Initiatives of the ‘New Silk Road’ Achievements and Challenges

Edited by Duško Dimitrijević and Huang Ping

Belgrade, 2017 Cover: http://www.eppi‐online.com/2017/06/08/silk‐road‐with‐detours/ Thematical Proceeding from the International Scientific Conference:

INITIATIVES OF THE 'NEW SILK ROAD' – ACHIEVEMENTS AND CHALLENGES

Belgrade, July 12‐13, 2017 Publisher: Institute of International Politics and Economics, Belgrade For the Publisher: Professor Branislav Đorđević, Director Editors in Chief: Duško Dimitrijević, Professorial Fellow, IIPE, Belgrade Professor Huang Ping, Director General, IES, Beijing

Reviewing Board: Professor Joachim Becker, Institute for International Economics and Development, University of Vienna, Austria Mikhail M. Lobanov, Ph.D., Institute of Economics, Russian Academy of Sciences, Russia Professor Liu Zuokui, Department of Central and Eastern European Studies, Institute of European Studies, Academy for Social Sciences, Beijing, China Professor Mariana Tian, Institute for Historical Studies, Bulgarian Academy of Sciences, Professor Blagoje Babić, Institute of International Politics and Economics, Belgrade, Serbia Professor Branislav Đorđević, Institute of International Politics and Economics, Belgrade, Serbia Professor Svetla Boneva, University of National and World Economy, Sofia, Bulgaria Vlad Vernygora, Centre for ‐Pacific Studies, Department of Law, Tallinn University of Technology, Estonia and University of Lapland, Finland Layout: Sanja Balović Text editor: Maja Nikolić

Printed by: Donat graf doo, Beograd

ISBN 978‐86‐7067‐246‐8 Thematical proceedings were financially supported by the Ministry of Education, Science and Technological Development of the Republic of Serbia within the project: “Serbia in contemporary international relations: Strategic development orientations and consolidation of Serbia’s position in international integration processes – foreign policy, international economic, legal and security aspects”, number 179029, for the period 2011–2017. TABLE OF CONTENTS

Preface 11

FIRST SESSION: “NEW SILK ROAD” – CHINESE STRATEGY OF WORLD DEVELOPMENT

Elke FIMMEN THE NEW SILK ROAD – ITS STRATEGIC IMPORTANCE FOR WORLD PEACE 17

KONG Tianping ONE BELT AND ONE ROAD INITIATIVE: PROGRESS AND CHALLENGES 31

SUN Jingying SYNERGY EFFECT OF CHINA`S BELT AND ROAD INITIATIVE AND SUSTAINABLE DEVELOPMENT GOALS: CHINA`S EXPERIENCES AND IMPLICATIONS 35

Jacqueline MYRRHE, William CAREY CHINA’S SPACE PROGRAMME – BORN OUT OF NATIONAL NEEDS POISED TO SUPPORT GLOBAL PROGRESS 62

Jasminka SIMIĆ INITIATIVE “ONE BELT, ONE ROAD” – A SOLID FOUNDATION FOR INTRA‐REGIONAL CONNECTIVITY 78

5 FU Cong, ZHAO Chen CHINA’S BELT AND ROAD INITIATIVE AND EU – COMPLEMENTARY AND COMPETITIVE RELATIONSHIP IN CENTRAL AND EASTERN ’S 16+1 (CEE16) 93

Slobodan ZEČEVIĆ THE “NEW SILK ROAD” AND RELATIONS BETWEEN CHINA AND THE EU 106

HE Zhigao CHINA’S POLICIES TOWARDS REGIONAL PLATFORM ‐ WITH THE CASE OF “16+1” COOPERATION 114

Anastas VANGELI 16+1 AS A LABORATORY FOR THE BELT AND ROAD INITIATIVE: A PRELIMINARY ANALYSIS 130

Aleksandar JAZIĆ BORDER IN EUROPE: GREAT POTENTIAL FOR CHINESE SILK ROAD 140

PENG Jinsong OPEN COLLABORATION AND WIN‐WIN DEVELOPMENT – THE APPROACHES AND IDEAS TO DEEPEN THE COOPERATION BETWEEN CHONGQING AND THE CITIES OF CEEC AT THE BACKDROP OF THE BELT AND ROAD 153

Jędrzej CZEREP POLISH READING OF THE NEW SILK ROAD PROJECT 163

Leonidas CHRYSANTHOPOULOS THE NEW SILK ROAD AND 172

6 Mariana TIAN THE PARTICIPATION OF BULGARIA IN THE INITIATIVES OF THE ‘NEW SILK ROAD’ ‐ ACHIEVEMENTS AND CHALLENGES” 178

Alexandru GEORGESCU CRITICAL INFRASTRUCTURE PROTECTION, INSTRUMENT AND OPPORTUNITY FOR THE BELT AND ROAD INITIATIVE 191

SECOND SESSION: GEOPOLITICAL VISIONS AND ACTIONS OF THE “NEW SILK ROAD” INITIATIVES

Časlav OCIĆ CHINA GLOBALIZES (introductory lecture) 205

Neven CVETIĆANIN CREATION OF THE ORDER OF THE 21ST CENTURY 209

Boris MIJOVIĆ, Filip TURČINOVIĆ CONFRONTATION OF GREAT POWERS ALONG THE SILK ROAD 226

Miloš ŠOLAJA CHINESE PRESENCE IN SOUTH EAST EUROPE AND STRATEGIC RELATIONS OF GREAT POWERS TO THE 241

Milan KANKARAŠ, Ivan PETROVIĆ, Biljana STOJKOVIĆ, OPPORTUNITIES AND THREATS OF NEW IDEA 255

LIU Zuokui THE RISKS ASSESSMENT OF THE BELT AND ROAD INITIATIVE IN CENTRAL AND 267

7 Zlatan JEREMIĆ CHINA’S MEGAPROJECT – GLOBAL SECURITY ANALYSIS 278

Sergej ULJANOV NEW SILK ROAD SECURITY CHALLENGES 292

LI Ruizhong THE CHINESE APPROACH TO ENERGY SECURITY IN THE CONTEXT OF THE “ONE BELT, ONE ROAD” INITIATIVE 307

Ratko LJUBOJEVIĆ MIGRATIONS AS SECURITY CHALLENGES ON THE ‘NEW SILK ROAD’ 319

THIRD SESSION: GEOECONOMIC, LEGAL AND CULTURAL VISIONS AND ACTIONS OF THE “NEW SILK ROAD” INITIATIVES

Dušan VASIĆ, Nela BOSNIĆ, Nina VASIĆ CHANGE OF CHINESE ECONOMIC DEVELOPMENT STRATEGY 335

Nataša TOMIĆ‐PETROVIĆ SIGNIFICANCE OF THE NEW SILK ROAD FOR THE CONSTRUCTION OF TRANSPORT INFRASTRUCTURE ON THE REGIONAL AND GLOBAL LEVEL 353

Duško DIMITRIJEVIĆ, Nikola JOKANOVIĆ THE IMPORTANCE OF CHINESE INVESTMENTS IN THE ONE BELT, ONE ROAD INITIATIVE 360

Dobrica VESIĆ, Pero PETROVIĆ ECONOMIC EFFECTS SILK ROAD AND COOPERATION WITH THE EURASIAN ECONOMIC UNION 391

8 Edita STOJIĆ KARANOVIĆ, Enisa IMAMOVIĆ ТHE NEW SILK ROAD AND THE REGIONAL COOPERATION OF THE WEST 401

Hatidža BERIŠA, Igor BARIŠIĆ, Katarina JONEV “ONE BELT AND ONE ROAD” AND SERBIA 413

Đurađ GRUBIŠIĆ IS IT POSSIBLE THAT THE NEW SILK ROAD INITIATIVES COULD ALTER SERBIAN ECONOMY – ACHIEVEMENTS AND CHALLENGES 422

Boris NIKOLIĆ SERBIA AS CHINA HUB TO EUROPE ‐ AN MBA PERSPECTIVE 437

Dušan DABOVIĆ COOPERATION BETWEEN THE PEOPLE’S REPUBLIC OF CHINA AND THE REPUBLIC OF SERBIA IN THE FIELD OF FOOD SAFETY 449

YAN Weitao THE STUDY OF KEY FIELDS AND PROJECT DESIGN WITH RESPECT TO AGRICULTURAL COOPERATION BETWEEN CHONGQING AND CENTRAL AND EASTERN EUROPEAN COUNTRIES AT THE BACKDROP OF THE BELT AND ROAD 465

Dragoljub TODIĆ, Sanja JELISAVAC CHINA, EU AND SERBIA AND THEIR STATUS IN THE INTERNATIONAL ENVIRONMENTAL AGREEMENTS 476

Katarina ZAKIĆ CULTURAL DIMENSIONS OF “SUMMIT 16+1” COUNTRIES – HOFSTEDE MODEL 498

ZHAO Jizhou CONSULAR PROTECTION: A NEW AGENDA FOR CHINA‐CEE COUNTRIES COOPERATION 515

9

PREFACE

In co‐operation with the Institute of European Studies (IES) and the Chinese Academy of Social Sciences (CASS) from Beijing, the Institute of International Politics and Economics (IMPP) organised the second annual scientific conference: “Initiatives of the ‘New Silk Road’ – Achievements and Challenges”. The international conference took place in Belgrade on 12 and 13 July 2016. Besides the distinguished scientists from Serbia and China, the conference was attended by respectable experts and researchers from Russia, USA, Great Britain, , Bulgaria, Romania, Poland, Greece, Montenegro and Bosnia and Herzegovina. The conference was supported by the Ministry of Education, Science and Technological Development and the Committee on Foreign Affairs of the National Assembly of the Republic of Serbia. The Embassy of the People’s Republic of China in Belgrade also gave support to the holding of this scientific conference. The aim of the conference was to launch a wider scientific discussion on the achievements and challenges in the realization of the “New Silk Road” as a global Chinese development strategy in both its directions: North ‐ mainland, formulated through the initiative of the “New Silk Road Economic Belt” and the Southern ‐ maritime, defined through the initiative of the ”21st Century Maritime Silk Road”. Given that these initiatives (colloquially named: “One Belt, One Road” Initiative) are the framework action plan for China’s opening to the world, the conference participants discussed various geopolitical and geo‐economics challenges that may arise in connection with their realization, as well as the benefits which these initiatives are launching in terms of opening up the long‐term and “win‐win” developmental perspectives for the significant number of Asian, European and African countries. At the conference, a special accent was dedicated to the analysis of China’s cooperation with Central and Eastern Europe countries (CEEC) within the “16 + 1” mechanism, as well as the possibilities for its

11 improvement. In this regard, the participants of the conference concluded that the cooperation between China and CEEC within the “16 + 1” mechanism, could be used for the realization of the objectives of regional cooperation between Asia and Europe (as well as between different regions on these two ), and what per se, should lead to the improvement of the national economy, financial cooperation, direct foreign investment, as well as to the intensification of scientific, technological and cultural cooperation and exchange. The necessity of a deep scientific study of the “One Belt, One Road” Initiative arises from the interest of the participating states to determine their own foreign policy priorities in relation to its realization. Presenting of different knowledge and experiences of political, economic legal and security aspects of the phenomenon, the participants of the conference were enabled to perceive more objectively the development potentials of the CEEC in connection with China and vice versa. Hence, their findings and expertise may contribute to political and social development, security stabilisation and increasing achievements of long‐term and sustainable economic growth as an indispensable pre‐condition for the attainment of a higher level of common progress and peaceful co‐existence of various nations, states and regions in the world. Starting from the determination of previously determined factors essential for the realization of common foreign policy goals of the countries involved in the implementation of the Chinese development strategy of the “New Silk Road” and its geostrategic important predictions sublimated through the “One Belt, One Road” Initiative, in a special part of the third session of the conference, participants had the opportunity to present the results of their scientific analyzes related to current foreign policy determinants of Serbian‐Chinese relations. In this regard, they made very important conclusions in which they emphasized the importance of promoting Serbian‐Chinese relations, especially within the framework of the mechanism “16+1”, that should go towards the upgrading of Chinese “Open‐up” policy, through a common and mutually beneficial implementation of the “Belt and Road” Initiative, which would in perspective led to stronger linkages between Asian and European countries and the development of their mutual relations.

12 On this occasion, we express sincere gratitude to all participants of this international scientific event. We also express deep gratitude to Professor Branislav Đorđević, Director of the Institute of International Politics and Economics, Mr. Vladimir Popović, State Secretary at the Ministry of Education, Science and Technological Development of the Republic of Serbia, Professor Žarko Obradović, President of the Committee on Foreign Affairs of the National Assembly of the Republic of Serbia, and H.E. Mr. Li Manchang, Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China in Belgrade who supported this international conference by delivering their introductory speeches.

Editors

13

FIRST SESSION:

“NEW SILK ROAD” – CHINESE STRATEGY OF WORLD DEVELOPMENT

THE NEW SILK ROAD – ITS STRATEGIC IMPORTANCE FOR WORLD PEACE

Elke FIMMEN Researcher Schiller‐Institut e.V. and Executive Intelligence Review, E.I.R., Wiesbaden, Germany1

Abstract: The New Silk Road – BRI – is already the biggest infrastructure program in history and has set off a global dynamic of progress. It is a „win‐ win“‐strategy for strategic cooperation instead of geopolitical confrontation, which could lead into the thermonuclear abyss. The „Belt and Road conference for International cooperation“ (BRF), May 14‐15, 2017 in Beijing provided an important inflection point for intensified economic, cultural and scientific cooperation among the nations of the world and a new platform for peace through global development. China’s own successful „economic miracle“, which it is offering to the world, has focused on the increase of productivity by scientific and technological progress, infrastructure projects and education of the population (the „true wealth of nations“), which in turn were principles which created the industrial nations of the world. China’s „New Silk Road“ project is aimed at building a community of shared future for mankind, open to all nations. Key words: New Silk Road, Peace through Development; Global strategic cooperation; World Land Bridge; Scientific‐technological progress; New Credit institutions.

1 E‐mail: [email protected]. The international Schiller Institute was founded 1984 in the USA and Germany. The Institute is working for a new just economic order, a scientific and cultural renaissance and a dialogue of cultures. Its president and founder is Helga Zepp‐ LaRouche, E‐mail: www.newparadigm.schillerinstitute.com. In 2014, Executive Intelligence Review (EIR) published the roadmap‐study “The New Silk Road becomes the World Landbridge)” followed by Chinese (2015), Arabic (2016) and German (2017) editions. The author of this paper has contributed to the German edition, 2017 (16+1).

17 INTRODUCTION

Peace through Development In December 2016, China’s government published its White Paper: „The Right to Development: China’s Philosophy, Praxis and Contribution“. It starts with the statement: “Development is a universal human theme, providing for people’s basic needs and giving them hope of better life. The right to development is an inalienable human right, symbolizing dignity and honor. Only through development can we address global challenges; only through development can we protect basic civil rights of the people; only through development can we promote the progress of human society“. (China’s State Council, 2016).2 In this spirit, the New Silk Road concept, which President Xi Jinping presented in 2013 to the world, has already become the biggest infrastructure program in history and has set off a global dynamic of progress, economically and socially, especially in . It is a „win‐win“‐ strategy for cooperation and has created a new global paradigm, oriented towards the future, instead of structures and methods of thinking, which have been proven wrong by history. Since geopolitics was responsible for two world wars, the Belt and Road Initiative is the first time that a concrete concept has been offered to overcome geopolitics, according to Helga Zepp‐LaRouche, founder and President of the Schiller Institute, who has campaigned together with her husband Lyndon LaRouche for a new just economic world order and the New Silk Road for more than 26 years. In her characterization, the BRI is a “completely new paradigm of thinking, in which an idea proposed by one country puts the national interest in coherence with the interest of humanity as a whole. This has never happened...this initiative will grow until all continents are connected through infrastructure and development.“3

2 The State Council, People’s Republic of China, Dec. 2016: The Right to Development: China’s Philosophy, Practice and Contribution, Internet: http://english.gov.cn/archive/ white_paper /2016/12/01/content_281475505407672.htm 3 Helga Zepp‐LaRouche who participated in the Beijing BRF conference, described it as a very harmonious event, which generated hope and enthusiasm, especially among the participants of developing nations, to be able to finally overcome poverty and underdevelopment and the BRI as „a revolutionary move to a new epoch of civilization“. „The idea of having win‐win cooperation among nations is the first time that a concrete concept has been offered to overcome geopolitics”. http://www.shanghaidaily.com/

18 THE BELT AND ROAD FORUM IN BEIJING – A PHASE CHANGE FOR HUMANITY

The groundbreaking BRF conference in May 2017 assembled for the first time 29 heads of state or government, and over 1600 representatives from more than 130 countries, as well as more than 70 international organizations. In his keynote speech on May 14, Chinese President Xi Jinping stressed that with the Belt and Road Initiative (BRI), China has no geopolitical interest, but wants to achieve a “model of win‐win cooperation”.4 According to Xi, “China will enhance friendship and cooperation with all countries involved in the Belt and Road Initiative on the basis of the Five Principles of Peaceful Coexistence. We are ready to share practices of development with other countries, but we have no intention to interfere in other countries’ internal affairs, export our own social system and model of development, or impose our own will on others. In pursuing the Belt and Road Initiative, we will not resort to outdated geopolitical maneuvering. … What we hope to achieve is a new model of win‐win cooperation. We have no intention to form a small group detrimental to stability, what we hope to create is a big family of harmonious co‐existence.” President Xi stressed infrastructure connectivity as “the foundation of development through cooperation. We should promote land, maritime, air and cyberspace connectivity, concentrate our efforts on key passageways, cities and projects and connect networks of highways, railways and sea ports. The goal of building six major economic corridors under the Belt and Road Initiative has been set, and we should endeavor to meet it.” Russian President Vladimir Putin welcomed and endorsed the BRI and stated that the Eurasian Economic Union, initiated by Russia, has similar views to the Chinese on Eurasian integration. He called on European nations to be active part of the new effort, to realize the “unique opportunity for a common cooperation framework from the Atlantic to the Pacific – for the first time in history.”5 A high‐level US‐delegation, led

opinion/chinese‐perspectives/Belt‐and‐Road‐initiative‐instills‐hope‐for‐peace‐and‐deve‐ lopment‐among‐nations/shdaily.shtml 4 President Xi Jinping, Opening speech Belt and Road Forum, May 14, 2017, Internet: http://news.xinhuanet.com/english/2017‐05/14/c_136282982.htm 5 President Vladimir Putin: Speech, Belt and Road Forum, May 14, 2017, Internet: http://en. kremlin.ru/events/president/news/54491; see also E.I.R Strategic Alert, No. 20, Vol. 31, 2017.

19 by National Security Council senior director for , Matthew Pottinger attended the Forum and according to Agence Presse expressed the US’s willingness to join in with China’s “project of the century.” Hong Kong’s South China Morning Post quoted Pottinger saying that the U.S. companies and the U.S. Embassy in China had formed an “American Belt and Road Working Group”.6 The final communiqué of the BRF reflected the spirit of the Belt and Road Initiative in stating that “creating a prosperous and peaceful community with a shared future for mankind is our common aspiration.”7

ENDING GEOPOLITICS AND THE DANGER OF THERMONUCLEAR CONFRONTATION

The BRF conference in Beijing was followed by an intensification of diplomatic efforts to consolidate and expand the spirit of economic, political and strategic cooperation for the benefit of world peace. Key events after the BRF event in May leading up the G20 summit in Hamburg, reflecting this effort, in particular by China and Russia, included: • The SCO meeting, at which India and Pakistan were accepted as full new members.8 • BRICS ministerial meetings in China, leading up to the BRICS summit in Xiamen in September 2017.

6 E.I.R. Strategic Alert, Vol. 31, Nr. 20, 2017. 7 China signed MoU’s on Belt and Road cooperation with 11 countries and cooperation documents with 9 international organizations and signed economic and trade cooperation agreements with 30 countries. An additional 14.5 US$ were assigned to the Silk Road Fund; special credit mechanisms will be set up ($ 36.2 bio.) and $ 18.8 bio. to support Belt and Road cooperation on infrastructure, industrial capacity and financing. A new China‐Russia Regional Cooperation Development Investment Fund will be set up to promote cooperation between China’s Northeast and Russia’s . (Joint Communiqué of the Leaders Roundtable of the Belt and Road Forum for International Cooperation). Internet. https://news.cgtn.com/news/3d49544f34677a4d/share_p.html 8 The speeches of President Xi Jinping and President Vladimir Putin at the SCO‐Meeting, June 9, 2017 are of high importance for appreciating the strategic importance of this conference. Internet: http://www.chinadaily.com.cn/world/2017xivisitskazakhstan/2017‐ 06/09/content_29691652.htm http://en.kremlin.ru/events/president/transcripts/54739

20 • The preparation of state visits by Japanese President Abe to China and to Russia and the announcement by President Abe, that could join the AIIB. • The St. Petersburg economic forum9 • An unprecedented new level of cooperation between Russia and China, which was demonstrated with President Xi’s visit to Russia before his state visit to Germany and his participation in the G‐20 summit in Hamburg. A strategic partnership on all levels to synchronize the New Silk Road dynamic with the Eurasian Economic Union and to work towards political stability both in and beyond has emerged between China and Russia. This includes joint positions on the fight against terrorism, on a peaceful diplomatic approach to North Korea, on Syria, the rejection of regime change wars, as well as economic, financial and scientific cooperation like nuclear energy and space. More than 40 agreements were signed during President Xi’s visit.10 • At the G20 meeting in Hamburg, President Xi and President Trump met for the second time after Mar‐a‐Lago/USA (April 6, 2017), reaffirming their joint commitment to cooperate in security and economic matters11, including North Korea. (Four dialogues had been established after the April meeting, including Diplomatic and Security, Economics, Law Enforcement and Cyber‐Security and Social, Cultural Exchanges). Importantly, the long overdue first meeting between President Putin and President Trump did take place in Hamburg, establishing a working relationship between the two presidents of the world‘s largest nuclear powers. Concretely, intensification of cooperation in Syria resulted out of it. For those neocons, who are determined to continue the confrontationist course of the previous US administrations against China

9 President Vladimir Putin, Speech SPIEF, 21st St Petersburg International Economic Forum http://en.kremlin.ru/events/president/news/54667 10 E.I.R. Strategic Alert, Vol. 31, Nr. 30, 2017 11 The 9th U.S.‐China CEO and Former Senior Officials Dialogue” June 20‐21, 2017. Joint Statement, Internet: http://english.cciee.org.cn/archiver/ccieeen/UpFile/Files/Default/ 20170621164537963089.pdf and: William Jones: US will cooperate with China on Belt and Road Initiative, Trump says http://www.larouchepub.com/eiw/public/2017/eirv44 n26‐20170630/20‐22_4426.pdf pages 20‐22, EIR, vol. 44, Nr. 26, June 30, 2017

21 and Russia, this was a clear defeat.12 Obviously, there are still many problems and dangerous strategic hotspots, which could lead to thermonuclear confrontation. However, if the presidents of the most powerful nations – China, Russia and the United States, can work together, the world has a chance to move forward and concentrate together on solving the huge problems of mankind and build a “community of shared future for mankind“, as President Xi has declared several times.13

WHERE IS EUROPE HEADED?

An increasing number of European nations, such as , Portugal, Greece, , , to name but a few, are eager to participate in new projects of the Silk Road, which offer a concrete opportunity to escape the induced effects of the EU‐and ECB imposed massive austerity and destruction of the productive powers. At the same time, the CEE‐nations are starting to realize their own potential to become a key bridge to the peaceful development of all of Eurasia. For all nations of Europe, including leading EU‐countries such as Germany and France, the New Silk Road policy objectively does offer a productive way out of the deep economic and political crises in Europe. President Xi’s state visit to Germany just before the G20 summit helped encourage those, who wish to fulfill the tremendous potential of the strategic partnership between Germany and China.14 Now,

12 Pilchikov, Ivan (2017), TASS interview, July 9: “Expert View: Anti‐Russia Campaign in U.S.A. Failed To Block Success of Putin‐Trump Meeting”, Internet: http://tass.ru/mezhdu narodnaya‐panorama/4399522 13 On this strategic perspective see: Zepp‐LaRouche, Helga (2017), „Once the United States joins the Belt and Road Initiative, a New Paradigm for Mankind can begin“, China Investment Magazine, May 2017 . 14 President Xi Jinping, upon his arrival in Germany on July 4, released a signed article, carried in the mainstream media, titled “To Make the World a Better Place” He noted that the “Belt and Road Forum for International Cooperation, recently held in Beijing, is aimed at stepping up the synergy of development strategies and connectivity” among nations, and that it “chimes with the theme of this year’s Hamburg [G20] Summit.” He suggested that the Belt and Road Initiative (BRI) and G‐20 cooperation “could complement and reinforce each other...”, Internet: http://usa.chinadaily.com.cn/2017‐07/05/content_29994986_ 2.htm); www.welt.de/debatte/kommentare/article166231727

22 there are concrete plans for joint projects in Africa. However, obviously much more needs to be done to bring about a full change of paradigm.15 The EU‐ bureaucracy continues to put up obstacles against Chinese investments into the economy and infrastructure, while the same EU has done nothing since 1989 to invest in the neglected infrastructure in CEE countries. China’s investments in the real, physical economy of Southeastern and are also an important opportunity to get Europe as a whole on a path of inclusive growth, instead of political and social disorder. The same kinds of investments are urgently needed in . The many railroad connections between Chinese and European cities are of crucial importance to uplift the infrastructure and productivity of Western Europe.16 And the present expansion of the New Silk Road project into Northern Africa, Middle Eastern countries like Syria and Lebanon, and , will be the only perspective to solve the refugee problem.17

SILK ROAD – THE KEY FOR STABILITY AND PROSPERITY IN AFRICA AND SOUTH WEST ASIA

China’s paradigm of “win‐win”‐cooperation is absolutely essential to stop the effects of decades‐long enforced underdevelopment, raw material wars, the perpetual regime change wars of the last decade and the geopolitically motivated build up of terrorism – which have led to mass hunger and millions of desperate refugees. All of this will not end until geopolitics is stopped and instead, Africa and the Mideast, as well as other poverty and terror‐stricken regions of the world, are given a future. China has approached the refugee problem at the source and has done more for the advancement of Africans in a few years than the former colonial powers and their heirs in 400 years.

15 “Germany: The Key to European integration into the New Silk Road”, in: The New Silk Road becomes the World Landbridge, EIR Special Report, 2014 16 One example of this objective need is the “Iron Rhine project”, connecting the German Ruhr area with the port of Antwerp. See AGORA ERASMUS (2017), http://www.agora‐ erasmus.be/fr/Signez‐la‐petition‐d‐Agora‐Erasmus‐pour‐la‐reouverture‐du‐Rhin‐d‐acier_ 09545 17 In 2012, the Schiller Institute published its „Emergency Program for an Economic Miracle in Southern Europe, the Mediterranean Region and Africa“, Internet: http://www.schiller institute.org/economy/phys_econ/2012/0606_hzl_mediterranean/eir_feature.html

23 The five biggest railway projects are currently built in Africa with Chinese participation. China has constructed railways and roads surpassing already 7000 km in length in Africa. The railway between Djibouti and Addis Abeba with over 700 km is operational as of this spring, as well as the Mombasa‐ Nairobi railway with almost 500 km, linking the largest port city with the capital of Kenya; this is to be extended and linked up to Tanzania and Uganda and exemplifies the beginning of a ‐wide modern standard gauge railway grid, with many Africans being employed and trained in the process.18 This goes hand‐in‐hand with the development of the surrounding areas, water development, streets and other infrastructure. China is the leading job creator in Africa (30 000 jobs in the last two years; 40 000 Africans will be trained in China). China has pledged 75 billion $ funding for Africa, especially for SMEs.19 Along with other important infrastructure, power stations, agricultural and industrial projects, China has also helped realize key water projects ‐ and is presently engaged in the project for the refilling of the Lake Chad, the Transaqua Project, which will benefit twelve nations of the region.20 From June 21‐22, high‐level officials, civil servants, poverty

18 Exemplary is this video: News China TV (2017): Mombasa‐Nairobi railway building, video Internet: https://www.youtube.com/watch?v=p9Z0eYHWFCI 19 A study by McKinsey & Co. McKinsey (2017), „Dance of the Dragons and Lions“, Internet: http://www.mckinsey.com/global‐themes/middle‐east‐and‐africa/the‐closest‐look‐yet‐ at‐chinese‐economic‐engagement‐in‐africa released June 30, estimates that some 10,000 Chinese firms are operating in Africa, and that a full 86% of their employees are locals, including 40% of their management staff. About 300,000 Africans have found employment so far in Chinese‐funded projects, and another 30,000 young Africans are being trained for a qualified job in the transportation sector. According to the McKinsey report, China’s direct investment in Africa increased at an annual growth rate of 40% from 2004 to 2015, and foresees a rising trend. They expect Chinese firms in Africa to increase their revenues by 140% by 2025, as compared to the current level by entering into five new sectors: , banking and insurance, housing, information communications technology and telecommunications, and transport and logistics. 20 The Italian Bonifica Spa engineering firm and Power China, one of China’s largest multinationals, mid 2017 have signed a letter of intent for cooperation on exploring the feasibility and possible implementation of the largest infrastructure project ever envisioned for Africa, the integrated water‐transfer, transport, energy and agro‐industrial development called Transaqua. The idea was developed by Bonifica in the 1970s, to build a 2400 km‐long canal from the southern region of the Democratic Republic of Congo (DRC) which would intercept the right bank tributaries of the Congo river through dams and reservoirs, and carry up to 100 bn m3 water per year, by gravity to Lake Chad, in order

24 fighters and policymakers from Africa and China met in Addis Abeba, Ethiopia, for the “China‐Africa High‐Level Dialogue and Think Tank Forum on Fighting against Poverty for Common Prosperity.” The conference was attended by Chinese Foreign Minister Wang Yi. The participants committed to replicate China’s “miracle in world development history” by eradicating poverty at home, in Africa, and in all countries.21 The same kind of approach has been taken by China for the Middle Eastern countries, including Syria.22

THE GLOBAL DANGER OF A NEW FINANCIAL CRASH

The other immediate global threat is the instability of the international financial system, which is much worse than 2007‐2008, with an uncontrolled financial blowout of the speculative derivatives system looming. This issue has been consistently acknowledged by China, including in the Hangzhou G20 conference in 2016. While China has become the locomotive of the global economy, with a growing part of its credit being channelled abroad as part of the Belt and Road Initiative, invested in modern infrastructure and the most advanced scientific activities of the planet in the fields of space, fusion energy, etc. the West has suffered an industrial and infrastructure collapse, growing poverty and high unemployment, as well as the

to refill the shrinking lake, while at the same time providing for electricity production and abundant water for irrigation. The canal would be a key transport infrastructure for . Since then, the situation around Lake Chad has become increasingly explosive and urgent. The drying out of the lake has forced a mass emigration to Europe, and the impoverishment the region has become a fertile ground for recruiting terrorists to Boko Haram. The Schiller Institute has for decades campaigned for this project. 21 Internet: (http://www.fmprc.gov.cn/mfa_eng/wjb_663304/wjbz_663308/2461_663310/ t1472200.shtml) 22 From Ethiopia, Wang went on to visit Jordan and Lebanon, two countries which host an extremely high number of refugees from the region in difficult conditions. In Lebanon, where Wang met with President Michel Aoun and Prime Minister Saad Hariri, among others, the great Belt and Road Initiative was at the center of discussions. In his press conference in Beirut, Wang addressed the refugee crises, for both Palestinians and Syrians, noting that as the situation stabilizes, Syrian refugees who are compelled to flee to various places should go back to their homeland and rebuild their homeland. He announced that China would work with Lebanon and every country to play a constructive role in this direction. (E.I.R. Strategic Alert, Vol. 31, No. 26, June 29, 2017).

25 abandonment of many scientific endeavours, by focusing on rescuing insolvent banks and feeding the international derivatives casino.23 There is an urgent need to clean out this ticking bomb from the transatlantic financial system and to create long‐term stability and real growth for the world economy. The first step would be the reintroduction of a strict separation between investment and commercial banks, as President FDR did successfully to solve the Great Depression, followed by a policy of sovereign credit generation for industrial and infrastructural projects, in the tradition of Alexander Hamilton, Abraham Lincoln and Friedrich List. These are the first two steps in the program of American statesman and economist Lyndon LaRouche (“Four Laws” for Physical Economy).24 China has already created completely new, large‐scale credit institutions for the BRI projects, as exemplified by the AIIB, the Silk Road Fund, the Maritime Silk Road fund, and many others. In contrast to Western financial institutions, these funds are to be used solely for productive and not for speculative purposes or to save bankrupt megabanks. This is of course supplemented by the BRICS NDB, the SCO Fund, and many bilateral credit funds. To join with these credit institutions and to apply a similar growth policy, must become the established policy in the transatlantic sector as well.

CHINA’S LESSON FOR THE WORLD

What is so unique about China’s approach, but at the same time, a universal principle for success is its absolute emphasis on development as

23 China’s banks operate de facto under the Glass‐Steagall regulatory principle, whereas western banks are deregulated along the model of “universal banking”. Ironically, just as the United States was in the process of repealing the strict banking separation Glass‐Steagall standard, China introduced that very same regulation, and has since then resisted any western‐induced temptation. Under the Chinese Banking Law of 1995, commercial banks, government‐sponsored or private are forbidden “from underwriting initial public offerings or acting as broker‐dealers in the stock market, the two biggest revenue sources for securities companies”, as noted in a Financial Times article of April 5, 2016. China’s main commercial banks have much larger commitments to lending, and a much greater proportion of loan interest income than U.S. or European megabanks and have less than 3% of the derivatives exposure of the world’s major banks. (E.I.R. Strategic Alert, Volume 31, Nr. 29, 2017). 24 LaRouche PAC: LaRouche’s Four Laws and America’s Future on the New Silk Road, Internet: https://larouchepac.com/20170225/four‐laws‐pamphlet

26 the key to everything. China’s tremendous success came about by a deliberate policy to increase the productivity through scientific and technological progress, infrastructure projects and the education of the population – the true wealth of nations. China succeeded to lift 700 million people out of poverty since the mid‐70s and with that, was the first country to achieve the UN‐millennium goals. China now feeds more than 20% of the world population with less than 10% of the agricultural area worldwide. The average life expectancy has increased from 35 years in 1949 to 76.3 years in 2015. More than 95% of the population has a health insurance. The GDP per capita increased from 200 $ in 1978 to more than 8000 $ in 2015. In 1949, 80% of Chinese were analphabets and only 20% of children went to school. In 2015, 99.88% of all children in schooling age went to school, 87% attended secondary school (Chinese White Paper).25 China adds each year 2000 km of high‐speed rail to its national railway grid, which has already grown to 20.000 km and should reach 50.000 in 2030 when all major cities will be linked by high‐speed trains. China is becoming the world center of nuclear power and is making great breakthroughs in fusion energy and space. 26 China’s successful policy is based on proven principles of economic science, which have long been neglected in the West, despite the fact that these same methods were essential for the successful establishment of the United States, Germany, France, Japan, and many others as industrial nations.27

25 The State Council, People’s Republic of China, Dec. 2016: The Right to Development: China’s Philosophy, Practice and Contribution, Internet: http://english.gov.cn/archive/ white_paper/2016/12/01/content_281475505407672.htm 26 In December 2016, China issued a White paper about the major achievements in this field since 2011, its tasks in the next 5 years and its impressive international exchange and cooperation efforts. It states that in the next five years China will „promote the comprehensive development of space science, space technology and space applications, so as to contribute more to both serving national development and improving the well‐ being of mankind.“ Internet: http://english.gov.cn/archive/white_paper/2016/12/28/ content_281475527159496.htm 27 These proven economic principles rely on physical economy, which prioritizes the development or „planting of productive powers of nations“, as German economist Friedrich List called it as opposed to the British monetarist theory of value (Adam Smith). The latter deals only with the simple exchange of values and trade, on how to „buy cheap and sell dear“ and neglects the necessary dirigistic role of the state and puts forward a fake theory of so‐called global free trade, which the British Empire and its sycophants has always used to kill the economic development of other nations in the cradle. On the

27 A DIALOGUE OF CULTURES AND A FUTURE FOR MANKIND

China has made possible the emergence of a new paradigm of cooperation and collaboration for the joint aims of mankind, which include first and foremost the right of development of the creative potential of each individual and each nation on earth. It has reinvigorated in human civilization the drive for progress and optimism, which has been buried for decades in the West, with cultural pessimism and imperial anti‐science bias, rooted in the wrong axioms of financial globalization and looting in favor of speculation and a system of unipolar power. Reminding ourselves of our own best traditions, we can join hands with this new unfolding dynamic of „peace through development“, which the Silk Road presents. We cannot only avoid the abyss of thermonuclear annihilation, but create a true global dialogue of cultures and offer a future to the youth and the many generations to follow. In addressing the 5th Global Think Tank Summit of the BRF in Beijing on this topic, Helga Zepp‐LaRouche said: “The true meaning of Win‐win‐cooperation is not just the material benefit of infrastructure and industrial development, but of making the joyful discoveries of other cultures, the beauty of their classical music, poetry and painting, and, by knowing them, we strengthen our love for mankind as a whole. In the building of the World Land‐bridge, all nations will cooperate on studying how to apply the laws of the Nöosphere to the establishment of durable forms of self‐government. The development of the creative mental powers of all nations will give mankind the sense of unity and purpose which will make our species truly human.”28 Faced with today’s challenges, we can decide to create a because to progress and develop is the true nature of mankind, in the words of Germany’s poet of freedom, Friedrich Schiller.

contrary, in physical economy, applied by China at home and now in the Silk Road paradigm, large scale infrastructure projects play a key role in increasing the overall productivity of nations, as well as the focus on high technology and science, to improve the level of education and productivity of the population, whose creativity is the true wealth of nations. The principle of a National Bank for credit generation was invented by first US‐Treasury Secretary Alexander Hamilton and became known as the key element of the „American System of Economy“ as opposed to the British monetarist System. 28 See Zepp‐LaRouche, Helga (2017), „The Belt and Road becomes the World Land‐Bridge“, speech at Roundtable I 5th Global Think Tank Summit, Beijing, Belt and Road Forum, in: EIR Magazine, May 19, 2017http://www.larouchepub.com/hzl/2017/4420hzl_spch_may _15_beijing.html

28 BIBLIOGRAPHY

9th U.S.‐China CEO and Former Senior Officials Dialogue”, 2017, Joint Statement, Internet: http://english.cciee.org.cn/archiver/ccieeen/Up File/Files/Default/20170621164537963089.pdf AGORA ERASMUS (2017), http://www.agora‐erasmus.be/fr/Signez‐la‐ petition‐d‐Agora‐Erasmus‐pour‐la‐reouverture‐du‐Rhin‐d‐acier_09545 China’s White Paper on Space Activities in 2016, Internet: http://english.gov. cn/archive/white_paper/2016/12/28/content_281475527159496.htm EIR Special Report, “The New Silk Road becomes the World Land‐Bridge“, (English 2014, Chinese 2015, Arabic 2016, German 2017) (English, ISBN: 978‐0‐943235‐24‐0) Executive Intelligence Review, Strategic Alert, Wiesbaden (Vol. 31, Nr. 20, 31, 2017) Joint Communiqué of the Leaders Roundtable of the Belt and Road Forum for International Cooperation; Internet: https://news.cgtn.com/news/ 3d49544f34677a4d/share_p.html William Jones: Jones, William: “US will cooperate with China on Belt and Road Initiative, Trump says”, Internet: http://www.larouchepub.com/eiw/public/2017/ eirv44n26‐20170630/20‐22_4426.pdf, pp. 20‐22, EIR, vol. 44, Nr. 26, June 30, 2017 LaRouche PAC, LaRouche’s Four Laws and America’s Future on the New Silk Road, Internet: https://larouchepac.com/20170225/four‐laws‐pamphlet Lixin, Wang (2017), “Belt and Road Initiative instills Hope for Peace, Develop‐ ment among nations“, Shanghai Daily, June 1, 2017, interview with Helga Zepp‐LaRouche Internet: www.shanghaiDaily.com, http:// www.shang haidaily.com/opinion/chinese‐perspectives/Belt‐and‐Road‐initiative‐ instills‐hope‐for‐peace‐and‐development‐among‐nations/shdaily.shtml McKinsey (2017), “Dance of the Dragons and Lions“, Internet: http:// www.mckinsey.com/global‐themes/middle‐east‐and‐africa/the‐closest‐ look‐yet‐at‐chinese‐economic‐engagement‐in‐africa News China TV (2017): Mombasa‐Nairobi railway building, video Internet: https://www.youtube.com/watch?v=p9Z0eYHWFCI Pilchikov, Ivan (2017), TASS, July 9, 2017: “Expert View: Anti‐Russia Campaign in U.S.A. Failed to Block Success of Putin‐Trump Meeting”, Internet: http://tass.ru/mezhdunarodnaya‐panorama/4399522

29 Putin, Vladimir (2017), SCO‐Meeting, June 9, 2017, Internet: http:// en.kremlin.ru/events/president/transcripts/54739 Putin, Vladimir (2017), Speech SPIEF, 21st St Petersburg International Economic Forum, Internet: http://en.kremlin.ru/events/president/news/ 54667 Putin, Vladimir (2017), Speech, Belt and Road Forum, May 14, 2017, Internet: http://en.kremlin.ru/events/president/news/54491 Schiller Institute (2012), „Emergency Program for an Economic Miracle in Southern Europe, the Mediterranean Region and Africa“, Internet: http://www.schillerinstitute.org/economy/phys_econ/2012/0606_hzl_ mediterranean/eir_feature.html The State Council, People’s Republic of China, Dec. 2016: The Right to Development: China’s Philosophy, Practice and Contribution, Internet: http://english.gov.cn/archive/white_paper/2016/12/01/content_28147 5505407672.htm Xi, Jinping (2017), “To Make the World a Better Place”, Internet: http:// usa.chinadaily.com.cn/2017‐07/05/content_29994986_2.htm Xi, Jinping (2017), Opening speech Belt and Road Forum, May 14, 2017, Internet: http://news.xinhuanet.com/english/2017‐05/14/c_1362829 82.htm Xi, Jinping (2017), SCO‐Meeting, June 9, 2017, Internet: http://www.china daily.com.cn/world/2017xivisitskazakhstan/2017‐06/09/content_29691 652.htm Yi, Wang (2017), Keynote speech: “China‐Africa High‐Level Dialogue and Think Tank Forum on Fighting against Poverty for Common Prosperity”, June 21‐22, Addis Ababa/Ethiopia, Internet: http://www.fmprc.gov.cn/ mfa_eng/wjb_663304/wjbz_663308/2461_663310/t1472200.shtml Zepp‐LaRouche, Helga (2017), „Once the United States joins the Belt and Road Initiative, a New Paradigm for Mankind can begin“, China Investment Magazine, May 2017, Internet: http://www.larouchepub. com/eiw/public/2017/eirv44n22‐20170602/03‐07_4422.pdf, Vol. 44. Zepp‐LaRouche, Helga (2017), „The Belt and Road becomes the World Land‐ Bridge“, speech Roundtable I 5th Global Think Tank Summit, Beijing, Belt and Road Forum, in: EIR Executive Intelligence Review Magazine, May 19, 2017, Vol. 44, p.7‐8, Internet: http://www.larouchepub.com/hzl/ 2017/4420hzl_spch_may_15_beijing.html

30 THE BELT AND ROAD INITIATIVE: PROGRESS AND CHALLENGES

KONG Tianping Professor, Institute of European Studies Chinese Academy of Social Sciences, Beijing, China1

Abstract: The Belt and Road Initiative (BRI) is widely received in the last four years. This paper focuses on the progress and challenges of the Belt and Road Initiative. First, it gives a brief overview of the progress of the BRI, second, it points out the main challenges facing the BRI. The author assumes that China will match words with action, show the world that the Belt and Road Initiative can benefit global development, in the long run, China can smartly address some concerns, cope with challenges. Key words: The Belt and Road Initiative (BRI), China, Europe, international relations.

INTRODUCTION

The Belt and Road Initiative (BRI), also referred to as One Belt and One Road (OBOR), was put forward by China’s president Xi Jinping in late 2013. The BRI comprises the Silk Road Economic Belt and the 21st Century Maritime Silk Road. It is one of the most important initiatives raised by China in the last 2 decades. If this ambitious initiative is implemented in the right way, it will not only transform China itself, but also the evolving world order in one way or another. As one of the most important diplomatic activities in 2017, the Belt and Road Forum for International Cooperation held in Beijing (May14‐15, 2017) brought together over 1,200 representatives from 60 international organizations and 110 countries, including leaders from 29 countries. This forum is a milestone event, which signifies the BRI is under the spotlight of the international community, even the United States and Japan sent the delegations to attend the forum. One observer assumes “this forum – the highest‐level platform

1 E‐mail: [email protected]

31 since the launch of the initiative – is the first attempt at introducing multilateralism as the method of work.”(Passi 2017). It is perceived that China uses this forum to redefine globalization, cements the consensus on globalization as the continuing norm of development. (Passi 2017). This forum tried to take stock of the achievements of the BRI in the last three years, conducting a wide‐ranging coordination and dialogue over the relevant issues concerning the BRI. The Leaders Round Table of the BRI forum issued a joint communiqué that defines the cooperation objectives, cooperation principles and cooperation measures. As the joint communiqué puts “our joint endeavour on the Belt and Road initiative and seeking complementarities with other connectivity initiatives provide new opportunities and impetus for international cooperation. It helps to work for a globalization that is open, inclusive and beneficial to all” (Xinhua 2017). After referendum of Brexit and Trump’s victory in the American presidential election in 2016, the Western world is moving towards economic nationalism and trade protectionism, globalization is in retreat, and uncertainty has become a catchword to define the world in which we live. Under the above‐mentioned conditions, the BRI may provide China’s solution for the globalized world; give a boost to globalization based on the open economy and free trade. In more than three and half years, the BRI has been mostly positively received worldwide. The New Silk Road initiative proposed by China has been widely covered, observed and analyzed. As the BRI is a long‐term enterprise, it may span the current political cycle and it is too early to evaluate its effects and consequences. This paper is aimed to highlight the progress of the BRI, point out the main challenges facing the initiative.

PROGRESS OF THE BELT AND ROAD INITIATIVE

In less than 4 years, as a result of joint efforts of relevant ministries and agencies, the progress of the OBOR has gone beyond expectation.

Policy dialogue and policy coordination China has enhanced policy dialogue and policy coordination over the BRI; therefore, it has been positively received by many countries and major

32 international organizations. China has enhanced coordination with the policy initiatives of relevant countries, such as the Eurasian Economic Union of Russia, the Master Plan on ASEAN Connectivity, the Bright Road initiative of Kazakhstan, the Middle Corridor initiative of Turkey, the Development Road initiative of Mongolia, the Two Corridors, One Economic Circle initiative of Viet Nam, the Northern Powerhouse initiative of the UK and so on. China has signed the cooperation agreement with over 40 countries and international organization about the building of One Belt and One Road, China has started to carry out the cooperation of production capacity with more than 30 countries. China and The European Commission signed a Memorandum of Understanding on the China‐EU Connectivity Platform to enhance synergy between the BRI and the Trans‐European Transport Network policy in September 2015. The platform involves cooperation in areas such as infrastructure, equipment, technologies and standards. The Belt and Road Forum for International Cooperation contributed policy dialogue and policy coordination over the BRI. During the forum, China signed the Memorandum of Understanding on One Belt and One Road with Mongolia, Pakistan, Nepal, Croatia, Montenegro, Bosnia and Herzegovina, Albania, East Timor, Singapore, Myanmar and Malaysia. China signed a cooperation agreement under the BRI with United Nations Development Programme, United Nations Industrial Development Organization, United Nations Human Settlements Programme, United Nations Children’s Fund, United Nations Conference on Trade and Development, World Health Organization, The World Intellectual Property Organization and International Criminal Police Organization. Some China’s ministries signed agreements with several international organizations, such as Nations Economic Commission for Europe and World Economic Forum. China and Hungary signed MOU on jointly working out a guideline for bilateral cooperation. China National Development and Reform Commission and Greek Ministry of Economic Development signed the “Sino‐Greek Cooperation Plan in Key Areas 2017‐2019”.

Infrastructure Connectivity A well‐connected transport network is a key to economic success; the BRI focuses on connectivity, especially the infrastructure connectivity. Based on the information from China’s Ministry of Transport, China has

33 signed more than 130 agreements for transport cooperation with countries along the Belt and Road, including the intergovernmental agreement on facilitating international road transport by the member states of Shanghai Cooperation Organization ‐ China‐ASEAN Agreement on Maritime Transport. China has jointed with relevant countries to create 6 economic corridors: China‐Mongolia‐Russian Corridor, China‐‐Western Asian Corridor, China‐Indochina Peninsula Corridor, China‐ Pakistan Corridor, Bangladesh‐China‐India‐Myanmar Corridor and the New Eurasian Land Bridge. The six economic corridors are put into the framework of the Belt and Road initiative by China’s decision‐makers. Jakarta‐Bandung high‐speed railway is under way, China Railway International Co Ltd and four Indonesian state‐owned enterprises formed a Chinese‐Indonesian consortium to construct and operate the line. China‐ Laos railway is under construction, the railway will become the main passageway to Laos and Thailand. Addis Ababa‐Djibouti railway built by China’s enterprises started to operate in October 2016. As for Budapest‐ Belgrade railway, the business contract for the Serbian section was finalized while the construction contract for Hungarian section was signed. After 2011, more and more China’s cities have opened freight train links with European cities. So far, there are 13 freight train links between China and Europe (see Table 1). The freight train links between China and Europe transport China’s products to Europe 20 days faster than by ocean shipping. The freight train links are subsidized by local governments; they have become an alternative way of transportation between China and Europe. The main challenge is how to address the empty wagons, which is still widespread for the return freight trains from Europe and China.

34 Table 1. China‐Europe freight train links Distance Time of Operation Freight train links Year of starting (Kilometres) (Day) Chongqing— 2011 11179 16 Duisburg Wuhan— 2012 10700 15 Pardubice/Lodz Suzhou‐Warsaw 2012 11200 14

Changsha‐Duisburg 2012 11808 18 Zhengzhou 2013 10245 15 ‐Hamburg Chengdu‐Lodz 2013 9965 14

Yiwu‐Madrid 2014 13052 21

Harbin‐Hamburg 2015 9820 15‐17

Xining‐Antwerp 2016 9838 12

Baoding‐Minsk 2016 9500 12‐14

Guangzhou‐Moscow 2016 11500 15

Yiwu‐London 2017 12451 18‐20 Source: collected from China’s media.

Trade and Investment The trade volume between China and other Belt and Road countries in 2014‐2016 has exceeded US$3 trillion. Trade between China and the countries along the Belt and Road totalled about 913 billion U.S. dollars in 2016, more than a quarter of China’s total trade value. The Chinese enterprises have invested more than 50 billion U.S. dollars in the countries along the Belt and Road and helped build 56 economic and trade cooperation zones in 20 of those countries, generating nearly 1.1 billion U.S. dollars in tax revenue and 180,000 local jobs. China’s direct investment

35 in 49 countries of the Belt and Road in term of non‐financial category amounted to 14.82 billion USD, increased by 18.2% over the previous year. China’s direct investment in 53 countries of the Belt and Road in term of non‐financial category reached 14.53 billion, decreased by 2% over the previous year. The turnover of overseas project contracting 2014‐2016 increased at a steady pace; it reached 64.4 billion USD in 2014, 69.2 billion USD in 2015 and 76.0 billion USD in 2016. Newly‐signed contracts of the overseas projects amounted to 126 billion USD, increased by 36% over the previous year. Based on the information from China’s Ministry of Commerce, China has established 75 overseas economic and trade cooperation zones in 35 countries and regions. The overseas economic and trade zone has benefited the host countries, brought tax revenue more than $100 billion, created 950,000 jobs by the end of the year 2016 (Li, Wang 2017). Sino‐Belarus Industrial Zone started in 2012, is perceived as a bright pearl along the New Silk Road. Sihanoukville Special Economic Zone in Cambodia jointly operated by Jiangsu Taihu Cambodia International Economic Cooperation Investment Co., Ltd. and Cambodia International Investment Development Group Co., Ltd. has attracted 109 firms to settle down, created jobs for 16,000 people, become the main centre for the in Cambodia. It strives to be the demonstration project of the Belt and Road Initiative. Wanhua Group founded China‐Hungary Borsod economic and trade cooperation zone in Hungary, which has drawn 18 enterprises to the industrial zone. The state‐ owned enterprises are very active in joining the initiative; it is hard to find out the place of the small and medium‐sized enterprises. Now, the situation may change. In August 2017, the Ministry of Industry and Information Technology and China Council for the Promotion of International Trade jointly kicked out the special activities to support the small and medium‐sized enterprises to engage in the building of One Belt and One Road. The main areas of cooperation will focus on new information technology, biology, new energy, new materials, etc.

Financial Integration One of the priorities of the Belt and Road Initiative is infrastructure connectivity. However, building or improving infrastructure requires a large sum of investment and it is very important to find adequate ways to finance

36 the infrastructure project. China initiated the founding of The Asian Infrastructure Investment Bank (AIIB), which is aimed to provide finance to the infrastructure projects in Asia. Also, China founded the Silk Road Fund. The Asian Infrastructure Investment Bank has provided US$1.7 billion of loans for 9 projects in the Belt and Road participating countries. The Silk Road Fund has made US$4 billion of investment, and the 16+1 financial holding company between China and Central and Eastern European countries has been inaugurated. The Belt and Road initiative has become one of the important factors to enhance the RMB internationalization. Newly released data by SWIFT RMB Tracker shows that process of RMB internationalization slowed down in last 2 years, with the proportion of international currency payments (customer initiated payments and institutional transfers) denominated in RMB falling from 2.09% in June 2015 to 1.98% in June 2017. Despite the trend, it is reported that more than 1,900 financial institutions worldwide are using the RMB for payments as of June 2017. Out of the 1,900 cited, nearly 1,300 institutions are making RMB international payments with China or Hong Kong, representing a 16% increase from June 2015. It can be observed that four Central Asian States: Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan are showing positive signs in terms of RMB usage for Credit Transfer Payments as those countries are part of the Silk Road Economic Belt. RMB Credit Transfer Payments sent by China to Indonesia, Malaysia, Thailand and Vietnam are increasing substantially; other maritime Silk Road states such as Egypt, India and Greece have limited use of RMB payment. As for the European countries, there is a growth in RMB Credit Transfer Payments from China to Germany, Poland and the Czech Republic and a reduction from China to the , France and Italy (SWIFT 2017).

People‐to‐people exchange Historically, the Silk Road serves as a passageway of cultural exchange. In order to revive the Silk Road in the new context, it is imperative to strengthen people‐to‐people exchanges along the Belt and Road. China established 11 cultural centres in 11 countries of the Belt and Road; it declared it will establish additional 13 cultural centres along the New Silk Road by the end of 2020. China tries to tap the potential for cooperation in the cultural industry and trade of cultural goods, increases the scope

37 and scale of cultural exchange. China provides the Silk Road government scholarships for 10,000 students from countries of the Belt and Road. Some local governments also give scholarships for students and scholars, for example, Beijing municipal government set up a “Belt and Road Scholarship” to fund academic programs in fields like aviation, railway operation, law, finance, electronic information engineering and traditional Chinese medicine. The Hong Kong government allocated HK$ 1 billion to launch the One Belt & One Road scholarship to students from the countries along the maritime Silk Road. Some universities offer Silk Road scholarships to students in countries of the Belt and Road. The Ministry of Education encourages higher education institutions under its direct jurisdiction to formulate the One Belt and One Road action plan for education. The BRI has ignited research interest. The International Liaison Department of the Communist Party of China, China’s Development Research Centre of the State Council, Chinese Academy of Social Sciences, and Fudan University jointly launched the “One Belt, One Road” Think‐ tank Alliance in 2015. It is estimated that more than 300 One Belt and One Road research platforms from scientific research institutes and higher education institutions were founded after 2013. China’s think‐tanks have intensified dialogue and exchanges with their foreign counterparts over the Belt and Road Initiative, so many conferences, symposiums and seminars were held both in China and abroad.

CHALLENGES FOR THE BELT AND ROAD INITIATIVE

China’s leadership has the determination to put such a grand vision into practice, however, the implementation of the Belt and Road Initiative is more complicated and difficult than anticipated. China has to confront different challenges with regard to the Belt and Road Initiative. The first question of all is how to dodge geopolitical risks. Despite the Belt and Road Initiative is not a geopolitical project, China has to be vigilant to the potential geopolitical risks. If we look at China‐coined Silk Road economic belt, the different level of geopolitical threats can be observed. Europe as the destination for the continental Silk Road has no threats of war, but in the periphery of Europe, especially in the Balkans, the ethnic hostility that derived from historical grievance has not disappeared and a

38 weak statehood and failed state could pose threats to domestic peace and regional stability. The rivalry of great powers may complicate the situation in the region; awaken the memory of the powder keg. Despite Central European countries and the Baltic States are member states of NATO, these countries have experienced the security anxiety after Russia’s annexation of and intervention of Ukraine. NATO has reinforced its military presence in some Central and Eastern European states in order to reassure its security commitment in the last couple of years. Although there are no imminent threats of conflict and war in Europe, animosity and mistrust between Russia and the West overshadow the continental Europe. In the former Soviet space, some countries are still gripped by the frozen conflicts, the legacy of the breakup of the Soviet Union. As for the Central Asian states, terrorism, separatism and religious extremism are the main menaces for the Central Asian states. There are geopolitical risks in the maritime Silk Road. China has committed to peaceful resolution of a dispute with some ASEAN countries in the South China Sea. As Chinese saying states ‐ the tree desires stillness but the wind will not cease. The United States continues to pursue its geopolitical interests in the South China Sea by Navy patrol, in the name of the defence of free navigation. Therefore, the geopolitical risks and security threats have to be taken into account regarding China’s firm plans to undertake large‐scale projects in the countries of the Belt and Road. The second question is how to avoid political risks. The Belt and Road Initiative encourages Chinese firms to seek economic opportunity along the new Silk Road. Many countries express their willingness to welcome Chinese firms, nevertheless, the journey of Chinese firms along the new Silk Road is full of risks, and one of them is a political risk. Political instability, political crisis, political turmoil and regime change may change the economic environment in different ways, in the case of extreme, the property of foreign firms may be confiscated, and the contracts can be changed and annulled. Political intervention in economic activities, intertwined relationship between politics and business, red tape, corruption, cronyism, favouritism create uncertain expectations for firms and increase the costs of operation. Thus, Chinese firms have to be wary of political risks. The third question is how to make use of different frameworks for cooperation. The Belt and Road Initiative has transformed China’s

39 diplomacy, it can be said the BRI repackages China’s foreign policy. As China formed different partnerships with an individual country or a group of countries, various cooperative frameworks exist; these cooperative frameworks can be used to promote policy dialogue over the Belt and Road Initiative. If we take stock of the cooperative frameworks, we can make following list: China‐EU strategic partnership, China‐CEEC cooperation (16+1 format of cooperation), Sino‐Russian comprehensive strategic coordinative partnership, Shanghai Cooperation Organization, China‐Asean cooperation (10+1), and other different bilateral partnership. These frameworks for cooperation can serve as the platform for policy communication over OBOR. The fourth question is how to deal with different stakeholders. To make the Belt and Road Initiative work, China has to deal with different stakeholders. Frankly speaking, more or less, the global economy is under the influence of big players, for example, the United States as an architect of the current global economic order, the European Union as a developed regional group, Russia as a stakeholder in the former Soviet space. As the newcomer of the global economy, China tries to expand its economic influence abroad and the Belt and Road Initiative may contribute to China’s firms to go globally. It may increase competition with other heavyweights; some stakeholders may express their doubt and anxiety over the BRI and its possible economic consequences. If we look at the EU common message over the Belt and Road Forum issued last May, the EU still has qualms over the BRI, its support of cooperation with China over OBOR is conditional. It states “We support co‐operation with China on its “One Belt, One Road” initiative on the basis of China fulfilling its declared aim of making it an open initiative which adheres to market rules, EU and international requirements and standards, and complements EU policies and projects, in order to deliver benefits for all parties concerned and in all the countries along the planned routes” (EEAS 2017). The recent attempt to veto foreign investment in the EU and tighten oversight of foreign acquisition by “Big Three” (Germany, France and Italy) in the EU and European Commission shows protectionism is on the rise. It will have dramatic impacts on China’s cooperation with the EU over OBOR. The Eurasian Union is Russia‐led regional organization, so understanding of Russia’s interests and attitude is quite important for the synergy between the Belt and Road Initiative and the Eurasian Union. The right approach to deal with stakeholders is to

40 accommodate their interests, find out the common ground, and seek mutually beneficial cooperation. If the stakeholders resort to unfair practice, China should take counter‐measures. The fifth question is how to reconcile political rationale with economic laws. The Belt and Road Initiative has its political rationale, now it has already become a nationwide initiative, different layers of government have taken measures to implement the initiative. In terms of political logic, it is desirable to achieve specific goals at a fast pace when the costs of implementation can be ignored. However, in terms of economic logic, this endeavour has to be cost‐effective; loss‐making is unacceptable whatever the reason. Even state‐owned enterprises and commercial banks confront with hard budget constraint, bear full responsibility for its business decisions. This raises a question what the government and firms can do in the implementation of the Belt and Road Initiative. The government can help firms in many ways, for example, it can facilitate policy coordination concerning the Belt and Road project, provide relevant information for firms, give financial support to firms. Firms are the major players in the implementation of the Belt and Road Initiative. It is up to entrepreneurs to make business decisions based on commercial principles. The sixth question is how to find adequate methods of financing large projects. As the Belt and Road Initiative emphasize infrastructure connectivity, investment in infrastructure involves large sums of capital and long payback period. How to finance large infrastructure is a huge challenge for the Belt and Road Initiative. Except for existing institutions such as China Development Bank and Export‐Import Bank of China, China did form different tools of financing in last four years. China launched the Silk Road Fund (US$ 40 billion) in 2014; the fund mainly comes from foreign exchange reserve. China founded the Asian Infrastructure Investment Bank (AIIB) in October 2015. The AIIB focuses on infrastructure investment in Asia, and the registered capital is US$ 100 billion. The New Development Bank founded by BRICs in 2015 serves as a new multilateral development bank, it can finance infrastructure projects. So far, the three main investment vehicles have exercised prudential in making investment and bridging the gap of financing infrastructure remains an issue. The Belt and Road Forum paid attention to the issue of financing. The Guiding Principles on Financing the Development of the Belt and Road were passed by the Ministers of

41 Finance from 27 countries during the Belt and Road Forum. The Ministry of Finance of China signed the memorandum of understanding on collaboration on matters of common interest under the Belt and Road Initiative with the Asian Development Bank, the Asian Infrastructure Investment Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the New Development Bank and the World Bank Group. It was announced during the Belt and Road Forum that The China Development Bank will set up the Belt and Road Multi‐currency Special Lending Scheme for Infrastructure Development (100 billion Yuan equivalent), the Belt and Road Multi‐currency Special Lending Scheme for Industrial Cooperation (100 billion Yuan equivalent), and the Belt and Road Multi‐currency Special Credit Lines for Overseas Financial Institutions (50 billion Yuan equivalent), The Export‐Import Bank of China will set up the Belt and Road Multi‐currency Special Lending Scheme (100 billion Yuan equivalent) and the Belt and Road Multi‐currency Special Lending Scheme for Infrastructure Development (30 billion Yuan equivalent). It is estimated that there is US$ 5 trillion shortfall in infrastructure in Asia and its periphery, the gap is even wider in the Eurasian continent. In this regard, China needs international cooperation to finance the OBOR project. The seventh question is how to cope with the governance challenge. The Belt and Road Initiative has something to do with governance. Some scholar points out the institutional challenge for governing cross‐border connectivity. It is said that improving infrastructure and connectivity “requires policy reforms in countries which want to benefit from stronger integration, and platforms among financing institutions to foster project development and common standards for financing as well as for environmental, social and governance standards”. The Belt and Road initiative can move from bilateral Chinese initiative to “multilaterals” mechanism which would include private business and national and local government institutions (Wolff 2016). It should be admitted that the process of institutional change is evolutionary; it may be time‐consuming for the emergence of so‐called multilaterals mechanism because the countries of the Belt and Road have their own laws and regulations under the influence of the regional organization. The eighth question is how to balance between ambition and capacity. There is no doubt that the Belt and Road Initiative is an ambitious vision.

42 However, it will be an arduous journey to desirable objectives, because the Belt and Road Initiative involves 65 countries, which represent around 62% of the world’s population and 30% of the global GDP, it covers almost everything from political communication to trade and investment, from infrastructure connectivity, financial integration to cultural exchange. It can be called system engineering, on the one hand, it requires top‐level design, and on the other hand, it requires a bottom‐up response. Implementation of the Belt and Road Initiative itself is a learning process for decision‐makers at different levels as well as different actors, coordination between central government and local government, coordination among different ministries, the synergy between government and business, the balance between internal development and external exploration are not easy. Therefore, the urgent task is capacity‐building. China needs more qualified officials, who are familiar with international business and international finance, China needs more innovative entrepreneurs, who are capable of exploring overseas market, China needs more internationally renowned enterprises, which are competitive in global market, China needs to more outstanding bankers and financiers, who are good at international financial services, China needs more learned scholars and students, who are proficient in foreign culture and languages. China has started the journey, China can learn by doing while China can focus on capacity building in different aspects. The Belt and Road Initiative is referred as a “project of the century”, it is aimed to move China at the centre of a global network of commerce, trade, transport and infrastructure. To some extent, this initiative has transformed China’s foreign policy from Deng Xiaoping’a policy “hiding its light, maintaining a low profile, never claiming leadership” to more proactive policy. China does want to assert its deserved position in the international arena without destabilizing current global order, The Belt and Road Initiative is perceived as global public goods that China provides to the world. Ideas of extensive consultation, joint action and shared benefits are highly evaluated. In terms of evolving global economic order, the BRI provides an alternative for the global economic order against the backdrop of the rising wave of trade protectionism, economic nationalism and populism. Because the Belt and Road Initiative has lasted less than 4 years, it is the first step for a long march, so it is too early to evaluate its impacts and consequences. In spite of great efforts made by China,

43 scepticism about its intention and practice does not disappear. Implementation of the Belt and Road Initiative still faces various challenges. As President Xi Jinping put, “The Belt and Road Initiative is a great undertaking which requires dedicated efforts. Let us pursue this initiative step by step and deliver outcome one by one. By doing so, we will bring true benefit to both the world and all our people” (Xi 2017). In my opinion, China will match words with action, show the world that the Belt and Road Initiative can benefit global development. In the long run, China can smartly address some concerns, cope with challenges.

BIBLIOGRAPHY

EEAS, Belt and Road Forum—EU Common Message, Gang Li, Tuo Wang, Yidaiyilu Jinmao hezuo fazhan de xianzhuang yu qianjing (Current Situation and Prospect of Economic and Trade Cooperation Development under “Belt and Road” Initiative, Kaifaxing Jinrong Yanjiu (Development Finance Research), No.3, 2017. Internet: http://news.xinhuanet.com/english/2017‐05/14/c_136282982.htm. Internet: http://www.orfonline.org/expert‐speaks/china‐bri‐forum‐pur‐ suing‐change/. Internet: https://eeas.europa.eu/delegations/china_en/26051/Belt%20 and%20Road%20Forum—EU%20common%20messages. Internet: https://www.die‐gdi.de/uploads/media/Belt_and_Road_V1.pdf. Jinping, Xi, The full text of the keynote speech given by Chinese President Xi Jinping at the opening ceremony of the Belt and Road Forum for International Cooperation, Passi, Risaina, China’s BRI Forum: Pursuing Change from Within, SWIFT, RMB Internationalization: Can the Belt and Road revitalize the RMB? Internet:https://www.swift.com/news‐events/press‐releases/ rmb‐internationalisation_can‐the‐belt‐and‐road‐revitalise‐the‐rmb_. Wolff, Peter, China’s ‘Belt and Road’ Initiative ‐Challenges and Opportunities. Xinhua, Joint Communiqué of the Leaders Roundtable of the Belt and Road Forum for International Cooperation, Internet: http://news.xinhua net.com/english/2017‐05/15/c_136286378.htm.

44 SYNERGY EFFECT OF CHINA`S BELT AND ROAD INITIATIVE AND SUSTAINABLE DEVELOPMENT GOALS: CHINA`S EXPERIENCES AND IMPLICATIONS

SUN Jingying, Ph.D. Research Fellow Institute of World Economics and Politics Chinese Academy of Social Sciences, Beijing, China1

Abstract: This paper explores if substantial development benefits could be achieved by the synergy effect of China’s Belt and Road Initiative (BRI) and the UN 2030 Agenda. The BRI could accelerate the process and realization of the Sustainable Development Goals and further expand the provision of global public goods. The five priorities of BRI touch the core of global sustainable development framework and the associated set of SDGs. Moreover, the 2030 agenda complements the BRI by emphasizing the vitality of sustainability, which is critical for BRI`s credibility. Key words: Sustainable Development Goals; Belt and Road Initiative; Synergy Effect; 16+1.

INTRODUCTION

In recent years, global governance has developed with two key features: inclusiveness and sustainability. In 2015, UN has reached within its member states the major agreements to set the future course of global development, including the 2030 Agenda, the Paris Climate Agreement, and the Addis Ababa Action Agenda on financing for development. Different players across the world have committed to the Sustainable Development Goals (SDGs). China has increasingly emerged as a responsible player and public goods provider in global development cooperation and governance, which through the Belt and Road Initiative (BRI) will shed a significant impact on the international community. China’s economic development has gained the world recognition. China is now the world’s most populated country, the

1 E‐mail: [email protected].

45 second largest economy and the powerhouse of world economic growth and trade. Having experienced a double‐digit growth for almost three decades, China accounted for 12% of global GDP in 2013 (UNDP, 2015). Along with the economic rise, China has achieved remarkable development progress as well, attaining major Millennium Development Goals (MDGs; UNDP, 2015). Most notably, 439 million poor were lifted out of poverty between 1990 and 2011 in China.2 China’s economic status offers a further complement to its international development and common prosperity commitment. The Chinese economy has benefited from the inflow of FDI, and now China is a net exporter of FDI and an emerging donor of development aid. In its 2014 white paper (2010 to 2012), China has provided a total of 89.34 billion Yuan ($13.4 billion in current rates) in foreign assistance to 121 countries, over a third in grants, the rest in concessional loans.3 Multilateral cooperation is gaining momentum in China’s development scheme. Multi‐cooperation mechanisms such as G20, BRICS, CEEC‐China (16+1), and the Forum on China‐ Africa Cooperation and so on have demonstrated China’s long‐term promise to carry out sustainable development. China’s leading effort of the establishment of the multilateral institutions, such as the BRICS New Development Bank (NDB) and the Asian Investment Infrastructure Bank offers extra potential financial resources to implement the UN 2030 Agenda. The BRI and SDGs are organically intertwined and reinforced with each other. “Both strive to create opportunities, global public goods and win‐win cooperation. And both aim to deepen ‘connectivity’ across countries and regions: connectivity in infrastructure, trade, finance, policies and, perhaps most important of all, among peoples,” the Secretary‐General said at the Belt and Road Forum. The Goals of the sustainable development scheme could offer the guidance for policies and actions that will be carried out under the Belt and Road. With the initiative expected to generate vast investments in infrastructure, the world could seize the moment to assist countries to make the transition to clean‐energy, low‐carbon pathways – instead of locking in unsustainable practices for decades to come.4

2 This is calculated at the World Bank’s poverty line of $1.25/day. 3 White Paper on China’s Foreign Aid in 2014, Retrieved from Internet: http://www.scio. gov.cn/zfbps/ndhf/2014/document/1375013/1375013_1.htm 4 Retrieved from Internet http://www.un.org/sustainabledevelopment/blog/2017/05/at‐ chinas‐belt‐and‐road‐forum‐un‐chief‐guterres‐stresses‐shared‐development‐goals/

46 I BRI and the SDGs: Shared Vision for Global Development Table 1. BRI as One Platform for SDGs Implementation

BRI SDGs In line with UN Charters and international agreements; Principles Peace, inclusiveness and prosperity Economic growth, regional and global economic cooperation; Agenda Social progress and people’s lives; Environmental Protection and Climate Change. Unimpeded trade and financial integration; Infrastructure connectivity; Energy Modernization; Means of Implementation Focus on green and low‐carbon development; Focus on people’s livelihood through economic growth, employment, health and education, etc.

PRINCIPLES

Generally speaking, the BRI and the SDGs are all in accordance with the core principles and foundations of the UN Charter. It upholds the Five Principles of Peaceful Coexistence: mutual respect for each other’s sovereignty and territorial integrity, mutual nonaggression, mutual non‐ interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence. What is more, the BRI enriches the SDGs with a lot of potential achievements in key development fields. In this regard, not only does the BRI support and echo with the SDGs, but it also works in accordance with the SDGs priorities. The BRI works towards the same direction with SDGs by sharing the idea of greater economic, social and environmental enhancement. Through trade and investment facilitation and infrastructure connectivity, the BRI will generate promising outcomes, thus enhance the sustainable development of all BRI countries. Both the BRI and SDGs emphasize the importance of peace, inclusiveness and prosperity. The BRI is inclusive, and respect the roads and development modes chosen by individual countries. In the meanwhile, the BRI, through its unique

47 cooperation mechanism, tries to bridge the difference among countries, regions and civilizations. While the BRI offers an open cooperation platform that different countries, international and regional organizations could engage to make concerted efforts, it also adheres to the principles of seeking common ground while shelving differences and drawing on each other’s strengths, so that all countries can coexist in peace for common prosperity.

AGENDA

Economic Growth and Regional Economic Cooperation The BRI aims to promote the connectivity of the Asian, European and African continents and their adjacent seas, with a view to realizing the achievement of diversified, independent, balanced and sustainable development in these countries. The SDGs is founded upon the Millennium Development Goals and aims to complete what has not been achieved. The SDGs are integrated and indivisible, and try to balance the three dimensions of sustainable development: the economic, social and environmental aspects. The BRI is designed to uphold the global free trade regime and the open world economy in the spirit of open regional cooperation. It is aimed at promoting orderly and free flow of economic factors, the highly efficient allocation of resources and deep integration of markets; encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in‐depth regional cooperation of higher standards; and jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all. The SDGs place great emphasis on sustained economic growth, through cooperation and partnerships.

Social Progress and People’s lives The BRI is in the interests of the world community, which reflect the common ideals and the pursuit of human societies. To support the social progress and increase people`s lives, the BRI encourage Chinese enterprises to participate in the infrastructure construction in other countries along the Belt and Road, and make industrial investments there. The BRI support localized operation and management of Chinese companies to boost the

48 local economy, increase local employment, improve local livelihoods. The SDGs recognize that eradicating poverty is the greatest global challenge and an indispensable requirement for sustainable development. Besides, the SDGs is determined to end poverty and hunger, in all their forms and dimensions, and to ensure that all human beings can fulfill their potential in dignity and equality and in a healthy environment. Sustainable development goals (1) to end poverty in all its forms everywhere and (10) reduce inequality within and among countries all address these issues.

Environmental Protection and Climate Change Implementation of the BRI could promote ecological progress in conducting investment and trade, increase cooperation in conserving the eco‐environment, protecting biodiversity, and tackling climate change. Also, the BRI calls for conducting investment and trade, increasing cooperation in conserving the eco‐environment, protecting biodiversity, and tackling climate change. The BRI proposes that efforts should be made to promote green and low‐carbon infrastructure construction and operation management, taking into full account the impact of climate change on the construction. The SDGs are determined to protect the planet from degradation, including through sustainable consumption and production, sustainably managing its natural resources and taking urgent actions on climate change, so that it can support the needs of the present and future generations. (Goal 13) Take urgent action to combat climate change and its impacts reflect the UN`s effort in this field.

MEANS OF IMPLEMENTATION

Unimpeded Trade and Financial Integration The BRI is designed to create closer economic and trade ties between the participating countries, which will greatly boost the local economies and contribute to poverty reduction. China attaches importance to furthering such ties and building a more balanced, equal and sustainable trade system. Further cooperation in finance will create a stable financial environment for the Belt and Road Initiative. This will play a positive role in guiding various sources of

49 capital to engage in developing the real economy, in value chain creation, and in promoting the healthy growth of the global economy. The UN 2030 Agenda recognizes that the mobilization of financial resources, as well as capacity‐ building and the transfer of environmentally sound technologies to developing countries on favourable terms, are of vital importance. Public finance, both domestic and international, will play a vital role in providing essential services and public goods and in catalyzing other sources of finance. Efforts should be made to enhance the global partnership for sustainable development, mobilizing and sharing knowledge, expertise, technology and financial resources to support the achievement of the sustainable development goals in all countries, in particular developing countries.

Infrastructure connectivity The BRI prioritize facilities connectivity for implementing the BRI. On the basis of respecting each other’s sovereignty and security concerns, countries along the Belt and Road could improve the connectivity of their infrastructure construction plans and technical standard systems, jointly push forward the construction of international trunk passageways, and form an infrastructure network connecting all in Asia and between Asia, Europe and Africa step by step. The SDGs Goal 9. – build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation, also reflect this approach. In order to realize this, the SDGs calls for the development of quality, reliable, sustainable and resilient infrastructure, including regional and trans‐border infrastructure, to support economic development and human well‐being.

Energy modernization The BRI advocates promoting cooperation in the connectivity of energy infrastructure, work in concert to ensure the security of oil and gas pipelines and other transport routes, build cross‐border power supply networks and power‐transmission routes, and cooperating in regional power grid upgrading and transformation. The BRI also advocates to increase cooperation in the exploration and development of coal, oil, gas, metal minerals and other conventional energy sources; advance cooperation in

50 hydropower, nuclear power, wind power, solar power and other clean, renewable energy sources; and promote cooperation in the processing and conversion of energy and resources at or near places where they are exploited, so as to create an integrated industrial chain of energy and resource cooperation. While for SDGs, Goal 7 is to ensure access to affordable, reliable, sustainable and modern energy for all. Specifically speaking, by 2030, the SDGs aims to ensure universal access to affordable and reliable energy services increase substantially the share of renewable energy in the global energy mix and expand infrastructure and upgrade technology for supplying modern and sustainable energy for all developing countries.

Green and Low‐carbon Development The BRI is committed to promoting green and low‐carbon infrastructure construction and operation management, taking into full account the impact of climate change on the construction, and promoting ecological progress in conducting investment and trade. The BRI advocates increasing cooperation in conserving eco‐environment, protecting biodiversity, and tackling climate change, to make the Silk Road an environment‐friendly one. For the SDGs, goal 6, 12, 13, 14, 15 all reflect the low‐carbon development issues.

Employment, Health, Education, etc. The BRI works on personnel exchange, education, and health and personnel development in a joint effort. For personnel exchange, the BRI works to promote extensive cultural and academic exchanges, personnel exchanges and cooperation, media cooperation, youth and women exchanges and volunteer services. Regarding education, the BRI is committed to promoting cooperation in jointly running schools (China provides 10,000 government scholarships to the countries along the Belt and Road every year), and increasing personnel exchange and cooperation between countries along the Belt and Road. For health issues, the BRI seeks to strengthen cooperation with neighbouring countries on epidemic information sharing, the exchange of prevention and treatment technologies and the training of medical professionals, and improve our capability to

51 jointly address public health emergencies, and provide medical assistance and emergency medical aid to relevant countries, and carry out practical cooperation in maternal and child health, disability rehabilitation, and major infectious diseases including AIDS, tuberculosis and malaria. For the SDGs, goal 2, 3, 4, 5, 8, 11, 16 reflect the relative issues.

CHINA`S DEVELOPMENT PROGRESS AND EXPERIENCES IN SDGs.

As the largest developing country in the world, China has always given top priority to development. China attaches great importance to the 2030 Agenda. The 13th Five‐Year Plan was reviewed and approved by the Fourth Session of the 12th National People’s Congress in March 2016, linking the 2030 Agenda with domestic mid‐and‐long term development strategies. Right now, implementation of the 2030 Agenda is in full swing in China.

China`s Development Progress in General The Chinese government attaches great importance to implementing the 2030 Agenda, integrating it into the 13th Five‐Year Plan for Economic and Social Development and other mid‐ and long‐term development strategies. At the 2015 Global Poverty Reduction and Development Forum held in October 2015, President Xi Jinping announced that in the five years to come, China would lift all the 70 million‐plus people living under its current poverty line ‐ out of poverty. This marked an important step in China’s effort to implement the 2030 Agenda. The Chinese government has been implementing the 2030 Agenda in all sectors and achieved early harvest on several targets of the Sustainable Development Goals. The economy has registered sound and steady growth. In 2016, China’s GDP reached 74.4 trillion RMB Yuan, boasting an increase of 6.7%, and contributing to more than 30% of global growth. Economic performance improved markedly in quality and returns. Employment grew faster than expected. A total of 13.14 million additional urban jobs were created over the course of the year, and the registered urban unemployment rate stood at 4.02% at the end of 2016, the lowest level in years. The Development of Innovation Demonstration Zones for Implementation of the 2030 Agenda for Sustainable Development was started. A growing number of people started new businesses and made

52 innovations, contributing to the robust growth of emerging industries. Work on employment and entrepreneurship yielded remarkable results, infrastructure networks were further improved, and new growth drivers gained stronger momentum. People’s living conditions have been improved. The income of rural and urban residents has grown steadily. In 2016, disposable income per capita increased by 6.3% in real terms. The number of rural people living in poverty reduced by 12.4 million. At this rate, China is expected to achieve the SDG goal on poverty eradication ten years ahead of schedule. The Maternal mortality rate was reduced to 19.9 per 100,000, and the infant mortality rate and under‐five mortality rate were reduced to 7.5 and 10.2 per 1,000 respectively, reaching relevant SDG targets ahead of schedule. China made continued progress in building a “Healthy China” and achieved full coverage of the serious disease insurance scheme. Quality of education ranked high in the world and the educational attainment rate reached the average level of middle‐ and high‐income countries. All‐around progress has been made in green development. The Chinese government has strengthened ecological conservation and energy saving, and mobilized the entire society to participate in the process. China has implemented “three major action plans” on tackling air, water and soil pollution in an effort to strengthen prevention and control of pollution. In 2016, China’s energy consumption and carbon dioxide emissions per unit of GDP fell by 5% and 6.6% respectively, over fulfilling the yearly targets. Remarkable achievements have been made in deepening international development cooperation. China has implemented the practical cooperation measures put forward by President Xi Jinping and other Chinese leaders at major international conferences, including the summits marking the 70th anniversary of the United Nations, the Johannesburg Summit of the Forum on China‐Africa Cooperation and the high‐level meetings of the 71st session of the United Nations General Assembly. In 2016, the Chinese government provided foreign aid for about 250 engineering and materials projects of various types, and dispatched approximately 5.000 managerial and technical personnel, medical team members, volunteers and other foreign aid experts, benefiting 156 countries, regions and international organizations. China successfully pushed for the adoption of the G20 Action Plan on the 2030 Agenda for Sustainable Development at the G20 Hangzhou Summit, putting development at a prominent position in the global macroeconomic policy framework for the first time. At the Belt and Road Forum for International Cooperation, China

53 announced a host of major measures for advancing international development cooperation, injecting strong impetus into the global efforts to implement the 2030 Agenda. China hosted the High‐Level Roundtable on South‐South Cooperation and the Symposium on the 2030 Agenda for Sustainable Development at the UN Headquarters in New York, promoting the global partnership for the implementation of the 2030 Agenda. China also participated in the first round of UN Voluntary National Reviews and promoted the development of the Innovation Demonstration Zones for Implementation of the 2030 Agenda for Sustainable Development in China.

China`s Development Experiences China’s domestic inter‐agency coordination mechanism comprised of 43 government departments has been established for the implementation of the 2030 Agenda. China’s experience in achieving the MDGs can be summed up as follows: (1) Taking development as the top priority. China, with a population of over 1.3 billion, is the largest developing country in the world. Development is the top priority of China in governance and national revitalization, and the key to resolving all major issues. China believes that peace and development are the themes of the era back when it first adopted the Opening Up and Reform Policy in 1978. To preserve peace and promote development bears on the well‐being of all nations and represents the common aspirations of all peoples. It is an irresistible trend of history. A new world war is unlikely in the foreseeable future. It is realistic to bring about a fairly long period of peace in the world and a favourable climate in areas around China. In light of the domestic and international conditions, the Chinese government and people have developed a series of new development concepts, such as the Scientific Outlook on Development, set the ambitious goal of building a moderately prosperous society in all respects, and firmly established the development concept featuring innovative, coordinated, green, open and shared development. China has made the overall plans of building socialism with Chinese characteristics and promoting all‐round economic, political, cultural, social, and ecological progress. (2) Integration of MDGs/SDGs into national planning. The Chinese government formulates five‐year national plans according to the needs of

54 economic and social development in different periods and mobilizes all kinds of resources for the implementation of these plans. In addition, China has also made a range of specific plans to effectively promote the development of relevant sectors, including the Outline for Development‐oriented Poverty Reduction for China’s Rural Areas (2011‐2020), Outline on Mid‐and‐Long‐ Term Food Security in China (2008‐2020), Outline on Mid‐and‐Long‐Term Educational Reform and Development Plan in China (2010‐2020), and Twelfth Five‐Year Plan for Health Sector Development. (3) Proper handling of the government and Market relations, making the market play the decisive role in resource allocation. China became a member of the World Trade Organization (WTO) on 11 December 2001. The date was a key moment in China’s development, as the Chinese government agreed to open and liberalize the Chinese economy in order to better integrate into the world economy. China committed to adhering to the rules and obligations of the WTO system, which is based on market economy principles, and promoting a transition towards the socialist market economy. The socialist market economy has efficiently mobilized various factors of production and provided guarantees for the implementation of the MDGs. (4) Establishment of a sound system of laws and regulations. The Chinese government has successively promulgated or amended the Compulsory Education Law, the Law on Protection of Women’s Rights and Interests, the Employment Promotion Law, the Labour Contract Law, and the Environmental Protection Law to provide a sound legal guarantee for the implementation of the MDGs. The government has also engaged all social actors in the implementation efforts through active guidance, multiparty cooperation, publicity and other means. At the same time, non‐governmental groups are also involved in a bottom‐up manner to achieve goals such as eradicating poverty and hunger and advancing environmental protection. (5) Pilot zones and experimental projects. Pilot zones and experimental projects constitute an important institutional innovation in China’s reform and opening‐up process. To achieve MDGs and sustainable development, China has launched a series of experimental programs in economic, social and environmental protection fields. For example, China has set up the China (Shanghai) Pilot free trade zone, sustainable development experimental zones and 42 low‐carbon pilot provinces, autonomous regions and cities, with the aim of producing duplicable and scalable models for nationwide development.

