China’s Inroads into Central, Eastern, and South Eastern Europe: Implications for Germany and the EU

Abstract

China's increased engagement in Central, Eastern, and South Eastern Europe has aroused concerns in Europe that China is pursuing a divisive strategy. Its primary goal, however, is to use the region as a gateway to Western Europe’s markets while including the EU in its own Eurasian integration project; in Beijing's view, a robust regulatory EU is doubtless preferable to a fragmented Europe. China's deepening involvement in the region could nevertheless increase economic divisions within the EU as whole. As a trade triangle emerges involving China, Germany, and the Visegrad states, the "German-Central European manufacturing core" potentially stands to gain at the expense of the EU's Atlantic and southern European member states. Germany must address this risk with a triple strategy that balances national interest, EU cohesion, and engagement with China. This involves, first, working with the Visegrad Four, with other European countries, and with EU institutions to forge a deeper and more effective cooperation with China to enhance transport connectivity and economic modernization, particularly in the Western and Eastern Balkans. Second, Germany should increase pressure on China to open up the Chinese domestic market to ensure mutual access. And third, it should promote forward-looking European industrial policy centered on the digitalization of value and supply chains for Central, Eastern, and South Eastern Europe. This would allow Germany to prevent intra-European divisions from deepening, while taking advantage of its triangular relations with China and the countries of Central Europe and fostering mutually advantageous integration across Eurasia.