At Budapest summit, China strengthens its grip on Central Europe and Balkans

Borissov, Orbán and Li Keqiang in Budapest. [Facebook page of Boyko Borissov]

A 16+1 summit of Central and Eastern European countries and China took place on Monday (27 November) in Budapest, hosted by Hungarian Prime Minister Victor Orbán. His Bulgarian counterpart, Boyko Borissov, announced that next year’s summit will take place in Sofia.

The 16+1 format was conceived after the first China–Central and Eastern European Countries Economic and Trade Forum, which was also held in Budapest in 2011.

The countries included are China, 11 EU members: Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, and five EU hopefuls: Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia. (Kosovo is missing, as a result of Serbia’s intransigence with its former province.)

In 2016, China Ocean Shipping Company (COSCO), a Chinese state-owned enterprise, acquired the majority stake in the Piraeus Port Authority. The Chinese government considers Greece’s’ Piraeus port as the main entry point for Chinese exports into the southern, eastern and central EU, as well as the key hub for seaborne transportation across and around the Mediterranean Sea.

‘Chinese Balkan corridor’ pits EU north against south

The Western Balkans have become China’s preferred access point to the EU, and a corridor to Europe’s north from the Greek port of Piraeus is being financed by Beijing. But Brussels fears EU rules will not be respected, while in northern countries, big ports resent the competition.

Since then, the Chinese government obtained the key to influence the trade routes between China and the EU. The main corridor is Piraeus, but also the Chinese-funded upgrade of the Belgrade-Budapest railway.

The high-speed rail link between Belgrade and Budapest is expected to cost €3.2 billion. China, Serbia and Hungary signed a memorandum of understanding for the reconstruction of the 370-kilometre rail route in December 2014. The deal has created tensions with the EU, as Union procurement rules have not been respected.

China’s is focusing on Greece and Serbia, but also other countries in the Western Balkans, who are benefitting from low-interest Chinese loans for infrastructure projects.

Diplomats said that Chinese involvement in the Western Balkans was “provoking second thoughts in northern Europe and especially in Brussels”.

Big ports of the north like Rotterdam and Hamburg could end up losing a lot of trade volume, because of these new projects in the south.

The Commission officially downplays the geopolitical stake. Bulgaria has been so far circumvented from the Chinese corridor.

This did not prevent Borissov from jumping on the bandwagon. He announced that the next 16+1 summit will be hosted by Bulgaria. Usually these summits take place at the end of the year, which means the event would not coincide with the Bulgarian EU presidency.

“We have a rare chance of combining two huge economic powers – the EU and China with their initiatives. This will enable us to advance on many projects. The more projects we realise, the more the region will be prosperous and competitive”, he said, as quoted by the governmental press service.

Greece and Bulgaria sign 'Sea2Sea' project, hoping for EU funding

Sofia and Athens signed a memorandum of understanding on Wednesday (6 September) for the construction of a high-speed railway, hoping to attract foreign investment and establish strong links in a region historically known for divisions and antagonism between neighbours.

Chinese Premier Li Keqiang appealed for integrating the Chinese ‘Belt and Road’ initiative with the EU strategies with Central and Eastern Europe and the Western Balkans. He also conveyed the message that more efforts were needed to accelerate the building of the Hungary-Serbia high-speed railways.

Li announced the establishment of China-CEEC Inter-Bank Association and more financing under the China-Central and Eastern Europe Investment Cooperation Fund.

Orbán praised China and said countries from the region would take this opportunity for development, in line with the spirit of equal treatment and mutual respect.

The Hungarian PM also said the CEEC countries would actively participate in the ‘Belt and Road’ initiative and create a better environment for Chinese companies investing and developing in the region.

China's new Silk Road risks unravelling in Hungary

China’s planned railway link between Greece and Central Europe has hit difficulties after the project was accused of flouting EU rules on public procurement in Hungary. EURACTIV’s partner Italia Oggi reports.

Hungary’s foreign minister Peter Szijjarto has said the country plans to invest 550 billion forints (€1.77 billion) in the overhaul of the 152 km-long Hungarian stretch of the Belgrade-Budapest railway line.

Reportedly, the Hungarian economy ministry has agreed to a 20-year loan from Export-Import Bank of China (EXIM Bank) with an interest rate of 2.5%, which will cover up to 86% of the project cost.

An earlier version of this article was published with the website BulgarianPresidency.eu.