55 (6) International cooperation and mutual exchange of development experience. The Chinese government has always implemented the MDGs with an open‐minded and win‐win attitude. Over the past 15 years, it has strengthened in‐depth, wide‐ranging and multi‐form exchanges and cooperation with foreign government agencies, international organizations, businesses, research and consultative institutions and civil society organizations, in order to share experiences and lessons with each other and jointly promote the realization of the MDGs. China’s MDGs achievements have not only advanced domestic development in an all‐ round way, but also made a remarkable contribution to international development cooperation and global progress in the MDGs. China’s successful practices have boosted the Chinese government and people’s confidence and determination in pursuit of socialism with Chinese characteristics and provided valuable experience for other developing countries to step up all‐round development and find a development path suitable to their own national conditions. It has been widely acclaimed by the international community, especially other developing countries.

INTERNATIONAL COOPERATION: SYNERGIES BETWEEN BRI AND THE 2030 AGENDA

China is advancing the BRI in a way that will facilitate the implementation of the 2030 Agenda in countries along the two routes, and supporting the efforts by regional commissions and specialized agencies of the United Nations to formulate action plans for the goals and targets that fall within their respective regions or fields. By 2022, China will jointly launch about 10 country programs under the South‐South cooperation framework with the United Nations Food and Agriculture Organization, and conduct cooperation with countries and regions along the Belt and Road routes in such areas as crop breeding, animal husbandry, fishery and processing and trade of agricultural products.

The BRI as New Globalization Paradigm The BRI is emerging as the new paradigm for a newly globalized World economy. Traditional globalization is largely based on competition and a

56 country situational dominance possessing a unique comparative advantage. The BRI’s political and economic context will advance a different foundation: cross country dynamic synergy, in which the participating countries not only rely on their comparative advantages, but also develop new advantages in the network. For example, with the facility and infrastructure connection, land‐locked countries which have no direct access to the international market now can be more efficiently integrated into the global value chains. The BRI will, to all appearances, require different conceptual foundations from those that guided Reagan’s globalization efforts and the waves that followed. The initiative is presented as the conceptual and operational framework for the restructuring of the global economy. Foundations are designed to be all inclusive. There is capital, trade, technology and human resource elements. There is outward flows, inward flows, bilateral flows and regional flows. It is projected as “a Chinese idea but for everyone’s benefit”. China is committed to maximizing win‐win cooperation by pushing forward the Belt and Road Initiative and seeking the optimal combination of the initiative with the development strategies of other B&R countries. Kazakhstan’s Bright Road economy policy, Saudi Arabia’s oil and gas program for its western region, Mongolia’s Prairie Road program, the EU’s Investment Plan for Europe, ASEAN’s Master Plan on ASEAN Connectivity 2025, Poland’s Responsible Development Strategy, Indonesia’s Global Maritime Fulcrum Strategy, Turkey’s Middle Corridor Initiative, Serbia’s Reindustrialization Strategy, APEC’s Connectivity Blueprint for 2015‐2025, the Asia‐Europe Connectivity Initiative, are all complementary to China’s Belt and Road Initiative. China welcomes cooperation with related countries and international organizations in implementing these strategies.

Synergy Effect Aligning the BRI and SDGs Alignment of the SDGs and the BRI could create multiple advantages and potentials, as follows: (1) China’s Credibility as Responsible Player and Public Goods Provider Currently, China has increased its engagement in wide‐ranging global affairs. Yet, China’s increasingly active role also rises up concerns and criticism and sometimes might cause potential tension. The China‐led BRI is not only

57 received with enthusiasm but also with concerns. The SDGs and BRI alignment could help China to enhance its international profile as a leading and a responsible player in the world development framework, together with the UN`s participation. This will lessen regional and geo‐political anxiety and consolidate multilateral cooperation. (2) Better Solution for Environmental and Social Risks The implementation of large BRI infrastructure projects should be sensitive to underlying the environmental risks and be compatible with disadvantaged or vulnerable groups. The SDGs can provide the guiding principles for every phase of the BRI projects, including planning, initiation, planning, execution, monitoring& control and closure. (3) Strengthened Institutional Arrangements and Policy Coherence The implementation of the BRI needs various mechanisms as institutional support. China has made tremendous progress thus far. For example, in financing, China has taken the initiative to establish the Asia Infrastructure Investment Bank (AIIB) and has scaled up the USD 40 billion Silk Road Fund by another RMB 100 billion which is dedicated to supporting the BRI projects. The China Development Bank and the Export‐Import Bank of China will also set up special loan schemes of RMB 250 billion equivalents and RMB 130 billion equivalents respectively, so as to support the Belt and Road cooperation. However, with the deepening of the BRI, it is foreseeable that more bilateral, multilateral, and regional mechanisms will be set up to facilitate the relevant goals. In this way, aligning the BRI and SDGs can enhance the cross‐regional coherence of the BRI initiatives with the locally adapted SDG agenda while improving institutional capacities to maximize the BRI’s sustainable development impact. As a global, multilaterally adopted agenda, the SDG policy framework can facilitate dialogue and enhance communication on the BRI, and can also help effectively align different national development strategies with global and regional development goals. Building strong ties in and among the BRI countries ensures buy‐in and commitment to common sustainable development objectives. (4) Monitoring and Assessment The BRI offers the opportunity to maximize development outcomes, but it also needs follow‐ups, feedbacks upon progress, results, and lessons. There

58 are 7 Sustainable Development Goals and 169 targets under the UN 2030 Agenda, which will not just stimulate action over the next fifteen years in areas of critical importance for humanity and the planet, but also will offer the guidance and implications for other multilateral development initiatives, such as the BRI. A carefully chosen set of SDGs indicators could contribute to the monitoring and assessment process, to determine outcomes can also provide info in a sound and timely manner for further perfection of the BRI.

CHINA AND CEE COOPERATION UNDER THE BRI AND UN 2030 AGENDA

Cooperation on the BRI has taken place at multiple levels, using existing regional organizations such as the Shanghai Cooperation Organization (SCO) for Central Asia; ASEAN for ; the China‐Arab States Cooperation Forum (CASCF) for the Middle East; the Forum on China‐African Cooperation (FOCAC) for Africa; and, to a much lesser extent, the BRICS (Brazil, Russia, India, China, and South Africa) format. Regarding Europe, the 16+1 format (comprising 11 central and eastern European (CEE) countries, five Western Balkan countries and China) was set up in 2012, one year before the BRI was launched. At the 2015 EU‐China summit, the BRI was incorporated as a new dimension to the EU‐China strategic partnership.5 The BRI provides a framework for new multilateral institution‐building, such as the China‐led AIIB and the NDB. The BRI‐related financial cooperation between China and Europe may further expand as a result of China’s membership in the European Bank for Reconstruction and Development (EBRD) since January 2016 and the recent opening by the European Investment Bank (EIB) of an office in Beijing. The BRI also create a chance for the 16 countries to cooperate with China and other stakeholders through other formal development framework. One such cooperation platform could, for instance, be through the UN 2030 Agenda. Ultimately, the UN 2030 Agenda aims at a profound, comprehensive, global socioeconomic transformation. One of the key insights from the recent transformations in CEE countries is the transition to a market economy

5 One Belt, One Road (OBOR): China’s regional integration initiative, European Parliament Documents, retrieved from Internet: http://www.europarl.europa.eu/RegData/etudes /BRIE/2016/586608/EPRS_BRI%282016%29586608_EN.pdf. 2017/9/14

59 following the market rules and international laws6, with which China also shares similar path and history. China has already partnered with the UN in the context of the BRI and the SDGs—being universal in scope and in acceptance. The 16+1 Cooperation, with the BRI as its cooperation platform and the UN 2030 as the guidance, will for sure gain further momentum and credibility in future 16+1 cooperation.

CONCLUSION

What the BRI priorities: the policy coordination, infrastructure connectivity, unimpeded trade, financial integration and people‐to‐people bonds, address the fundamental issues of the current global sustainable development, especially the SDGs. The sustainability, which is the core of SDGs, also raise the bar for the BRI`s credibility. The SDGs encompass economic, social and environmental dimensions, the achievement of which calls for cooperation at local, regional and global levels. In this sense, the BRI serves as a platform for further integration of economies and societies. The BRI’s intrinsic alignment with the Agenda 2030 can make it more than an initiative. It can be a crucial coordinating device for drawing up infrastructure development plans. The BRI can provide the framework for a larger set of countries to organize trade, investment, social and environmental interaction with the greater good and long‐term human development in the focus. In general, the inherent consistency between the BRI and SDGs offers a win‐win solution. Carrying out the BRI gives the SDGs country a level content and will enhance cooperation at the local and regional level. The implementation of the BRI projects will also offer solutions to and impact on critical social issues such as inequality and inclusiveness. One of the BRI principles is to fully embrace human development, which will transcend above the short‐term economic or political interests, and win the recognition and support from all participating countries and stakeholders. China, in this process, will raise its image as a responsible and leading country, and update a new multilateral development financing system, which will offer profound shifts on ODA, as well as other funding resources.

6 For Sustainable Development “Transforming Our World”, A position paper from the Regional Environmental Center for Central and Eastern Europe, Page 2, retrieved from: http://documents.rec.org/publications/SDGPositionPaperENG_May2916.pdf

60 BIBLIOGRAPHY

2017 Report on the Sustainable Development of Chinese Enterprises Overseas, retrieved from Internet: http://www.cn.undp.org/content/ china/en/home/library/south‐south‐cooperation/2017‐report‐on‐the‐ sustainable‐development‐of‐chinese‐enterprise.html Horvath, B., Identifying Development Dividends along the Belt and Road Initiative, retrieved from Internet: http://www.cn.undp.org/content/ china/en/home/library/south‐south‐cooperation/identifying‐ development‐dividend s‐along‐the‐belt‐and‐road‐initia.html. China’s National Plan on Implementation of the 2030 Agenda for Sustainable Development, retrieved from Internet: http://www.un.org.vn/en/ publications/doc_details/543‐the‐national‐action‐plan‐for‐the‐ implementation‐of‐the‐2030 ‐sustainable‐development‐agenda.html China’s Report on Progress in the Implementation of the 2030 Agenda for Sustainable Development, August 2017, Beijing For Sustainable Development “Transforming Our World”, A position paper from the Regional Environmental Centre for Central and Eastern Europe, Page 2, retrieved from: http://documents.rec.org/publications/SDG PositionPaperENG_May2916.pdf One Belt, One Road (OBOR): China’s regional integration initiative, European Parliament Documents, retrieved from Internet: http://www.europarl. europa.eu/RegData/etudes/BRIE/2016/586608/EPRS_BRI%282016%29 586608_EN.pdf. 2017/9/14 UNDP. (2015). Rebalancing Global Economic Governance – Opportunities for China and the G20 beyond 2015. Beijing: United Nations Development Programme. UNDP. (2015). Report on China’s Implementation of the Millennium Development Goals (2000‐2015). Beijing: United Nations Development Programme. White Paper on China’s Foreign Aid in 2014, Retrieved from: http://www. scio.gov.cn/zfbps/ndhf/2014/document/1375013/1375013_1.htm Action plan on the Belt and Road Initiative, 2016/07/21, retrieved from Internet: http://english.gov.cn/beltAndRoad/

61 CHINA’S SPACE PROGRAMME – BORN OUT OF NATIONAL NEEDS POISED TO SUPPORT GLOBAL PROGRESS

Jacqueline MYRRHE Independent space journalist, Germany William CAREY, Ph.D. CEO Five Owls Technology Limited, United Kingdom

Abstract: The 21st century is believed to become the Asian century. In the last few years, China has introduced several economic and political initiatives which promote its rise as a global power. Embedded in its development and rise is the national space programme. Western observers tend to look at China’s space programme as being small, slow, technologically less advanced and not significant enough. Is that correctly reflected or what is it then? Is China’s space programme able to support not only national advancement in science and technology but also support global progress? Which role does the Belt and Road Initiative play in this process? Is it possible to predict China’s near‐term future in space? Which contributions can space technology make to empower people to secure their existence independently and freely and consequently, create the ‘democratisation of the economy’? The authors, through consulting open source information and performing in‐depth analyses, look to find qualified answers to these questions. Key words: China, space programme, space history, space and technology strategy, future perspectives, economy.

REVIEW – THE BEGINNINGS OF CHINA’S EFFORTS IN SPACE

To understand China’s space programme, it is necessary to take the societal and economic context into consideration. This is particularly important for the time after World War II until the turn of the millennium. At a time when Western nations in Europe, the U.S. and Japan enjoyed economic development and prosperity, the Chinese economy rode on a rollercoaster during the periods of ‘The Great Leap Forward’ and the ‘Great Proletarian Cultural Revolution’. Since 1958 the Chinese economy has

62 experienced moderate growth. Initiated in 1958, ‘The Great Leap Forward’ project was supposed to catapult China within 15 years into the league of leading industrial nations. After only 3 years, however, the economy of the country was broken. The following Five‐Year‐Plan brought some relief, until in 1966 the ‘Great Proletarian Cultural Revolution’ took its course. The persecution of intellectuals and academics damaged a whole generation of experts, teachers, and the scientific elite – most of China’s best talented. The economy during the ‘Cultural Revolution’ did not completely stand still, but the progress did. Only after the death of Mao Zedong the situation could halt. China’s firsts in space are embedded into these dramatic decades of the nation’s post‐war development.

DONG FANG HONG – THE EAST IS RED

As an outcome of the Korean War, China felt under nuclear threat and asked the Soviet Union for technical assistance in the development of its own nuclear capabilities including long‐range missiles. The Chinese request was granted. The launch of Sputnik 1 on 4 October 1957 by the Soviet Union sincerely impressed the ‘Great Helmsman’, Mao Zedong. Such a satellite he wanted to have for his own nation, preferably with the support of the Soviet Union. China’s space ambitions were not driven by a race. For China, the underlying principle was to catch up with leading technology developments in the world. The Chinese Academy of Sciences (CAS) set‐up a task force for the technical and scientific development of an indigenous satellite, connected to a long‐term and comprehensive national satellite programme. CAS was fully aware of the relevance of satellites for future national scientific and technical development. Despite the Soviet Union supporting China’s military missile programme, there was no assistance in the civil space sector. Worse, because of the ‘Great Leap Forward’ too few allocated resources, material, and workforce made it impossible for CAS to succeed with a national satellite. In 1961, after the ‘Great Leap Forward’, the Chinese leadership focused on the so‐called ‘Four Modernisations’, among which was also science and technology. Despite that, the satellite work group within the CAS was still struggling. In 1966 the ‘Cultural Revolution’ deeply impacted the Chinese society and shook its foundations. Intellectuals were targeted and scientific institutions became places of conflict and violence. After 12 years of hard work,

63 impacted by economic and technical constraints and political and societal interference, China launched its first satellite Dong Fang Hong – DFH 1 on 24 April 1970. The 173‐kg satellite whose only task was to transmit the heroic Chinese song ‘The East is Red’ was more of a propaganda instrument than the starting point for a solid, sustainable science programme. China, however, became the fifth nation in the world capable of placing a payload into orbit.

GEOSTATIONARY SATELLITE

After the end of the ‘Cultural Revolution’ in 1976, Deng Xiaoping was responsible for education, science, and technology – of the ‘Four Modernisations’ that he thought to be the most important. Deng became famous in illustrating his idea in a 1978 meeting when he tried to persuade his comrades to go for a communications satellite programme in this enthusiastic way: “If we invite a good teacher to give a lecture in the Great Hall of the People only 10,000 people can hear it, but if the same teacher were to give that lecture on television, and everyone had the equipment to receive it, that’s a classroom of unlimited size.” (Kulacki, 2008, p. 16) In the second half of 1983, China accomplished the five major systems needed for geo‐stationary access to space: launch vehicle, satellite, launch site, the tracking and telemetry equipment, and a network of ground stations. China’s first GEO satellite was finally launched on 8 April 1984, making China the 5th GEO nation in the world and enabled space applications for economic development.

MANNED SPACE PROGRAMME

China‘s human spaceflight programme came late into being since its usefulness for national development was less obvious. Deng Xiaoping was interested in space applications, but closed officially the manned space project in 1976: China “should not participate in the space race” and instead we should “focus our energies on urgently needed practical satellite applications.” (Kulacki, 2008, p. 21).

64 On 23 March 1983 U.S. President Ronald Reagan held his SDI speech. In China, this speech led to discussions on what the role of science and technology is for a country’s national development. In April 1986, the legendary document: ‘An Outline for National High Technology Planning’, the ‘Plan 863’ was published and in October of the same year, the plan was approved and budget allocated. From now on, the manned spaceflight programme served as an ambitious project that would develop a national space industrial infrastructure and promote the education of the required talent and specialists. Finally, the Standing Committee of the Politburo approved the space station plan on 21 September 1992, declaring the Chinese Space Station (CSS) the core of China’s human space flight efforts. (Kulacki, 2012, p. 7). In 2003 China would become the 3rd nation in the world capable of human space flight. 10 years later, China fulfilled a big legacy of high symbolism when during China’s fifth human mission Shenzhou 10, a female crew‐member Wang Yaping succeeded in turning Deng Xiaoping’s vision of a classroom of unlimited size into reality. From aboard the Tiangong 1 space lab, she delivered a science lesson to 60 million Chinese students from space.

CAESURA – THE ECONOMIC BOOM, WHITE PAPERS, AND ROADMAP 2050

The economic success at the turn of the millennium not only provided China with the self‐confidence and self‐esteem to proffer big societal concepts, but was also the point in time to give science, technology – and with it, space – a fundamental new orientation and direction to meet the needs of the future of the nation. Since 2001, four ‘White Papers on Space Activities’, published in parallel with the respective five‐year‐plans explained the achievements and objectives of the national space activities. (Carey, 2012, p. 25‐29). The most important message reads: “The Chinese government has all along regarded the space industry as an integral part of the state’s comprehensive development strategy….” (The State Council Information Office, 2000, Chapter I) In 2009, the document: ‘Space Science and Technology in China: A Roadmap to 2050’ was published. Experts analysed the strengths and flaws of China’s science community, the worldwide trends in space and technology,

65 and came up with long‐term goals and defined the steps necessary to achieve them. The roadmap activity aimed at predicting the future developments of science and technology in accordance with the needs of the Chinese nation for the next 20‐30 years: “to address the needs of both, the nation and society, the continued growth of economy and national competitiveness, the development of social harmony, and the sustainability between man and nature.” (Guo, 2010, p. XIII). Science, technology, innovation and management have to be interconnected with the economic societal base. Space has to become a tool for the benefit of the Chinese society, and the achievement of the overarching goals and synergistic efforts as laid out in the roadmap. (Carey, 2014, p. 31‐38). Furthermore, it was concluded, that growth by purely extending the economic production had reached its limit. China’s economic and social development will largely depend on science and technology through scientific discoveries, through the realisation of so‐called ‘Mega Projects’ such as the Beidou navigation system, the High‐Resolution Earth observation network, the ground station network, and through new inventions and technological innovation. The strategic aims of the roadmap are reflecting the principles of the White Papers. And here another highly interesting quote from the roadmap: “The past 250 years’ industrialisation has resulted in the modernization and better‐off life of less than 1 billion people, predominantly in Europe, , Japan and Singapore. The next 50 years’ modernization drive will definitely lead to a better‐off life for 2‐3 billion people, including over 1 billion Chinese, doubling or tripling the economic increase over that of the past 250 years.” (Lu in: Guo, 2010, p. X) To make this happen, space science and space technology will be the best available tool. What we witness today, is that China has developed a robust, comprehensive and strategically‐oriented space programme in order to serve its overall national development. The next, intriguing, question therefore is: What has worked on a national level – could that be applied globally?

66 ENTERING THE GLOBAL STAGE

After China had proven that space infrastructure and space technology is a successful driver for economic and societal development, it offered its space resources to other nations.

United Nations In March 2016, the United Nations Office for Outer Space Affairs UNOOSA and CMSA, the China Manned Space Agency, signed a Framework and Funding Agreement to develop the space capabilities of UNOOSA Member States via opportunities on‐board China‘s future space station. China offers: • to use the CSS for experiment payloads or joint research; • for the development of modules, sub‐systems, components, or other platforms; • train and fly astronauts; • share technical know‐how. (Ji QiMing, 2014, p. 28)

In April 2016, Yang Liwei, China’s first man in space told media on the occasion of China’s First National Space Day: “Payload has been reserved in the Chinese space station, due to enter service around 2022, for international projects and foreign astronauts. Upon request, China will also train astronauts for other countries, and jointly train astronauts with the European Space Agency. … The future of space exploration lies in international cooperation. It’s true for us, and for the United States too. China will not rule out cooperating with any country, and that includes the United States.” (Yang Liwei, 2016). And on 22 August, after the conclusion of a sea survival training session for 16 Chinese and two European astronauts in the waters off the coast of Yantai, in the Chinese Shandong province, Yang Liwei confirmed that more than 10 countries, mainly developing countries have asked for China’s assistance in the selection and training of astronauts. (Yang Liwei, 2017). Does the future Chinese Space Station have the potential to become the World‘s Space Station?

67 APSCO, BRICS, SCO

Within the Asia‐Pacific Space Cooperation Organisation, APSCO, China is driving the use of space capabilities for socio‐economic development. For that, the Small Multi‐Mission Satellite – SMMS project – is one of its flagships. Next to Brazil, Russia, India, and South‐Africa, China is one of BRICS’ Member States – an association of emerging economic powers to find its place in a multi‐polar world. This community of emerging nations is home to 42% of the world’s population, contributes 18–22 % of global GDP, and has generated more than half of global growth in the past decade, staying the most important engine for the world’s economic growth. China’s President Xi Jinping stressed in his speech at the opening ceremony of the 7th BRICS Business Forum on 3 September 2017 in Xiamen, China: “BRICS is not a talking shop, but a task force that gets things done. Our goal is to build a big market of trade and investment, promote smooth flow of currency and finance, improve connectivity of infrastructure and build close bond between the people. … We should seize the opportunity presented by the new industrial revolution to promote growth and change growth model through innovation. We should pursue innovation‐driven development created by smart , the ‘Internet Plus’ model, digital economy and sharing economy, stay ahead of the curve and move faster to replace old growth drivers with new ones.” (Xi Jinping, 2017). In their declaration after concluding the 9th BRICS Summit on 3 and 4 September 2017 in Xiamen, China, the BRICS Leaders stated: “We will enhance joint BRICS research, development and innovation in Information and Communication Technologies (ICT) including the Internet of Things, Cloud computing, Big Data, Data Analytics, Nanotechnology, Artificial Intelligence and 5G and their innovative applications to elevate the level of ICT infrastructure and connectivity in our countries.” (BRICS 2017, paragraph 13). While in 2015 the option of a joint BRICS space station was briefly discussed, the BRICS Science, Technology and Innovation Ministers signed in March 2015 a ‘Memorandum of Understanding on Cooperation in Science, Technology and Innovation’ where ‘Space research and exploration, aeronautics, astronomy and earth observation’ are explicitly mentioned. (BRICS 2015, p. 3) In the meanwhile, a solid cooperation project in the area of Earth observation was

68 underway. Igor Komarov, Programm Director of Roscomos State Corporation explained in May 2016: “The practical initiative, on which we are now working together with the BRICS countries, is a data exchange in distanced probing of the Earth, which will help in quicker responses to emergency situations, natural calamities, pollution and other aspects. I believe, it will find rather prompt and very important practical use for the BRICS countries.” (Komarov, 2016). Comprehensive space infrastructure – like the Chinese Beidou satellite navigation system and the Russian GLONASS – are ready to feed space applications, essential for the realisation of the ‘One Belt – One Road’ endeavour. The Belt and Road initiative is complementary to the Eurasian Trade Zone, an initiative by Russian President Vladimir Putin. He confirms: “For us, China is a key partner in the region.”

THE NEW SILK ROAD PROJECT – BRI

Since 1989, driven by security concerns, China embarked in Central Asia on a new neighbourhood policy, supporting the now independent post‐Soviet States in the economic development and social stability. The proclamation of the ‘New Silk Road, Economic Belt and Maritime Silk Road – One Belt – One Road’ project (now called: Belt and Road Initiative – BRI) in 2013, is a consequent continuation of this strategic move. For the revitalisation of the bridge between Asia and Europe in order to address uneven global development – among other strategic partnerships – SCO and BRICS are of high importance. The SCO – Shanghai Cooperation Organisation – is the biggest regional organisation to date. Its objectives are comparable to the Helsinki Accords/OSCE (Organisation for Security and Co‐operation in Europe). China’s Minister for Foreign Affairs Wang Yi, stressed in March 2017 when talking to the media: “The Belt and Road is China’s initiative, but it belongs to the world. The idea came from China, but the benefits will flow to all countries.” (Wang, 2017a).

THE VISION: CONNECTIVITY – A MULTI‐DIMENSIONAL INFRASTRUCTURE NETWORK FOR A WORLD ECONOMY

The ‘Belt and Road’ mega‐project of economic and societal development is perceived as a broad and multi‐layered economic, as well as geopolitical

69 scheme. It comprises two main components, the overland connection, the so‐called ‘belt’, consisting of a grid of several major economic corridors, major rail, and fibre optic cabling, energy and pipeline projects. The second main component, the sea‐based ‘road’ covers maritime routes, ports, canals, submarine cabling and cargo handling infrastructure. Even new air routes and air travel hubs will contribute to an ‘Air Silk Road’. All of this encompasses the terrestrial infrastructure. That terrestrial network is going to be supported and extended by space‐based resources – the ‘Space Silk Road’. China’s Beidou satellite navigation systems will provide the ‘digital glue’ for the infrastructure on ‘terra firma’, as analyst Trefor Moss rightly described it. (Moss, 2016) After the national test run, the first users of Beidou were neighbours in Asia‐Pacific and until 2018 countries along the ‘Belt and Road’ and in neighbouring regions will be served before the systems go global by 2020. Beidou is positioned to support a so‐called ‘downstream industry’ providing space‐based applications for economic, educational, communication or other purposes. In China alone, navigation services generated in 2015 a turnover of 25 billion US‐Dollars which should more than double by 2020. The ‘Digital Silk Road of the 21st Century’ comprises a ‘Belt and Road Space Information Corridor’ including several elements reaching from Earth observation, communications and broadcasting, navigation, ground and application system construction up to space application product development. ‘Joint Laboratory Initiative’, ‘Science Park Cooperation Initiative’, ‘Technology Transfer Initiative’ and much more will enable a full integration of science and technology into a digital economy. “China encourages the integrated development of the Beidou satellite navigation system and Internet+, big data, and cloud computing, supports the integrated positioning and innovative utilization of satellite navigation together with mobile communications, WLAN, pseudo‐satellites, ultra‐wide band and Ad Hoc Network signals, promotes integrated development of satellite navigation and emerging industries such as the Internet of Things, geographic information, satellite remote sensing and communication, and mobile Internet, and encourages people to start their own businesses and make innovations, so as to vigorously upgrade the innovation capability of the industry.” (The State Council Information Office, 2016a). The state of global connectivity – enabled by this multi‐dimensional infrastructure network, lays the base:

70 • for mass participation in economic processes, • for mass innovation, •and consequently, mass entrepreneurship. Such a model of a ‘Shared Economy’ “could unleash everybody’s potential… promote social equity and justice…” as China’s Premier Li Keqiang, pointed out at the Opening Ceremony of the 10th Annual Meeting of the New Champions in Tianjin, in June 2016. “The sharing economy is one of mass participation. Greater economic globalization and the spread of the Internet have provided a big stage and broad space for entrepreneurship and innovation by the people. Through mass entrepreneurship and innovation, we will combine the innovation activities of the elites with the grassroots, the on‐line with the off‐line, and companies with research institutes, so that individual efforts of numerous market players will lead to greater synergy for innovation‐ driven development. If we could make full use of the Internet to efficiently match the massive amounts of information about supply with that about demand, we could then bring about cooperation among and sharing of R&D and professional expertise and skills. The sharing economy is something that everyone can take part in and benefit from.” (Li, 2016). Imagine all the people could be their own entrepreneur – their own bosses! Technology paves the way for every person on planet Earth to get – just with small hand‐held devices – connected to the whole world and the global marketplace to make use of it for securing its existence. Technology becomes the ultimate tool, literally a hand‐size tool, to empower ordinary persons by adding their human ingenuity to set‐up their own virtual or real work‐shop, virtual or real production, any type of virtual or real service – independently and freely. Infrastructure enables the distribution of the produced items or services. The winner is the creator of the production and not only the manager or owner of a business. Economic dependencies – the biggest killer of creativity and motivation – are taken away and the traditional dialectic contradiction between capital and labour is fading. Science and technology are democratising economy, most likely the global economy. This could become the optimistic vision of a human future for all people, or as Chinese Foreign Minister Wang Yi put it during a press conference in Beijing in May 2017: “the magnificent goal of constructing a community of shared destiny for mankind.” (Wang, 2017b)

71 BIBLIOGRAPHY

57th session of the Committee on the Peaceful Uses of Outer Space – COPUOS, Vienna, 11–20 June 2014. Brian Harvey, China in Space – The Great Leap Forward, 2013, ISBN: 9781461450436, 9781461450429 BRICS 2015, Memorandum of Understanding on Cooperation in Science, Technology and Innovation, 2015, Internet: http://www.brics.utoronto. ca/docs/BRICS STI MoU ENGLISH.pdf, (accessed September 2017). BRICS 2017 Leaders Xiamen Declaration, 2017, Internet: https://brics 2017.org/English/Documents/Summit/201709/t20170908_2021.html, 4 September 2017, (accessed September 2017). Gregory Kulacki, J. G. Lewis, A Place for One’s Mat: China’s Space Program – 1956‐2003, 2008, American Academy of Arts and Sciences, ISBN: 0‐ 87724‐079‐5. Gregory Kulacki, Why China is Building a Space Station, June 2012, Union of Concerned Scientists, Internet: http://www.ucsusa.org/sites/default/ files/legacy/assets/documents/nwgs/why‐china‐is‐building‐a‐space‐ station‐06‐12‐12.pdf, (accessed September 2017). Guo Huadong, Wu Ji, Space Science & Technology in China: A Roadmap to 2050, 2010, Science Press Beijing, ISBN 978‐7‐03‐025703‐1, Springer ISBN 978‐3‐642‐05341‐2. http://news.xinhuanet.com/english/2017‐09/03/c_129695215.htm, Xinhua, 3 September 2017 (accessed September 2017). Igor Komarov, BRICS countries plan exchanging data of Earth satellite probing, 2016, Internet: http://tass.com/science/872101, TASS, 24 April 2016, (accessed September 2017). Ji QiMing, Chinese Space Station CSS and International Cooperation, 2014, Li Keqiang, Address by Premier Li Keqiang at the Opening Ceremony of the Tenth Annual Meeting of the New Champions, Tianjin, 27 June 2016, Internet: http://english.gov.cn/premier/speeches/2016/06/28/content _281475381438561.htm (accessed September 2017). Lu Yongxiang, in: Guo Huadong, Wu Ji, Space Science & Technology in China: A Roadmap to 2050, 2010, Science Press Beijing, ISBN 978‐7‐03‐025703‐ 1, Springer ISBN 978‐3‐642‐05341‐2.

72 The State Council Information Office of the People’s Republic of China, November 2000, China’s Space Activities in 2000, Internet: http://english1.english.gov.cn/official/2005‐07/27/content_17656.htm, (accessed September 2017). The State Council Information Office of the People’s Republic of China, October 2006, China’s Space Activities in 2006, Internet: http://www.china.org.cn/english/features/book/183672.htm, (accessed September 2017). The State Council Information Office of the People’s Republic of China, December 2011, China’s Space Activities in 2011, Internet: http://www.china.org.cn/government/whitepaper/node_7145648.htm, (accessed September 2017). The State Council Information Office of the People’s Republic of China, China’s BeiDou Navigation Satellite System, June 2016, 2016a, Internet: http://www.scio.gov.cn/zfbps/ndhf/34120/Document/1480623/148062 3.htm, (accessed September 2017). The State Council Information Office of the People’s Republic of China, December 2016, China’s Space Activities in 2016, December 2016, 2016b, Internet: http://www.scio.gov.cn/zxbd/wz/Document/1537091/ 1537091.htm, (accessed September 2017). Trefor Moss, China’s ‘One Belt, One Road’ Takes to Space, 2016, Internet: https://blogs.wsj.com/chinarealtime/2016/12/28/chinas‐one‐belt‐one‐ road‐takes‐to‐space/, 28 December 2016, (accessed September 2017). Wang Yi, Foreign Minister Wang Yi Meets the Press, Ministry of Foreign Affairs of the People’s Republic of China, 2017a, Internet: http://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1444204.shtml, 8 March 2017, (accessed September 2017). Wang Yi, The Two Major Platforms of the “Belt and Road” and G20 Can Coordinate and Facilitate Each Other, Ministry of Foreign Affairs of the People’s Republic of China, 2017b, Internet: http://www.fmprc.gov.cn/ mfa_eng/zxxx_662805/t1465540.shtml, 24 May 2017, (accessed September 2017). William Carey, J. Myrrhe, What if…? Searching for Evidence – An Attempt to Analyse the ‘Space Science & Technology in China: A Roadmap to 2050’, 2014, GoTaikonauts! – All about the Chinese space programme, 12, p. 31‐38.

73 William Carey, No Giant Leap – A Review of China’s Space Activities White Papers (2000‐2011), 2012, GoTaikonauts! – All about the Chinese space programme, 4, 25‐29. Xi Jinping, President Xi’s speech at opening ceremony of BRICS Business Forum, 2017, Yang Liwei, in: Xinhua, China Focus: China open to Sino‐U.S. space cooperation, 2016, Internet: http://news.xinhuanet.com/english/2016‐04/24/c_1353 07921.htm, Xinhua, 24 April 2016, (accessed September 2017). Yang Liwei, in: Xinhua, China glad to train foreign astronauts, 2017, Internet: http://www.china.org.cn/china/2017‐08/23/content_41458490.htm, Xinhua, 23 August 2017, (accessed September 2017).

ILLUSTRATIONS

Graphic 1 – caption:

China’s space programme comprises all the elements of a technologically advanced space power. Copyright: NASA, CMSEO, GoTaikonauts!

74 Graphic 2 – caption:

Chinas societal development after World War II is marked by several phases of societal experiments. Although their intentions were to advance the Chinese nation, the results have been devastation for the people. Only after the ‘Great Proletarian Cultural Revolution’ ended in 1976, did China enter a path of stable development. Copyright: GoTaikonauts!

Graphic 3 – caption:

China’s firsts in space have been achieved despite unfavourable conditions for science and technology. The modernisation of the Chinese nation, initiated by Deng Xiaoping in the mid‐1970s, laid the foundation for China’s space infrastructure and paved the way for ambitious space projects we see evolving today. Copyright: CMSA, NASA, GoTaikonauts!

75 Graphic 4 – caption:

Predictions about the future of the Chinese space programme are rare. The Sino‐ European GoTaikonauts! The team had an intense debate about the future of the Chinese space programme. Each one of us was looking at China’s space dream from a different angle and dared to make predictions for the future development. Although we are all convinced that Chinese space activities will increase and grow, we diverge a little bit on the speed and pace of how this will happen. The scientists (red) say: Space exploration will remain important in China. The efforts will continue to grow linear because space science and technology is considered to be a tool for the development of the overall society. Space is a fundamental desire of mankind. It has the image of being a high‐tech area. It is extremely difficult and by challenging space, any society can demonstrate its capabilities. The societal focussed opinion (blue) says: space exploration in China will remain important, but other issues (climate change, energy, social welfare, infrastructure projects – also on a global/Asian/African scale) will require more resources. Once, the creation of a harmonious, possibly global, society is achieved, space exploration will experience a renaissance. The engineer says: China has a good track record to complete its space plans, which have been demonstrated in the manned space flight, lunar exploration, Beidou navigation system and other civil and military programmes. So, it is very reasonable to see that China continues its fast expansion in space, but with a pace consistent with the slightly slowed down growth rate of its economy. Although there are many challenges ahead, we will see China becomes the second space power after the U.S. Copyright: GoTaikonauts!

76 Graphic 5 – caption:

China’s different space programmes are about to serve international organisations and projects: Beidou Satellite Navigation for the ‘Belt and Road’ project; CLEP China’s Lunar Exploration Programme for the international scientific community; China’s future Space Station for UNOOSA Member States; Small Satellite Programme for APSCO Member States and Earth Observation data for BRICS Member States. Copyright: BRF, CLEP, UNOOSA, APSCO, BRICS, CMSA, Beidou, internet, GoTaikonauts!

Graphic 6 – caption:

The ‘Belt and Road’ mega project can be defined as the terrestrial infrastructure, which will be complemented by space‐based and space‐supported assets, adding an extra dimension, an extra layer or shell, to the core project. Everything together enables the democratisation of a World Economy which not only empowers any person to master its existence, but also lives from the active participation of every single individuum. Copyright: NASA, GoTaikonauts!

77 INITIATIVE “ONE BELT, ONE ROAD” – A SOLID FOUNDATION FOR INTRA‐REGIONAL CONNECTIVITY

Jasminka SIMIĆ, Ph.D. Research Fellow Editor‐Journalist of the Radio Television of Serbia, Belgrade, Serbia1

Abstract: The Belt and Road initiative (BRI) is China’s mega project (Reviving the Silk Road) of deepening its reform and opening up towards the world as well as practicing its ideas of win‐win cooperation. Since its establishing in 2013, more than 100 countries and international organizations are currently involved in the initiative. Over 30 countries along the “Belt and Road” have signed cooperation agreements with China, more than 20 countries have been working on capacity building projects in the manufacturing sector, 14 countries have signed free trade agreements with China, and 56 countries have signed bilateral investment agreements, thus greatly promoting trade and investment cooperation with these countries. China recorded US$ 3,1 trillion worth of commodity trade along the “Belt and Road”, which accounts for 26% of its total trade volume. Culture, science, media and tourism are the pillars of bilateral and multilateral relations. All these areas open up the opportunity for broadening the scope of people‐to‐people exchanges. Thus, the initiative ”One Belt, One Road” represents a bridge between the developing and developed countries, an instrument in encouraging global economic growth, and more importantly furthering at various levels. It will lead to better connectivity; intra‐regional connectivity will lead towards trans‐regional economic cooperation and integration. To what extent the initiative “One Belt, One Road” represents the opportunity, in the way that the big infrastructure projects can boost the better regional cooperation and economic growth of including Serbia, especially through the “policy 16+1”, is the major scientific objective of this paper. Key words: “One Belt, One Road“, “policy 16+1“, connectivity, people‐to‐ people policy, China, Serbia.

1 E‐mail: [email protected]

78 INTRODUCTION

The “One Belt, One Road” initiative as the project of reviving the Ancient Silk Road has become an inspiration and the opportunity to reshape the new world, economically and socially more balanced than a previous one. Since its establishment in 2013, a significant progress has been made on the “One Belt, One Road” initiative, in terms of its top‐level design, related policy coordination, facilities, connectivity, free trade, financial integration, people‐ to‐people policy, China’s local affairs, as well as suggestions for the “One Belt, One Road” initiative’s future growth.2 The aim is to accelerate and provide ideas for its future implementation. The “Silk Road, Economic Belt” and the “21st Century Maritime Silk Road” are the two main routes of the “One Belt, One Road” initiative. The “Silk Road, Economic Belt” focuses on bringing together China, Central Asia, Russia and Europe (the Baltic), linking China to the Persian Gulf and the through Central Asia and West Asia, and connecting China with Southeast Asia, and the . The “21st Century Maritime Silk Road” is designed to have two routes, one from China’s ports along its coast to Europe via the South China Sea and the Indian Ocean, and the other from China’s ports along its coast through the South China Sea to the South Pacific. On land, the initiative focuses on jointly building a new Eurasian Land Bridge and developing China – Mongolia ‐Russia, China – Central Asia – West Asia, China – Pakistan, Bangladesh – China – India ‐Myanmar, and China – Indochina Peninsula economic corridors by taking advantage of international transport routes, relying on the cities along the “One Belt, One Road” and using key economic industrial parks as cooperation platforms. At sea, the initiative focuses on jointly building smooth, secure and efficient transport routes connecting major seaports along the “One Belt, One Road”. China insists to realize closer cooperation and connection between the land and maritime routes in order to make greater progress of this initiative and to facilitate transport connectivity as one of the priorities of the “New Silk Road”. The National Development and Reform Commission (NDRC), which has four departments – General Affairs, Silk Road, Maritime Silk Road and International Cooperation as a

2 Adhering to the Planning, Orderly and Pragmatically Build the “Belt and Road”, The Belt and Road Progress Report, The Belt and Road Progress Research Team, Renmin University of China, September 26, 2016.

79 coordination mechanism, including a special leading group, has been established on February 2015 to implement this initiative, known under the abbreviation “Belt and Road”. The same year, NDRC, the Ministry of Foreign Affairs and the Ministry of Commerce jointly released the “Vision and Actions on Jointly building Silk Road Economic Belt and 21st Century Maritime Silk Road”, setting forth the guiding principles, defined routes and cooperation priorities for the Initiative. This initiative upholds the spirit of peace, coordination, openness, inclusiveness, mutual learning benefit, following five principles accordingly: to be in line with the purposes and principles of the UN Charter, to be open for coordination and to all countries, international and regional organizations for engagement, to be harmonious and inclusive, to follow market rules, and to seek mutual benefit. In this process, the important role plays the policy coordination to bolster mutual political trust, reach the cooperation consensus, coordinate development strategies, facilitate trade and introduce the multilateral cooperation mechanism. Over the past four years, more than 100 countries and international organizations are involved in the “Belt and Road” initiative. More than 30 countries along this route signed the cooperation agreements with China, including Serbia during the “Belt and Road” Forum held on May 14‐15 2017 in Beijing. China is working with more than 20 countries on capacity building projects in the manufacturing sector. China signed free trade agreements with 14 countries, and bilateral investment agreements with 56 countries, thus greatly promoting trade and investment cooperation with these countries. Joint Economic and Trade Commission and other mechanisms are to promote investment cooperation, providing the legal and institutional basis for bilateral investment cooperation. In the first part of 2016, China invested US$ 51.1 billion in the “Belt and Road” countries, accounting for 12% of China’s overseas direct investment over the same period (US$ 6.86 billion in Singapore, Indonesia, India, Malaysia, Laos and Russia, accounting for 7.7% of the total investments). China’s direct investment in Africa increased at annual growth rate of 40% from 2004 to 2015, and foresees a rising trend. It is expected that Chinese firms in Africa increase their revenues for 140% by 2025, as compared to the current level, by entering into five new sectors: agriculture, banking and insurance, housing, information communications technology and telecommunications, and transport and logistics.3 The other

3 E.I.R. Strategig Alert, Weekly Newsletter, Volume 31, No. 27 – July 6, 2017, p. 4.

80 side, countries along the “Belt and Road” invested US$ 3.36 billion in China, accounting for 4.8% of the total foreign direct investment in China. In 2016, China has signed US$ 9.41 billion worth of contracts in services outsourcing with countries along the “Belt and Road”, which is a 33.5% increase compared to 2015. China has signed tax treaties with 53 countries along the “Belt and Road”, creating a tax treaty network that covers the major investment sources and foreign investment destinations and that helps eliminate tax barriers to investment between China and these countries.4 China continues to enhance the role of multilateral cooperation mechanism and has made remarkable results in implementing the “Belt and Road” initiative, with existing regional mechanisms, such as, Shanghai Cooperation Organisation (SCO), China‐CEEC Cooperation (China+16 Central and Eastern European countries), ASEAN Plus China, Asia‐Pacific Economic Cooperation (APEC), Boao Forum for Asia (BPA), Conference on Interaction and Confidence‐Building Measures in Asia (CICA), Forum on China‐Africa Cooperation (FOCAC), China‐Arab States Organizations, Greater Mekong (GMS). These mechanisms have attracted more countries and regions to participate in the BRI. People‐to‐people policy provides public support for implementing “Belt and Road” initiative, bringing the spirit of friendly cooperation on culture, education and science, media and tourism. High‐level mutual visits made by Chinese President Xi Jinping and Premier Li Keqiang, including Serbia and their foreign counterparts, contributed to building political mutual trust, as well as to incentive the role of the traditional friendship and cooperation between China and the countries along the “Belt and Road” initiative.

BROADENING THE SCOPE OF “BELT AND ROAD” INITIATIVE

The Action Plan for the “Belt and Road” Standard Coordination 2015‐2017 was released, setting out 20 guidelines for developing procedures and mechanisms for mutual certification of standards adopted in the countries along the BRI, covering 13 key areas: infrastructure construction and

4 Adhering to the Planning, Orderly and Pragmatically Build the “Belt and Road”, The Belt and Road Progress Report, The Belt and Road Progress Research Team, Renmin University of China, September 26, 2016. p. 12.

81 investment, trade, energy, finance, industrial sector, logistics and transport, standards and certifications, environmental protection, agriculture, culture, information, think‐tanks collaboration and local collaboration. Facilities connectivity is one of the priorities of the “Belt and Road” initiative in order to coordinate infrastructure standards, to connect infrastructure networks, to integrate energy infrastructure and to create the Information Silk Road. An infrastructure network that links subregions in Asia and that extends into Asia, Europe and Africa is taking shape. The “Belt and Road” proposes a trade and transport network connecting Europe, Asia and Africa through six economic corridors, recording US$ 3.1 trillion worth of commodity trade along the “Belt and Road”, which account for 26% of its total trade volume. In particular, the new Eurasian Land Bridge, the China – Mongolia – Russia Economic Corridor and the China – Central Asia – West Asia Economic Corridor will bring together the most economically vibrant East Asia region and the highly developed European economy, while facilitating trade flows between the Persian Gulf and the Mediterranean Sea and creating opportunities for countries in the Eurasia hinterland. The China – Pakistan Economic Corridor, the China – Indochina Peninsula Economic Corridor and the Bangladesh – China – India – Myanmar Economic Corridor will help extend the economic benefits of the Europe – Asia Corridor to South Asia, Southeast Asia and Indian Ocean Region and release the great potential of these regions. Thus, the goal of the “New Silk Road” is to open the new markets to the Chinese economy, which slowed down its growth, although it is still 6.9%, while the competition comes from neighboring 12 countries gathered around the “Transpacific Partnership” led by the United States of America and Japan (with some countries in this group China has territorial disputes).

Transport Network

The transport network which consists of railways, highways, sea and air routes, together with the electric power transmission and telecommunication network, oil and gas pipelines, creates a connectivity network that provides the physical infrastructure of the six economic corridors and has significant importance for the region of Southeast Europe. In the first part of 2016, 39 freight train lines between China and Europe were operational, contributing to a transport infrastructure network linking the subregions in Asia, Africa and

82 Europe. The numerous Chinese state‐owned enterprises have signed construction contracts for 38 large projects of transport infrastructure, covering 26 countries and focusing on key routes, port cooperation and the improvement of infrastructure in developing countries. China has launched 15 new airport projects and 28 airport expansion projects in the provinces along the “Belt and Road”. The total investment in 51 strategic projects launched under the BRI could reach 200 billion Yuan. During the same period, China launched 52 trade and economic cooperation zones in 18 countries along the “Belt and Road” countries, with the total investment of US$15.6 billion. They include the Central European Trade and Logistics Cooperation Zone in Hungary, Special Economic Zone in Egypt, China‐Belarus Industrial Park, Sino‐Russia Agricultural Cooperation Zone, etc. From October 2013 to June 2016, China’s state‐owned enterprises participated in the construction of 40 overseas energy projects, including power plants, electricity transmission facilities, oil and gas pipelines, covering 19 countries along the “Belt and Road”. In 2014, Tajikistan part of the Central Asia – China Gas Pipeline (line D) and the Russian part of the Russia – China Gas Pipeline (East Route) inaugurated. During the first half of 2016, China has signed deals for 16 energy projects with the “Belt and Road” countries. The New “Energy Silk Road”, as the pipeline “Turkish Stream” was called by Turkish President Recep Tayyip Erdogan in Istanbul (July 2017), is the biggest development opportunity for the Southeast Europe and Serbia itself. It will be especially important if Russia abolishes the transportation of gas through Ukraine.

Financial Network The successful implementation of the “Belt and Road” initiative needs cross‐border financial cooperation. The Asian Infrastructure Investment Bank (AIIB) was founded in 2015 as an inter‐governmental multilateral development institution for Asia, with the headquarters in Beijing, aiming to facilitate progress on enhancing connectivity and economic integration among Asian regions and cooperation between China and other countries and regions across the world. The AIIB’s capital of US$100 billion considers the “Belt and Road” related projects as one of the investment priorities. This Bank approved US$509 million in investment for its four projects (2016) for power, transportation, urban development and other projects in Bangladesh, Indonesia, Pakistan and Tajikistan, all the countries along the BRI. The “Silk

83 Road Fund” is a medium and long‐term development and investment fund established in Beijing (December 2014) with an investment of 61.525 billion Yuan from the State Administration of Foreign Exchange, China Investment Corporation, Export‐Import Bank of China and China Development Bank, focusing on investment opportunities and providing investment and financing the support under the framework of the BRI. The “Silk Road Fund” planed in 2016 to invest in hydropower plants in Pakistan and other South Asia countries, in Russian‐based Yamal LNG project (liquefied natural gas project located deep in the Russian ),and to make an acquisition of Italian tire maker Pirelli. It has also signed the Memorandum of Understanding (MoU) with Serbia on joint development of renewable energy projects. The BRICS New Development Bank established in July 2015 (Shanghai) has an authorized capital of US$100 billion and its first round of loans for clean energy projects in China, India, Brazil and South Africa.5 In 2016, nine Chinese‐ funded banks have set up 56 Level A branches in 24 countries along the “Belt and Road”. On the other side, 56 commercial banks from 20 “Belt and Road” countries have set up 7 subsidiaries, 18 branches and 42 representative offices in China. The use of Yuan (RMB) has been expanding in cross‐border trade and investment exceeding 2.63 trillion Yuan in the first part of 2016. In August the same year, the People’s Bank of China signed the Memorandum of Understanding on financial intelligence communication and cooperation with 39 overseas anti‐money laundering organizations.

THE NEW DIMENSION OF “BELT AND ROAD” INITIATIVE

As a regional power with global influence, China has begun to assume global leadership in the numerous areas. The major projects with the countries along the “Belt and Road” have occurred during 2015/16:

5 Playing a prominently important role on the global plank, BRICS has transformed from an investment concept into a cooperation model on the emerging market and among developing countries. The global economy still faces uncertainty and instability, and the BRICS countries should strengthen trade and economic cooperation by improving mechanism, expand fields, innovating new measures and exploring new growth drivers. See: Opening address of Chinese Commerce Minister Zhong Shan presided over the 7th Meeting of BRICS Trade Ministers opened in Shanghai, 1 August 2017. Available from: http://current affairs.adda247.com/2017/08/7th‐meeting‐of‐brics‐trade‐ministers.html, 3 August 2017.

84 1. Chinese nuclear power companies launched cooperation projects in Romania, United Kingdom, Pakistan and Argentina; 2. Chinese hydropower companies worked on cooperation projects in Angola, Brazil, Nepal, Pakistan and Argentina. In particular, the Karot Hydropower Project in Pakistan was the Silk Road Fund’s first overseas investment; 3. China signed deals for 16 energy projects with the countries along the “Belt and Road” during the first half of 2016; 4. Chinese telecommunication service providers (such as China Unicom, China Telecom and China Mobile) are spreading up cross‐border transmission projects in the countries along the “Belt and Road” to expand international telecommunication infrastructure; 5. China is working on two satellites with France and one satellite with Venezuela. The first one is CFOSAT marine satellite, devoted to the observation of ocean surface winds and waves (to improve wind and wave forecast) for marine meteorology, ocean dynamics modelling and prediction, climate variability knowledge, fundamental knowledge of surface processes. The launch is planned for mid‐2018. The second one is SVOM, Space Variable Objects Monitor satellites (for gamma ray), to be launched 2021. The third one is a Venezuela’s VRSS‐2 satellite – earth observation, where China assisted in designing, manufacturing, assembling, testing, launching and data processing. The launch into a 645 km sun‐synchronous orbit has been planned for September 2017; 6. China has been making efforts to explore the Arctic. The icebreaker Xuelong (“Snow Dragon”) set sail on the country’s eighth Arctic expedition in July 2017 to attempt China’s first circumnavigation of the Arctic rim. The is the most sensitive area in global climate changes. The expedition focuses on a series of frontier scientific research on marine biology, meteorology, geology and chemistry, such as ocean acidification and plastic pollution in the sea. China has paid close attention to cooperation and sharing of information in polar research. The Chinese National Arctic and Antarctic Data Center has provided data for more than 100 international projects and more than 10 countries. All these new projects have contributed to the current progress in the development of the “One Belt, One Road” initiative.

85 SINO‐SERBIAN PROJECTS

Although China’s trade with the countries of Southeast Europe is only a small part of its trade with the European Union, China has recently made or initiated a number of strategic investments in the region, from Greece and Turkey via Serbia, Bulgaria, Romania, and Albania to Macedonia and Montenegro. “Chinese investments in the region changed the pattern of economic relations between China and Eastern Europe since, in the 1990s, China’s economic presence largely depended on numerous Chinese small and medium companies in this region” (Simić, 2015, p.p.11‐12.). With the new approach to Central and Eastern Europe, China through the policy “16+1” forged in Warsaw 2012 (“12 Measures for Promoting Friendly Cooperation with 16 Central and Eastern European Countries“), started a series of short‐term and medium‐term measures to improve economic relations with this region, including a $10 billion credit line to boost trade and inject new investments into the region. It became a part of the Chinese global project “One Belt, One Road”, a part of the new interdependence in international economic and trade business. The value of trade between China and Southeast European countries increased from US$3 billion in 2000 to US$53 billion in 2013 and according to Chinese estimates by 2018 its value will be doubled. Serbia and China signed an important Strategic partnership agreement in August 2009, which consists of a wide array of subjects including the mutual respect of territorial integrity, plans for trade development as well as cultural, technological and scientific exchange.6 Serbia’s export to China is mainly based on machinery, plastics and wood products, and in 2016 its value amounted to US$25.3 million, while imports from China amounted more than US$1.6 billion, mostly high technology products.7 It is planned that the trade volume between the two countries will soon reach about US$3 billion. China is increasingly interested in importing organic food, agricultural tourism and scientific innovation, while it will continue to develop industry, information technology, small and medium‐sized enterprises. Chinese companies are working on infrastructural

6 Statistical Office of the Republic of Serbia, Dissemination and Public Relations Division, Available from: http://www.pks.rs/MSaradnja.aspx?id=73&p=1&pp=2&, 22 February 2017. 7 Statistical Office of the Republic of Serbia, Dissemination and Public Relations Division, Available from: http://www.pks.rs/MSaradnja.aspx?id=73&p=1&pp=2&, 22 August 2017.

86 projects in Serbia, representing at the same time platform to introduce Chinese investors with business capacities in Serbia. The first investment from the credit line of US$10 billion was the bridge „Mihailo Pupin“ in Belgrade (Borča‐Zemun), built by the company „China Roads and Bridges Corporation“. China is interested in building a port on the Danube in Belgrade, confirming that this river is both, the water corridor and geostrategic framework of the political and economic cooperation between China and Europe. China is building a two section of the corridor 11 – the highway Horgoš‐Požega which leads from the north to the west of the country: Surčin‐Obrenovac and Lajkovac‐Ljig, to be ended 2019, and extending towards the port Bar in Montenegro. China’s Export Import Bank finances the construction of the third block of the thermal power plant Kostolac B and the modernization of the “Nikola Tesla” thermal power plant in Obrenovac. China is also ready to finance the modernization and reconstruction of the railway Belgrade‐Budapest: Belgrade‐Stara Pazova and Novi Sad‐Subotica. Serbia began construction work on this railway, the section from Novi Sad to the Hungarian border. The future common project is the new high‐speed train between Belgrade and Budapest as a part of connectivity of the maritime and land “New Silk Road”. But there is the EU observation addressed to Hungary that this project was not carried out in accordance with the EU rules, i.e. there was no tender which means that the Chinese partner cannot be both, the creditor and the contractor. Chinese steel producer Hesteel bought Serbian steel mill “Smederevo” for EUR46 million in April 2016. The “Bank of China” opened its branch in Serbia in January 2017, becoming the first Chinese bank starting operation in the country and covering the rest of the Western Balkans countries. The “Bank of China” will make a further contribution to China’s “Belt and Road” initiative through its financial services. The regular Belgrade‐Beijing air route via Prague was re‐established in mid‐September 2017. The Chinese investments in the Southeast Europe bring a financial incentive which is especially important during the period of the economic crisis and the crisis in the euro zone. China becomes one of the ten largest trading partners for these countries, simultaneously helping the better connectivity between them in the various areas. The EU fears that the Chinese investments in the future could make new divisions within the Union. How to harmonize the euro integration path of the countries of Southeast Europe and the European

87 standards with the Chinese investments in this region will be the main challenge for the further progress of the “Belt and Road” initiative.

PEOPLE‐TO‐PEOPLE POLICY

There have been many scientific, cultural and touristic exchanges across the world since the launching of the “One Belt, One Road” initiative. China has made active efforts to enhance visa facilitation, opening up the opportunity for broadening the scope of people‐to‐people exchanges. The free visa system with Serbia came into force in January 2017. Local governments in China have launched programs like the “Silk Road Special Scholarship” to encourage international cultural and educational exchanges. The people‐to‐people policy includes youth exchanges, cooperation among political parties and governments, non‐governmental cooperation and cooperation among the think‐tanks. According to the two indexes of “degree of participation” and “effectiveness of cooperation”, the Development and Evaluation Report of think thanks cooperation between China and CEEC (2015–2016) shows that Poland is the most active participator in the exchanges and cooperation with 16+1 Think Tanks Network, then follows Slovenia, the Czech Republic, Serbia, Hungary, Latvia, Romania, Slovakia, Macedonia, Montenegro, Lithuania, Albania, Bulgaria, while Croatia, Bosnia and Herzegovina and Estonia are the last ones in the ranking (Huang, Ju, Liu, Ma, 2017, pp. 3‐4).

Science and Education The science development is the most important driving force of the society and the state, so 38 scientific and technological centres were established in China – smart industrial parks, joint labs, international technological transfer centres, industrial cooperation centres to incubation centres.8 China signed 56 Memorandum of Understanding on scientific and technological cooperation with the countries along the “Belt and Road”.

8 Adhering to the Planning, Orderly and Pragmatically Build the “Belt and Road”, The Belt and Road Progress Report, The Belt and Road Progress Research Team, Renmin University of China, September 26, 2016. p. 22.

88 Scientific and technological park of the University of Tsinghua in Beijing and the University in Belgrade signed (Jun 2016) the Memorandum of Understanding that provides cooperation in the field of entrepreneurship, transfer of technology and scientific research. It includes 20 joint development and research projects in the period 2017‐2020. The joint action will contribute to mutual understanding, exchange of information and cooperation between entrepreneurs of both countries. The Chinese language has been taught in primary and secondary schools in Serbia, through the pilot project for six years. The program is implemented on the basis of the educational cooperation between two countries. The Chinese language is also present in the kindergartens and high schools of national importance, as well as at the Confucius Institute. The first year of Sinology at the Faculty of Philology enrolls up to 35 students and with post‐graduate students, the total is about 350. China would provide 10,000 government scholarships, as well as 120,000 training opportunities and 150,000 scholarships for citizens of other developing countries to receive education in China, so as to help train 500,000 professional technicians for other developing countries.9 Prestigious medical institutions in Serbia are ready to cooperate with the counterparts in China designing thus the overall capacity development of the “Belt and Road” initiative.

Culture and Tourism China set up 25 overseas Chinese cultural centres and 500 Confucius Institutes across 125 countries, signing up 41 agreements on cultural cooperation. The Chinese Cultural Center in Belgrade is to be opened at the end of 2017. China National Tourism Administration would help 150 million Chinese tourists to visit the “Belt and Road” countries with the total expenditure of US$200 billion. Meanwhile, China would attract 85 million visitors from the area with total spending of US$110 billion in China.10 Serbia has become increasingly attractive for Chinese tourists. In 2011, for example, 3.470 Chinese tourists came to Serbia and recorded 11.895 overnight stays.

9 Adhering to the Planning, Orderly and Pragmatically Build the “Belt and Road”, The Belt and Road Progress Report, The Belt and Road Progress Research Team, Renmin University of China, September 26, 2016. p. 20. 10 ibid. p. 21.

89 In 2015, the number of visitors has increased to 14.238, and the number of nights spent increased to 32.779. In 2016, 18.409 Chinese tourists arrived in Serbia, while the number of overnight stays totaled 42.986. Similar data are also valid for the region of Southeast Europe, for example, the number of Chinese tourists visiting Greece was 12.203 in 2012 and more than doubled to 28.328 in 2013 (Tzogopoulos, 2016).

Table 1.11 Tourists from China Arrivals to Serbia Nights in Serbia 2016 18409 42986 2015 14238 32779 2014 9592 30749 2013 5783 14047 2012 4812 13665 2011 3470 11895

Traditionally good political relations between Serbia and China have been completed by the better media cooperation. Radio‐television of Serbia (RTS) and China Central Television (CCTV) signed a cooperation agreement (2016) on the exchange of their programs and mutual support and assistance in their work. CCTV is broadcasting in 140 countries having 80 correspondents around the world, including in Belgrade. The “2015 Seminar on Radio and Television Program Production for Central and Eastern European Countries“ held in Shanghai (October 2015) was founded by the Chinese Government and hosted by the State Administration of Press Publication, Radio, Film and Television of the People’s Republic of China. The Seminar was designed as a part of the Chinese policy „16+1“in the framework of the “One Belt, One Road” initiative. This improves the scope of following the news from Southeast Europe, while the news from the Far East become more accessible to this part of Europe.

11 Statistical Office of the Republic of Serbia, Dissemination and Public Relations Division, [email protected], 2016, 2017.

90 CONCLUSION

As a beneficiary and a contributor to economic globalization, China continues to open up to the world, create a favorable business environment and work with all parties to promote economic globalization that underscores openness, inclusiveness, reciprocity and balance for a win‐win outcome. The “One Belt, One Road” initiative launched in 2013 is an important reflection of active participation of China in the global governance. It has been strengthening communication and consultation with the countries along the “One Belt, One Road” initiative, promoting a practical cooperation and connectivity and implementing a range of policies and measures. It could be a new engine for the world economic growth and better living conditions based on overseas economic and trade cooperation zones, which leads to the new interdependence in international economic, trade and technological business. It is of strategic significance for the eradication of poverty, resolving the migrant crisis and other social challenges, avoiding conflicts and fighting terrorism, but also for building a community of shared values, mutual political trust and cultural inclusiveness. The “One Belt, One Road” is the new project for attracting investment and for local development, like in Southeast Europe, but in the future it should be a long‐term, complex and systematic program based on an efficient and powerful nationwide coordination mechanism, which can create new and sustainable international economic, trade and human relationship. To achieve the goals of the “One Belt, One Road“ initiative, the participating countries should also encourage the public debate concerning its policies, especially financial and investment overlapping with the West, and „people‐ to‐people“ policy including cultural diversity.

BIBLIOGRAPHY

Adhering to the Planning, Orderly and Pragmatically Build the “Belt and Road”, the Belt and Road Progress Report, the Belt and Road Progress Research Team, Renmin University of China, September 26, 2016. Chamber of Commerce and Industry of Serbia, Available from: http:// www.pks.rs/PrivredaSrbije.aspx E.I.R. Strategig Alert, Weekly Newsletter, Volume 31, No. 27 – July 6, 2017,

91 Ping, H., Zuokui, L., Weiwei, J., Junchi, M., Development and Evaluation Report of Think Thanks Cooperation between China and CEEC (2015‐ 2016), Institute of European Studies, Chinese Academy of Social Sciences, Beijing, 2017, Available from: http://ies.cass.cn/english/wp Simić, P., Odnosi NR Kine i Jugoistočne Evrope: Kontinuitet i promena, Zbornik radova povodom 40 godina sinologije „Biseri sa zrncima pirinča 1974‐ 2014“, Filološki fakultet u Beogradu, Beograd, 2015. Statistical Office of the Republic of Serbia, Dissemination and Public Relations Division, 2011, 2012, 2013, 2014, 2015, 2016, 2017. Tzogopoulos, G.N., Greece: Perspective on Eurasian integration, 8 June 2016, Available from: http://www.ecfr.eu/article/essay_eurasian_integration_ greece, 22 August 2017.

92 CHINA’S BELT AND ROAD INITIATIVE AND EU – COMPLEMENTARY AND COMPETITIVE RELATIONSHIP IN CENTRAL AND EASTERN EUROPE’S 16+1(CEE16)

FU Cong, Associate Professor, Institute of European Studies ZHAO Chen, Associate Professor, Chief of European Diplomacy, Institute of European Studies, Chinese Academy of Social Sciences, Beijing, China1

Abstract: The ‘Belt and Road Initiative’ (BRI), proposed by China’s President Xi Jinping in 2013, is one of the latest buzzwords in China’s global strategic overview during the past several years. With the mechanism of China and Central and Eastern Europe’s 16+1(CEE16) cooperation, the BRI has become one of two important novel engines to tighten China‐Europe ties and complements the partnership between China and the European Union. From the perspective of the Chinese side, the BRI brings more opportunities for investment and trade in the CEE16 which could be beneficial for the homogeneity of the European integration. While the attitude of the European Union is still not clear and the EU shows its hesitation for the Belt and Road model, including the content of state‐ owned capital, sovereign guarantee and public procurement. The authors believe that by strengthening mutual trust and policy running in, both Beijing and Brussels can achieve win‐win outcomes in helping the economic development of the CEE region. Key words: Belt and Road Initiative (BRI), China and Central and Eastern Europe 16+1, European Union

INTRODUCTION

The ‘Belt and Road Initiative’ (BRI), or ‘One Belt One Road’ and ‘New Silk Road’, proposed by China’s President Xi Jinping in 2013, dedicates to the

1 E‐mail: [email protected].

93 connectivity and cooperation between the Eurasian countries. This plan aims to enhance China’s trade and financial linkage with countries along the Silk Road and hopes to create an unbroken transport and infrastructure network. China and the European Union have established the Comprehensive Strategic Partnership for over a decade. This strategic partnership has been based on common perspectives on the international multi‐polar structure and the common will to address the current most pressing global political and security challenges. China and the EU have no geopolitical interest contradictions, which ensure both sides away direct security conflicts; meanwhile, the economic partnership enjoys a higher proportional importance in the comprehensive strategic partnership between the EU and China. The Central and East European countries2 (CEE 16) are an inseparable part of the EU. Twelve CEE countries are the EU member states and the other four are the candidates. While China has an institutional framework with the 16 CEE countries named “16+1” which is a sub‐regional cooperation channel between China and Europe. With the introduction of the BRI, “16+1” has been integrated into this initiative. And the CEE countries are treated as a hub to connect the west, south and north European countries along the New Silk Road. Will the BRT, or the new Silk Road proposal engender Brussels’ existence and economic interest in the CEE countries, which has been or will be integrated into the EU? Or it will afford additional help for the healthy and more even economic development of the CEE countries and the EU? This article aims to explore the relations between the BRI, the CEE countries and the European Union, and analyze the pros and cons that the BRI brings to the EU.

BRI AND CEE COUNTRIES

Central and Eastern Europe are far from China, but the BRI draws China closer to this region in various economic dimensions. In 2016, over 33 billion

2 Central and Easter Europe is a generic term of the group of countries in , Southeast Europe (the Balkans), Northeast Europe (the Baltics), and East Europe, usually means the former communist states in Europe. However, in this paper, CEE Countries are specifically referred to 16 countries that participate the 16+1 cooperation with China, including Estonia, Latvia, Lithuania, Czech Republic, Slovakia, Hungary, Poland, Romania, Bulgaria, Slovenia, Croatia, Albania, Bosnia‐Herzegovina, Macedonia, Montenegro and Serbia.

94 foreign direct investment (FDI) flowed in Central and Eastern European countries (Hunya and Schwarzhappel 2017). According to the data of China’s Ministry of Commerce, China’s investment in the CEE countries has accumulated to more than $8bn until 2016, covering machinery, chemical, telecom, housing appliances, new energy, logistics and commerce, research and development, financing agriculture, and other areas (Xinhua, 2017). China’s FDI storage in the CEE 16 increased to 5 billion US dollars in 2015 from 3.5 billion US dollars in 2013, with 43% growth rate (The Ministry of Commerce of the People’s Republic of China, 2016). Only Ningbo, a southeast coastal city which favours China‐CEE cooperation in Province, has set up 42 enterprises and invested 190 million US dollars in this region until the end of 2016 (Xinhua, 2017). China‐CEEC trade has also increased to $58.7bn in 2016, around 20% increase from 43.9 billion US dollars in 2010 (Xinhua, 2017). China‐Europe land‐sea fast transport route, from the port of Greece Piraeus to Hungarian Budapest, opened in February 2017, has speeded up transportation between China and Europe. It decreases the transportation cost of goods and offers great help for the CEE 16 small and middle‐sized enterprises entering China’s market. Other EU countries out of the CEE region also share the spillover effect in terms of the better infrastructure quality in the CEE 16 countries. Other than trade and investment in traditional industries, the new economy, such as IT business has played a rather important role in the effect of BRI for the CEE countries. China is the largest E‐commerce market in the world and its market is driven by its mobile‐first consumer behaviour, innovative social commerce model, and a trusted digital payments infrastructure (Michael Cheng, 2017). Under the framework of BRT, some Chinese IT companies start to put more emphasis on the CEE16 markets. On May 19, 2017, Suning Holdings Group, a Chinese leading retailer, signed a cooperation agreement with the Czech Trade Promotion Agency, and launched the ‘Czech Pavilion’ on Suning Group’s online shopping site, Suning.com, selling Czech products to Chinese enormous market (Suning, 2017). DiDi Chuxing, another Chinese app‐based ride‐hailing operator, bought a minority holding of an Estonian online taxi firm, Taxify, to help its expansion in Europe and Africa in August 2017. In the opinion of Cheng Wei, CEO of DiDi, the partnership will strengthen the cooperation between Asian, European and African transport networks (Baltic News, 2017). In our view, we think the overspreading cooperation of IT industry in the CEE countries can help the EU reforming its outdated

95 regulation, stimulating the structural reform of the IT or E‐commerce business, and reducing the upgrade cost in the service industry as well. After all, the digital transformation of business and society presents enormous cooperation potential for the EU and China. We have seen that the European Commission declared its Digital Single Market Strategy in 2015. At the same year, Chinese State Council published the “Guideline on Positively Promoting ‘Internet Plus’ Action” as well.

CHINA AND EU’S ROLE IN CEE COUNTRIES: COMPLEMENTARY OR COMPETITIVE?

Geopolitical perspective For Western European countries, it was a significant development for the European integration towards the East that most of the CEE16 became members of the EU. The fall of the Berlin Wall in 1989 and the collapse of the Soviet Union was a mark of the end of the post‐Second‐World‐War bipolar system and transformed the world order dramatically (Balázs, 2014). Meanwhile, this movement also triggered the dissolution of Czechoslovakia and Yugoslavia. These new countries in the CEE area have been experiencing very large and rapid political, economic, social, even cultural changes. Because these changes were fit for the zeitgeist in that term, these transiting countries were quickly accepted by international organizations, especially those vital regional organizations, such as the EU and NATO. The CEE16 joined in the EU through three waves in 10 years. The first‐wave accession includes eight countries, which are Estonia, Latvia, Lithuania, the Czech Republic, Slovakia, Poland, Hungary and Slovenia, who joined the EU on 1 May 2004. Then Romania and Bulgaria joined on 1 January 2007. Finally, Croatia joined in 2013. The rest of the Balkans, namely the Western Balkans countries, like Albania, Macedonia, Montenegro and Serbia are the EU candidates. Besides, the CEE16, except Macedonia and Serbia, all are NATO members. Geographically, the CEE16 have been one part of the EU, either with the form of member states or candidates. They could also be understood as the forefront countries towards Russia with realpolitik theory and this scenario has increased its probability to become real since Ukraine crisis happened. On one side, the CEE16 are integrated within the EU, a

96 powerful agent for democratization and modernization, through requiring the so‐called Copenhagen Criteria based on liberal democracy and market economy. On the other side, the integration with NATO is helpful for resolving security concerns of the EU and the CEE16 by trying to push back Russian influence in Central and Eastern Europe (Balázs, 2014). China has no geopolitical ambition for the CEE countries. The two cooperative mechanisms, neither ‘16+1 cooperation framework’, nor ‘BRI’, entail security content and adhere to the Chinese traditional ‘non‐intervention’ foreign policy principle. China is fully aware of the CEE countries’ tight relations with Brussels and has no intention to challenge it. The Chinese government proclaims that China is always the adamant supporter of the European Integration. When the Chinese government discusses the cooperation plan with the CEE countries, the status quo economic regulations and relative laws in these countries, which have got through a Europeanization process, are always farthest respected. There is also no geopolitical consideration like ‘divide and rule’ strategy to separate the European Union by establishing a special relationship with the CEE countries in China’s foreign policy landscape. In fact, China mainly takes the ‘16+1’ and ‘BRI’ as the tools strengthening the economic ties with the CEE countries and the EU. As Chinese President Xi Jinping said, China sees the 16+1 cooperation between China and the CEE 16 countries as an important gateway to incorporate the ‘BRI’ into the European economic circle (Xi, 2017).

Economic perspective Economy is the main consideration that the Chinese government raised the initiative of Belt and Road and its affiliated ‘16+1 cooperation’ plan. It also could be detected by the organizing and implementing the process in the Chinese bureaucratic system. The general coordination ministry for the Belt and Road Initiative Summit held in Beijing 2017 is the National Development and Reform Commission, the Ministry of Foreign Affairs, but the former is chief in charge of economic issues in China. From the perspective of economy, the Chinese endeavour in the CEE countries effectively complements the EU’s shortage in this area. On investment, since part of the CEE countries joined in the EU, the capital from west European countries, especially German capital, flows in with some preference and promote the privatization of these countries’ economic structure. Among them, Poland, the Czech Republic and

97 Hungary are the largest FDI recipients. But private investment from the West mainly focuses on natural resources and cheap labour those CEE countries own. In public investment, through Structure Fund and Cohesion Fund, the EU also offers development aid to those poor regions in CEE countries that have already been the member states. However, the limited EU funding cannot fill the big gap that it’s new members’ financial need in the infrastructure construction who try to become part of the European network. And those non‐EU CEE countries, particularly those in the West Balkans, are quite hungry for the necessary foreign investment and cannot drink from the tank of Structural Fund and Cohesion Fund. Therefore, the received Chinese investments are a welcome complement to the EU funds. The Chinese investment in the CEE countries rose nearly 90% in the first nine months of the year 2016, and cumulative two‐way investment stands at 7 billion US Dollars. The Chinese government also established the 16+1 financial fund, led by the Industrial and Commercial Bank of China, with a scale of 10 billion Euros credit line and plans to leverage project funds to 50 billion Euros (ICBC, 2016). Infrastructure building is what China is good at, but not a comparative advantage of the EU. In this area, the BRI also makes a contribution to the CEE countries and complements the EU’s economic capacity. Chinese companies have constructed a bridge over the Danube in Serbia, as well as the highways connecting Bosnia, Montenegro, Albania and Macedonia (Deutsche Welle, 2014). According to an interview with Zorana Mihajlovic, Serbia’s Minister of Construction, Transport and Infrastructure, Mihajlovic said: “thanks to the Belt and Road project, China’s investment in Serbia’s infrastructure has exceeded 5.5 billion Euros”(B92, 2017). Chinese firms also cooperated with Slovakia builder on the construction of D4 highway bypass in Bratislava from Jarovce to Raca and of R7 dual carriageway in the direction towards Dunajská Streda (Spectator, 2015). The five non‐EU members among the CEE16 signed the most significant infrastructure deals, although, the remaining 11 CEE EU members are economically much stronger and their trade with China accounts for more than 90 percent of the CEE16 group total. For implementing the BRI, China has been gradually getting into the CEE markets, particularly by winning contracts of regional transportation infrastructure (ports, highways and high‐ speed railways, etc.), building industrial parks and importing and exporting manufactured goods from and to CEE 16. The China‐CEEC trade has kept growing, reaching 43 billion Euros in the first three quarters of the year 2016, up 4% year on year (Li, 2016). In all, China emphasizes that cooperation under

98 the BRI in CEE 16 is an important, integral part of the China‐EU Comprehensive Strategic Partnership, and it complements the partnership. It has been seen that China’s increasingly important role in the CEE16 as offering mutually beneficial and complementary development. China can offer high‐quality, cost‐ effective equipment and production capacity supported by its maturing technologies and tremendous financial resources. The CEE16 are working to speed up industrialization and needing more manufactures and modern infrastructures. West Europe countries have advanced technologies and managerial expertise. It could lead to all‐win outcomes when the three parties combine the strengths for cooperation. While it is obvious that the new actor also stirs up some chaos and raises some negative voices against China in the EU decision making circles. European common market is noticeably showing some kind of protectionism since the 2008 financial crisis. It is reported that Italy, France and Germany have asked the European Commission to reinforce existing regulations that allow the EU states to block foreign acquisitions of European companies in July 2017. This investment screening aims to block Chinese takeovers of companies viewed as strategic in cases of being financed by state funds or agencies (Reuters, 2017). It has been seen that Brussels is highly concerned about the consequences of Chinese capital presence in the field of Hi‐tech or strategic industries all over the Europe. The EU is insisting on upholding the European technical, legislative standard and making security review to block Chinese goods and service import or buyouts of Chinese business. In Germany, for instance, Chinese Corporate Media Group’s acquiring German robotics firm Kuka was delayed by months of regulatory review (Chazan, 2016). In October 2016, the German government withdrew clearance for the planned takeover of chipmaker Aixtron by Fujian Ground Chip Investment based on security worries (Sheahan and Copley, 2016). In France and Italy, during their election campaigns, blaming China has been more often used as a tactic by politicians to appease electorates’ populism sentiment. The same thing happens in the CEE countries. The BRI offers alternative choice other than the EU for the CEE16 with a cheaper price, same or better quality goods or higher efficient services. If the CEE16 want to build infrastructure or develop world‐beating manufacturing companies, they will benefit from a cheaper price of imported steel from China. China has been involved in the CEE countries’ local infrastructure projects, such as the Hungary‐Serbia railway, one huge logistic line in Serbia and a corridor up to Hungary. The Hungary‐ Serbia high‐speed railway was under discussion with Chinese financial support

99 in 2015, but so far is not finished (Hu, 2017). The railway starts in Serbia but the project has broken no rules there, as Belgrade is not obligated to launch a tender procedure given it is not yet a member of the EU. Although Hungary has allowed China to embark on the project, the EU halted it and is now investigating the situation because Hungary was alleged not to publish a call for public tender and instead relied on bilateral agreements with China (Pira, 2017). The up and down of the Serbia‐Hungary high‐speed railway project shows the concerns of Brussels and European business sector. State‐owned capital, sovereign guarantee and public procurement have been the other worries in Brussels that China might go against the EU rules. The differences between economic ideology, investment rules and market standards have impeded the EU’s approval or recognition of Chinese companies’ action in the CEE countries. State‐owned Enterprises (SOE) occupy a large portion in China’s foreign investment within the Belt and Road Initiative framework, especially in the infrastructure industries. However, many EU institutions have the character influenced by the economic liberalism school. They do not trust the SOEs and always believe they will hamper the fair competition in the market. Absolutely many Chinese state‐owned funds flowing in the CEE countries bring some cultural shocks to Europeans. Another issue is about the EU’s regulation on sovereign debt of its member states. The European Sovereign Debt Crisis has just got relieved in past two years. The Stability and Growth Pact listed in the 1997 Amsterdam Treaty requires each member state implementing a fiscal policy satisfying the upper limits of an annual deficit no more than 3% of GDP and the total public debt no more than 60% of GDP. Chinese credit insurance institutions usually put more stringent requirements on a sovereign guarantee for project loans in the process of evaluation and approval of an outward foreign direct investment (Wang, 2017). It may result in the CEE countries’ sovereign guarantees for a preferential credit over the limits of the EU provisions on sovereign debt of its members. For this reason, a number of CEE countries dare not borrow much money from China‐dedicated financing schemes. In the past years, China has been expanding financial instruments, partly revising the sticky sovereign guarantee provision on many infrastructure projects in CEE16 and replaced the funding approach from sovereign guarantee loan to project finance (Lim, 2016). During Prime Minister Li Keqiang’s visit to Serbia in 2014, he announced that China would be opened to new models of funding and investments and the new funds would be established to explore new ways of cooperation through public‐private

100 partnerships (PPP). This change has made many infrastructure projects’ financing in the CEE countries a reality. The last obstacle for the BRI’s implementation is that for the Chinese enterprises could be difficult to win the contracts from European public procurement markets, including in the CEE countries. The EU has rather strict restrictions concerning technical standards, equipment and employment rules, which make it almost impossible to take those methods of cooperation that have been proven successful and workable in the Chinese economic relations with Asian and African countries, and apply them in the CEE countries. The progressing integration of CEE countries’ legislative systems with the EU system means that additional obstacles have begun to emerge even in non‐EU member states (Kaczmarski and Jakóbowski, 2015). The EU often complains that Chinese financial holding companies mainly finance infrastructure and production capacity cooperation projects under the 16+1 framework and only support the projects purchasing Chinese equipment and products. Now China is negotiating for access to the World Trade Organization’s Agreement on Government Procurement. In terms that the EU and all its member states are signatories; this issue is not limited in the CEEC region, but upgraded into an international negotiation at the global level.

CONCLUSION

Europe was the destination of the Silk Road in history; nowadays it is a very important partner of the current Belt and Road Initiative too. If we separate the EU into Central East Europe and other parts, evidently the CEE countries are more favourable to the BRI. The CEE countries prefer to thinking the BRI is a golden opportunity for enhancing their economic vitality. However, at the same time, China does not take the BRI projects in the CEE region and 16+1 cooperation exclusive ones, believing they should match the trend of European integration in general. In the Chinese government’s view, the economic cooperation on product capacity, infrastructure connectivity and digital economy between the CEE 16 and China are beneficial to the development of the EU economy in all and fit for China‐EU strategic partnership. However, as a market and normative power on the stage of world economy and international politics, the EU has got used to its privileged standards setting a behaviour model and inclined to protect its economic interest intuitively. The bureaucratism of Brussels and rising

101 protectionism throughout of EU after the European debt crisis also makes troubles for some contracts signed between China and the CEE countries, such as the project of Serbia‐Hungary Railway. Moreover, the Chinese enterprises are also not fully prepared to get involved in the local business environment and obey the complicated regulations in the CEE countries, which have deeply integrated into the EU law tradition and business culture. The experiences of Chinese companies in Africa and obviously are not suitable in Europe. Therefore, if the BRI wants to be successful it definitely needs the close trilateral cooperation among the CEE 16, the EU and China. Both, the EU and China, should strengthen political communication and mutual trust for the benefit maximization of the CEE countries. We are optimistic about this because we have seen some positive phenomena. Starting from the 5th China‐CEE Summit (2016), the EU has attended the meetings under the ‘16+1 framework’ as an observer. In Brussels, Berlin and other capitals of west European countries, there appears more and more objective appraisal in media and think tank reports.3 The leaders of big member states of EU also expressed their support for the Belt and Road Initiative. For example, during German Chancellor Angela Merkel’s visit to China in 2015, she said that Germany hoped to participate in the BRI construction and had paid a lot of attention on the investment projects along the new Silk Road (Merkel and Li, 2015).

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105 RELATIONS BETWEEN CHINA AND THE EU AND THE “NEW SILK ROAD”

Slobodan ZEČEVIĆ, Ph.D. Professorial Fellow Institute of European Studies in Belgrade, Serbia1

Abstract: China’s export of goods created the trade surpluses that allowed it to appear as an investor in the international arena. Due to the global economic and financial crises, the exchange reserves of China diminished so that from 4000 billion dollars in 2014 fell to 3,200 billion in 2016. Therefore, Beijing has an interest in placing his liquidity in infrastructure projects, which will reduce the time of transportation of Chinese goods to Europe and will preserve China’s liquid assets. Due to the lack of liquidity, the European Union searches the investors in infrastructure. The European Union is the most important Chinese trading partner and the Commission estimates that the amount of trade between the two sides is one billion euro per day. Previously stated fact could lead to the conclusion that the relations between the two parties have a bright future. However, there are some factors which can have a negative impact on mutual relations. The China’s subventions policy in favour of big national companies and its customs politics in some areas could contribute to the discrimination of foreign investors. According to the research of the European Parliament in 80 percent of cases, China appears as a country that practices a policy of unfair competition in the European market regarding subventions to the national producers and applying dumping prices, especially in the steel sector. The Chinese “New Silk Road” has its political aspects. The European Union is worried that the Chinese investment in Europe infrastructure could strengthen the Chinese political influence on the European continent. Key words: The New Silk Road, China, The European Union, the infrastructure projects, the trade exchange, dumping, the political influence.

1 E‐mail: [email protected]

106 INTRODUCTION

The Chinese program called the “New Silk Road” has a task to connect Asia with Europe and Africa by the network of roads, railways, ports, airports, gas and oil pipelines. President Xi Jinping promoted this economical belt when he signed in 2013 the oil contract in Astana, the capital of Kazakhstan. The official name was “One Belt, One Road”, but soon the term “New Silk Road” prevailed in reference to the network of the commercial links established near the 138 BC by the Chinese emperor Han between the city of Xi An and the Mediterranean sea in Syria.2 The Chinese concept and initiative for the “New Silk Road” have many aspects and the investment in infrastructure to improve the flow of goods between Asia and Europe is only one of them. Today’s China by dynamic export created high trade surpluses, which allows it to appear as an investor in the international arena. However, due to the financial crises which started in 2007, the Chinese foreign exchange reserves invested in the financial markets diminished. Thus, they decreased from 4000 billion in 2014 to 3200 billion in 2016. That is the reason that Beijing has an interest placing funds in specific infrastructural projects that could enable better delivery of Chinese goods on the world markets and the preservation of Chinese foreign exchange reserves. China hopes also that the infrastructure network will help to boost its slowly decelerating economy. Constructing a new Silk Road would supposedly solve these problems by boosting exports and opening new markets for the Chinese goods – all while helping to upgrade and engage the economically undeveloped Central China. Investments in the infrastructure of other countries contribute to the development of the same, and to the increasing purchasing power of the population, especially in the middle class. In this regard, Beijing believes that investing with the aim to help the development of countries will create conditions for the population to buy Chinese goods, which will reduce the Chinese trade dependency on the Western markets. With the investments in infrastructure, China also wants to increase its political influence in the world and get out of encirclement policy led by the USA. What the attitude of the European Union towards the Chinese

2 Michel Nazet, La nouvelle route de la soie ou la resurrection d’un mythe, 212.04.2014., Internet: www.diploweb.com

107 economic expansionism is and whether this may lead to a strengthening of the Chinese political influence on a global scale is the subject of this paper.

