China-CEEC February 9 2021 Summit: Xi Jinping Speech – Highlights & Analysis

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Op/Ed by Chris Devonshire-Ellis 

  • China wants to buy US$170 billion worth goods from CEEC countries in next five years. 
  •  China-CEEC bilateral trade up 85% in past nine years to US$103.45 billion in 2020
  • Encourages increased connectivity, and blockchain technologies
  • Huge opportunities to supply agriculture to China 

The annual China and Central & Eastern European Countries (CEEC) Summit was held yesterday,  with Chinese President Xi Jinping hosting virtually from Beijing. The CEEC is a quasi-offshoot of the Belt & Road Initiative, also known as the “17+1” group. It includes  Albania, Bosnia & Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Greece, Macedonia, Montenegro, Poland, Romania, Serbia, the Slovak Republic, Slovenia, and the three Baltic States: Estonia, Latvia and Lithuania. This year, observers from Austria, Belarus, the EU, Switzerland and European Bank for Reconstruction and Development also attended the Forum.

However, the CEEC has never sat that easily with the European Union headquarters in Brussels responsible for regulating the activities of the CEEC EU members. Recent media from the EU has suggested the China-CEEC bloc was falling apart and that members of it ‘had lost interest.’

Aware of this, Xi Jinping delivered a keynote speech entitled “Keeping up the Momentum and Working Together for A New Chapter in China-CEEC Cooperation”. (See the full text, translated into English here). I summarize the main points as follows:

China-CEEC Cooperation

In his speech, he stressed that the cooperation between China and CEE countries adheres to the principles of extensive consultation and joint contribution, real results and balance, openness and inclusiveness, and an innovative and pioneering spirit, which is a vivid practice of multilateralism and an important part of China-EU relations. China is willing to work with CEE countries to follow the general trend of the times, achieve a higher level of common development and mutual benefit and win-win results, and work together to promote the building of a community with a shared future for mankind.

Xi pointed out that it has been nine years since cooperation between China and CEEC started. Nine years on, China-CEEC cooperation has stood the test of time and intricate changes in the international landscape. It has developed some principles that are reflective of its distinctive features and accepted by all parties.

Comment: Xi is underlining the China-CEEC relationship has legs and therefore relevance.

Equal Partners

First, making decisions through consultation. China-CEEC cooperation is based on mutual respect and has no political strings attached. All countries involved, regardless of their size, are equal partners in a cooperation mechanism featuring extensive consultation, joint contribution, and shared benefits. The two sides have been mindful of each other’s concerns.

Delivering Benefits: Mutual Trade Up 85% in a Decade, Tourism quadrupled.

Second, delivering benefits to all cooperation partners. With its focus on real results, China and CEE countries promote more balanced cooperation, pursue both economic cooperation and cultural exchanges, and place equal importance on trade and investment. The trade between China and CEE countries is 85 percent bigger than nine years ago. The number of mutual tourist visits has grown five times. The China-Europe Railway Express has reached most of the CEE countries. Impressive progress has been made in several projects.

Comment: Xi cuts to the chase here and states upfront the benefits of trading with China and the increasing volume of Chinese tourists, while underlining the trade importance of China-Europe rail connectivity. 12,400 trains travelled between China and Europe in 2020, responsible for assisting with supply chains during the pandemic. 

Following Rules, Increasing Cooperation

Third, pursuing common development through openness and inclusiveness. China and CEE countries have drawn on each other’s strengths through mutual learning, and narrowed differences and resolved disagreements through consultation and cooperation. The two sides have followed widely accepted international rules, conformed to market principles, welcomed the participation of other countries and international organizations in the cooperation to achieve win-win results.

Comment: This is partially a reference to the much-delayed Budapest-Belgrade railway link which the EU insisted was tendered a second time under EU monitoring. 

BRI Accepted in Eastern Europe

Fourth, achieving bigger growth through innovation. China and CEE countries have taken steps early on to explore the possibility of aligning cross-regional cooperation with Belt and Road cooperation, making Central and Eastern Europe the first region where all countries have signed agreements on Belt and Road cooperation.

