An aerial view of the Qingbaijiang Railway Port from where freight trains travel between China and Europe as part of the Belt and Road Initiative, in Chengdu, southwestern China's Sichuan province, on April 30, 2019. Photo: Yi Fang / Imaginechina via AFP

Lithuania has announced that it is pulling out of China’s “17+1″ bloc in Eastern Europe. This followed the annual 17+1 summit on February 9, where the leaders of some European Union member nations snubbed China’s invitation to the summit. 

China has invested in a large number of projects across the world mostly through its flagship Belt and Road Initiative. In Europe, the bulk of China’s infrastructure investment has been in the Central and Eastern European nations.

The 17+1 initiative was established in 2012, and 12 of the 17 countries in this initiative were EU members. China has filled in the gap for the need for infrastructure investment in this region. It has invested in constructing new as well as upgrading existing roads, railway lines, ports, airports, electrical grid networks and other infrastructure.

In 2012, during the first 17+1 summit, China promised a credit line of US$10 billion to the members. One of the important projects was a high-speed railway line connecting Budapest in Hungary to Belgrade in Serbia, about 85% funded by China.

This project is part of the China-Europe land-sea fast intermodal transport route. This line is planned to be ultimately connected to Piraeus Port in Greece overlooking the Mediterranean. The Chinese firm COSCO owns a 67% stake in this port project and has made it the second-largest container port in Europe.

In Serbia, China has constructed the Mihajlo Pupin Bridge among many other projects.

In Montenegro, its only highway has been constructed by way of a Chinese loan of about $1 billion. This led to an increase in its debt to about 78% of its GDP in 2019, endangering the debt’s sustainability and a scramble for help from the EU and the US.

China promised to invest up to $10 billion in Romania’s energy infrastructure.

Overall Chinese loans may reach 18% of the GDP in Montenegro, 12% in Serbia, 10% in Bosnia-Herzegovina, and 7% in North Macedonia. 

Eastern Europe is critical to Beijing’s connectivity plans in the continent. China wants Eastern Europe to host regional hubs to its bigger market in Western Europe. 

Freight trains have been operating from China to Europe. The first train, which started from Chongqing in March 2011, reached 22 European countries. The China-Europe freight service has completed more than 40,000 trips with goods valued at more than $200 billion to date. 

This largesse has arguably had political results. Greece, for example, vetoed the EU’s condemnation of China’s human-rights record. Hungary also recently vetoed the EU’s criticism of China’s Hong Kong policy. It appears that the bloc as a whole does not want to take a very critical stance openly for financial reasons and wants to maintain the economic ties it has with China.

However, while China has announced a plethora of projects through this initiative, it has lagged considerably in its implementation. The flagship project, the Budapest-Belgrade high-speed railway line, was later said to be a normal-speed line. The project, which was announced in 2013, has many sections where construction is yet to begin. 

European countries including some in this initiative have grown wary of China’s intentions, and this has been evident during recent 17+1 summits. Romania early last year canceled its contract with a Chinese company for construction of the Cernavodă Nuclear Power Plant after six years of negotiations. Romania has also postponed the construction of a Chinese-built coal-fired power plant.

Instead of the region becoming the “gateway for Chinese investment” to Europe, most of the foreign direct investment from China still goes to countries in Western Europe, causing increased frustration in the Eastern European region.

RomaniaEstonia and Poland have signed deals with the US to restrict the use of Huawei products, especially for the rollout of fifth-generation (5G) technology. Romania has also planned to restrict Chinese companies’ involvement in both digital and transport infrastructure. 

Latvia named China as a cyber and espionage threat in its yearly security assessment in 2020. Also last year, Lithuania called for the World Health Organization to include Taiwan in the international assembly. 

There is a growing disillusionment with China due to investments not living up to the expectations and delays in implementing existing projects. The growing conflict between the United States and China has also increased their concerns. The 17+1 mechanism seems to be on its way to becoming a symbol of Chinese failure in Europe.

Sumanth Samsani

Sumanth Samsani is a research intern at the Takshashila Institution, a think-tank and public policy school based in Bangalore.