FUNDS FOR THE REALIZATION OF THE NEW SILK ROAD

To achieve its commercial ambitions on the world level, China has established certain financial mechanisms.3 First of all, China set up a fund called the “New Silk Road”, whose assets amount to $40 billion. In addition, China has also established the “Asian Bank for investment and infrastructure”, with a capital of $ 100 billion and the possibility of its increase. In the Bank’s capital participates 57 countries, but the Chinese share is dominant. Keeping in mind that the previously mentioned means are significant but insufficient for its huge plans, China is counting on additional investment provided by the governments of Chinese provinces and major Chinese companies that could get profit from the infrastructure projects of the “New Silk Road.” China thinks that the co‐financing the participation of the countries on whose territory the projects are realized is necessary, but it also counts on their maintenance of the projects. In this context, it is necessary to consider the possibility of participation in the infrastructure projects of the “New Silk Road” of the “New Development Bank” of BRICS founded by Brazil, Russia, China, India and South Africa, with a capital of $ 100 billion. The Chinese part in the capital of this Bank is 41 percent. Thus, China’s foreign policy is oriented towards the creation of international financial institutions under the Chinese influence that would exist in parallel with those under the American influence. The latter is, for example, “Asian Development Bank” that actually is under the majority control of the US and Japan, as well as the pro‐Western World Bank.

THE NEW SILK ROAD IN THE CONTEXT OF RELATIONS BETWEEN CHINA AND EUROPEAN UNION

The European Union is the most important Chinese trading partner and the Commission estimates that the amount of trade between the two sides

3 Anne Bruce‐Lockhart, “China’s $900billion New Silk Road. What you need to know “, Internet: https://www.weforum.org

108 is one billion euro per day.4 On the other hand, China is the second commercial partner of the European Union, after the US. Imports into Europe from China consist mainly of industrial and manufactured goods: machinery (48, 4%), clothing and textiles (11, 2%), furniture, toys, etc. European export also consists of machinery (29, 8%), transport equipment (22, 4%) and chemicals (9, 8%). Between 2011 and 2015, the average annual growth rate was 4, 4 % for European imports from China and 5, 7% for European exports to China.5 The Chinese investment in Europe tends to attract significant media interest. For example, in the third quarter of 2016 we saw major mergers and acquisitions: Kuka, the German robot specialist, was bought by Midea for 4.8 billion Euros, the BCP Meerwind holding company was bought by China Three Gorges for 730 Million and the German private bank Hauck & Aufhaeuser, was acquired by Fosun for € 232 million. Investing in sports is also making headlines. For example, investment in French football and golf, with the recent acquisition of the Open de France by the Chinese group HNA. However, China is not among the top ten investors in the EU. 40 percent of foreign investments in Europe comes from the United States, then from Switzerland, Canada and Japan. The main beneficiary countries of China investments in Europe are Germany, Luxembourg, the United Kingdom and Greece. European investments in China are concentrated in the automobile sector (such as Volkswagen), semiconductors (such as the Austrian printed circuit board AT & S or Germany’s Infineon Technologies), and consumer goods (the British luxury brand Burberry).

THE IMPORTANCE OF THE CHINESE INVESTMENTS IN INFRASTRUCTURE PROJECTS

China wished to increase connectivity with the European Union by the construction of “economical built.” The goal is to diminish the time of transport goods between Europe and China. That is the reason for constructing the railway Chonking‐Duisburg or investing in airports like one

4 Chine‐Union europeenne: quelles relations commerciales?, Internet: www.touteleurope.eu, 05.12.2016. 5 Ibid.

109 in Toulouse in France. In January 2013 was opened a railroad connecting China with the United Kingdom. It is now the world’s second longest railroad, with a length of over 12,000 km.6 Apart from railroads and highways, China also plans to build new oil and gas pipelines, Internet networks and power grids. So far, Western European countries are accepting the enhanced cooperation with China. Both France and Italy have officially expressed their interest in deepening mutual trade, as well as the willingness to collaborate on projects regarding other sectors, like nuclear energy, science and space exploration. German enterprises have welcomed the opportunities connected with widening railroad infrastructure and upgrading ports like Hamburg or Duisburg. In our region, China bought the port of Piraeus and wanted to modernize it by investing 260 million US dollar. China has the intention to connect this port to the continental part of the European Union. From the port of Piraeus, the majority stake of which is owned by China, the goods can arrive in Hungary via Macedonia and Serbia by rail, and then proceed to the most important economic centres of Europe.7 Upgrading the Belgrade‐Budapest railway line is a key element of this segment, on which a decision was made at the summit of the “16+1 Cooperation” in Bucharest, at the suggestion of the Chinese party. The distance of nearly 350 km is currently covered by trains in 8 hours. After the modernization – thanks to the electrified, double‐track line suitable for a top speed of 160 km/h – the journey time is expected to drop to 2 hours and 40 minutes. The entire cost of refurbishment amounts to about US$3 billion, 85% of the investment would be funded from a Chinese interstate loan. This railway is especially important for the Chinese party because it would be the first time that the Chinese companies build a railway track in an EU Member State, which later could be used as a reference in the case of other European infrastructural developments. This project is not without risk because the costs are extremely high, and the return of the construction is doubtful. However, the modernization of the railway segment has significant advantages. First and foremost, the two capitals could be reached more easily after the modernization of the segment. In addition, sooner or later its refurbishment will be inevitable, although the line is not included in the European core

6 Hanka Burešova, „The New silk road Controversy of Beijing Summit, 05.05.2017., Internet: www.europeum.blogactiv.eu 7 Est‐Central Europe on the New silk road, 20.03.2017., www.geopolitika.hu

110 railway network. The hopes that Serbia may become a European‐level logistics centre would most probably reinforce its central role in the region. The developed railway link will increase Serbia’s ability to attract capital. Furthermore, with the help of the railway link, not only Chinese goods could arrive in the European Union, but it would provide more opportunities to the Balkans country to export domestic products. One should not consider the Chinese market only; by One Belt, One Road other regions (e.g. the Middle East, the , Central Asia, etc.) can be reached more easily. In terms of economy, participation in One Belt, One Road may open new prospects for Serbia, decrease its unilateral dependency and increase its role as a bridge.

SOME CHALLENGES IN THE RELATIONS BETWEEN CHINA AND THE EUROPEAN UNION

Beijing has an interest in placing his liquidity in infrastructure projects, which will reduce the time of transportation of Chinese goods to Europe and will preserve China’s liquid assets. Due to the lack of liquidity, the European Union searches the investors in infrastructure. Previously could lead to the conclusion that the relations between two parties have a bright future. However, there are some factors which can have a negative impact on mutual relations. The China’s subventions policy in favour of big national companies and its customs politics in some areas could contribute to the discrimination of foreign investors on the Chinese market. The European Commission estimated that the Chinese trade barriers for entering on China market are the cause of the European trade deficit with China.8 On the other hand, in the European Union market, according to the research of the European Parliament, China appears as a country that practice a policy of unfair competition by according subventions in 80 percent of cases (e.g.: Gavalda, Parleani, 2010, p. 493; e.g.: Zečević, 2012, p. 269) to the national producers and applying a dumping prices especially in the steel sector.9 At the same time, some European officials are criticizing the Chinese acquisitions in Europe. A document from the German Ministry of Economics, disclosed in

8 The European Commission has the role of guardian of legality. 9 Chine‐Union europeenne: quelles relations commerciales?, Internet: www.touteleurope.eu, 05.12.2016.

111 October 2016, proposes a selection mechanism to block investments with a 25% interest in European companies if investment is motivated by industrial policy, if the buyer receives government subsidies, or if the country of origin of the investment does not offer access to the reciprocal market. In November 2016, the European Commission published its new proposals to strengthen the EU trade defence instruments, but it continues to divide the member states. Finally, the EU arms embargo set up after Tiananmen events in 1989 is a major issue, which still creates tensions with China as well on side of the EU. France, Austria, Belgium, the Czech Republic, Italy, Greece and the United Kingdom declared themselves against the embargo, while Germany, Denmark, Sweden, the Netherlands and the European Parliament supported it, or could accept a revocation under certain conditions (for example in the field of human rights). Lifting the restrictions could have an impact on trade relations, although some European countries have already used some legal gaps in order to export arms to China.

CONCLUSION

Central and Eastern European countries are the bridge to the European Union in the geographical and economic sense. The cooperation between China and the CEE in the framework of the program of “New Silk Road,” particularly on developing the region’s transportation infrastructure, will enable physical connectivity and promote economic exchanges between China and Europe. On the other side, the region could be more economically connected and dependent on China. The Chinese “New Silk Road” has its political aspects. The European Union is worried that the Chinese investment in Europe infrastructure could strengthen the Chinese political influence on the European continent. The question is if the 16+1 initiative is the threat for the European Union and for its unity.10 The Union needs to have a common policy towards China to preserve its economic and political interests. The danger is that China will be in position by developing economic relations with some of the countries of 16+1 initiative which are not ready yet to be a member of the European Union, to influence them and broke

10 Dragan Pavićević, China in Eastern and Central Europe: 4 myths, 16.06.2016., Internet: http://www.thediplomat.com

112 the European unity. This danger can be avoided by the regular consultation between the members of 16+1 initiative with the European Commission in order to respect the EU legal order and it’ s politics toward China. The Chinese investments in Europe are causing media attention and emotions in public opinion. In fact, the Chinese engagement in the infrastructural projects in central and Eastern Europe is not a real treat for the European Union. The European engagement is institutionally and economically too strong to be disturbed by the Chinese initiative. The above‐stated, only means that the European Union does not invest enough money in candidate countries. In the absence of serious investments, these countries must turn to the investors outside the European continent.

BIBLIOGRAPHY

Alomar, B., Dayiano, S., Lambert, T., Sorin, J., Grandes questions europeennes, 3 edition, SEDES, Paris, 2013. Bruce‐Lockhart, A., “China’s $900billion New Silk Road. What you need to know“, 26.06.2017., Internet: https://www.weforum.org Burešova, H., „The New silk road Controversy of Beijing Summit, 05.05.2017., Internet: https://www.europeum.blogactiv.eu Chine‐Union europeenne: quelles relations commerciales?, 05.12.2016., Internet: www.touteleurope.eu, Decocq, A., Decocq, G., Droit de la concurrence, 5 edition, L.G.D.J., Paris, 2012. Dragan Pavićević, China in Eastern and Central Europe: 4 myths, 16.06.2016., Internet: http://www.thediplomat.com Gavalda, C., Parleani, G., Droit des affaires de l’ Union europeenne, 6 edition, Litec, Paris, 2010. Manin, P., L’Union europeenne, Pedone, Paris, 2005. Michel Nazet, La nouvelle route de la soie ou la resurrection d’un mythe, 212.04.2014., Internet: www.diploweb.com Zečević, S., “Institucionalni sistem i pravo Evropske unije”, Institut za evropske studije, Beograd, 2015. Zečević, S., “Poslovno pravo Evropske unije II – pravo konkurencije”, Evropski univerzitet, Beograd, 2012.

113 CHINA’S POLICIES TOWARDS REGIONAL PLATFORM ‐ WITH THE CASE OF “16+1” COOPERATION

HE Zhigao Assistant Professor, Institute of European Studies Chinese Academy of Social Sciences, Beijing, China1

Abstract: The regional platform not only provides space dimension of international studies, in terms of dynamics, structure, process and consequences, but also render the platform for other variables embedded in the regional dimension with a specific meaning. With the evolution of domestic political and social structure and international society, it exerted significant influences on China’s role and perception towards international society, thereby formulating objectives and approaches of China’s foreign policy. In order to fulfill their national interests, it is important for China to rely on a platform, including regional, international and global to carry out China’s foreign policies. China could exert more feasible and influential role at the regional level. And most countries within a regional framework might accept easier the norms rendered by China. The paper picks up one case: the “16+1” cooperation, as respecting diversity and equality, and non‐ alignment cooperation. Regarding China’s policies towards the regional platforms, there are three approaches for China’ regional policies, specifically these are a regional path, economic integration and people‐to‐ people exchange. Key words:China, regional platform, 16+1 cooperation, economic integration.

INTRODUCTION

The evolution of domestic political and social structure and international society exerted significant influences on China’s role and perception towards the international society, thereby formulating objectives and approaches of China’s foreign policy. In order to fulfil its national interests, it is important

1 E‐mail: [email protected]. I am particularly grateful to participants of International Conference: “Initiatives of the ‘New Silk Road’ ‐ Achievements and Challenges”. I would thank the Fund on China‐Central and Eastern Europe Relation, with Project No.KT201701.

114 for China to rely on a platform, including regional, international and global to carry out China’s foreign policies. For instance, China stressed bilateral relations with other major powers, including Russia and the US, while China actively exerted influences on international organizations, including the International Monetary Fund and the World Bank. Nevertheless, China has increasingly paid attention to the regional and sub‐regional platform. China could make use of the regional platform as a leverage, improving the efficiency, legitimacy and reputation of China’s policies in the global governance. In other words, the region (and integrated organization) is one platform of China to integrate and influence international society, which fulfils the two China’s 100‐year goals. When referring to interactions between China and the international society, they not only consist of changes in perceptions and attitudes but also comprise China’s understanding, recognition, compliance and reform of international organizations as well as international rules. There are six phases of China’s policy towards international organizations: resistance (1949–1971), preliminary engagement (1971–1979), comprehensive engagement (1979–1989), full integration (1989–2002), initiative cultivation (2003–2008), and active cultivation (2008–). It is the historical dimension of China’s policy towards international organizations, which relies on variations of China’s status and the international society. Regarding the horizontal comparison, there are at least five differences between China and the Western countries’ policies towards international organizations. Number one, China stressed informal agreements and rules, while western countries preferred formal institutions. Number two, China’s policies emphasized process dimension, while the Western countries stressed strict rules and regulations. Number three, China preferred soft constraints, while the Western countries preferred rigid restrictions. Number four, when it refers to the relationship between China and international organization, China advocated openness and inclusiveness for international organizations, the Western countries maintained closure and exclusiveness of international organizations. Number five, regarding the patterns of operation, China proposed a task‐oriented cooperation based on multiple values, the Western countries stressed for burden‐sharing based on common values. Nowadays, China’s interaction with international organizations has reached an unprecedented height. On the one hand, China has been playing a high compliance power in the international society, strictly abiding, to some extent, by the rules and regulations of international

115 organizations. On the other hand, in the face of the emerging global issues and changes of the international norms, China intends to put forward the proposition of China’s governance idea, set up the international agenda and renders some alternative governance norms and ideas. For example, China has increasingly proposed some initiatives, including initiating the establishment of the Asian infrastructure investment bank, the new BRICs Development Bank, Silk Road Fund, etc. These not only reflect that China stresses the role of existing international order, but also highlight that China acts as a responsible major power. Especially, China has been viewed as a rising power and major power since 2008. These also manifest that the legitimacy of international organizations is dispersed and absent for the stakeholders. For example, the position and policy of IMF and the World Bank is challenged by emerging markets and relative small powers. Therefore, China put forward new norms and ideas about international organizations on the one hand; China stressed the role of regional organizations and the regional platform on the other. The “16+1” cooperation is one of the most attractive and influential frameworks. It not only safeguards China’s own interests but also belongs to the connotation of a community of common destiny, especially with the participant countries. There are two categories of China’s policies towards the regional framework. The first one is that China actively integrated into regional organizations, i.e. Asia‐Pacific Economic Cooperation (APEC), ASEAN Regional Forum (ARF). The second one is that China actively participated with the regional framework. For example, China‐Arab States Cooperation Forum, Shanghai Cooperation Organization, China‐EU Cooperation, 16+1 cooperation, China and ASEAN Free Trade Area (CAFTA) are the platform of China’s policies towards the regional organizations. It manifested that China’s policies towards the regional organizations are respecting for diversity, people livelihood‐oriented, open‐regionalism, partnership, but nonalignment. This paper intends to explain why China stress the regional platform, and pick up one case to analyze China’s policies towards the Central and Eastern European Countries (CEE countries), and lastly address possible approaches for China towards the regional platform. China‐Central and Eastern European cooperation (“16+1 Cooperation”) is a new diplomatic model of China’s overall cooperative diplomacy that is, China as one side, with the CEE countries and their respective regional organizations as the other side, the two sides jointly carry out the cooperation, including leaders’ summit, the

116 level of regular meetings, economic and trade cooperation, cultural exchanges and other forms of mechanism of cooperation.

THEORETICAL FRAMEWORK

Mao Zedong has put forward the theory of “Three Worlds” (Dirlik, 2014) and considered China as a member of the Third World, which has been the foothold of China’s foreign policies towards other powers during a long period. Therefore, it served as the main path for China to maximize national interests based on the strategic platform of the Third World. However, with the evolution of the international society (or the international system and order) as well as the domestic political and social structure, it is not enough to fulfil the aim of China’s international strategy, if China still exclusively stress the role of the Third World. Therefore, China put forward new comprehensive international strategies, i.e. major powers are the key, periphery countries are the primary, developing countries are the bases, multilateral is a significant platform. Nevertheless, there is not a clarified or published regional strategy or Asian strategy, indeed. International actors’ participation in the international society is based on the objective assessment of its domestic and international circumstances, thereby realizing the organic integration of subjective willing and objective circumstances. There are three variables for explaining China’s regional strategies and policies towards the regional platform, including the importance of national power, the role of international society, and the importance of regional politics. More specifically, the former two variables are the necessaries for China’s policies towards the regional platform, while the last one is the possibility for China’s policies towards the regional platform. We could assume that the world is composed of regions because there are different regions with integrated organizations. Besides, there is some sub‐regional cooperation in one region, like Southeast Asia and Northeast Asia. Based on China’s domestic considerations and international circumstances, China’s international strategy might focus on the regional level, East Asia and Central Asia might be the first platform of China’s policy towards the integrated organization. Subsequently, China‐EU and China‐Africa could be another dimension of China’s policies towards the integrated organization, in terms of the inter‐regional connection and strategic partnership construction. Moreover, China could pursue sub‐regional cooperation, like

117 the “16+1” cooperation, which could contribute to China‐EU relationship. This strategic thinking may be more likely in line with the Chinese nation’s thinking habits, from neighbourhood to distant areas, from a dot to a line to an area, which will effectively contribute to China’s strategic orientation. 1) National power highlights a domestic dimension of a nation state, based on an inward perspective, it is composed of three parts, which are the country’s substantive basis, institutional framework and idea aggregation. The substantive basis is an objective existence of one international actor. The institutional framework connects the substantive basis with the idea aggregations of an international actor. The idea aggregation distinguished the substantive basis from the institutional framework, which to some extent replace or complement with the institutional framework. The substantive basis of the state, namely territory, population, natural resources and wealth. The institutional framework of the state, bonding framework between the government and society, the state machine, which is composed of formal and informal rules. The idea or norms of state aggregation problem is the core of the deep, abstract, more reflected in the national characteristics, namely, the legitimacy dimension, specifically the relationship between a state and a nation and supporting the ideology which covers the country’s main idea of aggregation problem. 2) Macro‐oriented international system cultivates and shapes the orientation of national foreign policy. The international community refers to “a group of countries not only formed a system but also established a dialogue mechanism and common rules and systems to regulate their relations” (Bull, H. and Watson, A., p. 1). China’s strategic choice will be, to a large extent, shaped by the international society, as it is largely determined by China’s domestic situation and its own intentions. The international society is a mixer, including the transitions of the system structure, transformation of interaction and process, and the reconstructing of norms. More specifically, the transition of international system or structure is due to significant changes in international order, which is the shift of international actors or shift among international actors (upward or downward), distribution of powers, and polarization of international order. Firstly, with the deepening of globalization, interdependence and the enhancement of interactive density, the international society also provides a significant strategic opportunity for China, a historical window or a time window.

118 Secondly, the process dimension refers to the model and pattern of interaction between international actors, not only contains a material dimension, but also a normative dimension. In this part, members of the international society adjust their interests and strategic intention based on the interaction and communication process. Thirdly, even though the international society is still under the discourse of western countries, it has been improved since the transition and development of international pattern and international process, thereby bringing alternations of discourse and ideas. Therefore, changes of this dimension are the slowest, but harbour the most profound influences. 3) As a foreign policy analysis, regional studies have been at the edge of international relations. However, mainstream international relations theories have not paid enough attention to the regional studies. However, the region is a concept, not only in terms of geopolitical category, i.e. similarity of the geographical proximity and circumstances. It is also a comprehensive concept in terms of a social and political culture category, which is mutual‐ constructed, inter‐constructed, and cultivated among different actors (Buzan, B. and Waever, O., 2003; Cantori, L. and Spiegel, S., 1970; Mattili, W. 1999). Therefore, the region is an “internal characteristic common interaction type and to understand the concept of shared areas exist” (Buzan, B., 1998, p. 73). When it comes to the region evolution, it is coincident that the globalization deepening is accompanied by regional integration. It is the region that becomes one of the important dimension of the international society. There are many scholars viewing that the world is composed of regions, which is “A world of regions”, “a more regional world system”. It has been a norm status of the international order since the end of the cold war, which has been viewing the region as an analysis level and analysis variable. On the one hand, the region itself has the characteristics, structure, system, process and environment of the region. The interactions of international actors mainly settled in the regional level, “interactions of major powers and international affairs fundamentally occurred and conducted in the specific regional framework” (Wang, X., 2000, p.39). The importance of the regional level challenged the assumption of traditional international theories, which is the homogeneity of international actors. It has put forward the assumption that the world is composed of heterogeneous and complicated regions. Therefore, it is sufficient to say that the region could be an analysis variable and policy platform. On the other hand, it is the globalization that highlights

119 the role of regional cooperation. For instance, the European integration still keeps moving even though there are multiple crises challenging the role of the regional governance structure. Besides, Asia regional cooperation and Africa regional cooperation also experience slowing but continuous development. Therefore, regional organizations or the regional governance provide another option for world peace, prevention of war, and economy prosperity and social stability. It further strengthened the evidence that the region is a new analysis level and a new area of International relations and world society. (Please check the Figure 1)

Figure 1. Theoretical Framework

National power 1. Regional path China’s policy 2. Economic towards International context approach regional 3. People‐to‐ platform People exchange Regionalism/ regionalization

Cooperation is one complicated and difficult issue. There are different perspectives to understand cooperation and solutions to reach cooperation. More specifically, if we discuss cooperation, there could be at least four dimensions, for instances, a sphere of cooperation, and a degree of cooperation, effectiveness and a target of cooperation. Regarding independent variables, factors such as perceptions of security, foundations for cooperation, mechanism of cooperation, the approach of actions, a capability of building and rule‐making could exert an influence on variations of cooperation. When we discuss China’s policies towards the regional platform, it is essential to figure out variations of cooperation. Therefore,

120 the following part touches upon the cooperation between China and the Central and Eastern European Countries.

CHINA’S POLICIES TOWARDS REGIONAL PLATFORM: 16+1 COOPERATION

The regional platform not only provides space dimension of international studies, in terms of dynamics, structure, process and consequences, but also renders the platform for other variables embedded in the regional dimension with a specific meaning. The regional organizations, as one of the most institutionalized institution, could exert intermediary and filtering influence on the relationship between global system and circumstance and national foreign policies, which is more local and specific. China could maintain a certain distance from the Western countries, if China’s strategic priority is the regional level, thereby to some extent reducing the (direct) resistance of the Western countries. Besides, there are higher culture inter‐connections, economic ties, and close strategic connections with periphery regions. China could exert more feasible and influenced role in the regional level. And most countries within the regional framework might accept easier the norms rendered by China than others. If China continues to pursue the combination of national culture, political nationalism and economic liberalism, it is the regional level rather than the global level that serves the ideal platform where China will conduct its foreign policies. China launched the new cooperation mechanism with Central and Eastern European Countries, known as the “16+1 Cooperation” in 2012. The forum – consisting of China plus 16 CEE countries, both EU members and non‐members – has developed relatively rapidly into a loosely institutionalized form, with a secretariat, national coordinators, and regular meetings. During five years of 16+1 cooperation, there have been five summits, including Warsaw summit, Bucharest summit, Belgrade summit, Suzhou summit, Riga summit. It involves many cooperation areas, mainly focuses on 1)Economic cooperation, 2) interconnection and interoperability, 3) capacity and equipment manufacturing cooperation, 4) financial cooperation, 5) agriculture, forestry and quality control cooperation, 6) science and technology, research, innovation and Environmental protection cooperation, 7) culture, education, youth, sports and tourism cooperation, 8) health

121 cooperation, 9) local cooperation. There are plenty of fruitful results for the “16+1 cooperation”, indeed. Recently, however, China has increasingly realized that the CEE countries are too complex and heterogeneity, thereby to some extent relies on the EU. As mentioned in Riga Declaration, “all participating EU member states reaffirmed that the implementation of the actions envisaged by this document must be done without prejudice to the competencies of the European Union and with respect for the obligations stemming from their membership of the European Union”. (Riga Declaration, 2016) It manifested that China did not intend to divide the CEE countries from the EU, even though there are plenty of overlapping between the “16+1 cooperation” and China‐EU cooperation. Rather, China managed to combine the “16+1 cooperation” with China‐EU cooperation, like synergies between China‐ CEE fund and Junker investment plan. Besides the areas of cooperation between China and the CEE countries, and the relationship between China and the EU, the most important is respecting for diversity and equality. As mentioned in the Medium‐Term Agenda for cooperation between China and Central and Eastern European Countries, “based on mutual respect for sovereignty and territorial integrity and understanding of each other’s development choices, the Participants will actively implement the Agenda in light of their respective realities, needs and priorities, through equal‐footed consultations, capitalizing on each other’s complementarities and win‐win cooperation.” (Suzhou, 2015) The possibility of involvement of other partners in specific “16+1” projects and activities will be decided based on the principle of consensus. The Participants will carry out cooperation in accordance with their respective laws and regulations. China has launched a number of multilateral initiatives to strengthen cooperation. For their part, many CEE countries have expressed interest in deepening relations with China by deepening economic and commercial bilateral ties to improve connectivity in the region and eventually gain a more strategic leverage. As for Western Europe member states, the “16+1” cooperation forges a deeper and more effective common platform, not only the CEE countries and Western Europe, but also China and the EU, especially enhancing infrastructure connectivity and economic modernization. Admittedly, it is mainly driven by the economic logic and Geo‐economic logic, rather than the geopolitical logic, for China engaging with the CEE countries. It might be a sample for OBOR initiative. Besides, the “16+1” cooperation and OBOR initiative have the potential to

122 complement each other, turning the CEE countries into China’s gateway to Europe and corridor between Europe, Russia and China. Indeed, the 16+1 cooperation might give the EU, the CEE countries and China the chance to increase their own strategic, political and economic leverage. Through platforms such as SCO, the 10+1 cooperation between China and the Association of Southeast Asian Nations, the 16+1 cooperation, China could render a series of ideas on China and regional actor’s cooperation. There are other platforms including Forum on China‐Arab Cooperation, Forum on China‐Africa Cooperation, which might also draw previous, tangible experience from cooperation mentioned above. Therefore, China’s policies towards the regional platform might win positive evaluation from the international society, especially those countries within the regional organization framework, thereby fulfilling China’s strategic interests.

APPROACHES FOR CHINA’S STRATEGY TOWARDS REGIONAL PLATFORMS

China’s regional policy is one of the contents of China’s foreign policy. And the goal is to enhance China’s authority and influence in different regions, like Asia and the western Pacific, Europe and Central Asia. However, the foremost region is Asia, especially East Asia. Regarding for China’s strategy towards regional organizations, there are three approaches for China’ regional strategy, specifically is the regional path, economic integration, and people‐to‐people and cultural exchange. The regional path is China’s guiding strategy to carry out foreign policy, not only in the surrounding areas but also in other regions, like the EU, the Arab region and Africa. It manifests that China stresses the regional level, in addition to the bilateral relationship. For instance, China stressed the role of EU member states, like Germany and the CEE countries, but also concerned the role of the EU institutions. It is impossible for one region to develop and integrate without the participation, recognition and mutual support of the regional members. China’s strategy to carry out the surrounding areas in the economic integration, but also the economic security, public safety and environmental security, are inseparable. As part of China’s global strategy, the regional path could be conducted under the strategic goal of national strategic objectives, as a starting point, thereby serving the relationship between the

123 regional strategy and wholesome strategy, coping with the relation between the regional strategy and parts of the global strategy (mainly referring to major power strategies). It refers to the relationship between a whole and parts, the relationship between parts and parts. Especially in the historical stage of the rise of China, the regional strategy will provide a platform for the peaceful rise of China and the peaceful transformation of the international community. It is not to say that China elides the role of major power, as well as international organizations, either the role of nation‐states in the regional organizations. The regional path is only one level of China’ foreign policy, which requires effective coordination between the regional level and the national and global level. Economic integration is the specific practice of China’s security strategy in the different regions. The regional or sub‐regional path selection and implementation strategy of the surrounding is China’s starting point. Economic integration is a specific policy. It is essential for China to develop and promote economic ties with integrated regions. Meanwhile, the mechanism of coordination is likely to stress economic integration. The rapid growth of economic strength and the increase in the density of foreign economic exchanges not only provide an impetus for China’s domestic reform and development but also enhance China’s political influence in the region. Under the impetus of the “economy first”, China increasingly strengthened the relationship with regional organizations, integrated into the regional system, from an “out of the country” into a “region of the country”, resulting in the spill over effects. With the deepening of economic cooperation, the “16+1” cooperation should move towards constructing cooperation mechanism, including the deep organizational mechanism, as well as loose organization form and flexible operation mechanism. The construction of cooperative mechanism will avoid information asymmetry and uncertainty, reduce transaction cost, and restrain the behaviour and policy choice of sides, thereby shaping the common interest appeal, and enhancing the breadth and depth of cooperation. The “16+1” cooperation is a long‐term systematic project because the cooperation mechanism can be divided into the low cooperation mechanism based on the benefit generalization, the moderate cooperation mechanism based on the system differentiation and the deep cooperation mechanism based on the value solidification (Yang, 2012). China and the CEE countries could, under the overall framework of the “16 +1” Cooperation, strive to discuss and reach a

124 consensus on the timetable and roadmap for the cooperation among the “16+1” interests community, and gradually promote the construction of cooperative mechanisms at all levels. 3) People‐to‐people and cultural exchange is the effective complement with official diplomacy. Considering China’s economic power has, to some extent, translated into a political influence. Public diplomacy could add cultural attractiveness to the economic integration. (Wang, He, 2013) Public diplomacy is an “instrument used by states, associations of states, and some sub‐state and non‐state actors to understand cultures, attitudes, and behaviour; build and manage relationships; and influence thoughts and mobilize actions to advance their interests and values” (Gregory 2011, 353). With the deployment of people‐to‐people and cultural exchange, it could contribute to a more favourable image of China in the CEE countries. And it would strengthen China’s discourse power and help China to seize strategic opportunities. People‐to‐people and cultural exchange, as public diplomacy, is a possible and even necessary approach to promote a mutual understanding between Europe and China which may have a positive effect on their co‐evolution. The Chinese leaders, therefore, “will take solid steps to promote public diplomacy as well as people‐to‐people and cultural exchanges, [and] conduct friendly exchanges” between all sorts of stakeholders (Xinhua 2012). Therefore, it is important for China to conduct people‐to‐people and cultural exchange to bring a benign co‐evolution between China and the CEE countries, which contributes not only to the development and transition of China, but also to the development and transition of the CEE countries. Since most CEE countries are members of the EU, the co‐evolution of China and the CEE countries might contribute to the further integration of Europe. When we carry out the “16+1 cooperation”, we need to establish an overall strategic direction. Without strategic considerations, we will lack continuity and strategic engagement with countries in the CEE countries, which harbours an unclear position with regard to the overall strategy and the priorities of economic policy. At the same time, if we lack a consistent policy orientation, the elites and people of the CEE countries are hesitant about our policy stance, and the policy signals that others (including the EU, Russia, etc.) are not clear, which, in turn, is not conducive to our cooperation with the CEE countries and the EU. With the rapid development of China and the CEE countries, in terms of economic and trade relations, cultural exchanges, the CEE countries find

125 more and more dependence on China. However, without stable and rule‐ based cooperation, the people and elites in the CEE countries could not really establish a strategic cooperation with China.

CONCLUSION

At the moment, we are in a somewhat uncertain situation. With the complexities of globalization, anti‐globalization, de‐globalization, a regional‐ oriented foreign policy and behaviour is to some extent a Pareto sub‐optimal choice. The regional platform, in terms of the coordination and cooperation, not only renders certain structure embedded with governments but also ensures an equal participation and mutual benefit of the relevant countries. It means all participants could be possible for accepting unified standards and regulations, and supporting, to some extent, the regional governance mechanism and institutions. It is the most conducive to promote the process of globalization and its challenges, if we solve global problems at the regional level, or implement regional standards and measures to achieve global standards. It is certain regions that understand and appreciate the influence of globalization and the importance of globalization. Meanwhile, it is more hypersensitive for international actors to react with and response to the balance of interests and motivations, not on a global level, but on a regional level. At the same time, international actors’ response will firstly exert a direct impact on the region. China develops significantly, in the sphere of materials, economy and military. China’s political influence is also expanding, and China has been increasingly involved in the multilateral platform in terms of identity, other countries in the regions have altered their perceptions of the rise of China, because the countries in the region used to view China as the “threat”, now they regard China as a “constructive partner”, and a non‐ threatening regional power. With the rise of China and the changes in neighbouring countries’ recognition of China, they adjust their relations with China and expect China to play an increasingly important role in regional affairs. The “16+1” cooperation is a new and important engine for China‐EU relations and OBOR initiative, which is a new platform for deepening traditional friendship and expanding pragmatic cooperation. When we conduct the “16+1” cooperation, it is essential for China to figure out the dimension of Integration and Differentiation, and under the instruction of

126 China grand strategy. The main point of this paper is that China’s policy towards the regional platform will focus on the regional level, emphasizing the integrity of the region, rather than just concentrating on the specific bilateral relationship. It is the starting point and platform for China’s international strategy to concentrate on a regional or a sub‐regional level. Specifically, the economic integration is China’s concrete policy to conduct an international strategy. Based on the logic of economic integration, China conducted the economic integration on the regional or the sub‐regional level, including periphery regions and distant regions. Besides that China concentrate on the importance of the regional path and economic integration, China might strengthen its cultural exchanges, via public diplomacy or people‐to‐people exchanges with neighbouring countries, thereby improving China’s international image and creating a friendly, peaceful and cooperative international image. It is also possible for China to expand the Chinese language, Chinese culture, technology, to train foreign political and technical elites, thereby consolidating and developing the relationship between China and neighbouring countries, not only on the government level, but also on the social and public level. It is not a paradox for China’s bilateral and multilateral policy; at the contrary, it is parallel with the idea of a community of common density with regional organizations, as well as their members.

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129 16+1 AS A LABORATORY FOR THE BELT AND ROAD INITIATIVE: A PRELIMINARY ANALYSIS

Anastas VANGELI Researcher, Ph.D. Candidate Graduate School for Social Research, Polish Academy of Sciences, Warsaw, Poland1

Abstract: For the last five years, China has carried out an unprecedented diplomatic initiative aimed at boosting its relations with the countries of Central, East and Southeast Europe (CESEE). An analysis of the new China‐ CESEE relationship within the particular historical context – both global and regional – in which it has developed, indispensable generalizable insights on China as a global actor applicable to future studies of its engagement in areas well beyond CESEE, and in particular with regards to the further development of the Belt and Road Initiative. In CESEE, China has boldly engaged into diplomatic experiments and innovations (most significant being the creation of the 16+1 mechanism), and the lessons from the region have informed China’s proactive diplomacy at the world stage. At the same time, an insight into the particular reasons and motivations for selecting CESEE as a particular region of focus by Chinese policymakers also unveils much about the normative and symbolic components of China’s new foreign policy, which serves not only to facilitate the refashioning of China’s economic and political relations with the rest of the world, but also has the potential to animate changes in the thinking and behaviours of others on both international cooperation and domestic development. Key words: China, 16+1 mechanism of cooperation, Central, East and Southeast Europe (CESEE).

INTRODUCTION

The contemporary relations between China and the sixteen nations of Central, East and Southeast Europe (CESEE, or what in the Chinese wording is known as Central‐East European Nations, shortened as CEEC, also dubbed as

1 E‐mail: [email protected]

130 16+1) are strongly linked with China’s Belt&Road Activity (BRI). Already the majority of the CESEE countries have signed the Memoranda of Understanding with the Chinese government on the BRI, and the BRI occupies an important position in the joint working agenda of the so‐ called “16+1” platform between China and the region. Moreover, a series of events at different levels of interaction now seek to explore the synergy between 16+1 and the BRI. However, there is still an open question how to approach the link between 16+1 and the BRI. One common way to define this link is to frame it in the context of the geography of the BRI, which then is inevitably linked to the idea of the BRI as a mega infrastructure connectivity project. Defined like this, CESEE represents one leg of the BRI – it is the space where the Eurasian Landbridge Corridor, but also the China‐Russia Economic Corridor links with the European common Market; it is also the area where once reaching Southern Europe, the Maritime Silk Road continues over land to the rest of the continent.2 However, another way to see the 16+1 is as a foreign policy laboratory, or testing ground, of ideas and practices that inform the BRI. This is a point often raised by Chinese experts and policymakers on the topic, which corroborates the assessments that the Chinese political system and governance practices that are founded on experimentation, and also helps in making sense of the temporal difference between the establishment of 16+1 and the BRI (16+1 was initiated in 2011 in Budapest and formalized in 2012 in Warsaw, while the BRI was formally announced only in late 2013). This paper takes the function of 16+1 as a testing ground for the BRI as given, and analyzes below seven policy principles that are being developed through 16+1 and can be also identified in the development of the BRI. This, of course, does not imply that the only purpose of 16+1 is to serve as a laboratory, nor that it is the only laboratory where policy principles are tested prior to being applied at the level of the BRI, nor that the policy principles analyzed below are the only ones that underpin either 16+1 or the BRI.

STATE‐DRIVEN ECONOMICS

China has become a global economic powerhouse by relying on a state‐ centric economic model (Breslin, 2011; So & Chu, 2015; Zhao, 2010). It has

2 For the geography of the BRI See: Office of the Leading Group for the BRI, 2017; for the link between 16+1 and BRI See: Liu, 2016; Vangeli, 2017.

131 also developed a model of economic‐led diplomacy with many areas in the world. In the development of the platform 16+1, China has emphasized measures that are directly or indirectly directed towards economic development and economic activity. This was visible ever since the initial twelve measures of Wen Jiabao promoted in Warsaw in 2012, and has been the common thread spanning through all annual summits and accompanying events. If one analyzes data on the economic exchange between China and the sixteen, however, it is easy to notice that comparatively, the largest leap in the cooperation occurred before the establishment of 16+1, up until the economic crisis in 2008‐09 (Vangeli, 2017). The common sense assumption, then, is that the platform for inter‐governmental cooperation has not lived up to the expectations, given that unbound, market‐led cooperation grew faster in the past. However, the explanation here is different – and this is important for the understanding of the logic of the state‐led economic cooperation initiated by China. First, the financial crisis and its impact on the cooperation between China and CESEE signalized a certain vulnerability or weakness – in almost every area of the economy in the West. In this sense, the major difference between China and the West is that in China the crisis was a signal for a greater economic role of the state – both at home, but also abroad. Second, even outside the context of the crisis, it is quite possible that the assessment of the Chinese leadership was that the possibilities of market‐led China‐CESEE cooperation have reached a level beyond which is hard to overpass. In that sense, the purpose of 16+1 was for the state(s) to step in, to tackle the negative effects of the crisis, and to push the limits of cooperation further. In this sense, the BRI emerges from a similar context. It is explicitly framed as a Chinese response to the global crisis that aims to utilize the power of governments to extend the limits of economic cooperation (National Development and Research Commission, 2015).

SOUTH‐SOUTH COOPERATION WITH NORTH‐SOUTH CHARACTERISTICS

To the bewilderment of CESEE representatives, 16+1 in the Chinese official discourse is presented as “South‐South Cooperation with North‐South Characteristics” (SS/NS) (Kowalski, 2017). This is clearly an expression rooted in China’s worldview that splits the world into a global North (comprised of developed countries – OECD members), and a global South (comprised of

132 emerging/developing countries, to which China belongs and identifies with). This is different from the view that splits the world into “East” (Orient) and “West” (Occident). In CESEE, nominally, the case is that the sixteen countries are indeed comprised of both developed and developing countries. Some more advanced economies (i.e. the Czech Republic) are more convergent with core Europe, but others are rather poor and similar to the developing world (i.e. Macedonia). For China, South‐South cooperation means that the relations happen along a shared post/anti‐colonial sentiment, and are driven by mutual understanding on certain cooperation principles. However, while in the past the predominant sentiment was solidarity, and China’s main method was development aid, China had gradually become more conscious of the economic role of such diplomacy (i.e. what does China gain from a deal?). On the other hand, while formerly China has treated the North as an exploiter and therefore an enemy, since the days of reform and opening up it accepted the rules of global capitalism and started adjusting to the situation. North‐South cooperation with regards to the role of China, then, is an interaction which contains elements of strategic competition or at least logic of business making (rather than solidarity) The innovation of SS/NS cooperation then reflects the mixed character of the group of sixteen, but also the ambivalent normative backdrop against which 16+1 is being developed – in some ways, China pushes for more development, but in others, it promotes a business agenda in which there are no sentiments involved, i.e. via loans (rather than aid). The BRI itself is also an example of SS/NS cooperation. While the majority of countries who participate are developing economies, there are also some OECD countries involved; moreover, while China promotes elements of South‐South cooperation, it promotes North‐South relations as well. This is a way to achieve win‐win cooperation, whereby both sides gain something, which overcomes simple aid‐based relations (where only the receiving country gains), but also exploitative relations (where only the richer country gains).

(RE)CONSTRUCTION OF A REGION

While China has engaged in various venues of regional diplomacy, in CESEE it has engaged in a process of constructing its own version of CESEE. That makes 16+1 different to formats such as China‐FOCAC or China‐CELAC

133 cooperation, as in those platforms China engages with pre‐existing entities. At the same time, while 16+1 is not the only regional project in CESEE, it is unique in the selection of countries. Nowhere except in 16+1 all of the sixteen countries involved sit together. In the process of shaping the design of the regional platform for cooperation in CESEE, China utilized the asymmetrical relations, its symbolic power and the ability to convene groups of countries and act as their spokesperson. With this, China does not aim to shape a new, distinct CESEE identification in international relations, but rather it contributes by adding yet another level of shared interactions between the countries. At the same time, the regional approach serves to overcome the challenge of a small size of the individual countries. Economically, China desires to stimulate regional economic integration which would stimulate the creation of a CESEE regional economy of scale, which would then make CESEE a much more attractive economic partner. In terms of infrastructure projects, a regional cooperation is a prerequisite for the realization of large trans‐national projects (railways and highways). On a practical level, a regional cooperation format allows for the Chinese representatives to communicate consistently with sixteen governments at once, and avoid the complications that could arise from trying to communicate with each country separately on the same issues. The logic of regions and regional cooperation is also knitted into the BRI. The BRI is supposed to be realized through six corridors, implemented through 16+1 and other regional diplomatic platforms, and finally, it aims to construct a mega‐region (or rather an economic area) of the countries that participate in the BRI.

INSTITUTION BUILDING

16+1 is a cooperation platform that is aimed to be implemented through a myriad of joint institutional mechanisms and quasi‐institutions, which itself make it look like a quasi‐international organization. This institutional design has its own peculiarities and is different from other similar projects, both implemented by other actors in the region, and projects implemented by China elsewhere (Vangeli, 2017). The central mechanism through which the cooperation is advanced is the annual Summit of heads of states and governments that is organized in one of the participant countries. The

134 permanent Secretariat established within the Chinese Ministry of Foreign Affairs then has regular meetings with the CESEE ambassadors in Beijing. Then, there are national coordinators and the ministries of participant countries who are over‐viewing the cooperation. However, the most innovative aspect is that a number of coordinating institutions now span across a myriad of policy areas, such as people to people contact, trade and investment, connectivity, technology and innovation, agriculture and forestry, healthcare, political parties dialogue and local government. At the same time, these mechanisms are dispersed through the cooperating countries, but also different Chinese provinces, meaning that not everything revolves around Beijing. While it is still difficult to even map all the institutions created under 16+1, it is also important to argue that most of them are yet to pick up the pace with their work. One of the key promises of the BRI Forum held in May 2017 was the establishment of a special Secretariat that will coordinate the cooperation with the participant countries. This in itself is very much similar to the Warsaw summit of the 16+1. The Forum will then take place regularly, every two years. A whole range of institutional and coordination mechanisms is about to be established – with some of them located outside China. Most importantly, however, the BRI will also be accompanied by a significant diplomatic activity of China’s regions, provinces and cities, and promote the idea of railway linkages.

OVERCOMING HISTORICAL CONCERNS

The interaction of China and CESEE did not start with 16+1. In fact, they have had a complex and intertwined historical trajectory during the Cold War era, and in the years afterward (Bailes, 1990; Tubilewicz, 1998; Wasserstrom, 2000; Yahuda, 1995). Before 1989, both China and CESEE were a part of the global socialist community. In 1989, socialism in Europe started to collapse, while in China, even though tempted, it survived. This diverging experience, however, has left consequences on their mutual relationship in the following period. In the 1990s, most of the CESEE either ignored China or attacked it on ideological grounds, as they promoted an anti‐communist foreign policy agenda. They even got involved with issues such as Tibet and Taiwan, which made closer relations with China seem rather impossible at the time. By 2008, many of them even called on boycotting the Beijing Olympics. However, the

135 financial crisis and China’s proactive approach led to the greater refashioning of the relationship, from the complications by historical legacies to one in which sensitive issues are circumvented, and common interests (in the first sense economic cooperation) are emphasized. Sporadic references to the Cold War era relations are used as a backup point and a tool to create a common narrative between China and CESEE. In this sense, China has managed to initiate a cross‐country consensus on the cooperation, something that has not happened even in the Cold War era (when the Soviet factor complicated the intra‐bloc relations). Rightfully so the Chinese diplomats today claim that the relationship between China and CESEE is at the highest point in history. Moreover, China has pre‐empted politicization of its relations with CESEE by reaching out also to opposition political parties via the political party’s forum. Thus, the question on cooperation with China has been a subject of the national consensus in the countries of CESEE. The successful shelving of the burdens of history and ideological divergences and the focus of reframing its external relations as driven by pragmatism is something that goes under the radar – but is something that China has truly mastered in the context of 16+1. This is a practice that also underpins China’s strategy in Southeast Asia, and potentially in its relations with other regions along the BRI. In fact, much of the success of the BRI depends on whether China will have a similar success elsewhere.

BYPASSING GLOBAL AND REGIONAL POWERS

Prior to establishing the format for cooperation with CESEE, China has not consulted with global and regional influential actors. Therefore, stakeholders in the region, in the first place Western European countries and the European Union (EU) have not embraced 16+1 warmly. In fact, they have frequently interpreted 16+1 as China’s “divide and conquer moment.” As of late, European politicians refer to 16+1 as a breach of the “One Europe Policy” by China (Poggetti, 2017). The reaction of the EU towards China’s move to convene a number of European countries in a separate platform is an unintended consequence that nevertheless offers insight in how China’s proactiveness on the global stage and its diplomatic innovations can spiral into friction, and even contention with major powers. The major problem here is the diverging perception of the region in question (CESEE), and the

136 countries that comprise it. China treats them as fully sovereign and independent and therefore talks to them directly. In the eyes of the EU, however, this is problematic on several grounds. On the formal political level, eleven of these countries are the EU members and the five others want to join the EU, and given the mechanisms of pooling sovereignty and joint decision‐making in the EU, there is an added EU‐dimension to the China‐ CESEE relationship. However, there is the added element of economic concerns – be it concerns that China is an “economic trespasser” in a region that is the “backyard” of the core European economies such as Germany (Pepe, 2017); but also the concern that by proposing new corridors through CESEE, China may shake up the European economic architecture. Finally, the question of identity and political belonging of CESEE within Europe has been an issue of contention and debate, and by engaging the CESEE in such way, China arouses the insecurities in the rest of Europe. Residues of prejudice – both towards China and “the Easterners” inside Europe add on to this impression. Yet, strategically, just like 16+1, the BRI has been also implemented by circumventing virtually all of the major global powers. They have had a different response to it. After initial doubts, Russia decided to embrace the BRI. The EU, as in the case of 16+1 is slow to formulate the official policy and is rather suspicious of the intentions of China – even though some individual EU member states have greatly embraced the initiative. Most important – and most puzzling, however, is the role of the US – while many American scholars have raised concerns about the BRI, the US did send a delegation to the BRI Forum in Beijing.

DIVERSE DEVELOPMENT

16+1 is a platform that involves countries that in many ways are similar and comparable, but nevertheless have tangible differences related to size and geography, level of economic development, overall political climate, institutional settings, needs and priorities, and resources to cooperate with China. At the same time, China also has different visions, experiences and expectations for each of them. This leads to a rather divergent development of the vision for 16+1 across different subregions and countries within CESEE. For example, the trade volume between China and the four Visegrad countries (Poland, Hungary, the Czech Republic and Slovakia) is much higher

137 than the trade volume between China and the other countries. These countries also receive a majority of the investments. However, the majority of infrastructure projects (both in transportation and energy) are realized in the Balkans. On a political level, there are four “anchor” countries that are China’s strategic partners in the region – Poland, Serbia, the Czech Republic and Hungary ‐ and have more frequent and deeper high‐level dialogues. Therefore, even if one often analyzes the sixteen as a whole, the reality varies. The same principle applies to the BRI. Comprising a great area comprised of a variety of participating countries, ranging from impoverished post‐colonial developing ones to some of the world’s most advanced economies, the BRI, in reality, will inevitably diversify into projects that correspond to the different local circumstances. There will be no single and most suitable example of the BRI in action, but there will be many different ones.

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138 Office of the Leading Group for the BRI. (2017). Building the Belt and Road: Concept, Practice and China’s Contribution (First). Beijing: Foreign Languages Press. Retrieved from Internet: https://www.yidaiyilu.gov.cn/ wcm.files/upload/CMSydylyw/201705/201705110537027.pdf Pepe, J. M. (2017). Continental Drift. Germany and China’s Inroads in the “German Central Eastern European Manufacturing Core:” Geopolitical Chances and Risks for Europe. Presented at the ISA International Conference, Hong Kong. Retrieved from Internet: http://web.isanet.org/ Web/Conferences/HKU2017‐s/Archive/397b4475‐f2b4‐4731‐bcec‐c5aa 13241a44.pdf Poggetti, L. (2017, September 9). One China – One Europe? German Foreign Minister’s Remarks Irk Beijing. The Diplomat. Retrieved from Internet: http://thediplomat.com/2017/09/one‐china‐one‐europe‐german‐foreign ‐ministers‐remarks‐irk‐beijing/ So, A. Y., & Chu, Y. (2015). The global rise of China. Cambridge, UK ; Malden, MA: Polity Press. Tubilewicz, C. (1998). Comrades No More: Sino‐Central European Relations after the Cold War’. Problems of Post‐Communism, 46(2). Vangeli, A. (2017). China’s Engagement with the Sixteen Countries of Central, East and Southeast Europe under the Belt and Road Initiative. China & World Economy, 25(5), 101–124. https://doi.org/10.1111/cwe.12216 Wasserstrom, J. (2000). Chinese bridges to postsocialist Europe. In S. Antohi & V. Tismaneanu (Eds.), Between Past and Future: The Revolution of 1989 and Their Aftermath, Central European University Press. Yahuda, M. B. (1995). China and Europe: The Significance of a Secondary Relationship. In T. Robinson & D. Shambaugh (Eds.), Chinese Foreign Policy: Theory and Practice, Oxford University Press. Zhao, S. (2010). The China Model: can it replace the Western model of modernization? Journal of Contemporary China, 19(65), Internet: https://doi.org/10.1080/10670561003666061

139 BORDER REGIONS IN EUROPE: GREAT POTENTIAL FOR CHINESE SILK ROAD

Aleksandar JAZIĆ, Ph.D. Research Fellow Institute of International Politics and Economics, Belgrade, Serbia1

Abstract: Political changes on the national level, which are the result of globalization, affect the position of local self‐government. Today, the lower level of government has authority to act independently in some areas, for example to establish cooperation with its counterparts from another country. The best example of such authority is the creation of Euroregions. This is a form of cooperation by which the regions of different countries get connected without establishing traditional political institutions. People living in these regions can make an influence on their own living conditions and cooperate to solve mutual problems with no interference of state institutions. This is the most important characteristic of Euroregions that could contribute to the stability and cooperation of the wider region. It is especially important for border regions which are usually less developed than the central regions. Through Euroregions, border regions are able to cooperate and consequently develop their economy. This way, border regions can keep their stability and prevent the outflow of the population. In the framework of Chinese Silk Road border regions are seen as a great opportunity for investment because they themselves need investments and have significant unused potential. They represent an open field for Chinese investments and an open door for China to enter the market of other countries. Key words: border regions, Chinese Silk Road, Euroregions local self‐ government, investments, international cooperation, globalization.

INTRODUCTION

Globalization is one of the main factors that crucially influence the changing role of the national states. Other spheres of international relations are also under the influence of globalization. This process is changing the position of the national states and helps other actors to emerge on the

1 E‐mail: [email protected]

140 international scene. Some of these newly emerged actors are regional initiatives or other groupings. Globalization causes economic transformation on the global level. This fact encourages economic links on global or regional level among different factors. As the power of a national state is getting weaker, the position of various civil society actors is getting stronger. This process is ultimately changing the structure of such societies.2 The above‐ mentioned changes bring about economic changes. For example, the position of border regions and the local self‐government is changing. Their position is becoming more complicated in terms of economic development compared to the position of central regions. However, the border regions have the authority and are able to connect with the border regions in their neighboring countries. They can create Euroregions with the aim to improve their economic position. It is obvious that the Euroregions are associations of local and regional authorities on both sides of a national border. Sometimes the Euroregions have an assembly as the main body of their functioning structure. This sort of association usually has a permanent secretariat and technical support. Also, the Euroregions can be organized as a non‐profit association on both sides of a national border. Of course, they are obliged to respect the legal systems of their own countries. Another organizational form of the Euroregion is that of a public entity which is based on inter‐state agreements.3

STRUCTURE AND FORMS OF EUROREGIONS

A Euroregion as a form of cross‐border co‐operation structure does not presume the establishment of a new government or other institutions. That is why this form of cooperation has no political powers and its competences are very limited. The competences of Euroregions are limited to the powers of local or regional authorities that participate in this form of cooperation.

2 Dragan Petrović, Ka multipolarnom svetskom poretku, Pešić i sinovi i Centar za razvoj međunarodne saradnje, Beograd, 2010, str. 83‐86. 3 Mario Otočan, “Euroregion as a mechanism for Strengthening Transfrontier and Inrerregional Co‐operation: Opportunities and Challenges”, Report, CDL‐UDT (2010) 008, European Commission for Democracy Through Law (Venice Commission), Strasbourg, 9 March 2010, p. 5.

141 The main tasks of Euroregions are the promotion of common interest, the improvement of living standards of border population and their economic development. A Euroregion as a form of cooperation can have different internal structure. It is already mentioned that the Euroregions can have a parliamentary assembly and/or permanent secretariat with a technical and administrative team. As for the legal nature of a Euroregion, it may be private or public.4 There are three ways to regulate organization and cooperation within the Euroregions and all the three are based on agreements. The agreements may be (1) multilateral, (2) bilateral and trilateral but also (3) regional and local agreements. These agreements are basic elements which shape the type of a Euroregion. Therefore, it is possible to distinguish the three types of Euroregions: no legal entity that is functioning as a working community or community of interest, Euroregions based on private law and those based on public law.5 So, it is obvious that the Euroregions are informal groups of neighboring regions. This way a new entity is created without a new state and local institution or body being established. Initiative for creating the Euroregions usually comes from the population of the regions in neighboring countries or it comes from the institutions of local self‐ government. The main reason for an attempt to connect the regions of different countries is a possibility for political, economic and another kind of cooperation that exists in the specific area.

EUROREGIONS IN THE POLICY OF THE EUROPEAN UNION

During the last decade of XX century, there was a common belief within the EU that local and regional authorities should get a more important role in its development. The first step was made in 1994 when the Committee of Regions was created. This Committee was made of 189 representatives from different countries. The members of the Committee of Regions are the representatives of local and regional authorities. In their own countries, the representatives must be officially elected in the local government bodies or

4 Markus Perkmann, “The rise of the Euroregion. A bird’s eye perspective on European cross‐ border co‐operation”, Lancaster University, Department of Sociology, Lancaster, 2002, pp. 7‐8 5 Mario Otočan, “Euroregion as a mechanism for Strengthening Transfrontier and Inrerregional Co‐operation: Opportunities and Challenges”, loc. cit, p. 6‐7.

142 be politically responsible to the national parliament. The position of the Committee members must be free from any instructions of their home countries and they must be independent in their work. They must fulfill their duties in line with the common interest of the community. Representatives in the Committee of Regions are elected on the proposition of their home states.6 The Committee of Regions has, above all, consultative role because the representation of regional institutions through one body cannot be good enough reason for the participation of regional authorities in the EU decision‐ making process. This is because there are different interests and authorities between local and regional institutions which are represented in the Committee of Regions.7 According to the rules and organization of the EU, the Committee of Regions gives opinions about drafts and regulations of the EU in different areas. The areas in which the EU brings drafts and regulations are defined by the Maastricht Treaty (formally: The Treaty on European Union).8 The European Commission and the Council of European Union are obligated to request the opinion from the Committee of Regions.9 The role of local and regional authorities is very important for the implementation of political initiatives of the EU. There are two main reasons for the efficiency of local and regional authorities in the implementation of the EU policy. First, exquisite awareness, because only local and regional authorities have extensive knowledge regarding specific conditions that the EU legislation need to implement. The second one is responsibility, because in many countries of the EU local and regional authorities use their own resources to finance one part of their activities. Small administration enables a higher level of public access and a stronger sense of responsibility to local voters.10 The existence

6 “Consolidated Version of the Treaty Establishing the European Community”, Official Journal of the European Communities, C 325/33, 24.12.2002, Art. 263. 7 Andrew Evans, “Regional Dimensions to European Governance”, The International and Comparative Law Quarterly, Vol. 52, No. 1 (Jan., 2003), pp. 32‐33. 8 “The Maastricht Treaty”, Provisions amending the Treaty establishing the European Economic Community with a view to establishing the European Community, Maastricht, 7 February 1992, Art. 198c. 9 Ana S. Trbović, Dragan Đukanović i Borisav Knežević, Javna uprava i evropske integracije Srbije, Fakultet za ekonomiju, finansije i administraciju Univerziteta Singidunum, Beograd, 2010, str. 90‐95. 10 See: Regional and Local Government in the European Union: Responsibilities and Resources, European Communities, Belgium, 2001, p. 20.

143 of such regional government organization on the EU level is important for the inclusion of the regions in the decision making processes. That kind of organization provides a single voice of the regions in the advocacy of the interests of their citizens within the EU. The regions have the possibility to give their contribution to the shaping of the EU in the form that will fulfill interests of regions and not only the states. Within the EU, the regions have the possibility to represent their interests apart from the central governments. This is good from the standpoint of autonomy and independency of regions’ activities. Some of the most important EU initiatives and programs which are aimed to foster cross‐border cooperation are INTERREG and The Phare CBS (Cross‐Border Cooperation). INTERREG is financed from the EU Structural Funds and represents the largest initiative of this kind. This initiative evolved so that from 1990 until 1993 there was INTERREG I, while from 1994 until 1999 there was INTERREG II. From 2006 this initiative is known as INTERREG III because it supports three types of cross‐border initiatives: cross‐border cooperation (Strand A), transnational cooperation (Strand B) and inter‐ regional cooperation (Strand C). In 1994, the EU started The Phare CBS initiative. In the beginning, the goal of this initiative was to support Central European countries which were back then bordering the countries of the EU. This initiative spread its sphere of influence in December 1998 in the border regions between Central European countries and other candidate countries. It should be mentioned that the EU supports some of the projects that are related to regions outside the area of influence of INTERREG III and The Phare CBC. These projects are mainly oriented towards Eastern European and Western Balkans countries.11

THE PROBLEM OF BORDER REGIONS AND AN EXAMPLE OF COOPERATION

In time, it became obvious that domestic and foreign investors have not been interested enough in investing in the border regions. One of the important reasons was the development of cities in which business and capital have become more and more concentrated. Because of that, the

11 “Practical Guide to Cross‐border Cooperation”, Third Edition prepared by Association of European Border Regions (AEBR), European Commission, Gronau, 2000, p. 37.

144 border regions are less developed than the centrally located ones. As the consequence, the border regions offer fewer opportunities for career development and setting‐up successful businesses. The young and educated have no interest to stay in the border regions and they usually move to central regions. Working population outflow weakens the capacities for economic and other development of the border regions. One of the preconditions for new business opportunities and better living conditions is to make the movement of people easier. In the case of border regions, it means easier border crossing. Border regions located on the border triangle of Poland, the Czech Republic and Slovakia established cooperation to make it easier for employment seekers to move in their search for a job. A number of local and regional entities have joined to create a cross‐border partnership EURES‐T Beskydy. The purpose of such cooperation is to give working population useful information regarding employment and business opportunities in the border areas of the three states. The representatives of 35 institutions and organizations from Poland, the Czech Republic and Slovakia signed in Veliki Karlovci (the Czech Republic), on 6th December 2007, a Framework Agreement on EURES‐T Beskydy partnership. At the beginning of 2008, a request has been sent to the European Commission to officially recognize this partnership. On 12th March 2011, the European Commission officially agrees with the formation of the new cross‐border partnership, i.e. Euroregion EURES‐T Beskydy, within the territory of the EU. This Euroregion covers an area of around 19000 square kilometers. As for the regions from the states participating, it covers 45% of the territory of the Czech Republic, 38% of Poland and 17% of Slovakia.12

12 “What is “EURES‐T Beskydy?”, EURES‐T Beskydy, Internet: http://www.eures‐tbeskydy.eu /cross‐border‐partnership‐eures‐t‐beskydy/, 09/07/2017.

145 Picture 1: Map of the area which covers EURES‐T Beskydy partnership

Source: Internet: http://ww1.wup‐katowice.pl/ww1.wup‐katowice.pl/__data/assets/ image/0016/2833/C1_y_html_25d84c8d.jpg, 14/07/2017.

Regarding local and regional authorities and institutions from these countries, the members of the partnership are regional employment offices, middle‐level government authorities, municipal authorities, unions, associations of employers and education centers.13 EURES‐T Beskydy partnership is based on a three‐year strategy developed in annual action plans. These plans must be confirmed by the European Commission. The Partnership provides actual information and its exchange, as well as advice about jobs and job vacancies. Relevant information is also available on the labor market in the border regions, such as those relating to living and working conditions. The efficient and better flow of information should be contributed by EURES advisers in the region. The Partnership provides

13 “EURES”, Provincial Labor Office in Katowice, Internet: http://wupkatowice.praca.gov.pl/ wyniki‐wyszukiwania/rezultat‐wyszukiwania/?p_p_id=101&p_p_lifecycle=0&p_p_state= max imized&p_p_mode=view&_101_struts_action=%2Fasset_publisher%2Fview_content&_101 _assetEntryId=1020473&_101_type=content&_101_urlTitle=1020469‐eures, 17/07/2017.

146 preparation and publishing of public ads on opportunities for vocational training in the region and supports trainees’ further development. One of the key goals is to develop projects which are intended to make a better labor market in cross‐border regions and establish cooperation with other relevant programs.14 Cross‐border Partnership EURES‐T Beskydy has set‐up an internet page which contains all the relevant information for employers, employed, employment seekers and students. There are job ads on the website as well as statistics on the labor market in the cross‐border region. For those who are seeking employment, the sections of the internet page which present living and working conditions in the cross‐border region are very important. Those who are interested in the circumstances that led to the formation of partnership EURES‐T Beskydy and the basic goals of this cross‐border partnership may also find this information on the website. There is also information on the history of partnership EURES‐T Beskydy, its further development path and the results achieved. Moreover, there is an insight into past and current development strategies. Unlike the previous strategies, the current one is set for a period of five years, that is, from 2015 to 2020.15 According to data of the Provincial Labor Office of Silesia in Katowice and Public database of the Czech Republic, it could be said that there is a lot to be done on the development of cross‐border partnership EURES‐T Beskydy. Previous activities have not produced the desired results, but the negative effects of the global economic crisis must be taken into account. Statistics show that Polish and Czech districts in the regions which are included in this partnership have not been exposed to the negative effects of the crisis for a long time. It can be assumed that the partnership has reduced the negative consequences of the crisis.16 This cannot be said for the members from Slovakia where the crisis had a negative effect on employment.17 The EU pays

14 “Cross‐Border Partnership EURES‐T Beskydy”, EURES‐T Beskydy, Internet: http://www.eures‐ tbeskydy.eu/cross‐border‐partnership‐eures‐t‐beskydy/, 20/07/2017. 15 See more about EURES‐T Beskydy on the official Internet page: EURES‐T Beskydy, http://www.eures‐tbeskydy.eu/en/, 21/07/2017. 16 To see detailed statistics on unemployment in the Polish district and the Czech districts, see the Internet pages: Provincial Labour Office in Katowice, Internet: http://wupkatowice. praca.gov.pl/; Czech Statistical Office, Internet: https://www.czso.cz/csu/czso/home. 17 See detailed information on: Regional Statistics Database STATdat. of Statistical Office of the Slovak Republic, Internet:http://statdat.statistics.sk/cognosext/cgi‐bin/cognos.cgi?b_ action=xts.run&m=portal/cc.xts&gohome=.

147 a great attention to the employment and social stability policy, and it is not a surprise that the EURES‐T Beskydy partnership is constantly evolving. EURES‐ T Beskydy is important from the point of view of citizens’ concerns as it opens new opportunities for raising the living standards. Sometimes the citizens feel closer to the cities across the border than to the ones in the inner part of their home country, which may be quite far away. This program of cooperation offers border population the ability to look for a job across the border in the cities that are located in their immediate vicinity. It directly prevents the outflow of population from the border region and contributes to stable economic development. Keeping the labor force in the border region is one of the important prerequisites for the stable functioning of the economy. Such programs may be the solution to the problem of less developed border regions vs. the other regions within the same state.

CHINESE SILK ROAD AND ECONOMIC OPPORTUNITY FOR BORDER REGIONS

The idea of Chinese Silk Road was presented first in September 2013. It was then that for the first time the strategic vision of setting‐up an economic zone along the route of the Silk Road and setting‐up the Maritime Silk Road was publicly disclosed. This is the Chinese plan for the economic development in XXI century. The goal of establishing the Silk Road and Maritime Silk Road is to promote the cohesion of Europe, Asia and Africa. What is interesting for this paper is another goal of this strategy, that is, the incentive to harmonize the development of the countries that are on the route of these two roads. This will involve the exploitation of trade potentials of the region, significant investments, consumption, demand creation and job creation. In 2014, the value of China’s trade with the countries along the economic zone of the Silk Road and Maritime Silk Road was already about $ 1.13 trillion, which made up 25% of the total Chinese foreign trade. China intends to invest $ 40 billion in order to implement the strategy. It should be pointed out that international investors will be included as well, which will result in mutual benefit and positive results of business and other partners. At the beginning of 2015, China officials highlighted the basic priorities in the strategy of building an economic belt along the Silk Road and establishing the Maritime Silk Road for the XXI century. These priorities are: transport

148 infrastructure, ease of investment, trade and financial cooperation. Therefore, under this strategy, around 900 billion dollars will be invested in various projects, and 900 projects will be implemented in more than 60 countries.18 Since the above‐mentioned strategy will encompass a large number of countries, the border regions which need economic incentives to establish a steady development may also benefit from this situation. The Silk Road results in the change of priorities not only on the international level but also within the countries themselves. This can bring about a better economic climate across the border regions, which would allow the regions to impose themselves as a good investment ground. This is particularly interesting for the Euroregions that include two or more countries. The reason for this is the fact that there is already international cooperation at the lower levels of government within the Euroregion. Therefore, investing in these regions could be interesting to the creators of the Silk Road strategy because in the Euroregions, the most important thing is to provide the basis for a stable economic development. Moreover, the Euroregions, at least in terms of economic development and mutual cooperation, are independent in relation to the central authorities. That is why the Chinese investors and their partners would be able to invest funds more quickly and easily in projects they find interesting. Another positive aspect of the Euroregion is the fact that their local authorities have already crossed the state borders and that economic cooperation is already taking place between several countries, even at the lower levels of government. This is a great advantage for those implementing the Silk Road strategy since they will be able to invest in specific countries much easier. The aforementioned priorities of the Silk Road strategy in terms of economic development fully fit into projects that the border regions gathered in the Euroregions are trying to realize. It is undeniable that the central authorities of those countries whose border regions are gathered in the Euroregions would be positive about the investments that the Silk Road strategy implies, as this would encourage the economic stability of the entire state. The Euroregions made up of border regions are able to impose themselves as partners in the Silk Road strategy.

18 Branko Žujović, „Ekonomski pojas duž Puta svile i pomorski put svile za XXI vek ‐ retrospektiva”, Nova srpska politička misao, 04. septembar 2015, Internet: http:// www.nspm.rs/savremeni‐svet/ekonomski‐pojas‐duz‐puta‐svile‐i‐pomorski‐put‐svile‐za‐ xxi‐vek‐retrospektiva.html, 25/07/2017.

149 The long‐term cooperation within the Euroregions may be an advantage in this case. Many of these regions have already built up a stable structure, experience in troubleshooting, attracting investments, self‐fundraising, developing a business environment, and the like.

CONCLUSION

Globalization diminishes the role of central government and gives an opportunity to the lower level of government to influence a decision‐making policy. One way to make local and regional authorities stronger is to create a Euroregion. Also, the ability of local and regional governments to take part in the creation of the Euroregions proves once more their important role in modern political systems. The conclusion is that the level of government which is the closest to common people may create better living conditions and influence the higher levels of government to make them consider the interests of some local communities or areas. This fact is especially important to the border regions which are usually less developed than the regions that are closer to the capital city. That is why the border regions of neighbouring countries are interested in creating a Euroregion; because their interests are usually the same. In XXI century, the Euroregions are becoming more and more a model for the border regions to solve mutual problems and raise living standards. Other reasons for the creation of Euroregions could be related to the exchange of experience, infrastructure, culture, minority issues, etc. The key point is that the communication among border regions is taking place on both local and regional level, without the interference of central governments. Of course, this communication and possible creation of a Euroregion is a subject to the laws of neighbouring states. A Euroregion is a very good model for the stability of borders between the states because the lack of economic growth and development in border regions favour smuggling, illegal border crossing, corruption and similar forms of illegal activities. The Euroregions are an efficient way to overcome many economic problems in South Eastern Europe that still exist after the end of the Cold War and the fall of communist regimes. The countries in this part of Europe are still going through the process of transition which is characterized by extensive poverty. This is especially obvious in the Western Balkans where the disintegration of the former Yugoslavia resulted in a war and destruction

150 of the economic system in most of the countries in this region. In the Western Balkans, border regions suffered the most and the establishment of Euroregions could be the solution for the problems that are still present. Another good aspect of establishing the Euroregions is the development of border regions according to the standards of the EU. This could positively influence the situation in candidate countries as a whole and make them even closer to the EU accession.

BIBLIOGRAPHY

Consolidated Version of the Treaty Establishing the European Community”, Official Journal of the European Communities, C 325/33, 24.12.2002. “Cross‐Border Partnership EURES‐T Beskydy”, EURES‐T Beskydy, Internet: http://www.eures‐tbeskydy.eu/cross‐border‐partnership‐eures‐t‐beskydy/, 20/07/2017. Czech Statistical Office, Internet: https://www.czso.cz/csu/czso/home EURES‐T Beskydy, http://www.eures‐tbeskydy.eu/en/ “EURES”, Provincial Labor Office in Katowice, Internet: http://wupkatowice. praca.gov.pl/wyniki‐wyszukiwania/rezultat‐wyszukiwania/?p_p_id=101& p_p_lifecycle=0&p_p_state=maximized&p_p_mode=view&_101_struts _action=%2Fasset_publisher%2Fview_content&_101_assetEntryId=102 0473&_101_type=content&_101_urlTitle=1020469‐eures, 17/07/2017. Evans, Andrew, “Regional Dimensions to European Governance”, The International and Comparative Law Quarterly, Vol. 52, No. 1 (Jan., 2003). Otočan, Mario, “Euroregion as a mechanism for Strengthening Transfrontier and Interregional Co‐operation: Opportunities and Challenges”, Report, CDL‐UDT (2010) 008, European Commission for Democracy through Law (Venice Commission), Strasbourg, 9 March 2010. Perkmann, Markus, “The rise of the Euroregion. A bird’s eye perspective on European cross‐border co‐operation”, Lancaster University, Department of Sociology, Lancaster, 2002. “Practical Guide to Cross‐border Cooperation”, Third Edition prepared by Association of European Border Regions (AEBR), European Commission, Gronau, 2000.

151 Provincial Office of Labour in Katowice, Internet: http://wupkatowice.praca.gov.pl/ Petrović, Dragan, Ka multipolarnom svetskom poretku, Pešić i sinovi i Centar za razvoj međunarodne saradnje, Beograd, 2010. Regional and Local Government in the European Union: Responsibilities and Resources, European Communities, Belgium, 2001. “The Maastricht Treaty”, Provisions amending the Treaty establishing the European Economic Community with a view to establishing the European Community, Maastricht, 7 February 1992. Trbović, Ana S, Đukanović, Dragan i Knežević, Borisav, Javna uprava i evropske integracije Srbije, Fakultet za ekonomiju, finansije i administraciju Univerziteta Singidunum, Beograd, 2010. “What is “EURES‐T Beskydy?”, EURES‐T Beskydy, Internet: http://www.eures ‐tbeskydy.eu/cross‐border‐partnership‐eures‐t‐beskydy/, 09/07/2017. Žujović, Branko, „Ekonomski pojas duž Puta svile i pomorski put svile za XXI vek – retrospektiva”, Nova srpska politička misao, 04. septembar 2015, Internet: http://www.nspm.rs/savremeni‐svet/ekonomski‐pojas‐duz‐puta‐ svile‐i‐pomorski‐put‐svile‐za‐xxi‐vek‐retrospektiva.html, 25/07/2017.

152 OPEN COLLABORATION AND WIN‐WIN DEVELOPMENT – THE APPROACHES AND IDEAS TO DEEPEN THE COOPERATION BETWEEN CHONGQING AND THE CITIES OF CEEC AT THE BACKDROP OF THE BELT AND ROAD

PENG Jinsong Vice Director and Research Fellow of the Urban Development Research Institute Chongqing CEEC Research Center Chongqing Academy of Social Sciences, Chongqing, China1

Abstract: As Chongqing is a national‐level central city in the Chinese western inland region, the point‐to‐point cooperation between Chongqing and the cities of CEEC is promoted to further enhance the strategic depth and width of the cooperation between China and cities along The Belt and Road and to achieve mutual benefit and win‐win of urban development. Based on the strategic background of The Belt and Road, this paper proposes relevant approaches and ideas for pilot exchanges and cooperation between Chongqing and the cites of CEEC in logistics and trade channel building, industrial chain construction, open and cooperative platform establishment and cultural and travailing exchanges. Key words: Urban Collaboration, Win‐win Development, Approaches and Ideas, Chongqing, CEE.

INTRODUCTION

As Chongqing is an important national‐level central city in the Chinese western inland region and also the only municipality with a provincial‐level status in western China, multi‐layered and wide‐ranging exchanges and cooperation made between Chongqing and major cities of CEEC are promoted to further enhance the strategic depth and width of the cooperation between China and cities along The Belt and Road and to achieve mutual benefit and win‐win situation of urban development.

1 270 Qiaobeicun, Jiangbei District, Chongqing, China.

153 AN ANALYSIS ON THE NECESSITY OF EXCHANGES AND COOPERATION BETWEEN CHONGQING AND THE CITIES OF CEEC

Firstly, to deepen The Belt and Road Strategy. Based on international economic cooperation and supported by cultural exchanges, The Belt and Road Strategy forms a development layout for creating interest and values and achieving multilateral win‐win situation, which is a great idea to promote international cooperation in a new era and exerts a profound effect on economic globalization. Belonging to the country category along The Belt and Road, 16 CEE countries are the important gateways and ties for China to enter or withdraw from the EU markets. As international market competition becomes extremely fierce due to the development of globalization and regional integration, CEEC are searching for new growth points and embracing a strong desire to deepen and enhance cooperation with major global economies. The promotion of bilateral and multilateral exchanges and collaborations between Chongqing and major cities of CEEC enlarges the cooperative areas and deepens the cooperative modes of The Belt and Road Strategy at the urban level, makes a response to the era demands, enriches the cooperative contents, innovates development ideas and provides pilot modes and operation benchmarks, which will further improve international cooperative relationships between China and CEEC and boost the in‐depth development of The Belt and Road Strategy. Secondly, to pay close attention to bi‐directional associations between CEEC and the Chinese Inland Regions. With a close connection with international markets and a relatively high‐level of economic development, the Chinese eastern coastal regions are an important open area in China. Restricted by geographic conditions, the Chinese western inland regions lag largely behind the Chinese eastern coastal regions in urban opening levels and economic development levels, especially in weak associations and few trade interactions with European countries. The majority of CEEC cities undergo a similar economic development to Chinese inland cities. Under the background of The Belt and Road, both parties embrace a common desire and make unanimous decisions to establish a communication channel, accelerate bi‐ directional openings and improve the level of trade and economic cooperation. Thirdly, to promote the transformation and upgrading of both Chongqing and cities of CEEC. Both Chongqing and CEEC fail to satisfy requirements of

154 global integration in international‐oriented markets, sufficient‐oriented element supplies and foreign‐oriented industrial structures. Through cooperation between Chongqing and major cities of CEEC in the economy, trade, culture, public services and infrastructure construction, the comprehensive mobility and optimal allocation of resource elements can be promoted in order to improve shortcomings of urban development and to achieve supplementary advantages and win‐win collaborations. Hence, market spaces are enlarged in cooperative cities and new economic growth momentum is cultivated, with urban transformation and upgrading and great‐leap‐forward development being established at a higher level.

AN ANALYSIS ON THE FEASIBILITY OF DEEPENING EXCHANGES AND COOPERATION BETWEEN CHONGQING AND THE CITIES OF CEEC

Firstly, the increasingly close political and economic relationships create an advantageous environment for intercity exchanges between Chongqing and CEEC. China and the European Union established a comprehensive strategic partnership in 2004. During the past decade, China and 16 CEE countries have deepened cooperation in economy and trade, culture, education, science and technology and made outstanding achievements. The increasing enhancement in political mutual trust between China and CEEC has created a good external environment for intercity cooperation between Chongqing and CEEC. Chongqing is endeavouring to promote the supply‐side structural reform, create an inland opening highland and share a strong cooperative desire and demand with CEEC in urban infrastructure, industrial development, culture and tourism. This is the proper time to promote point‐ to‐point exchanges between Chongqing and the cities of CEEC. Secondly, Chongqing and CEEC share larger cooperative and supplementary features in industrial restructuring. As an important manufacturing base, Chongqing has a relatively mature technological and production supporting system in various industrial fields, such as automobile and motorcycle production, instrumentation and rail transportation equipment manufacturing. Some products in Chongqing bear certain competitive advantages in China. At the same time, a series of emerging industries experience a rapid development in Chongqing, such as high‐end electronic information, smart equipment and new materials. In 2016, the

155 industrial value added and above designated scale in Chongqing experienced a year‐on‐year growth of 10.3%, which was 4.3% higher than the average national level and ranked first in seven consecutive years. In 2016, Chongqing produced 3.1562 million vehicles which accounted for one‐eighth of the size of national manufacturing, and manufactured 58.4216 million laptops which accounted for one‐third of the size of the global manufacturing, all of which basically formed a development layout driven by traditional manufacturing and emerging manufacturing at the same time. The majority of CEEC consists of newly developing countries which bear urgent demands for the introduction of advanced industries and technologies. According to statistics, CEEC mainly imported the following products from China in 2015: mechanical instruments, electric machines, electrical equipment and components and optical precision instrument. Chongqing Changan Group has established R&D centres in Torino of Italy and Birmingham of Britain and Chongqing LIFAN Group has made investments in establishing plants in Russia, Iran and Ethiopia, with both of them endeavouring to expand automobile industries to relevant countries along The Belt and Road. The industrial and technological collaborations are carried out between Chongqing and CEEC, the prospect of which is anticipated. Thirdly, a strategic channel focusing on Chongqing has been established to provide convenient connections with The Belt and Road. Chongqing is the only one mega city which possesses various transportation manners in Chinese western inland regions, including railways, airways, waterways, highways and channels. Chongqing has been clearly positioned by the Chinese government as one of the four major international and comprehensive transportation junctions in China. In recent years, Chongqing has focused on the Belt and Road Strategy to open a transportation channel for convenient communications. To the western direction, Chongqing has made cooperation with countries in Europe and Central to initially create a major inter‐modal channel of the YUXINOU International Railway. Passing through some CEE countries, such as Estonia, Latvia, Lithuania and Poland, this international railway has opened an accumulated train schedule of 1,130 and is over‐20‐day shorter than waterways to Duisburg of Germany. In addition, the exportation ratio transmitted in Chongqing has exceeded over 40%. To the southern direction, Chongqing opened the YUGUIXIN International Railway in May of 2017 which could transport products from the Qinzhou Port to Singapore and countries along

156 the way. On the basis of establishing two new open and international channels at the western and southern directions, economic connections are closely enhanced between Chongqing and the countries and regions along the Belt and Road. Fourthly, Chongqing has established many platform carriers for open development. In recent years, Chongqing focuses on open development to endeavour to establish an international economic communication and cooperative platform, which has one state‐level new area — Chongqing Liangjiang New Area, two national independent innovation demonstration areas, five state‐level development areas and seven special customs supervision areas. In addition, Chongqing has established 17 places that bear functions of ports (including four I‐type national ports) and eight designated ports for special commodities with approval. These platforms for the open development have become important functional carriers for Chongqing to carry out international cooperation. In 2016, Chongqing made an actual foreign investment of USD 2.429 billion, experiencing the growth rate of 70.5%. The amount of offshore financial settlement arrived at USD 90 billion and the amount of cross‐border RMB settlement arrived at over RMB 100 billion. From 2012 to 2016, the amount of foreign capitals actually utilized by Chongqing arrived at USD 10 billion in five consecutive years. Until the end of 2016, Chongqing attracted 272 incorporations of the Fortune Global 500, which fully demonstrated the strong potential of the open development in Chongqing. Fifthly, Chongqing has a relatively strong economic growth power and a vast market radiation sphere. Located at the junction of the Yangtze River and the Jialing River, Chongqing has traditionally been considered as an important collection & distribution centre and an industrial & commercial city for shipping supplies in Sichuan, Yunan and Guizhou. 20 years have passed since Chongqing became a municipality with provincial‐level status in 1997, during which Chongqing has continuously enlarged its urban sphere, improved its urban functions and increased its urban influences. Until the end of 2016, Chongqing’s economy achieved a double‐digit‐increase in eleven consecutive quarters, which ranked first in China and became a city with the fastest economic growth and the strongest development vitality. Focusing on Chongqing, a huge consumption market that radiates many provinces and cities in central and western China and a population of about 300 million has

157 been established. Acting as the centre, Chongqing can conveniently send high‐ quality green agricultural products, industrial products and cultural and tourism products from CEEC to the vast Chinese markets.

Figure 1. The Situation of Economic Growth in Chongqing in Recent Years

KEY COOPERATIVE FIELDS AND DESIGN OF PLANS BETWEEN CHONGQING AND THE CITIES OF CEEC

The in‐depth implementation of the Belt and Road Strategy has provided a major opportunity and a strategic platform for a comprehensively deepening economic cooperation between Chongqing and the cities of CEEC. Based on this new starting point, Chongqing and major cities of CEEC will carry out pilot cooperation in logistics and trade channel construction, key industrial chain building, open and cooperative platform establishment and

158 cultural and tourism exchanges, which makes intelligent contributions to the global economic prosperity. In order to achieve the objectives mentioned above, initial plans and ideas are put forward as follows:

Logistics collaborations are enhanced to jointly build a bilateral trade channel between Chongqing and CEEC Based on the comprehensive junction advantage, Chongqing has endeavoured to develop a multi‐modal transportation and establish an internet‐oriented international logistics junction integrating railways, highways, airways and waterways and a port‐opening system. The transportation capacity and commodity structures of the YUXINOU International Railway inter‐modal channel are continuously optimized. The connection of the standard system for shipping infrastructure technologies is improved between Chongqing Jiangbei International Airport and CEEC. More destination cities are opened between Chongqing and CEEC. The number of international passenger and cargo flights is increasing. Information channel, collection and distribution capabilities should be improved. An international collection and distribution centre based on Chongqing and facing to CEEC should be established in order to enhance functions, including international transit, international distribution, international procurement, entrepot trade and allocated distribution, and to add new cargo allocation centres in main port cities and central regional cities along the flight route. CEEC are encouraged to transport industrial products and special agricultural products to Chongqing through the YUXINOU International Railwayinter‐ modal channel and to enlarge their Chinese markets by considering Chongqing as a collection and distribution centre.

Industrial collaborations are enhanced to jointly establish an industrial and cooperative demonstration park between Chongqing and CEEC Based on advantageous industrial fields in respective cities, Chongqing and CEEC carry out extensive and deep collaborations in order to continuously expand the depth and width of industrial operative chains. A

159 set of Chongqing‐CEEC Industrial Demonstration Parks can be actively explored in Chongqing and many cities of CEEC. Relying on its manufacturing industry cluster with a complete industrial chain and the strong motive power in automobile and motor cycle manufacturing, railway transportation equipment and instrumentation, Chongqing should enhance its industrial collaborations with CEEC, establish some local industrial transfer bases through joint venture factories, major engineering contract, mergers and acquisitions, and deeply participate in the industrial system reform and construction in CEEC. Considering Chongqing as the base and relying on China (Chongqing) Free Trade Pilot Area and China‐Singapore (Chongqing) Strategic Demonstration Initiative, cities of CEEC should deepen cooperation with Chongqing in industrial fields, such as petroleum and natural gas equipment, civil aviation equipment, large engineering construction machinery and equipment, and jointly make investments in industrial projects, technological collaboration tackling, and scientific & technological achievement transformation.

