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How a Rising China Complicates Europe’s Future

China's Xi Jinping at BRICS Summit
China's Xi Jinping at BRICS Summit

Beijing’s relentless drive to transform itself into a global power places it in direct 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.

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.

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.

James Jay Carafano is a vice president for foreign policy at The Heritage Foundation. Silviu Nate is the Director of the Global Studies Center, Lucian Blaga University of Sibiu, Romania. Oana-Antonia Colibasanu is a Senior Analyst at Geopolitical Futures and Lecturer at SNSPA.

9 Comments

9 Comments

  1. Slack

    September 20, 2021 at 4:32 pm

    Europe’s future is written by Brussels (and Washington) and others should not be asked to shoulder blame.

    Europe, together with US, has been involved in hi-adventure hi-thrills wars in libya, yemen, iraq, syria, afghan, etc.. Result is constant flow of refugees to europe. Germany is expected to be moslem majority nation by turn of century. But does brussels care? Washington cares ??? Yeah?

    Neither US nor europe has willed world to boycott 2022 olympics or desired to put in jail person responsible for current pandemic but happily blames others for coming problems whose architect is brussels or washingtin or combo of the two.

  2. Jimmy John Doe

    September 20, 2021 at 9:46 pm

    This article implies it’s illegal for other nations to rise except europe. Europe 100 years had a collection of colonies around the globe and they were ripping off their hapless subjects or victims.

    Today, europe is being overrun by refugees who think there’s a pot of gold on every other street in europe, just waiting for them to pick up.

    Meanwhile, eurofascists are turning their countries into NATO parade grounds in order to help US prepare for WW3, not realising they would be the sacrificial meat in the conflict.

    It is time for europe to show some backbone and shake off the world’s top seductress’ embrace and also boycott the 2022 winter olympics!!

  3. Mario DeLosa

    September 21, 2021 at 9:31 am

    What this article makes clear is that change is happening whether we like or not. It is quite likely that China will become the dominant world power in the next couple of decades. This is happening thanks to American and European fecklessness as much as it due to any PRC cleverness. It is worth remembering that the PRC is an autocracy and, as such, it is not hampered by the political quicksand that defines the politics of Brussels and Washington. With that being said the PRC is a giant with clay feet. The country’s wealth is concentrated along the coast, a corrupt aristocracy rules the country, the Gobi desert is gobbling up farm land just to name a couple of issues. We can only guess what will happen in the long run.

  4. Gary Reynolds

    September 21, 2021 at 10:22 am

    The Chinese economic system is real estate based and dependent on construction which now coming home to roost via Evergrande pending bankruptcy. Secondly they have stolen and cheated economic trade partners for decades. Getting in bed with the PRC is fraught with bad consequences in the long run. Thirdly the PRC and their Illusions they have a right to any territory they once may have ruled through affiliation, power and history is absurd in today global realignment of what is and is not sovereign territory.
    Lastly their Military ambitions do not stop at self protection but speak to their desire to dominate and rule for the benefit of the elitist who control the communist party apparatus.

  5. JMC0891

    September 21, 2021 at 6:13 pm

    None of this matters as long as US and European business interests continue to be beholden to CCP. As long as this conflict persists, China will continue to gain while West will be hollowed out. Sad but simple truth.

  6. Commentar

    September 21, 2021 at 10:16 pm

    Europe has ‘possessions’ in the Indian Ocean, in the western Pacific, even in central and southern atlantic, yet europe still does’t realise why it is suffering from ailments such as ‘weakening democracies.’

    When you insist on clinging onto possessions belonging to your past colonial glory or era, your mentality becomes bogged down by it and thus ‘weakening democracies’ syndrome.

    Time for some self reflection !

  7. Andrew N

    September 21, 2021 at 11:21 pm

    Why would you believe that China is rising? It is about to appoint a Chairman for life and the world is moving away from trading with it. To see this is true look at the Shanghai Composite, it is up 10% in ten years whilst USD has declined by 50%; in real terms the amount of private capital in the economy has DECLINED 30%. Sure they may have the world’s biggest armed forced and be poised to use that but they are no rising economic power.

  8. FRAZIER STALL

    September 22, 2021 at 12:19 am

    Europe has NO FUTURE if it continues to hang onto uncle sam’s apron strings. In fact, it has zero moral decency. Hanging onto madan babylonia. Zeo. Zilch.

    Europe salivates at china’s huge market and china returns the favor, often distributing pics of citizens driving BMWs and italian luxury goods stores crowded with buyers to entice more salivating. Zero moral values.

    No euro politician worth his/her salt has stood up and strongly demand a BOYCOTT of 2022 olympics cuz big corporations have been warded super lucrative deals. Zero morals.

    Still wanting to blame china for europe’s future? Blame yr morals.

  9. Slack

    September 22, 2021 at 1:00 am

    Europe has dank future because of lack of balls (lack of guts).

    Europe, for a change, could issue an international arrest warrant for xi jinping or have him attend the coming G20 summit and getting SEAL Team 6 to get him and whisk him away to the US.

    Failing that europe could demand china force him to step down next year and have him exiled abroad. But europe has no balls to do anything.

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