July 4, 2018 / 1:12 PM / in a month

China's ambitions in eastern Europe to face scrutiny at summit

SOFIA/BERLIN/BRUSSELS (Reuters) - China meets central and eastern European leaders on Saturday for a summit where Beijing’s promises of big infrastructure deals will come under greater scrutiny with some participants saying the annual gatherings yield little.

FILE PHOTO: China's Premier Li Keqiang delivers a news conference with French Prime Minister Edouard Philippe (not pictured) at the Great Hall of the People in Beijing, China June 25, 2018. Fred Dufour/Pool via REUTERS/File Photo

States from the Baltics to the Balkans will meet China’s Premier Li Keqiang at the seventh “16+1” summit in the Bulgarian capital, hoping for fresh money from Chinese companies backed by state banks.

More than 250 Chinese companies and 700 business people from central and eastern Europe are expected to attend a special economic forum alongside the summit.

“Our main goal is to increase Chinese business presence in Bulgaria and in the whole region of central and eastern Europe,” Bulgaria’s Deputy Foreign Minister Georg Georgiev told Reuters.

The gathering, less than two weeks before the European Union’s annual summit with China in Beijing, is unpopular in Brussels, which sees it as an attempt to divide the European Union. The EU is also resisting Chinese pressure to agree a joint stance against U.S. trade policies at the Beijing meeting.

China denies it is seeking to undermine the EU.

Li, who arrives in Sofia on Thursday in the first official visit by a Chinese prime minister to Bulgaria in almost two decades, published an article in two Bulgarian newspapers on Wednesday headlined: “New beginning, new hope, new journey”.

“China, now and in the future, supports European integration and welcomes a united, stable, open and prosperous Europe and a strong euro,” Li said.

MODEST EXPECTATIONS

Besides China, the 16 countries that participate in the summits include EU members Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia, as well as non-EU states Albania, Bosnia and Herzegovina, Macedonia, Montenegro and Serbia.

First held in Warsaw in 2012, the format was initially embraced, as China promised billions of dollars in loans and investments for countries reliant on EU development funds, or in the case of the poorer Western Balkans, desperate for outside money to build railways, roads, airports and power stations.

But some countries have started to grumble about a lack of results, sometimes involving the use of Chinese labour and materials, finance and contractual terms, and difficulties with EU standards.

The summit agenda is more modest this time around, in part because it takes place only seven months after the last meeting in Hungary in November.

Earlier this year, European officials told Reuters that China was considering moving to bi-annual summits, in part because it was worried that the format was hurting its image in western European capitals.

But Beijing abruptly reversed course after the negative press, setting a much earlier date than expected, just before Premier Li is due to attend German-Chinese government consultations in Berlin.  

“The Chinese saw an opportunity,” said a German diplomat. “Now Li can swoop into Berlin from the 16+1 summit in Sofia. They want to send a message to us.”

China and hosts Bulgaria are struggling to find a main theme for the final summit communique, European diplomats said, as individual governments seek to negotiate language to reflect their own interests. The EU will have observer status at the summit. Greece, not part of 16+1, has also been invited.

At a preparatory meeting in Sofia in early June, Poland expressed frustration with the way the summits were organised and the final communique put together, according to participants. It is one of several eastern European countries that have come to view the summits with scepticism after years of unfulfilled investment pledges.

Warsaw says Chinese firms abandoned several construction sites in Poland before the Euro 2012 soccer championships.

Slovakian officials also say there are no major Chinese investments in the country at present, while in Romania, a 2015 agreement with China to build two more nuclear reactors worth some 6 billion euros (£5.30 billion) has not progressed.

Hungary and Serbia, however, remain enthusiastic. A delegation of German and French diplomats travelled to Budapest this year to convince Hungary to distance itself from China, but were rebuffed, according to officials in Berlin.

INVESTMENT SHORTFALL

Many of the funding offers for infrastructure are part of Beijing’s “Belt and Road” plan to build transport and trade links from Asia to Europe, as China looks to increase influence.

Last month, Hungary finalised the construction timetable with China for the Budapest-Belgrade rail link, one of the biggest Chinese-backed infrastructure projects in the region.

Outside of Hungary, Chinese investments have not met expectations, even if the exact amounts are unclear.

China’s commerce ministry said last year that China’s cumulative investment in central and eastern European countries had risen to more than $8 billion by 2016.

Another estimate by the Center for Strategic and International Studies think-tank said Chinese pledged around $15 billion in investments between 2012 and 2016.

Additional reporting by Ben Blanchard in Beijing, Radu-Sorin Marinas in Bucharest, Marcin Goclowski in Warsaw, Tatiana Jancarikova in Bratislava; Writing by Robin Emmott; Editing by Giles Elgood

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