The opening platform carrier is enhanced to jointly build an exchange bridge between Chongqing and CEEC Extensive cooperation in every aspect should be enhanced between Chongqing and CEEC, and a multi‐layered communication and collaboration mechanism should be established among governments, enterprises and scientific & research institutions. The ChongqingCEEC Trade and Logistics Development Forum should be established. Conference communications and negotiations should be carried out in the economy, trade, culture, science and technology. A forum should be held every year. CEEC are supported in establishing new diplomatic consular institutions and trade offices in Chongqing. Governmental leaders and entrepreneurs from cities of CEEC are invited to participate in major exhibitions and communication activities, such as Chongqing Mayor International Consultant Annual Meeting, Chongqing Investment Trade Negotiation Meeting and Chinese Three Gorges International Tourism Festival. Chongqing trade representative agencies, offices, and investment promotion agencies should be established in major cities of CEEC in order to actively popularize investment, entrepreneurship and living environments in Chongqing, which can further enhance Chongqing’s reputation and influence in CEEC.

160 Scientific, technological and educational collaborations are enhanced to cultivate an S & T Education Exchange Park between Chongqing and CEEC There are more than 50 institutions of higher learning, 30 top three hospitals and thousands of various technological and research institutes in Chongqing, demonstrating its solid scientific, technological and educational resources. Relying on Chongqing University, Southwest University, Chongqing Medical University and high‐quality vocational colleges in industry, commerce and cities, Chongqing should carry out academic exchanges and talent training cooperation with major cities of CEEC in the following disciplinary fields, such as machinery, electronics, modern agriculture, trade logistics, health care and urban management. Chongqing and the cities of CEEC can arrange respective advanced experts in engineering technologies, medical health, science, technology and education to carry out academic exchange and training activities. Chongqing should select excellent engineers and technicians who will be arranged to CEEC to jointly implement technological project tackling plans with technicians at local scientific and research institutions. The Chongqing‐CEEC Innovation and Entrepreneurship Development Fund is proposed to be established, which aims to attract talents from CEEC to bring projects and ideas to make employment or undertake a business in innovation and entrepreneurship bases, such as Chongqing Liangjiang New Area and Chongqing university town, and to gather international talents.

Cooperation in cultural and tourism is strengthened to jointly establish a Chongqing‐CEEC tourism gold belt Sister cities are extensively established between Chongqing and cities of CEEC, based on which urban cultural exchanges are prosperously made. Chongqing enterprises are actively encouraged and organized to participate in international expositions held by CEEC. Cultural organizations and teams from CEEC are supported in carrying out cultural and artistic activities in Chongqing in order to spread, demonstrate and exchange their own excellent cultures, deepen mutual understandings and enhance mutual friendship. Based on cultural and tourism resources, such as Three Gorges of the Yangtze River, hot springs, night view of city, Bayu folk and specialties,

161 customer sources from CEEC should be actively developed, the improvement of tourism supporting services and facilities should be enhanced and the convenience of bringing foreign tourists to Chongqing should be increased, all of which aim to make Chongqing an international tourism destination open to CEEC. Relevant procedures should be simplified, working efficiency should be raised and cooperation with travelling agencies of major cities in CEEC should be enhanced, all of which aim to provide convenient and considerate services for Chinese tourists on visa, accommodation and transportation departing from Chongqing to CEEC.

BIBLIOGRAPHY

Research Group. Research into Chongqing, an Opening‐up International Metropolis in Chinese Inland Areas [R]. Chongqing Municipal Productivity Development Centre, July, 2016. Zhu Xiyan. The Belt and Road Strategy and the Acceleration of Building an Inland Opening‐up Hub[J]. Chongqing Administration, June, 2015. Chen Wenling. Connotations and Strategic Significance of the Belt and Road and the Yangtze River Economic Zone Strategy [J]. Chinese Business and Market, July, 2016. Yu Jun. The Current Status of China‐CEEC Cooperative Mechanism and Improvement Approaches [J]. International Studies, February, 2015.

162 POLISH READING OF THE NEW SILK ROAD

Jędrzej CZEREP Cardinal Wyszyński, University in Warsaw, Poland1

Abstract: Introduction of the train connection Łódź‐Chendgu brought the New Silk Road project into the heart of the Polish public debate. There are significant differences in reading Polish position towards China in the New Silk Road context among analysts and political spectrum. While some tend to consider it to be a vague and undefined tool of Beijing’s soft power, part of the Polish political establishment attempts to bring it into the centre of the debate on Polish national interests, hotly debating chances, threats and myths related to the project. Key words: Silk Road, Poland, Łódź, Chengdu, train, parliament, debate.

INTRODUCTION

In the period between the announcement of the New Silk Road initiative by China’s President Xi Jinping (2013) and today, there was a steady evolution in coverage of Polish economic relations with China and of prospects for cooperation within the 16+1 framework. It is fair to say that if in 2013 and 2014 the issue was hardly present in the experts’ focus or in the general public debate in Poland. This started to change around 2015, when authors and analysts of major research centres started to publish comprehensive assessments of the pros and cons for Poland in relation to increasing political and economic assertiveness of Beijing in the Central and Eastern European region. Certainly launch of the direct train connection between Łódź and Chengdu in April 2013 marked a new phase in the Polish perception of China and role in international setting.2 Publications vary in terms of depth of analysis, keeping the big picture in

1 E‐mail: [email protected] 2 M. Janduła, Hatrans: Przetarliśmy szlak dla pociągów Chiny – Polska, 23.12.2016, Rynek Kolejowy, Internet: http://www.rynek‐kolejowy.pl/wiadomosci/hatrans‐przetarlismy‐ szlak‐dla‐pociagow‐chiny—polska‐79567.html

163 the perspective, and in producing realistic conclusions. The purpose of this article is to analyse some of the texts published by renowned research centres and authors that will give a fair overview of the Polish experts’ reading of the One Road One Belt project and the 16+1 format. Authors’ points of view vary significantly, which can in some cases be attributed to their political affiliation. In most of the times, while economic opportunities are acknowledged, a careful scepticism in foreseeing political future prevails.

CENTRE FOR EASTERN STUDIES, 2015 – CENTRAL AND EASTER EUROPE JUST A STOP EN ROUTE TO WESTER EUROPE

A series of major publications was initiated with Centre for Eastern Studies’ (OSW) report “New Silk Road: universal tool for Chinese policies”3, authored by Marcin Kaczmarski and published in February 2015. While OSW remains the most significant expert centre for analysis of the post‐ Soviet area, and the wider Eastern Europe (with Turkey and Germany on its radar as well), China was not widely covered and big publications of Beijing’s policies are rather exceptional. OSW is a government‐owned centre and its expertise serve as an intellectual backup for the Ministry of Foreign Affairs in seeing political processes on the global stage in an informed and comprehensive way. The author derives from the observation that the New Silk Road is an elastic formula used by China for the purpose of dialogue with a wide range of individual states. Thanks to its inclusive character the initiative serves as a tool to decrease the negative perception of the rapid economic expansion and of China, particularly towards its neighbours, as well as to put its foreign policies into a friendly framework. However, in a wider context the main benefit for China would be derived from finding ways to get its influences rooted in the transit countries en route to Western Europe (including a number of Arabic countries, Israel, and Turkey, among the most significant), as well as to gain footholds in particular strategic supra‐regions, namely the Horn of Africa (with Kenya as a key partner), and Central and Eastern Europe

3 M. Kaczmarski, Nowy Jedwabny Szlak: uniwersalne narzedzię chinskiej́ polityki, Komentarze OSW, nr 161, Warsaw 09.02.2015

164 (particularly Balkan states, Poland, Czech Republic, Slovakia, Hungary). The open and undefined character will help to make the project look like a success story no matter how much or how little of the vision actually materializes. As commitments and expectations can be modified, re‐ designed, or scaled down, space remains open for future diplomatic manoeuvres which could use the right moment to herald the piece of the New Silk Road to be put in place. Also, the elastic character of the Chinese initiative would allow Beijing to repack earlier bilateral investments and to present them as being an integral part of the New Silk Road. Silk Road, the author argues, should clearly be seen as a tool of Chinese soft power, which is accompanied by a massive package information/“propaganda of success“ package, which includes sponsoring and organizing cultural events, arranging and participating in expert discussions, presenting opportunities for tourism, etc. The Common denominator of these “build‐ up” activities can be identified in attempts to decrease fear of China in countries where Beijing invests, and to present itself as a “friendly superpower”. The New Silk Road / One Road One Belt is primarily an elastic formula for dialogue with different countries or regions, where the pro‐Chinese political package can be “sold” without attempting to create any anti‐Western umbrella organization. Such a move would not be attractive for the transit countries or consistent with their core political orientations. Instead, it is still clearly a means for China to build a space for expanding its political influences: for example, it may be used to explain a military build‐up on seas in terms of protecting maritime commercial routes, as part of the One Road One Belt framework. In a long run, the author argues, the project should be read as a challenge to the global American domination (and American projects in Asia), or Russian and Indian influences in Eurasia, no matter how “soft” images it adopts. When looking at the position of Central and Eastern Europe within the Chinese Silk‐Road‐foreign‐policy, the author notes that the region is seen by Beijing as a gate to the Western European markets, which are its prime focus when the economic interests are concerned. Central and Eastern European states could possibly be assigned a role of a testing ground for improvement and marketing of Chinese goods before they reach Western Europe. There are certainly benefits for the Central and Eastern European region from increased Chinese presence: particularly projects of developing infrastructure. However, there are risks of conflicts between

165 the countries benefiting from the Chinese investments. As Chinese policy is to attract potential partners by stressing their “key location”, there is a risk of competitions for the notion of being in the most key/strategic location. Poland, for example, sees itself as being a hub on the Western edge of the land route from China to Western Europe (strengthened by the Łódź‐Chengdu connection). But this perception might be challenged by Greece, which sees itself in similar terms. Still, the perception of Poland within the New Silk Road would be defined by understanding that maritime and air routes are the most important parts of it, and the land routes are to remain supplementary. The author mentions a risk of another form of rivalry, which could have negative effects: the so‐called “race to the bottom”, which is characterized by lowering standards of labour rights and removing other safety nets and regulations to attract foreign investments4.

CENTRE FOR EASTERN STUDIES, 2016 – A UNILATERAL GLOBALIZATION

Another publication by the same author came out in late 2016, where the vision of the One Road One Belt was put in the wider context of the Chinese. In the report “Silk globalization, Chinese vision for a world order”5, Kaczmarski notes that the initiative, in its origins, has developed to answer to internal economic challenges, mainly the crisis of over‐ production. It was therefore needed to secure new markets for Chinese products and investments. Then, these strictly economic and internally‐ driven processes were built into the wider vision of international relations. Implementation of the One Belt One Road projects and attracting partner countries into accepting investments within this framework is being secured by China’s programme of building long‐lasting influences in the countries concerned. By its nature, in order to stay “long‐lasting”, those influences should be resistant to potential domestic policy shifts, therefore penetrating a wide range of political forces and business circles of different ideological and political affiliations. Open character (inviting almost all the

4 Racing to the bottom, The Economist, 27.11.2013, Internet: https://www.economist. com/blogs/freeexchange/2013/11/labour‐standards

166 countries “on the road” to participate) gives an indication that there is no intention of building a specific ideologically‐driven Chinese block. Instead, the author concludes, it is rather a manifestation of the Chinese idea of globalization. What is crucial in understanding these new Chinese policies at the global arena is that they are highly unilateral. It would not be reasonable to call them “partnerships”, as the “partner” countries do not participate in designing them. They are simply invited to accept them, and the difference in economic potentials narrows the space for negotiations and working out the best solutions. It is also an attempt to combine Chinese and Western “ways of doing things” – traditional Sino centrism, as performed by the authorities, as referred above, is being mixed with some tools characteristic for the West, for example, use of development banks. Still, a strong reluctance to institutionalization can be observed on the Chinese side. This reluctance is understood if introducing clear rules means empowering partners (in this unequal relation) and restricting China’s operations.

NOWA KONFEDERACJA JUNE/JULY 2016: POLAND’S ROLE IN THE REGION EXPECTED TO GROW

The coverage of the One Road One Belt potential gains and risks for Poland increased around the visit of President Xi Jinping to Poland. One of the most enthusiastic, among analysts, came from Jacek Bartosiak, an expert on geopolitics, associated with right‐winged editorials, who published a text “Poland on the Silk Road” in Nowa Konferedacja (New Confederation) bimonthly6. His main argument, expressed in this article, is that Poland can and should use participation in the New Silk Road initiative for its own development, gaining power, and expanding influences. In his understanding of the historical processes, the meaning of the New Silk Road / One Road One Belt is that the geopolitical status quo, where Western maritime states dominate the global system, is being

5 M. Kaczmarski, Jedwabna Globalizacja. Chińska Wizja Ładu Międzynarodowego, Punkt Widzenia nr 60, Warsaw October 2016 6 J. Bartosiak, Polska na Jedwabnym Szlaku, Internetowy Miesiecznik̨ Idei, nr 6 (72)/2016, 1 czerwca–5 lipca 2016

167 challenged by a new order where power manifests itself in control over land routes. The New Silk Road is, therefore, in its origins, a reaction to the US pivot into Asia. As increased US presence on seas prevents China from moving eastwards, a choice of stepping towards the West was made, as it was the only option for economic expansion available. Bartosiak argues that Poland is a natural major trading hub in Europe (as it links routes North‐South and East‐West). Within the New Silk Road framework, it can use its geographic location in order to gain significance in the Baltic‐ Black Sea Belt. That can happen if Poland is involved in participation as a real partner. Parallel to Russia’s expected weakening, Poland can emerge into a role of the regional leader. This view reflects recently vocal hopes for putting Poland as a regional leader in the Central and Eastern Europe, echoing the pre‐Second‐World‐War Interparium or Jagiallonian concepts. The current calls for a Polish‐led regional block resemble those from 70 years ago in ignoring the fact that Warsaw’s leading role might not be obvious nor natural for the countries of the imagined alliance. If Poland wants to open for partnership with China as part of the New Silk Road / One Road One Belt framework, the author argues, it must carefully rethink frames of relations with its strategic partners, the US and particularly Germany – which is also a major trading partner to Beijing. Even if the project fails, the author finalizes, the investments in infrastructure and some of the capital allocated would remain.

POLAND‐ASIA RESEARCH CENTER 2016 (NIEWIŃSKI): DEMYTHOLOGISING BILATERAL RELATIONS

The most important Polish think‐tank dedicated entirely to an analysis of the Far East, Centrum Studiów Polska‐Azja (Poland‐Asia Research Center) published a number of important articles on the issue of positioning Poland within the One Road One Belt initiative. Around the Chinese President’s visit to Poland, Stanisław Niewiński published a commentary “Poland on the Silk Road – chances, myths and threats”7. He

7 S. Niewiński, Polska na Jedwabnym Szlaku – szanse, mity i zagrożenia, Centrum Studiów Polska Azja, 18.06.2016, Internet: http://www.polska‐azja.pl/polska‐na‐jedwabnym‐ szlaku‐szanse‐mity‐i‐zagrozenia/

168 derives from acknowledging the fact of gaining the role of China on the international stage and argues that there is a natural need for being on time with global dynamics. He takes note of some politicians’ over‐ estimating its role and their attitude to look at the New Silk Road through the lens of simplifications and myths. Some tend to present jumping on board the initiative as a remedy to all problems. Obviously, this view must be corrected. The author emphasises that China builds the new road and maritime trade routes for its own benefit first, not for making the world better. It is therefore important to see the entire initiative from the perspective of Beijing achieving its goals. Potential benefits for the partner countries would not materialize automatically. They strongly depend on how the partners would grasp on opportunities. The author lists both internal and external risks to the success of the project in a long run. The most significant is the economic slowdown in China – which is difficult to assess due to lack of reliable statistics. If a slowdown or recession takes roots, it might hamper the ambitious projects such as the One Road One Belt. Another risk could have come from major powers, such as the US, Japan, India or Russia. If they feel endangered by a growing Chinese role and power, they may resort to attempts to undermine the New Silk Road – by a range of means available. Poland, as the author notes, should not dream that it has found a magical key to become a new regional power (as, to some extend Bartosiak did, similarly to several minor politicians). Instead, it should think through, and then develop and deliver a clear vision of what it wants to gain from China. Warsaw should not continue with the approach which favours “maximum words, minimum action” – meaning it is impossible to keep the good impression indefinitely without getting seriously involved in the projects and in areas of cooperation. Poland should also forget about the attitude of dividing the world into the “good guys” and “bad guys” dichotomy. There is a risk, Niewiński writes, that too much optimism about the New Silk Road might put China into the schematic role of the “good guys” and make some think about the traditional Polish allies in the West as of the “bad guys”. Such a situation would be unacceptable from the point of view of vital interests and due to Poland’s geographic location, which is not about to change despite finding opportunities in cooperating with more distanced partners.

169 POLAND‐ASIA RESEARCH CENTER 2016 (PYFFEL): PARTNERS OR CLIENTS?

Not long after Niewiński’s text, the head of the think tank, Radosław Pyffel, published an article “One more time on linking Intermarium to the Silk Road”8. He stressed again on the very ambitious, but at the same time highly vague and undefined nature of the New Silk Road / One Road One Belt. These characteristics put partner countries in roles of clients, who are thrown into a situation of competing with one another about who can better attract the Chinese investment – a parallel to the observation of Kaczmarski from the Centre for Eastern Studies. What is original in Pyffel’s observations is the acknowledgment that the Central and Eastern Europe is maybe the last region in the world where China arrives in a role of a new superpower: the region’s experience in such a relation is, therefore, more limited than that of others.

CONCLUSION

Polish position towards the New Silk Road / One Road One Belt initiative is about to be worked out by analysts and leaders of opinion. Influential think‐tanks only recently took an effort to analyse the potential risks and the risks related to the development of a new kind of relations with China within the wider framework of the Road / Belt and the 16+1. Majority of the authors stress the priority of maintaining firm relations with the West, and not allowing to be put in a position where those relations are challenged. They acknowledge that a new game is written in the language of the Chinese soft power, with all its shortcomings. As they generally agree that the new relations offer economic benefits, a potential of winning it politically is being put under a question – some see a window

8 R. Pyffel, O „zetknięciu się” Międzymorza i Jedwabnego Szlaku raz jeszcze, Centrum Studiów Polska‐Azja, 18.07.2016, Internet: http://www.polska‐azja.pl/r‐pyffel‐o‐ zetknieciu‐sie‐miedzymorza‐i‐jedwabnego‐szlaku‐raz‐jeszcze/; text included extracts from the article R. Pyffel, Chińska perspektywa Międzymorza, Teologia Polityczna nr 10/2016, http://www.teologiapolityczna.pl/radoslaw‐pyffel‐chinska‐perspektywa‐ miedzymorza/

170 of opportunity in the major reshuffle of the global setting and the majority of authors is sceptical about it. What is clearly lacking in the process are firm rules, frames, institutions and procedures that would empower partner countries, such as Poland, to actively shape the relations with China in bilateral or multilateral formats.

BIBLIOGRAPHY

Bartosiak J., Polska na Jedwabnym Szlaku, Internetowy Miesiecznik̨ Idei, nr 6 (72)/2016, 1 czerwca–5 lipca 2016 Janduła M., Hatrans: Przetarliśmy szlak dla pociągów Chiny – Polska, 23.12.2016, Rynek Kolejowy, Internet: http://www.rynek‐kolejowy.pl/ wiadomosci/hatrans‐przetarlismy‐szlak‐dla‐pociagow‐chiny—polska‐ 79567.html Kaczmarski M., Jedwabna Globalizacja. Chińska Wizja Ładu Między‐ narodowego, Punkt Widzenia nr 60, Warsaw October 2016 Kaczmarski M., Nowy Jedwabny Szlak: uniwersalne narzedzię chinskiej́ polityki, Komentarze OSW, nr 161, Warsaw 09.02.2015 Niewiński S., Polska na Jedwabnym Szlaku – szanse, mity i zagrożenia, Centrum Studiów Polska Azja, 18.06.2016, Internet: http://www.polska ‐azja.pl/polska‐na‐jedwabnym‐szlaku‐szanse‐mity‐i‐zagrozenia/ Pyffel R., Chińska perspektywa Międzymorza, Teologia Polityczna nr 10/2016, Internet: http://www.teologiapolityczna.pl/radoslaw‐pyffel‐ chinska‐perspektywa‐miedzymorza/ Pyffel R., O „zetknięciu się” Międzymorza i Jedwabnego Szlaku raz jeszcze, Centrum Studiów Polska‐Azja, 18.07.2016, Internet: http://www.polska ‐azja.pl/r‐pyffel‐o‐zetknieciu‐sie‐miedzymorza‐i‐jedwabnego‐szlaku‐raz‐ jeszcze/ Racing to the bottom, The Economist, 27.11.2013, Internet: https:// www.economist.com/blogs/freeexchange/2013/11/labour‐standards

171 THE NEW SILK ROAD AND GREECE

Leonidas CHRYSANTHOPOULOS Ambassador ad.h. Greece1

Abstract: In his work, the author referred to the evolution of the phenomenon of the “New Silk Road”, its role in linking different world destinations to different continents (Asia, Europe, and Africa). The author devotes special attention to the Greece’s current relationship with this Chinese development strategy. Starting from his many years of diplomatic experience, the author concludes that the “New Silk Road” project can play a very important role in the humanization of international relations and the achievement of appropriate political stability. Key words: “New Silk Road”, OBOR, Greece, China.

INTRODUCTION

The name ‘Silk Road’ was given in the late nineteenth century by the eminent German geologist, Ferdinand von Richthofen, ‘Seidenstraβen’, and is still being used.2 In antiquity, the Silk Road connected essentially what today are Italy, Greece, Asia Minor, and the Middle East with Asia where civilization flourished at that time, while what today is Europe was still uncivilized. In the 6th century B.C. it was Persia that had an empire expanding as far as the . Herodotus informs us that a road network existed that linked the coast of Asia Minor with Babylon, Susa and Persepolis allowing already at that time a distance of more than 1.600 miles to be covered in the course of a week.3 However, it was Alexander the Great who smashed the Persian Empire in the battle of Gaugamela (331BC), located near today’s Erbil. He founded new cities, known today by other names, like Kandahar, Herat and Bagram. The period following Alexander’s death saw Hellenism establishing itself in the East. The Greek language could be heard

1 E‐maiil: [email protected] 2 Peter Frankopan,The Silk Roads, Bloomsbury Publishing, UK 2015, pxvi 3 Ibid., 2

172 all over Central Asia and the Indus valley. Greek was in daily use by officials more than a century after Alexander’s death, as tax receipts and documents relating to soldiers pay from Bactria around 200 B.C. show.4 Some of the edicts issued by the Mauryan ruler Ashoka, the greatest of the early Indian rulers, were made with parallel Greek translations, evidently for the benefit of the local population.5 Trade between China with the rest of the world slowly developed, at the beginning it was over land and later on, it became maritime. Primarily, it was rare and high‐value goods that were transported over long distances. The most important high‐value product was of course silk, which was used also as a currency to make payments since producing coins was sometimes a problem. Bolts of raw silk were used regularly as international currency as well as a luxury product.6 Throughout the ages, the Silk Road was not only used as a means for exchange of goods, it was also used for the exchange of ideas, of religion, but also of diseases. It must not be forgotten that the black plague that decimated Europe in the 14th century originated in the steppes of Asia. In September 2013 China announced its Belt and Road Initiative (B+R) or the ‘Silk Road Economic Belt and the 21st Century Maritime Silk Road’. It is a development project that focuses on connectivity and cooperation between the Eurasian countries and China. It consists of the land‐based Silk Road Economic Belt (SREB) and the ocean‐ going Maritime Silk Road (MSR).

CONNECTIVITY, THE MAIN FUNCTION OF THE NEW SILK ROAD INITIATIVES

The Belt and Road Initiative aims to connect Asia, Europe and Africa along five routes: 1. Linking China to Europe through Central Asia and Russia. 2. Connecting China with the Middle East through Central Asia; 3. Bringing together China and Southeast Asia, South Asia and the Indian Ocean. The Maritime Silk Road focuses on using Chinese coastal ports to;

4 Ibid., 5 5 Ibid., 7 6 Ibid., 11

173 4. Link China with Europe through the South China Sea and the Indian Ocean and, 5. Connect China with the South through the South China Sea. The first of the five routes is the New Eurasian Land Bridge, which is an international railway line running from Lianyungang through Alashankou in Xinjiang province to Rotterdam. After exiting Chinese territory, the new land bridge goes through Kazakhstan, Russia, Belarus and Poland, reaching a number of coastal ports in Europe. It seems that China has already opened freight rails linking Chongqing to Duisburg in Germany, linking Wuhan to Melnik and Pardubice in the Czech Republic, Chengdu to Lodz in Poland and Zhengzhou to Hamburg in Germany. Most important is the fact that these rail routes have a speedy custom facilitation system, providing one declaration, one inspection and one cargo release. The second route is the China‐Mongolia‐Russia Economic Corridor which consists of road and rail transport. Work is being done there to renovate and strengthen the existing two modes of transport, including advanced customs clearance, which is of vital importance. The third route is the China–Central Asia‐West Asia Economic Corridor, which is a rail corridor running from Xinjiang in China going through Kazakhstan, Kirgizstan, Tajikistan, Uzbekistan, Turkmenistan, Iran and Turkey. While emphasis has been given to rail transport in the first and third of the previously mentioned routes, the importance of a parallel road transport system should not be underestimated in order to avoid bottlenecks in the rail transport system and to ensure a more effective flow of goods in both directions. For example, if there is a parallel road network in the West Asia Economic Corridor, then it could be linked to the Black Sea Economic Cooperation Organization (BSEC) project of the Black Sea Ring Highway, a 7.500 kilometers’ highway that links the European road network to that of Asia. The project is in its last phase of preparation.7

GREECE AND THE “NEW SILK ROAD”

The Maritime Silk Road connecting China with Europe also involves Greece. However, before going into the details of the Greek involvement,

7 The Belt and Road Initiative,Hong Kong Trade Development Council,21 January 2016, Internet: http://china‐trade‐research.hktdc.com/business‐news/article/The–Belt‐and‐ Road‐Initiative/The–Belt‐and‐Road‐Initiative/obor/en1/1X000000/1XOA36B7.htm

174 the current situation of that country should be examined. Greece, after seven years of austerity measures imposed by its international lenders, has become an economic catastrophe, while at the same time has lost its sovereignty. The economic policy of Greece for the next 100 years is now made in Brussels. Unemployment from 9% in 2009 is today about 25%, while over 60% of the youth are unemployed. Public debt as a percentage of GDP has increased from 148.3% in 2010 to 180% today. Pensions have been slashed by 60%, the health system has collapsed while over taxation prevails. Death rates have dramatically increased around 430 deaths daily while in 2006 it was 287. Deaths in 2013 were 70.830 and in 2016 that number reached 118.623. Suicides have increased by 45%. And no end is in sight to resolve the crisis that has been imposed upon the country by erroneous economic policies of the EU, the IMF and other lenders. The participation of Greece in the Maritime Silk Road might alleviate the existing situation, under the condition that profits remain in the country and unemployment is substantially reduced. In November 2008 talks between Greece and China resulted in a contract between COSCO and the Piraeus Port Authority (PPA) that gave the former a 35‐year lease as operators of Piers II and III at Piraeus. In 2016 the Greek Government sold 51% of its shares in PPA to COSCO, thus making the Chinese Company the owner and operator of all three piers of the container terminal, but also of the ferry port, cruise‐ship port, car terminal and the ship repair facilities. COSCO is also entitled to purchase another 16% of the shares in PPA by 2021 if it makes 300 million euro additional investments in the port.8 One of the many objectives of COSCO is to increase the ports container turnover to 5 million TEU by 2018, thus making Piraeus into Europe’s fifth largest port. In 2014 the number of containers handled was 3.5 million TEU, while in 2008 it had been only 0.4 million. The activities of COSCO in Piraeus constitute the most important activity to date of China’s One Belt/One Road approach in Europe. While COSCO got involved in Piraeus before the official launch of OBDR in 2013, its role in Piraeus demonstrates how China transforms international trade routes by establishing control over a major foreign port, and Piraeus is a potential example for the Chinese

8 Frans‐Paul van der Putten,Greece:Piraeus and the Maritime Silk Road ,The Geopolitical Relevance of Piraeus and China’s New Silk Road for Southeast Europe and Turkey/ Clingendael Report,December 2016, p. 14.

175 involvement in ports elsewhere. Port activities are at the center of the Maritime Silk Road. In 2013 Hewlett‐Packard, which in 2015 became HP Inc., signed an agreement with COSCO to use Piraeus as a base for distributing its China‐ made products to Europe. The Greek train operator TRAINOSE – taken over by the Italian company TRENITALIA ‐ has been transporting HP components from Piraeus to factories in the Czech Republic. This transport route to Central Europe forms the blueprint for the Land Sea Express Route (LSER), which reaches the via Poland and connects to the China‐Europe train corridor running East/West via Russia, Belarus, Poland, Germany and the Netherlands. The Belt and Road Initiative has some mechanisms and instruments that hopefully will assist in the implementation of this project. Existing bilateral and multilateral mechanisms will be used as well as the signing of cooperation MOU’s. Existing instruments are the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB). The Silk Road Fund was established basically to finance the Belt Road Initiative. Endowed with a capital of $40 billion, the Fund will invest mainly in infrastructure and resources, as well as in industrial and financial cooperation.9 The AIIB has been set up with an objective of addressing infrastructure needs in Asia, including energy and power, transportation and telecommunications, agricultural development, water supply, environmental protection and urban development. There are 61 founding members and the Bank has a capital of 100 billion USD. In March 2017, Greece was given prospective member‐ state status and Greece can start now to be more actively involved in this project. If this project is successful it could be back to the future with goods being transported both ways East/West and vice versa. At the same time, if the infrastructure projects are done in a way beneficial to the planet, the populations living on these routes may enjoy the benefits of correct economic development. But, as in the past, now in the present, this route could also facilitate cultural exchanges and exchange of ideas at all levels between the East and the West. On April 24, Greece held the first meeting of the “Ancient Civilizations Forum” with the participation of China as well. This forum could play an important role towards enhancing also cultural exchanges and relations.

9 The Belt and Road Initiative,Hong Kong Trade and Development Council, 21 January 2016, p. 5.

176 CONCLUSION

In conclusion, if this project that is of paramount importance to humanity is to succeed, peace and stability must prevail. However, the existence and promotion of this project can also facilitate successful peace initiatives if the parties in conflict are able to understand that the benefits from their participation in the Belt and Road Initiative greatly surpass ambiguous benefits from prevailing in a conflict. Such was the experience with the Black Sea Ring Highway where differences between some BSEC Member States were able to be softened down to the extent that the highway was allowed to pass through the zones of frozen conflicts. Consequently, a successful Belt and Road Initiative is by itself an incentive for pacification. One can only imagine how Asia would be with peace in Afghanistan and in the Middle East, while the perspectives that open for humanity –scientific‐cultural– philosophical‐spiritual‐with global peace prevailing are immense. That is why the Belt and Road initiative must succeed.

177 THE PARTICIPATION OF BULGARIA IN THE INITIATIVES OF THE ‘NEW SILK ROAD’ – ACHIEVEMENTS AND CHALLENGES

Mariana TIAN Professor, Institute for Historical Studies, Bulgarian Academy of Sciences, Sofia, Bulgaria1

Abstract: The paper “The participation of Bulgaria in the Initiatives of the ‘New Silk Road’ ‐ Achievements and Challenges” is critical aimed. The introductory part briefly marks the subject matter of the Chinese initiative “OBOR” and in chronological order follows the contacts between the Bulgarian and the Chinese governments in this direction. The second part reveals the Bulgarian‐Chinese cooperation and achievements in Bulgaria under the “One Belt, One Road” initiative. This part is based on comparative analyzes with the other Balkan countries – Serbia, Croatia, Romania, Slovenia, Bosnia and Herzegovina, Montenegro, Turkey, Greece, Macedonia. They have reported some missed opportunities, weaknesses and errors and have made some recommendations for further work with the Chinese investors. Key words: Bulgarian‐Chinese cooperation; The Bulgarian Black Sea region; The Danube region; Chinese investments; OBOR; “16+1”; The Balkans

INTRODUCTION

The `New Silk Road` strategy carries obvious geo‐economic and geo‐ cultural implications. It revolves around creating intercontinental connectivity by establishing land, maritime and air‐based transportation networks. However, the BRI is more than just the transportation connectivity; it is intended to be a trade, scientific, educational, technological exchange along the New Silk Road routes. OBOR’s success is very much dependent on its synchronization with other regional geopolitically viable projects and interested states along the Silk Road corridors must come up with their

1 E‐mail: [email protected]

178 proposals on how to implement further initiatives. Natural continuations of the BRI in the European context are the CEEC. In the Chinese strategic thinking they form a distinct geographical region and after 2010 Beijing began recalibrating its policy approach towards them. It gathered sixteen CEEC for a high‐level meeting in 2011 in Budapest, and a year later the “16+1” cooperation process was officially launched at the Warsaw Summit. Other “China‐CEEC” Summits have outlined the areas and mechanisms of this cooperation. At the Suzhou Summit the seventeen leaders outlined a clear direction and forms of cooperation until 2020 in the medium‐term agenda, and “16+1” Riga Summit apart from guidelines also produced a declaration. It is not a secret for anyone that the Platform “16+1” brought a new momentum in China’s positioning in Europe. Considering the former Communist countries as a springboard for the Chinese positioning in the West European geopolitical and geo‐economics’ domain, Beijing has formulated an autonomous policy approach towards CEEC. On the one hand, the “16+1” Platform has matured within a period of six years of existence into a pragmatic wide‐ranging cooperation in the sectors of trade, finance, industry, agriculture, forestry, energy, environmental protection, science and technology, culture, education, media, tourism, sports, health care. Thus, it has helped “16+1” to be well structured in terms of areas and formats of cooperation, levels of interaction and mechanisms of policy coordination. Sectorial cooperation forums have helped intensification of China‐CEEC contacts at a level of local authorities, business communities, think‐tanks and policy research institutes, to name a few. On the other hand, the BRI has still a long way to go. China initiated high‐level Belt & Road Forum for International Cooperation (BRF) held in Beijing 14‐15 May 2017, is subject to further observation. The event which gathered national delegations of 130 countries, incl. 29 heads of states, heads of international organizations such as the UN Secretary‐General, the president of the World Bank, the director of IMF and so on, was designed to be a stepping stone in the realization of the BRI. The aim of the Chinese hosts was to operationalise the OBOR at the level of policy‐making and policy coordination, despite differences in socio‐political systems, development models, business regulations and practices and cultural traditions between the participating BRI` countries. The first BRF resulted in the signing of more than 70 unprecedented multilateral and bilateral agreements and produced a joint communiqué, in which:

179 • OBOR cooperation principles and measures were outlined by the Leaders Roundtable; • a list of deliverables to be implemented within the BRI framework during the next five years– cooperation initiatives, incl. list of concrete projects; • an Initiative on Promoting Unimpeded Trade Cooperation along the Belt & Road.

THE LAST DOCUMENT NOT ACCEPTED BY THE EU

Here is the point to indicate that Brussels finds it difficult to comprehend why China sets up a cooperation platform with a regional grouping from which 11 partner‐countries are part of the EU and approached “16+1” rather reluctantly, accusing Beijing of undermining the EU unity by rule and instigating divide tactics. Germany is particularly suspicious of the Chinese strategic intentions towards CEEC, despite Beijing’s reassurance and intention to develop relations with CEEC within the framework EU‐China Strategic Partnership and in line with the common EU laws and regulations, “in the interest of the Union”. `“16+1” Guidelines`, incl. `Suzhou Medium‐ Term agenda` have emphasized that China insists on the “16+1” cooperation process with EU‐China Comprehensive Strategic Partnership (incl. EU‐China Connectivity Platform). “16+1” has a regional focus while the BRI is global in scope, but in real terms, they share a common philosophy and principles of cooperation, a high level of pragmatism, respect for sovereignty, non‐ interference, no political conditions attached and opposed to zero‐sum geopolitics, they are based on win‐win and inclusive approaches. In this respect an institutional coordination between the BRI and “16+1” China‐ CEEC Secretariat should be sought. Each CEE country should decide to what extent and form to participate in both initiatives. The common goal of CEEC and China within both BRI and “16+1” should be sharing the benefits and tackling challenges of globalization era through cooperation connectivity platforms in key areas of infrastructural development, industrial investments & trade, finance & banking, people‐to‐people relations. CEEC seek to build on China’s experience, know‐how and potential in infrastructural development. Land, maritime, air, cyber‐based interconnectedness is impossible without necessary infrastructure. “16+1” Suzhou Summit (2015) was an important step in terms of infrastructural synergy with the BRI in the

180 CEE context. Beijing signed two sets of bilateral MoU with 5 CEE countries (Bulgaria, Czech Republic, Poland, Serbia, and Slovakia). The first agreement was related to jointly advancing land and maritime dimensions of the New Silk Road through policy coordination, road & rail connectivity, trade, investments, and humanitarian exchange. A special emphasis is to be placed on further synergizing the development of regional transport infrastructure with the BRI plans. The second agreement laid the principles of port and harbor industrial port cooperation. Unarguably, the BRI land and maritime connectivity would be impossible without setting up necessary logistics in the form of sea and river port infrastructure systems and industrial logistics zones to serve connecting dots along the BRI routes. Beijing’s initial strategic perception of the CEEC as a common region is now under reassessment. “16+1” Riga Summit (2017) witnessed the adoption of ‘Three Sea Initiative’ (the Baltic Sea, the Black Sea, and the Adriatic Sea) in which Beijing indirectly recognized the subregional divisions within the region of CEE – the Baltic states; Visegrád group; the South East Europe). CEEC is heterogeneous with regard to China since 16 CEEC, having different potential, developmental needs and interests, compete on their own for the Chinese attention and investments. As for subregion of the CEE, South East Europe, historically known as the Balkans, experiences different levels of the Chinese engagement. This is one of Europe’s entry points for the BRI. So far China’s BRI and “16+1” infrastructural plans are mainly concentrated in the Western Balkans alongside the Greece‐Macedonia‐Serbia‐Hungary transportation corridor, involving modernization of sea‐port infrastructure, road & railways infrastructure construction, etc.

WHAT ABOUT BULGARIA?

China takes into account Bulgaria’s strategic geographic position in South East Europe. In this context, there could be two options for inclusion of Bulgaria in China’s Eurasian connectivity strategy (New Eurasian Land Bridge Corridor) embedded both in “16+1” and BRI plans. Firstly, the inclusion of Bulgaria in planned high‐speed rail connection starting from North‐West China via Central Asia, Iran, Turkey, via Bosporus to Bulgaria and a further extension to Central Europe through Serbia and Hungary. The Chinese corporate business has spotted Bulgarian town of as a networking

181 hub for OBOR and “16+1” and investigates the possibility of setting up an industrial and logistic zone “Trakia Economic Zone”2. Secondly, inclusion of Bulgaria in a rail and sea‐based corridor starting from China via Central Asia, then crossing the to reach Azerbaijan and continuing up to , then passing through the Black Sea to Varna/Bulgaria with a deviation to Rousse/Bulgaria and Geurgevo/Romania where the Danube River route can be further utilized for cargo transportation to Central Europe. This option would require substantial investments in construction and rehabilitation of sea‐port and river‐port infrastructure, incl. setting up of multi‐ modal terminals and railway networks. If realized this option will promote the Black Sea regional dimension of the BRI. Industrial investments in the context of BRI and “16+1” involve setting up industrial parks, manufacturing capacities, power generation capacities, agro‐complexes to name a few. They add up to highways, railways, road bridges, tunnels, junctures, energy pipelines and accompanying land based logistics hubs, sea and river port based multi‐modal terminals, etc. characterized as infrastructure investments. Both industrial and infrastructural investments are essential background for trade flows alongside the BRI economic corridors. Warsaw based China‐CEEC Business Council and China‐CEEC Investment Promotion Agencies Contact Mechanism should seek synergy with emerging BRI trade and investment promotion structures in outlining areas of shared development, setting up cross‐border economic zones, e‐commerce connectivity platforms. Business investment forums, held under the aegis of China‐CEEC summits could include the B&R – “16+1” synergy topic high on its discussion agenda. China‐CEEC

2 In April 2016 Shenzhen City Porter Business Management Co. Ltd. entered into a joint venture with Sienit Holdings (a large Bulgarian construction company) to set up an integrated logistics and commercial centre in Trakia Economic Zone (projected as EU‐China New Economy Cooperation Pilot Zone ‐ Plovdiv). The project has the backing of the Bulgarian government and nine municipalities. The centre is envisaged as a modern public hub for business, e‐ commerce, logistics and finance (networking platform for direct contact between customers and manufacturers). The hub could be used as a launching pad for Chinese access to European markets. A German business association with over 100 corporate members joined the initiative too. The project suits overall China’s Eurasian connectivity strategy. China’s major European markets could be reachable in 3 hours flight and 24 hours by trucking from the planned commercial and logistics hub. It is in this context that Chinese investors demonstrate also an interest in obtaining operator’s rights of Plovdiv Airport (through a concession agreement) and integrate it in the centre’s logistics infrastructure. The Bulgarian government is also promoting hub development advantages of Bozhuriste Industrial Zone and Sofia Tech Park.

182 Trade Expos could be utilized as supportive platforms for increasing commercial, industrial, technological visibility of small and medium size companies in an integrated OBOR and “16+1” context. Europe and China are closely intertwined by history, culture, trade, investments, R&D, etc. Brussels and Beijing share similar positions on world politics, both are proponents of multilaterals and opponents to economic protectionism. Currently, China is the EU’s second trade partner, after the US, and the EU is the China’s first trade partner, mutual trade worth up to 514.7 billion euro in 20163. The EU ‐ China relations have been naturally elevated to the point of comprehensive strategic partnership since 2003. This has served as an important point of reference for the EU member’s states to intensify their bilateral relations with Beijing. CEEC are an integral part of the EU with 11 EU member countries and the EU integrated legislative and market space. The rest, notably, the Western Balkan countries, are linked with the EU through association agreements and are at different stages of the EU integration process. For the moment 6 of the CEEC countries are not fully integrated into the EU normative framework. From a geostrategic point of view, Beijing regards the CEE region as an important linking point of B&R corridors to the western markets. CEE region is a territory of 1.3. Million sq. km. with 123 million total populations. Total Chinese investment in the CEE region went beyond $5 billion, while CEEC have invested some $1.2 billion in the Chinese economy. China‐CEEC trade volumes reached $65 billion in 2015.4 However, CEEC still are not in a position to export high‐technology goods to China. The EU refused to subscribe to the BRF Initiative on Promoting Unimpeded Trade Cooperation along the Belt & Road. Brussels still doubts the Chinese commitments to economic, financial, social, environmental sustainability and transparency of the projects it initiates. The EU wants true promotion of free trade and reciprocity in market access5.

3 European Commission: Directorate General for Trade (Trade‐G‐2/15.02.2017). Internet: http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_122530.02.2017.pdf. [Accessed on 26.06.2017]. 4 Spotlight: Premier’s Latvia visit adds fresh impetus to China‐CEE ties. Xinhua, 11.06.2016, Internet: http://news.xinhuanet.com/english/2016‐11/06/c_135810001.htm. [Accessed on 27.06.2017]. 5 For instance, Bulgaria’s access to China food and agro‐products market is still difficult. The country has problems with approval procedures for export of certain foods and feed to China. Out of 28 requests by the Bulgarian Ministry of Agriculture and Food only 4 procedures have been approved by the Chinese side.

183 Besides, OBOR economic corridors should be designed in operability with Trans‐European Networks.

BULGARIA’S CONNECTIVITY PRIORITIES

• Bulgaria considers the “16+1” cooperation platform as an indispensable reinforcement to EU‐China relations. The platform should contribute to overall EU‐China connectivity. • “16+1” and B&R should evolve alongside EU common policies and regulations and should not undermine the EU common development. The Chinese investments in CEEC should take into account the EU social and environmental standards, the EU public procurement regulations. The European Commission’s assessment of compliance with the EU regulations by the Chinese infrastructural projects stays critical. • At policy coordination a synergy should be sought between EU‐China Comprehensive Strategic Partnership, incl. EU‐China Connectivity Platform and EU Investment Plan, and OBOR, incl. “16+1” as an important addition to B&R in CEEC context. • The BRI and “16+1” infrastructure and trade connectivity contributes to the development of South‐East Europe as a sub‐region of CEE. It also shows the significances of region’s strategic value for Eurasian connectivity, incl. New Eurasian Land Bridge Corridor. In this context, Bulgaria welcomes the Chinese investments in logistics infrastructure along this OBOR economic corridor. • The EU Black Sea Synergy should be reinvigorated and included in the EU‐China connectivity proposals. It highlights the significance of the Black Sea region for overall EU development. • Synergy should be sought between the EU Danube Strategy and B&R/”16+1”. Bulgaria supports the Chinese infrastructural investments – motorways, railways, sea and river port based multi‐modal terminals, designed to link the Danube River with major country’s Black Sea ports. Currently, Europe’s second‐longest river’s potential as a transport artery has remained underutilized. • The EU‐China connectivity should be envisioned beyond trade, transport, infrastructure, manufacturing. Humanitarian dimension of relations is a

184 key ingredient for building ambiance of mutual trust and mutual learning which goes along with any business undertaking. Beijing resists the B&R and “16+1” to be labeled as China’s ‘Marshall Plan’ because it does not impose any political and security conditions on the realization of OBOR and “16+1” based projects. However, the projects are executed by the Chinese companies. Usually, they are the ones to provide financing and the Chinese workforce, ‘loan‐and‐build’ based contracts. Beijing, therefore, preserves managerial, know‐how and funding supervision over the projects6. Synergy should be sought in the form of inter‐bank cooperation between OBOR and “16+1” funding instruments and major European banks, e.g. between the Asian Infrastructure Investment Bank and the European Bank for Reconstruction and Development or the European Investment Bank. Large portions of Chinese lending for “16+1” major infrastructure development projects originate from Beijing’s policy‐making banks: Development Bank Cooperation and Export‐Import Bank of China, leading commercial banks. Thus, in addition to potential China‐EU inter‐bank synergy bilateral financial cooperation should be encouraged between the Chinese banking institutions and individual CEEC national development banks. Bulgarian Development Bank has entered into framework agreements with the Export‐Import Bank of China (China Exim Bank) and Industrial and Commercial Bank Loans of China for mutual lending, feasibility studies, financial evaluation and management of the projects. Both agreements have been signed within the “16+1” China‐CEEC framework. Inter‐bank Bulgarian‐ Chinese cooperation would provide funding for the realization of Bulgarian‐Chinese investment and trade related projects. The problem with the Chinese OBOR and the “16+1” funding mechanisms for CEEC is that they use conventional lending schemes, not grants. This type of lending is not

6 One the one hand, the Silk Road Fund (RMB100) and the Asian Infrastructure Investment Bank are the principal pillars of the OBOR financial infrastructure. China encourages Overseas Fund Business in RMB (appx. 300 RMB) to financially back OBOR (BRF deliverable). The purpose behind is to speed up the internationalization of Chinese yuan (RMB) in investment and commercial transactions. The 16+1 funding framework, on the other hand, initially began with a special credit line of 10 billion euro (announced at Bucharest summit, 2013) and later (at Riga summit, 2016) evolved in a decision to set up a separate international financial company for implementation of infrastructural development projects under China‐CEEC investment format.

185 attractive for 11 CEEC which as the EU members have access to the EU structural funds, under the EU cohesion policy. Besides, most CEEC refuse the Chinese funding to be linked to an obligation of sovereign guarantees to be granted by recipient countries. Alternative forms of funding agreements should be sought, such as public‐private partnership schemes or concession agreements, toll system financing the major railroad and highway projects. Nevertheless, CEEC’s participation both in 16+1 and B&R provides a possibility for these countries to attract infrastructural and industrial investments beyond the EU financial instruments. Both cooperation platforms offer the possibility for diversification of CEEC economic and trade relations and for greater integration in the global networks of industrial production, commerce, transportation and logistics. Connectivity in the context of B&R and “16+1” is people‐to‐people relations. They are a non‐governmental foundation for support of official state‐to‐state relations. High‐level political dialogues remain a futile exercise if not enhanced by people‐to‐people bonds. They are also an essential perquisite for conduct of corporate business. Deadlocks in political and corporate negotiations could be overcome thanks to building mutual human trust and understanding. This is accomplished through the ambience of people‐to‐people interaction, cross‐professional, cross‐cultural and cross‐ civilization. People‐to‐people contacts mean first and foremost humanitarian exchange in the field of culture, education & science, technology, tourism, sports. Education and science are the intellectual backbone of society. They are essential tools for a nation’s overall economic competitiveness. Education is also a basic tool for fighting poverty worldwide. Education and science are high on OBOR and “16+1” cooperation connectivity agenda. They are used in fostering educational and scientific exchange and promotion of sustainable environmentally friendly development. While the BRI stresses on developing relations with a network of UN specialized agencies, most notable UNESCO, and promotion South‐South and North‐South educational and scientific connectivity, e.g. boosting educational and scientific opportunities for underdeveloped countries in line with the UN Millennium Development Goals, “16+1” utilizes regional connectivity formats. A synergy should be sought between “16+1” China‐CEEC Virtual Technology Transfer Centre and China‐CEEC Higher Education Institute Consortium with respective B&R connectivity platforms, there are proposals for Science and Technology People‐to‐People Exchange Initiative, Science Park Cooperation Initiative and the Technology Transfer Initiative. CEEC national educational centers can serve

186 as good examples of “16+1” and OBOR synergy. Such is the case with the Confucius Institutes in Bulgaria, functioning under the auspices of Sofia University ‘St. Clement Ohridski’ and Veliko Turnovo University `St. Cyril and Methodius`). The Confucius Institute under Sofia University “Kliment Ohridski”, one of the first to be set up in SEE, is an important platform for popularizing the Chinese cultural heritage, folklore and language in Bulgaria. Sofia based Confucius Institute uses on‐line platform “Friends of the Great Chinese Wall” to reach wider audiences. ‘All about China’ (中国大观园) web portal managed by Bulgarian enthusiasts is an example of how internet exchange can stimulate people‐to‐people connectivity. The Chinese language has been taught at a secondary school level since 1992. Now, some 2000 Bulgarian pupils study the Chinese language and culture in 20 schools. On the other hand, the Chinese specialists on Bulgaria are trained at the Department of Bulgarian Studies at Beijing Foreign Studies University. Bilateral agreements in the field of scientific research and education ensure smooth exchange of students, university tutors & professors. Four editions of the international conference ‘The Silk Road’ organized by the institute during 2010‐2017 provided scientific and expert platform for European sinologists, orientalists, historians, foreign policy analysts, etc. to seek links between the BRI and “16+1” China‐CEEC cooperation. To provide an academic support for OBOR and “16+1” they have established think tank networks. Think tanks, defined as policy research organizations or institutes, or centers for strategic studies, operate as incubators of ideas and concepts. In theory, they should be independent institutions, not affiliated to political and business structures and interests. Thus, think tanks could provide policy analysis and expertise outside the pressure of government bureaucratic decision‐making. The networks encompass a large number of partnering organizations and function as non‐hierarchical, flat, flexible structures. The “16+1” Think Tanks Network was inaugurated in Beijing, Dec 2015 and underpinned by the creation of Budapest based China‐CEEC Institute in April 2017. Among the deliverable of BRF ‐ 2017 was: • the establishment of International Think Tank Cooperation Network by Silk Road Think Tanks Association; • Creation of the Silk Road Think Tanks Network (SiLKS) under the MoU between the Development Research Centre of the State Council of China and the UN Industrial Development Organization.

187 Think tank networks should be envisioned as centers for generation, dissemination, management and sharing of general and specialized expertise, institutional capacity building. They could utilize advantages of web‐based interactive platforms for knowledge generation & sharing, cost‐ effective knowledge management platforms. The synergy between the BRI and “16+1” academic networks could be implemented in three ways: • Organization of joint conferences, roundtables, expert discussions on cross‐cutting topics; • Initiation of joint research projects aimed at synergizing OBOR and “16+1” knowledge in key areas of connectivity ‐ infrastructure, commerce, finance, manufacturing, sustainable development and ecology, non‐governmental exchange. Examples: • EU‐China Facilitation Project: The project will be run through a number of activities, including policy research, capacity building, policy study tours, regional workshops and business facilitation conferences, to strengthen and improve the Clean Development Mechanism (CDM) in China; • Marketing study project: marketing study of the habits of Chinese touristic trips to CEEC (expectations and preferences in terms of accommodation, places of interests) The project results could be disseminated via “16+1” Tourism Promotion Association and relative BRI structures; • Contribute to policy coordination in various fields of common concern, e.g. poverty eradication through policy‐related research and capacity building. The BRI and “16+1” can succeed if only comprehended by societies at large and not confined to small circles of experts. In this respect: • think tanks networks should work closely with higher educational institutions on the promotion of bachelors and master university programs with regard to OBOR and “16+1”, provide methodology tool kits for teaching the subjects; • engage with leading media outlets in popularizing the topics of B&R and “16+1” at a national and international levels; • Synergize closely with business associations with the purpose of bringing academia and industry together, e.g. the BRI and China‐CEEC think tank networks can provide institutional and analytical/theoretical framework

188 for joint business‐academia projects for the development of technology‐ driven industrial parks. A specific role to play in people‐to‐people B&R and “16+1” connectivity is the Diaspora factor. The Diasporas are the bridge builders that bring different nations, cultures, and civilizations together. They are especially useful in fostering inter‐business relations. Diasporas can be an indispensible information source about business culture and practices in the country of their residence. Sometimes they may be even more valuable with an excess they could have to key political and corporate decision makers. Diasporas do not substitute but complement the embassies in promotion of China‐CEEC trade and business relations. There is a small but vibrant Chinese Diaspora in Bulgaria. The Chinese residents in Bulgaria are involved in small scale retail trade, restaurant business, in running small and medium sized companies in the field of agro, wine and rose oil production. Some have lived in Bulgaria for more than 25 years. There is already a first generation of young Chinese who have been raised and educated in the country. They are at ease with the local way of life, speaking Bulgarian and making Bulgarian friends. The Chinese who live and work in Bulgaria do not generate social problems and do not challenge the domestic labor market in general. There is also a small Bulgarian business and student community living, working or studying on the Chinese soil. The Chinese companies operating in CEE markets and CEE companies operating in the vast Chinese market face unfamiliar business environment. Diasporas from CEE countries on the Chinese soil and the Chinese Diaspora in CEE countries can contribute to successful realization of various business undertakings. For instance, the first Bulgarian‐Chinese auto industry joint venture, a vehicle assembling plant for China’s Great Wall Motors in the town of Lovetch with the annual capacity of 50.000 unit with 120 and export markets in Serbia, Macedonia, Romania, Croatia and Italy, was accomplished thanks to corporate and technological connections of Bulgarian expats in China. A prospective St. Sofia Smart City undertaking, a joint venture by Bulgaria Development Holdings Ltd, and ZTEICT, a subsidiary of ZTE for the purpose of building a smart entertainment and commercial complex near the Bulgarian capital has been initiated under auspices of the B&R cooperation program, jointly between Bulgarian expats in China and representatives of ZTE, a leading Chinese telecommunication company, present on the Bulgarian market for more than 5 years. If realized it would be the first corporate driven new generation smart city complex in CEE.

189 CONCLUSION

In conclusion, there is consensus within the Bulgarian expert community and political elite with regard to China. Sofia‐Beijing relations are not burdened by unresolved issues. Beijing’s friendly relations with Central and Eastern Europe date back to the late 1940s. Bulgaria was the second country to recognize the PR of China, a highly valued fact in the history of our bilateral relations. In 2014, the two countries marked the 65 anniversary of establishing diplomatic ties, which was celebrated by a state visit of the President of Republic of Bulgaria Mr. R. Plevneliev to China. Bilateral political dialogue at all levels, from experts to high‐level, is favorable and promising. Bulgaria participates in the network of “16+1” China‐CEEC cooperation platform given its institutional expertise, capacity and sectoral specialization: • in 2016 hosted a meeting of the China‐CEEC Agricultural Cooperation Association; • *China‐CEEC Forum of Capital City Mayors; • September 2017 to host the 3rd working meeting of the China‐CEEC Association of Provincial Governors; • In 2018 The 4th China‐CEEC Local Leaders’ Meeting. • Chinese trade and investments could boost economic growth in CEEC. This in turn would help narrow the economic gap between West European countries and Eastern newcomers, and promote a more balanced economic development in the EU. China considers legitimate to build up relations with CEEC as freely and sovereignly as it does for instance with France, Germany, Great Britain, Italy, etc. • The Bulgarian government explores financially and economically viable partnership schemes for implementation of concrete Bulgarian‐Chinese projects in the field of transport and logistics infrastructure, manufacturing and energy sectors, information and communication technologies sector, tourism, etc. The country should utilize its experience within “16+1” as a premise for proactive engagement in the B&R framework. Bulgaria’s membership in the EU requires its participation in “16+1” and OBOR to be in conformity with the EU legislation and common policies.

190 CRITICAL INFRASTRUCTURE PROTECTION – CHALLENGE AND OPPORTUNITY FOR THE BELT AND ROAD INITIATIVE

Alexandru GEORGESCU, Ph.D. Romanian Association for Space Industry and Technology Bucharest, Romania1

Abstract: The Belt and Road Initiative (BRI) is a complex project that is continuously evolving in a challenging security environment. The paper proposes a new perspective on the BRI as a collection of critical infrastructures comprising a system‐of‐systems, utilizing concepts already in use for Critical Infrastructure Protection (CIP) throughout the world. This perspective not only highlights the role that the BRI can play in the development and the means for future planning, but also the challenges that arise from the project, involving numerous security risks which must be tackled not just at the level of individual countries, but also collectively. In this, it presents an opportunity for the BRI, by underlining a clear necessity for better cooperation and greater ties for risk and security governance in an increasingly interdependent world. Key words: Belt and Road, risk management, security governance, critical infrastructure protection, resilience

INTRODUCTION

The present article proposes that the Belt and Road Initiative initiated by China to strategically organize and focus its investment and partnerships abroad to access new synergies can be viewed as a process of creation and exploitation of critical infrastructures. By extension, the BRI will only be as successful and it’s Member Countries as safe and as prosperous as its infrastructures will allow. The advance of the BRI requires that the attention should be paid to protecting new critical infrastructures and understanding their interdependencies, while also creating a policy and

1 E‐mail: [email protected]

191 institutional framework. This must be adequate to the security needs but also cognizant of political realities to ensure that critical BRI infrastructures are protected, especially as the future success of the project enhances interdependencies and, by extension, risks, vulnerabilities and threats.

CRITICAL INFRASTRUCTURE PROTECTION THEORY

Human society is dependent for its proper functioning and development on a substrate of sociotechnical systems, such as institutions, industrial assets, and transport networks and so on. These infrastructures are keys to productivity and efficiency in the economy and the administration, as well as the general functioning of society. Some of these infrastructures are critical, which, as Moteff et al. (2001) highlighted, are “infrastructures so vital that their incapacitation or destruction would have a debilitating impact on defence or economic security”. The American security establishment first defined the field through Executive Order 13010 signed by President Clinton on July 15, 1996, and the Presidential Commission on CIP advanced proposals directing research into this field and instructing security structures to liaise with competent authorities for various sectorial infrastructures to ensure that “any disruptions or manipulations of these critical functions must be brief, infrequent, manageable, geographically isolated and minimally detrimental to the welfare of the United States” (PDD‐63, 1998). The more advanced and developed a society is the more critical infrastructures it has and the more vulnerable it is to all manner of risks, vulnerabilities and threats. A society with fewer critical infrastructures in number and quality will likely be more resilient to all manner of shocks, but will also be poorer and more dysfunctional in other ways. In the end, a country will only be as safe and as prosperous as its infrastructures will allow. Critical infrastructures run the gamut from pipelines, electricity grids and roadways to, in more recent development, finance, public administration and healthcare. The US started by defining it as comprising telecommunications, electrical power systems, gas and oil storage and transportation, banking and finance, transportation, water supply systems, emergency services (including medical, police, fire, and rescue) and continuity of government. The European Union (EU) began its efforts in 2004 with energy and transport

192 which were the key elements of integration and convergence, and introduced the European Programme for Critical Infrastructure Protection EPCIP with Directive 114/2008, further expanding the list. Not every piece of infrastructure is critical ‐ the goal of CIP as a “discipline of disciplines” is to provide the tools and methodologies to identify the criticality of individual infrastructures, their interdependencies, to assign scarce resources to their protection and to ensure system resilience. Resilience is defined by Hokstad et al. (2012) as “the ability of a system to react and recover from unanticipated disturbances and events”. Interdependencies, meanwhile, are a very important contribution of CIP theory to security, which Gheorghe and Schlapfer (2004) defined as a “bi‐directional relationship between two infrastructures, through which the state of each infrastructure influences or is correlated to the state of the other” and classified as being geographic, physical, logical and cybernetic/ informational. These interdependencies raise the specter of cascading disruptions, wherein a partial or total failure in one critical infrastructure affects others as well, which in turn affect others, spreading throughout the entire system‐of‐systems in ways that sometimes cannot be anticipated. Perrow (1999) termed these as “normal accidents” which are an inherent property of interlinked systems after a certain threshold of complexity. In addition, Rinaldi et al. (2001) also defined escalating disruptions, where a failure in one infrastructure worsens the state of an independent infrastructure, and common cause failures, where two or more infrastructures fail from the same trigger. Various aspects of CIP theory are exemplified in the chart below (Rinaldi et al., 2001).

193 Figure 1 – Dimensions for understanding critical infrastructures (Rinaldi et al, 2001)

BRI INFRASTRUCTURES

The significant introduction above serves as a primer on describing the critical BRI infrastructures which, in addition to the characteristics stressed before, also pose the added challenge of being transnational and transcontinental, bringing new challenges to the governance processes. The reasoning behind the proposal of a critical infrastructure perspective on the BRI lies in the nature of the support framework for the achievement of BRI goals. In order for China to increase its trade with the world and with new markets, for its companies to go global and for its economy to reorganize into a sustainable form for the next economic growth cycle, a series of new assets will be required, both as a goal of the BRI and as a means to further the goals – new ports, new roads, new trade routes, new industrial facilities, new pipelines, new financial organizations and, lastly, new security structures, formal or informal.

194 Figure 2 – General elements of a CIP perspective on BRI

Existing infrastructure

New infrastructure

Financial institutions (AIIB etc)

Subordinate initiatives – China‐PAK, 16+1 BRI Components Shifting trade ties

Shifting production chains

Source:author.

In the beginning, most infrastructures would consist of existing assets, connected in novel ways through the planning and coordination of China and its partners. In time, these prove to be insufficient and so upgrades are implemented for old infrastructure and new infrastructure is planned. The complexity of BRI leads to a multilayered and flexible structure, where bilateral partnerships (China‐Pakistan) and multilateral partnerships (16+1) target goals which further the BRI objectives at the macro level. Every element of BRI development, from physical assets to the establishment of market ties, financial institutions (AIIB, Silk Road Fund, New Development Bank, etc.) and partnerships at multiple levels (intergovernmental, municipal, between companies, between civil organizations) can be considered infrastructures and some of them will, most likely, be critical. This is also a function of time, as criticality grows with the increase in

195 dependencies which a successful course for the BRI will generate. At the same time, the BRI’s focus on infrastructures is useful not only for its own designs, but as a response to significant demand in the developing world (but also the developed one), for financing and expertise in repairing aging infrastructure and creating a new one. According to a report from UNCTAD (Griffith‐Jones, 2014), the world requires significant investment in infrastructures in order to close the gap with the developed world. The charts below show the necessary investment and financing, alongside the current state of available financing for such projects.

Figure 3. Minimum annual infrastructure investment needs by region, sector and phase ()

Griffith‐Jones, 2014.

Given the geographic breadth of the BRI, many of those projects are also of interest to the BRI and to its growing capacities for funding infrastructure investment. However, much these may grow, they will certainly not be able to cover the full demand. Rather than any notion of supplanting Western financial institutions, the BRI affiliated financing mechanisms like the AIIB and the New Development Bank or the Silk Road Fund will first attempt to cover the shortfall in resources for infrastructure investment.

196 Figure 4. State of yearly financing for infrastructure projects

Griffith‐Jones, 2014, compiled by: author

Ultimately, this will create new infrastructures which can be designated as critical, deepening the challenge of ensuring the structural viability of a BRI‐led better‐integrated economy in the context of significant challenges, both natural and man‐made.

CRITICAL INFRASTRUCTURE PROTECTION

From a BRI perspective, protecting critical infrastructures will likely pose significant challenges because of the size and diversity of the countries involved, comprising 67 nations and over 60% of the global population. Each one has its own level of development, pre‐existing CIP knowledge, efforts and tools, as well as its own resources, but with the weakest link affecting the entire system‐of‐systems. At the same time, for geopolitical, political and philosophical reasons, the BRI is constrained in the institutional form that its CIP activities can take. At a basic level, CIP within the BRI involves: • The physical and cyber security of existing infrastructure designated as BRI‐critical, some of which stretch across several nations and continents; • Maintaining confidence in the legitimate authorities of each nation and their capacity to coordinate, on the part of citizens, consumers and investors;

197 • The planning, design, financing, building, operation and protection of new critical infrastructure, possibly in very challenging security environments; • As a subset of infrastructures, it is vitally important to build and administer the regional inter‐connectors that enable the global nature of the BRI; • To ensure business continuity and quality of life in the face of disruptive threats which inevitably materialize; • To achieve sustainable production and consumption patterns in order to maintain the economic integrity of the system, but also perform function like protecting the environment. • The risks faced by BRI critical infrastructures are numerous and varied, ranging from man‐made to natural and from deliberate to accidental. An important category of threats is the attrition of existing infrastructure systems, increasing their chance to fail, as well as the current trend of layering new systems atop older ones, giving rise to unpredictable interactions in cases of emergency. A non‐exhaustive list of risks includes – Terrorism, organized crime, sabotage, insurgencies, cyber variants of these, natural disasters, environmental change, technological attrition, technological mismatch, physical attrition, spontaneous malfunction, human error, political and legislative risks, governance failures. • The BRI’s zone of action includes that of numerous pre‐existing blocs (EU, ASEAN, SCO, African Union, Eurasian Economic Community and others), making the concerted action more difficult. This is apparent in the anxiety with which European institutions in Brussels have greeted the 16+1 partnership between China and Central and Eastern European countries. Without the opportunity of formalizing an institutional partnership for critical infrastructure governance, except possibly at the UN level, justifying it with the interconnected world, then the BRI Member Countries must make do with the best possible framework which is politically acceptable. • Fundamentally, there are a few key elements necessary for governance, some of which can also be promoted in the absence of institution building at BRI level, for instance through private‐public and private‐private cooperation, academic cooperation, civil society, individual nation coordination in implementation and so on. One

198 particularly useful tool in this regard might be the Think Tank Exchange and Coordination network at the level of 16+1, coordinated by the China Academy of Social Sciences. These include: • Common studies and risk assessment; • Harmonizing CIP elements and practices; • Exchanges and dissemination of knowledge and best practices; • Advocacy for integrated CIP processes; • Advising national leaders on the best way to manage Belt and Road Infrastructure risk exposure; • Advising national leaders on aspects of building a resilient system‐ of‐systems; • Bridge between private and public actors with security interests; • Disseminating best practices through transnational companies. • This lines up well with the main elements of CIP efforts, especially as regards the international level.

Figure 5 – Elements of governance for international CIP efforts Critical Infrastructures

International National Public/ National standards International regulatory Private Civil Society Authorities and best Bodies frameworks Partnership practices Source: author.

Piecemeal construction of such an effort, to the extent possible, will likely be a long‐term and complicated process, but necessary to achieve an all‐hazards approach to security governance in a challenging and rapidly changing environment. Moreover, CIP can also become a stabilizing factor for countries in Africa, Central Asia and elsewhere, by supporting not just protection efforts, but also the decision‐making processes regarding future infrastructures, whose resilience can be improved from the design phase.

199 CONCLUSION

The vertical and horizontal development of the Belt and Road Initiative across a wide swathe of the territory comprising a majority of the world’s population is critically dependent on the existing and planned infrastructure substrate supporting economic processes in wide categories such as transport, manufacturing and finance. Protecting these infrastructures is a challenge for China and its partners, as well as an opportunity, since it creates an inescapable logic of coordination driving closer exchanges and cooperation. The form that this will take is unclear at this time, given the regional complexities and the underlying differences between nations. If the BRI were to accede to a new level of institutional organization, it might be possible for it to draw inspiration from the European Programme for Critical Infrastructure Protection, which exhibits several of the components that a CIP effort would require: dissemination of standards and best practices, distinctions between national critical infrastructures and European critical infrastructures, chain of communication for reporting threats and disruptions involving private operators, state operators, competent national authorities and European authorities, a useful taxonomy of critical infrastructures, etc. Moreover, through the 16+1 Initiative, a majority of members are already involved in the EPCIP framework, an experience which could be useful at least for this regional initiative, if not easily scalable to the BRI itself. The challenging security environment will only grow in underlying complexity and fragility. A myriad of threats may manifest, in addition to new threat categories based on developments in asymmetric conflict or emerging from the interaction of the components of the infrastructure system‐of‐systems. Therefore, CIP should become a priority for decision makers.

BIBLIOGRAPHY

Council Directive 2008/114/EC of 8 December 2008 on the identification and designation of European critical infrastructures and the assessment of the need to improve their protection. Gheorghe, Adrian V., Schläpfer, Markus, “Critical Infrastructures: Ubiquity of Digitalization and Risks of Interdependent Critical Infrastructures”, IRGC – ETH Document, June 2004, Zürich

200 Moteff J., Copeland C., Fischer J., 2003 Critical Infrastructures: What Makes an Infrastructure Critical? Report to Congress, Washington DC. Per Hokstad, Ingrid B. Utne, Jørn Vatn, “Risk and Interdependencies in Critical Infrastructures”, pg 16‐18, Springer Series in Reliability Engineering, Springer, Trondheim, , 2012, ISBN 978‐1‐4471‐4661‐2 Perrow, Charles, “Normal Accidents: Living with High‐Risk Technologies”, Princeton University Press, 1999, ISBN 978‐0691004129 Rinaldi, SM., Peerenboom, JP., Kelly, “Identifying, understanding, and analyzing critical infrastructure interdependencies”, IEEE Control Systems Magazine, 21(6), 11–25, 2001 Stephany Griffith‐Jones, “A BRICS development bank: a dream coming true?”, Discussion paper no 215, march 2014, UNCTAD, Internet: http://unctad.org/en/PublicationsLibrary/osgdp20141_en.pdf The Clinton Administration’s Policy on Critical Infrastructure Protection: Presidential Decision Directive No. 63 (PDD‐63), White Paper, May 22, 1998.

201

SECOND SESSION:

GEOPOLITICAL VISIONS AND ACTIONS OF THE “NEW SILK ROAD” INITIATIVES

CHINA AS GLOBALIZER1

Časlav OCIĆ Academician, SASA Full Member Serbian Academy of Sciences and Arts, Belgrade, Serbia2

Abstract: China is globalizing. And it has a vision. How to implement that vision turning it into a non‐zero sum game (win‐win strategy)? China is committed to a cooperative (coordinated and harmonized) strategy, as opposed to a conflict‐based one. How to transform strategic thinking into strategic action? The New Silk Road (Belt and Road) in global terms is a pioneering synthesis of the telurocratic and talassocratic geo‐economic strategies, whose breadth and diversity are without precedent in world history. How can the development achievements and experience of China be translated into all‐around benefits for all countries, i.e. how can the world as a whole benefit from it? It is clear that the Chinese (and at the same time global) new development philosophy smacks simultaneously of commitment to principle and pragmatism. In the spirit of Deng Xsiaoping, it reconciles principles, values, and interests. There are many signs of intensified interaction between China and the global environment (Belt and Road). China is opening up, but at the same time, it is returning to its roots. Opening up is itself a part of the Chinese tradition: China today is sufficiently strong to open up, and it was always opening up in periods of strength and closing up when it was weak. Opening up of entities which are small and weak is not usually the cause of the ruin of their economies and of social, governmental, and value system collapse, which most frequently results in neo‐colonial dependence. Key words: China, globalization, New Silk Road, principles, values, interest

1 Introductory lecture. 2 E‐mail: [email protected]. [email protected]

205 INTRODUCTION

“China is globalizing,” we are told with increasing frequency as we peruse newspaper headlines (both in China and elsewhere), as well as periodicals, scholarly publications, and so forth. David Shambaugh wrote a book entitled China Goes Global, subtitled The Partial Power, which ponders China not only in a global context, but also points out the limitations (and obstacles) to Chinese globalization. So, China is globalizing. And it has a vision. How to implement that vision turning it into a non‐zero sum game (win‐win strategy)? China is committed to a cooperative (coordinated and harmonized) strategy, as opposed to a conflict‐based one. At the same time, China does not shut its eyes to the reality of diverse interests and power configurations. So how, and with whom, to square the circle? That – how to transform strategic thinking into strategic action – is the topic of numerous debates in China (and the world at large), opening up many issues of global and domestic interest. Interesting and stimulating ideas can be heard, and naturally there remain many unanswered questions (the future always shocks with new questions) so that these dialogues are by their very nature endless. Those dialogues began even before the start of the global (and the EU) economic crisis – the point being to anticipate events because the future belongs to those who prepare for it. That is attested by the topics taken up in conversations conducted between the Chinese Academy of Social Sciences and the Serbian Academy of Arts and Sciences at venues such as Belgrade, Beijing, Shanghai, and Chongqing during the past decade (with Professor Huang Ping playing a conspicuous role). When the crisis broke out (and Chinese exports to the US fell drastically) some ready‐made answers were offered: when after more than three decades the double‐digit growth rate (10–12%) was halved (6, 5%), that marked the onset of a “new normal”, i.e. a shift from quantity to quality. Also, from imitation to innovation. From Made in China to Created in China. Shanghai, Chongqing…these are first hand examples which illustrate the new practice and demonstrate the results of the innovative measures which China has applied in the area of economic management. However, the focus of attention is on Chinese innovation in global economic management: the principal strategic developmental innovation is the mega project of the New Silk Road.

206 The New Silk Road (Belt and Road) in global terms is a pioneering synthesis of the telurocratic and talassocratic geo‐economic strategies, whose breadth and diversity are without precedent in world history. That strategy at first glance strikes one as “mission impossible.” If it is mission feasible, what are the prospects of implementing utopia, what are the limits (and possibilities) of intellectual (and moral) social guidance, what is the relationship between democracy and meritocracy (and is there an optimal mix of the two, does that mix change in time and space?) And so on, and so forth. Chinese Communist Party leaders (in cooperation with scholars from China and the Chinese Diaspora) have developed the CPC’s notion of global economic management quite comprehensively and in great detail so that the world can appreciate the CPC’s position, understand the proposal, and take its share of responsibility by actively participating in reforms and innovations in international economic management. The foundation of that idea and its programmatic framework were defined by these questions. Taking into account the difficulties and challenges faced by the economies of various countries and regions, cognizant of reality in the way the global economic management system functions, facing competing tendencies and arguments and diverse concepts and goals, the Chinese elite is asking itself: what perspective with regard to global economic management does the world need? How can the management systems and the ideas of various countries be integrated? How can countries strengthen the links that bind them as they apply their policies and rules? The 2016 G20 Hangzhou summit (eleventh meeting of the Group of Twenty held on 4–5 September 2016 in the Chinese city of Hangzhou) has brought many results. The world is following with interest how the conclusions drawn at the Summit are applied in practice, and how China will stimulate world economic development and innovations in global economic management by modelling its own innovations and coordination through an economic, social and ecologically sustainable, open, efficient, and just joint development. What progress has been achieved in Chinese provinces, cities, and financial institutions and companies, chiefly in the areas of reform and development, and in innovative new management techniques? How will the Asian Infrastructural Investment Bank and the Belt and Road initiative, started by China, bear fruit in the form of new ideas and ensure successful innovations in global economic management? How can the development achievements and experience of China be translated into all‐around benefits for all countries, i.e. how can

207 the world as a whole benefit from it? It is clear that the Chinese (and at the same time global) new development philosophy smacks simultaneously of commitment to principle and pragmatism. In the spirit of Deng Xsiaoping, it reconciles principles, values, and interests. It starts from the premise that “in an epoch when human beings are increasingly interlinked as a community of common destiny and interests, constructing and reforming a system of global economic management – which includes taking into account the interests of all the world’s economies and the well‐being of all the world’s citizens – is the demand which becomes ever more urgent, and it ought to be supported and implemented as their very own task by the various organizations and regions, in a process in which everyone’s voice should be heard and which should benefit from everyone’s input.” (Though the new platform is the fruit of collective wisdom and historical experience, nevertheless one name merits special mention, that of Lin Yifu, a former vice‐president of the World Bank and honorary dean of the National Development School in Beijing, who has played an extraordinary role in preparing for the future.) There are many signs of intensified interaction between China and the global environment (Belt and Road). China is opening up, but at the same time, it is returning to its roots. That was also asserted by the popular Chinese writer Chen Danyan (author of the Shanghai Princess) in an interview she gave to Marina Vulićević (“The Dictionary of the Khazars is why I came to Serbia”) at the 61st Belgrade Book Fair, published in the Belgrade daily Politika on October 28, 2016: “Contemporary Chinese are increasingly turning to their traditions, culture, and religion.” At one of the plenary sessions of the Chongqing Dialogue 2016, the respected Beijing University professor Pan Wei, director of the Centre for Chinese and Global Issues, stressed that the opening up is itself a part of the Chinese tradition: China today is sufficiently strong to open up, and it was always opening up in periods of strength and closing up when it was weak. Opening up of entities which are small and weak is not usually the cause of the ruin of their economies and of social, governmental, and value system collapse, which most frequently results in neo‐colonial dependence.

208 CREATION OF THE INTERNATIONAL ORDER FOR THE 21ST CENTURY AS RETURN TO EARLY MODERN WESTPHALIAN BALANCE OF POWER

Neven CVETIĆANIN, Ph.D. Senior Research Associate, Institute of Social Sciences, Belgrade, Serbia1

Abstract: The paper discusses the future of international relations in the 21st century. A possible pattern of these relations is found in the early modern European (Westphalian) diplomatic system of sovereign states, with the balance of power between the great powers as the basic principle. In order to support this thesis, the paper examines, in the basic outlines, the history of international relations from the Westphalian system to the present day and defines the different phases of these relations in a new and innovative way. In this sense, the paper offers a new periodization of the various systems of international relations of the modern epoch, with a special emphasis on the three phases of international relations from the end of the Second World War to the present day. The paper concludes that after a cold‐war equilibrium between two superpowers (the U.S.A. and the U.S.S.R.) and the short‐term domination of the U.S.A. as the only super power after the end of the Cold War, we currently have the appearance of a new multipolar world with several dominant global powers (primarily the U.S.A., China, Russia, and the U.K) that are currently seeking a new balance of power between themselves. Therefore, the basic thesis of this paper is that these great powers will sooner or later have to organize a “new Yalta” (or a series of international conferences such as those in Yalta) for a “new deal” on the configuration of the international order in the 21st century. The thesis of our work is that the ideal model for this configuration can be found in the early modern European Westphalian system of sovereign states. Our thesis is similar to the thesis of recent research by Henry A. Kissinger, whose works we used mainly in our research on this topic. Key words:Westphalian system, balance of power, great powers, international relations, 21st century, new Yalta, balance of power for the 21st century.

1 E‐mail: [email protected]. This scientific work is part of project Social transformations in process of european integrations (no. III 47010) funded by the Ministry of Education, Science and Technological Development of the Government of Republic of Serbia for the period 2011–2017.

209 INTRODUCTION

Perhaps we can say that at the end of the second decade of the 21st century, the circle of Modern Age and its accompanying social processes coming to an end, and that current global social processes are flowing in the opposite direction in relation to the direction initiated by the French Revolution, and that we are attending the restoration of many pre‐modern political‐economic figures in a new post‐modern context. This is not only confirmed by the return of the British Isles in the form of a self‐sustaining kingdom after Brexit and the return of the informal “tsarist” system in Russia (and somewhat in China) as well as the return of the “sultanate” in Turkey after the constitutional changes initiated by Erdogan – but already confirmed by the mutual relations among the main world powers (United States, China, Russia, UK, the “German” EU, etc.) which today closely resemble the relations of the great empires of the past – with the difference of a greater interdependence today than it was before. All this seems to be a challenge to the enlightenment dream of the French Revolution and the practical victory of that model of politics and diplomacy described by Henry A. Kissinger in his Harvard doctoral dissertation (Kissinger, 1964.) about Prince Metternich, who once in the system of the Holy Alliance renewed the conservative diplomatic order of balance of power among the traditional empires, which was valid before the French Revolution and established with the Peace of Westphalia in the 17th century. Nevertheless, we must be careful with our thesis of flowing history back to the early modern Westphalian international system in its extended version and refrain from harsh judgement, which is certainly not appropriate for a paper of this format. We need to refrain from the harsh judgement due to the fact that at the moment, at the global level, two elites are struggling for power – the conservative and liberal elite – and it is difficult to say with complete certainty which of these two elites will win this battle. It is possible that some “synthesis” among these elites will arise again as in the past (previously, Metternich, Kissinger and, in general, diplomats of this profile were bearers of such “synthesis”, and they possibly could be in the same role again in the future) and this “synthesis” can again, as in the past, reunite opposing poles of the world elite in a new balance of power between these different poles of the global elite and between traditional diplomatic great powers.

210 EUROPEAN INTEREST FOR GLOBAL BALANCE OF POWER

However, the bare fact of the struggle of the two global elites – the conservative (pro‐national) and the liberal (pro‐global) ones – regardless of the outcome of this struggle – confirms the thesis we advocated in our previous works and have explicated with the help of analytical tools that we have called the dialectics of political mechanics (Cvetićanin, 2016.) that in the political field at any time, we have a dominant basic conflict that defines it – i.e. every historic period has its own forces of action and reaction. However, in our time, the conservative elite that is marching with Trump and proponents of Brexit is actually “revolutionary” and in the position of the forces of action, while the opposed liberal elite is currently in the position of forces of reaction because it is the guardian of the “old liberal order” established after the fall of the Berlin Wall. While a new general pole of the synthesis between these two opposite poles would be a “new balance of power” for the 21st century that would pacify existing social and geopolitical conflicts – just as it once was the case in the old Westphalian diplomatic system in Europe with its different versions during the 17th, 18th and 19th centuries. But at the moment, the fate of our European continent and its pan‐European political and economic creation – the European Union – in these new global processes is very interesting, because the European Union is precisely between the forces of action and the forces of reaction of our time (between conservative and liberal elements), both from outside and within European societies, within which the conservative and liberal elements are now explicitly struggling (right populism against liberal institutionalism, while leftist populism is also slowly rising), which is best seen in this year’s French presidential election. If international order will go in the direction of restoring the Westphalian (and “Metternich’s”, and “Kissinger’s”...) conservative order of balance of power among the great powers, the European Union, an economic but not a security giant (especially after Brexit, and not “a great power” at all in the strict meaning of the term), would have to find its equilibrium position in such a new order, which will certainly be easier if the dominant global great powers (the United States, Russia, China, the UK, etc.) established a peaceful global coexistence, and if the dominant regional powers on the borders of the European continent, like Turkey, would be interested in a peaceful co‐existence with the EU – and finally if relations between the liberal and the conservative elements of European societies would be in balance (and if even a new political left also found a

211 political space) – which would altogether allow the whole system to balance and to keep its stability. However, if (especially three) dominant global super‐ powers (the US, Russia, China) in the new global circumstances do not establish peaceful coexistence (in the European context, the relations between the United States and Russia, which since the Cold War have affected Europe as some kind of “big brothers”, are the most important) and if regional powers on the borders of Europe, such as Turkey, do not want to be partners with the EU but will insist on a confrontation, and finally if conflicts within European societies between the liberal and conservative (and the growing left‐wingers) elements escalate, then the European Union will face a difficult task of redefining its position and its institutions, becoming the centre of the struggle of various, broader, geopolitical interests, which the European political and intellectual elites will have to synthesize and reconcile if they want to keep the continent peaceful and stable, and the institutional model of United Europe sustainable in the long‐term. It would also help to create a new world balance of power for the 21st century as the equilibrium point that is again (as always) in times of crisis, a principle of stability. We are inclined to believe that peace and stability at the global level will occur sooner or later (as always in the past), only at this moment it is not clear whether this will be only after a more noticeable social, political and geopolitical global conflict or things though will not go that far. This will not be possible to judge with scientific credibility at the moment because it is only possible to speculate about these processes, and all we have at the moment is the mere experience that according to all the available data (the volume of political, economic and armed crises around the world), we are currently living in a time of crisis in which history is receiving new acceleration – as never before since the end of the Second World War.

BACK TO THE ROOTS – THE RETURN TO THE EARLY MODERN WESTPHALIAN BALANCE OF POWER AS OLD‐NEW MODEL FOR THE 21ST CENTURY INTERNATIONAL RELATIONS

Why are the Great Powers “great”? The history of international relations is very dynamic. Throughout the history of international relations, the power of some individual stakeholders (in the first line great powers) grew or declined. From the very beginning of

212 rulers and states, the phenomenon of ascending and descending of collective (national) power had been the topic and the subject of numerous analyses, expert reviews and articles. Such analyses have been particularly intensified since the Middle Ages and especially became relevant with the establishment of an early modern Westphalian international system with its key‐principle of the balance of power (between great powers). Through history, we can classify a few permanent conditions for the level of power for every country (nation): 1. the size of the population 2. territory 3. natural resources 4. economy 5. military power 6. culture and 7. informational technologies (contemporary condition) Throughout modern history, different nations with their different quantum of power have constituted specific international orders for different periods. The first and basic one in the modern history of Europe and the world was the so‐called Westphalian system of sovereign states with its specific balance of power. This international system lasted for centuries in its different versions.