Xi pointed out that we are living in challenging times. In the face of such unprecedented challenges, countries must come together and respond with improved solidarity and coordination. Xi put forward four suggestions on the cooperation and development between China and CEE countries under the new situation:

Tackling Covid; Stability in Supply Chains

First, we need to tackle COVID-19 head on and boost confidence in cooperation to tide over the tough times. Our two sides could enhance joint response and experience sharing on prevention and treatment, explore cooperation on traditional medicine, and scale up public health and medical cooperation. These efforts will contribute to a global community of health for all. China is willing to actively consider the vaccine cooperation needs of CEE countries. The two sides need to promote trade and investment liberalization and facilitation, coordinate COVID response and economic and social development, resume travels and economic activities in a prudent and orderly manner and keep industrial and supply chains stable.

Comment:  At least six of the 17 CEECs including Serbia, Hungary, North Macedonia and Montenegro have either purchased Chinese COVID-19 vaccines for their mass inoculation campaigns or expressed an open attitude to buying them. Among these, Serbia is the first European country to use Chinese vaccines for its mass rollout and Hungary was the first EU country to approve Chinese vaccines for emergency use in January. In a recent move, Czech Prime Minister Andrej Babis said Friday during a trip to Hungary to consult with authorities on their experiences with Chinese and Russian vaccines that Czech Republic may consider using vaccines not registered in the EU to speed up vaccinations. Chinese vaccines are not currently registered for use in the EU but with a shortage in the bloc it can only be a short matter of time before Chinese (along with Russia’s Sputnik V and Indian vaccines) enter EU approved use. 

Improving Interconnectivity via Rail

Second, we need to focus on connectivity and develop smooth avenues of cooperation for interconnected development. We need to keep improving connectivity, pursue high-quality Belt and Road cooperation, speed up such major projects as the Budapest-Belgrade Railway, and continue to support the development of the China-Europe Railway Express. We should deepen customs cooperation to ensure trade security and faster clearance and explore cooperation on a pilot basis under the “Smart Customs, Smart Borders and Smart Connectivity” Initiative.

Comment: More reference to the Budapest-Belgrade rail link, as well as continuing the theme of China-Europe Rail ConnectivityThere was a first mention at the CEEC Forum of the multilateral use of blockchain technologies and smart ports to speed up transit and delivery times with a need for Europe to adopt these technologies. There is some catch up to do: the first Blockchain train from Turkey to Russia arrived last week, these facilities are not yet in place across much of Europe, and they need to be. 

China’s Imports: US$170 billion from CEEC Countries Over Next 5 Years

Third, we need to aim for concrete results and increase cooperation outcomes that benefit both sides. China intends to import, in the coming five years, more than 170 billion U.S. dollars of goods from CEE countries. We need to speed up the entry of agri-food products from CEE countries into China in a bid to double CEE countries’ agricultural exports to China and raise two-way agricultural trade by 50 percent over the next five years. China proposes setting up a farm produce wholesale market in the CEE region. We need to continue to develop demonstration zones and industrial parks for China-CEEC business cooperation in cities like Ningbo and Changzhou. We also need to enhance cultural exchanges and take the opportunity of the Beijing Winter Olympics to strengthen cooperation in the sports field.

Comment: Xi gave another prod to economists and CEEC traders, giving them a shopping list of products and services China wants to buy. China is changing its economic model to that of a consumer society and is opening up its markets. Xi also needs to keep his domestic Chinese power base happy and that means supplying them with goods.  

Climate Change, Green Energy

Fourth, we need to focus on green development and forge drivers of future-oriented cooperation. We need to steadfastly advance international cooperation on climate change and take the China-CEEC Year of Green Development and Environmental Protection as an opportunity to deepen exchange and cooperation in green economy, clean energy, and other related areas. China proposes setting up a China-CEEC STI Research Center and holding a China-CEEC Forum for Young S&T Talents. We need to widen our cooperation on the digital economy, e-commerce and the health sector and support setting up a China-CEEC dialogue mechanism on e-commerce cooperation and a China-CEEC alliance in the public health industry.

