Economic Cooperation of CEE and China Business in Central and Eastern Europe SGH - Warsaw School of Economics Luís Calheiros, nº 76219 Pedro Silva, nº 76318

Agenda Introduction Relations between CEE countries and China Political Economic Economic trade between CEE countries and China Treaties and Agreements Conclusion

Introduction For decades, both China, People’s Republic of China, and Central and Eastern Europe countries were countries with socialist/communist regimes. With the end of the Cold War and the fall of the Soviet Union, CEE countries passed through a systemic transformation, aiming to reach a market economy in their systems and be closer to the rest of the “West” Europe. Today: China still has a communist regime but with a more open and free economy than before. Most CEE countries reached the goal aimed of becoming market economies.

Relations between CEE Countries and China Political Economic

Political Although having the same ideology (communism) during Cold War times, due to the Sino-Soviet conflict in the 60’s, the relations between CEE countries and China were practically nonexistent. After the fall of the Soviet Bloc, the democratization and liberalization of CEE countries didn’t bring major changes in the previous relations with China. With no longer having a common ideology, CEE countries followed Western standards of democracy and human rights, pointing their fingers at China on issues related to Taiwan, Tibet, etc.

Political However, some years later, the bilateral relationships of CEE countries with China have come to see improvements. These improvements can be explained with the gradual formation of each CEE countries’ own foreign policy, as well as the achievements made by China in its reforms and opening-up. For example, President Aleksander Kwasniewski of Poland went to China on a state visit in mid-November of 1997, the first in 38 years. This visit represented the entering in a new stage of improvement of relations between these two countries.

Political In 2012, Chinese Premier Wen Jiabao paid a visit to Central and Eastern Europe, and in Warsaw the 2nd China-CEE economic and trade forum was held. In this visit, it was established a cooperation mechanism between CEE and China. However, EU takes suspicious and cautious attitudes to the establishment and development of this China-CEE cooperation mechanism. The EU is concerned that China is trying to achieve a political goal of dividing the EU countries through economic means and regrouping EU states according to their attitudes towards China.

Economic Looking now to the economic relations between CEE countries and China, we can see that they remained more consistent compared to political relations. China is focused on investing significant amounts of money in CEE countries. Chinese investments in CEE countries have covered chemical, machinery, household appliances, telecommunications, automobiles, new energy and other sectors, contributing to local economic growth and employment.

Economic In 2001, the total trade volume between CEE countries and China was “only” US$ 4.3 billion. This number sharply increased to US$ 52.9 billion in 2011, with an annual average growth of 27.6%. Poland is China’s biggest trading partner in this region. The trade volume between these two countries increased from US$ 144 million in 1991 to around US$ 10 billion in 2008 and US$ 14.38 billion in 2012.

Economic Trade between CEE Countries and China

China-CEE trade and economic relations China and CEE countries had a long traditional trade and economics relations. After some CEE countries joined EU, as the EU’s internal market is getting longer, it provided good opportunities for China to access the EU market. Since then, the trade between China and CEE came back to growth shape. In 2011, China’s trade with 12 EU´s new member states, from which 10 were CEE countries, plus Malta and Cyprus, reached US$ 54.3 billion, from which US$ 41.2 billions were China’s exports and US$ 13.1 billion imports.

China’s Foreign Direct Investment in CEE

Trade with China Between 2000-2014, China’s share increased in the exports of CEE countries but the increase is even more in the imports.

Exportation and Importation A common feature of CEE trade with China is the considerable deficit that is present in every country. Poland, as the largest country, has the highest deficit among all. Trade with China in 2014, mn euros China's trade with CEE

Exportation (traded products) The most important import products from China, percentage of total export. China’s export from CEE

Importation (traded products) The most important export products to China, percentage of total export. China’s import from CEE.

Poland

Treaties and Agreements

“16+1” Initiative The 16+1 format is an initiative inaugurated in Warsaw in 2012 by the People’s Republic of China aimed at intensifying and expanding cooperation with 16 countries of Central and Eastern Europe (11 EU Member States and 5 Balkan countries). It’s focused in the fields of investments, transport, finance, science, education, and culture. The countries of CEE who participate are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia.

One-China Policy All CEE countries support the One-China policy. This policy is based on the principle that insists that both mainland China and Taiwan are inseparable parts of a single "China". This idea recognizes the PRC as the only legitimate government of this “China”. Some of these CEE countries, although recognizing only People’s Republic of China as the legitimate ruler of “China”, keep informal relations with Taiwan (Republic of China).

Bilateral Investment Treaty A Bilateral Investment Treaty (BIT) is an agreement establishing the terms and conditions for private investment by nationals and companies of one state in another state. A BIT is established through a trade pact. Countries like Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Poland, Romania, Serbia, Slovakia and Slovenia have a BIT in force with China.

Visa-free Agreement Both Serbia and Bosnia and Herzegovina are part of a very small group of countries, 15, that have a Visa-free agreement with China. This type of agreement allows citizens from these two countries to enter China for a certain period of time without having to apply for a Visa. In the case of Serbia, the Visa-free agreement is valid for a 30-day period. The agreement with Bosnia and Herzegovina is still in negotiation and waiting to enter into force.

Conclusion Economic cooperation between China and CEE countries can be seen with good perspectives. Since both CEE countries and China are developing in a fast way, political and economic partnerships between them can benefit both sides. China can look to relations with Central and Eastern Europe as an opportunity to reach the rest of the European market and, with that, become closer to the Western standards of government and trade. On the other side, CEE countries can look to China as the world’s biggest market (by population) and with that increase their exports and find countless new business opportunities.

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