Westphalian Peace and Westphalian International Order of Sovereign States The Peace of Westphalia (Gross, 1948, p. 20) was negotiated and signed on 24 October 1648, after a thirty‐year war between the Emperor Ferdinand III, the German princes, representatives of the Netherlands, France and Sweden. It was based on three important principles: 1. rex est imperator in regno suo – (king is an emperor on his national territory), the sovereign cannot be a subject to a higher authority including the Christian church, and every king is independent and equal in rights to any king 2. cujus regio, ejus religio – (the ruler determines which religion will be present on the national territory where he is sovereign) up to that

213 moment, from the outside no one has the right to intervene in someone else’s sovereign territory or the state even if he has the right to intervene for religious reasons and 3. statera virtutis (balance of power) – whose goal is the prevention of the establishment of hegemony on the European continent that would dominate all other rulers and peoples in their own countries. The Peace of Westphalia established a new modern international (Westphalian) order (as opposite to the Middle Ages international order with supremation of the Church in Europe) which stayed ideal of international stability until today (Kegerly, Raymond, 2002.). The Peace of Westphalia also established a so‐called “Westphalian diplomacy” which was based on the principle of balance of power among sovereign nations and had its essence in the balance of fear. The principle of balance of power is colourfully described by one of the greatest diplomatic minds of our time – Henry A. Kissinger – who used this principle as a basis for his practical and theoretical diplomatic approaches: “In the West, the only examples of functioning the balance of power can be found in the city‐states of ancient Greece and in Renaissance Italy, as in the European state system created after the Peace of Westphalia in 1648. The main feature of the system was that the real situation – the existence of numerous states of approximately equal powers – understood as the principle that will govern the world order.” (Kissinger, 1994, p. 21)

Two Phases of Westphalian System and the end of Westphalian Balance of Power in the World Wars The modern Westphalian international order had two distinct phases. The first phase was the phase of powerful rulers and their states which were in the balance of power in the second half of the 17th century and almost the entire 18th century. This phase lasted until the French Revolution. The second phase started with the French Revolution and the Napoleonic wars and was characterized by frequent multilateral congresses, where great powers resolved all open issues and problems in interstate and diplomatic relations with multilateral agreements with multilateral negotiations, as a permanent diplomatic practice. The peak of this second phase were the Vienna (1814/1815) and the Berlin Congresses (1878), which were

214 ingeniously conducted by two of the most talented diplomats of the 19th century – the Austrian Prince Klemens von Metternich, i.e. the Prussian Prince Otto von Bismarck, who re‐established the old “Westphalian” balance of power between great powers and balanced division of interest spheres between the great powers (what was previously disturbed by the French Revolution) during the largest part of the 19th century. Thus, from the end of the Napoleonic wars and the Vienna Congress, the nineteenth century will be a century of relative stability in the international order, established by Metternich in the first, i.e. Bismarck in the second half of this century. However, at the end of the 19th century, after the fall of Bismarck and his moderate politics, the balance of power between the great powers will be dissolved, which will give rise to world wars in the first half of the 20th century. The end of the nineteenth‐century balance of power established by Metternich and Bismarck was the announcement of a bloody 20th century marked by world wars as a frontal collision of the great powers: “Yet by the end of the nineteenth century, the European balance‐of‐power system returned to the principles of power politics and in a far more forgiving environment.” (Kissinger, 1994, p.22). So‐called “power politics” will lead to new wars in Europe and the world, with which, for some time, the Westphalian principle of balance of power in international and diplomatic relations was deconstructed. The world was, only after the end of the world wars, ready for a new agreement by which the great powers will establish a new “Westphalian” balance of power for the 20th century. This was done at the Yalta summit, which established for half of a century “cold‐war” balance of power between the then dominant great powers.

The World after World War II and 3 Phases of Post‐war International Order After WWII international order went through 3 phases: (1) from the end of WWII until the fall of the Berlin wall – phase of cold war balance of power between two world super powers – the U.S.A and the U.S.S.R. (2) from the fall of the Berlin wall until the Global financial crisis – the attempt to create a unipolar world order with supremation of the one and only super power – the U.S.A.

215 (3) after the Global financial crisis and especially after the crisis in the European Union (Brexit, economic antagonism between north and south, etc.) and the crisis in the U.S.A. (crisis after the election of Donald Trump as U.S. president with the disputed legitimacy of the new president as with no president before) we entered into a new situation in which no single (super)power can rule the world alone giving rise to the question of establishing a new balance of power between the great powers of our time such as the U.S., China, Russia, the UK, etc. in the new multipolar world. Our paper set a thesis that this new multipolar world can find a model in the old European Westphalian (early modern) system with its balance between the great powers, based on the three previously mentioned principles (rex est imperator in regno suo, cujus regio, ejus religio, statera virtutis) which basically consists of the division of spheres of interest with obligation of every great power not to intervene in the sphere of interest of other powers. So the thesis of our paper is that sooner or later the great powers of our time (the U.S., China, Russia, the UK, etc.) will establish „a new Yalta Conference“ (or series of conferences) as “a new deal“ for international order for the 21st century and that international order could use some models of the old Westphalian international system, especially the model of balance of power (statera virtutis), but in the new context. However, let us go back to the original Yalta Conference and let us take a look at a specific dialectic of the “world order“ after WWII – from the Yalta Conference to present day.

The Yalta Conference and the Division of Spheres of Interest after World War II – Bipolar International System of the Cold War With the beginning of World War II the anti‐Hitler coalition was formed with the leaders of three anti‐Nazi great powers of that time: the U.S.A., the U. K. and the U.S.S.R. with their leaders: Roosevelt, Churchill and Stalin, who all together constituted specific “diplomacy at the top”. The peak of this “diplomacy at the top” was the Yalta Conference held from 4th to 11th February 1945, in Crimea. The Yalta Conference between Roosevelt, Churchill and Stalin resulted in the division of spheres of interest – not only in the European continent but in the whole world – and led to the formation of the United Nations with its Security Council as a “permanent conference”

216 of winning the great powers who established predictable rules in international relations. On a political plane, the three leaders at Yalta Conference divided the world into two big spheres of interest – the western (the United States, the UK and their strategic allies in NATO alliance) and the eastern (the USSR and its strategic allies gathered later in the Warsaw Pact alliance). Strong antagonism existed between these two blocks during the whole time of the Cold War but at the same time balanced diplomacy also existed with a general respect to the “deal” from the Yalta Conference. The cold war between these blocks was quite cold, during most of the time really cold (with many diplomatic and security crises but without a big and direct armed conflict between the two super‐powers) and at that time the world was in (nuclear) balance of power as (nuclear) balance of fear. Thus began the era of so‐called nuclear diplomacy which controlled and managed all crises between the blocks as well as the biggest Cuban Missile Crisis, which lasted 14 days, from 14 to 28 October 1962. Thanks to the engagement of the best diplomats from both sides and especially the so‐called discreet diplomacy, it was peacefully ended and the global peace was secured, despite smaller incidents, during the whole era of the cold war.

217 Table 1. Incidents of near nuclear use Date Incident States involved Cause Operation October 1962 Soviet Union Miscommunication Anadyr Cuban missile Conflict escalation Cuban 27 October 1962 United States crisis missile crisis Conflict escalation and 27 October 1962 Black Saturday United States miscommunication Penkovsky false 22 November 1962 Soviet Union Espionage warning October 1973 1973 Arab–Israeli war Israel Conflict escalation Exercise scenario tape NORAD: Exercise 9 November 1979 United States causes nuclear alert for tape mistaken reality NORAD: Faulty 3 June 1980 United States Faulty computer chip computer chip 25 September 1983 Serpukhov‐15 Soviet Union Technical error 7–11 November Soviet Union, Misperception of military Able Archer‐83 1983 exercise United States training Loss of command and 18–21 August 1991 Failed coup Soviet Union control structure Black Brant Mistaken identity of 25 January 1995 Russia scare research rocket launch Source: Patricia M. Lewis, Heather Williams, Benoît Pelopidas, Sasan Aghlani, Too Close for Comfort Cases of Near Nuclear Use and Options for Policy, The Royal Institute of International Affairs, London, 2014, pp.VI.

The End of the Cold War and Moving towards a Unipolar World with Domination of the U.S.A. as the One and Only Super‐power The end of the twentieth century, among other important historical events, is marked by the demolition of the Berlin Wall and the end of communism2 as the opposed ideological system to the capitalist system and

2 The fall of communism has been announced and “celebrated” by Zbigniew Brzezinski (Brzezinski, 1989).

218 a key‐idea for legitimacy of the U.S.S.R. world power. With the fall of communism the bipolar international system slowly began to slip toward a unipolar one – led by the only remaining super‐force – the U.S.A. Disintegration of the bipolar international system began when Mihail Sergejevich Gorbachov came to power in the USSR in 1985. Since then, several “summits on the top” between the U.S.S.R. and U.S.A. have been held and on these summits the space for the power of the communist bloc had been reduced, finally resulting in the replacement of the bipolar international system with two super‐powers with the unipolar international system, with the U.S.A. as the one and only super‐power. For example, the summit meeting of two presidents, Reagan (U.S.A.) and Gorbachev (U.S.S.R.) in Reykjavik (11‐12 October 1986.) ended without concrete results, but resulted in the Agreement on nuclear disarmament, which planned to be a specific contribution of their planned foreign policy of detente. But after a few years, at the meeting in Malta, this process ended in the real collapse of the Cold War era of bipolarity3 as era of balance of power. At the summit in Malta and by the signatures of the two aforementioned presidents, the final end of the bipolar “cold war international order” was marked on December 3, 1989. A few years after this, in his famous speech, which was held on November 9, 1991 in the House Chamber (The House of Representatives) on Capitol Hill in Washington, George Herbert Walker Bush, US President, in a live broadcast of the national television and radio, openly mentioned that Americans together with Arabs, Europeans, Asians and Africans were working on achieving the “principle and the dream of a new world order.” (Bush, internet resources, 2014.) It was an open announcement of an attempt to constitute so‐called “the new world order” with the political, military and cultural dominance of only one surviving super‐power – The United States of America. After political and military suprematism of the U.S.A. in international relations during the nineties of the 20th century, at the beginning of the new millennium, Zbigniew Brzezinski especially highlighted the importance of American cultural dominance as an element of full American global dominance, as dominance that do not have rivals or historical comparisons: “The level of American cultural dominance itself has

3 The famous British historian Eric Hobsbawm believes that the Cold War ended in Reykjavik and Washington: “Practically the Cold War ended with the two summits in Reykjavik (1986) and Washington (1987).” (Hobsbawm, 2002, p. 191)

219 neither rivals or historical comparisons, nor there is a rival in sight. Moreover, as the world is becoming more urbanized, as humanity becomes increasingly interdependent and interactive, and that more traditional and predominantly rural parts of the world are becoming smaller and softer, the American cultural dominance is becoming more and more stronger” (Brzezinski, 2004.). At the time he wrote this, Brzezinski saw the USA as the only country in the world in the role of a global leader with no rivals, not only in that time, but in the entire history. On the other side, some strategists as, for example, Joseph Nye (and Henry Kissinger as well) warned officials of the United States that “our desire to go alone may ultimately weaken us” (Nye, 2004, p 11.). In that context, the next question is inevitable: what was the essence of Nye’s previous warnings to officials of the United States? The answer could be in Nye’s following statement: “Modern information and its accompanying sign, globalization transforms and reduces our world. At the beginning of this new century, these two forces have increased American power, including our ability to influence others through our attractive or ‘soft’ power. But over time, the technology will spread to other countries and people, and our relative superiority will be reduced” (Nye, 2004, p 11.). The previous words sound prophetic because at the end of the second decade of the 21st century, we found ourselves in a changed, dynamic world, which is increasingly difficult to manage from one centre and which is aspiring to multipolarity. So the main question of our time is the question of a new balance of power as a key principle in creating a balanced international order for the 21st century.

The Quest for a New Balance of Power in the Multipolar World of the 21st Century and for a Balanced International Order for the 21st Century The previous prophetic statement of Joseph Nye enry Hon the decline of American power (reflected on so‐called “soft power, Nye, 2005, Melissen, 2005.), as opposed to previously mentioned findings of Zbigniew Brzezinski, became especially valid with the marching of global financial crisis in 2007/2008. A visible crisis of liberal international order (which is dominant from the fall of the Berlin Wall) began just with the global financial crisis in 2007/2008 and culminated with the election of Donald Trump for U.S. president a decade after. If Donald Trump’s key cry is to “make America great

220 again”, that means nothing else but that in the meantime America had become “smaller” – in the sense of world power. This is in fact recognition that we live in a multipolar world in which the great powers will need to make new arrangements with each other and find new (in fact the old) balance of power as always in the history of international relations. The thesis of our paper is that the best model for the new‐old balance of power in international relations for the 21st century is the old European Westphalian system of sovereign states which was at the peak in the 18th and the 19th centuries as we previously described in our paper.

The Creation of the International Order for the 21st Century as a Return to Early Modern Westphalian Balance of Power Our previous thesis is quite similar to the thesis of Henry A. Kissinger who also viewed the Westphalian system of sovereign states as the best model for international relations in the 21st century and for what he calls “international order in the twenty‐first century”. Kissinger said: “The international order in the twenty‐first century will be marked by something that at first glance seems contradictory: on the one hand there will be fragmentation, on the other increasing of globalization. At the level of inter‐ state relations, the new order will be more like the European system of the states from the eighteenth and nineteenth centuries, but the rigid structures of the Cold War” (Kissinger, 1994, p. 10). Our interpretation of the quoted Kissinger’s words is that he thinks that the great powers of our time (the U.S., China, Russia, the UK, etc., with no single super‐power) should establish a new (old) balance of power in international relations, just as was the case in the old European Westphalian system. Therefore, our thesis with which we go a step further into the future than Kissinger is that the great powers of our time (the US, China, Russia, the UK, etc.) will sooner or later initiate the “New Yalta” as “New Deal” for balanced international relations in the 21st century. At this moment we cannot say whether this will happen after more intense global conflicts between the great powers or things will not go so far and a new global stability arrangement will be found without escalating significant global conflicts between the great powers, which would certainly be better for entire humanity. This is out of reach of our knowledge and the only thing that we can say at this moment is that the new global stability arrangement will sooner or later be found at some “New Yalta”, as always in the past, but

221 we do not know whether it will be preceded by significant conflicts between the great powers (as in the past) or not. So we think that the continuation of the 21st century will be sooner or later characterized with the return of “diplomacy at the top” between leaders of the great powers of our time, just as was the case at the time of the previous Yalta Conference. That means that our century will be characterized by intensive multi‐polar diplomacy between the great powers as a specific return to classic diplomacy and to classic Realpolitik of the old Westphalian system. However, we hope that all of this will be in service of global stability and global balance of power because “at the same time, international relations for the first time have truly become global. Communications are current; world economy operates simultaneously on all continents” (Kissinger, 1994, p.10). This means that many of the problems that have emerged in contemporary international relations (nuclear proliferation, environmental and climate change and environmental protection, demographic growth and economic development) can be resolved only at the global level with the help of permanent communication between the great powers. On the other side, the “great powers” are not only in the game because the sign of our century is the significant increase in the number of subjects of public international law, with all its flaws and shortcomings. This is especially true for the new states and the newly formed international organizations, which has led to an increase of not only international contacts, but also to the need to strengthen the diplomatic service in the world as such. In our time the world is the net of different international players with different interests just as it was at the time of the old European Westphalian system of sovereign states, which for this reason can be a model for the international system of the 21st century as mentioned by Dr. Kissinger and which also presents the main thesis of our paper. In the multipolar world of the 21st century our country, Serbia, has a chance to improve its position of political and military neutrality4, escaping from being involved in every big (and for Serbia unnecessary) international political crisis – and stay open for good relations with all main great powers of our time. Small countries like Serbia do not have the luxury to participate in major world crises and to declare some rigid, radical, attitude on main strategic groupings in the world, and it is best for them, if possible, to remain neutral. Even the

4 Research on the long‐term sustainability of Serbia’s political and military neutrality is in Cvetićanin, 2015.

222 European Union and Europe as a continent can be in the new multipolar world of the 21st century “Big Switzerland” – a territory for the meeting of the great powers of our time – primarily the U.S., China and Russia as political and geostrategic giants in relation to the European Union, which, however, has great moral credibility as the birthplace of classical diplomatic systems, such as the Westphalian one. In these sense initiatives such as, for example, the Chinese initiative for the “New Silk Road” (One Belt One Road Initiative) could be useful not only for China, but for Europe and Serbia and for balancing world politics as such. This new (silk) road between two continents could be an introduction to the multipolar world of the 21st century in which continents and the great powers need to communicate and balance in every sense – economically, politically and diplomatically. In this case, we would live in a balanced multipolar world of the 21st century just as was the case in the old European stable Westphalian system of sovereign states. Otherwise, we could live in a hell of mutual conflict between the great powers that could turn the whole 21st century into a postmodern global hell, which is neither in the interest of the great powers (because a mess in international relations cannot be in the interest of the great powers) or finally in the interest of humanity as a whole.

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225 CONFRONTATION OF THE GREAT POWERS ALONG THE SILK ROAD

Boris MIJOVIĆ Assistant Professor, Faculty of Business Economics, Bar, Montenegro Filip TURČINOVIĆ Professor, Faculty of Law and Business University “Union Nikola Tesla”, Belgrade, Serbia1

Abstract: It would be reasonable that in international relations determined by the international order, especially with the United States and China among the main agents, there was a kind of balance of power present. It would be so much more reasonable to expect if it was based on cooperation and mutual understanding. Having that direction in their minds, the leaders of both the United States and China not so long ago came to a standing that it was necessary to establish a strategic partnership in the Pacific, since it would be the best way to preserve the balance of power and control any threats of military interventions. There were various statements made by leaders of the two countries, as well as by leaders of the other countries ‐ the main agents of the contemporary international community, but they have not resulted in desirable shifts in the positive direction, probably because none of these countries are able to act as absolutely superior and dominant anymore. It is, therefore, not surprising that the incentive of Mr. Xi Jinping, the President of China, on “One Belt and One Road” has been perceived with special attention and interest. Key words: initiative, international order, strategic partnership, balance of power, global agents.

INTRODUCTION

Confrontation of the great powers on the ‘’Silk Road’’ is multiplex and qualitatively heterogeneous. Relations between Russia and China are seemingly stable but it could not be said that they do not contain special dynamic of the contradictories of different causes of genesis. Several

1 E‐mails: boris_mijović@yahoo.com, [email protected]

226 distinguished sinologists emphasize certain advantages which China enjoys in relations with Russia. So, it is often pointed out to unusual reactions in the form of the absence of professing to the Chinese initiative ‘’One Belt, One Road’’ which affects states and territories of great significance for total strategic‐political interests of Russia.2 The truth emphasizes that Russia is not a great agent on the scene of economic relations what indispensably diminishes its significance as a global agent. The newest crises on the Korean peninsula shows the global significance of the role of China in those problems and its clear and unambiguous statement, that in case of unilateral guided action toward North Korea by the side of the USA, it will consider such type of arrangement as a violation of its interests. Furthermore, the regime in Pyongyang skilfully uses existing confrontations in the foreign political interests of the USA and China. The questions of Taiwan and construction of the islands in the Southern Chinese Sea have been opened, as well as the necessity of containment of global initiatives and expansion of China, which encroach deeply into the spheres of influence not only of Russia but also of the USA. Therefore, the new strategic directions of events can be marked by confrontations of these two states regardless that the USA, for the time being, relatively successfully restrain their global expansion. In world proportions, although the further direction of the development of Chinese foreign policy is unpredictable, it cannot be waived off the significance of the stability of China for comprehensive relations in the international community. Chinese initiatives in the area of investments are quite acceptable for numerous states and thus for the European Union. It would certainly bring to the increase in the number of employed persons in these states if the case is that the domestic workers are being employed and that there is a possibility of control of the characters of those investments by the side of domicile state. Specifics of the internal order and foreign politics activities of China could be expressed as the most long‐lived ones and quite clearly expressed and defined during the long period in the past, but at least connected with the international Order of Westfall. Such position of China could not be regularly assessed if it is understood in simplified terms because it has a compact and very rich internal dynamics and principles on which it is based on. Only recently, the intensive participation of China has

2 Keri Braun, professor of Chinese studies at King’s college in London, Politika, Belgrade 30th April, 1, May 2, 2017.

227 been noticed in the mechanisms of balance of powers in international order, although it is a matter of the system which unfortunately has not yet possessed an elaborated efficient mechanism of preserving peace. In that direction, a question is often raised if the transpacific partnership is a real answer or there is a matter of momentous redistribution of forces.3 Hinduism, where a conception of the cycles of history and metaphysic reality which go beyond the secular experience are valid, has treated its world of religion as a complete system which is not opened for new solutions, both through conquering or checking of any kind of such conversion.4 China after its unification in 221 BC and until the 20th century has considered itself as the unique sovereign authority in the whole world. It considered its tsar as a cosmic greatness, the only connection between the divine and human world. The tsar was a sovereign on the top of the world’s universal hierarchy, and by no means the factor of balance between sovereign and equal states. There was not a system of maintenance of diplomatic relations in the modern sense. It was rather a mechanism of ceremonies and rituals in rare occasions of direct contacts with strangers. The institutional frame was not in the form of Ministries, but those affairs were conducted by the Office for management of affairs of all countries’’. The tsar’s supreme authority was emphasized because during the ritual called ‘’koutou’’ it was compulsory for the foreigners to bow by touching the floor with their heads. Later, that was shown as the disturbance in mutual relations, particularly with western states. Therefore, China applied strictly psychological pressure in order to achieve its strategic goal at least to promote hostile countries even at the expense of relatively amicable ones. It did not waive from such type of pressure either during armed conflicts, for example, in wars with India and Vietnam in 1962 and 1979. It was a specific situation when they were conquered by the side of the Mongols in the 13th century and by the side of the people of in the 17th century. However, the conquerors by the miraculous actions of giving concessions to the numerous nations, in fact, adopted the patterns of Chinese culture which were the first and the most important condition to integrate them into the Chinese society. They were later completely assimilated. China, in meeting with the developed

3 Henry Kissinger, World order, 2015 pp. 165‐168. 4 M. Mancall, The Ching tribute system: An Interpretative essay in The Chinese Word order, 1968.

228 imperial West, has passed through a brutal battle against their expansionism persevering to defend its cultural pattern. That could, along with certain economic advantages in its region, bring it to the ’’eminent position’’. Nevertheless, that is not a new one, but the existing historical scheme. Therefore is worth to add that it is a new thing because a powerful state in the world has accepted the Westfall model, but thereby it has not forgotten the ancient bequests ’’All beneath the sky’’. The contemporary China obviously inherited the synthesis of these two approaches along with technocratic modernization.5 The People’s Republic of China was founded under the leadership of Sun Yat Sen in 1912 after the demolition of the Empire. Chiang Kai Shek set for his government as the priority task in 1928 to assume its place in the Westfall system of world order and the global economic system. Therewith he strived to achieve modernization, although the international system was, unfortunately, in serious convulsion. After the 2nd World War, China was overtaken by the revolution and civil war. Victorious Communist Party of China under the leadership of Mao Ce Tung proclaimed the founding of the People’s Republic of China. Afterwards came his effective slogan of his rulership through the doctrine of ’’constant revolution’’. Numerous conceptions of the institutional structure were attacked, as for example the Western democracy, the Soviet leadership in the communist movement and almost entire heritage of the Chinese history. He named such system the ‘’great harmony’’, although it was truly a pattern of declination from the Confucian culture. ’’One country two systems’’ is a political concept of Deng Xiaoping, but it is in fact, as he called it, the socialism in the Chinese manner. Besides acceding of Hong Kong to the mother country, China has ascended to the second place in the world economy. In order to achieve that, it had to accept the rules of the world order. That process in China itself did not go without resistance, particularly because it did not participate in creating those rules and it had to waive from traditional notions of its greatness. Nevertheless, the wise decision prevailed that it was necessary to comply with these rules and eventually, when a chance arises, to work on their reorganization and revision.

5 R. Rosecrance, The Resurgence of the west: How a Transatlantic Union Can Prevent War and Restore the United States and Europe, 2013.

229 ONE BELT ONE WAY

The global initiative ”One Belt, One Road” was launched almost four years ago and it already gives certain results in economic growth. This initiative was launched by the Chinese government headed by President Si Ji Ping. In fact, it is the matter of economic belt so‐called ‘’Silk Road’’, which connects China and Europe by land corridors through Western and Central Asia. Additionally the ’’Maritime Silk Road’’ connects Africa, Europe and South‐East Asia with China.6 The initiative has a long‐term developing dimension which provides real profit even in a short‐term projection. In order to achieve this, it was necessary to provide economic corridors and the infrastructural base. In that direction, the construction of the first highway started in Mongolia in May 2016. This was assessed from the political elite of that country as the turning point in the development of its infrastructure, especially having in mind that it would connect the capital city and the international airport in the Hushit valley in the Tuv province. Mongolia is the state which borders with Russia and China. Its orientation is to improve through the plan ’’Steppe road’’ the quality of infrastructure for the purpose of increasing economic growth, because it is indisputable that the cross‐border traffic would be very desirable within the frame of economic corridor China ‐ Mongolia – Russia as a necessary part of the afore‐ indicated initiative. This corridor is one of six main corridors within the frame of that initiative. China, Russia and Mongolia signed in July 2015 the Memorandum of Understanding regarding construction of the corridor among mentioned countries. Afterwards, already in September 2016, China announced the draft of the first plan on multilateral cooperation. The works on the economic corridor of the highway Karakoram between Pakistan and China officially started in April 2016. Immediately after that, the fast construction of the biggest transport infrastructural project within the frame of this corridor started in the month of May. The construction of the branch of the highway M4 which connects Shorkot and Kaneval in the province of Punjab started in August. This project is financed by the side of the Asian

6 See more complete on confronted interests of China, Indonesia, Philippines, Vietnam, Malesia and Brunei but also the other main agents of international community in the article of Dusko Dimitrijevic: “Disputes in South China Sea and International Law, Legal life (Pravni život), number 12/2016, pp. 151‐166.

230 Infrastructure and Investments Bank, which is supported by China financially and structurally. The Pakistan Prime Minister Nawaz Sharif stated several times that the economic corridor between China and Pakistan represented an irreplaceable benefit for three billion people in China, Central and South Asia and partially in the Middle East.

ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB)

The Asian Infrastructure Investment Bank in the year of founding (2013) had 57 members and seven states which should become lawful members in the near future. It is the first Asian bank independent from the Bretton Woods institutions (the International Monetary Fund and the World Bank). The following states are considered the leading founders: China, India, Malesia, Indonesia, Singapore, Saudi Arabia, Brunei, Myanmar, Philippines, Pakistan, Great Britain, , Brazil, France, Germany and Spain. The seat of the institution is located in Beijing. According to starting plans, the initial capital of 50 billion USA dollars is recorded with a tendency to reach 100 billion in the most recent times after the founding. The USA and Japan, as the most powerful economies, have not applied for admission. As soon as Xiaoping announced the initiative for the founding of the bank, the American President Obama expressed doubt in the transparent managing and assumed the potential conflicts with existing institutions, especially with the Asian bank for development in Manila. Additionally, the AIIB is seen as the competitor to the world financial institutions, although Christin Laggard has stated that she is satisfied with that bank. Donald Trump, the American president has designated, as his priority, that he will invest a trillion of dollars in order to raise the US economy and make it powerful. According to some Chinese officials, the American president would achieve his dream if he accedes to the AIIB, in other words to the initiative ’’One Belt, One Road’’, because in order to provide a trillion of dollars he needs ten years to find real sources for that investment. We should take into consideration that the USA debt is amounting to 20 trillion, which is 106% of their GDP, as well as the fact that the 60% is the upper limit of indebtedness. If the Congress approves accession to the AIIB, China would unlock the debt and allow the free flow of private capital from China, which would fit with the Trump’s

231 priorities and dreams of restoring of power and the grandness of the USA economy.7

MARITIME SILK ROAD

The key event of the Maritime Silk Road happened on 10th August 2016 when the Chinese company KOSCO bought the majority package of shares of the Port of Piraeus. This has put the Port of Piraeus at the 39th place in the whole world, which is a very dynamic and big progress considering that in 2010 it was in the 93rd place. Except for geographically favourable position, the initiative ’’One Belt, One Road’’ has obviously contributed to the most of that. Many experts predict that Piraeus will become the European maritime junction for the ’’Silk Road’’ in the 21st century, that it will connect the economic belt of the Silk Road and become the fast line for connecting the lands and seas between China and Europe, which should provide the economic growth for the whole region.8

COOPERATION WITH ASEAN

The 13th Summit of the countries of the Association of Southeast Asian Nations (ASEAN) was held last year in the Chinese autonomous region Guanxi. The basic goal of the Summit was to promote the Maritime Silk Road and to create conditions for a greater and closer cooperation. At that summit participated 2600 companies from 29 countries. Actually, that was the 25th anniversary of the cooperation between China and ASEAN. Trade between China and ASEAN in 2015 amounted 472 billion dollars. It is a great growth if we compare it with 1991 when it was less than 8 billion dollars.9 The growth of all forms of cooperation is recorded, which is confirmed by the fact that the semi‐annual investments in 2016 is amounting more than 165 billion

7 South China Morning Post 29th May 2017. 8 Internet: www.newsweek.rs. Visit the site on 25th May 2017. Company paid the majority package of 368,5 million Euro. Additionally it promised that it will invest 350 million Euro in next five years. 9 Internet: https://sv.wikipedija.org/wiki/asean/ Visit to the site on 23rd May 2017.

232 dollars. China is the biggest trade partner of ASEAN. Political elites in the countries of ASEAN state that the initiative “One Belt, One Road’’ will accelerate the development of all types of economic‐political relations and create great possibilities for all countries which participate in this type of cooperation. In May 2017, the Chinese president Si Xiaoping promised 124 billion dollars in order to create a road of peace, inclusivity and free trade and called for abandoning of the ‘’old models based on the rivalry and diplomatic games’’. With this road, a ’’platform of cooperation could be created and greater openness of the world economy would be achieved’’. Regarding this, there were also dissonant tones mostly at the margins of the Summit. So, in that way, Germany warned that it would not sign the joint statement if the planned agreement did not encompass guarantees on free trade and fair competition. According to the opinion of German officials, it is necessary to provide a greater transparency on projects and tenders of the initiative along with the respect for the adopted international standards. Besides, there were also comments regarding the Plan and Summit, stating that they were also an attempt of China to increase its influence at the global level. On the other side, the Great Britain represented a point of view that this country is a natural partner to the programme of the ‘’Silk Road’’. Among the participants of the Summit, there was also a delegation of North Korea. The USA protested because they considered that the summit dedicated to the peace and prosperity was not a place for the representatives of the totalitarian and nondemocratic regime in Pyongyang. On the other side India, as the old rival of China, upholds the thesis that the programme ’’One Belt, One Road’’ will put certain Asian countries into enormous debts and make them lose their sovereignty because the mentioned programme is nothing else than a new colonialism. Through this programme, the economic and political domination is encouraged. These statements of the critics of the ‘’Silk Road’’ were rejected by the domestic journalists, calling them ’’collectors of fear’’ and ’’vultures’’. Regarding that, the Chinese officials emphasized that this programme and model of globalization could bring benefit and spread the freedom of trade and remove the causes of poverty. It is often considered that the USA does not leave many chances for this issues to be repaired. The fact that the level of direct foreign investments dropped for 13% confirms, at least, partially that judgment. The Asian bank for development assessed that the countries encompassed with the programme would need 2 billion dollars in order to construct the infrastructure for the maintenance of economic growth and

233 mitigation of the consequences of poverty. Regarding this, there are different evaluations. According to some data from the USA, China will provide four billion dollars for development of 65 countries in which 70% of world population live and where the one‐third of world GDP is created. Indian officials reject those evaluations stating that the amount of around 50 billion has been invested so far. This was the reason that the Indian Prime Minister Narendra Modi did not participate in the Summit, stating that this initiative was ’’nothing more than a colonialist undertaking which would leave behind debts and destroy local communities’’ and those countries will be pushed into a deeper misery and crises. Unfortunately, as the Indian media observe using the rhetoric of the western critics of globalisation, the foreign owners of capital will become richer because the markets in these countries have been carelessly opened for them. Continuing in that style, they declare an objection of non‐transparency, because they do not see the intention for the international tenders to be publicly announced, which will unavoidably stop the development of domestic companies in the participating countries represented at the Summit. Except above‐mentioned, they often raise arguments on creating the ecologic damage and the loss of sovereignty. Also, the arguments are presented that China is known for protectionism. However, the poor countries cannot refuse participation in the programme of the ’’Silk Road’’ because a great number of them is in the commercial sense dependent on the Chinese investments. Russia, a big state which economy shows certain signs of weakness does not hide that it wishes to participate in investment projects and programmes from the Chinese initiative.

COOPERATION OF SERBIA WITH AIIB

According to the newspaper reports, Serbian officials signed at the Summit in Beijing several pre‐contracts regarding the construction of the highway from Preljine to Pozega. It is expected that the contract will be signed in November this year with the firm ‘’China communication contraction’’ and ‘’China road and bridge corporation’’. That contract will be signed within the frame of the Group 16+1, which takes place in Budapest at the level of the leaders of 16 states and China. The value of construction of the whole section is estimated to be 2 billion dollars. Additionally, the Memorandum on construction of fast communication from Novi Sad to

234 Ruma with a value of about 500 million USA dollars was signed. According to data of the National Bank of Serbia, the total investments since 2014 have been increased to 158 million dollars until the middle of 2016. The highway Surcin ‐ Obrenovac with the total length of 17.6 kilometres was started on the 1st of March, and it should be finished in the middle of 2019. It is significant that domestic contractors perform 49% of works. Such proportion is on the highway Lajkovac – Ljig and Obrenovac – Ub with the total length of 50 kilometres. Beside road network, the second phase of modernisation of the Thermal power plant ’’Kostolac’’ is being constructed. The value of contracted works is 715 million dollars. A loan was taken from the Chinese Exim Bank, amounting approximately 610 million dollars, and the second smaller part is provided from the Electric Power Industry of Serbia. The Chinese corporation CMEC worked also on the first phase for the purpose of renewing and reducing the quantity of sulphur emission from existing blocks of Kostolac B. The loan taken from the Exim Bank amounted approximately 300 million dollars. It is significant that the sale of the RTB Bor was discussed at the Summit and that in this business a substantial assistance is offered by the side of the Republic of Serbia in order to provide industrial progress of the eastern Serbia. Additionally, there were discussions regarding the problem of ‘’Ikarbus’’ and some Chinese companies expressed their interest. During the meeting of the prime ministers of Serbia and China, Aleksandar Vucic and Li Keqiang in Beijing on 16th May 2017, the Loan Agreement was signed with the Chinese bank for the financing of the projects of reconstruction and modernization of the railway Belgrade‐Stara Pazova. The Annex 3 to the Agreement on economic and technical cooperation in the area of infrastructure, as well as the Memorandum on establishing the action plan for trade and investments in agriculture, were also signed. That loan is amounting to approximately 300 million dollars and it is of preferential character.10 It is especially significant that the cooperation and exchange in agriculture will be improved. The two delegations signed The Memorandum on establishing the action plan for trade and investments in agriculture. Our farmers will be able to export unlimited quantities of corn, prunes, and slices of beet and lamb meat. The agreement on conditions for export of beef, pork and milk products should be signed by the end of the

10 Daily newspaper „Politika“ Belgrade of 14th May 2017.

235 year. The Agreement on strategic partnership for the development of information and communication infrastructure in educational institutions was signed with the company ‘’Huawei’’.11

OBOR VISION

According to the OBOR vision, there are six corridors on the Silk Road, namely: 1) Western China – Western Russia; 2) China – Mongolia – Russia; 3) Northern China – Eastern Russia; 4) China—Central Asia, so‐called West Asia corridor from Western China to Turkey; 5) China –Indochina to Singapore; China – Pakistan, corridor from Southwest China to Pakistan; 6) Bangladesh‐China‐India, Myanmar corridor from South China to India; The Maritime Silk Road encompasses the area from the Chinese coast, Singapore, India to the Mediterranean Sea. 68 countries from Asia, Europe, and Eastern Africa are involved.12 In 2013, Chinese President Xi Jinping promoted a modern equivalent to the ancient Silk Road which would consist of multifarious networks of railways, roads, pipelines and all useful business connections which would connect China and Central Asia, Western Asia and part of the Sothern Asia. The initiative ‘’One Belt, One Road’’ (OBOR) is, according to many opinions, much more than a physical connection. It is the matter of an intention to create maybe the biggest Platform for economic cooperation, including political coordination, trade, and financial, social and cultural cooperation through the achievement of numerous benefits which are expected for all participants. The State Council of China adopted this initiative and the Action plan for 2015 with two main components, namely: the Silk Road Economic Belt and the Maritime Silk

11 Daily newspaper „Politika“ Belgrade of 15th May 2017. 12 Internet: https://en.wikipedia.org/wiki/belt_and_Road_Initiative Visit to the site on 22nd May.

236 Road. The first one connects three routes by land, namely: China and Europe, the Persian Gulf, the Mediterranean Sea and the Indian Ocean. The second one should connect regional waterways. More than sixty countries with GDP of 21 trillion USA dollars participate in this initiative. At the beginning, it brought some significant achievements. First, the bilateral agreement was signed with Hungary, Mongolia, Russia, Tajikistan and Turkey. Apart from that, the agreement on construction of the railway between eastern China and Iran was also signed, which should in perspective become a bridge for expansion toward Europe. New railways with Laos and Thailand are planned, as well as the fast railways with Indonesia. The first steps were made on the institutionalisation of cooperation between China and the Middle East and states from the basin of the Mediterranean Sea. Over two hundred enterprises which signed agreements on cooperation for the projects within the OBOR frame are the proof of above‐stated. In 2014, China formed the Fund for the Silk Road with 40 billion USA dollars for investments and for several key projects. Thereby it expresses the conviction that the benefits from cooperation can forward the strengthening of friendships among the states and people participants in the initiative. The possibilities of achieving significant benefits for all the participating parties, including the ecologic management and cultural cooperation, point out to that. In all indicated areas, there are numerous comparative advantages. In that way, China would put billion dollars into investments in the states which gravitate to the Old Silk Road connecting it with Europe. This is a grandiose project in which China would invest annually around 150 billion dollars into 68 states. The Summit which was already completed in Beijing is, without a doubt, the most attractive event in China after the Olympic Games held in 2008. Several leaders of European states participated at the Summit. However, it was not a sufficient number. The majority of the states of European Union ignored the meeting in Beijing. In connection with that, the question is raised what implications it has for the entire event. In a political sense, there are some assessments clearly expressed in the official attitudes of some EU states that this is a break up with the policy established by Deng Xiaoping. He persevered to carry out the foreign policy of hiding all relevant capacities of the state, waiting for its time and never in the position of a leader.13 In some American publications, we can find an acronym BARF which hallmarks the

13 A. I. Brunet, J.P. Guiscard, Economic Imperialism, Hegemonic strives of China, pp. 12, etc.

237 summit held in Beijing, with the remaining allusion of the maxim ’’a cuckoo in the nest’’. According to that allegations, it was also said that this was a matter of protectionism, which was also discussed at the Forum in Davos in January 2014. On the other side, in China in the same year, Xi Jinping said that it was a matter of very important foreign policy decision. Its goal is the creation of Euro‐Asia for which the critics say that it would be under the domination of China in order to create conditions for economic and trade rivalry with Transatlantic and Transpacific groups which are dominated by the USA. These are primarily critical observations based on strategic imperatives. Beside them, there are also those that are considered as various variants of expressed scepticism on coherency and practical value of the entire order. Xi Jinping believes that he will find a suitable ground for investing of his very large foreign currency reserves, contrary from what the USA security services think and evaluate. He also thinks that he will successfully create new markets for Chinese companies, for example, those ones that deal with fast railways, production of cement, steel and other metals. Investment into the unstable states of Central Asia would create a stable neighbourhood for the Chinese disobedient provinces Xinjiang and Tibet. Additionally, the participation in the projects in the regions which gravitate toward the South China Sea, in other words, connecting the land with the Maritime Road as the part of the cited project would be encouraged.14 The situation in the South China Sea is not quite clear. Confronted interests are visible also in various arbitrage and judicial disputes. The Chinese side considers that the USA policy is the source of instability in the South China Sea. However, problem is that some of these ambitions are contradictory. The question is hereby raised if these projects, which have been treated as a skilled invention, are better than those organized under the protection and with the support of the USA Government. Both of them can be interesting, but if the interests are conflict‐provoking then they would lose plenty of their attractiveness. However, there were also the internal conflicts because different Chinese institutions have not always had the same interests and they started from different positions. For example, the Ministry of Industry, the Ministry of Foreign Affairs have not always had identical attitudes in this area. Also, the Commissions for planning in provinces sometimes expose their own views which are opposite to the opinions of

14 D. Dimitrijević, op.cit. pp. 163, etc.

238 the cited Ministries.15 The matter seems to be more difficult, especially when it is difficult to identify a profitable project in certain participating states. Some Chinese businessmen who tried to run their business in these states named it ’’One Road, One Road’’ because of aggravating conditions of business operations. Therefore, there is sometimes a gap in the concluded businesses after the creation of a new authority. Thus, in Sri Lanka and Myanmar the new authorities demanded to renegotiate on certain concluded businesses because their authoritative predecessors had misused the authority. This, along with other reasons, forced the states of European Union to mainly be absent from the Summit. It is obvious that China, regardless of presented limitations, has serious reasons for the continuation of the project because, among other, this is the way to get out of economic problems it is being confronted with. However, as Xi Jinping says, China despite problems continues the work on the project ’’One Belt, One Road’’.

CONCLUSION

Confrontations between the great powers in Asia are more than evident in spite of the certain balance of power between China, the USA, Korea, Japan and even Russia and Vietnam. The good thing is that partnership and cooperation are promoted because the opposite course would inevitably lead to a confrontation that could ultimately result in warlike options. Since the military component should not, in any case, be seen as the only possibility, maybe a combination of partnership and even diplomacy could in certain extent result in the projection of peaceful coexistence, apart from an always persistent fear of hegemony of the powerful. Perceptions of the factors that have contributed to the emergence of the serious global crisis are manifold and cannot be entirely presented in this kind of the paper. It is not only about the risks that have emerged because of intolerably wrong monetary policy or numerous bad banking procedures undertaken in the named sectors in the USA, the UK and the European Union. The aftermath of China’s accession to the WTO has resulted in the constant recording of trade surpluses that have been partly conditioned by both underestimations of its own currency and skillful manipulation within the field of its action. That way it has accumulated

15 The Economist of 15th May 2017.

239 large foreign exchange currency reserves, therefore, becoming the largest creditor of the United States and the European Union. That enormous external deficit, in addition to the recession, forced the developed G7 Member States to maintain their interest rates at a low level, to discourage savings and encourage borrowings, and even to tolerate the growth of the public deficit. The consequences of such, a bit adventurous, policy have still not been perceived as a whole in practice unless they have maintained the seeming successfulness, i.e. the GDP growth. China has supported such a policy by investing huge foreign exchange reserves into the US long‐term Treasury bonds. It has also invested large foreign exchange reserves into the European Union countries` treasuries. The above stated makes clear that “the international order requires a subtle balance between restraint, power and legitimacy”. The words Napoleon stated in 1816 on island of Saint Elena were, therefore, prophetic: “When China wakes up, the world will tremble”.

BIBLIOGRAPHY

Braun K, professor of Chinese studies at Kings college in London, cited in newspaper Politika, Belgrade, 30th April, 1st and 2nd May 2017 Brunet A. and Guiscard J.P, Economic Imperialism, Hegemony aspiring of China. Daily newspaper Politika, Belgrade, 15th May 2017. Daily newspaper Politika, Belgrade,14th May 2017. Dimitrijevic, D, “Disputes in the South China Sea and International law, Legal life, number 12/2016. Internet: https://en.wikipedia.org/wiki/belt_and_Road_Initiative Internet: https://sv.wikipedija.org/wiki/asean/ Internet: www.newsweek.rs Kissinger H, World Order, 2015 Mancall, M., The Ching tribute system: An Interpretative essay in The Chinese World Order, 1968. Rosecrance, R.,The Resurgence of the West: How a Transatlantic Union Can Prevent War and Restore the United States and Europe, 2013. South China Morning Post, 29th May 2017. The Economist, magazine, GB, 15th May 2017.

240 CHINESE PRESENCE IN SOUTH EAST EUROPE AND STRATEGIC RELATIONS OF THE GREAT POWERS TO THE REGION

Miloš ŠOLAJA Professor, Faculty of Political Sciences, University of Banja Luka, Bosnia and Herzegovina1

Abstract: This paper will examine Chinese strategic presence in South East Europe since the Cold war and Chinese relations with regional countries under the shadow of international presence. Since the beginning of the last decade of the 20th century, the post‐Yugoslavia space fragmented into a few independent countries and some of them in shape of de facto states. The Balkans stabilized after a few wars between independent countries, the former Yugoslav republics, and other types of internal armed conflicts as well as international reactions, practically taking Dayton Peace Accord as a deadline for the regional peace and stability. Almost all post‐Yugoslav or other Balkan countries have been exposed to different international settlements based on the processes of Euro‐Atlantic and European Integrations. In the meantime, Russia and Turkey have been raising the strategic presence in the Balkans. In such environment, China has defined its strategic role in the region through the “Mechanism of Sixteen plus One” as a part of its global strategic project “Belt and Road”. All of these processes make the Balkans more complicated than it has ever been throughout history. Key words: region, economy, politics, international community, security, China, strategy.

INTRODUCTION

The Chinese initiative “New Silk Road” still provokes many discussions between the global and other big powers, but also between other actors in international relations. The “New Silk Road”, initiated by Chinese President Xi Jinping in 2013, is consisted of two global economy projects the “Economy

1 E_mail: [email protected]

241 Silk Belt” and the “Maritime Silk Belt”, which aim to improve and facilitate economic cooperation, trading and investments through collective arrangements instead a huge number of bilateral agreements, and to facilitate the transport of Chinese goods to Europe. This should be a fruitful combination of Chinese development productivity and infrastructure projects oriented to clearly realize the Chinese interests, primarily to connect China with Europe by transcontinental railroad networks which remind of the classic “Silk Road” at the time of Marko Polo. The “Maritime Silk Road” is innovation of the idea oriented to engage more actors from China to Europe – many states in the ‘rimland’2 which would link European ports and complete railroads such as the link port of Piraeus, Greece through Macedonia and Serbia to Budapest, Hungary or the highway Split, Croatia – Banja Luka, Bosnia and Herzegovina or direct and indirect investment in industrial assets and infrastructure projects in Serbia. China has the interest to enhance and make cheaper the accession to the energy of regional countries and on that base to increase its influence in the region of South East Europe. It is quite clear that the impact of any single country and regional policies should decrease the influence of other actors in the region. There are questions which China’s presence in the Balkans poses. It is becoming obvious that China takes account on a cooperation with Serbia and its strong economic presence in Serbia in a frame of the “Mechanism 16 + 1”, which assigns the cooperation of the Peoples Republic of China (PRK) with sixteen countries of East, Central and South East Europe and Serbia as some sort of strategic axis of the project. The second question is how strongly this project affects China –EU relations. Do they stay in a frame of sixteen mentioned countries or do they relate to the entire relations with the European Union as very important for China’s political and economy interests? The third question is how relations to three regions, particularly South East Europe, fit in relations with Russia and the United States of America and its allies. And the fourth question is what is the role of the project in China’s global policy and strategy? China enjoys a perception of the most important rising power. In the last few decades, China moved from the periphery into the focus of the international political and economic relations. China is present everywhere and achieved it almost silently – it is strongly

2 Belt of maritime and island countries or countries close to overseas.

242 linked with countries of entire Africa, and, of course, it has positioned itself as the regional Asian power. China is also more or less present in other world regions. The Chinese foreign policy is obviously characterized by harmonized, peaceful building of relations with all countries. This is a process of transfer of economy initiative in politics and consequently in security reflections of Chinese presence. “China’s investments in global security will be shaped by its own calculations of national interests no matter what the inducements of the international community.”3 Such a role has to change the security environment globally but also in eastern regional dimensions and to inflict a dilemma of inclusive balancing.4 This might be a compilation of Chinese harmonizing and peaceful approach to international politics and foreign affairs as an indispensable reflection of internal economic and political dynamism that implies huge external aspirations. Few recently substantial years, China’s is the most growing economy with the biggest GDP rise in the world. Robert Kaplan is right when he says that “China’s emerging influence on Eurasia and Africa is growing, not in the nineteenth‐century imperialistic sense but in a more subtle manner better suited to the era of globalization. Simply by securing its own needs, China is shifting the balance of power in the , and it must mightily concern the United States”.5 Regardless the western suspicions, particularly because of the fear from non‐transparency, China launched the “reform and opening” policy based on the direct Communist Party policy launched at the famous Third Plenary Session of the Eleventh Central Committee in December 1978. In the 1980s, China “invited world in” and started incrementally to draw on the world stage. The main focus in the very beginning was educational, science and technology exchanges. After the 1990s, China’s modernization has been a national pursuit of “comprehensive power”. China has been carefully studying the experiences of other great powers, including the failings and rising of their strength. Its policy is to conquer a power through spheres of economy, science, technology, education, culture, values, military, diplomacy

3 Shambaugh, David (2013) China Goes Global: The Partial Power, Oxford University Press Oxford etc p. 306. 4 Holslag Johnatan (2009), Embracing Chinese Global Security Ambitions, The Washington Quarterly, Center for Strategic and International Studies, p. 106. 5 Kaplan, Robert (2010), “The Geography of Chinese Power: How far Can Beijing reach on Land and Sea”, Foreign Affairs.

243 and other areas important for economic, political and social development. ”China grasps the idea that power is comprehensive and integrative, no atomistic”.6 China’s combination of idealistic rhetoric and constructive approach drew near some nations in Africa, Asia, South America, and later on in Europe, enhancing China’s ‘soft power’ development over time. “Public opinion polls demonstrate that China’s popularity, in fact, remains high in most developing countries, whether in Southeast Asia, Africa or Latin America, largely because of perceived economic benefits from engagement with China.”7 So, China worked out complementary concepts of spreading economic power and economy cooperation and assistance by which is recognized in the world with political concepts of ‘peaceful development’, ‘harmony’ (understanding also a concept of ‘harmonious world’), as well as ‘strategic partnerships’. Although China’s values were not well‐known worldwide and not so easy to understand, the country invested a lot of efforts in order to raise its power. Traditional cultural values based on Confucianism are considered as a fundamental contribution that has been promoting China and its values. Many Confucian centres, libraries, translations of the classic Chinese philosophy and literature, documentaries, movies and media are spreading Chinese presence as a contribution to the universal values. Additionally, “China has not only provided substantial overseas financial and infrastructural assistance but also sent its doctors and teachers abroad; funded educational opportunities in China for foreign nationals; encouraged the spread of traditional Chinese medicine; and promoted the study of Chinese language abroad (specifically simplified Chinese characters, used in more than 200 Confucius Institutes around the world”8

CHINA’S INTERNATIONAL POSITION

A question today is what kind of power China is? Is it a global or a regional power? From many aspects it is possible to observe the Chinese universal

6 Shambaugh, David (2013) China Goes Global: The Partial Power, Oxford University Press Oxford etc p. 7. 7 Pew Global Attitudes Project (2007) Global Unease with Major World Powers, June 27. 8 Bergsten, Fred; Freeman, Charles; Lardy, Nicholas R; Mitchell, Derek J (2009), China’s Rise: Challenges and Opportunities, p. 215.

244 influence and, at the same time, there are many characteristics in international relations that reflects China as a globally reduced and dominantly regional power. In the last four years, China has dramatically opened itself to the world, intending to be as much as possible integrated into the world processes. In the process of opening, China is dominantly an economic power in terms of global trade and energy but also in terms of raw material export. It started as a dwarf in terms of external investments and minimal development of multinational corporations regardless that many thought of China as a fruitful ground for business. It made China’s impact on the universal processes very limited although China has been expanding tourism, education, literature, culture, film, sports, design and fashion. Regardless, the Chinese impact based on activities in these areas is not that huge as to transform China into a global power. This clearly reflects that the potentials of China’s ‘soft power’ are not so influential comparing some western powers. In culture and generally social sphere, China was not so attractive because many project and programs of different kinds of cooperation have been developed only to impress foreign experts and tourists by China’s growth, development and achievements. More and more delegations and visitors that came to China had to be impressed as a basis for further cooperation. China has also developed the ‘strategic partnerships’ in order to define strategies of economic cooperation which are oriented on trade exchange but even more on developing strategic investments abroad. A vivid economy has been transforming China from a closed state into a global economic power with enormously high GDP, which at the time reached 9%. It ranked China as the second largest world economy after the United States of America. The strategy of economy presence in the world was very interesting. It was a very careful selection of goals and areas where China discovered its interests. Dominantly, in the areas of development of communications and other infrastructure which response with the realization of China’s goals in exports of goods, better approach to exploitation of raw materials and easier approach to energy assets. At the same time, China has exceedingly achieved the political influence based on the principles of the foreign policy defined as peaceful coexistence, cooperation with the developed world, harmonization of economic activities. Vibrant foreign activities are a huge contribution for stabilizing the internal situation in terms of improving social services and resolving elementary necessities of the population. Through industrial and financial investments

245 abroad, trading, export of technology, know‐how, joining the financial market and engagement of its own working power, China improves its presence on global markets and facilitate internal economy and social situation. On the other hand, in terms of Asian security, China established itself as a big regional power. Therefore, some analysts think that huge economic development should be followed by development in the security field. ”It is not surprising that Beijing has refocused on modernizing its armed forces to keep pace with its overall development in recent years.”9 Following that strategy of modernization, the Chinese state is increasingly capable of conducting military operations “beyond its shores or over its land borders in the Asia‐Pacific region as an unprecedented development.”10 The Chinese People Liberation Army (PLA) has become capable to sustain power in the Asia‐Pacific region and along with the Chinese economic force has enough potential to change the Asian geopolitical and geostrategic frame which was posed after the Second World War. Rising power and global economy position necessarily invoked significant changes in China’s military doctrine. Among many characteristics that have marked these shifts, the first is the emphasis of the strategy from defence to offense, i.e. a different historical approach that made China into a defence power. Another key change is the necessity to have the ability for operational pre‐emption instead to absorb operational blows, i.e. instead of focusing on the enemy’s weakest geographic sectors to focus on the enemy’s most critical capabilities. With the increasing self‐awareness of growing of military power in the world, China became inclined to be active in shaping the international system, avoiding to be purely reactive as it was in the past. Modernization of security doctrine, military strategies and PLA can project a role of military power beyond China’s borders throughout the entire Asian continent and active presence in the Asia‐Pacific region. This incipient expeditionary capability will get better at the sustaining operations along exterior lines and communications. Orientation on strategy and doctrine of developing a sophisticated, efficient and capable army for the first time will enable China to become one of the operationally most capable military forces in the region. Anyway, the Chinese military power is not completed and abandoned

9 Bergsten, Fred; Freeman, Charles; Lardy, Nicholas R; Mitchell, Derek J (2009), China’s Rise: Challenges and Opportunities p. 192. 10 Ibidem, p. 192.

246 work, it is at best a work in progress. Between the most visible acts of military strength is obviously the ground‐based missiles system which destroyed China’s abandoned satellite in space illustrating the vulnerability of the armies that relayed in outer space for operational communication and battle space awareness. The second area is the acquisition of aircraft carriers and its interest for further developing of carriers. China thus shows the ability for interventions abroad and emergency rescue for their citizens such it was in Libya rescuing of Chinese workers during the “Arab spring” 2011. Military power clearly guides to stabilizing China as the regional military power and a key player in the regional security, but at the same time with enterprising many activities that express broader aspirations for influential policies in the global security. To conclude, with global economic power and regional security power, along with limited potentials in the ‘soft power’, “in each aspect China is only a partial power”. 11 Beside active approach of Chinese diplomacy, it is possible to conclude that China is not influential in many parts of the world or on major international issues. “China is not shaping events and actively contributing to solving problems.”12 The Chinese relations with Europe are complicated because of sanctions imposed on import of defence and military technology. Regardless, using by‐passing approach, the Chinese relations with Europe developing for years show that China’s economy has come on the threshold of the ‘Old Continent’. China carefully watches how the EU implements its defence and military sanctions but at the same time develops intensive economy cooperation and trading on both sides satisfaction. As the matter of fact, the European Union and whole Europe are divided in terms of implementing sanctions against China and consequently cooperation with China. Nevertheless, the internal EU relations were not enough obstacle for China to try to invest a substantial amount of money in the EU in a strategy of “going out policy”, as was realized in a process of enlargement of its global presence. The Chinese accession to Europe started after publishing the document The “Proposal for Practical Policy to the European Union” in 2003. This paper aimed at a necessity of broadening economy presence in Central and Eastern Europe as some sort

11 Shambaugh, David (2013) China Goes Global: The Partial Power, Oxford University Press Oxford etc p. 309. 12 Ibidem, p. 309.

247 of “eastern gate” for the Chinese penetration to Europe. Concretely, due to the “Beijing Consensus”13 as a practical implementation of “going out” policy, an intensive economy cooperation and trading began to develop. Carefully bypassing defence and military sanctions, China imports many technologies, energy assets and goods from Europe and exports investments and many goods from China making the sanctions invisible and dysfunctional. Unlike in the authoritarian communist times, using its generally achieved global positive international image in most countries, even including Europe, China embarked a “charming offensive.”14 The Chinese model for assistance and investments abroad is founded on the “Beijing Consensus”, defined by Joshua Cooper Ramo15 and based on principles of innovations and accommodation to the local situation, sustainability and stability through investments and maintaining independency. At the launch of the Silk Road Fund on 8 November 2014, Xi Jinping stressed that ‘the new Silk Road Fund will be used to provide investment and financing support to carry out infrastructure, resources, industrial cooperation, financial cooperation and other projects related to connectivity for countries along the ‘Belt and Road’.16 On 28 March 2015, a ‘special leading group’ was set up and the action plan published.17 The rationale behind the project is manifold. First of all, it reflects a foreign policy change by President Xi Jinping: a reorientation from a great power approach to the focus on relations with the neighbourhood countries in Asia.18 Another

13 Cooper Ramo, Joshua (2004), The Beijing Consensus, The Foreign Policy Centre London, p. 39. 14 Kurlantzik, Joshua (2008), Charma Offensive: Hos China’s Soft Power is Transforming the World, New Haven, Yale University Press. 15 Cooper Ramo, op. cit. 16 Y. Yi, ‘China Pledges 40 bln USD for Silk Road Fund’, Xinhua News Agency, 8 November 2014, available at http://news.xinhuanet.com/english/china/2014‐11/08/c_133774993.htm (accessed: 15 June 2015). 17 Permanent Mission of the People’s Republic of China to the UN, ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st‐Century Maritime Silk Road’, White Paper, 28 March 2015, Internet: http://www.chinaun.org/eng/hyyfy/t1249669.htm (accessed: 21 June 2017). 18 Godbole, A (2015), China’s Asia Strategy under President Xi Jinping: Strategic Analysis, Volume 39, Number 3, pp. 298‐302.

248 practical consideration behind the project is an estimation of the growing trade turnover between China and Europe in the future. A vast majority of the goods sent from China to Europe is shipped by sea. However, the carrying capacity of the Suez Canal is expected to reach its maximum level soon.19 As far as Beijing carefully defined strategies to different world regions, it even more dedicated itself towards Europe and strategic partnership with Europe. ”While Europeans hope to win over China through the use of unconditional engagement, Beijing has carefully crafted a strategy to manage the EU, using three sets of tactics. First, China takes advantage of the mismatch between its own centralized authority and the EU’s rules‐ based system of government: it makes full use of the openness of EU markets while using the fuzziness of its own administrative channels to restrict access to its own markets. Second, China channels the EU pressure on specific issues, such as human rights, by accepting formal dialogues about them – which the EU hails as a great victory – and then turning them into inconclusive talking shops. Third, China exploits and on occasion fosters the divisions between the EU Member States. While even close allies of the EU exploit its divisions – as the US did in the run‐up to the Iraq war – China can do so with unusual ruthlessness, targeting individual Member States with punitive measures when national interests are at stake or short‐term goals require it.”20 Examined and precise determined foreign policy and the ‘European approach’ defined the area of Central, East and South East Europe as the ‘eastern gate’ for Chinese entrance into whole Europe. Nevertheless, countries of the region which are the European Union ‘new comers’ or just aspirants into the ‘European neighbourhood’ all need fresh money in order to develop staggering economies. China has not overtaken a key role in development and conditionals as the European Union has done. Their money is seen as a complementary source of investments and, at the same time, as a complementary precondition for stronger Chinese presence in Europe.“

19 Vinokurov, E; Libman, A. (2012) Eurasian Integration: Challenges of Transcontinental Regionalism, Palgrave Macmillan, p. 98. 20 Fox, John; Godment, Fracois (2009), A Power Audit of EU‐China Relations, London, European Council on Foreign Relations.

249 For the investment‐hungry countries of SEE, Chinese investments are a welcome complement to the EU funds. The EU integration is the firm long‐ term choice of all SEE countries, supported by a wide cross‐party consensus. However, when it comes to funding, some of them, particularly those in the Western Balkans, perceive Chinese finance as practically the only available way to overcome the following dilemma: access to large EU structural funds for candidate countries is not possible until they join the EU, but in order to make progress towards accession, countries need to improve infrastructure and transport links both within their borders and with neighbours.“21 China continues to expand its interests in south‐eastern Europe (SEE). Several years after the first summit meeting of the Prime Ministers of China and sixteen countries of central and south‐eastern Europe (“summit 16+1”),22 China’s economic presence in the region is no longer tentative and is likely to increase further in the coming years. China’s economic links with SEE come in three broad forms. The highest‐profile involvement is through direct lending to governments for infrastructure – roads, railways, ports, power plants, etc. The second way is through trade links: Chinese exports and imports from the SEE region have grown dramatically in the past decade, with the potential for a further strong growth in the coming years. Lastly, Chinese companies are showing an increasing interest in direct equity investments in SEE. As the main instrument of Chinese foreign policy in developing process is using the Foreign Aid and Government Sponsored Activities (FAGIA). Through this instrument, China realizes its own political, diplomatic, development, business goals and promotes economic development and improvement of life standard in countries end‐users of assistance. In October 2003, Chinese leadership adopted and published a proposal of pragmatic politics towards the European Union which has defined the “east gate” for Chinese penetration on the territory of whole Europe as a model of integrations available also for the Asia region. Central, East and South East

21 Oleg Levitin, Oleg; Milatovic, Jakov Sanfey, Peter (2016) China and South‐Eastern Europe: Infrastructure, trade and investment links, Department of Economics, Policy and Governance, EBRD, p. 2. 22 The 16 countries are: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, FYR Macedonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Romania, Serbia, Slovak Republic and Slovenia.

250 Europe become thus the important step in implementing the “going out” policy and at the same time the European Region was of the primary importance. It is expected that China will invest through loans and grants more than 11 billion dollars primarily in the infrastructure of reparation and construction of railroads and high‐ways, as well as the energy sector.

SOUTH EAST EUROPE REGIONAL ENVIRONMENT AND CHINESE PRESENCE

The Balkan states have been set in two groups recently ‐ EU countries and non‐EU countries. Most of them are at the same time NATO members, but “others” ‐ dominantly accession countries are not. They are in different stage of internal reforms and transformations in order to get to the EU and in different relations with the great powers in the region. Since 2007, the impacts of changed regional geopolitical architecture lead Balkan states to rethinking relations with the EU and NATO but also with Russia, Turkey and other actors. The factors such as regional closeness of the war in Syria, the migrant crisis, Brexit and elections in the United States have been forcing re‐ examining of the role of EU and NATO member states in international relations. The Balkan countries are dominantly small countries which intend to follow a changed approach to the issue of sovereignty. Changed positions of Hungary, Poland, Great Britain, Turkey and few other countries are redefining their international position intending to reveal a formula for balancing between the great powers and their interests and a position of nation‐centric, state‐centric and other sovereignty style of governing. Reviving some level of defence realism based on state interests and state‐centric thinking led the majority of them to intensify common communications in order to realize the foreign policy goals of small countries. The Chinese presence through the “Mechanism sixteen plus one” makes the Balkans situation more complicated particularly from a standing point of the great actors. It is evident that the Chinese presence imposes a rethinking of classic geopolitical and geostrategic approach to the Balkans region. By speeding up diplomatic, political, economic and industrial relations with Central, East and South East countries, for only a few years China has become one of the main actors in the region. Not only bilateral relations but also the “New Silk Road” and multilateral approach to the countries of the region serve as a connection

251 between many regions in the European – Asian space. The same applies for the “New Maritime Silk Road” which ends in the Balkans as the strategically important region for China and its economy entrepreneurship. The “Belt and Road” which encompasses both initiatives represents the most important political strategy for the region even comparing it with the “Balkan Stream” pipeline as a Russia‐Turkey initiative. It is visible that changes in strategic relations provoke a strong reaction of the United States, which is trying to make the obstacles to enhancing non‐West strategic policies. After stopping of the “South Stream”, which was halted by the European Union, Russia – Turkey cooperation in building the “Turkish Stream” or “Balkans Stream” was considered as an open threat to interests of Western partners. Regardless of re‐establishing of Russia – Turkey relations after crashing down of a Russian war aircraft, China’s project “Belt and Road” is accepted by regional actors as a project of the biggest economy importance for them. On the other hand, it could be used as a tool for the realization of long‐term Chinese strategy in the region as an obvious geo‐economics assertion of the Balkan route of the “New Silk Road” and “Maritime Silk Road”. Connecting with mentioned European regions is a road to connecting whole Europe, to facilitate communication of West and North Europe regions and to facilitate economic cooperation and trading through shortening and speeding up of goods exchange. Banja Luka daily “Independent newspaper” (the Republic of Srpska, Bosnia and Herzegovina) cited the “New York Times” quote that “Chinese bring more working places, make better life standard and stimulate the economic growth, while Serbia by opening its economy to China “cemented support of Beijing under the European Union pressures to recognize Kosovo independency. Some people in China pose a question of economy assertion of Chinese ‘investment boom’ while others, outside of China, feel fear that the Chinese ambitions could maintain authoritarian leaders in the region and leave in debt countries with ecologically doubtful projects”23 At the same time there is a claim that “Chinese ambition in the Balkans produce conditions for a potential confrontation with the EU plans and countries as Serbia have founded themselves in the middle.”24 At the same time the “New York Times” mentioned the Russian presence in the region. “Russia intends to keep Serbia

23 Nezavisne novine, Banja Luka, Internet: http://www.nezavisne.com/ekonomija/analize /NYT‐Kina‐ambiciozni‐novajlija‐na‐turbulentnom‐Balkanu/442441 (last access 11. 9. 2017). 24 Ibidem.

252 as far away as possible from the West, promising arms and energy on discounted prices”.25

CONCLUSION

Regardless that the European Union is still the strongest power in the Balkans, using the striving of regional countries to access to the EU, changed geo‐economics and geopolitical situation enabled other great powers to be more active in the region. Balkan countries complain about the European bureaucracy and slow procedures in order to access the EU development funds. In the case of ”Berlin–London” (now “Berlin Plus”) process, the infrastructure is the main goal. A recent summit in Trieste, Italy clearly shows the EU intentions to improve infrastructure projects, which practically represents the competition with the Chinese initiatives and already completed projects or new ideas. China is a relatively new actor in a very turbulent region of South East Europe or the Balkans, playing very sensitive game between American intention for hegemony, the European Union activities on enlargement and Russia’s strategic presence renewing. Since the United States work actively against the “Balkan Stream” and other similar pipelines, it is quite clear that they are not satisfied with the “New Silk Road”, also named the “Balkan Silk Road”. However, there was not the possibility to prevent that Chinese initiative since the “Belt and Road” project has become the axis of the Balkans. As far as strategic pipelines have some obstacles in playing the role of the asset that encompasses the regional countries, it is expected that Russia – Chinese strategic cooperation would be of utmost geostrategic importance. In a frame of Russia politics in the region, the new significant renewed partnership with Turkey would enhance its position in the energy sector, which will also make stronger the non‐West actors in the region. After the “South Stream” was halted by the European Union, Russia – Turkey cooperation in building the “Turkish Stream” or “Balkans Stream” was observed as an open threat to the interests of Western partners. Although China is very distant from the Balkans it is very interesting how China successes to achieve so important strategic political and economic position leaving at the same time positive image.

25 Ibidem.

253 BIBLIOGRAPHY

Bergsten, Fred; Freeman, Charles; Lardy, Nicholas R; Mitchell, Derek J (2009), China’s Rise: Challenges and Opportunities Cooper Ramo, Joshua (2004), The Beijing Consensus, The Foreign Policy Centre London Fox, John; Godment, Fracois (2009), A Power Audit of EU‐China Relations, London, European Council on Foreign Relations. Godbole, A (2015), China’s Asia Strategy under President Xi Jinping: Strategic Analysis, Volume 39, Number 3. Holslag Johnatan (2009), Embracing Chinese Global Security Ambitions, The Washington Quarterly, Center for Strategic and International Studies. Kaplan, Robert (2010), “The Geography of Chinese Power: How far Can Beijing reach on Land and Sea”, Foreign Affairs. Kurlantzik, Joshua (2008), Charma Offensive: Hos China’s Soft Power is Transforming the World, New Haven, Yale University Press. Levitin, Oleg; Milatovic, Jakov Sanfey, Peter (2016) China and South‐Eastern Europe: Infrastructure, trade and investment links, Department of Economics, Policy and Governance, EBRD. Nezavisne novine, Banja Luka, Internet: http://www.nezavisne.com/ekonomija /analize/NYT‐Kina‐ambiciozni‐novajlija‐na‐turbulentnom‐Balkanu/442441 Permanent Mission of the People’s Republic of China to the UN, ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st‐Century Maritime Silk Road’, White Paper, 28 March 2015, Internet: http://www.chinaun.org/eng/hyyfy/t1249669.htm Pew Global Attitudes Project (2007) Global Unease with Major World Powers, June 27 Shambaugh, David (2013) China Goes Global: The Partial Power, Oxford University Press Oxford. Vinokurov, E; Libman, A. (2012) Eurasian Integration: Challenges of Transcontinental Regionalism, Palgrave Macmillan. Y. Yi, ‘China Pledges 40 bln USD for Silk Road Fund’, Xinhua News Agency, 8 November 2014, Internet: http://news.xinhuanet.com/english/china/ 2014‐11/08/c_133774993.htm

254 OPPORTUNITIES AND THREATS OF NEW IDEA

Milan KANKARAŠ, Assistant Professor Ivan PETROVIĆ, Assistant Professor Biljana STOJKOVIĆ, Ph.D., Research Fellow Ministry of defence of the Republic of Serbia, Belgrade, Serbia1

Abstract: In general, a new idea means new opportunities, hopes, desires, etc. Meanwhile, a new idea indicates some challenges, risks and threats. So, before realization, each idea should be analyzed by outcomes and considered by pros and cons. There are several scientific and managerial methods for analysis. One of them is force field analysis. In this paper, the force field analysis and its application to contemplating advantages and disadvantages of the new Silk Road as a new idea is presented. The solutions in this paper impersonate an authors’ vision. This paper could be useful for the development of scientific thought, as well as practical solutions for management in the public sector and other organizations. Key words: idea, force field analysis, opportunities, threats.

INTRODUCTION

Contemporary organizations try to keep compositeness on the market. In that sense, management constantly reviews new ideas since their need for adoption of the organization to future changes in the environment. In that process, the organization’s management should consider all advantages and disadvantages of a new idea and its total impact on the organization. In the theory and practice, there are several different methods that are used to support the decision‐making process, and enable identification positive (opportunities of the new Silk Road) and negative (threats of the new Silk Road) impact of new idea. One of those methods is the force field analysis (hereinafter: FFA process). The main

1 E. mails: [email protected], [email protected], [email protected]. rs

255 purpose of the new Silk Road is to connect a numerous Asian, European and African countries in an economic circle. In the sense of this paper, the new Silk Road is a new idea for each country on its line. So, consideration of opportunities and threats of the new Silk Road is very convenient for the countries. In order to determine the opportunities and threats of the new Silk Road, a research was carried out. The research is conducted in two phases: opportunities and threats were identified in the first stage, and their total impact is assessed in the second phase. The aim of the research is to present the possible way of deliberation about a new idea and consideration about all factors effect on the organization.

IDEA

There are many different approaches of idea notion. According Business Dictionary there are three apprehensions of idea meaning: a thought or collection of thoughts that generate in the mind, an impression or notion that tries to portray the overarching scope or outline or an opinion or belief (Business Dictionary). An idea is usually generated with the intent, but it also can be created unintentionally. For the purpose of this paper, the apprehension of an idea is as a thought with a certain intention. In general, for many people a new idea means prosperity, hopes, desires, etc. In one word they might be named opportunities. Unfortunately, in addition to the opportunities of new idea, there are threats. Identification and analysis all threats of new idea are very important for an organization because every organization should be prepared to confront the future threats. The identification should be objective, based on facts, not on subjective opinion. There are several scientific and managerial methods to identify opportunities and threats. Selection and application of the method or methods depend on sources (Figure 1).

256 Figure 1: Methods to identify opportunities and threats

Open sources are published documents, analysis, official announcements, newspaper, etc. A suitable method for analysis of the open sources is the document analysis. That method enables the monitoring and analysis of quantitative and qualitative features in documents as well as conclusions about the observed circumstance. Knowledge is often defined as a belief that is true and justified and provides an orderliness to our lives which allows us to conceptualize goals, to anticipate and perceive events, and to respond in accordance with the changing needs, purposes and desires (Hunt, 2003, p. 100). As a source of identification, knowledge includes expertise, skills and experiences of experts. Convenient methods are expert assessment, brainstorming, etc. Business data are the most reliable and the most useful source. However, unfortunately, most of the business data are confidential information. That limits the using of business data because their usage requires approving access or data exchange. After the approved access to business data, the document analysis is a pretty suitable method. Identification of opportunities and threats of a new idea is a very serious process, especially

257 the assessment of their impact on the organization. Thus, a procedure of identifying the opportunities and threats of new idea is very useful for an organization. The procedure ensures objective identification of the opportunities and threats of a new idea and assessment of their total impact on the organization.

MODEL OF IDENTIFYING OPPORTUNITIES AND THREATS AND ASSESSMENT THEIR IMPACT

The procedure is based on identifying opportunities and threats from all resources by appropriate methods, classification identified opportunities and threats and the assessment of their impact on the organization. In this way, a model of identifying opportunities and threats is created, and it includes two phases: analysis and synthesis (Figure 2).

Figure 2: Model of identifying opportunities and threats and assessment their impact

258 Bearing in mind data sources, in the analysis stage, opportunities and threats should be identified from all sources by different suitable methods. For example, analysts should study all open sources, identify opportunities and threats to the organization and note them in a pre‐prepared table. The result of the first phase is the list of opportunities and threats of new idea. Summing the identified opportunities and threats from all sources and their total impact on the organization has been done in the synthesis stage. That phase includes two steps. In the first step all identified opportunities, regardless of source, are summarized in one class – opportunities, and all identified threats are summarized in another category – threats. The assessment of the total impact of identified opportunities was conducted in the second step of the synthesis stage. There are numerous methods for assessing an impact. The Force field analysis is used to assess the total impact of identified opportunities and threats on the organization in this paper. The Force Field Analysis is a technique which visually identifies and analyse forces affecting the problem situation so as to plan a positive change (Kumar, 1999, p. 17). The main purpose of FFA is a systematical analysis of the factors found in complex problems. According to the FFA procedure, in the process of assessment, it is necessary to give each opportunity and threat a score between 1 and 5, where 1 is week or low impact and 5 is strong or high impact (Free business management). The total opportunities impact presents the sum of the assigned value of all individual opportunities, and the total threats impact presents the sum of the assigned value of all individual threats. Based on the total opportunities impact and the total threats impact, the total impact can be calculated as a difference of their total impact (Equation 1).

TI = TIo – Tit (1) Where: TI – total impact; TIo – total opportunities impact; Tit – total threats impact. It is based on three possible total impact values: the total impact is higher than 0 (total opportunities impact is higher than total threats impact – a favourable environment), the total impact is equal 0 (total

259 opportunities impact and total threats impact are equal) or total impact is lower than 0 (total opportunities impact is lower than total threats impact – an unfavourable environment). The model of identifying opportunities and threats and assessment of their impact enables recognition of all opportunities and threats in order to prepare the organization, i.e., increase opportunities impact and decrease threats impact on the organization. Also, the model can be applied to analyse every idea, as well the New Silk Road.

OPPORTUNITIES AND THREATS OF NEW SILK ROAD

The main purpose of this paper is a presentation of the model and its application to consider opportunities and threats of the New Silk Road as a new idea. The New Silk Road projects are instrumental in laying the foundation for regional cooperation; creating political flexibility; improving economic growth; offering trade diversifications; and investing in transportation, mining and energy sectors (Fedorenko, 2013, p. 4). According (Minghao, 2015, p. 5) the New Silk Road would run through Asia, Europe and Africa, connecting the dynamic East Asian economic circle at one end and the developed European economic circle at the other. The idea was announced in 2013 and contains two corridors, overland – Silk Road Economic Belt, and marine – 21st Century Maritime Silk Road (Bruce‐Lockhart, 2016). The overland corridor (total length is more than 10,000 km) should connect countries of Central Asia, the Middle East and Europe, while the marine corridor should also include countries of Southeast and South Asia and East and (Tiezzi, China’s ‘New Silk Road’ Vision Revealed, 2014). The marine corridor is longer than the overland corridor and the journey by sea takes up to 60 days (Khorgos, 2014). Unlike the sea road, the journey by land supposedly takes approximately 14 day – trains from Chongqing in south‐west China to Duisburg in Germany, via Kazakhstan, Russia, Belarus and Poland (Khorgos, 2014). Currently, the New Silk Road initiative spans 65 countries: Central and East Europe – 19 countries, Central Asia – 9 countries, Southeast Asia – 11 countries, South Asia – 7 countries, West Asia, Middle East and North Africa – 16 countries and Russia, Mongolia and China (Wijeratne, Rathbone, & Lyn, June 2017). However, the initiative expands and more

260 countries might be added to the list. Realizing the idea should increase the turnover of goods, trade, production and the overall economic situation in countries that are located near the New Silk Road (Tiezzi, China’s ‘New Silk Road’ Vision Revealed, 2014; Khorgos, 2014). So, it is obvious that there are many different factors effect on the realization of the New Silk Road as a new idea. In order to provide the New Silk Road, it is necessary to identify all factors that influence on the idea. In the first phase, data are gathered only from the open sources by the document analysis. On the basis of the analyzed open sources, the following opportunities are identified (Van der Leer & Yau, February 2016, p. 6; Wijeratne, Rathbone, & Lyn, June 2017, pp. 28‐32; Fedorenko, 2013, pp. 14, 19, 24; Wong, Booker, & Barthe‐Dejean, February 2017, p. 21): – Technology expert/licensing; – Engineering services export; – Construction/labor export; – Equipment export; – Outbound financing; – Outbound capital projects and infrastructure; – Transportation/logistics; – Investment of assets; – Partnerships in engineering, procurement and construction; – International project management; – Supplying construction equipment and machinery; – Operation of assets; – Divestment of assets; – Non‐traffic trade; – Urbanization and population growth. – Besides opportunities, threats have also been identified (Van der Leer & Yau, February 2016, p. 7; Wijeratne, Rathbone, & Lyn, June 2017, pp. 35‐43; Fedorenko, 2013, p. 5; Wong, Booker, & Barthe‐Dejean, February 2017, p. 22): – Rough terrain; – Persistent regional conflicts;

261 – Thriving corruption; – Skepticism amongst various countries; – Environment pollution; – Long gestation period; – Significance to bilateral relationships; – Cross‐territorial presence; – Host countries’ ability to pay; – Private funding cautiousness; – Operational risks; – Rule of law and human rights concerns; – Terrorism and narcotics trafficking; – New regulations. It is possible to identify more opportunities and threats of the New Silk Road, but for the purpose of this paper these are completely enough. In the second phase impact of identified opportunities and threats are assessed by six analysts. Taking into consideration that all selected analysts are not closely profiled to the New Silk Road, the formation of expert groups is conducted using measures of closeness expert’s estimates to the average value of estimate of group. Every analyst has assessed the individual impact of each identified opportunity and threat on a hypothetical country located on the New Silk Road. The total individual impact of opportunities and threats are determined by equation 2 (rounded to two decimals).

(2)

Where: II – individual impact; TII – total individual impact; o/t – opportunity or threat; k – analyst; n – number of analysts. According to analysts’ opinion, the total individual impact of opportunities and threats is shown in table 1.

262 Table 1: Total individual impact of opportunities and threats TOTAL TOTAL OPPORTUNITY INDIVIDUAL THREAT INDIVIDUAL IMPACT IMPACT Technology 3 Rough terrain 4 expert/licensing Engineering services 4 Persistent regional conflicts 5 export Construction/labor 3 Thriving corruption 4 export Skepticism amongst various Equipment export 2 4 countries Outbound financing 3 Environment pollution 4 Outbound capital projects and 4 Long gestation period 4 infrastructure Significance to bilateral Transportation/logistics 3 4 relationships Investment of assets 5 Cross‐territorial presence 3 Partnerships in engineering, Host countries’ ability 4 3 procurement to pay and construction International project Private funding 4 2 management cautiousness Supplying construction equipment and 4 Operational risks 4 machinery Rule of law and human Operation of assets 3 3 rights concerns Terrorism and narcotics Divestment of assets 3 5 trafficking Non‐traffic trade 4 New regulations 4 Urbanization and 5 population growth Total opportunities 54 Total threats impact 53 impact

263 The total opportunities or threats impact is calculated as sum of total individual impact (Equation 3).

(3)

Using the equation 3 and based on the total individual impact of opportunities and threats (table 1), the total opportunities impact is 54, and the total threats impact is 53. Finally, the total impact of the New Silk Road is calculated by equation 1, and it is 1. Bearing in mind that the total impact is higher than 0, it can be concluded that the total opportunities impact is higher than the total threats impact; respectively there is a favourable environment. The presented total impact can be disputed, but it is not important for the purpose of this paper. More important is the model, deliberation about a new idea, consideration about all factors effect on the organization and possibility of spotting actions that should be realized to reduce negative impacts of threats and increase positive impacts of opportunities.

CONCLUSION

In the paper, the results of the research aimed at the possible way of deliberation about the new idea and consideration about all factors effect on the organization were presented. In that sense, available literature which relates to the idea is studied, the new Silk Road and the FFA process, as well as its practical application. Opportunities and threats of the new Silk Road are identified by using the document analysis. According to the open sources, it is identified 15 opportunities and 14 threats. Their impacts are assessed by six analysts by using the FFA process. The research results indicate that there is a favourable environment of the new Silk Road and the proposed model allows deliberation about the new idea and consideration about all opportunities and threats. Also, the organization or countries can spot action to reduce negative impact of idea and increase positive impact. At the end we can conclude that presented model provides: – identification of opportunities and threats of new idea; – assessment of their impact on organization or system;

264 – comparison of total impact of opportunities and threats and – spotting actions should be realized to reduce negative impacts of new idea threats and increase positive impacts of new idea opportunities. Based on the results which are presented in this paper it is possible to look at future directions of researches in this area. Namely, in further researches, it is necessary to consider the need for prioritization opportunities and threats, as well as the possibility to automate the process. The presented model can be applied to solve many different problems in every form of organization, as well as in government.

BIBLIOGRAPHY

Bessler, P. (2017). EU‐ASIA Economic Governance Forum. China’s “new Silk road”: Focus on Central Asia. Tokyo: Social and Economic Governance Programme Asia/Japan Office. Bruce‐Lockhart, A. (n.d.). Why is China building a New Silk Road? Retrieved August 16, 2017, from World economic forum: https://www.weforum. org/agenda/2016/06/why‐china‐is‐building‐a‐new‐silk‐road/ Bruce‐Lockhart, A. (2016, Jun 26). Why is China building a New Silk Road? Retrieved August 16, 2017, from World economic forum: https:// www.weforum.org/agenda/2016/06/why‐china‐is‐building‐a‐new‐silk‐ road/ Business Dictionary. (n.d.). Retrieved july 2, 2017, from http://www. businessdictionary.com/definition/idea.html Fedorenko, V. (2013). The New Silk Road initiatives in Central Asia. Rethink paper 10. Washington: Rethink Institute Washington DC. Free business management. (n.d.). Retrieved August 2, 2016, from http://www.mftrou.com/ Hunt, D. P. (2003). The concept of knowledge how to measure it. Journal of Intellectual Capital , 4 (1), 100‐113. Khorgos. (2014, November 15). The New Silk Road: Hardly an oasis. Retrieved August 16, 2017, from The Economist: https://www. economist.com/news/asia/21632595‐kazakhstan‐turns‐geography‐ advantage‐china‐builds‐new‐silk‐road‐hardly‐oasis

265 Kumar, S. (1999). Force field analysis: applications in PRA. PLA Notes (36), 17‐23. Minghao, Z. (2015). China’s New Silk Road Initiative. IAI working papers , 15 (37). Petrović, D., Cvetković, I., Kankaraš, M., & Kapor, N. (2017). Objective Technology Selection Model: The Example of complex combat systems. International Journal of Scientific & Engineering Research , 8 (3), 105‐114. Tiezzi, S. (n.d.). China’s ‘New Silk Road’ Vision Revealed. Retrieved August 16, 2017, from The diplomat: http://thediplomat.com/2014/05/ chinas‐new‐silk‐road‐vision‐revealed/ Tiezzi, S. (2014, May 9). China’s ‘New Silk Road’ Vision Revealed. Retrieved August 16, 2017, from The diplomat: http://thediplomat.com/2014/ 05/chinas‐new‐silk‐road‐vision‐revealed/ Van der Leer, Y., & Yau, J. (February 2016). China’s new silk route: The long and winding road. PwC Growth Markets Centre. Wijeratne, D., Rathbone, M., & Lyn, F. (June 2017). Repaving the ancient Silk Routes. PwC Growth Markets Centre. Wong, G., Booker, S., & Barthe‐Dejean, G. (February 2017). PwC Growth Markets Centre PwC Growth Markets Centre. PwC Growth Markets Centre. Zimmerman, T. (2015, October). The New Silk Roads: China, the U.S., and the Future of Central Asia. New York: Center on international cooperation.

266 THE RISKS OF THE BELT AND ROAD INITIATIVE IN THE CONSTRUCTION OF EURASIAN ECONOMIC CORRIDOR

LIU Zuokui Senior Research Fellow and Director Institute of European Studies Chinese Academy of Social Sciences, Beijing, China1

Abstract: The author analyzes the possible risks related to the construction of the Eurasian corridor in the text. In this sense, he concludes that China’s risk management on the security of the Corridor has been improved to some extent. Despite that, the “soft” risks are constantly emerging, which needs timely assessment and response. What the author pointed out in this article is that the security risks of the Corridor not only refer to a series of real security challenges, but also include some “soft” risks with the focus on operating efficiency, quality and the general environment of global trade, etc. Key words: China, the Belt and Road Initiative, risks, Eurasian corridor.