Xi concluded that China will quicken its pace in fostering a new development paradigm, continue to open its door wider, and take a more active part in bilateral, multilateral, and regional cooperation that delivers higher levels of mutual benefit for all. China’s continued development and opening-up will inject powerful impetus into global economic recovery and growth and broaden the horizons for China-CEEC cooperation. China is ready to work with CEE countries to build on new consensus and draw a new blueprint for China-CEEC cooperation, support respective development through cooperation, and enrich the China-CEEC comprehensive strategic partnership, to build an open world economy and a new type of international relationship.

The leaders of all countries extended festive greetings to the Chinese people and wished them a happy Chinese Lunar New Year and good luck in the Year of the Ox.

Summary

Xi came in part with gifts, providing a shopping list of goods worth US$170 billion he wishes to buy from the CEEC by 2026. Given that bilateral China-CEEC trade has already – as he pointed out – doubled in the past nine years and hit US$103.45billion in 2020; that equates to an increase of 12% per annum, a significantly higher import growth rate than the existing 8% average annual growth in China-CEEC bilateral trade.

A survey we conducted in November found that EU nations who had signed off an MoU with China on its Belt & Road Initiative experienced export increases of 5% more than those who have not.  That is part improved China sales access and part improved infrastructure. For example, the Greek Port of Piraeus, now Chinese owned, saw the volume of TEU it handles increase from an average per month of 316 in 2017 to 398 in 2019.

Much of this growth in CEEC exports to China will come in a deepening of agricultural cooperation. Xi stated that he wanted to double CEE countries’ agricultural exports to China and raise two-way agricultural trade by 50 percent. That is in part due to wishing to reduce reliance on certainly the United States and to some extent Russia in agriculture imports. China is agriculture poor, having 20% of the world’s population but just 5% of its arable land.

Xi also proposed setting up a farm produce wholesale market in the CEE region and introducing an exchange program for young agricultural professionals. With a high dependence on agriculture, CEE countries are set to see its farmers produce a trade account for a larger proportion of bilateral trade with China.

Those statistics will be valuable for national economists as policy makers in the CEEC. They will also be challenged by those, especially within the EU and elsewhere, who view China’s building of supply chains and selling of products to be in some way insidious.

Bob Savic, an advisor to Dezan Shira & Associates in the UK, notes “China’s offer of $170 billion in orders is a strategy Beijing is likely to play more aggressively in wooing important regional blocs, like the CEEC, on China’s side for years to come. The concessions made by Xi to conclude the recent CAI with the EU, followed by this promise of increased annual imports for CEEC and the dozen EU states within the bloc, all arises out of the increasing competition between the US and China, and from which regional groupings, such as CEEC, ASEAN, EU, AU, CARICOM, Mercosur and so on will be in a prime position to leverage off as this geopolitical tussle intensifies over the coming decade or longer.”

To understand China though, one needs to look at history. The EU’s population in total is 446 million. It has gone through two world wars and numerous local ones to arrive where it is today as a relatively peaceful trade bloc. Xi however has even greater pressure: a population of 1.4 billion and he alone has ultimate responsibility. China also went through a world war, civil war and revolution. Xi knows full well that he needs to deliver to the Chinese citizens or civil unrest – with potentially lethal consequences – could break out.

This is why he comes with a shopping list to the CEEC – not just because he is being nice and wants to somehow subvert Europe – but because he needs to deliver goods to the Chinese people. With China having also changed its economic model to that of a consumer society by way of relaxing its foreign investment regulations, providing an improved market access for EU companies, and encouraging Chinese nationals to spend – the onus really should be on the CEEC nations – and the rest of Europe to listen to those calls – and start to look at China as a consumer market. When the Chinese President turns up and says he wants to spend US$170 billion, it’s probably a good idea to listen.

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About Us

Silk Road Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Asia, and assists foreign investors into the region. For strategic advisory and business intelligence issues please contact the firm at silkroad@dezshira.com or visit www.dezshira.com

 

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