Foreign Policy Research Institute A Nation Must Think Before it Acts China’s New Role in the Baltic States

China’s New Role in the Baltic States

China’s New Role in the Baltic States


(Source: State Chancellery of Latvia/Flickr)

Since its inception in 2012, China’s “16+1” cooperation platform—an initiative aimed at intensifying Beijing’s economic and cultural ties with 16 countries in Central and Eastern Europe—has attracted great speculation about China’s motives and questions about the format’s concrete deliverables. Controversy over Beijing’s proposals to finance critical infrastructure, increase foreign direct investment (FDI), and boost trade has arisen both from within the 16 participating countries and from EU neighbors. In this atmosphere of political ambivalence, however, the Baltic states have succeeded in capitalizing on their relationship with China without antagonizing Brussels. They have increased their visibility in China and boosted people-to-people contacts. Many of China’s European counterparts remain frustrated by the low levels of economic gain, but the Baltic States are satisfied with what they have achieved with China.

The Baltic States and the Beginnings of “16+1”

As the 19th National Congress of the Communist Party of China concluded in October 2017, onlookers proclaimed Xi Jinping’s “Socialism with Chinese Characteristics for a New Era” the conference’s biggest highlight and “Chinese Diplomacy for a New Era” its most significant innovation. While it has only recently gained such a prominent role, the concept has been implemented for nearly five years already. The Baltic states, in particular, proved a testing ground for China’s new diplomatic approach.

China’s new foreign policy concept—“a community with a shared future for mankind”— was enshrined in the Party constitution. The Congress was of major significance also because Xi Jinping’s power over the party state grew yet further, resulting in a power concentration referred to as “the coronation” of Xi. These two factors demonstrate that Xi Jinping will continue to dominate China’s foreign policy for years to come, shaping relations with the Baltic states, among others.

When China first expressed its desire to bring together a diverse set of Balkan, Baltic, and Central European countries in the document “China’s Twelve Measures for Promoting Friendly Cooperation with Central and Eastern European Countries,” many commentators remarked that the only commonalities between the 16 newly proclaimed partners were their socialist pasts and the fact that their cooperation would not antagonize Russia. Concerns about Russia allegedly prevented Belarus, Moldova, Ukraine, and Kosovo from being invited.

Latvia, Lithuania, and Estonia—while surprised by the size of the format—welcomed this new avenue for cooperation. Officials hoped to decrease their trade deficits with China, attract Chinese FDI, and incorporate their transport infrastructure into the network of roads, railways, and ports used to transport Chinese goods to Europe. Having very limited economic ties with China in the past, the baseline for success in the Baltics was quite low. This set the Baltic countries apart from other “16+1” members such as Hungary, the Czech Republic, Poland, Serbia, and to a lesser extent, Slovakia, which already had an established name in China and a history of cooperation. Hungary, for example, was a regional leader in attracting Chinese capital investment in 2013, thus setting high expectations for the newly established cooperation platform. The Baltic states started without deep relations with China, so any improvement in ties was welcome.

The Baltic States vs. the Visegrad Group: Differences in Perception

As cooperation progressed, several problems transpired, the most visible being political objections from Western European leaders claiming that China seeks to divide the EU. The other main criticism of the format, that China has failed to deliver on its economic promise, grows stronger with each “16+1” summit.

Indeed, the gap between expectations and reality is the largest issue of China’s “16+1” cooperation plan, especially from the perspective of the Visegrad Group—the Czech Republic, Hungary, Poland, and Slovakia. The disappointment stems from the lack of promised investment flow. The pivotal “16+1” role ascribed to these countries by official Chinese discourse set high expectations.

But unlike other Central European countries, the Baltic States never had unrealistically high expectations. As Estonia’s Ambassador to Latvia H.E. Tonis Nirk put it: “All the 16 countries involved in the Format were primarily interested in two things: access to Chinese market and cooperation in logistics and transport.” Therefore, the biggest risk that Lithuania and Latvia anticipated when joining the format in 2012 was going unnoticed among the many other partners looking to engage with China. The “16+1” countries all had similar sales pitches; they are “gateways between the East and the West” and are “perfect locations for China to enter Western European markets.”

Lithuania, Latvia, and Estonia further realized that their shared traits served as obstacles to cooperation with China: their geographic position (unofficially referred to as the “Baltic cul-de-sac” by Chinese partners), the small size of their domestic markets, and their lack of name-recognition in China. When it came to infrastructure development, the availability of EU funds and the incompatibility between Chinese terms and EU legislation presented another impediment. Given such low expectations, every positive development—be it cooperation in logistics, a decrease in the trade deficit with China, or an increase in people-to-people exchanges—had the potential to become a success story. As a result, the Baltic states tend not to share the frustrations of their Central European neighbors regarding the slow pace of cooperation with China—because their expectations were realistic to begin with.

Neither has the “divide and rule” criticism of China’s actions been an issue in the Baltics. The pro-EU Baltic states have not used China as leverage in intra-European bargaining, stating that the “16+1” cooperation platform serves to complement to the joint EU-China dialogue within the Strategic Partnership.

The Outcomes of China’s New Presence

Five years into the “16+1” cooperation format, none of the sixteen partners can demonstrate a dramatic increase in Chinese investment in their respective economies. The Baltic states, however, have accomplished several goals. They have maintained friendly relations with China while upholding the official EU position, for example, when voicing concern about limited access to Chinese markets for EU companies, or during debates about EU statements on human rights in China. Notably, Latvia, Estonia, and Lithuania have been requesting the involvement of European institutions and the adherence to EU principles during the “16+1” discussions, notably during the 2016 “16+1” Riga Summit.

On the economic front, they have more than doubled total exports to China, with leading product groups being timber, furniture, machinery and electronics, and mineral products. Latvia exported €117 million of products to China in 2016 compared to 46.6 million in 2012. During the same years, Lithuania’s exports to China increased from €66.6 million to 123.3 million, while Estonia’s grew from €101.2 million to 167.7 million euros. The Baltic states also attracted a record number of Chinese visitors, with tourism from China growing in 2016 by 57.8% in Latvia, 25.3% in Lithuania, and 24.2% in Estonia. They also channeled China’s political desire for cooperation into increasing their visibility in a rising great power. Given their low expectations about relations with China, this represents a real success for Baltic diplomacy.

On the diplomatic level, China has recognized the importance of the Baltic states as interlocutors as Beijing seeks to boost its influence in Europe. For China, working with previously underexplored partners within the EU opens untapped national and regional cooperation opportunities and demonstrates China’s widening outreach. Given China’s interest in deepening relations, the Baltic states will continue to engage in the new cooperation models shaped by China, such as “16+1” and the Belt and Road Initiative. On top of this, Sino-Baltic interaction will be pursued via platforms not devised by China, such as the Nordic Baltic Eight (NB8), a group of eight Nordic and Baltic countries that sent a parliamentary delegation to Beijing in January 2018. Even if the economic substance of China’s new role remains limited, the diplomatic symbolism is sufficient to keep both China and the Baltic states interested in the relationship.