A BASIC INTRODUCTION TO THE EURASIAN ECONOMIC CORRIDOR

The EU/European market has always been fundamental to the development of economy and trade of China. The EU is the No. 1 trading partner of China. With regard to the Gross Domestic Product (shorted as “GDP”), the EU is the largest economy in the world with the US and China ranking as the second and third largest economy respectively. Needless to say, the cooperation between two powerful economies, namely EU‐ China cooperation, is of great significance to the economic development of China. For this reason, China has always been committed to pushing forward the construction of the Eurasian Economic Corridor, so as to facilitate the bilateral trade between two sides. There are mainly two routes of trade from China to Europe: one is the land route named the Second Eurasian Land Bridge or the New Eurasian Land Bridge; the other is sea route called the China‐Europe Land‐Sea Express Passage. The land

1 E‐mail: [email protected]

267 route focuses on building the CHINA RAILWAY Express which is international railway container transport operating on the route from China to Europe and along the “Belt and Road”. The CR Express was launched by the China Railway Corporation and operates according to the fixed trips, routes, timetables and runtime of the whole journey. It is definitely the important carrier for the deepening of the economic and trade cooperation between China and countries along the “Belt and Road” as well as the key to the promotion of building the “Belt and Road” Initiative. The China‐Europe Land‐Sea Express Passage is an important sea route between China and Europe which starts from the coastal cities in the south of China and ends at the Piraeus Port in Greece via the Mediterranean Sea. At the Piraeus Port, Chinese cargo can be directly transported to European hinterlands via the Greece‐Macedonia‐Serbia‐ Hungary Railways. The construction of both the land and sea route will lay a solid foundation for the construction of the Eurasian Economic Corridor.

SEVEN RISKS IN THE CONSTRUCTION OF THE EURASIAN ECONOMIC CORRIDOR

In the past years, through hard work, China’s risk management on the security of the Corridor has been improved to some extent. Despite that, the “soft” risks are constantly emerging, which needs timely assessment and response. What the author emphasized in this article is that the security risks of the Corridor does not only refer to a series of real security challenges, but also include some “soft” risks with the focus on operating efficiency, quality and the general environment of global trade, etc.

Risk One: The Potential Risk of the Break‐Up or the Disintegration of the EU Based on the current situation, the European integration is in lack of momentum and faces the increased risks of going backwards. As a united big market, the EU has been playing a huge role in promoting the connectivity and trade cooperation between China and Europe, and is one of the major engines for the development of European and Asian markets. If the EU, as a united market, splits or disintegrates, the cost of the

268 cooperation between Chinese and European market will rise dramatically, which will be unfavourable to the implementation of the “Belt and Road” Initiative. Although the break‐up or the disintegration of the EU is considered as the low probability event, it could still happen. The France’s Front National that calls for separation from the EU has targeted 2017 as the year to make utmost efforts to campaign for a referendum and realize French exit from the EU. The constitutional referendum held in Italy in 2016 was not approved and thus the constitutional reform did not come into effect. Following that, Renzi tendered his resignation as a Prime Minister, which created favourable conditions for the 2017 campaign of the Italian Populist Party the Five Star Movement who called on people at all social levels to oppose refugees and the European integration. Spain’s “We Can” party and Greece’s Coalition of the Radical Left have received relatively high support in the national parliamentary elections in recent two years. Germany’s Populist Party, the Germany’s Choice Party (AfD) has experienced a rapid growth, adding some uncertainties to the 2017 German election. Within the EU, views about a weakening EU keep on rising. The EU disintegration used to be a forbidden topic for politicians, but now it usually becomes the focus of politicians’ attention. Donald Tusk, the President of the European Council, also admits that the emotions like anti‐EU, nationalism and xenophobia are running high within the EU. Worse, the number of people who still believe in policy integration falls sharply. The rise of populism and the increasing doubts for basic values of freedom and democracy also remain as major concerns.2 The EU has indeed come to the crucial moment at stake. If the EU member countries do not work together, there is a possibility that the EU would cease to exist.

Risk Two: Populism and Trade Protectionism Prevail Increasingly In Europe and the US In recent years, the European populism is rapidly spreading throughout the Europe, which not only stands for the duel between the European Pro‐ Establishment Camp and the Anti‐Establishment, but also reflects an

2 “United we stand, Divided we fall”, letter by President Donald Tusk to the 27 EU heads of state or government on the future of Europe, Internet: http://www.consilium. europa.eu/en/press/press‐releases/2017/01/31‐tusk‐letter‐future‐europe/

269 unprecedented crisis of confidence encountered by the European integration. Issues such as the European debt crisis, refugee crisis and the Brexit have fuelled people’s doubts for the Pro‐Establishment elites. Common people can hardly ever gain the benefits of European integration. Instead, they suffer from more and more unfair treatments. As a result, they grow increasingly suspicious of the mainstream parties. The America’s Anti‐Establishment Representative Donald Trump was appointed as the President of the US on January 20th, 2017. His victory in the presidential election has indeed mirrored that the masses are more in favour of the anti‐immigration and the politicians who raise doubts for the western mainstream values, and they hope that the new state leader will find better solutions. However, the fact that Donald Trump came into power has further stimulated the rise of the European Right‐wing Populism. The increasing popularity of the populism has made the EU more conservative with less time and power to synergize the cooperation with China, including the “Belt and Road” Initiative. The populism obviously advocates the anti‐ globalization and holds that the emerging countries like China must shoulder necessary responsibility and make the market opening commitments in response to the benefits they have received from the globalization. Moreover, it urges the EU to protect its own market and job positions. Under such circumstance, the EU highly votes for the trade protectionism and frequently files anti‐dumping and anti‐subsidy on Made‐ in‐China products. With the change of the US and the EU’s attitude toward the globalization as well as the further spread of the anti‐globalization, the trade protectionism is likely to become the biggest risk to the global economy in 2017. China has received the biggest number of the anti‐ dumping and anti‐subsidy investigations from Europe and America in recent years. In the mid‐term of 2016, the Ministry of Commerce of China reports that, throughout the world, China has received most anti‐dumping investigations for 21 consecutive years and most anti‐subsidy investigations for a decade. Based on the situation at the beginning of 2017, China remains to be the main target of the “Double Antis” launched mainly by the US and the EU on the trade measures taken on China. This definitely goes against the “Belt and Road” Initiative which advocates openness, inclusiveness, free trade and more efficient globalization.

270 Risk Three: the Mutual Sanctions between Europe and Russia Impedes the Eurasian Trade’s Inter‐Connectivity On March 17th, 2014 the European Council made a formal announcement that the EU would adopt restrictive measures against actions threatening Ukraine’s territorial integrity targeting 21 Russians including travel restrictions and freezing assets.3 Ever since then, the EU has imposed continuous sanctions on Russia, and together with the US, it tightened existing sanctions and added more sanctions against Russia. At the same time, Russia has adopted anti‐sanction measures to the EU. Russia and CEECs are two critical junctures of Eurasian continent; therefore, the mutual sanctions between Europe and Russia have severely affected the inter‐connectivity of trade in Eurasia, and caused disturbance to the realization of unimpeded trade in the construction of the “Belt and Road”. For instance, due to the Russia’s sanctions on the EU, the agricultural products imported from Poland cannot be delivered to China by the CHINA RAILWAY Express through the Eurasian Land Bridge. At the macro level, whether the tension between Europe and Russia can be alleviated could have profound impacts on the further connectivity of Eurasia and the progress of the construction of the Eurasian Economic Corridor. So far, the newly‐elected President of the US, Donald Trump has the intention to alleviate ties with Russia. In addition, some CEECs also wish the EU to lift sanctions on trade with Russia as soon as possible. However, the opinions within the EU are divided on this matter. If the mutual sanctions between Russia and the EU remain unresolved in short term, the construction of the “Belt and Road” will have to face the risks of “there are links between Eurasian continent and poor connectivity”.

Risk Four: The Ukraine Crisis Triggered the Geopolitical Conflicts of Eurasia The Ukraine Crisis broke out in late 2013, which made the geopolitical conflicts and tensions between Russia and the West aggravated. Some

3 “EU adopts restrictive measures against actions threatening Ukraine’s territorial integrity”, Council of the European Union, Brussels, 17 March, 2017, Internet: http:// www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/141603.pdf

271 CEECs such as Poland and the Baltic States have upgraded their defences by introducing the power of NATO to confront Russia, and Russia responded the same. Currently, European countries are generally pessimistic towards the prospect of the Ukraine crisis in the way that they believe that the Ukraine crisis will become a tricky and unresolved geopolitical crisis of Eurasia in the short run. The influence of the geopolitical confrontation on the connectivity of Eurasia is quite evident as the constant conflicts in the region aggravate the investment environment. Some CEECs including Poland call for China to resolve the geopolitical conflict by exerting policy pressure upon Russia based on its need for promoting the “Belt and Road” Initiative.4 As a matter of fact, China will not interfere with Russia’s domestic and foreign policies. Apart from that, the Ukraine crisis is by no means accidental, and it would be unfair to point the finger wholly at Russia. After all, the America and the EU’s continuous expansion eastwards and strategic pressing on Russia also give rise to the crisis. On January 31st, 2017, the east of Ukraine resumed war with another round of conflicts. At present, there is hardly any sign of complete alleviation of the Eurasian geopolitical conflict. In that case, the “Belt and Road” Initiative has to proceed and progress while facing geopolitical tensions.

Risk Five: The Problems of Immigration and Refugees Haunt Europe and the Balkans The Balkans play an essential role in the construction of the sea route between China and Europe, but the region is geopolitically sensitive and extremely vulnerable to the geopolitical unrest. The relationship between some Balkans countries is problematic and suffers from the refugee crisis. In addition, some Balkans countries are lack the economic and social stability. Meanwhile, the Balkan region is accessible to the refugees, facing a serious challenge of refugee flows. Turkey has constantly suffered from violent terrorist attacks, which makes it hard for the EU to rely on Turkey for refugee resistance. The sea route in construction passes many Balkans

4 The speech from the Polish Foreign Minister Witold Waszczykowski at the Chinese Academy of Social Sciences on 25 April, 2016.

272 countries including Greece, Serbia, Hungary and Macedonia, and will most probably involve Turkey which is struggling with terrorism, refugee crisis, ethnic groups’ contradictions and domestic political instability. Due to the external threats, the security and stability of the Balkans are in great peril, which will, in turn, affect the layout and the progress of the “Belt and Road” construction in Eurasia.

Risk Six: The Competition between Road Transport and Sea Transport The China‐Europe Land‐Sea Express Passage bears 98% of the total transportation of Sino‐EU trade products and consists of two routes of ocean transportation: the first route starts from Asian base ports and reaches European base ports via the South China Sea, the Strait of Malacca, the Indian Ocean, the Red Sea, the Suez Canal, the Mediterranean Sea, the Strait of Gibraltar, the Atlantic Ocean and European base ports; another route connects Asian base ports with European base ports through the South China Sea, the Indian Ocean, the Cape of Good Hope, the Gulf of Guinea and the Atlantic Ocean. The sea transportation has several merits including convenient customs clearance that only requires two transport documents, high loading of containers and low transportation cost. The disadvantages of the sea transportation are relatively long distance and time of transportation.5 The road transport including the CHINA RAILWAY Express is more time‐efficient than the sea transport, but the price is much higher with a more complicated process of customs clearance. Both the road transport and sea transport have pros and cons. Some cargoes can be delivered by either land or sea transport, which intensifies the competitions between two modes of transportation over the supply of goods. There has always been such kind of competition between the CHINA RAILWAY Express and the China‐Europe Land‐Sea Express Passage due to the shortage of goods. From my perspective, this issue should be addressed through the active coordination of governments and guilds. In addition, the collaboration between road transport and sea transport is the general trend of the China Europe corridors construction.

5 Xiao Yang, China Europe Land and Sea Express Passage and the Balkan Nexus of the “Belt and Road” Logistic Network, Journal of Contemporary International Relations, no. 8, 2015.

273 Risk Seven: The Competition between China and Russia on the Construction of Eurasian Corridors When it comes to the construction of Eurasian corridors, Russia is committed to developing the Siberian corridor which is also called the First Eurasian Land Bridge. China is concentrating on exploiting the new Eurasian Land Bridge, namely, the Second Eurasian Land Bridge. As the country of origin and cargo distribution on the Second Eurasian Land Bridge, China will not seek far as transporting the Sino‐Europe commodities through the First Eurasian Land Bridge. The Second Eurasian Land Bridge is definitely the intercontinental railway framework of the Silk Road Economic Belt. The strength of the First Eurasian Land Bridge is as follows: to begin with, the freight time is predictable due to the fact that the railway gauge of CIS countries (the Commonwealth of the Independent States) is the same with that of Finland with no need of replacement. Secondly, after the containers get loaded at the Vostochny Port of Nakhodka, the arrival time at each stop along the route and the consuming time for the whole journey will be accurately calculated. Besides, Russia, Kazakhstan and Belarus have formed a customs union to simplify the process of customs clearance. The Second Eurasian Land Bridge, on the other hand, is also advantageous and well‐ received due to the relatively short distance and low cost of railway transport. Specifically, compared with the First Eurasian Land Bridge, the Second Eurasian Land Bridge makes the distance between China and Central Asia above 1000 kilometres closer. Also, the short‐distance (around 1000 kilometres) inter‐country transportation has relatively low cost. Russia has always regarded the exploitation of the First Eurasian Land Bridge as the basic national policy aimed at driving the economic development of the Far East. It not only targets the Second Eurasian Land Bridge as the main competitor, but also adopts various measures to expand the influence of Russian railways in the development of Asia‐Europe logistics. Firstly, by making full use of multilateral platforms such as the CIS Railway Transport Commission, Russia actively pushed the CIS countries to use unified railway standards based on Russian railways in order to monopolize market of railway equipment in Central Asia. Secondly, Russia established the “Wide Rail Gauge Alliance” through the international cooperative mechanism of 1520 mm gauge railways. Based on this, Russia joint hands with Kazakhstan and, Belarus to set up the united transportation company while taking

274 charge of the Asian part of the Eurasian Railways. Thirdly, Russia proposed to establish a joint venture rail company (Trans‐Eurasia Logistics) with China, Germany and Kazakhstan, so as to build the Russia‐oriented Eurasian logistic chain of railway container transport. All these actions of Russia have added competitive pressures to the promotion of connectivity of the Second Eurasian Land Bridge by China.6 China still needs to prevent Russia from taking apart the China‐Europe freight trains. As a matter of fact, some China‐ Europe freight trains such as the trains departing from the northeast of China run through the First Eurasian Land Bridge while others travel via the Second Eurasian Land Bridge. So far the unified identity of the freight trains has only been realized in several provinces in China instead of the whole country. Therefore, competitions are quite frequent over the transport routes and the supply of goods all round the country, which makes it possible for Russia to adopt the “divide and rule” strategy towards China.

POLICY SUGGESTIONS

This article offers a series of principled solutions to some fundamental and pressing issues, and is expected to explore effective countermeasures seriously. Firstly, the macro issues and micro issues should be wisely handled and properly balanced. We must pay close attention to the risks in the construction of the Eurasian corridors, strengthen relative research at both macro level and micro level, and adopt flexible and targeted measures based on the situation of each country and the condition of each matter. At the macro level, we must attach great importance to the European integration, the European populism and trade protectionism, the Eurasian geopolitical crisis and refugee crisis, and make analysis and the assessment of the trade environment and the development prospect of geopolitics of Eurasia and the world, so as to enrich our knowledge on the risk‐aversion of the “Belt and Road” Initiative. At the micro level, we need to focus on the attitudes that the EU member states and candidate countries hold towards the “Belt and Road” Initiative, and adopt flexible

6 Xiao Yang, China Europe Land and Sea Express Passage and the Balkan Nexus of the “Belt and Road” Logistic Network, Journal of Contemporary International Relations, no. 8, 2015.

275 measures based on the situation of each country. Meanwhile, we must have a clear understanding of the specific challenges faced by the “Belt and Road” construction, and provide targeted solutions according to the conditions of each matter. Secondly, neither plans nor market should be neglected. With regard to the layout of the “Belt and Road” in Eurasia, we must underline the market‐orientation while making the best of executive powers. Some hold the view that the construction of the “Belt and Road” will not be sustainable if without the market‐orientation, which is debatable. As neo‐liberalism is encountered with dilemma and crisis, the national administration has played an increasingly prominent role in the deployment of major strategies. Considering the China’s national conditions, we must make good use of the administrative forces while placing great emphasis on the fundamental role of the market, give full play to the strength of plans in allocating resources, pooling wisdom and improving efficiency, and have good top‐level design for the “Belt and Road” Initiative. Besides, we should find out the difficulties faced by the Initiative, adjust methods innovatively and explore solutions actively, enhance rationality of the system and the supply of resource by effectively combining plans and market, so as to push forward the “Belt and Rod” Initiative properly. Thirdly, there should be reasonable competition and effective cooperation between the sea transport and the land transport. In the process of building the China‐Europe corridors, both the sea transport and the land transport have pros and cons, and they should be chosen based on the delivery requirements of goods rather than the will of local governments. In order to sustain the development of two transport means, there should be reasonable competition and effective cooperation between the sea transport and the land transport. To give full play to the advantages of the sea‐land multimodal transportation not only promotes the basic role of the market, but also maintains the security of China’s trade corridors. For instance, the CR Expresses could attract more high‐value‐added freight that used to be delivered by sea transport within limited time and the air freight with enough delivery time. The sea transport, however, should be used to deliver those with relatively low added value and sufficient delivery time. As for the goods that can be carried either by sea transport or by land transport, the sea‐land multimodal transportation is a better and possible choice that leads to the reasonable and effective division of labour in the Eurasian transport

276 market. It should also be noted that to unify the identity of the freight trains is only the first step to tackle certain issues in the operation of the CR Express such as the low efficiency, financial subsidy and insufficient supply of goods. There are bigger challenges ahead which should be approached through continuous and ever‐strengthened coordination among all trains within China and between the sea transport and land transport throughout the world. Fourth, China’s competition and collaboration with Russia is the prerequisite for consolidating the China‐ Russia strategic cooperation. The connectivity of trade in Eurasia is not only beneficial to China, but also in the interest of Russia. Where there are overlapping interests, there are fierce competitions. Russia competes with China over the China‐Europe corridors for both economic and geopolitical interests. For such kind of competition, China should take the dominant influence of Russia in Eurasia into consideration. As long as there are shared interests, China should adopt a pragmatic attitude to build strengths by learning from Russia and integrating into the Russian market, compensate for weaknesses by taking advantage of the Russian market, and gradually establish a firm foothold in the Eurasian transport market. After all, the ties can only be built upon strength rather than tolerance, and it is the strong competitiveness that wins the real partnerships. Finally, we should embrace risks and challenges with confidence and preparations. In spite of so many difficulties and challenges in the construction of the “Belt and Road”, we should always be confident towards the Initiative by constantly enriching its connotation. The implementation of the “Belt and Road” in perilous Eurasia is in itself an effective way to spread the core values, the development path and the system of China. Under the circumstance of the global turmoil and the sluggish economic growth, the neo‐liberalism is gradually losing to the populism and trade protectionism which are prevailing in the western world, suggesting that western countries’ appealing to the world by advocating openness and freedom has gone into reverse. In contrast, China is facing rare opportunities of development. And for that, we should manage the outside expectations towards the “Belt and Road” Initiative, make China’s ideas and voice heard, and endeavour to gain the upper hand in the competition of two regimes and two ideologies.

277 CHINAS MEGAPROJECT – GLOBAL SECURITY ANALYSIS

Zlatan JEREMIĆ Ph.D. Research‐associate Institut of International Politics and Economics, Belgrade, Serbia 1

Abstract: The People’s Republic of China (China) is taking serious steps in accordance with its global development strategy of the One Belt One Road (OBOR) initiative. This geopolitical and geo‐economic megaproject meets the positive and the negative connotation on the road that passes through over 60 countries of different civilizations, religious, cultural, economic, political and other values and orientation. Only a superficial analysis of the security aspects megaproject points to numerous difficulties and obstacles that must be neutralized in order to realize the common economic interests of all participants along the way. Security analysis of the OBOR initiative has been implemented through a description of the basic factors that determine the security aspect of this megaproject. Only the security situation of the countries along the way, their grouping in the security and defence alliances, crisis points and intertwining interests of the major actors in the international arena provide a clear factual picture that leads to the understanding of security difficulties along the way. Key words: New Silk Road, Silk Road Economic Belt, the Maritime Silk Road, security, crisis, security and defence alliances, conflicts of interest, Central Asia, Asia and Pacific region.

INTRODUCTION

In 2004, then‐President Hu Jintao delivered a speech in which he highlighted China’s ‘overseas interests’ (a) the safety of overseas nationals; (b) institutions, companies and investments; (c) strategic sea lanes and communication channels; (d) overseas energy and resources.2 The term primarily centres on China’s economic interests abroad, although these do overlap with overseas political and military interests as well. As China’s 2013

1 E‐mail: [email protected]. 2 Internet: http://in.chineseembassy.org/eng/zyjh/SPEECHES/t92044.htm

278 Defence White Paper stated, these have become an integral component of China’s national interests.3 In China’s Military Strategy 2015, safeguarding the security of China’s overseas interests had been upgraded to one of the strategic tasks of the People’s Liberation Army.4 The concepts of the “New Silk Road” and the “Maritime Silk Road” were launched in 2013 by President Xi Jinping when he revealed Chinese plans to connect East Asia with Europe with the Silk Road Economic Belt 5 and the 21st Century Maritime Silk Road.6 Despite the fact that OBOR real objectives are not defined as strategic objectives because it is treated as an initiative, however, guidelines can be transposed in following: to enhance diplomatic relations and cooperation; to expand China’s geopolitical influence; to improve and expand international trade routes with benefit for involved countries; to develop and stabilize China’s western regions by integrating them in trade routes and by opening markets to goods produced in those regions.7 The OBOR initiative is supposed to be a new Eurasian Land Bridge, China – Mongolia‐ Russia, China – Central Asia – West Asia and China – Indochina Peninsula economic corridors, as well as a China – Pakistan Economic Corridor and a Bangladesh – China – India – Myanmar economic Corridor. China’s vulnerability to geopolitical and security challenges lead to a need to deal with political risk and insecurity in the Asia‐Pacific region, Central Asia, South Asia and the Middle East. Many of the OBOR projects are linked with underdeveloped or conflict‐ridden regions, which could generate additional security challenges. To protect its interests and combat

3 Chinese State Council Information Office (note 80), Internet: http://english.scio.gov.cn/ 4 Chinese State Council Information Office, ‘China’s Military Strategy’, May 2015, Internet: http://english.scio.gov.cn/ 5 The Silk Road Economic Belt seeks to connect China, Central Asia, Russia and the Baltic states; linking China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and connecting China with Southeast Asia, South Asia and the Indian Ocean. 6 The 21st‐Century Maritime Silk Road will connect China’s coast to Europe through the South China Sea (SCS) and the Indian Ocean, and China’s coast via the SCS to the South Pacific. 7 Zlatan Jeremic, Branislav Djordjevic, One Belt, One Road – Security Analysis, Thematical Proceeding from International Scientific Conference: Danube in the Function of the New Silk Road, Belgrade, 2016, p. 468.

279 these transnational risks, China should negotiate and provide assistance for domestic security organizations in countries along the OBOR networks. Security threats for the OBOR include: (a) great power geopolitics; (b) territorial disputes; (c) organized crime; (d) political instability (including colour revolutions); (e) economic and financial risks; (f) environmental and ecological hazards; (g) quality control; (h) China’s border security; (i) social and human security factors; (j) piracy along the Road; and (k) issues related to information security.8

SECURITY REVIEW IN DIFFERENT REGIONS

The rivalry between the bloc led by the US and the collaborative Allied‐ Moscow‐Beijing axis increases the possibility of destabilizing the regions: 1) Asia‐Pacific Region, which moves the focus of economic and political power; 2) the Middle East, whose economic importance and the energy accumulated internal contradictions continue to have a destabilizing potential; 3) the area of Central Asia, where the interests of the West intersect and 4) the European periphery, especially in the east and south. The OBOR initiative covers regions from Asia to Europe via Southeast Asia, South Asia, Central Asia, West Asia and the Middle East.9 Southeast Asia consists of Mainland Southeast Asia10 and Maritime Southeast Asia11. The likelihood of inter‐state wars in this region is greatly diminished, although territorial disputes and conflicting claims in maritime areas still exist. The region is increasingly confronted with non‐conventional

8 Wang, Y., and Zheng, D., Non‐traditional security challenges One Belt, One Road faces, China Opening Journal, Aug. 2015; and Liu, H., Security challenges to the One Belt, One Road strategy and China’s choices, Pacific Journal, no. 2 (2015). 9 In this paper is used The United Nations geoscheme as a system which divides the countries of the world into regional and subregional groups. It was devised by the United Nations Statistics Division (UNSD) based on the M49 coding classification. https://en.wikipedia.org/wiki/United_Nations_geoscheme. 10 Mainland Southeast Asia, also known historically as Indochina, comprising Vietnam, Laos, Cambodia, Thailand, Myanmar (Burma), and (West) Malaysia. 11 Maritime Southeast Asia comprising Indonesia, (East) Malaysia, Singapore, Philippines, East Timor, Brunei, Christmas Island, Andaman and Nicobar Islands, and Cocos (Keeling) Islands.

280 security threats such as international terrorism, organized crime, separatism, piracy, irregular migration, environmental issues, energy shortages, economic crises and epidemics. The most contested issue is the demarcation of maritime borders in the South China Sea where at least six claimants12 have occupied atolls and islets in the Spratly archipelago and erected military installations. Other hot spots which may trigger inter‐state wars are located outside the region13. Even if they explode into armed conflicts, their effects on Southeast Asia will be more of an indirect nature. They may increase the presence of external powers and militarize the region, but it is unlikely that they will draw the region into hostilities. International terrorism has the highest priority on the security agenda of Southeast Asia. The challenge of terrorism is its increasingly transnational organization and the fact that it is often directed against soft targets and civilians. Separatism still exists, but seems to be on the decline. There was an upsurge of separatism and ethno‐ religious violence in Southeast Asia in the 1990s. Even more speculative are suspected links between international terrorism, separatism and piracy. Although piracy is rapidly on the rise in Southeast Asian waters, there is so far only weak evidence for links between separatist groups, piracy and terrorism. Separatist forces, as well as the government troops fighting them, are engaged in arms smuggling, drug trafficking, illegal logging, protection rackets and money laundering.14 That makes security problems related to international migration and caused a dramatical increase of the migratory problems in Southeast Asia. Today, Southeast Asia is a sending region and a destination for migrants at the same time.15 A region connected with Southeast Asia which over helm countries from other regions is: The Asia‐Pacific region which has an important strategic position in the world.16 Currently, the situation in this region is stable on the whole. Political

12 China, Taiwan, Vietnam, the Philippines, Malaysia and Brunei. 13 Taiwan, the Korean peninsula and Kashmir. 14 Most Southeast Asian states are thus still on the negative list of the OECD’s Finance Action Task Force (FATF). 15 While Indonesia, Philippines and Burma are still sending nations, Malaysia and Thailand have become sending as well as receiving countries. Indonesia also has become a transit country for migrants from the Middle East en route to Australia. 16 The region typically includes much of East Asia (China, Hong Kong, Macau, Japan, Mongolia, North Korea, South Korea, Taiwan), South Asia, Southeast Asia, and Oceania.

281 mutual trust among countries has been strengthened, and major countries have interacted and cooperated with one another. Regional hotspot issues and disputes are basically under control but still face multiple destabilizing and uncertain factors. The nuclear issue on the Korean Peninsula is complex and sensitive; the reconciliation process in Afghanistan remains slow; and disputes over territorial sovereignty and maritime rights and interests continue to unfold. Some countries are increasing their military deployment in the region, certain countries seek to shake off military constraints, and some countries are undergoing complex political and social transformations. Non‐traditional security threats such as terrorism, natural disasters and transnational crimes have become more prominent.17 A consistent security framework in this region is not foreseeable in the near future, and it will be normal to see multiple mechanisms advancing together in the evolution of a regional security framework. All the countries involved should play their roles in safeguarding the regional peace and stability in parallel with the development of a regional economic framework. Security and development are closely linked and mutually complementary. Equal consideration should be given to both a security framework and an economic framework – the main components of the entire regional structure – to ensure their parallel development. The current territories of Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, India, Pakistan, and Sri Lanka form the South Asia region. The sub‐continent’s history, India’s strategic culture and the cycle of mistrust between the countries in the region make continuing tension and a low‐level conflict likely for the foreseeable future. The India‐Pakistan dispute is the dominant strategic issue in the region. All‐out war between the two countries seems unlikely at present, but tensions remain very high and have been exacerbated by terrorist attacks. The impact of any armed conflict between India and China over their disputed border region would be catastrophic, but there is little likelihood of this occurring. The relationship

17 Pushing forward the building of regional security mechanisms, China initiated the Shanghai Cooperation Organization (SCO), Six‐Party Talks, Xiangshan Forum, China‐ ASEAN Ministerial Dialogue on Law Enforcement and Security Cooperation, and Center for Comprehensive Law Enforcement and Security Cooperation in the Lancang‐Mekong Sub‐Region. China has actively supported the Conference on Interaction and Confidence‐ Building Measures in Asia (CICA) in its capacity and institution building, and participated in the ASEAN‐led multilateral security dialogues and cooperation mechanisms.

282 with India barely registers in China as a strategic issue. Multilateralism and security cooperation are distant aspirations. India sees any concession as a weakness that will lead its neighbours to take yet more from India. Transnational terrorism, with its roots in the India‐Pakistan conflict, is a particular threat faced by India. India and Bangladesh face threats from insurgent campaigns. Although the violence can be brutal, the insurgencies are localised and unlikely to represent a serious threat to the stability of the states, even as inequality grows as a result of economic development. Central Asia stretches from the Caspian Sea in the west to China in the east and from Afghanistan in the south to Russia in the north.18 Central Asia was the scene of wars and colour revolutions. An active conflict still rages in Afghanistan and spreads on Pakistan. Instability in Kyrgyzstan threatens to spill over into neighbouring countries, and any future conflict in which are included Iran, Syria and Lebanon, may be reflected in Central Asia. Control of Central Asia would upset the project OBOR and because of this the US strategy in Central Asia seeks to prevent the emergence of China as a global superpower, and China on the way to disable access to energy resources. Afghanistan’s continuing struggle with the Taliban insurgency and activity of Islamic State has caused concerns for neighbouring states Tajikistan, Turkmenistan and Uzbekistan. Fighting on the borders could spread into these states, possibly posing a threat to their ruling regimes. The flow of narcotics from Afghanistan, especially through Tajikistan, also generates security risks and cause high levels of corruption. Among the regional states, these challenges are aggravated by border tensions, ethnic‐minority disputes and problems of water security. Collectively, these challenges have led the defence policies and capabilities of all five Central Asian countries to focus almost exclusively on the internal stability and security at the expense of defence against the extra‐regional states. A significant development in recent years has been the expansion in support, training and capability development of the internal‐security forces that combat the region’s non‐state armed actors. Beijing, which is increasingly concerned with a potential effect on the Muslim Uighur population in China, has expanded its assistance to Kyrgyzstan and Tajikistan. This assistance ranges from economic projects to military assistance in the form of small‐arms

18 Central Asia region comprising Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan Uzbekistan and Afghanistan.

283 deliveries and the provision of anti‐terrorism. Despite the US military support, emerging Chinese military equipment and training programmes in the region, Russia remains the ultimate guarantor of stability. Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Palestinian territories, Saudi Arabia, Syria, Turkey, UAE, and Yemen are considered as West Asian countries.19 This region as a strategic place where two major overland and maritime routes will eventually meet, as the China – Central Asia – West Asia Economic corridor reaches Iran and Turkey and the Mediterranean Sea, the Red Sea and the Suez Canal, is of crucial importance for the success of OBOR initiative. The Middle East, because of its internal conflicts, reflects instability in a broader sense and thus making the Middle East dimension of OBOR route more complicated. An unstable security situation in the MENA region is characterized by: (1) spill over of the conflict in Syria and Iraq to the territories of other countries – Libya, Tunisia, Egypt, Niger, Algeria, Mali; (2) a large number of foreign fighters from Western countries in the MENA region and (3) humanitarian crisis caused by the large number of internally displaced persons and refugees.20 While regional states are concerned about the rise of extremism, the Gulf Cooperation Council (GCC) countries have long‐standing concerns about Tehran’s growing influence, the actions of its proxies and its military capabilities. The nuclear agreement with the P5+1 and the EU also begins to open the way for Iran to revamp its equipment inventory, with China and Russia potentially major suppliers, though sales of conventional systems remain embargoed for five years. The region itself contains contentious underlying security liabilities such as religious radicalism, an ethnic mosaic, a strained resource base (water, arable land), highly attractive natural resources (oil, gas), widespread terrorism, unfinished

19 West Asia is a term that refers to the western most part of Asia. The term is partly coterminous with the Middle East, which describes the geographical position in relation to Western Europe rather than the location within Asia. The Middle East and North Africa (MENA) is a transcontinental region centered on Western Asia and Egypt in North Africa. Due to the perceived Eurocentrism, international organizations such as the United Nations, have replaced Middle East with West Asia. 20 Since the beginning of Arab Spring, on december 2010 in Tunisia, there were 3 revolutions (Tunisia, Egypt, Yemen), 2 civil wars (Libya, Syria), one Cou d’état (Egypt), 2 foreign interventions (Bahrain, Libya) and few dramatically political reforms (Morocco, Algeria, Jordan etc.).

284 state‐building projects, democratic deficits (or worse), major power patrons, and growing poverty problems, which all accompany the traditional security problems as typically seen being between states and acted out through diplomacy or violence. In combination, this creates a highly complex and fragile system, where several of the above‐mentioned security issues are inter‐related and has system‐wide, regional, implications. Nowadays, the highest security risk and threat are those that come from the security interdependence of the area.21 The region‘s interaction with neighbouring countries is quite limited, as the interaction internally defines the complex. Even so, the Middle East has some adjacent regional security sub‐complexes encompassed in it: the Gulf (Iran, Iraq, Gulf Arab states led by Saudi Arabia), the , and the Levant. This sub‐complex is principally Israel and its immediate neighbours, and it is a mixture of states (Egypt, Syria, Lebanon, Jordan) and non‐state actors (PLO, Hamas, Hezbollah). Several countries have been directly engaged against Israel in significant ways (Iraq, Iran, Saudi Arabia, Kuwait, Libya, and Tunisia), giving rhetorical, financial, and sometimes military support. The Middle East could also be seen as a regional security complex full of other sets of security complexes, or sub‐complexes, which all have their own security issues that connect the states together in inextricably entangled relations. For instance, the Palestinian issue is a security concern for many states in the region, particularly within the Mashrek, and forms the Palestinian‐Israeli security complex. The Israeli‐Palestinian security complex can be defined as including the Palestinians, Israel and the countries that have been at war with Israel and that had, or still have, parts of their territory under Israeli occupation (Egypt, Jordan, Syria and Lebanon). Similarly, the rivers Euphrates and Tigris form the security issue for the three user states, Turkey, Syria and Iraq, and form a security complex. Being an area where major international political and economic challenges are being played out, the instability sometimes comes from outside of the Middle East, creating tensions that are shaping the global environment in which other state actors operate.22

21 Iranian nuclear threat, the conflicts between Israel and its neighbors and terrorists that are spread cross borders (Hezbollah is present in Syria and Lebanon) and the Palestine‐ Israel conflict (Jerusalem, West Bank, Gaza strip), ISIL spreading furthermore (already in Egypt, Gaza, Lebanon, Jordan, Iraq, Syria). 22 The global powers have a history of involving in the Middle East for economic, political and security purposes. The US has been involved military, political and economically

285 RELATIONS BETWEEN CHINA AND POWERFUL COUNTRIES IN DIFFERENT REGIONS

In current global political and security environment, besides the US, China is the only power capable to practice its maritime and continental dimensions of power. Other great powers with their geopolitical, geo‐economics and geostrategic projects for Eurasia consider the OBOR initiative as a security threat. Russia, the US, India, and Japan are all important players in the OBOR countries and could use their power to block China’s plans. Since 2015 the overall relationship between China and the US has remained stable and even made new progress. The two countries have made steady progress in the practical cooperation in various fields, and maintained close communication and coordination on major regional and global issues like climate change, the Korean and Iranian nuclear issues, Syria, and Afghanistan. Despite developed economic relations, China and the US deepened the relationship rivalry and a different view of the situation in the Asia Pacific region. China insists on establishing a model of relations between big powers, which means avoiding confrontation, mutual respect and cooperation on the win‐win basis. China does not observe in good faith the US alliances with Japan, South Korea and the Philippines, as well as friendly relations with Thailand, Taiwan and Australia. In this sense, it is making efforts to, as a factor of reduction of the US influence in the region, which forms a homogeneous and sealed Economic Community of Southeast Asia, expand economic impact on the state Association of Southeast Asian Nations (ASEAN), establishing transport routes directly from the US west coast and enhance impact on both Korea. It is possible that China will try to create a military‐political alliance of Southeast Asian nations relying on the ASEAN countries. China‐US military relations have generally maintained a momentum of steady progress.23 Since 2015, the two militaries have

in the region. Other countries are involved only military and economically – Russia, UK, Germany, France; while China and India benefit from the economy of the region. 23 In 2015 they held their Joint Humanitarian Assistance and Disaster‐Relief Field Exercise and Disaster Management Exchanges in China and the US and participated in Khaan Quest 2015 multinational peacekeeping military exercise and Exercise Kowari, a China‐ US‐Australia trilateral military exercise. In January 2016 a working meeting of officials from the two ministries of defence was held in Beijing, and in May a video conference was held between the Chinese Chief of the Department of the Joint Chiefs of Staff of the Central Military Commission and the US Chairman of the Joint Chiefs of Staff. From

286 continued to improve their two mutual‐confidence‐building mechanisms: the Mutual Notification of Major Military Activities24 and the Rules of Behaviour for the Safety of Air and Maritime Encounters25. Over the years, China‐Russia relations have gained healthy, stable and fast development, made new achievements through joint efforts and can be defined as a rival‐partner.26 With the battle for dominance in the region of Eurasia, Middle East, South and Southeast Asia, two countries are developing partnerships to strengthen counterbalance pressure from the West. China and Russia are found in all major integration processes, above all in the format of BRICS, the SCO and the Forum ‘’Peace ocean‐Asia economic cooperation’’. The two sides continue to strengthen their cooperation within regional multilateral frameworks, safeguard the purposes and principles of the Charter of the UN and universally recognized norms governing international relations, uphold the achievements of WW II and international justice, advance the process of a political solution to regional hotspot issues, and contribute more positive energy to the regional peace, stability, development and prosperity. Since 2015, the China‐India strategic partnership for peace and prosperity has been further deepened in various areas and stayed in close communication and coordination on regional and international issues. They have cooperated on climate change, energy and food security, reform of international financial and monetary institutions and global governance. The relations between the Chinese and Indian militaries remain healthy and stable in general, with increasingly close communication and pragmatic cooperation in greater breadth and depth.27 Cooperation in

late June to early August 2016, Chinese Navy Fleet 153 participated in RIMPAC 2016, a joint military exercise in Hawaii. In July and August the same year, the US Chief of Naval Operations and Chief of Staff of the Army each made a visit to China. 24 For the whole document see Internet: https://www.defense.gov/Portals/1/Documents /pubs/141112_MemorandumOfUnderstandingOnNotification.pdf 25 For the whole document see Internet: https://www.defense.gov/Portals/1/Documents /pubs/141112_MemorandumOfUnderstandingRegardingRules.pdf 26 In 2001 the two countries signed the Good‐Neighborly Treaty of Friendship and Cooperation, which established the idea of a lasting friendship in legal form. In 2011 the bilateral relationship was upgraded to a comprehensive strategic partnership of coordination based on equality, mutual trust, mutual support, common prosperity and lasting friendship. In 2014 the China‐Russia comprehensive strategic partnership of coordination entered a new stage.

287 personnel training, professional exchanges and other fields is being carried out. The two sides have also conducted border defence cooperation, which plays a positive role in maintaining peace and tranquillity in the border areas between China and India.28 China‐Japan relations have maintained a considerable economic cooperation, despite complex and sensitive factors in bilateral relations have been disrupted following a dispute over islands in the South China Sea. The difficulties in bilateral relations are the result of Japan’s unilateral resolution of the status Diaoyu Islands (Senkaku). Japan has a series of actions (appointment of the islands in the archipelago, landing in the land of the island, their purchase from the Kurihara family, etc.) threatening bilateral relations. It is estimated that the islands possess the great natural resources of oil and gas, although neither side had conducted research. China is determined to be no compromise on this point, but for stability and peace in the region is ready for joint exploitation of resources.

CHINA’S POSITION ON DIFFERENT HOT SPOTS

The Korean Peninsula nuclear issue is important for China which considers that the denuclearization of the peninsula, its peace and stability, should be settled through dialogue and consultation. It has made tremendous efforts to facilitate the process of denuclearization of the peninsula, safeguard the overall peace and stability there, and realize an early resumption of the Six‐Party Talks.29 Concerning nuclear tests and launched missiles of various types made by South Korea, China has made clear its opposition to such actions and supported the relevant Security Council resolutions to prevent the further pursuit of nuclear weapons. Despite clear opposition from relevant countries including China, the US and the South Korea announced the decision to start

27 Eight rounds of defence and security consultation and six joint military anti‐terrorism training exercises have been held so far. 28 Military leaders of the two sides visited each other in 2015 and 2016, and reached an important consensus on strengthening pragmatic cooperation between the two militaries and working together to maintain peace and stability in the border areas. 29 The six‐party talks aim to find a peaceful resolution to the security concerns as a result of the North Korean nuclear weapons program and its withdrawing from the Nuclear Non‐ Proliferation Treaty (NPT) in 2003. There has been a series of meetings with six participating states in Beijing: South Korea, North Korea, United States of America, China, Japan, Russia.

288 and accelerate the deployment of the THAAD anti‐ballistic missile system in the South Korea. Such an act would seriously damage the regional strategic balance and the strategic security interests of China and other countries in the region, and run counter to the efforts for maintaining peace and stability on the Korean Peninsula. China opposes the US and South Korea deployment of the THAAD anti‐ballistic missile system in the South Korea, and strongly both sides to stop this process. At present, the counter‐terrorism situation is undergoing complex changes. Several regions face severe security challenges posed by violent and extremist ideologies spreading at an ever‐faster pace, more active terrorist and extremist forces, rising threats from cyber terrorism, and frequent violent terrorist activities, in particular, the infiltration of international terrorist organizations and the inflow of foreign fighters. The Chinese government opposes terrorism in all forms and calls on the international community to cooperate in fighting terrorism on the basis of the principles of the Charter of the UN and other universally recognized norms governing international relations. Additionally, there should be no double standard in fighting terrorism, which should not be associated with any particular country, ethnicity or religion. Since 2015, China has cooperated with a number of neighbouring countries in combating terrorism‐related human smuggling. These efforts inflicted a heavy blow to the illegal human smuggling networks of the “Eastern Turkistan Islamic Movement”30 and other terrorist organizations, and effectively countered and prevented the infiltration efforts of the ETIM and other terrorist organizations. China has held bilateral anti‐ terrorism consultations with the US, Russia, Canada, the United Kingdom, India, Pakistan, the South Korea and Indonesia, hosted the 13th ARF Inter‐ Sessional Meeting on Counter‐terrorism and Transnational Crimes, and promoted cooperation on combating Internet‐spread violent and terrorist audios/videos and cross‐border terrorist activities. In addition, by taking an active part in the APEC Counter‐terrorism Working Group, the Global Counter‐ terrorism Forum and the ASEAN plus China Meeting on Transnational Crime at ministerial level, China has strengthened exchanges in anti‐terrorism cooperation. China, Afghanistan, Pakistan and Tajikistan have established a coordination mechanism on counter‐terrorism cooperation among the military

30 The East Turkestan Islamic Movement (ETIM) is a Muslim separatist group founded by militant Uighurs, members of the Turkic‐speaking ethnic majority in northwest China’s Xinjiang province.

289 forces of the four countries, aimed at conducting coordination on situation analysis, verification of clues, sharing of intelligence, capacity building, joint training and personnel training, and providing mutual assistance. Maritime cooperation is a key part of building the 21st Century Maritime Silk Road. China and the ASEAN countries conducted a series of cooperative events on maritime security, scientific research and environmental protection.31 The overall maritime situation is characterized by frequent cases of piracy, smuggling and drug trafficking. Misunderstandings and lack of mutual trust among some countries about traditional security issues also pose risks to maritime security. Maintaining maritime security is the shared responsibility of all countries in different regions, and serves the common interests of all parties. Strengthening cooperation and jointly tackling challenges with all relevant parties to maintain maritime stability is a proper way to reach maritime security. China is actively involved in international cooperation in combating transnational organized crimes and maintains sound cooperation with the UN and other international and regional organizations. It has facilitated law‐enforcement and security cooperation along the Mekong River and conducted multiple joint actions with the Southeast Asian countries in combating transnational crimes, and effectively fought against human trafficking, telecom fraud, economic crimes and drug‐related crimes that are prevalent in the region. China is a supporter and an active participant in international efforts to ensure cyber security as an issue that should be used to promote economic and social development and maintain international stability. China has continued to promote cyber security within the UN framework, been deeply involved in the process and has continuously strengthened bilateral dialogues and practical cooperation on cyber security with all countries.

CONCLUSION

China is more frequently presented as a great power, with a historical role in the international arena, given by its size, culture and economy. China’s

31 China and Thailand conducted a scientific expedition in the Andaman Sea, and held the Fourth Joint Committee Meeting on Maritime Cooperation. China and Malaysia signed the Memorandum of Understanding on the Establishment of the China‐Malaysia Joint Oceanographic Research Center.

290 foreign policy could be described as a sum between the “neighbourhood diplomacy” and “great powers diplomacy”. In this context, the OBOR initiative seems appropriate for the present political and economic development of China, together with its considerations regarding the international relations. However, this strategy is exposed to several risks that exist in regions along OBOR. Until now, the OBOR initiative seems better articulated than other similar projects if we consider its soft power and other diplomatic activities, its strategic and planning and the financial resources. The Chinese investment in countries along OBOR may be exposed to regional turmoil and conflicts, terrorism and religious conflicts. It is worth noting that the Chinese enterprises investing overseas have yet to devise a comprehensive security strategy for dealing with such risks. They currently rely mainly on Chinese consular and diplomatic protection, which are certainly inadequate safeguards against major threats such as terrorism and ethnic and sectarian religious violence.

BIBLIOGRAPHY

Chinese State Council Information Office, Internet: http://www.scio.gov.cn/ Mutual Notification of Major Military Activities, Internet: https://www. defense.gov/Portals/1/Documents/pubs/141112_MemorandumOfUnd erstandingOnNotification.pdf Rules of Behaviour for the Safety of Air and Maritime Encounters, Internet: https://www.defense.gov/Portals/1/Documents/pubs/141112_Memora ndumOfUnderstandingRegardingRules.pdf United Nations Statistics Division (UNSD) based on the M49 coding classification, Internet: https://en.wikipedia.org/wiki/United_Nations_ geoscheme. Wang, Y., and Zheng, D., Non‐traditional security challenges One Belt, One Road faces, China Opening Journal, Aug. 2015; and Liu, H., Security challenges to the One Belt, One Road strategy and China’s choices, Pacific Journal, no. 2 (2015). Zlatan Jeremic, Branislav Djordjevic, One Belt, One Road – Security Analysis, Thematical Proceeding from International Scientific Conference: Danube in the Function of the New Silk Road, Belgrade, 2016, p. 468.

291 NEW SILK ROAD SECURITY CHALLENGES

Sergej ULJANOV, Ph.D. Ministry of Interior Republic of Serbia, Belgrade, Serbia1

Abstract: The author directs his attention to real security challenges affecting the new Silk Road. At first, he stresses out the historical importance of the Silk Road and uniqueness of the new Silk Road comparing their international impacts. Subsequently, the author introduces us to criminal activities close to the Silk Road and explains their actual forms relate to the new Silk Road and its directions. Analyzing illegal activities as being a burden to the continental north and maritime south segments of the new Silk Road, the author especially singles out and deals with phenomena of trafficking in illicit goods, smuggling of illegal migrants, trafficking in human beings and maritime piracy. The author’s intention in the article is to warn of present criminal threats which endanger geopolitical and geo‐economics necessities of the new Silk Road to be. Key words: Silk Road, new Silk Road, trafficking in illicit goods, smuggling of illegal migrants, trafficking in human beings, maritime piracy.

INTRODUCTION

It is in human nature to explore surroundings and communicate with neighboring individuals and communities, just as groups, tribes and nations. Established approximately two hundred years before Christ, the Silk Road connected the ancient Far East and Europe, leading through and the Middle East, being consisted of Maritime Spice routes and Eurasian landlocked steppes. These huge networks enabled more than just trading links considering the exchange of luxurious goods and rare spices. Essentially, the constant movement and mixing of populations caused the transmission of information, ideas, knowledge, cultures and beliefs, which had an impact on the historical flows and progress of the Eurasian civilization.2

1 E‐mail: [email protected] 2 According to UNESCO project “Integral Study of the Silk Roads: Roads of Dialogue, 1988‐ 1997”, 2002, p. 1.

292 The fame of Chinese textiles was spread beyond the steppe due to the fact of trading in silk with the nomads.3 One can say ‘they also contributed to the demand for certain trade goods on this route, which soon became one of the major communication and transportation arteries of Eurasia that, taken together, came to be known in modern times as the Silk Road’.4 Actually, it was a system of commercial routes, on both land and sea, which linked various peoples from China to the Mediterranean (Liu, 2010, p. 10). Subsequently, new communities of traders settled along these routes to meet the demand for luxury goods at either end of this route system.5 The merchants often organized themselves into caravans‐trading teams that carried goods.6 Caravan cities started to form along the trunk routes of the Silk Road to host the caravans, beginning around the early first century BC.7 Caravans link up from all over the world, bringing exotic goods to China and taking Chinese products back along the extensive network of oases that developed along the Silk Road.8 In the 5th century, the open exchange of ideas, cultures and art created a vibrancy and growth in economic, social and cultural affairs along the Silk Road that was incomparable at the time.9 With the beginning of the 10th century, political instability in China led to economic decline and blocked the import of luxury goods into the country (Ouyang, Gordon, 2014, p. 1). In the 14th century, China was even more effectively closed to the outside world.10 Land caravans fell out of favor and merchants began to utilize shipping as new and cheaper forms of transport (Ouyang, Gordon, 2014, p. 11). Likewise, ‘other countries also mastered the cultivation and production of silk, resulting in declining need for an exchange of ideas and technology’.11 The once lustrous trade route had turned into a dusty byway of meager economic interest, by the 15th and 16th centuries (Ouyang,

3 Xinru Liu, The Silk Road in World History, 2010, p. 10. 4 Ibidem. 5 Ibidem. 6 Xinru Liu, Ibid., p. 10‐11. 7 Xinru Liu, Ibid., p. 11. 8 Yongfu Ouyan, Bradley Gordon, “Investment Guide to the Silk Road“, 2014, p. 1. 9 Ibidem. 10 Ibidem. 11 Ibidem.

293 Gordon, 2014, p. 1). Therefore, conventional history of the Silk Road stops with the European Age of Discovery and the opening of maritime routes to the East in the late 15th century (Waugh, 2010, p. 18). However, there had already been for a long time an extensive maritime trade between the Middle East, South Asia, Southwest Asia, and East Asia.12 By all means, the relative value of overland and sea trade changed, as did the identity of those who controlled commerce (Waugh, 2010, p. 18). Obviously, ‘despite growing political disorders disrupting the overland routes, many of them continued to flourish down through the 17th century’.13 Indian and Armenian merchants were playing important roles causing new trading posts to emerge and trade along the Silk Roads continued, even if transformed in importance, into the 20th century.14 As the economies of the Silk Road begin to revive and re‐ emerge as global players, the Silk Road region has the potential to become internationally important once again for trade and a leading destination for foreign investment.15 In September 2015, China’s National Development and Reform Commission, the Foreign Ministry and the Ministry of Commerce announced that the scheme considering land and maritime Silk Roads has official English name ‘The Belt and Road’.16 This concept ‘comprises two physical routes, with numerous side‐branches along the way’.17 These two different routes ultimately connect China with Europe, Africa and Southeast Asia (van der Leer, Yau, 2016, p. 2). As a matter of fact, the Belt and Road means both, a land route running from inner China to Southern Europe (via the Netherlands) and a sea route connecting the port of Shanghai finally with the end point of the land‐based route in Venice, via India and Africa.18 Due to the fact of its immeasurable worth, the New Silk Road having the framework of ‘Belt and Road’ concept and strategy are constantly targeted by organized criminal activities such as inter alia trafficking in illicit goods, smuggling of illegal migrants, trafficking in human beings, and maritime piracy.

12 Daniel Waugh, “The Silk Roads in History”, 2010, p. 18. 13 Ibidem. 14 Ibidem. 15 Yongfu Ouyan, Bradley Gordon, op. cit., p. 11. 16 Yeroen van der Leer, Joshua Yau, “China’s new silk route‐The long and winding road”, 2016, p. 2. 17 Ibidem. 18 Ibidem.

294 TRAFFICKING IN ILLICIT GOODS

According to INTERPOL definition, trafficking in illicit goods is a generic term which includes such illegal actions as trademark infringements (counterfeiting), smuggling of legitimate products, copyright infringements (piracy) and tax evasion. Illicit trade means selling fake or counterfeit products as the real thing, just as selling genuine goods on the black market to avoid paying taxes. In Europe, the trafficking in illicit goods, cigarette smuggling, forging and counterfeiting has a dramatic and detrimental impact on legal trading with a potential to become more problematic, relates to the recent decline of the global economy and increase the volume of illicit goods to be sold. While, earlier, targeted were luxurious goods regarding fashion, music and film products, today forging and counterfeiting are about affecting a wider range of consumer goods like food, cosmetic products, hygienic articles, spare parts for vehicles, toys and various kinds of technical or electronic equipment. Besides causing the loss of the tax income, cigarette smuggling matters in many ways consumers’ health also, not to highlight the enormous profitable source made of full scaled illegal trafficking to the organized criminal network. Avoiding regulatory controls gives an opportunity to illegal traders for offering quite dangerous products with a complete disregard for the consumers’ health and safety. The European Union is strongly exposed to the incoming of illicit products of Chinese origin19, smuggled and distributed through the Middle East, the Horn of Africa and the Maghreb toward countries in Western and Central Europe, just like in . Undoubtedly, one of those channels for trafficking in illicit goods is the region of Western Balkans. These goods are to endanger consumers’ health condition having been made of unhealthy material. Mostly it considers: – Clothing; – Footwear; – Sports confectionary and equipment; – Cosmetic and perfumery products for home use; – Food products; – Cigarettes and tobacco goods;

19 It considers goods produced in China and South American states in 90% of cases.

295 – Alcoholic drinks; – Agro‐chemical products; – Medical aids and pharmaceutical products; – Artificial orthopedic implants made of poor quality alloys;20 – Trademarks; – Toys and wristwatches; – Electronic devices; – Products of IT industry and software; – PC hardware; – Audio and video records on compact discs, books and printed publications and, even, – Spare parts for vehicles. INTERPOL provides support to the national police forces in member states and to the other competent agencies,21 to: enhance the ways of data exchanging; enable improvement of international cooperation in the fields of risk analyses and police operational analyses; coordinate investigating having logistic support in databases of the General Secretariat of INTERPOL; realize interception and seizure of delivery considering counterfeited or else illicit goods and arrest offenders; create conditions for running controlled deliveries22 according to the actual member states’ legislative frameworks; detect and stop international organized criminal groups in further illegal activities regarding trafficking in counterfeited or else illicit goods and to analyze all seizures of illicit products to get new trends identified and upgrade knowledge of law enforcement agencies about complexity and various modus of the criminal activity, as well. Growing to an unprecedented level and following the new Silk Road network, the criminal phenomenon poses tremendous risks to society and the world economy. All levels of society are impacted by trafficking in illicit goods. Forging and illicit trading harm solid businesses which produce and sell legitimate goods. Subsequently, governments lose tax revenue from the

20 Such an artificial orthopedic implant could cause cancer by damaging human tissue and bones. 21 Like Customs Service is, for example. 22 If it matters the reshipment of goods with suspicious origin (like observed containers, etc.).

296 products illegally produced or sold on the black market. Hence, consumers are at risk from fake products. There has been established a strong connection between the trafficking of illicit goods and transnational organized crime. Criminal organizations are targeting the lucrative profits involved in trading forged or fake goods, just as in trading proper products through illegal channels. So, illicit goods are manufactured and traded on a regional and increasingly global scale. New technology is exploited by organized criminal groups. Differences among the national legislative and strings between the global finance, economic and transportation systems are used for a criminal purpose, obviously. Gained profits fund other criminal activities such as robbery, drug trafficking and people smuggling.

SMUGGLING OF ILLEGAL MIGRANTS

Favorably located along the New Silk Road, nearly a hundred of smuggling hotspots strongly attract migrants just as criminal networks.23 The Western Balkans as a transiting zone connects African, Asian and European parts of the New Silk Road network. Illegal migration routes lead from the Far East and Central Asia to be intersected with people smuggling channels run from East, Central and across its northern part, Mediterranean countries and the Middle East then, toward Southeast Europe and further to the north and west directions. Transport infrastructure such as international train stations, airports and service stations for long distance buses are needed locations for migrant smuggling activities. Migrant smugglers rely on inadequate border controls and the corruption of border guards, police patrols or navy officers to facilitate their activities in areas with weak law enforcement controls or poor rule of law implementation. Nevertheless, illegal migrants are a potentially cheap labor force on the criminal markets in the economically powerful states.24 Thus, organized criminal groups dealing with people smuggling use lower‐level contacts that are part of their personal network. Mostly, these contacts are drivers, crew members, scouts, or recruiting agents.25 A rough estimate of the yearly

23 According to Joint Europol‐INTERPOL Report, 2016, p. 7. 24 Ibidem. 25 Joint Europol‐INTERPOL Report, Ibid., pp. 7‐8.

297 turnover of migrant smuggling can be produced based on the number of migrants who entered the EU in 2015: approximately 1 million people entered the EU, most of whom were facilitated, and who paid an average of USD 3,200 – 6,500 (EUR 3,000‐ 6,000) and so, this would result in an average turnover of USD 5 to 6 billion in 2015 (Joint Europol‐INTERPOL Report, 2016, p. 8). It is to be highlighted that the illegal migration has taken on new proportions in recent years, especially in the Mediterranean region, as a core segment of the New Silk Road. Linked to people smuggling are other crimes such as illicit money flows, the use of fraudulent travel documents and trafficking of human beings. In 2015, over 220 smugglers were identified by Europol as being involved in more than one crime area and out of these, 22% were linked to drug trafficking, 20% to trafficking in human beings, 20% to property crime and 18% to forgery of documents (Joint Europol‐INTERPOL Report, 2016, p. 9). Regarding future trends and risks on people smuggling phenomenon, ‘it is expected that: – Document counterfeiting will further increase as a supporting crime; – Cases of human exploitation, especially labor exploitation, may increase predominantly in the countries of destination of migrants; – The links between migrant smuggling and other types of crimes will remain stable (e.g. trafficking in human beings, drugs trafficking, smuggling of goods); – Unaccompanied minors may be further victimized, as they may be sexually exploited, forced to commit criminal activities, or else be involved by smugglers in the recruitment of other potential clients and finally – The demand for identity and travel documents of unlawful origin will increase, possibly with more demand for high‐quality counterfeits’.26

TRAFFICKING IN HUMAN BEINGS

As a horrible face of slavery today, human trafficking is a multi‐billion‐ dollar resource of international organized crime profit (Uljanov, 2013, p. 284). Recruited victims are trafficked westward along the New Silk Road. Stripped of their autonomy, freedom of movement and choices, they are forced to

26 Joint Europol‐INTERPOL Report, Ibid., p. 11.

298 suffer various modes of mental and physical abuse. According to INTERPOL,27 prevailing ways of human trafficking are defined by their causes as: – Sexual exploitation; – Harvesting of tissue, cells and organs and – Forced labor. Trafficking in women for sexual exploitation is a dominant form of trafficking that hits every part of the New Silk Road to the detriment of either source, transit or destination countries. Provided with false travel documents and transported to the targeted countries, victimized women and children find themselves forced into sexual slavery and held in a constant fear and inhumane conditions. As a criminal phenomenon that follows directions of the New Silk Road, trafficking for tissue, cells and organs, kidneys especially,28 grows rapidly. Criminals use the opportunity to exploit the desperation of patients and possible donors (Uljanov, 2013, p. 288). The health and lives of victims are at risk as operations may be carried out in unhygienic clandestine conditions with no standard medical logistic. The increased problem of diabetes increases the requirement for organ transplants making these illegal actions even more profitable.29 For the cause of forced labor victims come from economically poor countries, primarily. Recruited and trafficked by coercion and deception (Uljanov, 2013, p. 280), they find themselves held in conditions of slavery in numerous kinds of jobs. Adult and minor, both sexes are engaged in illegal mining, agricultural and construction work, just as regarding domestic servitude, work in green markets and fisheries. Therefore, as a typical criminal activity in Southeast Asia, fisheries is targeted of our efforts to focus a special attention to it as an existing problem affecting the core segment of the New Silk Road.30 Agents recruit locally with promises of well‐paid work. In fact, excessive fees are paid in advance. Assets are held

27 More details on Internet: https://www.interpol.int/Cime‐areas/Trafficking‐in‐human‐ beings/Trafficking‐in‐human‐beings, 14.08.2017. 28 Kidney is most appropriate human organ to be transplanted for its characteristics of durability and simplicity to be transplanted from living donor that could remain with another kidney, afterward. 29 Ibid. 30 See information on Internet: https://www.interpol.int/News‐and‐media/News/2017/ N2017‐057, 17.08.2017.

299 as collateral and agencies contravene regulations. Thus, family members are liable for non‐fulfillment of contracts and there is reliance on migrant workers. Consequently, long periods of time is spent at sea with salary withheld or unpaid. It is followed by restricted freedom of movement, violence and abuse, just like parameters of indecent living conditions. Dangerous and illegal working tasks consider mixing licit and illicit fish products. Owner and operators dealing with particular companies gain profit‐driven business model having front companies as an umbrella. Such a criminal conspiracy leads to money laundering, fraud and other serious crimes. It affects on international distribution and trade of fish and seafood. Essentially, this is a sale of illegally caught fish under conditions of slave labor committed by trafficked individuals.31 In international operational police cooperation next problems have been noticed causing possibilities for human trafficking flourishing: – Untimely sending of information; – Failing to establish identity on the basis of photographs and fingerprints or DNA profiles, but basing it on repeated false identity particulars; – Failing to respect exact information which is forwarded, such as failing to use true identity particulars after identity has been established; – Not providing feedback (e.g. the information on established identity, the close of a case, additional data on criminal connections, telephone subscribers and other); – Repeating requests which have already been answered to via parallel channels through contacting local police services directly; – Single‐minded ambitions to close a case and – Random conducting of a case, without using the essential police approach. – Looking for solutions, following patterns are recommended to make problem overpowered: – Timely exchange of all information; – Regular holding of bilateral and trilateral meetings; – The use of liaison officers;

31 Ibid.

300 – The use of institution of international requests for concrete investigative actions: search of dwellings, wiretapping, DNA profiles, gathering evidence; – Transfer of criminal proceedings; – Trust and truthfulness in co‐operation32 and – Joint investigations. Consequently, one can establish connections among various modes of criminal phenomena endangering the New Silk Road. Organized crime seeks for data and providing data through cyber criminal activities to achieve following goals: – Victims detecting; – Victims recruiting; – Keeping a low profile of illegal activities; – Logistic support (e.g. transportation, accommodation, staying, documents, identity, etc.) – Money transfer (payments) – Supporting of criminal activities flows – Black markets creating So, let us stress out that in the network of the New Silk Road cyber crime is an intersection for various criminal activities deriving from phenomenological directions of people smuggling, human trafficking (for forced labor, especially) and trafficking in illicit goods. As a matter of fact, trafficking in drugs, organized crime, money laundering, trafficking in firearms and environmental crime interactively make mutual influence through the various modi operandi of trafficking in illicit goods.

MARITIME PIRACY

Maritime piracy does not only threat the very parts, but it also threats the New Silk Road network globally. Nowadays, approximately 80 percent of international trade relies on the sea routes (A World Bank Study, 2013, p. 33). As a menace to political stability and an international security burden,

32 It means that information cannot be required without the readiness to provide it.

301 maritime piracy devastates the global growth prospects and blocks it to go forward. According to the World Bank Report, just the problem of piracy off the Horn of Africa has cost an annually average of ‘US$18 billion loss to world trade’.33 In the way, the phenomenon of piracy has the same effect as imposing an additional ‘value‐added tax’ on all shipments that transit through the Eastern African waters raided by pirates. These costs include: – Insurance premiums for cargo; – Crew salaries and bonuses; – Vessels equipment; – Rerouting or canceling shipments; – Use of enhanced security measures and – Contracted armed security personnel to counter pirate attacks.34 As a hotspot of maritime piracy, the Horn of Africa has been replaced by the South China Sea region, in a recent couple of years. In Southeast Asia, waters of China and Vietnam especially, vessels are mostly raided while berthed and anchored.35 This is quite a different modus operandi compared to pirate raids operating off the coasts of Somalia and Kenya with steaming vessels as predominant targets. One of the core parts of maritime Silk Route, the South China Sea encompassing an area south of China, east of Vietnam, west of Philippines, east of Malay peninsula and Sumatra, up to the strait of Singapore in the western and north of the Bangka Belitung Islands and Borneo. Literally, hundreds of islands create an archipelago, in the region, appropriate for pirates’ hideouts hard to be controlled, as well. Due to the fact of having tremendous strategic importance, ‘one‐third of global shipping passes through the South China Sea carrying over US$3 trillion in trade, annually’.36 Vessels were boarded in Vietnam and Chinese waters in 2015 three times more than in previous periods, while there were no registered attacks in the Gulf of Aden at all (IMB Annual Report, 2016, p. 7). In 2016, knives and guns were commonly used in pirates’ raids more than any other

33 “Pirate Trails“, A World Bank Study, 2013, p. 33. 34 Ibidem. 35 ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, 2016‐ Annual Report, 2017, p. 8. 36 China Power Team, “How much trade transits the South China Sea?”, 2017, p. 1.

302 kind of weapons.37 In the same year, more than a half of the total number of attacks happened in the South China Sea.38 During the first three months in 2017, Philippines are leading on the black list regarding even ten cases of kidnapping and two cases both considering threatening and killing vessels’ crew members.39 Analyzing possible connection among piracy and the other forms of criminal activities following illegal affairs are linked to pirates’ raids on the maritime Silk Route. After committed attacks, criminals spend their proceeds not only on drugs, vehicles and liquids but also on ‘trafficked girls and sex workers or even sex slaves (e.g. girls as young as 14 were being trafficked for “pirate consumption”)’.40 Pirate financiers spend their profits on a wide range of legal and illicit activities including on human trafficking, people smuggling and buying weapons, liquids, drugs, real estate, just like companies.41 As of most concern it is to be underlined that ‘pirate financiers have now evolved to the point where they are not only the most profitable criminals at sea but also some of the most powerful actors on land, thanks to their weaponry and economic influence’ (A World Bank Study, 2013, p. 67). Finally, the connections among maritime piracy, people smuggling, human trafficking as sex slavery, illegal buying of stolen vehicles and smuggled weapons, money laundering through investments in real estates, the founding of fake companies and possible funding of terroristic groups, are developing supported by corruption and vulnerability of targeted shipping.

CONCLUSION

Having exceptionally rich resource endowment, educated labor force and strategic location connecting East and West, the Silk Road economies present a great attraction to resource and strategic asset looking for investors (Ouyang, Gordon, 2014, p. 44). Nevertheless, ‘the region is turning its huge potential into profitable opportunities and has become a substantial market

37 ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, op. cit., p. 10. 38 IMB Piracy Report, 2016. 39 ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, 2017‐First Quarter Report, 2017, p. 11. 40 “Pirate Trails“, op. cit., p. 66. 41 Ibid., p. 67.

303 for investors thanks to robust economic growth, which has been among the fastest in the world in recent decade’.42 With more than 150 million people living in the region, the Silk Road not only offers investors a promising regional market, but also access to huge markets in Turkey, China and the Russian Federation.43 It is to be stressed out that continuously improving investment environment, strengthened infrastructure, political and social relative stability across the region, and ongoing efforts to boost intraregional and interregional economic integration are attractions enough for international investors (Ouyang, Gordon, 2014, p. 44). As a new expression of Silk Road idea, the ‘concept of “Belt and Road” is more a large “umbrella” way of initiative’.44 It seems to be a potentially huge collective and current, planned and future infrastructure projects focusing the development of wide array of assets, including ports, roads, railways, airports, power plants, oil and gas pipelines, refineries just as zone of free trade, and supporting informatics, telecom network and financial infrastructure, as well (van der Leer, Yau, 2016, p. 3). Essentially, the very profile of ‘Belt and Road’ strategy takes into considering following mutually dependent and interconnected core issues: 1) Outbound capital projects and infrastructure; 2) Transportation/logistics; 3) Technology expert/licensing; 4) Engineering services export; 5) Construction/labor export; 6) Equipment export and 7) Outbound financing.45 There are many barriers for China and the other countries involved, of which rough terrain, persistent regional conflicts, thriving corruption, and skepticism amongst various countries towards China and its intentions are just some.46 For sure, ‘the sheer amount and variation of challenges will make the realization of the ‘Belt and Road’ initiative a very complex endeavor’.47 There is a long and winding road ahead before China, along with all the underdeveloped nations across Central Asia and the Middle East, can reach the position, influence and level of prosperity that they once held in the days of the ancient silk routes (van der Leer, Yau, 2016,

42 Yongfu Ouyan, Bradley Gordon, op. cit., p. 44. 43 Ibidem. 44 Yeroen van der Leer, Joshua Yau, op. cit., p. 3. 45 Yeroen van der Leer, Joshua Yau, Ibid., p. 6. 46 Yeroen van der Leer, Joshua Yau, Ibid., p. 7. 47 Ibidem.

304 p. 7). The fact of existing security challenges, some of them analyzed in this article, is a serious threat to the essential purpose of the New Silk Road and jeopardizes each and every benefit possible to be achieved in the future days. Let us be aware of Robert Rice’s saying: ‘Crime is a logical extension of the sort of behavior that is often considered perfectly respectable in legitimate businesses.

BIBLIOGRAPHY

“Migrant Smuggling Networks”, Joint Europol‐INTERPOL Report, IPSG, Lyon, 2016. “Pirate Trails”, A World Bank Study, World Bank, Washington DC, 2013 “Report on Organ Trafficking“, IPSG, Lyon, 2006. China Power Team, “How much trade transits the South China Sea?”, Center for Strategic and International Studies, Washington DC, 2017. Daniel Waugh, “The Silk Roads in History”, in: Expedition Magazine, Volume 52, No. 3 (November 2010), University of Pennsylvania Museum of Archeology and Anthropology, 2010. ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, 2015‐Annual Report, Cinnabar Wharf, London, (Jan.) 2016. ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, 2016‐Annual Report, Cinnabar Wharf, London, (Jan.) 2017. ICC International Maritime Bureau, “Piracy and Armed Robbery against Ships”, 2017‐First Quarter Report, Cinnabar Wharf, London, (May) 2017. Internet: https://www.interpol.int/Cime‐areas/Trafficking‐in‐human‐beings /Trafficking‐in‐human‐beings, 14.08.2017. Internet: https://www.interpol.int/News‐and‐media/News/2017/N2017‐ 057, 17.08.2017 Sergej Uljanov, „Međunarodna policijska saradnja u borbi protiv organizovanog kriminala, sa posebnim osvrtom na problem trgovine ljudskim organima“, u: Strani pravni život, br. 1/2013, Institut za uporedno pravo, Beograd, 2013. The Silk Roads Project: “Integral Study on the Silk Roads: Roads of Dialogue, 1988‐1997”, UNESCO, Paris, 2002.

305 Xinru Liu, “The Silk Road in World History”, University Press, Oxford, 2010 Yeroen van der Leer, Joshua Yau, “China’s new silk route‐The long and winding road”, PwC’s Growth Markets Centre (February), Singapore, 2016. Yongfu Ouyan, Bradley Gordon, “Investment Guide to the Silk Road”, UNCTAD, Geneva, 2014.

306 THE CHINESE APPROACH TO ENERGY SECURITY IN THE CONTEXT OF THE “ONE BELT, ONE ROAD” INITIATIVE

RUIZHONG Li, PhD. Engineer‐in‐Charge China Electric Power Planning & Engineering Institute, Beijing, China1

Abstract: Energy is the motive power propelling human society to evolve. With the rapid economic growth and industrialization, China’s energy industry has developed rapidly in the past decades, making it the largest energy consumer and producer in the world. China has been deeply involved in the international energy market with large‐scale energy trade and cooperation projects around the world. Energy cooperation under the Belt and Road initiative is all‐dimensional and multi‐tiered and has made fruitful achievements, offering vast potential for future development, bearing much importance for China’s energy security. Despite the important and fruitful results of energy cooperation, there still are challenges and obstacles facing China and the Belt and Road countries. Measures to tackle these challenges must be put into practice, which include: participating in global energy governance, promoting high level exchange, advancing mutual benefits, improving connectivity and coordinating organization. Through concerted efforts of collaboration, the Belt and Road energy cooperation will serve the interests of all countries along the land and sea routes. Key words: energy development; international cooperation; energy security; Belt and Road initiative.

BACKGROUND

Energy as a Key Element of Society Energy is the motive power propelling human society to evolve. The control of fire by early human beings, which is viewed by some experts as the

1 E‐mail: [email protected]

307 first energy revolution, was a turning point of human evolution, providing a source of warmth, protection, and a method for cooking food. Ancient humans used animals to do jobs that they could not do with their own labour. Water and wind drove the simple machines that ground grains and pumped water. The second energy revolution is the invention of steam engine and the adoption of coal as the main source of energy, which opened up a world of possibility. By the late 1800s, electricity was lighting up the cities in the US and oil was firing internal combustion engines. This is the third energy revolution. With the low‐cost automobile and the spread of electricity, our society changed forever. Nowadays, a new round of energy revolution is taking place, shifting from the carbon‐based fuels, predominant since the beginning of the Industrial Revolution, to no carbon‐based fuels. In addition, storage technology, which temporarily stores surplus energy, and Information and Communications Technology (ICT) which maintains a balance between energy supply and demand, are also expected to play an increasingly vital role in the effective utilization of diversified energy sources. In a new energy society, the way people live and work will change dramatically.

China’s Energy Situation In the past decades, China has experienced strong economic growth, and became the second largest economy in the world. With the rapid economic growth and industrialization, China’s energy demand has increased rapidly, growing at 5.9% annually between 1990 and 2016. In 2016, China’s total primary energy consumption reached 3.1 billion tons of oil equivalents, 4.5 times as much as that of 1990. China is the largest energy consumption country in the world and accounts for 23% of world total energy consumption, followed by the United States, accounting for 17%. (BP, 2016). The Chinese government has been giving great importance to energy issue for a long time. Through unswerving efforts, China’s energy industry has since reform and opening‐up, especially during the 11th and 12th five‐year plan periods, undergone leapfrog development, satisfying the demand of the economy and providing a sure guarantee for the national economic and social development. In 2016, China’s primary energy production was 2.5 billion tons of oil equivalents, ranked No.1 in the world, satisfying about 80% of its total demand. Now, China is the largest coal producer, as well as the largest electricity producer with installed capacity at 1.05 TW. (Xie et al, 2017)

308 The energy development objectives of China have for long been effectuating a transition toward a clean, low‐carbon, safe and efficient modern energy system. Energy consumption structure is optimizing dramatically. In 2016 compared with 1990, the proportion of coal dropped 12.5 percentage points; non‐fossil energy rose 7.0 percentage points. Recent years have witnessed a steady fall in China’s GDP growth speed but a bigger fall in the growth speed of energy consumption. The energy‐economy relationship presents a new feature‐“decoupling”. In 2015, the growth of economy was 6.9% and the primary energy consumption grew 1.0%. In 2016, the economy rose 6.5% and the growth of the primary energy was 1.4%. This shows that energy consumption was decoupled from the growth of the economy. (NBS, 2017). As its economy entered into a state of new normal, China’s energy development has correspondingly assumed a series of new features, with the consumption growth slowing down and structure optimizing. There was a significant progress in energy conservation and emission reduction. Energy consumption intensity and carbon intensity fell by large margins. The power sector introduced “ultra‐low emissions” requirement, aiming to make coal‐ fired power plants as clean as natural gas plants. Progress has been made in replacing coal in non‐power sectors either with electricity or natural gas. China V standard for gasoline and diesel, which is equivalent to Euro V, has been put into effect.

China’s Energy Developing Trends With the issuing of the 13th Five‐year Plan for Energy Development (NEA, 2016), the focus of China’s energy development has shifted to development quality, structural adjustment, system optimization, market rules, economic performance and mechanism innovation. The ultimate goal is to build a clear, low‐carbon, secure and efficient modern energy system. In the five‐year plan, a total energy consumption cap of 3.5 billion tons of oil equivalent was announced, along with reduction targets of energy intensity by 15% and carbon intensity by 18%. These targets put China in a good position to meet its commitments under the Paris Agreement on Climate Change. In the longer term, China’s energy consumption growth will decline gradually. Most researchers (IMF, 2016) believe that China’s economic growth will gradually slow down, from the current 7% to approximately 5% in 2030. In 2050, China’s per‐capita income is expected to reach the level of moderately

309 developed countries, and economic growth may drop to around 3%. China’s energy consumption peak is expected to reach 4 billion tons of oil equivalents around 2030 (Du, 2016). China’s energy consumption annual average growth rate is expected to be less than 2% before 2030. In contrast, during 2000 to 2014, China’s annual energy consumption growth rate was more than 8%. China’s energy consumption growth will gradually slow down to zero or negative in the 2030s, with the total energy consumption in 2050 expected to be 10% lower than in 2030. China’s energy self‐sufficiency rate is expected to be above 80% in the future. One of the most obvious changes in China’s future energy structure will be the decrease of coal and the increase of clean energy. The proportion of coal in the primary energy consumption is expected to significantly drop from 62% in 2016 to around 58% in 2020, and the non‐fossil fuel share will increase to approximately 15%. In 2030, the proportion of coal in China’s primary energy consumption will drop further to approximately 50%, while the natural gas share will rise to 12%, and the oil share will continue to remain at approximately 18%. After 2030, renewable energy technology, such as wind power and solar power, will be more mature, and will accelerate the replacement of fossil fuels, especially coal. By 2050, China’s energy structure will change more greatly, with the share of coal in the primary energy consumption dropping to less than 30%, the share of gas rising to 16%, the share of oil dropping to 14%, and the overall proportion of fossil fuel dropping below 60%. At the same time, the share of non‐fossil fuel will rise to more than 40%.

“BELT AND ROAD” ENERGY COOPERATION ACHIEVEMENTS

China’s International Energy Cooperation UN 2030 Agenda calls for global cooperation and joint efforts. Economic globalization provides strong power for global economic growth and promotes commodity and capital flows as well as cultural progress. China has implemented the “Going Global” strategy and proposed the Belt and Road Initiative to respond to these calls, aiming to build an open global economy that promotes the liberalization of trade and investment and facilitates further openness, communication, integration and development. In the past three decades, the international energy cooperation has yielded

310 fruitful results and Chinese energy enterprises actively expanded presence and made outstanding achievements in multiple markets. China was once a net exporting country of energy. In the late 1980s, it was one of the largest net exporters of crude oil outside of OPEC. The soaring demand for energy changed China into a net energy importer in 1990s. Since then its external dependency on energy kept rising, because the domestic production could not keep up with the rapid growth of energy demand, especially for oil and gas. After becoming a net importer of oil in 1993 and a net importer of natural gas in 2007, 65% of oil demand and 34% of natural gas demand in China was fed by imports in 2016. Besides, China became a net importer of coal in 2009 and its external dependency in coal stood at 6.3% in 2016. The total external dependency of energy kept at a relatively low level of 20%, thanks to its abundant domestic coal output supporting most of the energy demand. The impact of China’s energy sustainable supply to the world energy had become a focus of the world. Adhere to “open to cooperate for mutual benefits” principle, the energy cooperation is a key element in China’s “Going Global” policy. More than twenty years have passed since the Chinese oil companies made their debut in overseas exploration and production market. Now, the Chinese energy companies have made big progress in overseas investment and cooperation. Statistics show that more than 20 large and mid‐sized oil companies, including the China National Petroleum Corporation, the China Petroleum & Chemical Corporation and the China National Offshore Oil Corporation, had oil and gas investments in countries along the Belt and Road. China’s overseas equity oil and gas reached about 155 million tons of oil equivalents in 2016. Overseas stakes widespread in Africa, Russia‐Central Asia, America, the Middle East, Asia Pacific, with equal emphasis on onshore and offshore oil and gas, conventional and unconventional. China’s participation in the world oil and gas exploration and cooperation helps establish a multiple, stable and reliable energy supplying system, and thus guarantees the energy security of China in the open world. China is now looking to be an energetic developer of nuclear power plants around the world. Such trends became more visible after the Fukushima disaster in March 2011, as many western nations like Germany, Italy and Switzerland decided to shelve nuclear energy plans due to safety concerns. China can provide all the necessary equipment needed to construct nuclear power plants and has the ability to build the entire plant, apart from the nuclear island. With the expansion of the energy trade scale,

311 China has involved deeper in the international energy market with diverse import sources from the Middle East, Central Asia, Russia, Africa, Asia Pacific, and America. In 2016, China’s imports 380 million tons crude oil, 71.9 billion cubic meters natural gas and 255.5 million tons coal. Based on each party’s expertise and relative advantages, the energy cooperation is bidirectional. Foreign companies also have much development space in China. Foreign companies work closely with Chinese partners to develop oil and gas fields in China, as well as producing refining and chemical products, doing marketing and engineering services. They also conducted joint research and development of high‐end technology and equipment to advance innovation.

New Achievements of Belt and Road Energy Cooperation Energy cooperation is an important subset of the Belt and Road cooperation. It bears much importance for China’s energy security, for most of the sources and routes for imported energy are located in the Belt and Road region. China has built a decent partnership with the Belt and Road countries to develop energy resources. In addition to the sound foundation for energy cooperation, new achievements are made in recent years. The energy projects under the China‐Pakistan Economic Corridor are going well. By the end of 2016, work had started on ten power projects totalling nearly 7.3 GW, which will help to satisfy the power demand of Pakistan in the near term. On October 15, 2016, the 340MW unit 3 of the Chashma nuclear power plant was connected to the national grid in Pakistan. Chashma project is China’s first self‐developed commercial nuclear reactor built for the export market. The units of 1 and 2 each with the installed capacity of 300MW have already started commercial operation. The unit 4 is currently undergoing acceptance tests, and is expected to be on‐grid in the first half of 2017. On January 20, 2016, the Yanbu Refinery of Saudi Aramco and Sinopec went into operation. The refinery is Sinopec’s first oil refining project overseas and also China’s biggest investment project in Saudi Arabia, with a designed processing capacity of 20 million tons per year. On January 20, 2016, China Nuclear Engineering and Construction Group signed an MOU with Saudi Arabia’s King Abdullah City for atomic and renewable energy on building the High‐Temperature Gas‐cooled Reactor (HTGR), marking a major breakthrough for China’s fourth‐generation nuclear power technology HTGR to “Going Global”. The China‐Russia energy cooperation went well.

312 Construction on the Yamal LNG project started in 2016 and has been proceeding well. By the end of the year, 75% of the project has been completed. This project is proposed to put into operation in 2019 with the LNG production capacity of 16.5 million tons. On August 17, 2016, Nuclear Power Institute of China signed a contract with Russia’s LLC GPS to supply passive hydrogen autocatalytic recombiners, a move that marked a successful debut of a key piece of nuclear security equipment developed independently by China National Nuclear Group in the Russian market. It is also the first of its type in China to be exported to the international markets. The above‐mentioned cooperation has laid a solid foundation for the future cooperation extension between China and Belt and Road countries.

OPPORTUNITIES AND CHALLENGES FACING BELT AND ROAD ENERGY COOPERATION

Opportunities Though proposed by China, the Belt and Road energy cooperation is in the interests of all countries along the land and sea routes. Many countries along the Belt and Road are rich in energy resources but have financial and technical constraints. So the joint exploration, development and construction of energy pipelines and power facilities offer vast potential for future development. As a new economic powerhouse, China will bring a number of advantages to productivity, technology, funding, experience and development. It can then use this experience and create cooperative opportunities and market advantages for the region. The Belt and Road Initiative had been received positively by a number of different countries. Many countries designated its own development goals, including the construction of roads, railways, power plants, pipelines, and others, aiming to create modern infrastructure and contributing to countries’ sustainable development. These goals would be closely related to the recent initiatives of China, therefore diplomats, politicians and experts paid close attention to the recent strategic projects of the Asian Infrastructure Investment Bank and the Belt and Road Initiative. China also aims to foster synergy between the Belt and Road initiative and the development strategies of other countries.

313 Challenges What merits attention is that despite the important and fruitful results of energy cooperation within the Belt and Road region, there still are a lot of challenges and obstacles China is facing. Old and new problems are still entangled with one another and the problems of imbalance and non‐ coordination remained. First, the target area includes many countries which are considered to be very risky places for investment, with volatile politics and unstable economics. Energy projects usually last for decades, so stability and security are essential for these projects to be successful. Usually, information about the local situation, market demand, investment risks and laws and policies is not adequate for energy companies. Secondly, due to the impact of the global economic downturn and increasing trade protectionism, the demand for more openness, win‐win cooperation and mutual development is increasing for all countries. A real challenge ahead is how to jointly promote sufficient hydrocarbon supply, so as to complement the current deficiency in production. So far, up to 90% of China’s energy investment has been done through state channels or state‐owned enterprises (SOEs). Since SOEs answer to the government shareholders and enjoy state financial support, there has been little incentive for these companies to carefully assess costs, benefits and risks. As a result, investment returns have been low. The low oil prices in recent years have worsened this situation, with a lot of oil projects losing money. Historically, China tends to rely on bilateral relations with each country to help secure its investments, but transnational infrastructure may need a transition to more regional and multilateral engagement. There are also other issues like local disagreements, environmental concerns, etc. For example, Chinese companies using Chinese labour are not always welcomed with open arms. There are also talent bottlenecks regarding personnel development and information.

