. These practices not only expand Chinese economic influence in Europe, they undermine fiscal prudence and good governance practices.

Because China’s presence is managed through intergovernmental agreements, there are no large Chinese companies visible. Chinese firms control less than one percent of the total economic turnover under the 17+1 arrangements. This is fertile soil for corruption. In addition to receiving direct support from the Chinese government, private Chinese investors also get preferential treatment in public procurement tenders, finding themselves as sole bidders for infrastructure projects. For Beijing, this corruption becomes “the” competitive advantage for Chinese firms.

In Europe, China is dealing with weakened democracies. Its way of doing business undermines free-market competition with the West. Yet it’s a way of penetrating these markets is more sophisticated than the bullying, threats, and less subtle criminal aggression employed by Putin. Thus while Moscow shares Beijing’s antipathy toward Washington, China’s expanding influence in Europe presents challenges as well. Rather than welcoming China as a partner, Moscow has to worry about being marginalized in its own backyard.

Russian-Chinese antipathy won’t help the West. After all, both powers share a common cause in wanting to diminish American power and European independence. Even if jealousy and mistrust prevents them from collaborating closely, they are both moving in the same strategic direction.

Crossroads of Confrontation

Meanwhile, as China advances and Russia redoubles its efforts to shape Europe to its liking, Turkey sits at the crossroads of all challenges. Much of the collision of their interests is reflected in the Caucasus, the intersection of Europe and Asia, and between Eurasia and the Middle East and Asia.

Turkey and China developed better relations during 2020. China’s central bank, for example, transferred $1 billion to Turkey as part of a currency swap, giving a short-term boost to the country’s dwindling foreign exchange reserves. Turkey sorely needs financial stability, and a partner like China could be highly interested in providing it. However, their relations depend on how they intend to project influence in the Balkans and beyond. China has long promised investments in the region—and has done little to keep those promises.

With Russian socio-economics in trouble, Moscow’s priority is to keep the economy afloat and thus stave off social unrest. But as always, Moscow also needs to maintain a buffer zone between Russia and Western Europe. This is why countries like Ukraine, Belarus, or Moldova remain essential for Russia. Moscow aims to pull them out of the Western sphere of influence and back, once more, into its orbit.

Meanwhile, Western Europe has been more bystander than a serious player and the level of effort one might expect from the U.S. in the future remains uncertain. The new U.S. administration has been publicly supportive of the Three Seas Initiative, but beyond that, there has been little else. Meanwhile, Washington is distracted by the fallout from the Afghanistan withdrawal and domestic political fights.

The response in most of Central and Eastern Europe has been to try to deepen engagement with the U.S. and Europe to counterbalance the pull from other parts. Romania is a good example. The Romanians continue to significantly upgrade their armed forces and military-basing options to support NATO operations on the Eastern Flank, should action become necessary.

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Fixing the Firewall

The reality is that the U.S. can both counter malicious Chinese and Russian activity and balance and accommodate Turkish interests with a modicum of hard power offset. With a stable security situation in Central and Eastern Europe, the democracies will work through the economic and gray zone challenges, mostly on their own. They realize that, in the end, broad economic and political engagement with the U.S. and Western Europe as the best way not to become a suburb of Beijing or Moscow. Security relationships, however, need to be updated and enhanced in order to allow the buildup and maintenance of the arc of stability and cooperation encompassing the Black Sea from East to West.

NATO is debating its future concept as its allies’ realities are changing. With the new containment line between the Baltic and the Black Sea, Alliance members need to address the specific challenges in the region. In the Black Sea region, Turkey has been the key NATO ally and the key U.S. ally. Even if it is accommodating at times to Russia, it is historically a Russian competitor. This has begun to change as the U.S. has established good relations with Romania, as part of its strategy to establish a “new Intermarium” in Eastern Europe. While Romania can’t replace Turkey, considering its strategic location in the Middle East, Romania does give NATO and the U.S. an important posture, considering the role Constanta is playing in the Alliance’s infrastructure. At the same time, as China is increasing its game in the Balkans to include Turkey, things may begin to change even further for NATO.

The U.S. needs to remain engaged and to keep NATO and the EU engaged in Eastern Europe. In the Black Sea region, in particular, the U.S. needs to monitor how relations between Turkey and China evolve.

This piece originally appeared in 19fortyfive