CHINESE APPROACH TO ENERGY SECURITY IN THE CONTEXT OF BELT AND ROAD INITIATIVE

To address these challenges and obstacles, China and counterparts should strengthen its ability to fend off risks and cultivate an open and stable global energy market, jointly maintaining the safety of energy infrastructure.

314 Actively Participating in Global Energy Governance. To better the global energy governance structure, China seeks to build on the Belt and Road energy cooperation system, synchronize countries’ effort to jointly build a green and low‐carbon global energy governance structure and push forward global green development together. In 2016, China ratified the Paris Agreement on climate change, put forward “China Plan” for the global energy governance at G20 Hangzhou Summit, and released “Suzhou Consensus” at the International Forum on Energy Transition. China also put forward a plan to create “the Belt and Road Energy Club” to provide a platform for deeper understanding and wider consensus on energy cooperation for more countries and regions. China strengthened cooperation with the IEA, the IEF, the IREA, the Energy Charter and other international energy organizations and promote energy policy information, human resources and other international exchanges. The Chinese government has made important contributions to the adoption of the Paris Agreement. Former Secretary‐General of the United Nations Ban Ki‐moon commended China for its historic, fundamental, important and key contributions to the conclusion of the Paris Agreement and the success of the Paris Climate Change Conference.

Promoting Consensus through Summits and High Level Forums In June 2016, the G20 Energy Ministerial Conference was held in China. With the theme “Shaping a Low‐Carbon, Smart and Sharing Energy Future”, the conference appealed to the G20 members to share the advanced technology in the development of renewable energy and clean coal and realize inclusive development in the world energy. The conference had four outcome documents, including the main document the G20 Energy Ministerial Meeting Beijing Communiqué (G20, 2016), and the three other documents on specific action plans. At the G20 Hangzhou Summit in September 2016, President Xi put forward the proposal, calling for “To jointly establish green and low‐carbon global energy governance to promote global green development cooperation”. This was the first time for China to propose “China Plan” for the global energy governance at a core arena for the global economic governance like G20. It has pushed forward the top‐level design for the global energy governance. China holds the Belt and Road Forum on

315 International Cooperation in Beijing in May 2017. It is the highest level forum since the Belt and Road Initiative was put forward. It is also a major host diplomatic activity in 2017. It is of great significance in promoting international and regional cooperation. China wants to make the forum a mechanism to promote lasting communication at multiple levels and make it an important carrier for the energy cooperation projects in various countries.

Advancing Mutual Benefits The Belt and Road countries and China enjoy respective strengths and complementary advantages. With the cooperation principle of “equality, mutual‐benefit and win‐win result”, energy cooperation in the Belt and Road region will advance affordable, reliable and sustainable modern energy services for all, promote clean energy investment and development in relevant countries. In the area of energy production capacity cooperation, China stands ready to cooperate with other countries in the production of equipment related to this sector and in construction and engineering to jointly improve the energy industry’s development. Many countries in the Belt and Road region lack energy infrastructures, for example, only in the Asia‐Pacific region there are about 500 million people still not having access to electricity. China had already had a lot of experience in building infrastructure at a fast pace and reasonable cost. The Chinese oil companies have advanced technologies in exploration under complex geological conditions. The involvement of Chinese companies in new petroleum and gas exploration and production projects around the globe will promote production and enhance energy security. China has supported enhancing its cooperation on renewable energy and clean energy and in exploring new ways to ensure energy supply in line with the principle of mutual benefit. It also seeks to enhance long‐term cooperation on energy‐saving, environmental protection and climate change. Companies are encouraged to extend industrial chains in host countries, processing and converting resources at or near places where they are exploited, so as to create an integrated industrial chain, boost the local economy and improve employment. For example, in resource‐rich countries with market potential, further cooperation in refining and chemical sectors and build large petrochemical projects is expected to meet the petrochemical products demand.

316 Improving all‐round Connectivity Connectivity of energy infrastructure is essential to energy security, because it will boost the robustness of the energy system and increase the diversity of supply. China continues to improve and expand the scale of oil and gas pipeline connectivity, and advances cross‐border power transmission line constructions, upgrades and retrofits the regional power grid, negotiates to establish the regional power market and continually improves trade level. Joint effort also needs to be put into place to ensure the security of oil and gas pipelines and other transport routes. Except for physical connectivity of energy infrastructure, the “soft” connectivity is also very important. This kind of connectivity includes policy coordination, personnel exchange and building of regional energy markets. Universities may contribute to this area. China’s University of Petroleum has recruited the first batch of foreign students to its Karamay campus in Xinjiang Uygur autonomous region, and will train high‐ calibre engineering talents and promote the technological and cultural communication in Central Asia. Meanwhile, the university has dispatched more than 600 Chinese students including about 400 undergraduates and more than 200 postgraduates to the Belt and Road regions.

Coordinating the Organization and Service The government should organize planning studies on bilateral and multilateral energy cooperation. The state and energy industry associations can organize China’s advantageous industries and enterprises to go global en masse so as to boost their synergy and competitiveness as a whole. The relevant departments of government could intensify the risk assessment and early warning and control of energy projects overseas, improving the bilateral and multilateral investment protection mechanism and helping shoulder some of the enterprises’ risks in going global and protecting enterprises’ overseas funds. The state can provide a guidance to insurance institutions in setting up special insurance coverage associated with the Belt and Road country‐specific risks create new insurance mechanisms to enrich insurance products, and strengthen the support for export credit insurance for energy enterprises, investment insurance and reinsurance overseas. It is suggested that the state’s relevant departments study the financial policies favourable for the Belt and Road energy cooperation, erect platforms

317 between financial institutions and enterprises, encourage financial institutions to get deeply involved in the entire cycle of projects, thus giving rise to an industrial and financial cooperation model.

CONCLUSION

The Belt and Road energy cooperation is in the interests of all countries along the land and sea routes. The countries should jointly seize the opportunity provided by the Initiative, and promote energy cooperation in a larger scope, with higher standards and at deeper levels. Through concerted efforts of collaborate, the Belt and Road energy cooperation will become more and more successful, and enhance energy security for China and the world.

BIBLIOGRAPHY

BP: Statistical Review of World Energy, BP, 2016, London. Du Wei: The Future of China’s Energy, The Northeast Asian Economic Review, 2016, Vol. 4, No. 1, pp. 3‐10, 2016, Tokyo. G20: Energy Ministerial Meeting Beijing Communiqué, 2016, Beijing. International Monetary Fund (IMF): World Economic Outlook, 2016, Washington DC. National Bureau of Statistics (NBS): Bulletin of Statistics on National economic and social Development, 2017, Beijing. National Energy Administration (NEA): 13th Five‐year Plan for Energy Development, 2016, Beijing. Xie Qiuye et al: Annual Report on China’s Energy Development, China Electric Power Press, 2017, Beijing.

318 MIGRATIONS AS SECURITY CHALLENGES ON THE ‘NEW SILK ROAD’

Ratko LJUBOJEVIĆ Assistant Professor, Faculty of Law, John Naisbitt University Academy for National Security, Belgrade, Serbia1

Abstract: One of the geopolitical challenges of implementation of The New Silk Road is enhanced migratory movements. They will occur as a result of the need of workforce engagement of appropriate qualifications in the construction and operation of infrastructure facilities and heavy industry. The aim of this paper is to highlight the security challenges that come inevitably with such increased migratory movements. Security migration issues are seen as a geo‐demographic process that has three neuralgic points: Alaska, and Europe, where the European part of the ‘New Silk Road’ goes through the Balkan route. Key words: ‘New Silk Road’, geo‐demography, migrations, working force, security, Balkans.

INTRODUCTION

The Tsarist Road of the Ottoman Empire has been for a long‐time connecting North Europe with Bosporus. This road had been used by the Old Romans, the Byzantines, and the Europeans. One section of this road passed through Serbia, as it passes today, too. Someone would have thought that time had stopped. In times of wars and crises, the armies were passing through this route, and in peacetime, passengers and caravans with goods. On one occasion, the Serbian geographer Jovan Cvijić told about Serbs: You made a home in the middle of the road. He wanted to say that the road through Serbia was inevitable; that this road at some time had a devastating effect and sometimes prosperous. It has always depended on a geopolitical moment, to which the most influential politicians of the world have put a special seal. The first part of the paper

1 E mail: [email protected]

319 is devoted to the analysis of the characteristics of modern geo‐ demographic processes. These processes are marked with unprecedented massive migratory movements of the population towards Central and Western Europe. In the second part of the paper, increased migratory movements on The New Silk Road are discussed. The trends and tendencies of these movements are shown on the basis of the United Nations Population Fund (UNFPA) estimates. The third part of the paper talks about security challenges of migratory movements on the Balkan Route. Special attention is paid to the fact that this route goes inevitably through the Republic of Serbia.

CHARACTERISTICS OF MODERN GEO‐DEMOGRAPHIC PROCESSES

Modern trends such as globalization and mondialism are nothing more than a political stimulus. Actually, modern trends are no novelty. They are just an expression of the modern era. The Apostle Paul, in his letter to Romans, claimed that there is no power that is not from God, and all the authorities are from God. Tomas Hobs, in his theory of power, puts a craving for lasting and constant power in the first place, the general urge of all mankind that ends only with death. In a similar way, in his theory of psychological power, Friedrich Nietzsche thinks that what a man wishes and wants is actually Surplus of power. The perception of one’s power by real or potential objects can contribute to his real magnification of power (Simeunović, 2002, p. 147). Utopian thought considered always one to be the strongest and the most powerful on the world’s political scene. Therefore, in the apologetics of the world power, the greatest and most powerful advocate dominance over the small and the weak. In this way, the world is transformed into a unique and completely new order of political forces and relations, as David and Goliath fought (Knežević, 2013, p. 91). The basis of political power stems from economic power. Such power is defined as possession of a personal wealth or as a possibility of disposing of social wealth. Hence, political power that is derived from economic power affects the key flows of social development, which are determined between superiors and subordinates (Simeunović, 1989, p. 6). Oppenheimer views political power through the ability to influence, limit or punish. From this, we can conclude that political power has certain

320 rules but that it only respects its own. Namely, political power is a demonstration of force, often violence, but it can be a further means of demonstrating impotence. Loss of authority Mills sees as a lack of power that turns into a demonstration of violence (Ljubojević, 2015, 11). In line with geopolitical interests and divisions, the world population, its demographic trends and geo‐demographic processes themselves can also be used as a demonstration of political power. At this moment, more than seven billion inhabitants live in the world, and according to the United Nations’ forecasts, in the middle of the 21st century, the globe will have a population of 9.5 billion inhabitants. An increase in the overall human population is often used as a manipulative tool in order to spread panic. In this way, political crises are being provoked claiming that the existing natural resources are seen insufficient for the survival of human species on Earth. For this reason, some centres of power advocate the restraining of demographic explosions in regions where the human population is most prominent, but these are often territories that are immensely rich in energy or mineral wealth. Namely, the Western Catholic‐Protestant civilization gives itself a right, again in order to preserve its interests and especially privileged position, to intervene militarily, bearing in mind that the human population is a determinant of hard power (Stepić, 2016, p. 636). In fact, its unevenness, demographic trends and future spatial allocation are unnoticeably becoming the tool of geo‐demographic engineering. Natural disasters, global warming, lack of fertile fields, but also the most important factor, modern wars, from whose focus the largest number of inhabitants is migrating, give incentives to the phenomenon of geo‐demographic engineering. The uneven concentration of the population at the ocean coasts, plains and river valleys has already caused a lack of living space. Consequently, certain territories multiply their values so far. In this regard, one can expect the most brutal and cruel struggle for the possession and management of certain, according to modern standards, important territories. Migration movements have always been associated with geopolitical processes. Until recently, they were a product of spontaneous consequences: the persecution of the population, the war, the deportations, and the disappearance of certain states, the creation of new ones, the shift of demarcation boundary lines or some sort of planned displacement of the population. Today, the migration movements become a powerful instrument of power. Apparently, unwieldy but certainly

321 violent, contemporary geopolitical creators are creating political crises in a planned manner; they occupy a pre‐planned space with the migratory movement which is, in fact, a form of political and economic pressure that is directed towards undisciplined and disobedient vassals (Stepić, 2016, 637). The migratory movements, planned in terms of direction, can be an ideal means of destabilizing disobedient political elites. By creating social tensions, with the violent changes of the ruling, an ideal climate for new geopolitical goals is being created. The Arab Spring initiated a strong wave of migrations from African and especially the Middle Eastern countries. Their path to a promised European Union leads through the Mediterranean, the so‐called The New Gate of the Nations. In addition to the strong organization, financial support, regulated legislation, the European Union still does not have an adequate response. Namely, responsible political elites still negotiate, although the migrant crisis does not weaken but only changes its forms. Massive demographic movements directed toward Central Europe modify their directions by changing known routes. The movements are controlled, geopolitically generated, especially to France and Germany, which, as an economic and political flywheel of the European Union, are trying to get rid of the influence of the United States. The existing three migrant routes: the Aegean‐Basque through the Balkan Countries, Sicilian across the Aegean Peninsula and Gibraltar via the Iberian Peninsula, are continuously carrying out the demographic pressure that awaits the response. In this way, with specific engineering geo‐demographic plans, the Great Powers are fighting the imperial influences in transforming the modern geopolitical order (Stepić, 2016, p.637). From ancient philosophical thought to this day, science tries to define the essence of the functioning of the world. The emergence of large States stems from the action of expansionist economically powerful political elites. Responsible political elites driven by the need to increase overall power and desire to achieve as much profit as possible do not have the possibility of exclusivity to leave the political arena to the competitor. This would result in not only an imperial defeat but a complete failure (Minkler, 2009, p. 31). For this reason, the geo‐demographic migratory movements will cause structurally determined demographic transformations. Geopolitical changes will arise from the spatial deployment of religious, social, racial and national groups that will reduce the political influence of the white race on the European continent and

322 share it with the newcomers of the Old Continent. Uninhabited spaces will be pre‐mixed with other ethnics by occupying territories. This will result in an intensification of the spiral of demographic movements of indigenous peoples, advocacy of mass conversion, provoking religious extremism and terrorism, racial conflicts of wider scale to local unrest. Without a doubt, the number of crisis hot spots will increase, and an unstable and conflicting situation is likely, if political elites do not provide a solution in time, to become a pervading pandemic (Stepić, 2016, p. 638)

INCREASED MIGRATORY MOVEMENTS ON THE ‘NEW SILK ROAD’

Even Aristotle said that every society is organized for the good of man and the State for the best. However, if the State is underdeveloped, economically weak and has a huge population growth, it is inevitable that, as a result of the demographic explosion, the population only tries to find a way out of the coming crisis. Namely, demographic trends are sought as a safer solution for the population looking for survival and further existence, without the help of their country and hoping for help of the international community. The New Gate of the Nations and The New Silk Road are partly going along the same route. The increased migratory movements on The New Silk Road are the result of demographic explosions of the entire African continent, but also of war in the Middle East, which still has no end in sight. When it comes to population growth, the African continent is today leading with respect to the rest of the world. Namely, in Africa in 1950 only 9% of the world’s population lived, in fact, there were only 244 million inhabitants. Today, the picture is completely different. In Africa, there are one billion and two hundred million of people. So, in just half a century, the African continent has increased its population by one billion inhabitants (Simeunović, 2015, p. 122). According to the latest United Nations data and forecasts, at the end of the 21st century, the African continent will inhabit four billion people. In addition to population reproduction, such a demographic explosion is going to be assisted by a significantly improved standard of living. Better living and health conditions foresee the longer life expectancy of the population and consequently the population growth. Such demographic growth is

323 predominant in Nigeria. With its 106 million inhabitants, Nigeria is away ahead of Russia, which is territorially the largest country in the world. The forecast is that Nigeria will double its population in the next three decades, as much as the entire African continent had at the beginning of the 20th century. Special curiosity is the fact that the number of indigenous population of the countries of the European Union will grow by only 13 million by 2050. The mentioned facts point to the inevitable movement of the population and the settlement of uninhabited territories which have regulated infrastructure and social network (UNFPA, 2017). In addition to the fact that the African continent is growing rapidly, we must be aware of the fact that in the last few decades the African population had suddenly and radically Islamized. At the same time, we have especially to take into account the fact that their conquerors were of the Christian religion. In addition to the demographic explosion, the States without the help of the wider international community are not in a position to confront the social expectations of their own people especially in terms of employment and attaining the standard of living of developed countries. In addition to the fact that humanity has never produced as much food as is being produced in the world today, we must point out that the number of hungry in the world is growing. Of over seven billion people, one billion people live in utter misery and hunger. According to the United Nations data, 17 thousand children die from hunger every day. Contrary to this, more than 170 thousand children are born every day in the world. The population growth, the increase in the standard of living of most of the inhabitants of the Earth’s globe, all increase the need, primarily for water, food, living space, natural resources, energy, but also the need for labour engagement. On the other hand, the development of science and technology accelerates the development of information technology, robotics and automation, and the need for labour engagement is sharply reduced. The gap between the sudden population growth and the reduction in the need for labour engagement leads the world to a social abyss that, without the engagement of international institutions, can have unforeseen consequences (Simeunović, 2015, p. 123). The increased need for food is responsible for the devastation of forests on the entire earth’s sphere of about 13 million hectares a year. This results in floods and catastrophic movements of soil in certain territories, from which the surviving population has to move. The advancement of technology also affects the

324 increased exploitation of natural resources that are permanently disappearing, even faster than predicted. In addition to the increased need for natural resources, living organisms, and hence the human race, will be soon faced with a lack of healthy, clean and drinking water. According to predictions of the UN Population Fund (UNFPA, 2017), in 2030, the there will be a 40% shortage of drinking water in the world. Regardless its wealth in oil resources, the Middle East, which has been hit by war destructions after The Arab Spring, is confronted with pogrom and poverty. The population in the and Middle East also records a rapid growth. As an example, we refer to Syria, which in 1950 had only 3.5 million inhabitants. Immediately before the wartime events, the Syrian population grew to an incredible number of 22 million. After the war, most of the Syrian cities were destroyed and the population fled from the devastated territories. The largest part of this population wants to reach the countries of the European Union, which besides the high social standard of living also perform the highest level of human rights and human freedoms. In support of such migratory movements is the fact that in 2050 in the countries of the Old Continent the mortality will be larger than the number of newborns. Estimates are that by 2051 the European autochthonous population will be reduced by 32 million inhabitants and that the number of refugees will increase by 31 million. We can never take such estimates as exact ones precisely because of natural disasters that are unpredictable (Simeunović, 2015, p. 125). We cannot talk about The New Silk Road without mentioning The Republic of Serbia, which is an inevitable country on the mentioned road. Every year, Serbia loses one city demographically. It is due to the poor growth as well as to the outflow of scientists and high‐ quality workforce. Experts forecast that the Serbian population will decrease by 17% by 2050. Apart from Serbia, the number of inhabitants will be drastically reduced in other Balkan Countries, especially in Bulgaria and Croatia. The curiosity is that on one side we have a huge population growth, that this growth happens in the part of the world with the lowest standard of living and on the other side, especially in the countries of the European Continent we have a drastic fall in birth rate. It should be emphasized that the European Continent is the most organized one, by the standard richest and as such the most attractive to the part of the human population, which due to objective circumstances, is compelled to migrate. One of the facts telling that migrations will continue is the

325 cognition that the border between Europe and Africa is almost impossible to defend. It extends to a long continental and maritime demarcation line, and numerous war conflicts only accelerate migratory movements. Namely, war events put human security at the lowest level and, on the other hand, increase the degree of insecurity not only for the individual, but for his family and the entire community. It is therefore natural for people to get out of disaster, especially when their end is timely unknown and their outcome is unpredictable (Simeunović, 2015, p. 124).

SECURITY CHALLENGES OF MIGRATORY MOVEMENTS ON THE BALKAN ROUTE

The famous Serbian professor of legal studies Slobodan Jovanović gave one of the shortest and most comprehensive definitions of the State. He says that the State is: territory, law and people. In fact, without a well‐ regulated legal system, there is no State. The State is a guarantor of fundamental human rights, human freedoms and human security. In addition to this, as well‐regulated countries, we consider those with clearly regulated ownership relations, whether they relate to individuals, national business entities or multinational companies. In addition to the legal system, it is very important for the State to have quality crisis management, that is, a strong political elite that can rely on quality State institutions. The task of the political elite is to timely anticipate possible upcoming crises that cannot be defined in a unique way. Since crises differ in content, duration, consequences and their specific characteristics, a universal pattern cannot be established. Analyzing the characteristics of various crisis situations, Arjen Boin points out to three common characteristics. These are: threat, urgency and uncertainty (Boin, Štern, Sandelius, 2012, p. 12). The threat is created when state institutions that are the guarantor of citizens’ safety become vulnerable and do not have a given function. In this case, personal security, community safety, human freedom, the welfare of all social communities, equality and justice, become meaningless confronted with the crisis of enormous proportions. The more human security is endangered, the more social and moral values are declining, and the global crisis gets in place. In such cases, fear becomes the overall state of the community. Fear acts primarily on directly

326 endangered but also on those who look to those threatened with fear, scared for their own personal safety. Urgency as a special feature of crisis situations is a direct problem that requires a solution without delaying from the most responsible individuals and state institutions. Possible untimely and inadequate response to a crisis situation leads to the complication of the crisis, and the factor of time becomes an insurmountable threat. Responsible decisions, when it comes to the lives of the most vulnerable, must sometimes be made without detailed analysis at the highest operational level. In addition, the detection of any threat is always accompanied by the highest degree of uncertainty. The greater the uncertainty, grave consequences are more likely and the solution to the crisis is more difficult and complicated. By adequately confronting and overcoming the crisis, the responsible political elite reduce the uncertainty and certainly diminish the consequences of the crisis (Keković, Kešetović, 2006, 87). Although the migration crisis on the Balkan route has been perceived by all responsible factors, it still lacks a national strategy, but more importantly, a supranational strategy of the entire world community. The responsible political elites are expected to give a timely and flexible response that will bring a more lasting solution. The goal is to preserve the life of all the inhabitants of the planet and of the entire community in general. If the already mentioned migrant crisis is placed under control with adequate assessments and proper guidance, the potential danger can be overcome or at least significantly reduced. Contrary to this, if the responsible policy makers and responsible actors of international organizations do not observe on time, neglect or inadequately respond to an increased migrant threat, the consequences can be devastating ones with an uncertain outcome. The fact is that in the Middle East, rich in oil sources, the number of inhabitants is increasing rapidly. Rich oil deposits still affect the wartime events and, consequently, they provoke the crisis situations. The migrant crisis has been perceived very clearly. However, while there is a lot of advocating for peace and the diplomatic solution, more warfare in the world could be identified due to conflicting relations between the interested parties. New warfare spots are opened, and the old ones are in no way close to an end, but they can, potentially, expand every day to unimaginable proportions. From the first Hague Conference held in 1898 on the initiative of Emperor Nicholas II Romanov, the world is trying to replace war conflict with the diplomatic

327 solution of the crisis. On the eve of the Great War, today known as the First World War, two conferences were held in order to achieve global disarmament and peaceful resolution of the overall upcoming crisis. Despite noticing the coming global crisis, the war events left unimaginable consequences. The end of the Great War brought out the League of Nations, which, as an international organization, had among other things the task that the pogroms of war would never again be repeated. It did not take long, for two decades to wake the Second World War, which brought even greater destruction, suffering and devastation of the entire earthly environment. At the end of the war, the world found a solution by the establishment of the United Nations, which today, as the umbrella organization of the world, has the greatest responsibility. Security Council resolutions have a decisive character not only for 193 Member States, but for other states and political systems that do not have a chair in the United Nations as well. Namely, the guarantor of security and fundamental human rights and human freedoms are the States. In addition, all States of this world must abide by the principles and established charters of this world organization; otherwise the Security Council has the appropriate instruments to discipline those who violate the rules. Today there is a particular controversy about the migratory movements that are heading to Europe by the Balkan route. Ones speak of the theory of conspiracy, others about the product of war, political and social events, but the truth stands somewhere in the middle (Simeunović, 2015, p. 126).There are conspiracies; they are a product of the interest aspirations for increasing power. However, interests are not always sufficiently functional because there are always more players. In contrast, it would be irrational not to use such immense migratory movements for personal gain. Those who are rich the crisis of enormous proportions will not prevent from getting even richer. Even in this situation, they are looking for the greatest benefit for themselves. Of course, the rich have the right to take care of their wellbeing. The State as a guarantor of security has the obligation to protect them. However, the question arises as to whether a real and sustainable moment is right now or perhaps the need for intervention by the wider community should be imposed. While the so‐called Islamic State believes that all Muslims have to fight for common goals at all costs, and even where life is placed on the cube, the rich look for their benefit. In fact, industrialists in developed countries see migrants as a cheap labour force

328 that comes to their feet on their own. With the help of that cheap labour force, they will earn increased profits, avoid paying transport costs if the goods were produced abroad and replace more expensive domestic workforce (Filipović, Đorić, 2011, 41). In addition to the United Nations, the European Union has also a need to protect its territory from the coming crisis, but also such need exists on the entire Old Continent, because the crisis can easily spill over. Epochal achievements, which constitute the basis of the concept of United Europe, are human rights, human freedoms, especially the freedom of movement of people, freedom of movement of goods and freedom of movement of capital. In addition to high social standards of living, these freedoms were the main reason and magnet for migratory movements towards the Old Continent. The European Union and its institutions did not respond promptly to the challenge of the migrant crisis. A press release from Brussels on the growing crisis and urgent problems showed the lack of readiness and insufficient organization of such a large institutional apparatus. Namely, when the news from Brussels arrived that an urgent meeting of all EU member states would be held in six weeks only, the unpreparedness of a huge and non‐operational institutional apparatus could be seen. Although the recommendations of the European Commission, as the EU’s executive authority, have a decisive character, all Member States continue to pursue their individual security policy. Although the conclusions of the security agencies of all EU member states are that the security data should be mutually exchanged, the situation on the ground gives a completely different picture. In fact, the information is being jealously guarded and delayed, resulting in terrorist actions in the open cities of Europe. So far, the EU has been trying to solve the migrant crisis by giving money to the most endangered areas through the UN Commissariat for Refugees, the World Food Program and other related bodies. However, the promised level of funding has not been met, and some EU member states have arbitrarily reduced the planned monetary benefits. Despite the European Commission’s announcement that it will increase financial assistance in resolving the refugee crisis, the problem remains unresolved (Simeunović, 2015, 128). In addition to the European Commission’s announcement that the most vulnerable countries, including Serbia, will receive substantial material resources, the solution to the crisis is largely transferred to the countries themselves to resolve the crisis on their own. In this regard, The

329 Balkan refugee route and The New Silk Road must be especially secured by the states through which the route passes. What would enhance security are regional security cooperation as well as an increased degree of general readiness of border units. The fact that a legal binding document between the security services of the Balkan countries still has not been drafted speaks of an unclear strategy for solving the current crisis. In the earliest future, the international community must initiate the creation of a multilateral document that should have been ratified by all vulnerable states, which would demonstrate the strength and readiness to resolve the existing migrant crisis.

CONCLUSION

The advancement of technology has contributed to the acceleration of all movements in the world: social, cultural, economic ones. In addition to the challenges that lie at every step, the world is developing and progressing rapidly. In order to ensure the institution of ownership, private property, state property or property of multinational companies, the State guarantees security, safety and freedom for all citizens by the Constitution, as the highest legal act. On the other hand, this free world becomes a driving economic force and a part of its wealth flows into the State Treasury through the public consumption and the tax system. The ultimate outcome is a mutual benefit. Individuals raise their own standard of living, companies are expanding and becoming richer, and the State is being built, getting stronger technologically and progressing.

BIBLIOGRAPHY

Boin, A., Hart, P., Štern, E., Sandelijus, B. (2010): Politika upravljanja krizama, Službeni glasnik, Beograd. Filipović, Miroslava; Doric, Marija: (2011): „Političke partije i ekonomski intervencionizam“, Srpska politička misao, Institut za političke studije, Beograd, br.1, 2011, pp. 39‐74. Keković, Z., Kešetović, Ž. (2006): Krizni menadžment i prevencija kriza, Filip Višnjić, Beograd.

330 Knežević, Miloš (2013): Prizma geopolitike, Beograd. Ljubojević, Ratko (2015): Agrarna politika Kraljevine Jugoslavije u vreme šestojanuarske diktature, Naučno društvo agrarnih ekonomista Balkana, Beograd. Minkler, Herfrid: Imperije‐logika vladavine svetom‐od starog Rima do Sjedinjenih Država, Službeni glasnik, Beograd. Simeunović, Dragan (1989): Političko nasilje, Beograd. Simeunović, Dragan (2002): Teorija politike, Beograd. Simeunović, Dragan (2015): „Migracije i nacionalni interes Srbije“, Nacionalni interes, Institut za političke studije, Beograd, Godina XI, vol. 24, br. 3/2015, pp. 121‐141. Stepić, Milomir (2016): Geopolitika, ideje, teorije, koncepcije, Institut za političke studije, Beograd. United Nations Population Fund (2017): UNFPA Annual Report 2016, New York.

331

THIRD SESSION: GEOECONOMIC, LEGAL AND CULTURAL VISIONS AND ACTIONS OF THE “NEW SILK ROAD” INITIATIVES

CHANGE OF CHINESE ECONOMIC DEVELOPMENT STRATEGY

Dušan VASIĆ Ph.D. Faculty of Business Studies and Law Nela BOSNIĆ MSc National bank of Serbia Nina VASIĆ MSc Commission for Protection of Competition Belgrade, Serbia1

Abstract: Redistribution of the power in the world economy has instigated a great political change over the Globe. Emerging countries, primarily BRICS countries, have strived for a greater stake of influence and a greater part of word’s GDP cake. Their fight for wider space and a new role was not based on the usage of weapons, but the commerce. They did not oppose to the globalization, only redirected its flow in their national waters and subordinate to their interests. China has a leading position on this path. This mighty country had made the greatest shift in its economic strategy and consequently redesigned priorities of the political strategy. This change was instigated by national and international factors and reasons. Slowing down of its economic growth has raised many uncertainties and concerns. At the same time, the intention of the so‐called West‐Atlantic coalition to strengthen the control over the world maritime commerce routes caused additional worries. Facing the risk of lagging behind and shaking financial stability the leadership shaped a new set of instruments and measures aimed at keeping track of future progress. The concept of “One Belt, One Road” was a part of this strategic shift. This state project should reinforce and widen the Chinese economic, political, even military influence in Asia, Africa, Europe and South America. The added value of China's economy in

1 E‐mails: [email protected], [email protected], [email protected]

335 2016 reached a volume of 21.3 trillion dollars, and thus the country became a leading global economic force. At the same time, the volume of the US total output amounted to 18.5 trillion dollars which push down its economy in the second position, measured by GDP. Japan has kept the third position (from 4.7), Germany the fourth (3.5), and the United Kingdom fifth (2.6 trillion dollars). But how to maintain the new position on the global scene and keep its economic engine going? The Chinese authorities decided to shift the focus of progress from accelerated growth to stable and sustainable development. In this paper, we consider whether the Chinese model of managing economics through politics could bring the desired results and how this turn will affect the world economy, especially how it will influence the countries on the New Silk Road, including Serbia. The results of the “One Belt, One Road“ The project will show whether China will succeed to create a new kind of globalization which differs and overcomes the aging Western globalization project based on the force. Many doubt that, but China is going ahead. Key words: China, Silk Road, Economic Strategy, Growth Rate.

INTRODUCTION

The People’s Republic of China has experienced an unprecedented transformation and progress since the middle of the last century. No other country in the world has ever succeeded to change its economy, to jump from poverty to progress, and to become a world leader in many industrial, technical and scientific areas during so short historical period (around fifty years). And what is the most important ‐ China did not make it by conquering other countries (as some European colonial empires, starting from the UK to Belgium and the Netherlands), neither with a help of the USA (as India, Japan, Israel, Egypt,), nor through the Marshall Plan or some similar economic‐ political plans (as Germany). China did it alone and by itself. Such accelerated change was not easy (it was followed by humane suffering), there were many exaggerations (Great Proletarian Cultural Revolution, for example), and even dangerous international confrontation (with India over Tibet, with the USSR or Vietnam over borders etc). Upon proclaiming of the PR of China, in 1949, this great country accepted the hard‐fashioned communistic way of development. The model represented a copy of the Soviet Union designed vision of a state‐planned economy, managed by the Communist party’s

336 comities. In that period, the emphasis was put on industrialization, electrification, centralization and collectivization. However, with the end of the Stalinist period in Russia, China’s leadership come to a conclusion that the authentic way of development should be created. They have noticed the advantages and disadvantages of both systems; the first based on state ownership and other based on private ownership, and decided to combine socialistic ideas and capitalistic rules and practice. The idea was to embed and harmonize the best from both, political system from the first and economic system from the second. The shaping of the new vision and crystallization of a “right way” lasted several years and caused serious political disputes and schnooks. However, such turbulent transition paved the way for the introduction of fundamental reform. The market laws were declared as the main instigator of socialist development, instead of Communist Party’s decrees. Lend reform opened the door for great changes not only in economics, but in politics and culture. Agricultural communes were abolished, and farmers got the right to lease land and sell the surplus on the market. Local authorities and directors of factories took responsibility for conducting business operations from the hands of Communist party officials. The opening of small private firms was granted, so their number by 2016 reached more than 18 million. The door to foreign capital was open, which created a boom of foreign investments. Special economic zones were introduced, mainly along the coast, giving special incentives for business. Prices become less controlled by the state, although state ownership in the economy still has absolute dominance. The transition has affected the whole system and was implemented within all its dimensions. None of the elements of economic, political, cultural and everyday life were exempted. Such transformation made China's economy mixed. The China’s GDP increased even 15 times between 1978 and 1995. Very soon, in 2001, China joined the World Trade Organization, faster than anybody could expect. China’s membership in the WTO encouraged foreign companies to invest in joint venture companies with domestic entrepreneurs. In a very short period of time, China has attracted more foreign direct investments than all other developed economies together. Simultaneously, China increased domestic consumption, exports of goods and services, and its own investment abroad. As a result, China has further accelerated its own economic growth and become one of the leading economic powers. High productivity, low labour costs and relatively good infrastructure made China a world leader in the production. This trend of

337 accelerated growth, with an average of 9, 4 percent per year, reached its peak in 2007, amounting to 9, 5%. In the years that followed, the growth rate begins to stagnate and then slowly decline. In 2015, the growth rate fell to its 25 years minimum of 6, 9 percent [Fous, Economics, 2017]. This tendency extended also in 2016, and the GDP growth rate was reduced to 6.7%. The World Bank forecasts that China's GDP growth rate will decline by 2017 to 6.5% and in 2018 to 6.3% [Global Economic Prospects. 2017]. Even with such slowdown, this rate is still one of the highest among the world’s largest economies.

WORRIES

China’s exceptional growth and re‐resurrection as a world power have cheered and encouraged many countries, especially small and underdeveloped ones, but on the other side, it has worried some others, which considered that their long‐ago acquired position of the most influenced countries would remain unquestioned forever. The economic strength of the PR of China enabled its companies to become the owner of the vital industries of the Western countries, to gain concession of many raw material and oil sources over the world, as well as water and electric power plants, and made its ships and tankers to sail across all oceans and seas. Together with economic growth, the China’s political influence and reputation in international relations strongly raised and made this country attractive and desirable partner all over the Globe. The Chinese companies and workers are engaged in many continents and are the main investor of all giant infrastructure projects. Nowadays, before making a decision, leaders in many of the world's capital cities are asking themselves ‐what would China say. The rise of China was going hand in hand with the regeneration of the Russia, and strengthening of other BRICS countries, which all together announced the shift in the distribution of power in the world, showing that the unipolar world has come to its end. Powers and countries that felt jeopardized, fearing for their economic interests and position, which were protected with military bases and troops over the planet, did not hesitate to accuse China as a threat for “democratic world”, claiming that it wants to rule the world. Such disinformation of China for allegedly military expansion in Asia, Africa, Latin America and economic expansion in Europe (as a part of the well‐known Western policy of deterrence), was aimed to discourage other countries from further

338 cooperation with China, from contacting its companies, giving them the concession and borrowing money. It is hard to say that China represents a military threat if one knows about the US military presence in two‐thirds of the UN member countries. Professor Vine from American University in Washington stated that, at this moment, the US has around 800 military bases, installations or units abroad, in about 160 countries. He remembers that World War II was ended 72 years ago, Korean ‐ 64, but according to Pentagon data, there are 172 bases in Germany, 113 in Japan and 111 in South Korea. More than 100 garrisons are scattered around 80 countries, including Australia, Bulgaria, Colombia, Qatar and Kenya. [Vine, D, 2017]. Paradoxically, the biggest critic arrives from the countries which have the largest trade with China. Apparently, the protection of its purely economic interests is their main preoccupation. Given that the accusation of China for global and hegemonistic aspiration did not give the expected effect, the concerned countries launched another campaign, asserting that slow down of the China’s economic growth will provoke serious consequences for the financial, economic and political stability of the country. Consequently, that will lead to the China’s decline in the total world export and import, and force the greatest China’s buyers and sellers to ask for new suppliers and consumers. Some calculations pointed the possible negative effect to 46 countries in the emerging and highly developed country, whose economy was reported a medium level of exposure to Chinese dependence. They found that a 1 percentage point negative shock to the China’s final demand growth (in one quarter) reduces the export growth rates by 0.1–0.2 percentage point over the course of a year [OECD, 2017]. Do such painting of the actual China’s economic position with gray colour has a reasonable foundation, would it have negative impacts to the national and international trade moment and could it be sufficient for ascertaining of the country’s presumable lagging behind?

SPECIFICS

The PR of China is a country with its own specifics, incomparable to other countries, and analysing of its characteristics require a sophisticated and comprehensive approach. China is a country that is particular in many aspects, including the way of managing the society and the economy. Its impact on the world history, as well as on the economy, varied from one

339 extreme to another, but China permanently has been facing large inward differences in development between regions, between city and countryside, between coastal areas and inland zones and between rich and poor individuals. As one of the cradles of civilization, the country for a long period of history had all the characteristics of a leading world power. However, after the destruction of main dynasties, its territory was divided and occupied by several countries, what at the beginning of the 20 century significantly deteriorated its economic situation, and bought a great part of the population to the brink of starvation. Since 1949, when the civil war in China ended and the People's Republic of China was declared, this country has been governed by the Communist Party’s managing model. In spite of all weakness, even failure or step backs, such a model of governance in long‐ term period proved successful. Maybe it was the only and one which under such complex circumstances, inequalities and disparities, could secure the stability of this the most populated country in the world, with 1.38 billion people. It is worth noting that only three years were needed to China, under the leadership of the Communist Party, to reach the pre‐war level of production [Brandt&Rawski, 2008]. The National People's Congress is the most influential institution of the PR of China. Between its meetings, supreme power lies in the hands of its Standing Committee. Executive authority belongs to the President of China and to the State Council. The Chinese National Congress meets once a year and is convened by the Standing Committee. Amendments to the Constitution may be proposed by the Standing Committee or at least one‐fifth of the Congress delegates. Their adoption requires the support of at least two‐thirds of the total number of Congress delegates, while adoption of the laws and resolutions requires a simple majority of delegates’ total number. The Chinese National Congress has a crucial role in a development and strategy shaping. The Congress adopts a national economic plan and the state budget, decides on matters as war and peace, introduces the special administrative regions, elects and dismiss the President of the Supreme Court, Chairman of the Central Military Commission, and other senior officials. From the day of its foundation, the Congress adopted 13 five‐year development plans. Since the Great Economic Reform, the nature and the title of the plan, as the instrument of development, has been radically changed. The new title of the planning document is “The social and economic programme” for the medium‐term period. Such change is not administrative, it expresses the structural change

340 in understanding the contemporary world and the redefined position of China in the world economy. It has no more overall centralistic feature and is contracted to the political priorities in specific areas and branches. In spite of ideological prejudices, even the experts from the most developed countries recognize that the five‐year plans were the key to many of the Chinese economic and social achievements. During the past 68 years of independence, China has passed the path from an exclusively agrarian to mostly industrial society and now it has approached to the information society, with a developed tertian sector. Many countries, particularly the developing countries, have started to study the Chinese way of projecting the economic growth through authentic and market‐oriented five‐year plans.

STRATEGY

The creators of the current Chinese development plan were aware that slowing economic growth has objectively caused some concern, due to the size of the country and its overall impact on the global economy, especially on the global import. Really, in recent decades, China has become the main source (top 10) in export demand for economies for over 100 countries, which account for about 80 percent of the world GDP. At the same time, China is one of the largest importers of not only capital and high‐tech products from the developed countries, but also the largest manufacturer and exporter of consumer goods to these countries. Having this in mind, the plan opted for such development strategy which will maintain the level of production in China and the volume of its trade with the world. The new strategy is no more based on rapid growth and constant growth rate increase. Its focus for the period 2016‐2020 has been shifted to balanced and stable development; although the growth rate will stay pretty high in the next years. “Export‐led manufacturing growth and capital investment in fixed assets are now being replaced by consumer‐led and service‐dominated expansion” [Brown, 2017, p.2]. In order to achieve such a complex goal, some structural measures have already been introduced or are under the way. In the first place, those are measures in relation to industrial overcapacity, reducing debt, decreasing corporate costs in the otherwise dominant state sector, together with measures for reducing unsold housing units and helping poor area’s growth. To relax business activities, China will

341 further facilitate levies imposed on companies and continue simplifying administrative procedures, along with a delegation of powers and a decrease in tax rates. That should reduce the costs of project financing and "normalize the interest rates" in favour of the real economy. At the same time, all five areas of social security and pension system shall also be simplified. The determination that the health insurance system “covers” the whole population is highly important. It was not forgotten that in spite of significant improvement of the standard of living a large part of the population is still struggling with extreme poverty [Li, et al. 2017]. Dimensions of corruption, the degree of workers’ vulnerability, lack of social and healthcare, as well as the enormous environmental pollution, also were clearly determined as a problem which should be addressed and solved. The adoption of the new strategy has brought many risks by itself. It was obvious that such radical change that should stimulate the growth in overseas investments and reduction of government influences on economic activity, at the expense of strengthening the influence of the market, can hardly be achieved without the aggravation of social problems and negative consequences at a macroeconomic level. It raised the question whether China in further mobilizing foreign technology, know‐how and capital in favour of sectors where the development assistance was most needed, will continue to be equally skillful and successful, or will resort to administrative measures. The challenges have been increasing, but the vitality of the Chinese development model stays undoubted. The decision of the National People Congress of China by the end of 2017, whether the president of the PR of China Xi Jinping will take its second term or will be replaced, in any case, will influence the further course of reforms, in one way or another. Recent statistical data confirm continuation of surplus in the balance of payments and the current account, high inflow of foreign direct investment, high savings rates, as well as the largest foreign exchange reserves in the world. It increases the probability that the Jinping leadership will continue.

FINANCE

Macroeconomic indicators and statistical data confirmed that China successfully managed its financial, monetary and credit policy doting the past three decades. China not only preserved but also strengthened its

342 financial stability. Even more, the IMF added China’s currency Yuan to the list of world's reserve currencies. The following facts testify to China’s financial stability: foreign currency reserves have reached a record amount of $ 3,005.1 billion, the foreign debt ratio decried to 5% (debt amount to $1,389.3 billion), the foreign trade balance is positive ($ 509, 9 Billion), as is the current account balance, while inflation is around 2 %. Starting from 2013, Yuan become the 8th most widely traded currency in the world. Chinese capability to control the stability of Yuan, despite “floating” of its value, was sufficient for the International Monetary Fond to join Yuan to the basket of reserve currencies in the mid of December 2016. Due to the solid fiscal position of the Government, the stimulative measures did not affect the Chinese public finances. However, a gradual slowing of the GDP rate growth during the last eight years brought a risk of a possible "hard landing" of the Chine’s dragon to the economically unstable ground. Contrary to the assessment that the growth rate in 2016 will be 6, 5%; it proved to be 6, 7%. China has succeeded to avoid cooling demand and economic downturn. However, the reduction in state spending and the number of workers, as a consequence of slowing of the growth rate, hardly could be postponed for long periods. Maybe in the year 2017, as a year of the election, the government will not take such unpopular measures. Maintaining confidence could be another reason for a delay in the implementation of more severe measures. The politicians and businessman are not sure whether there will be a change in the leadership and whether the structural economic reforms will continue. Losing the confidence could encourage the migration of capital [Gordon Orr, 2017]. None of the turbulences shall prevent the China’s authorities to strive for maintaining the value of the national currency against the US dollar. They will be persistent, despite the outflow of capital and the inevitable decrees of the leading industrial branch capacity (steel and the aluminum production especially). In the circumstances of the growth rate slowdown and appearance of serious social problems, domestic credit expansion remains one of the levers that are estimated to provide a stable and sustainable development. It should encourage the domestic consumption growth, far greater employment in the services sector at the expense of the secondary sector (industry), the build‐up of entire new regions and cities with cheaper flats which will absorb the migration from the countryside and the like. Financial stability could be shaken only by the USA announcement of a possible introduction of the import tariff on Chinese

343 goods up to 45 percent, and insisting that China give up from the allegedly artificial maintenance of the low value of the Yuan against the dollar [Korkodelovic, B, 2017]. Not only that China still possesses the largest foreign exchange reserves in the world (although reserves decline for six months consecutively), but the US did not dare to resort to the import tariff on Chinese goods. With an aim to avoid painful financial surprise, China already has passed regulations which put restrictions to the natural persons for foreign currency purchasing and for spending abroad. In addition, from July 1st all financial institutions were obliged to report to the National Bank of China any cash transaction which exceeds the amount of 50,000 Yuan (about $ 7,200). The investments of state‐owned companies abroad become subject to a strict control if exceeded $ 1 billion.

SILK ROAD

China’s financial strength and unlimited investment capacities were a solid ground for launching the Belt and Road Initiative in 2013 (also referred as the “New Silk Road”), as a long‐term project for improvement and enhancement of trade, investments and cooperation with Europe as a continent, and countries lying next to the Belt or gravitating towards its route. The Initiative started as a summit meeting of the Prime Minister of China and leaders of sixteen countries of central and southeastern Europe (“summit 16+1”), but with the passage of the years, and upon the formation of a Permanent Business Council it received the outlines of cooperation institutionalization. Although Chinese officials persistently assert that this is a purely economic project, the western countries mainly understood this Initiative as a geopolitical strategy for a stronger China’s infiltration in Europe, and the establishment and securing its political interest and influence. There is no doubt that the Initiative is in line with the new strategy of China’s economic development, and opens the door for the Chinese economic penetration in Europe as the greatest market in the world and potentially future biggest trade partner of the country (if the US impose restrictions on Chinese products). Economic benefits are the essence of this project, but its achievements will reflect to the global relations of the great powers and further shaping of the international order as a whole. Strengthening China’s political coordination with many countries in Asia, Africa and Europe,

344 harmonizing its stances toward the third countries and international institutions, ensuring concessions and the benevolent attitude of the Belt‐ related governments, will make these countries the stronger economic partners of China and enable them to better understand the Chinese position in the world. The Initiative appeared in the moment of serious deterioration in the relation between Russia and the West, which consequence was the suppression of the Russian interest in the Europe, especially in the Balkans. China is trying to fill in this gap, presenting itself as a politically neutral and economically reliable partner, which will not impose conditions for cooperation, let alone export the Chinese model of social, political and cultural life. In that sense, the major Chinese venture will be extended from the Belt and Road Initiative to the Balkans countries. It will embrace not only the countries which are candidates to accession, but the countries which already belong to the Union. Despite the existence of a high degree of Western’s suspicion toward the Chinese ultimate interests and “hard” entrance in Europe, there is a great degree of coincidence and harmony of the priorities between the European Union, countries on the Silk Road and China itself. Improving the infrastructure of the Central and Southeastern European countries is an essential precondition, especially for the Balkans countries in assessing to the Union. These countries suffer from a lack of capital; while the EU funds are not sufficient to cover the greatest infrastructure project. China is the only financial power, which capital is available for solving this problem and capable to satisfy appetites of those investments‐hungry countries of SEE. In addition, upon finishing infrastructure magistrates along the New Silk Road, the Chinese companies will approach closer to the EU market, providing that the maritime road between Beijing and Brussels will be shortened at least for one thousand miles. For example, transportation of one container from Shanghai to Rotterdam port nowadays takes approximately 32 days, but upon the reconstruction of Piraeus port transit time will take only 22 days. That will be a much faster and cheaper solution. The acceleration of transportation from the Far East to West Europe, together with buying the concession for Piraeus port, will not be feasible without the improvement of Balkan’s railway links and finishing the highway from Greece to Budapest. The Balkan’s Silk Road will be based on the existing European railroad corridor X, which links Central Europe with the Aegean Sea via Hungary, Serbia, FYR Macedonia and Greece.

345 SERBIA

Serbia, as a small country with an open economy, highly depends on international flows of goods and capital, but at the same time has no influence over these flows. Still, in this period of global uncertainty, it has managed to achieve positive results in preserving the stability of the financial system. Its interest for stronger cooperation with China has sound economic and political grounds. The level of proclaiming “strategic partnership” is not so high that Serbia could feel effects of modification and change in China’s economy. For that reason, a slowdown in the Chinese economic growth will not have a significant impact to Serbia. On the other side, the Chinese turning towards the Balkans will strongly benefit to the country. The Republic of Serbia open‐mindedly accepted to be a part of the cooperation mechanism between China and 16 Central and Eastern European Countries (“16+1 cooperation”), hoping it will instigate its economy, strengthen its political diversity and help its linking to the European Union. Statistical data show that Serbian trade relations with China are not so developed as with the EU countries, or Russia. In addition, Serbian debt in Yuan currency does not look so troublesome. No doubt that the Chinese investment will help strengthen the local infrastructure in Serbia and improving its transportation connections with other EU states. However, the financial aspect of trade cooperation is less optimistic. According to the UN data, trade in goods between China and the five non‐EU members of the Initiative (Serbia, Albania, Bosnia and Herzegovina, Montenegro, and Macedonia) grew by 6.4% on average over 2010–15. However, each of these countries recorded an increase in its bilateral trade deficit with China [The Economist, 2017]. China’s economic links with the South East Europe countries come in three broad forms. The highest‐profile involvement is through direct lending to governments for infrastructure – roads, railways, ports, power plants, etc. The second way is through trade links: the Chinese exports to, and imports from the SEE region has grown dramatically in the past decade, with the potential for further strong growth in the coming years. Lastly, the Chinese companies are showing an increasing interest in direct equity investments in SEE [Levitin, O, and all, 2016/1]. The Table 1 explains the most important projects in Serbia, which are mainly financed by the Chinese party (80 %), while Serbian participation in project financing is modest (around 20%).

346 The total value of Chinese investments in infrastructure projects listed in table 1 in 2016 amounted to 1, 67 billion. However, in the middle of 2017, the amount of all investment, not only mentioned in Table 1, assessed to € 5,5 billion [Mihajlovic, Z./2017]. Some of the particular projects have already been finished, as the Danube Bridge in Belgrade (which connects County of Zemun with County of Borča). Apart from that, the China’s mighty steel company bought a Serbian steel plant MKS in the city of Smederevo, while the National Bank of Serbia issued the licence to the Bank of China, which started to operate in Serbia in January 2017. In addition, there are the negotiations underway aimed at the construction of the largest Chinese industrial park in Europe, the heating plant which will connect Belgrade Power Plants and TENT (Thermal power plant Nikola Tesla) in Obrenovac, as well as the construction of the first large wastewater treatment plant in Veliko Selo, together with completion of the construction of the sewage network.

Table 1: Major transport and energy infrastructure projects in Serbia supported by Chinese investments Title of the Project Value % of GDP Danube bridge € 170mn Belgrade‐Budapest € 800mn in Serbia high‐speed railway link (out of the total €1.5bn 350 MW unit at the Kostolac € 700mn thermal power plant Sections of the European motorway XI (to MNE) TOTAL VALUE 1.67 bn TOTAL OF GDP 7‐8% Source: [Levitin, O, and all, 2016/4].

As for trade cooperation with China, all CEE countries, including the west Balkans countries, have a negative balance of its export and import. That can be seen in the Table 2. The greatest disbalance is linked to the Republic of Serbia.

347 Table 2: Trade volume between China and SEE, 2014 Exports to China Imports from China Trade with China % of % of % of In USD % of In USD % of In USD % of total total total million GDP million GDP million GDP exports exports exports Albania 164 6.7 1.2 382 7.3 2.9 546 7.1 4.1 B & H 34 0.6 0.2 376 3.4 2.0 410 2.4 2.2 Bulgaria 709 2.4 1.2 1,147 3.3 2.0 1,856 2.9 3.3 Croatia 68 0.5 0.1 589 2.6 1.0 657 1.8 1.1 53 2.7 0.2 300 4.4 1.3 353 4.0 1.5 Greece 370 1.0 0.2 3,314 5.3 1.4 3,684 3.8 1.6 FRY 93 1.9 0.8 432 5.9 3.8 525 4.3 4.6 Macedonia Montenegro 3 0.8 0.1 176 7.4 3.8 179 6.4 3.9 Romania 759 1.1 0.4 3,150 4.0 1.6 3,909 2.6 2.0 Serbia 14 0.1 0.0 1,561 7.6 3.5 1,575 4.4 3.6 SEE ‐TOTAL 2,267 1.3 0.3 11,427 4.6 1.7 13,694 3.2 2.1 Source: UNCTAD

Some above‐listed data are unfavorable for Serbia. The value of its export to China in 2014 was very low –hardly 14 mn USD (only Montenegro had a worse result, 3 mn). Even Bosnia and Herzegovina and Macedonia had greater exports (USD mn 34, respectively 93). As an importer, Serbia was placed fourth, among 10 countries of SEE, with an import value of USD mn 1,561 (i.e. 1, 5 bn). The greatest importers from China were Greece (USD mn 3,314) and Romania (USD min 3,150). Unfortunately, the value of Serbian import from China was 112, 5 times smaller than the value of export. None of other CEE countries had such a huge disbalance. Montenegrin export was 58 times smaller than import, Bosnia and Herzegovina’s 34 times, Macedonian 4,6 times and Albanian only 2,3 times. The Foreign Trade Report of the Serbian Chamber of Commerce (see Table 3) indicates that during the following two years

348 (2015 and 2016) Serbia has slightly increased its export to China, but disbalance is still high (during five years amounted to 11.871,6 USD million). In 2015, export increased to 20, 2 million, while in 2016 jumped to 25, 3 million. Giving such export increase, disbalance between Serbian tiny exports and enormous imports decreased from 112, 5 times in 2014, to 76 times in 2015, and 63 times in 2016. The coverage of imports by exports remains fairly low during the whole five year period, as follows: 1,0% in 2011; 0,5% in 2012; 0,6% in 2013; 0,9% in 2014; 1,3% in 2015 and 1,6% in 2016.

Table 3: Foreign trade between Serbia and China 2011‐2016 (in USD mn)

2011 2012 2013 2014 2015 2016

Exports from Serbia 15,3 6,3 9,0 14,1 20,2 25,3

Imports from China 1.488,5 1.385,1 1.509,5 1.561,0 1.540,2 1.603,9

Balance ‐1.473,2 ‐1.378,8 ‐1.500,5 ‐1.546,9 ‐1.520,0 ‐1578,6

Total trade value 1.503,8 1.391,4 1.518,5 1.575,1 1.560,4 1.629,2 Import coverage by 1,0% 0,5% 0,6% 0,9% 1,3% 1,6% exports (%) Source: Statistical Office of the Republic of Serbia, 2016 Foreign Trade Report (Republički zavod za statistiku)

CONCLUSION

The fears of the Chinese economic growth “cooling” and its negative repercussions to other great economies in the world have proven exaggerated. China’s GDP rate slowdown should not shake the world economy or the major players. In spite of seven‐year decline in the GDP growth rate, the results reached during 2016 and the first months of 2017 show that China has maintained progress and is decisive to continue further economic reforms [Scutt, David/2017]. The change of development strategy, with focus on stable instead constantly faster growth, and with an

349 emphasis on the structural adjustment and transformation to the market requirements already gives fruits. Financial, economic, social and political stability has been preserved. It is obvious that parameters designated to be achieved by the end of 2020, to a certain extent are more modest than results recorded in the previous five‐year period. The much complex situation in international relations and change of the world power equilibrium could not be neglected. China is no longer ready to force high rates of growth at any cost, but is decisive to preserve macroeconomic stability and build mechanisms that will make such a positive development sustainable. Of course, some radical steps on the national level should be inevitable, but without intention to aggravate the other countries’ position. A reduction of the gap in average GDP per capita between the United States and China, from the current 7: 1 to 3: 1, at this moment looks like the most attractive goal for the whole nation. At the end of March 2017, the IMF officials assessed first results of the new China’s five‐year programme as “transition to more sustainable levels of growth“[PRC and IMF, 2017, p.2]. That is to say that stable growth, instead of its constant acceleration, would be the leading thread in planning and assessing China’s economic perspective. Launching the One Belt‐One Road Initiative (OBOR) and its achievements during the several recent years confirmed that the Chinese strategy for economic expansion towards Europe, Africa and Latin America, opens a new space for its economy, investments and development. China has already laid down the tumbling stone for its penetration into new and growing markets and started to pave the infrastructure for its maritime and land route, which will make China inevitable and reliable business partner to many countries. Stepping over the New Silk Road, China has offered cooperation to the countries along the Road on the win‐win basis. Up to now, such balance has not been reached, giving the China’s growing economic power, enormous production and expanded investment capacities. The Republic of Serbia joined to the “16+1” initiative on economic and political cooperation between China and sixteen Central and Eastern European countries from the very beginning. For that reason, Serbia has already experienced the first positive effects of the Chinese investment here, mainly in the infrastructure projects. In spite of the great disproportion of the economic power and political strength between two countries, Serbia deems that the positive effects of such cooperation could be rather expected than the negative ones. Its concern only refers to the

350 negative balance in commercial relations. For that reason, Serbian priority, in the long run, should be the elimination of bilateral trade deficit with China. Each participant, not only Serbia, will sooner or later have to reassess its position and results achieved during this new voyage through the ancient avenue known as the Silk Road. It could not be neglected that only six SEE countries (Bulgaria, the Chez Republic, Hungary, Poland and Slovakia), which participate in 16+1 Initiative, account for 95 percent of the total investment for the whole group. [ECFR, 2016/8] For that reason, “enthusiasm for participating in the 16+1 has varied due to differences between economies, population and market potential of the 16 CEE countries“[ECFR, 2016/3]. Having in mind this fact, only the participants to the New Silk Road project could contribute to its deepening and strengthening for the benefit of all passengers

BIBLIOGRAPHY

Brandt Loren, Rawski G. Thomas (2008): “China’s Great Economic Transformation”, Cambridge University Press. Brown, Kerry (2017): “The Critical Transition: China’s Priorities for 2021”, Research paper, Chatham House, Royal Institute for International Affairs, London. Bryan, Starr John (2010): “Understanding China: A Guide to China’s Economy, History, and Political Culture”, Hill and Wang edit., New York, 2010. European Council on Foreign Relations (2016): “China’s Investment in Influence: The future of 16+1 cooperation, December 2016, Analysis No. 199. Focus, Economics (2017): “China Economic Outlook”, March 21, 2017, Economic forecast from the World’s Leading Economists, Internet: http://www.focus‐economics.com/countries/china, (retrieved, March 30, 2017). Global Economic Prospects, A World Bank Group Flagship Report, January 2017, page 83; Washington, DC 20433, USA. Korkodelovic, B, (2017): “Kineski odgovor na Trampov protekcionizam”, Danas, Daily newspaper, Belgrade, June 8th, 2017.

351 Levitin, Oleg, Milatovic, Jakov and Sanfey, Peter (2016): “China and south‐ eastern Europe: infrastructure, trade and investment links” , Department of Economics, Policy and Governance, EBRD, July 2016. Li, Hongbin, Prashant Loyalka, Scott Rozelle and Binzhen Wu (2017): “Human Capital and China’s Future Growth”, Journal of Economic Perspective”, 31(1). Mihajlovic, Zorana (2017): ” Kineske investicije 5,5 milijardi“, Danas, Daily newspaper, Belgrade, June 15th, 2017. OECD, Economic outlook, analysis and forecasts, March 21, 2017, Internet: http://www.oecd.org/eco/outlook/, (retrieved, March 30, 2017). Orr, Gordon, (2017), What we can expect in China in 2017, McKinaey & Company, Commentary January 2017, Internet: http://www. mckinsey.com/global‐themes/china/what‐can‐we‐expect‐in‐china‐in‐ 2017, (retrieved, March 30, 2017). Scutt, David (2017): “China’s trade surplus widens”, Business Insider Australia, Jun. 8, 2017, Internet: http://www.businessinsider.com/ china‐trade‐balance‐may‐2017‐2017‐6 (retrieved, August 30, 2017). Statistical Office of the Republic of Serbia (2016): Foreign Trade Report. Vine David, 2017, List of U.S. Military Bases Abroad, 2017 (version of 2017‐ 05‐14), Internet:http://dra.american.edu//islandora/object/auisland ora%3A55685 (retrieved, August 30, 2017); World Trade Statistical Review 2016.

352 SIGNIFICANCE OF THE NEW SILK ROAD FOR THE CONSTRUCTION OF TRANSPORT INFRASTRUCTURE ON THE REGIONAL AND GLOBAL LEVEL

Nataša TOMIĆ‐PETROVIĆ Professor, Faculty of Transport and Traffic Engineering University of Belgrade, Serbia1

Abstract: Natura in minimis maxima. Serbia with its favourable natural‐ geographic and traffic position has a good basis for the development of all forms of transport and attracting the transit of goods. Across our country, the natural and shortest road and rail links extend to the European countries, and the Middle and the Far East. Today, the importance of roads for economic, political and military relations is particularly evident in relation to the new Silk Road in northern land‐and southern‐sea direction of the Silk Road. China with the “new Silk Road“ establishes more direct traffic and geoeconomic connection with Europe and Serbia, obtains the additional opportunity for the development of relations with China and for connection with the countries in the region. The Strategy of water transport development of the Republic of Serbia from 2015 to 2025 (“Official Gazette RS“no. 3/15) has the function of promoting water transport as the most cost‐effective and environmentally friendly mode of transport. With improved infrastructure and transport means Serbia would be able to compete with the traffic of European countries. The modernization of road, railway and infrastructure on the inland waterways Pan‐European Corridor VII (Danube) and X will be the priority and our capital Belgrade follows the world trends in an effort to position itself on the map as the capital of Southeast Europe. Key words: China, new Silk Road, transport, infrastructure, progress, Serbia.

INTRODUCTION

Natura in minimis maxima. As we know the territory of China was inhabited from the earliest prehistoric times and the history of this country

1 E‐mail: [email protected]

353 was revealed in legends. The Silk Road is the route that in ancient times, caravans traveled from the Middle East to the Far East by land, sea and rivers and began to be used around 100 BC during the Chinese Emperor Vuu’s reign. On the Chinese territory, the road was about 6000 kilometers long and built upon the Persian Royal Road, which began from today’s Iranian town Ectaban, in the north‐west of Iran and led to Smyrna (today’s Izmir). [1] Serbia is located at the crossroads between Western and Middle Europe and the Middle East. Corridor X, as well as Corridor VII, pass through Serbia. Today, the importance of roads for economic, political and military relations is particularly evident in relation to the new Silk Road in the both its directions, northern land formulated by the initiative of the so‐called economic zone of the Silk Road and southern‐sea direction of the Silk Road for the 21st century. It is known that the Romans imported Chinese silk, as well as that the ancient Greeks were directed to the maritime links and communication with the world by sea.

EXPERIENCE OF SERBIA AND COOPERATION WITH CHINA

What the Suez Canal is for the that is the Panama Canal for the New World. Both of these channels are magnificent construction works. We had the Sea /Adriatic/ until 2006. The Strategy of water transport development of the Republic of Serbia from 2015 to 2025 (“Official Gazette RS“ no. 3/15) has the function of promoting water transport as the most cost‐ effective and environmentally friendly mode of transport. [2] From our capital Belgrade the load can be transported to all Black Sea ports by river‐sea ships of capacity up to 5,000 tons. Today, in the territory of the Republic of Serbia, the shipyards Kladovo owned by a Dutch company and the shipyard Novi Bečej, which is in private domestic ownership, are regularly working. These shipyards are working for foreign customers. The shipyard in Brnjici is also active, but mainly used for repair works and operating under very difficult conditions. The planned development of recreational navigation in the Republic of Serbia could create conditions for the so‐called activation of boatbuilding. With improved infrastructure and transport means Serbia would be able to compete with the traffic of European countries. The modernization of road, railway and infrastructure on the inland waterways Pan‐European Corridor VII (river Danube) and X will be the priority and our

354 capital Belgrade follows the world trends in an effort to position itself on the map as the capital of Southeast Europe. Corridor X through Serbia is being built for about 34 kilometres more of the highway, and when all 86.9 kilometres on the eastern branch of Corridor X is completed, then it will be faster to arrive at the Bulgarian border and its capital Sofia. It is planned that all the remaining sections are completed by the end of 2017. The public in our country learned that during June, Serbia was the special guest of the Silk Road 2017 when in the Chinese city Xian was opened the third International Fair “Silk Road 2017”. Our country has participated as a special guest and partner state and thus confirmed the traditional strategic friendship of the two countries and two people. Chinese companies will realize several projects in Serbia. In May 2017 in China, Serbia signed important agreements for the future of our country. Of particular importance is the introduction of a direct flight between Serbia and China, as well as the infrastructure projects. The current summit2 “One Belt, One Road” for International Cooperation, is dedicated to the China’s plan to connect by land and sea Asia, Europe and Africa. The agreements were signed on the construction of the highway on Corridor 11 to the border with Montenegro for sections from Preljina to Požega and from Požega to Boljari, with total length of 140 kilometres,3 which will start next year, as well as the Fruška Gora Corridor, i.e. a fast road from Novi Sad to Ruma4. The long‐term plan includes the construction of “fast railroad tracks” (construction of the third section of a fast railway from Novi Sad to the Hungarian border) within the project of modernization of the railroad tracks Belgrade‐Budapest, on which trains will, when it is completed, run up to 200 kilometres per hour, as well as a modern dispatching centre for the management of Serbian railways, according to the contract on the development of the project signed last year. The aim is to create an adequate infrastructure and strengthen relationships, i.e. work on closer relations among countries of Eurasia in the framework of the new Silk Road, as well as to form a corridor for direct delivery of goods from the East. It turned out that the geographical dispersion is not an insurmountable obstacle. China

2 Twenty nine heads of state and governments attended this Summit. 3 As stated in the announcement the first estimates show that this construction of these sections will cost around 2.1 billion euros. 4 The length of this section is 123 kilometers and the estimated value is around 400 million euros.

355 and Europe have recognized the spirit of the times in which we live and the cooperation in the fields of energy, industry and urban development is continuing. The People’s Republic of China has repeatedly assisted the defence system of the Republic of Serbia with several donations. The Chinese support for the development of airline, whether from Shanghai or from Beijing to Belgrade was provided, after performing the technical part of this great work. Also, the Agreement on strategic partnership for the development of information and communication infrastructure in educational institutions was signed with representatives of the company “Huawei”. Taking into consideration that electric cars have become our future, Serbia is still lagging behind on this path.5 Having in mind that electric vehicles produce significantly less carbon dioxide, the primary objectives are of economic and environmental nature. Thus, Serbia made plans for setting up charging stations for electric vehicles. It will be initially only 3 stations within the project “Green Balkanika”, while it is speculated with the information that in China there are 5 million of these stations. Modus faciendi (mode of action) shows that we need greater engagement, but also the support of the state. While on the 1st of June 2017 the United States of America6 informed the public on withdrawing from the Paris Agreement on climate change, China will continue to fulfil the commitments made in the Paris Agreement, in order to reach the target by 2030, and it is known that objective and the obligation is that the average temperature in the world does not rise more than 2 degrees Celsius compared to the pre‐industrial level. During 2017, Serbia will get a “Green Fund” from which will finance the projects intended for environmental protection. Already Leonardo da Vinci wrote that learning can never exhaust the intellect. Science grows by accumulation. Whatever kind of knowledge mastered your mind, you should not stop learning even for the moment because there are no interruptions in learning, wrote A. Firdawsī. Therefore, cooperation in this field means connecting and progress, the path to the future, i.e. the domination of intellectual economy with the development of science, technology and ethics. In China, there are five levels of government, and companies are encouraged in scientific research. 5,300 local regulations and a number of laws were adopted and inspections are functioning, while

5 On the way of electrification the most advanced is Scandinavia, especially Norway. 6 United States of America and China are the biggest polluters in the world who by this agreement committed themselves to reducing emissions of greenhouse gases.

356 citizen participation is visible. (from the lecture of the Chinese expert Hu Sangtao, 1998). China with the “new Silk Road“ establishes more direct traffic and geoeconomic connection with Europe, including the important region of the Danube basin too. [3] In this way, Serbia obtains the additional opportunity for the development of relations with China, and for connection of countries in the region, for its own development, especially in view of the Danube route, road corridors passing through its territory, as well as the high‐ speed railway project Pyreus‐Budapest.

IMPORTANCE OF ENERGY EFFICIENCY IN SERBIA

Today, in the world continues the polemics that the world of oil will be replaced by the world of gas. The so‐called “era of gas,” has begun, and proven reserves of natural gas, with the current level of consumption, could satisfy the civilization needs for about next 200 years and more. [4] Indeed, one of the very important factors for the future of the world is energy. These days, for the first time in Serbia the Week of energy, which is celebrated in the framework of European energy days, was held. In our country, since 2004 the care is systematically taken of the energy efficiency, which was one of the priorities in the Energy Development Strategy of the Republic of Serbia until 2015 (See: Decision on establishing the Energy Development Strategy of the Republic of Serbia until 2015 /“Official Gazette of RS” no. 44/05/) [5], which is now void, and the Energy Development Strategy of the Republic of Serbia until 2025 with projections until 2030 /“Official Gazette of RS” no. 101/15/ [6]. Modern cities are looking for energy‐efficient solutions. At the beginning of May 2017 the construction of “Turkish stream” has begun, i.e. the company “Gazprom” has started with the construction of the marine section of the pipeline on the Russian Black Sea coast. It is planned that the first line of the pipeline that will supply Turkey with gas will be completed until March 2018. At the same time, Germany is building with “Gazprom” a gas pipeline “North Stream 2”, while in Serbia7, for a decade, we are waiting for funding and the decision of the European Commission for building a gas pipeline from Niš to Dimitrovgrad. However, it has to be decided on which spot a gas pipeline will

7 Serbia currently has only one route for gas supplies through Hungary.

357 enter into Europe, i.e. the Russian gas will through “Turkish stream”8 go to Serbia. European countries depend on the extension of this gas pipeline on the territory of the European Union. It is significant that in early June 2017, Russia, Hungary and Serbia renewed the negotiations on the construction of the gas pipeline. Geostrategic games are of great importance for the gas pipeline. In order to improve energy efficiency, the development of new energy sources is required but also the Law on rational use of energy. In the Republic of Serbia conditions and manner of effective energy utilization and policy of effective energy utilization are regulated by the Law on effective energy utilization (“Official Gazette of RS” no. 25/13) in force from 2013.[7] A priority in implementation of the Action Plan for the implementation of the National Sustainable Development Strategy of Serbia for the period from 2011 to 2017 (Conclusion on the adoption of the Action Plan for the implementation of the National Sustainable Development Strategy for the period from 2011 to 2017, “Off. Gazette of RS” no. 62/11.) [8], as the most important element of sustainable development, is to increase energy efficiency at all levels.

CONCLUSION

Serbia with its favourable natural‐geographic and traffic position has a good basis for the development of all forms of transport and attracting of transit of goods. Across our country, the natural and shortest road and rail links extend to the European countries and the Middle and the Far East. Historical thought of the East is historically older than all forms of wisdom that we consider today the legacy of Western European civilization. About the Silk Road is also written as the defensive line. In Beijing, the signing of the so‐called road map with an emphasis on activities that are necessary to be performed by 2020 was proposed by Moscow. The initiative of China is to gather on the joint work and in the common interest within the framework of the project “Silk Road” nearly 70 sovereign states of the Eurasian area in which lives 70% of the world population, which manage 75% of known energy reserves. With improved infrastructure and transport means, Serbia would be able to compete with the traffic of European countries. The modernization of road, railway and infrastructure on the inland waterways Pan‐European Corridor VII (river

8 This is an economic project in which European countries can participate for mutual benefit.

358 Danube) and X will be the priority. The reputation of Serbia in the world has grown considerably and our strategic path is directed towards Brussels. A struggle for the preservation of the environment continues and today China and the European Union are trying with joint efforts to preserve and promote the implementation of the Paris Agreement from the year 2015. It can also be concluded that China positions itself as the leader of the current and future energy progress. China and Europe have recognized the spirit of the times in which we live and that cooperation in the fields of energy, industry and urban development is continuing.

BIBLIOGRAPHY

“Danube ‐ the River of Cooperation”, The First Conference, edited by Edita Stojić, publishers: International scientific Forum “Danube – the River of Cooperation”, the Institute of International Politics and Economics, and Dunav‐Fest, Belgrade 1992. Conclusion on the adoption of the Action Plan for the implementation of the National Sustainable Development Strategy for the period from 2011 to 2017 (“Official Gazette of RS” no. 62/11.) Decision on establishing the Energy Development Strategy of the Republic of Serbia until 2015 (“Official Gazette of RS” no. 44/05). Energy Development Strategy of the Republic of Serbia until 2025 with projections until 2030 (“Official Gazette of RS” no. 101/15). Law on effective energy utilization (“Official Gazette of RS” no. 25/13). Petrović D, Tomić‐Petrović N, “Geopolitical aspect of the new Silk Road“, International Scientific Conference, June 2016, in Proceedings “Danube and the new Silk Road“, edited by Duško Dimitrijević, Belgrade, 2016. Strategy of water transport development of the Republic of Serbia from 2015 to 2025 (“Official Gazette RS“ no. 3/15). Tomic‐Petrović N, “Energy efficiency and environmental protection /World experience and perspectives of Serbia/”, („Енергетска ефикасност и заштита животне средине /Светска искуства и перспективе Србије/“), “ELECTRA VII”, Seventh International Conference on Environmental Management System in the power plants and Interdependent Companies, Forum kvaliteta, Kopaonik, 13‐16 November 2012, in the Proceedings from the meeting.

359 THE IMPORTANCE OF CHINESE INVESTMENTS IN THE ONE BELT, ONE ROAD INITIATIVE

Duško DIMITRIJEVIĆ Professorial Fellow Institute of International Politics and Economics, Belgrade, Serbia Nikola JOKANOVIĆ, LLM China Foreign Affairs University, Beijing, China1

Abstract: The 16+1 cooperation initiative, involving the People’s Republic of China and the 16 countries of Central and Eastern Europe, was officially launched in 2012. Each of the countries has its own cooperation priorities, but the majority of the investment projects which are part of the initiative is in the areas of transport infrastructure, agriculture, energy, logistics, health, etc. This cooperation initiative is complementary to China’s landmark foreign policy project, One Belt, One Road; together, they determine China’s attitude towards these 16 countries. Firstly, this paper will view the main sectors of Chinese investment throughout the countries of Central and Eastern Europe since 2012. This will be followed by the investment projects which have been completed, as well as the most recent announced projects and their estimated value. Five years after the official launching of the 16+1 cooperation initiative, it is clear that not all countries in the region have benefited equally from the initiative ‐ while some have maintained enthusiasm due to a large number of implemented projects and tangible results, the others are still waiting to see tax revenue flowing into their budgets and are growing sceptical. The authors point out that dominant countries such as Hungary, Poland, the Czech Republic, Romania, Serbia or Bulgaria have seen most of the benefits; although it is unrealistic to expect equal benefits to all 16 countries of Central and Eastern Europe, the initiative will be fully successful only if major Chinese companies gain a stronghold in those countries in which they were absent until now. Key words: People’s Republic of China, Central and Eastern Europe, Serbia, 16+1, cooperation, investments.

1 E‐mail: [email protected], [email protected]

360 ONE BELT, ONE ROAD INITIATIVE AND ITS ECONOMIC IMPORTANCE

China’s tremendous economic development has made China an increasingly attractive economic partner in the first and second decade of the 21st century. During this period, the ancient Silk Road trade route became attractive once again. Its symbolism in the different geopolitical circumstances served China as the ideological basis for the proliferation of ideas of the “New Silk Road”, which has become, within the political paradigm of the “Chinese dream”, the leading national development strategy. Building on the earlier proclaimed policy of the “Peaceful Development”, this strategy conceptually shaped China’s efforts to consolidate the regional security and to ensure the harmonious economic development of most of the world. This strategic concept of Chinese foreign policy came up together with the economic concept of “Open door” which was applied in China by more than three decades and that led to the market‐ oriented reforms and gradual process of liberalization from which were removed the internal barriers in terms of movement of goods, labour and capital (Hongyuan & Yun & Qifa, 2012, p. 128, etc). Starting from 2000, onwards, China has made significant progress in the global market. Joining the World Trade Organization and by strengthening their economic capacity, China has managed to occupy one of the leading positions in the world economy. Unfortunately, today, as well as other global powers, China is faced with serious economic threats which are caused by the world economic crisis and internal social tensions. These problems were put aside exports and foreign direct investment as a leading Chinese economic development model. Given the difficult business conditions, China tries to find new export markets or preserve existing ones. This is the main reason why the “New Silk Road” has developed in two political framework initiatives expressed through the phrases: the Silk Road Economic Belt and the 21st century Maritime Silk Road and which is usually referred to in China as Yi Dai Yi Lu (One Belt, One Road). The “Silk Road Economic Belt” initiative called by the Chinese President Xi Jinping in September 2013, aims to promote cooperation between China and countries in Asia and Europe, according to the new model, which should include: “1) strengthen policy communication, which may help ‛switch on a green light’ for joint economic cooperation; 2) strengthen road connections, with the idea to establish a great transport corridor from the Pacific to the Baltic Sea, and from Central Asia to the Indian

361 Ocean, then gradually build a network of transportation connections between eastern, western and southern Asia; 3) strengthen trade facilitation, with a focus on eliminating trade barriers and taking steps to reduce trade and investment expenses; 4) strengthen monetary cooperation, with special attention to currency settlements that could decrease transaction costs and lessen financial risk while increasing economic competitiveness; 5. strengthen people‐to‐people relation” (Xinhua, 2013).2 On the other hand, the second initiative of the “21st century Maritime Silk Road” which was first mentioned by the Chinese President Xi in early October 2013, should serve for the improvement of maritime economy as well as environment protection, science, technology and security cooperation along the sea routes of southern Eurasia, from the Pacific coast to , the eastern Atlantic shores and Mediterranean.3 The Belt and Road initiatives have been proposed with the purpose of benefiting both China and the countries along the land and maritime route. They are open to all countries and international organizations (for example: Shanghai Cooperation Organization, the Eurasian Economic Community, Asia‐Pacific Economic Cooperation, Asia‐Europe Meeting, ASEAN plus China, BRICS, etc.), while adhering to the principles of mutual respect and common interests. The most important common economic interests include the improvement of trade and investment flows (facilitated through greater use of local currencies in cross‐border exchange,

2 Professor Liu Zuokui from the Institute for European Studies of the Chinese Academy of Social Sciences points out that: “The Silk Road Economic Belt has three routes on the corridor which refers to the Siberian Continental Bridge (also known as the First Eurasian Continental Bridge), starts from Vladivostok in the eastern part of Russia and ends in Rotterdam in the Netherlands; the New Eurasian Continental Bridge (also known as the Second Eurasian Continental Bridge), begins in Lianyungang in east China’s Jiangsu Province and ends in Rotterdam. It exits China via the Alataw Pass and runs through Central Asia into Russia, Poland, and Germany; the third is the Eurasian Continental Bridge that is now on the drawing board. This proposed route would start from Shenzhen in Guangdong Province and end in Europe via Myanmar, Bangladesh, India, Pakistan, Iran, Turkey and Bulgaria”. (Liu, Z. 2015, p. 186). 3 According to the recent information, published by the Xinhua agency, the Maritime Silk Road begins in Quanzhou (Fujian) and hits other southern Chinese ports (Fujian, Zhejiang and Guangdong) before heading to the Malacca Strait. From Kuala Lumpur, the Maritime Silk Road heads to Kolkata, crosses the rest of the Indian Ocean to Nairobi and then around the Horn of Africa into the Mediterranean – with final stops in Greece and Italy.

362 and through currency swap arrangements between the People’s Bank of China and other central or national banks), the improvement of transport infrastructure (the railway and highway network, and the deep water port facilities) and deepening economic integration (greater access to the Chinese market for all countries along the route, and vice versa) (Dimitrijević & Jokanović, 2016a, pp. 26‐27; Xinhua, 2015a). In order to achieve these initiatives, China and the states concerned from different continents have established the Asian Infrastructure Investment Bank (AIIB) with the initial capital of 100 billion US dollars earmarked for funding infrastructure projects and promoting regional interconnectivity and integration (Xinhua, 2015b). In line with the published Chinese projections, both of these initiatives are expected to become fully operative by 2025 (Escobar, 2014). These initiatives should boost the revitalization of the large part of the world which covers the vast area with more than 4, 4 billion people. It is expected that the total value of these initiatives surpasses 21 trillion US dollars (almost one‐third of the world’s GDP) (Janković, 2016, p. 6). The network of investments that includes the Belt and Road initiatives might create the landmark infrastructure projects of the 21st century (World Land‐Bridge), encompassing 60 or more countries from different continents (Zepp‐ LaRouche, 2015, pp. 2, etc.) Therefore, the importance of the Belt and Road initiatives is huge taking into account the number of countries they could encompass and the potential economic benefits for all of them. Hence, the Belt and Road initiatives indicate a positive climate for building a new international economic system that could bring prosperity to a large number of countries that are on the “New Silk Road”, including Serbia, which, according to its specific position in international relations has a special significance for their implementation.4

4 It seems very interesting to note that China came out with a list of priorities within the Belt and Road initiatives in February 2015. These priorities include building transporting infrastructure, facilitating the flow of investment and trade, simplification of customs procedures, the construction of logistics centres, financial cooperation, with the expansion of cooperation between nations through intensifying exchanges in culture, education, science, etc. In March 2015, the National Development and Reform Commission announced an important strategic document titled: “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”. This document outlines the framework of cooperation within the Belt and Road initiatives (National Development and Reform Commission, 2015a). The same Commission

363 EU AND THE OBOR INITIATIVE – BETWEEN APPROVAL AND SCEPTICISM

The EU and its member states all have different views and expectations of the OBOR initiative. For the most part, the experts agree on the potentially positive effects of the initiative – David Gosset of Shanghai’s China, Europe International Business School describes the initiative as capable of reshaping the Eurasia (in terms of prosperity and cohesiveness) if it is successful (Xinhua, 2015d). Bai Ming of Chinese Academy of International Trade and Economic Cooperation assumes that OBOR would result in China’s additional open‐up to the Western businesses and more opportunities for Chinese businesses throughout the EU (Xinhua, 2015d). Another author mentioning the benefits of the OBOR is Zhu Dan of European Union Chamber of Commerce in China – she views OBOR as a possible remedy of the EU’s economic hardships and believes that China and the EU have a complementary economic structure (Xinhua, 2015d). One of the experts highlighting the EU’s internal insecurity about China, the OBOR initiative and China’s increasing presence in Europe is Dragan Pavlićević (Pavlićević, 2015). As he notes, China’s cooperation with Central and Eastern Europe (CEE) is being constantly monitored and assessed in the EU institutions; the fears persist that OBOR is capable of splitting the EU so as to better accommodate Chinese interests, despite the reassurance from Chinese Premier Li Keqiang that China is in full support of the European integration (in December 2014) and that OBOR would contribute to fewer differences in development and living standards between different EU regions, while fully following the EU legal standards (Pavlićević, 2015). Pavlićević sees the China‐CEE ties as dependent on the broader EU‐China policy; he underlines the political control Brussels is exerting over the EU’s central and eastern parts and believes that the China‐CEE relations would worsen should the EU institutions and officials take a more radical approach towards China.

adopted on 22 October 2015, the “Action Plan for Harmonization of Standards along the Belt and Road (2015‐2017)” which confirmed that the objectives of the previous adopted document (Vision and Actions), will be achieved in practice (National Development and Reform Commission, 2015b).

364 CHINA AND THE COUNTRIES OF CENTRAL AND EASTERN EUROPE

When the Chinese President Xi Jinping launched the Maritime Silk Road and the Silk Road Economic Belt initiatives (which together became known as the OBOR), it became clear that the 16 countries of Central and Eastern Europe occupy a major position in the initiative – they link China and its targeted markets in Western Europe. The OBOR initiative coincides with China’s cooperation mechanism with the 16 CEE countries (the 16+1 platform), and the two complement each other. The strong ties between China and CEE countries will surely increase the chances of success of the OBOR initiative. The 16+1 platform was launched in 2011 during the then‐ Chinese Premier Wen Jiabao’s visit to Budapest and has been one of the dominant topics in European affairs ever since; the initial document, presented at the China‐CEEC Economic and Trade Forum, was the five‐point proposal to strengthen the mutual ties. The next such summit happened in Warsaw the following year (the first China‐CEEC summit), and this proposal was deepened and broadened into a 12‐point initiative. This document has remained a backbone of China’s approach towards the CEE countries – during its implementation, the Secretariat for Cooperation between China and CEE was established in September 2012, the special credit line of USD 10 billion aimed specifically at the CEE countries was launched, and initial steps were made to stimulate Chinese investments in special economic and technology zones in CEE countries. The initial points of common interest for China and the CEE countries also included the financial and banking sectors, transportation (the prospects of construction of a network of highways and high‐speed railways), cultural, scientific and educational cooperation (scholarships and the broadening network of Confucius Institutes) and coordination of activities on tourism promotion. Finally, the researchers of the China‐CEEC ties have received another source of funding and support, a research fund dealing specifically with this topic. In November 2013, the China‐CEE summit took place in Bucharest, Romania; the key document of this summit was the Bucharest Guidelines for Cooperation between China and CEE. The main motto of these guidelines remained the win‐win cooperation, bearing fruits for all participants in areas of investment and trade, science and technology, innovation, environmental protection and energy (nuclear energy and the renewable, in particular), infrastructure, people to people exchanges and culture. The parties to the Bucharest

365 Guidelines have encouraged each other to connect China and the CEE countries by highway and high‐speed railway, while simultaneously setting the distribution and logistics network. The document compelled the financial institutions of China and CEEC to design the full use of the previously mentioned USD 10 billion credit line so as to promote the China‐CEE economic cooperation and trade. At this time, the China‐CEE Investment Cooperation Fund was officially launched and more financial institutions and businesses were invited to support the fund. The Bucharest Guidelines also supported the People’s Bank of China and the central banks of CEE countries in signing agreements of currency swaps, while promoting local currency settlement as one of the means to promote trade and investment. The 3rd China‐CEE summit was hosted by Serbia in 2014 and saw the drafting and the adoption of the Belgrade Guidelines for Cooperation. The parties to the guidelines support the establishment of the China‐CEE business council (with Warsaw as its seat). The Belgrade Guidelines acknowledged the founding of the Secretariat of the contact mechanism for the China–CEE investment promotion agencies, with offices in Beijing and Warsaw. In addition to the invitation for a full use of the USD 10 billion credit line which was present in the previous two guidelines, these guidelines commended the Sino‐ Hungarian and Sino‐Albanian currency swap agreements (Chinese currency, the Yuan RMB, is to be used by business circles as the settlement currency in cross‐border trade and investment). At the China‐CEEC summit in Belgrade, China pledged to increase the funds available in cooperation with the CEE countries, all according to the European standards. Most of the attention during the summit was given to the future high‐speed railway connecting Belgrade and Budapest. The total length of railways is 350 km, of which the length of the Serbian side is 184 km and of the Hungarian side is 166 km. In addition to the existing track, the plan envisages the construction of another, mixed type, for passenger and cargo transport. Preliminary estimates released to the public, saying that the value of the project could be amounted from EUR 1.5 to circa EUR 2.5 billion. The total value of shares through Serbia was estimated to circa EUR 400 million.5 After

5 In the previous period, the Serbia Government has been actively working on keeping the coast of the Serbian section of Belgrade‐Budapest railway down, even below EUR 400 million. This represents a significant reduction from the originally announced budget of over EUR 850 million. Instead of making a new loan arrangement with China, Serbia

366 the trilateral meeting of the representatives of China, Hungary and Serbia, held in Belgrade in early September 2016, the parties agreed that the signing of a commercial contract on the project of modernization and reconstruction of the Belgrade‐Budapest railway should be performed at the fifth Summit of the mechanism of “16+1” in Riga, in November 2016. Finally, at the 5th Summit in Riga, Serbian company Serbian Railways, together with the Representative of the Government of Serbia, signed a commercial contract for the construction of the first section of speed railway Belgrade ‐ Budapest (from Belgrade to Stara Pazova length of 34.5 km), with a consortium of Chinese companies ‐ China Railway International and China Communications Construction Company in the amount of circa EUR 319 million. Serbia has signed the Memorandum of Understanding with the Chinese Exim Bank, which envisages lending to the construction of that section of railway high‐ speed railway through Serbia. (Politika, 2016, p. 5). On the basis of the data presented, it is essential to understand that the construction of the Belgrade‐ Budapest railway is a part of China’s New Silk Road strategy, which aims to connect the port of Piraeus with Central and Western Europe through Macedonia, Serbia and Hungary. The railway project will serve as an important impetus for the economic development of Serbia, Hungary and other countries in the region. The importance of this project for Serbia is also echoed by Prime Minister Aleksandar Vučić who sees marks that “the Belgrade‐Budapest railway would contribute to the realization of the transport networks, as well as to the movement of people and goods, which would hitherto encourage the creation of logistics routes and distribution centres, and long‐term access to new markets”.6 At the 4th China‐CEEC Summit in Suzhou, in November 2015, Serbia became a leader among CEEC

is interested in financing the project through its own budgetary means or with the help of a previously agreed loan with Russia (Pavlićević, 2015a). 6 Very interesting may be the fact that Serbia and countries in the region have not given up of the project “Morava”, which is also considered a possible direction in the framework of implementation of the strategy of the “New Silk Road”. Namely, on the basis of the Protocol signed in January 2013, China Gezhouba Group Corporation (CGGC), has prepared a feasibility study for the construction of part of the channel “Danube‐Morava‐Vardar” through Serbia. The study included the project “Channel Morava”, whose value is estimated at EUR 4, 5 billion. As a potential contractor in 2016 mentions the Chinese company Bonn Project.

367 in implementing joint infrastructure and energy projects with China. In Suzhou, China and CEEC supported Serbia’s efforts to establish a China‐CEEC centre for transport infrastructure and cooperation in Belgrade (Kong, 2015). Bearing in mind Serbia’s geographical location, traffic and energy connections with the region and beyond, the heads of government of China and CEEC concluded that Serbia could be an important link along the Silk Road. Therefore, the parties gave support for the construction of industrial parks along the Danube. In addition, in the field of Serbian transport infrastructure, China also supported investment in the two sections of Corridor 11 (highway E‐763 Belgrade‐Bar): Obrenovac‐Ub and Lajkovac‐Ljig, in total length of 50.23 km. According to Anton Spisak, only 8% of all foreign direct investment in the EU members in Central and Eastern Europe are of Chinese origin (with significantly larger percentages in favour of western European countries such as Germany, France, the UK, etc.). Although the total amount of Chinese investment in the CEE lags far behind the one of leading EU members, some countries have seen more benefits from this investment than others – Anton Spisak singles out Hungary and Poland as countries where 40% and 20% of Chinese investments landed, respectively; as for the non‐EU members from the region, the dominant destination for Chinese investment is Serbia with 66% of the total Chinese capital flow towards these countries (Anton Spisak, 2017). Poland is also the country where an anticipated infrastructure project with Chinese funding during the late 2000s, a proposed highway connecting Warsaw and Berlin, ended with failure – due to the fact that the Chinese companies involved in the project were not fully adhering to the European rules and standards and unable to overcome the opposition, the project was cancelled and these companies had to withdraw (Vasily Kashin, 2017). The evolution of China‐CEE cooperation and its importance has been monitored and studied by numerous authors; among them is Liu Zuokui with his advice to participating countries to reach an agreement in easier issues first – the initial successes would offer impetus for the broadening and deepening of the cooperation and the tackling of the more difficult issues. Liu continues by suggesting the evasion of economic and political risks to the Chinese Government; the interest of Chinese Government would best be served by respecting the market laws, assigning the front seat to the enterprises and letting the key projects shape the cooperation. When analysing all effects of all of these summits between China and the CEE countries, it can be concluded that the

368 “16+1” platform may serve as a catalyst which would bring some new approaches to development and strategic partnership in various productive spheres. Even more, the cooperation between China and the CEE countries is in line with China’s objective of being a partner for growth with the EU. In other words, China regards the renewal of its relationship with the CEE countries as a precursor to the improvement of the China‐EU relations, and believes that, by enhancing the overall level of China’s relations with the CEE countries, a healthier China‐EU relationship will also be promoted.

CHINESE INVESTMENTS IN THE CEE REGION

The Chinese investments in the CEE countries amounted to 1.697 billion US dollars in 2014 (Agatha Kratz, 2014) and have been growing faster and faster ever since. They represent a huge opportunity for development as well as good evidence of the successful conduct of foreign policy of China and the CEE countries which promote economic cooperation not only at inter‐regional but also at the global level and contributing to the harmonization of relations between East and West. In this context, the mechanism of multilateral cooperation “16+1” represents a significant political tool by which it is possible to achieve the development of mutual cooperation between China and the countries of Central and Eastern Europe, as well as the achievement of a comprehensive strategic partnership between China and the European Union.7 Agnes Szunomar has compared the characteristics, motivations and location determinants of Chinese

7 At the fourth Meeting CEEC and China held on 24 November 2015 in Suzhou (China), the Prime Minister of China Li Keqiang said: “China supports the European integration process, as well as a united, stable and prosperous Europe that plays a greater role in the international community… China’s cooperation with the 16 CEECs will not result in fragmenting the European Union. Much to the contrary, it will help deepen cooperation between China and the European Union and narrow the development gap between the eastern and western parts of the European Union… China‐CEEC cooperation is undoubtedly part and parcel of China‐Europe cooperation, and the two could naturally go in parallel and be mutually reinforcing“. (Pavlićević, 2015b, p. 12). According to the Joint Statement made during President Xi’s trip to EU headquarters, China and EU decided to develop synergies between China’s “Silk Road Economic Belt” initiative and EU policies and jointly to explore common initiatives along these lines (Joint Statement, 2014).

369 investments in the CEE countries with their counterparts from other East Asian countries, but also from the developed European countries and the US. Unlike Western and other East Asian investors who are driven by labour costs, market size and corporate taxes, Szunomar describe the Chinese investment as being institutionalized‐guided; the institutional factors sought by Chinese companies are the size of the Chinese community in the country receiving the investment, investment, privatisation and public procurement opportunities, as well as the quality of political relations between the recipient country and China (Szunomar, 2016). The dynamics of future Chinese investment in the region remains to be seen – although the Chinese investments in Europe experienced a rise (35 billion Euros in 2016, an increase of 77% compared to 2015), there are signs of a slowdown due to the reduced foreign exchange reserves in China and the fact that the Chinese authorities want to prevent capital outflow (ČTK, 2017); if the Chinese investments in Europe are to be decreased, the same will happen with the Chinese investment in the CEE region.

Serbia As Serbia is an active participant into the cooperation mechanism “16+1”, Serbia could also be a good partner in the realization of the Chinese development strategy of the “New Silk Road”. First, because the relations between the two countries imbued with mutual understanding and trust, and second, China and Serbia are sufficiently open to promote various forms of economic cooperation (Janković, 2016, p. 16). This is best reflected in the presence of the Chinese investments in the CEE countries that contribute to improving industrial capacity and living standards. However, in this regard, there are certain doubts because the participation of the Chinese investments in the CEE countries’ economy remained modest (Jackoby, 2015). Also, their importance for accelerated economic growth is limited to certain industries such as transport infrastructure, energy and ICT sectors. Although there is a tendency of growth and expansion in other industries, these investments are criticized that are exclusively based on the state‐to‐ state loans by providing state guarantees, which in the long run brings into question their feasibility and financial profitability. Of course, there are some general weaknesses that are not related directly to the Chinese investment since they stem from the macroeconomic indicators of CEEC economies that

370 prevent their greater financial efficiency (for example: inadequate economic structure, insufficient use of production capacities, outdated technology, inflexible labour market, limited domestic consumption, poor liquidity, lack of transparency of institutions and procedures, administrative barriers, corruption, etc.). The authors in this regard focus their analysis on the concrete examples of the CEEC‐Chinese investment relations in the last decade. For example, as they have entered Serbia, the Chinese companies have aimed for energy, ICT telecommunication and agriculture sector. First investment in energy sector relates to the revitalization of Kostolac B Power Plant with a value of $293 million. This project is funded by China on the basis of state‐to‐state loan under preferential conditions. It is important to be noted that the Chinese Exim Bank had approved to Serbia the new loan of $ 608, 26 million to build a new thermal block Kostolac B3 of 350 MW and for the expansion of mining pit Drmno from 9 million tons to 12 million tons per year (Pavlićević, 2015b, p. 11). The loan had approved with a repayment period of 20 years, a grace period of 7 years. The total value of the second phase of the revitalization of Kostolac Power Plant is EUR 715.6 million. The necessary additional funding will provide Serbia and its public company Electric Power Industry of Serbia (EPS). A new thermal bloc will be built in 58 months and it is expected that the works will be completed by the end of 2019. The revitalization and construction of thermal power plant Kostolac were taken over the China National Machinery and Equipment Import & Export Corporation (CMEC). The Chinese companies China Environmental Energy Holdings (CEE) and the Shenzhen Energy Group (SEC), in consortium with the Serbian public company Electric Power Industry of Serbia (EPS) participate in the construction of Block 3 Thermal Power Plant Nikola Tesla B in Obrenovac and mining pit Radljevo. The projected installed capacity of the new unit is 744 MW. The total project cost is estimated at over EUR 2 billion. According to information published by the public, the new power plant should become an independent producer of electric power in a majority Chinese ownership. The dynamics of implementation of the project is uncertain, due to the floods that hit Obrenovac and its surroundings in 2014. In addition to these investments, China has invested in Serbian IT sector. These investments contribute to accelerated economic and technological development of Serbia and they are very important for Serbia’s inclusion in the modern economy. An illustrative example is the investment in Serbian integrated telecommunications system for which the

371 Chinese company Huawei Technologies and Serbian Railways company have signed the Memorandum of Understanding in 2011. This MoU has, followed by the agreements on technical cooperation in 2012, and in 2013. The estimated value of the project amounts to circa EUR 200 million. The first phase of modernization should be completed by 2018, and the total value of the works is estimated at EUR 78 million. Planned sections of railway lines were Corridors 10 and 11, Pančevo‐Vršac and Požega‐Kraljevo‐Lapovo. Another significant example is the investment in the Serbian company Telekom agreed in July 2016. The agreement that was signed with Huawei Technologies provides the procurement of equipment and materials, construction and provision of services for the implementation of the ALL IP transformation. Investment is based on a Chinese bank preferential loan, amounting to EUR 150 million. Strategically, probably the most important Chinese investment in Serbia is an investment in the Serbian company in Smederevo Iron Works Ltd. This investment speaks in favour of the overall growth of the Chinese industrial investments in Serbia (Yang & Zhang, 2016). The importance of this investment of EUR 46 million is expressed through the reduction of the deficit of Serbian foreign trade balance with China, as well as the increase in GDP of 1%. Also, this investment affects employment growth and living standards. The investment includes an additional investment of at least EUR 300 million, increases industrial activity and capacity of the Serbian economy (Politika, 2016, p. 5). In this way, further incentives for the Chinese investments in Serbia would represent the mutual benefit because they promote the mutual economic cooperation, raise the level of political relations and improve the cultural, scientific and technological exchanges and cooperation, and thus create the preconditions for the realization of long‐term development strategy of the “New Silk Road” as a pledge for a common future.

Bulgaria When it comes to Bulgaria, agriculture is the dominant cooperative sector and the attraction to Chinese businesses. A large number of investment projects (with a goal of developing an industrial park on different locations in Bulgaria) have been announced and received media coverage, but few of them thus far become a thing of reality (among them was the Tianjin State Farms Agribusiness Group’s ambition to build a 100 million

372 euro‐worth food processing industrial park; the same company is also renting land in northwestern Bulgaria for agricultural purposes) (Novinite, 2014). One of the investments that is fully operative is in the automotive sector ‐ China’s Great Wall Motors has invested in a production facility in Lovech; the production goal for this facility was set at 50 thousand passengers and freight vehicles every year (Bal, 2013). A number of new projects have been announced in the previous months, and it remains to be seen if and when they will be completed and if they will increase the total Chinese investment in Bulgaria which currently does not exceed 100 million euro. One of them includes a signed Memorandum of understanding about redeveloping an old zinc mine in southwestern Bulgaria; on the Chinese side, the memorandum was signed by a group of private Chinese investors (Cheresheva, 2017). However, the most notable new project is the construction of Saint Sofia, a massive tourist and entertainment complex in the town of Elin Pelin near Sofia – the value of this project is estimated at 750 million euro, and it envisages the construction of hotels, casinos, an aqua park, conference halls, a shopping mall, offices and public green spaces. According to the initial estimates, Saint Sofia (already referred to as “the Bulgarian Las Vegas”) is to be completed within three years; the company in charge of the project is the Chinese‐owned Bulgarian Development Holdings Limited, BDHL (Cheresheva, 2017). This is not the only recent Chinese real estate project in Bulgaria – the Chinese investors have signalled their interest in transforming a private airport in southwestern Bulgaria into an international cargo hub linked to the railroad network (a project worth 100 million euro), and building luxury hotels, a marina port and a casino in the Thracian Cliffs golf resort on the Bulgarian Black Sea coast (a project worth 200 million euro) (Tsvetelia Tsolova, 2017). Apart from the above‐mentioned projects, it is worth of mentioning the China Railway Rolling Stock Corporation (CRRC) 300 million euro investment in Bulgarian Railways (BDZ). Of this amount, 130 million euro will be used for refinancing BDZ debt, whereas the rest will be used for acquiring new electric and diesel trains from CRRC. This investment is to be repaid through capital transfer from the Bulgarian state to the BDZ (Novinite, 2017). In addition, the Chinese e‐ commerce heavyweight Alibaba is willing to build a logistics centre in Burgas, on the Bulgarian Black Sea coast, to service its European orders and to offer Bulgarian commodities and food on its trade platform, whereas GS Solar Company considers building a solar panel factory (InvestSofia, 2017).

373 Romania The accumulated Chinese investment in Romania amounted to 741 million US dollars as of mid‐2016; when it comes to Romania, the investment ambitions are most frequently shown by producers of industrial goods from China aiming to expand further into the EU market (Kashin, 2017). In addition to industrial goods, Romania has caught the eye of the Chinese investors in agriculture, spare parts for cars, nuclear and solar energy, real estate and education. Some investments have been fully realised, but many more remain a mere announcement with realisation and launching being months or even years away; the reason lies in instability following the new Romanian government ambition to examine foreign direct investment in Romania for corruption, which has reduced the inflow of foreign direct investment from 10.93 billion US dollars in 2011 to 3.62 billion US dollars in 2016 (Wilson, 2017). Among others, the Romanian government has opened a corruption probe against a joint venture between KazMunayGaz (KMG), owner of Romanian oil company Rompetrol since 2007, and Shanghai conglomerate CEFC – two weeks after KMG and CEFC reached an agreement about the joint venture in Romania, KMG assets worth 2.1 billion US dollars have been frozen. Although the deal seemed to be on the verge of being broken, the two companies continued with the realisation of the joint venture and KMG sold 51% of its Romanian subsidiary, KMGI, to CEFC. If this investment is to become fully realised in the coming years, its value will surpass 3 billion US dollars (Wilson, 2017). When it comes to other notable Chinese investment projects in Romania, they include the Chinese Cofco company and its granary in the Romanian port of Corabia worth EUR 3 million. Cofco is the owner of another granary in Constanţa and thus plays an important role in grain transport in the Lower Danube (New Europe Investor, 2015). The much anticipated Chinese modernisation of Cernavoda nuclear plant and the construction of Tarniţa power plant, worth around 6 billion euro, are as of February 2017 still being negotiated (Besliu, 2014; Gheorghe, 2017). Last but not least, five investment projects (worth 118 million euro) were announced in 2016 during the minister of economy‐level summit in Ningbo, China; they include a future auto parts factory in Braşov, a car ornament factory, a solar power station of 20MW, a real estate investment in Bucharest and educational exchange in Hunedoara (The Diplomat.RO, 2016).

374 Macedonia During the Government of Nikola Gruevski, cooperation with China was initiated in the areas of energy, transport infrastructure and agriculture. Among the announced projects are the highway sections Kičevo – Ohrid and Miladinovci – Štip (in both cases, the construction is to be performed by Chinese company Sinohydro), and the funding is provided through a 580 million euro loan from China’s Exim Bank (Vlada.MK, 2013). A recent report by Paris‐based think tank European Union Institute of Security Studies (EUISS) has pointed out to the Chinese companies’ habit of contacting and requesting contracts for the projects directly from the government. As the Chinese companies do not prefer to secure their contracts via tenders and in a transparent way, EUISS report claims that the Chinese investment in its current form leads to an increase of already ubiquitous corruption. In case of Macedonia, EUISS sets the approximate sum of money lost to corruption (for both Kičevo – Ohrid and Miladinovci – Štip highway sections) at 155 million euro (Bjelotomic, 2017). This political instability (matched with the political changes in Macedonia) was not welcomed by Sinohydro and the construction works were only resumed after a temporary halt. In addition to highway construction, the Chinese companies have worked together with Macedonian Railways to assist in their rolling stock modernisation – China Railway Rolling Stock Corporation has supplied Macedonian Railways with new electric trains (Atli, 2016).

Albania China and Albania have had very strong ties during the socialist era; during the 1990s and 2000s, these ties were lost and their re‐establishing took a lot of effort. The most recent developments show, however, that Sino‐ Albanian business cooperation is quickly growing stronger and more intense – the Chinese companies have already entered Albanian energy and transportation sectors and expect to gain grounds in other areas as well. In March 2016, Shanghai‐based Geo‐Jade Petroleum acquired the controlling rights in two Albanian oil fields for 442 million US dollars ‐ of these two, Patos‐Marinza field is the biggest European onshore oil field and it produces 11900 barrels of oil every day while the other field, Kuçova, produces additional 400 barrels of oil per day (Atli, 2016). In terms of transport

375 infrastructure, China Communications Construction Company is developing the northern Albanian port of Shëngjin. The Tirana International Airport has been taken over by a consortium of China Everbright and a company from Hong Kong (with airport management rights until 2025), and the Chinese companies have displayed interest in constructing a highway between Tirana and the Macedonian border using loans from China (Atli, 2016). According to Genti Beqiri, head of the Albanian Investment Development Agency, the number of Chinese companies in Albania (whether small, medium or large) stands at around 150; the Chinese companies are likely to expand into mining as well – they are interested in assisting chromium extraction in Albanian mines (Xinhua, 2017).

Montenegro The Chinese investment in Montenegro focuses currently on infrastructure and transportation; in a similar way to other CEE countries, China as a source of investment is superseded by the European countries (in case of Montenegro, it is Norway, Italy, Hungary and Russia), although the investment (confirmed and forthcoming) exceeded 906 million euro as of October 2016. The notable projects include the future highway Podgorica – Kolašin (809.6 million euro) and the modernisation of the Montenegrin naval fleet (97 million euro) (Bibic, 2016). The highway Podgorica – Kolašin is part of the longer section Bar – Boljare and its construction has been criticised by the IMF, the World Bank and the EBRD on grounds of the fiscal stability. The project realisation has also been delayed for at least a year (May 2015 – June 2016), which questions the ability to meet the deadlines (set for 2019). On the other hand, the modernisation of the naval fleet has been supported by two loans from China’s Exim Bank of 56 million euro and 41 million euro respectively. A total of four ships (built by the Chinese Poly Group) has been ordered, and first two ships have already been delivered in 2012 (Bibic, 2016). The Chinese companies were also interested in entering the energy sector in Montenegro, in particular, the construction of hydro power plants on the Morača and Komarnica rivers. In this case, a total of five plants (worth 664 million euro) is expected to be built, but there aren’t any deadlines given (Bibic, 2016).

376 Bosnia and Herzegovina One of the largest investments in Bosnia in the post‐war period was announced during the Sarajevo business forum in 2016. China Gezhouba Group Corporation has signed a Memorandum of Understanding (MoU) with Elektroprivreda BiH for the construction of Block 7 of Thermal Power Plant Tuzla, worth 722 million euro. This project will be supported by a loan from the China Exim Bank, to be repaid in 15 years (Karanovic‐Nikolic, 2016). The upgrade of this power plant is expected to increase the competitiveness of BiH‐generated electricity on the European market as well as to open new jobs for coal miners. Although the initial estimates included the beginning of construction works in spring 2017, as of May 2017 the signed MoU was still being examined by the Ministry of Finance of the Federation BiH (Nezavisne Novine, 2017). In the meantime, the project has encountered a fierce resistance from the local environment protection groups due to anticipated excessive CO2 pollution as soon as Block 7 becomes functional. The environment protection groups were unable to influence the construction and launching of another such power plant, located in Stanari (worth 390 million US dollars and funded by another China Exim Bank loan); these groups have filed a complaint in the case of Block 7 in an attempt to prevent issuing the environmental permit and to thus prevent its construction (Darby, 2016)

Croatia The Chinese investment in Croatia has been facilitated after the founding of the Zagreb‐based Chinese Southeast European Business Association, or CSEBA, in 2014. There are currently two announced investment projects, in areas of tourism and automobiles. The Chinese company Zhongya Real Estate (owned by Zhongya Holding from the Guangdong province) has announced its coming with 30 million euro investment in Krapinske Toplice; the project will include the construction of mini‐villas and apartments, facilities for the accommodation of spa guests and hospitals, but also a home for the elderly and a public garage. The Chinese investor also aims at buying the hotel Toplice from the current owners (Rogulj, 2017). Another Chinese investment which is expected to become a matter of reality in the coming years is the 30 million US dollar investment in Rimac, a Croatian

377 manufacturer of electric cars. Camel Group, a Chinese manufacturer of batteries and battery packs (including those used in all sorts of vehicles), has signed an agreement on investing 27 million US dollars in Rimac Automobili, as well as 3 million US dollars in Greyp Bikes, a subsidiary of Rimac Automobili. The investor has stated its appreciation of the Rimac technology and will to expand further into the electric car market (The Dubrovnik Times, 2017).

Slovenia The Chinese investments in Slovenia have thus far been rare. The most recent investment includes the Maribor Airport – this airport was previously owned by Slovenian savings bank Delavska hranilnica, but has been sold in December 2016 to SHS Aviation (a company backed with Chinese capital). The agreed sum is 10 million euro, of which 7 million euro was already paid; the rest of the sum will be paid as soon as Maribor Airport receives a 15‐ year lease for the airport infrastructure (Prokopova, 2016).

Hungary Among the countries benefiting from cooperation with China since the 2012 official launch of the 16+1 cooperation mechanism, Hungary has always held a special place. Some of the reasons include Hungarian geographical position in Central Europe, its EU membership and a sizeable Chinese community living in Hungary. The most recent decision by the Hungarian Government to reduce the corporate tax rate to 9%, the lowest in EU (previously it was 10% for profits not exceeding 500 million forints (1.6 million euro) and 19% for profits exceeding that threshold) will also contribute to even greater Chinese investment in Hungary (Deloitte, 2017). Peter Szijjártó, Hungarian minister of foreign affairs and trade, has estimated the Chinese investments in Hungary as exceeding 4 billion US dollars as of May 2017, which would make Hungary the most popular destination for the Chinese investments in the whole CEE region (Xu, 2017). The sectors which have seen most of the Chinese investment in Hungary are logistics, telecommunications and chemicals. In previous years, the fully realised projects include the Huawei distribution centre in Hungary with more than

378 3000 employees, as well as Waihua Industrial Group‐BorsodChem partnership worth USD 1.6 billion (Hsiao, Czekaj, 2011). When it comes to the most recent projects, in 2016 two suppliers from China have displayed wish to invest 30 million Euros in Hungary, which would create approximately 600 new jobs in the country; of these announced investments, one is expected to be a capacity extension while the other will be a Greenfield investment (Keszthelyi, 2016). On the other hand, in 2015 four deals were signed – one of them is in the aviation sector and includes a 1.4 billion dollar loan from China Construction Bank Financial Leasing Co, issued to the Hungarian low‐cost airline Wizz Air to replenish its fleet with 11 new Airbus 320 planes. The cooperation in the telecommunication sector was marked by two new deals – one of them was between Huawei Technologies and the Szechenyi Istvan University in Gyȍr, envisaging the launching of a 300 thousand US dollar fund to be used for a telecommunication lab. The other involved EPS Parking System and China’s ZTE ITS Co, and the two sides agreed to jointly operate thousands of parking facilities throughout China. Finally, a 2015 memorandum of understanding between Hungary and China allows Hungary to issue Yuan renminbi‐ denominated government bonds with a total worth of 1.5 billion Euros, for the purpose of the Belgrade‐Budapest railway project (Wang, 2015)

Slovakia The number of Chinese companies willing to invest in Slovakia has been on a steady decline in previous years, although the value of the investment itself has experienced a rise. The number of companies receiving Chinese investment has dropped from 1668 in 2011 to 1232 in October 2016; the volume of the investment has however been increased by around 2 million euro in this period. According to Slovak consultant Milan Seliak, the Chinese investors in Slovakia prefer investing into bonds, loans and investment funds. However, if the total Chinese investment in Slovakia is to be compared with the total foreign investment in Slovakia, it is prudent to say that it has yet to experience its growth – as of October 2016, China has invested around 47.06 million euro in Slovakia, which was only around 1% of the total foreign direct investment in Slovakia (CIJ Journal, 2016)

379 Czech Republic The official relations between the Czech Republic and China have been significantly improved during the mandate of the Czech President Miloš Zeman; one of the symbols of this improvement is the official visit of the Chinese President Xi Jinping to Prague in March 2016 and the President Zeman’s reaction to the October 2016 visit of the Dalai Lama to Prague – President Zeman was among the high officials who condemned the visit and distanced themselves from any activities related to the Dalai Lama’s visit (Karaskova, 2016). According to the October 2016 Bisnode ranking of the most important foreign investors in the Czech Republic, China was occupying the 22nd place with a total of 5.2 billion Czech Koruny (slightly below 200 million euro) of investment (Radio Prague, 2016). The Czech Republic has been a point of Chinese interest due to its EU membership, vicinity and good connections with Germany and other European markets for Chinese goods and services, but also due to advanced technologies and high standards applied in the Czech industry (automobiles, civil aviation, IT), health care system and agriculture. However, the most important confirmed investment is in the area of real estate, a November 2016 acquisition of Florentinum office complex in Prague (worth 311.5 million US dollars) by CEFC China Energy (Hollis, 2016); CEFC is one of the largest private companies in China, and it has acquired a complex with office and retail space hosting Bank of China, HSBC Bank and RSJ Investment Group (Czech company active in the financial market). This is not the only investment by CEFC in the Czech Republic – the company has invested 78.46 million US dollars in the Czech brewery Pivovary Lobkowitz (one of the leading beer producers in the country), acquired a ten percent stake in Travel Service (operator of Smartwings airline and in possession of a share in Czech Airlines) and a number of hotels, and has a share in J&T Finance Group, a Czech‐Slovak banking and finance company (Hollis, 2016). Among the anticipated Chinese investments in the Czech Republic is the one of Huawei, a Chinese telecommunications giant, with an estimated worth of 360 million US dollars (announced during Xi Jinping visit to Prague). This investment is in early stages and is being scrutinised by the Czech authorities for a balance between economic benefits and possible security risks ‐ parts of the intelligence community in the Czech Republic oppose the Huawei investment due to alleged connections with the Chinese Government and potential for

380 espionage and leakage of sensitive information (Šulc, 2017). Still, it is confirmed that Huawei will take part in initiatives throughout the Czech Republic such as “smart city” or “safe city”.

Poland In a similar way to Hungary, Poland has been since 2012 one of the leading CEE countries when it comes to cooperation with China; an important reason in favour of Poland is the size of its market, availability of skilled labour and good connections with Western European countries. In dealing with China, Poland prefers foreign direct investment, the construction of factories and translocation of the industrial production process in Poland, which would mean the creation of new jobs for Polish citizens. The accumulated Chinese investment in Poland amounted to 462 million US dollars as of mid‐2016 (Kashin, 2017); despite the fact that Chinese investment in Poland is rapidly growing, it still represents only 1.2% of the total FDI in Poland (far behind the investment from Germany, USA, Japan or South Korea) (Yao, 2017). As of December 2014, there were 884 Chinese companies registered in Poland, most of them small enterprises. At the same time, an influx of major Chinese investors was signalled by LiuGong Dressta Machinery (Chinese heavy equipment giant) acquisition of Huta Stalowa Wola (worth 75.2 million US dollars), Tri‐Ring acquisition of Fabryka Łożysk Tocznych (a producer of roller bearings) in Kraśnik (worth 75.2 million US dollars) and Chinese investment into Animex (a Polish producer of meat products). These investments were mostly mergers and acquisitions; one example of an investment that included translocation of the production process to Poland was the 2016 decision of ChunXing Group (a manufacturer of aluminium components) to launch its prototype workshop in Gdańsk – according to the scheme, this facility is supposed to optimise the logistics for European customers and to make sure the prototypes are delivered in a short time (Choromanska, 2016) (Góralczyk, 2017). In order to complement the investment projects concluded on the governmental level, the Chinese have directed their attention to local authorities throughout Poland. The examples of this approach and its successful realisation are numerous – one such agreement was signed between the authorities of Opole (Lower Silesia) and the Chinese company Hongbo (an LED lamp producer), concerning the sale of 8 hectares of land intended for construction of LED lamps and worth

381 78 million US dollars. Another project was initiated between China Coal and Prairie Mining from Australia, regarding the Jan Karski coal mine near Lublin (the production is scheduled for 2023 and will be worth 630 million US dollars) (Góralczyk, 2017). The Chinese companies have also been active in the area of electric grid modernisation in Poland – Pinggao, a Chinese company owned by State Grid Corporation of China, has won several tenders for modernisation or construction of transmission networks worth 150.4 million US dollars in total. On the other hand, the Chinese company Sinohydro has been charged with constructing a 67‐km section of electric line between Chełm and Lublin, an investment worth 150.4 million US dollars (Góralczyk, 2017). Finally, the Chinese have shown interest in generating energy from alternative sources – Chinese investor China Everbright International has acquired Novago, a Mława (central Poland)‐based energy producer on the principle waste‐to‐energy, a deal worth 37.6 million US dollars (Góralczyk, 2017); the final cost has, however, reached 123 million euro, due to the fact that the Novago, in addition to waste‐to‐energy production process, covers municipal waste treatment, waste recycling, land filling and waste collection (Neveling, 2016).

Lithuania The Chinese investors in Lithuania have been interested in agriculture (to be specific, in black tea production), IT sector and maritime transportation. Chinese entry into the Lithuanian agricultural sector was marked by the 2016 arrival of the Yunnan Dianhong Group, a large black tea producer in China, and their decision to register activities in China. This investor will initially open a service centre dedicated to the consumers throughout the European Union and, if this service centre is successful, their operations in Lithuania will be reinforced by establishing a black tea processing plant which will meet the needs of EU consumers and operate according to the EU regulation (Ministraspirmininkas, 2016). The development of the Lithuanian IT sector will be assisted with a 10 million euro investment fund which was announced by Chinese IT businesses and their Lithuanian partners in July 2017. This fund will be available to Lithuanian IT startups, and to high‐tech, biotechnology and laser industries (GoVilnius, 2017). Also, the use of IT technologies for international settlements will be implemented in Lithuania courtesy of China’s

382 International Business Settlement (IBS) Limited; in 2016, this investor has decided to open a settlement centre in Lithuania (with 20 new jobs, which is expected to be doubled in the near future) and to register a subsidiary in this country, an investment of 20 million US dollars. IBS has also applied for an electronic money institution licence and hopes to apply for a specialised bank licence issued by the Central Bank of Lithuania. The established clearance system will be processing settlements between China and the EU, and the supported currencies will include euro, US dollar and the Yuan renminbi (InvestLithuania, 2016). When it comes to maritime transportation, Klaipeda port at the Lithuanian Baltic Sea coast has signed a letter of intent with China Merchants Group (a parent company of PRC’s largest port operator, CMHI). According to the Chinese investor’s announcement, Klaipeda port will be connected to a massive, 77.6 km2 large industrial park worth 5 billion US dollars which will be built by China Merchants Group in the neighbouring Belarus, and will receive container traffic from that industrial park (Knowler, 2015)

Latvia As an EU member, Latvia adheres to the EU common customs and tariff policy with China, but also influences the decisions which are made in the intra‐EU debates. Still, Latvia is one of the CEE countries which have seen only a limited amount of the Chinese investment so far – the overall Chinese investment in Latvia does not exceed 5.78 million euro, which is 40 times larger than Latvian investment in China (Bukovskis, 2016). Still, there is a great interest for cooperation with China, in areas of transport and logistics, food processing, timber processing, ITC, education and tourism sectors; China is currently Latvia’s 46th largest investor (Ministry of Commerce, People’s Republic of China, 2016)

Estonia The Sino‐Estonian investment ties are yet to become fully developed. The Chinese investment in Estonia amounted to 3.5 million US dollars in 2015 (only a fraction of the total foreign direct investment in Estonia in the same year, worth 130 million US dollars) (Chan, 2017). Cooperation with China

383 focuses on transportation and IT – in 2017, a strategic partnership was announced between Taxify (the Estonian taxi booking start‐up, named in 2014 the best mobile application in Estonia) and Didi Chuxing (a Beijing ride‐sharing company) which opens the door for Didi investment in Taxify and support of the latter’s growth and innovation in the European and African markets (Estonian World, 2017). Estonia has caught China’s attention due to its geographical position – it is the nearest EU member state to China. As a result, the Chinese e‐commerce giant Alibaba is considering the development of a logistics centre in Tallinn, in cooperation with the Estonian postal service Eesti Post; this logistics centre would accelerate the delivery of the ordered parcels to customers as far away as Spain (The Baltic Course, 2016).

CONCLUSION

Five years after the 16+1 cooperation format has been launched, the cooperation has not been flawless and its fruits were not available to an equal extent to all participant countries. However, the countries which are part of this cooperation mechanism still have the goodwill and enthusiasm for the cooperation to continue. This mechanism offers China a unique opportunity to shape its bilateral relations with each of the 16 countries of Central and Eastern Europe, and to improve its knowledge about this region and the neighbouring . On the other hand, the CEE countries have been using this forum to deepen and broaden their bilateral ties with China and to highlight the areas of cooperation which they deem the most important and where they think the Chinese assistance can be useful. Despite occasional successes in cooperation with China and political support to China in disputes such as the South China Sea, a radical foreign policy shift towards China in either of these countries is highly unlikely – these countries are expected to retain their positions as current or prospective EU members, and the importance they attach to European integration.

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389 Vlada na Republika Makedonija (2013). Macedonia offers projects under China’s CEE investment fund. Accessed 28 August 2017, at Internet: http://vlada.mk/node/7835?language=en‐gb (28AUG17) Wang, C. (2015). Hungary gets ‘billions’ in Chinese investment. Global Times. Accessed 28 August 2017, at Internet: http://www.global times.cn/content/955134.shtml Wilson, J. (2017). Chinese billions come to Romania. FDI Intelligence. Accessed 28 August 2017, at Internet: http://www.fdiintelligence.com/ Locations/ Europe/Romania/Chinese‐billions‐come‐to‐Romania (28AUG17) Xinhua (2015). China Focus: China sketches out priorities of “Belt and Road” initiatives. Accessed 14 February 2015, at Internet: http:// news.xinhuanet.com/english/china/2015‐02/01/c_133962709.htm. Xinhua (2015). Chronology of China’s “Belt and Road” initiatives. Accessed 14 February 2015, at Internet: http://news.xinhuanet.com/english /china/2015‐02/05/c_133972101.htm. Xinhua (2015). Silk Road initiatives to boost China‐EU ties. China.org.cn. Accessed 17 February 2015, at Internet: http://www.china.org.cn/ world/2015‐02/11/content_34799054.htm. Xu, J. (2017). Sino‐Hungarian investment funds coming. China Daily. Accessed 28 August 2017, at Internet: http://www.chinadaily. com.cn/business/2017‐05/16/content_29360616.htm (28AUG17) Yao, L. (2017). China and Poland: Economic Cooperation under the 16+1 Formula. Accessed 20 August 2017, at Internet: http://www.nouvelle‐ europe.eu/en/china‐and‐poland‐economic‐cooperation‐under‐161‐ formula

390 ECONOMIC EFFECTS SILK ROAD AND COOPERATION WITH THE EURASIAN ECONOMIC UNION

Dobrica VESIĆ, Ph.D. Senior Research Felow Pero PETROVIĆ Professorial Fellow Institute of International Politics and Economics, Belgrade, Serbia1

Abstract: The “Belt and Road” cooperation gathered, in mid‐May 2017, the leaders of 29 countries that are related to the project. In the future, this project can become a very strong and economically prosperous regional association. Serbia is a full member of the group “16+1”. China, as the leading and most propulsive world economy also leads this group of countries. On the other hand, Serbia actively participates in another regional organization led by Russia and Eurasia that gathers six countries (Eurasian Economic Union). Negotiations are underway on trade agreement and economic cooperation with China, free trade with Israel, as well as an agreement to launch consultations with Serbia, Egypt, Iran, India and Singapore. From the cooperation with the countries from the two regional organizations Serbia expects major economic effects. In addition to investment in transport infrastructure (motorways, railways, and airports) investments are expected in the metal and engineering and aerospace industries, trade, medical equipment, transportation equipment, military industry and military industry and other economic investment projects and industrial parks. Key words: Economic effects, development, Serbia, China, the Silk Road, primary and secondary activities;

INTRODUCTION

The “Silk Road” project, which was created and progressed by China, in a joint venture and in the common interest gathered 69 sovereign states of the Eurasian space in which some 70 percent of the world’s population lives, with

1 E‐mail: [email protected]

391 75 percent of the known energy reserves and the participation in the world gross national income of 55 percent. The “One Belt One Road” initiative marks a new stage in international co‐operation. China’s new regional integration is very successful. China realizes it through the “16 +1”. Over time, “One Belt One Road” initiative gathered 29 countries, among which Serbia has a remarkable role. On the other hand, the vision of Eurasian Economic Cooperation is led by Russia, and Serbia is included in this vision of the so‐called great Eurasia as an important economic space. In that regard, the process of Serbia’s accession to the most important regional organization should be kept in mind, the European Union is not called into question until the formal membership. The initiative, at the same time, will offer a long‐term development vision as well as a real expected profit in the near future. Serbia is among the founders of the Silk Road Support Group, which was established by 17 countries.

ONE BELT ONE ROAD

In mid‐May 2017, a summit of participants in the project “One Belt One Road” was held in China, attended by the leaders of 29 countries. It is estimated that access to the “16+1” group and the EAEU is not an obstacle for the EU. A big economic significance and great economic effects are expected. It is a major Eurasian partnership that involves multilateral cooperation with the EAEC countries, the Shanghai Cooperation Organization and the Association of Southeast Asian Nations (ASEAN). This connection process requires different depth, speed and integration level. The main objective of the EAEC is the comprehensive modernization and increase of the competitiveness of national economies, as well as their release of dependence on the sale of energy and raw materials. Russia, along with China, is seeking to implement the broadest economic integration, including more intensive cooperation with the European Union (Petrovic, P., Protic, M., pp.308‐324). On the other hand, “that moment stands as a cornerstone for developing relations and cooperation between China and the European Community. In the same year, the Commission and the Chinese authorities agreed to hold regular ministerial‐level meetings to discuss all aspects of EEC‐ China relations” (Babic, B., p.431). Success requires serious reforms and good positioning of countries in the world, which will mean that there are no obstacles to investing and that Serbia can count on the possibility of support

392 and assistance from all sides. The strategy is designed on pillars of foreign policy. The first pillar is the EU, whose member Serbia would like to become. The second pillar is Russia as a world political rising power and historical partner of Serbia. The third pillar is the USA, a great power with which Serbia had fluctuating relations in the past, but whose importance and influence in international relations Serbia had accepted as a reality. The fourth important pillar of Serbia’s foreign policy strategy is China as a global economic power and the traditionally good friend of Serbia in international relation2. In view of the aforementioned, Serbia’s position and its role in the Belt and Road initiatives are determined by many factors (Dimitrijevic, D., p.68). China is the most important foreign trade and financial partner of Serbia on the Asian continent. The economic cooperation between the two countries, which has been reduced almost exclusively to foreign trade, has been expanding in recent years on large projects in energy and infrastructure, and Serbia is seeking to attract Chinese capital. The total net capital investment of Chinese companies in the Serbian economy since 2014 has been multiplied. From 2007 to 2013 their value was about 27.3 million dollars, and investments from the beginning of 2014 to mid‐2016 reached 158.3 million dollars3. We will highlight the major infrastructure projects of Serbia and China in the near future, for example, the construction of the highway to Požega, the Fruska Gora Corridor and the industrial park in Belgrade.

ECONOMIC CORRIDORS AND COOPERATION IN SOUTHEAST ASIA

The project “One Belt One Road” is an initiative for the general welfare of the countries involved. The construction of infrastructure is one of the priorities of this Project, which are called the main economic corridors. There are six corridors4. On the other hand, it is expected that the Greek port of

2 Action Plan in Harmonisation of Standard Along and Road (2015‐2017). National Development and Reforms Commission , 22 October 2015, Accesed on 4 june. February 2016, http://china –trade.research, hktde.com/business‐ews‐article. One Belt‐One Road. Action‐Plan‐for‐Harmonisation‐of‐Standard‐Alo9ng‐the‐Belt and Road 2015‐2017/obor/ en//1/1X000000/1X0A4431/htm. 3 Internet: www.nbs, 16.07.2016. 4 For example, the construction of the first highway in Mongolia is a unique project launched under the auspices of the “Belt and Road” initiative in May 2016. The highway linking Ulan

393 Piraeus will function as a European hub for the sea shipping route and link the “Silk Road Economic Belt” with an express line of land‐sea between China and Europe, which will accelerate the economic growth of the region. Along with the intensification of the “One Belt One Road” initiative, China’s regional cooperation with the countries of Southeast Asia (ASEAN) has lasted for years5. For example, by mid‐2016, two‐way investments exceeded $ 160 billion, with China’s dominant participation, which is their biggest partner, and they are the third‐largest partner for China. So far, China has funded the launch of more than three hundred jobs in 26 economic cooperation zones with eight ASEAN countries, investing $ 1.77 billion. The initiative attracted more than 2,600 companies from 29 countries. The goals of the new belt on the new Silk Road are (Simic, J., pp.199‐201): alleviating the political dissatisfaction of the local population in Sanding, securing China’s energy security, creating an alternative land route for the transportation of Chinese goods, creating a peaceful climate in the region. In doing so, bearing in mind the development of Indian‐Chinese relations that can be characterized as both partnership and rivalry, India seeks to counter the Chinese project called the “New Silk Road”. On the other hand, there is the possibility that Iran, which has been freed from the sanctions of the international community and is open to business with the world, has encouraged India to close the project that had been previously agreed and thus put into a motion a Chinese plan to transform the Indian rival of Pakistan into a regional hub for commodity exchange. The agreement according to which India would lift the harbor in Kabahar in southeast Iran was signed by the two countries in mid‐2015. With a 220km‐long road from Kabahar to western Afghanistan, in whose construction India has already invested about $ 100 million, the port would complete a corridor that would allow India to transport its goods to Central Asia and the Persian Gulf much faster. This purely economic benefit was tempting enough, but the Indians have also had a political benefit in mind because the new port would be in addition to that in Guadalupe, which is on the other side of the border, in Pakistan. Guarding of the harbor was left to

Bator and the new international airport is a milestone in the history of infrastructure in Mongolia in order to stimulate economic growth through international transport, especially when it comes to the China‐Mongolia‐Russia corridor. 5 Trade between China and ASEAN has grown to $ 472 billion in 2015, with less than 8 billion. How much was it in 1991, and with an annual growth rate, on average, from 18.5 percent.

394 the operator from China a few years ago, which also signed a contract with the Pakistani Government in mid‐2015 to build a 3,000 km long road‐rail corridor that would connect the port to the Chinese region of Singhiang. The corridor would be a part of the Chinese Silk Road, which would enable China to deliver its products to the Middle East, Africa and Europe, and would include pipelines for oil and gas to China or its internal territories (Farrell David, Beinhocker Ernest (2014),McKinsey&Company, 2015).

SERBIA AND EAEU

In May 2016, negotiations on the accession of the Republic of Serbia to EAES began. The negotiations included the harmonization of the trade regime with the aim of establishing a free trade zone. The Republic of Serbia has already had a large number of free trade agreements signed with members of the EAES, including the Russian Federation, the Republic of Belarus and the Republic of Kazakhstan. The first free trade agreement was concluded with the Russian Federation. The agreement was signed on August 28, 2000 and exempted 95% of goods from customs duties. The duty‐ free trade agreement of the Republic of Serbia with the Russian Federation makes Serbia extremely privileged for foreign investors, since it is the only state outside the Union of Independent States that enjoys the benefits of duty‐free trade with the Russian Federation. The free trade agreement is one of the biggest advantages of the Republic of Serbia in relation to all countries of the European continent. The second free trade agreement was signed with the Republic of Belarus in Minsk in 2009, and in 2011 a protocol was signed regarding the withdrawal of a certain number of goods from the free trade zone. The third free trade agreement was signed with the Republic of Kazakhstan in Astana on October 7, 2010 and has been in force since 2011. The agreement with EAES will cover all countries and enable the Republic of Serbia to expand the free trade zone in the Republic of Armenia and the Republic of Kyrgyzstan, as well as strengthening bilateral, multilateral and foreign trade relations on new foundations with the Russian Federation, the Republic of Belarus and the Republic of Kazakhstan. The signing of this agreement will enable producers in Serbia to access under favorable conditions (sale of goods without customs duties) to at least 182 million people, which is also an additional motivation for many foreign investors to

395 invest in the agro‐industrial sector of the Republic of Serbia. The EAEU has made significant progress and has strengthened the common market, with Russia paying special attention to it. The EAEU has made significant progress and has strengthened the common market, with Russia paying special attention to it6. During 2017, the agreement on launching an agreement with Serbia for cooperation with the Eurasian Economic Union (EAEU) is being prepared. The signing of this agreement will allow Serbian manufacturers to access under favorable conditions (which could sell their goods without customs duties) a market of at least 180 million people, which is an additional motivation for many foreign investors to invest in Serbia. It is a matter of creating a free trade zone with Serbia and a large Eurasian partnership. It is estimated that around 50 countries from Europe, Asia and Latin America are interested in cooperating with the Eurasian Economic Union, consisting of: Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. Negotiations are underway on trade agreement and economic cooperation with China, free trade with Israel, as well as an agreement to launch consultations with Serbia, Egypt, Iran, India and Singapore. Serbia’s current position is to retain all those benefits under the free trade agreement with Russia, and to add some products (cars, poultry, cheeses, cigarettes and sugar). Decisions within the EAEC are made on the principles of equality and respect for the interests of members of the Union, and the main body is the Eurasian Economic Commission (EEK) within the EAEU. This would mean creating a system for simplifying bilateral and multilateral agreements in areas such as customs, sanitary and phytosanitary controls, investments, and the protection of intellectual property rights.

THE KEY STAKEHOLDERS ON THE SERBIA’S RELATIONSHIP WITH CHINA

The general environment for the development of Sino‐Serbian ties is very favourable. However, the honeymoon Belgrade and Beijing enjoyed so far is

6 The Eurasian Economic Union was founded by Russia, Belarus and Kazastan on January 1, 2015, and soon they were joined by Armenia and Kyrgyzstan. In May 2015 they signed a contract with Vietnam (90 million inhabitants), which was the first international free trade agreement between the EAEC and the third country. Negotiations with Serbia on the free trade zone, between the EAEC and the third country, are in progress since May 2017.

396 probably over. To analyze Serbian policy to China in the 21st century, one should naturally start from analyzing the country’s overall foreign policy, yet that is to be immediately confronted with a difficult question: Is there a Serbian foreign economy policy? (Pavlicevic, D., 2016, pp. 99‐119). Serbian strategic intentions concern its relationship with China. More broadly, what are other factors apart from China’s goals and initiatives that are important for shaping the Sino‐Serbian relationship? The cumulative influence of these structural factors on the prospects for a deeper Sino‐Serbian relationship is primarily related to the EU integration and “16+1” and are twofold: First, The China‐CEEC framework incentivizes the development of ties and is likely to create numerous opportunities to substantially deepen the bilateral relationship. However, as the EU accession provides the general context of Serbia’s foreign policy, the relationship‐building with China can only be of a secondary importance. In that sense, the development of Sino‐Serbian relationship should be seen as crucial for the prospects of its development. In response to the spread of globalization and increasing competition, enterprises are connected, first within their branch (black and non‐ferrous metallurgy, energy, telecommunications, road economy) at the destination, horizontally or vertically, in order to increase market share. Some companies try to cover as many field activities as possible, in order to achieve as much control as possible in the value chain. Boundaries between the branches are lost, activities are mixed, and a control over activities becomes more and more important. In modern economies within the network, there is a mediator “catalyst”, which links marketing activities, while the market mechanism encourages competition and cooperation. At the same time, a greater range of offers guarantees safety, flexibility and competition instead of interdependence, continuity and cooperation. In addition, the ability to acquire new knowledge and import innovation is increasing. Then, a modern information systems enhance communication among network members, contribute to the creation of mutual trust and enable direct access to markets through information technology. The system of tourist cooperation thus occurs before globalization, deregulation and the application of new technologies. Thanks to the flexibility, networks are superior to strict hierarchical systems and more successful marketing activities. China and Serbia have provided each other with a firm support in terms of issues concerning their most important interests, which also speaks about the essence of the strategic relationship. On the New Silk Road, there is Serbia

397 with its geo‐economics potential. The geographical position of the country is worth only as much as its capital and to the extent that the state is a reliable international partner to other actors along the corridor. Serbia and China have expanded their co‐operation in the fields of energy, iron and steel, telecommunications and finance. The cooperation is directed from the traditional loan approval model to the field of direct investments or joint ventures. Adjustment of the “16+1” format, with the “Belt Plus” initiative, will provide new opportunities for deepening the cooperation between China and the countries of Central and Eastern Europe in the fields of production capacities, transport, infrastructure and finance. Basically, the Chinese comprehensive economic cooperation aims to ensure a safe supply of energy products and to open up new markets to the Chinese investments, goods and services. Europe, including Serbia, has a bigger and richer market than Central Asia, and is the most attractive challenge to the Chinese. Mega enterprises from China purchased agricultural firms, manufacturers of machines or tires in Europe, but the Silk Road is also a geostrategic plan for spreading the political influence.

CONCLUSION

The New Silk Road, a global project that is streamlined, can bring benefits to many countries, which are included in its specific, individual projects. The Chinese model of economic growth has excellent results not only in the national economy, but also in the economies of the countries that participate in the New Silk Road Projects. The new model, taught for the Serbian economy and integration processes, resulted in a certain change in the main drivers of economic growth: in addition to investments and exports, there is also a significant place in spending, so the growth has been driven by the combined effects of the primary, secondary and tertiary sector, by encouraging domestic consumption, improvement of the investment mix, further industrialization, urbanization and modernization. “One Belt, One Road” is the official name of the project for the construction of a new silk route, as well as the network of ocean infrastructure throughout Eurasia. Taking into account the modalities of its development, China has, among other agreements, signed an agreement with 16 countries of Eastern Central Europe, including Serbia, on the New Silk Road, which is the backbone of

398 development not only of the Chinese business but of all countries on this way. In 2016, the relations between Serbia and China are gaining in intensity. The economy strengthens a traditional friendship with a country that has made a significant contribution to improving the global financial architecture. Serbia is the first country in the region with which China concluded an agreement on strategic friendship. Good relations with China cannot harm Serbia on its path towards the European Union. Such cooperation is much more important for the economy and trade for many member states. Serbia sees the cooperation with China as a possibility for its economy to be in the center of the performance in the European market but also the output of Serbian companies in the Asian market. Serbia is a key country in Southeast Europe for the Chinese investment and logistic centers and wants to establish itself as a small but important part of the largest global emerging corridor. With the multimodal transport, Belgrade can become a major logistics center, in which the goods are delivered from different directions and transported further into Central Europe.

BIBLIOGRAPHY

Action Plan in Harmonisation of Standard Along and Road (2015‐2017). National Development and Reforms Commission , 22 October 2015, Internet: Accesed on 4 june. February 2016, http://china –trade. research, hktde.com/business‐ews‐article. One Belt‐One Road. Action‐ Plan‐for‐Harmonisation‐of‐Standard‐Alo9ng‐the‐Belt and Road 2015‐ 2017/obor/en//1/1X000000/1X0A4431/htm. Babić, B., 2010, Kina i Evropska Unija : geoekonomska osovina u razvoju, Međunarodni problemi br.3/2010, Institut za međunarodnu politiku i privredu, Beograd. Dimitrijević, D., 2016, Chinese Investments in Serbia – joint Pledge for future of the „New Silk Road“, China‐CEEC Think Tanks Book Series, Editor –in – chief: Huang Ping and Liu Zoukui, China Social Sciences Press, Bejnig, 2016. Kong Tiaping, 16+1 Cooperation Framework: Genesis, Characteristics and prospect, Međunarodni problemi, Institut za međunarodnu politiku i privredu, Beograd, br.2‐3/20015.

399 Pavlićević, D., 2016, “The Key Stakeholders on the Serbia’s Relationship with China: Beyond China.Centric Explanations”, China‐CEEC Think Tanks Book Series, Editor –in –chief: Huang Ping and Liu Zoukui, China Social Sciences Press, Bejnig, 2016. Petrović, P., Protić, M., 2016, „Impact of economic development of China on Danube region“, coautor: Protić Marina, Ph.D., Institute of International Politics and Economics, Belgrade, Tematski zbornik radova: „DANUBE AND THE NEW SILK ROAD“, edited by Duško Dimitrijević, Ph.D., 2016. Simić Jasminka, Ekonomski pojas novog puta svile: kineski prodor na zapad ili odgovor na azijski izazov, Međunarodni problemi, Institut za međunarodnu politiku i privredu, Beograd, br. 2‐3/20015.

400 ТHE NEW SILK ROAD AND THE REGIONAL COOPERATION OF THE WEST BALKANS

Edita STOJIĆ KARANOVIĆ Professorial Fellow Hungarian Academy of Sciences, Budapest International Scientific Forum “Danube – River of Cooperation” Institute of International Politics and Economics, Belgrade, Serbia Enisa IMAMOVIĆ Research Assistant International Scientific Forum “Danube – River of Cooperation” Studio for Art Education, Research‐Documentation and Translation, Belgrade, Serbia1

Abstract: One of the preconditions for the implementation of the Program of New Silk Road in Europe is the improvement of the regional infrastructures in Southeast Europe, where the weakest link in the chain is the West‐Balkan region. There are not only economic obstacles, but also political ones. The question is how to manage increasing regional economic policy coordination, how to remove barriers to trade and free movement of Chinese goods, by improving regional diplomatic coordination. For the West‐Balkan region, the New Silk Road initiative could change their position of being the periphery of the European continent into the position of being the centre of the Eurasian continent. But for that, West‐Balkans has to ensure stability in the region and improve their mutual cooperation in all fields, especially economic. What are the obstacles for the above‐ mentioned need and which solutions for the problem of poor mutual relations of the West‐Balkans countries can they find for themselves, and how the New Silk Road program could galvanize the positive process? Key words: New Silk Road, Belt and Road Initiative, West‐Balkans, Southeast‐Europe, Danube Strategy.

1 E‐mails: [email protected], [email protected]

401 INTRODUCTION

The Western‐Balkans (WB) sub‐region, lying in the broader region of the Southeast and East‐central Europe, plays an important role in the Belt‐and‐ Road‐Initiative (BRI) strategy due to the region’s geographical position surrounded by geopolitical and economic areas of the strategic relevance: the Danube, the Adriatic Sea, the Mediterranean Sea and the Bosporus. And vice versa, the BRI investments, using the financial instruments of the New Silk Road and BRI Investment Fund, are of utmost importance for the countries of WB, which are the poorest countries in Europe. This is important not only for individual countries of the WB, but for the economic integration of the whole sub‐region. The improvement of regional cooperation would be of outstanding economic and political interest of all countries of the WB, as well as for their partners who have no hidden colonial or old‐fashioned great‐power intentions. Initiatives aimed at economic cooperation and neighbourly relations contribute a lot to the process of consolidation of this historically turbulent geopolitical region. Instability is partly due to historical heritage and partly originates from contemporary tensions in international relations. However, there are also factors of internal social and economic developments in respective countries that need to be addressed. After the phase of bloody conflicts ended, new forms of functional (rather than ideological) economic and cultural co‐operation in this region were re‐ established. New forms of cooperation emerged and are on the horizon and they can ensure optimal joint utilization of common natural resources, such as international rivers, in the common river basin, as well as a common infrastructure, such as railways, highways and communication systems. However, ‘progress could only have been ensured through the substantial economic development and cooperation in the region. It became evident that the historical heritage did not help much in preventing the entrapments of nationalism. The changes following the destruction of the socialist system presumed a development of new forms of functional, economic, cultural and ecological links in the region. In the case of the former Yugoslavia, however, they entered a dead‐end of sharp inter‐ethnic conflicts. This is where it was most necessary to prevent the tragic traps of nationalism.’ (Stojić Karanović 2008, p. 226). Without regaining economic strength from the time of the 1970s and the first half of the 1980s and even achieving better performances than then, the WB countries must build up a very

402 strong economic cooperation among themselves for ensuring investment‐ security for foreign companies. However, all these are not possible without the stronger mutual cooperation and international support for it. Therefore, inclusion in the BRI is very important for the WB countries, their progress and mutual regional cooperation, too.

ENCOUNTER OF INTEREST

Giving priority to economic interests among many others, it should be stated that the ‘interest of China is clear. It is a large country in expansion, with a need to develop the largest possible trade network. The promotion of trade routes, political cooperation and cultural exchange, is an answer to the need of finding new markets that can absorb expanding Chinese industrial capacity. ‘ (Stojić Karanović, Jolović, 2016, p. 180). The WB is positioned at the European section of the BRI. Investments in this region are not as substantial in size as in the immediate Chinese neighbourhood but they are very relevant for these countries that still have a huge gap in infrastructure. (Holzner 2016). Projects initiated by China in cooperation with partner countries ‘are located on the main or related routes along the New Silk Road. In this way, China supports the construction of infrastructure networks, especially transport networks. We can mention several ones: the lease of Terminal 1 and 2 and part of Terminal 3 of Piraeus Port by Cosco Pacific Ltd. in 2009; construction of the bridge Zemun‐Borča on the Danube river; planned construction of another bridge across the Danube river near Vinča; the high‐speed railway Belgrade‐Budapest; ongoing construction of the highway Bar‐Boljare in Montenegro, as well as a number of investment in the energy sector of the Western Balkans’. (Antevski, Trošić, 135). Important for the WB countries is also the fact that Thessaloniki Port, the Port of Igoumenitsa, and the Greek state railways are also in the focus of the Chinese companies. Actually, ‘the takeover of a majority share in the Greek harbour in Piraeus marks the beginning of a transit route via the WB, with motorways and railway links (notably a high‐speed railway between Belgrade and Budapest), improving overland connections between Piraeus, the Balkan Peninsula and Western Europe’. (Koutantou, 2016). Improving economic performances remains in the foreground for the WB countries. The average GDP per capita is only about half of that of the Central, East and Southeast

403 European EU Member States. Unemployment is widespread, especially among the young. The countries of the region lack competitiveness as indicated by their substantial and persistent trade deficits. The region cannot cover its imports by own production exports and is hence dependent on foreign capital inflows. The New Silk Road could give strong support for the economic strengthening of individual countries of the WB, as well as for the stronger mutual cooperation in the whole sub‐region. So, the potential economic gains for the WB countries are sizable. Calculations made at the Vienna Institute for International Economic Comparisons and presented in a published research show ‘a large diapason of increase of GDP in the WB, starting from the lowest increase of 1.5% of GDP for Albania to one of highest of 14% in Montenegro which could materialize over several years’. (Grübler, Sterer 2017). A coordination of efforts between the European side, as the Berlin Process2, the EUSDR3 and the TEN‐T projects4 and the BRI on other side would be also of great importance for the countries of the WB, and for the whole WB sub‐region, too.

PROBLEMS

One of the major causes of the problems which could slow down the faster progression of the BRI programs in individual WB countries and the whole region is the low competitiveness of their economies, with thin industrial bases and not integrated into the international value‐ added chains. The WB countries, together with the issue of structural disharmony, suffer from the lack of capital for development of infrastructure and for the implementation of the most up‐to‐date technology. On the positive side, this problem stimulated the WB countries to co‐operate. The idea of

2 The Berlin Process is a diplomatic initiative linked to the future enlargement of the European Union. It started with the 2014 Conference of Western Balkan States, Berlin, followed by the 2015 Vienna Summit and the 2016 Paris Summit. 3 EU Strategy for the Danube Region, with its goals stated in 11+1 priority area and its strategic projects. 4 The TEN‐T program consists of hundreds of projects – defined as studies or works – whose ultimate purpose is to ensure the cohesion, interconnection and interoperability of the trans‐European transport network, as well as access to it.

404 enhancing both bilateral, neighbourly co‐operation and multilateral co‐ operation in this region became widely accepted. Other main problem areas are non‐economic, mostly caused by the rise of nationalism that was strongly boosted and increased before and during the war in the 1990s in all WB countries, and is still present. The nationalistic ideologies were the basis of the war for establishing independent states, even by aggressive methods, in order to provide the possibility of an ethnically clean state. The nationalistic illness of the whole WB resulted in the international isolation and a delay of negotiations with the European Union for several years and still, even though two decades passed since the wars, causes several conflicts among the WB states. On the eve of the secession of individual republics and the disintegration of the Socialist Federal Republic of Yugoslavia (SFRY), the external debt (principal without interest) in the convertible currency area at the end of the year 1990 amounted to more than USD 15 billion. The debt settlement was the following (in billions of USD): Slovenia 1.7, Bosnia‐ Herzegovina 1.5, Montenegro 0.6, Croatia 2.7, Macedonia 0.7, and Serbia 4.8. To international financial institutions SFRY owed USD 3 billion, to commercial banks (London club) 4.4, and to governments of western countries (members of the Paris club) about USD 6.5 billion. The states that emerged after the break‐up of the SFRY today have a total external debt of about USD 145 billion (about EUR 133 billion), which is nine times more than at the end of 1990. Croatia, Slovenia and Serbia today have individually larger external debt than the whole SFRY. With the breakdown of SFRY, all the republics that were part of it lost a significant economic base, a large market, and human resources. The war in the 1990s broke down the economy and weakened the economic power of all them. The second group of non‐ economic problems arises from the side of the European Union (EU), in which all WB countries want to be accepted for members and until now only Croatia succeeds. However, the EU was never ‘too fond to bring China closer. The reasons for such opinion are multi‐layered. First, the European Union can compare with China neither in territorial nor in the demographical sense… Even more, this populated country has enough qualified workers that can compete with workers all around the world. And here we come to the point that bothers Europe the most – much lower prices of goods fabricated in China attract buyers while, at the same time, make the European products less competitive. Besides that, the Chinese capital offered to be invested in Europe also is not very welcomed because of the fear that

405 the Chinese enterprises might take over even the traditional European production lines.’ (Lađevac, Đorđević, 2016, p. 71). Lately, there have been some favourable changes, after the EU realizing that China could be a very important partner ‘in the fields of economy, trade and politics. One of the signals of such tendency is the EU‐China 2020 Strategic Agenda for Cooperation.’ (Lađevac, Đorđević, 2016, p. 68). In inter‐regional cooperation, regions of the continents cooperate by learning how to solve the problem of sustainable development and by supporting each other on this issue. The inter‐regional cooperation gives an important dimension to the new European structure, playing a vital role in sustainable use of natural resources on the global level. Therefore, the New Silk Road and the BRI programs give hope in the future.

HOPE IN FUTURE

The area of WB has a rather large number of varied forms of regional and inter‐regional cooperation forms. Several new forms of regional cooperation arose. According to the concept of cooperation in the regions, new forms should harmonize the economic policy of rural development plans, the environment, tourism and other policies, not only at the state level but more often at local and county level as well. They should enable a considerably wider range of activities and more possibilities for developing both the smaller region in the neighbouring countries and the whole region. “Regional, sub‐regional and inter‐regional cooperation forms have the utmost importance for overcoming the tensions created by the “use‐of‐ force” history everywhere.” (Stojić Karanović 2010, p. ). Regional cooperation is badly needed in all countries of WB, especially in the fields of economy and protection of the environment. The forms of regional cooperation which are based on sustainable use of natural resources are the ones which were conceived and have already shown some results. This cooperation happens at the level of states, at the level of smaller parts of countries, and at the level of cross‐border regional cooperation of municipalities and counties. For example, the Danube cooperation is based on the importance of the river and its tributaries, as well as of natural resources which should be used mutually in a sustainable manner for the benefit of all citizens in the Danube region. What really matters is that the individual countries of WB, as well as

406 nations in South East Europe, Balkans, and in the Danube Region are dependent on each other. The recognition of this fact could give us some hope in the future. Today, the fact that transitional changes can open the road to new forms of regional cooperation is widely accepted in the countries of the WB, too. Namely, it becomes clear that a consequent affirmation of the peculiarities of nations can be imagined only within coordinated activities in the area. However, these peculiarities should be appreciated as a cornerstone of the multicultural wealth, both within the state border and the wider region. They should never be used as factors of division and conflict if survival is the objective. The political atomization demands a reverse process in the sphere of the economy: new forms of cooperation, trade and industrial unions of these countries, tax‐free zones, organization forums for improvement in cooperation, bodies of experts in the governments of these countries, joint chamber of cooperation and mutual help, and trade and customs unions. These new forms will open new possibilities in the central part of the continent for a stronger development of full cooperation with the WB region, particularly in tourism and transport. The realization and development of new forms of cooperation is ahead of us, those in which countries and their parts participate, as well as those informal, in which non‐governmental organizations participate. The importance of informal aspects of regional cooperation will rise in the future. Investments using the New Silk Road Fund financial assets, while creating new business opportunities with local and the Chinese companies, are of major importance for the WB, not only for the individual countries, but for the whole region, as it can strengthen economic integration between the countries. On the initiative of the People’s Republic of China, aimed at intensifying and expanding cooperation with 11 EU member and 5 non‐EU member states, all in Eastern and Southeast Europe,5 the so‐called “16+1” mechanism of cooperation was established. It embraces several fields, from investments, transport and finance, to science, education and culture. In the framework of the initiative, China has defined three potential priority areas for economic cooperation: infrastructure, high technologies, and green technologies. For ensuring

5 By alphabetical order these countries are: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia.

407 continued development of the cooperation, a platform of regular meetings was established in 2012. At these meetings, the Chinese prime minister meets once a year with the leaders of the 16 countries. Upon the 16+1 mechanism, the “Belt and Road Initiative” (BRI) of China got a strong support for realization in East and Southeast Europe. In 2011, China revived its co‐ operation with a group of 16 Central and Eastern European countries (CEECs), namely, Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia. In 2012, the first meeting at the heads of government level was held in Warsaw, marking the official launch of the 16+1 format or mechanism under which China provides preferential financing to support investment projects that use Chinese inputs, such as equipment. Current trade volume between China and CEEC reaches USD 60 billion, i.e. about 11% of its trade with the EU. (Li Keqiang, 2015). On the other hand, the European Union’s Strategy for the Danube Region (EUSDR) sets the basis for the construction of the modern regional group in the international river basin of the Danube. The EU Strategy for the Danube Region provides strong support for the development of all countries of the Danube basin, regardless whether they are members of the European Union or not, guided by the principles of responsible use of natural resources for sustainable development. The river Danube itself represents the most complex natural resource for many areas of human activities, from the field of economy and industry, to the fields of culture and politics. The Danube has the drainage area of 816,960 square kilometres, the 32nd largest river basin in the world. The river Danube does not only represent a waterway for transportation and a bordering river between states, but it is also a waterway which connects regions and is a base of economic and cultural communication. Therefore, it was nominated as one of the European transport corridors, the Seventh, the only water corridor. EUSDR has the aim and task to support the development of the countries in the Danube basin, so the WB countries, too. Yet, it has no special financial means for that, only with projects countries could compete at the EU funds when there are calls for project proposals. This situation forced the countries to develop their projects, and that has resulted in additional skills for developing projects upon the newly gained awareness that regional, sub‐regional and inter‐ regional cooperation forms have the utmost importance for overcoming the tensions created in the “use‐of‐force” history everywhere. Upon experiences

408 of multilateral economic and cultural cooperation in the framework of the EUSDR, a positive effect on openness towards other initiatives for international economic cooperation appeared. So, the wealth in natural and cultural resources and first of all the strategic position of the region began to be used for international regional and inter‐regional economic and cultural cooperation – in fields which the 16+1 mechanism embraces, from investments, transport, and finance, to science, education, and culture – instead the self‐isolation and hostility toward neighbours. Therefore, it would be worthy to research more properly how the fields on which the EUSDR concentrate in its priority areas could go hand in hand with the aims of the 16+1. The priorities of the EUSRD are elaborated in 11 priority areas of the four columns: The first column titled as: Connecting the Danube Region 1) To improve mobility and multi‐modality 2) To encourage more sustainable energy 3) To promote culture and tourism, people to people contacts The second column titled as: Protecting the Environment in the Danube Region 4) To restore and maintain the quality of waters 5) To manage environmental risks 6) To preserve biodiversity, landscapes and the quality of air and soils The third column titled as: Building Prosperity in the Danube Region 7) To develop the Knowledge Society through research, education and information technologies 8) To support the competitiveness of enterprises, including cluster development 9) To invest in people and skills The fourth column titled as: Strengthening the Danube Region 10) To step up institutional capacity and cooperation 11) To work together to promote security and tackle organized and serious crime We are convinced that the synergy between the “16+1” and the EUSDR could bring a huge success in achieving goals of both mechanisms, the regional EUSDR and the inter‐regional BRI, 16+1 forms of international

409 cooperation. And the success of these cooperation mechanisms would bring to an end the unfortunate destiny of peoples on the Balkans (middle Danube region), who were “trained” to be divided by religious and nationalistic ideologies through history, with wars even in the last decade of the 20th century. Whereas in other parts of Europe all kinds of regional cooperation gained space and richness of forms, in Southeast Europe the process was more or less delayed in these countries. In some countries, people were ill‐ educated in the process of manipulation by so‐called highest intellectuals, yet nationalists and xenophobic. Regional cooperation is urgently needed in all the countries of Southeast Europe in the fields of economy and protection of the environment. Therefore, the forms of regional cooperation which are based on sustainable use of natural resources are the ones which were conceived and already have some results. Such are those at the level of states, at the level of smaller parts of countries, and at the level of cross‐border regional cooperation of municipalities and counties. So, the region of the middle Danube‐Basin will be an important node on the New Silk Route.

CONCLUSION

The New Silk Road (NSR) Program indicates that China, by offering a partnership cooperation, aims to become the major player in the global economy. The Program incorporates sixty percent of the world population and sixty‐five countries, with a plan to develop all forms of transport, particularly land (high‐speed railways, roads) and maritime routes, including sea, river and canal corridors (new ports, expansion of port facilities, improvements to navigation). However, debate exists on whether this type of expansion is good for the other side. The grandiose project of the New Silk Road from which mainly huge investments and flow of goods and capital are awaited should bring also a flow of way of thinking and behaving that was nourished through the history of China and was missing in Europe, but especially in its south‐eastern part. Encouraging cultural ties and friendly relations to build the support for the broader project of China‐Danube economic corridor. Possession of important natural and cultural‐historical resources‐Ancient historical wealth ‐ and in newer history the communist regimes are some similarities between China and the East European, also

410 the WB region. Some big differences could be considered as geographically (objectively) acceptable: The size of the two regions (namely the state of China on one hand and the western Balkans on the other hand) in certain extent is due to the territorial difference of the two continents, Europe and Asia. However, whereas this factor is acceptable, the wrong attitude in the WB is underestimating all achievements from the past, instead of preserving the good ones, as in China where the preservation of achievements of previous times dominated. Decomposition of Yugoslavia gives also a typical example how easy is here to cause discord on the bases of ethnic and religious differences and to manage to make a number of small economically weak countries. As it was said above, the former republics of the SFRY, after gaining independence now have a total external debt nine times more than at the end of 1990. With the disintegration of Yugoslavia, all the republics that were part of it lost a significant economic base, a large market, and human resources. The war in the 1990s has ruined many economies and weakened economic power and the WB become to be now the poorest region in Europe. The average GDP per capita is only about half of that of the Central, East and Southeast European EU Member States. The WB countries must build up a very strong economic cooperation among themselves for ensuring investment‐security for foreign companies, but all these are not possible without the stronger mutual cooperation and international support for it. Let’s conclude shortly what could and should be the gain from the New Silk Road for the WB states expecting security and prosperity first of all from their integration into the European Union with integration process which is taking too long and has been cumbersome. The stronger mutual cooperation, hand in hand with economic strengthening, would get a substantial push with receiving investments along the New Silk Road. Although investments in this region are not as substantial in size as in the immediate Chinese neighbourhood, they are very relevant for these countries that still have a huge gap in infrastructure. The takeover of the majority share in the Greek harbour in Piraeus marks the beginning of a transit route via the Western Balkans, with motorways and railway links (notably a high‐speed railway between Belgrade and Budapest), improving overland connections between Piraeus, the Balkan Peninsula and Western Europe are a very promising start of the desired development.

411 BIBLIOGRAPHY

Antevski Miroslav, Sanja Jelisavac Trošić, (2016) Chinese Response to Transatlantic Trade and Investment Partnership and Trans Pacific Partnership in: The Review of International Affairs, No. 1161. Dimitrijević Duško, Jokanović Nikola, (2016) Chinese Investments in Serbia and the New Silk Road, In: The Review of Inter national Affairs, No. 1161. Grübler Julia und Robert Stehrer (2017) Die chinesische Investitionsoffensive „One Belt, One Road” Wirtschaftliche Potenziale für Österreich, Wiener Institut für Internationale Wirtschaftsvergleiche. Holzner Mario, (2016) Policy Options for Competitiveness and Economic Development in the Western Balkans: the Case for Infrastructure Investment, Internet:https://wiiw.ac.at/policy‐options‐for‐competitive‐ ness‐and‐economic‐development‐in‐the‐western‐balkans‐the‐case‐for‐i nfrastructure‐investment‐p‐3916.html Keqiang Li (2015) Work Together to Open Up New Prospects for Win‐Win Cooperation, Fifth China and Central and Eastern European Countries Economic and Trade Forum, Suzhou, 2015. Internet: http://www.fmprc. gov.cn/mfa_eng/zxxx_662805/t1318407.shtml Koutantou Angeliki, (2016) COSCO sees Greece’s Piraeus among world’s top 30 ports by 2018, Internet:http://www.reuters.com/article/us‐greece‐ cosco‐piraeus/cosco‐sees‐greeces‐piraeus‐among‐worlds‐top‐30‐ports‐b y‐2018‐idUSKCN11S268 Lađevac Ivona, Đorđević Branislav, (2016) Possibilities for Promoting Interconnectivity Between China and Central and Eastern European Countries, In: The Review of International Affairs, No. 1161. Stojić Karanović Edita, (2008) Regionalna i susedska saradnja za održivi razvoj Srbije u prvoj dekadi 21. veka, Institut za međunarodnu politiku i privredu, Beograd. Stojić Karanović Edita, Dejan Jolović (2016) Danube’s Contribution to the New Silk Road and the Position of Serbia, In: Danube and the New Silk Road, Ed. Duško Dimitrijević, Institute of International Politics and Economics, Belgrade.

412 ТHE “NEW SILK ROAD’’ AND THE REGIONAL COOPERATION OF THE WEST BALKANS

Hatidža BERIŠA, Ph.D. University of Defence, Military Academy Katarina JONEV, Ph.D. candidate Faculty of Security Studies Igor BARIŠIĆ, University of Defence, Military Academy, Belgrade, Serbia1

Abstract: In the last few years, the new geopolitical aspect of the People’s Republic of China, as the fastest growing economy in the world, includes the Balkans and the Republic of Serbia. The most populous country in the world, relying on its centuries‐long tradition of non‐colonization of other countries, invests through “soft power” in infrastructure and economy to facilitate the further breakthrough of its industry into new markets. By investing in primarily infrastructural projects such as ports, railways, roads, in this region, China sees the Balkans and Serbia as a great potential. In order to improve intercontinental trade between Asia and Europe, PR China promotes the ‘’Silk Road’’, which covers the areas of China, through Central Asia, Iran, Turkey, Bosporus and the Balkan Peninsula. China sees Serbia as a reliable, strategic partner in this part of the world, which is supported by a series of agreements signed between Belgrade and Beijing and investments in infrastructure and roads worth several billion Euros. Key words: One Road One Belt, New Silk Road, PR China, West Balkan, Republic of Serbia, cooperation.

INTRODUCTION

From its ancient history to modern times, the People’s Republic of China was primarily focused on internal events and politics. China is the military force and army remains one of the most important instruments of the national power of the People’s Republic of China in international relations.

1 E‐mail: [email protected]

413 The beginning of accelerated economic development in the early years of the 21st century brought a new foreign policy. China became not only powerful regional but also a global actor in international politics with its rapid and peaceful economic development. With carefully designed, well‐organized and coordinated activities of building and strengthening, and also with right modalities of projection of its soft power, the People’s Republic of China gradually succeeds in improving its image and transforming it from an undesirable actor in international relations into a trusted partner. The initiative “One Belt, One Road”, announced by the Chinese State Administration, is an attempt to achieve a long‐term and effective combination of the soft and strong power of the People’s Republic of China in one successful strategy. This project attracted great attention of the world public and in its essence represents a unique idea of designing smart power, which is neither hard nor soft, but their unique combination (Armitag, Nye, pp.7‐9). This concept is formulated to influence positively on the building of the image of the People’s Republic of China with the simultaneous realization of the “Chinese dream”: the liberalization of Chinese society, the modernization of the Chinese economy, the realization of the “One Belt, One Road” (OBOR) initiative and the conversion of the Chinese Yuan into the global reserve currency (Cанкт‐ Петербургский институт внешнеэкономических связей, 2015, pp. 21‐23). Although the concept of “smart power” is not yet sufficiently methodologically and terminologically grounded in the People’s Republic of China, it has become an important component of its policy that appears as an attempt to achieve a concept on which it builds co‐operation with other countries and its own sustainable development (Nünlist, 2016:1‐3). More than 200 enterprises have signed cooperation agreements for projects along the OBOR’s routes. (Jinchen, 2016, p.3) The countries of Central and Eastern Europe traditionally have a great geopolitical significance. They make a “curtain” from the Baltic to the , which can be “lowered” or “raised” in the very center of the European continent, and between the borders or the spheres of the two powers ‐ Germany in the heart of Europe and Russia in the heart of Eurasia. At the beginning of the second decade of the 21st century, the People’s Republic of China appears in that zone, which establishes a specific format of cooperation “China + 16”, pointing out the importance of the countries of Central and Eastern Europe. This format operationalizes the cooperation of the People’s Republic of China with Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic,

414 Hungary, Latvia, Lithuania, Estonia, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia. The objectives of the Chinese policy towards the countries of Central and Eastern Europe include facilitating the transportation of Chinese goods to Western Europe, access to advanced technologies, as well as energy products and arable land. The People’s Republic of China is considered a zone of central and Eastern Europe not only as a geo‐economics intermediary, but also as a first‐class geopolitical standpoint. Although it is a “non‐homogeneous block of states, with communist past and geography as almost the only common denominator” (Зарић, p. 2015) , a group of countries, among which 11 are relatively new members of the European Union, and five are “pending” to become part of the Union ‐ China perceives this “sixteen” as a whole, and gives them a geopolitical subjectivity. Thanks to the favorable geographical position, the Republic of Serbia is the area in which the “Silk Sea Route” and “Economic Silk Roadway” are connected, i.e. the maritime and landmark of the “One Belt, One Road” Initiative, and on its territory, the People’s Republic of China plans to implement a series of infrastructure, economic and other projects.

THE INITIATIVE ‘’ONE BELT, ONE ROAD’’

The successful, long‐term and effective combination of the soft and strong power of the People’s Republic of China can be seen in the Initiative “One belt, One Road”. The initiative on the joint construction of the Economic Silk Belt of and the Silk Sea Route of the 21st Century was announced by Chinese President Xi Jinping during a visit to Central and Southeast Asia in September and October 20132 (State Council, 2015, p. 2). The “One Belt, One Road” initiative is a systematic project that should be implemented in cooperation and in the common interest of all countries along the belt and road, through joint efforts to integrate their strategies (der Leer, 2016). The initiative emphasizes peace and the promotion of cooperation, openness and inclusion of all interested parties, exchange of knowledge and experiences, and promotes the common benefits of all participants through sustainable development. By symbolizing

2 China’s president Xi Jinping announced the Silk Route Economic Belt (SREB) and the 21st‐century Maritime Silk Route (MSR). These two major initiatives were initially labelled under the overarching term ‘One Belt, One Road’ (一带一路).

415 communication and co‐operation between the East and the West, the spirit of Silk Road is the historical heritage and spiritual heritage of all countries in the world (State Council, 2015, p. 1). This is also a solution to the Chinese problems of reducing the dependence on oil imports through the Pacific ports, to the transformation of economic into geopolitical power. The initiative, also known as the “New Silk Road”, aims at diversifying trading options and exporting surplus industrial capacities that slow down the Chinese economy, and above all steel and cement (Bloomerg, 2016). It synthesizes all foreign political and, consequently, security models of the People’s Republic of China in the world (der Leer, 2016, p. 4). The initiative is a model of mutually beneficial cooperation, which promotes common development and prosperity and is oriented towards peace and friendship through strengthening understanding, trust and support for comprehensive exchanges. It promotes the cross‐ functional cooperation in all fields, and functions in order to build common interests and responsibilities by emphasizing the policy of trust, economic integration and cultural inclusion. (der Leer, 2016, pp. 3‐7). In this regard, the construction and improvement of the land, maritime and airway network and infrastructure is very important, raising the level of connection of the region to a higher level, improving the financial environment, establishing a free trade zone, improving economic ties and deepening political trust, raising the level of cultural and knowledge exchange different civilizations, promoting understanding, peace and friendship. “One Belt, One Road initiative”, is according to some, a project ‘’aimed at diversifying the country’s trade options and exporting the excess industrial capacity that is dragging down its own economy. (Bloomberg, 2016). What one has to have in mind is that from the very beginning The People’s Republic of China has highlighted economic, trade, integrative, energy, friendly, cultural and civilian intentions. On the geoeconomical and geopolitical plan, this initiative encompasses and connects almost all the key factors that enable domination. The European Union has been presented as the ultimate destination of the New Silk Road. Only the connection between the People’s Republic of China and the European Union raises the question of whether it will be a partnership, given that in many segments, according to many analysts, the European Union can be viewed as a transatlantic exponent of the United States or will the European Union be the subject of their competition to achieve global supremacy. The main pillars of the platform are: economy, trade, supporting projects on hydro, solar, wind and nuclear energy with high technology, financial cooperation and local

416 government cooperation, cultural cooperation, cooperation in industry, manufacturing, connectivity, telecommunication and infrastructure. In the field of transport, the focus is on railway connection and also on roads, marine and air infrastructure in the framework of regional networks. In this way, the Initiative of Cooperation is serving the larger project “One Belt, One Road” which will connect Asia with Europe. By investing in the region’s infrastructure projects, Beijing wants to accelerate the creation of a network of ports, logistics centers, and railways to distribute Chinese products and hasten the speed of East‐West trade. The Belgrade‐ Budapest railway, which will be constructed by Chinese companies according to the EU engineering standards and under the supervision of the European certification bodies, will help push the Chinese contractors up the value chain, thus fulfilling a crucial domestic objective of the OBOR initiative (EBRD, 2016, pp. 2‐6). China is increasingly seen as a credible source of economic growth and a partner for industrial restructuring. While international institutions are demanding privatization of inefficient industries, the Chinese acquisitions of heavy industry assets help protect local jobs, as was the case with the takeover of the Serbia’s Smederevo steel mill. Partly as a result of this, optimistic expectations of the Belt and Road Initiative are already shaping local investment decisions. Serbia is destined for the political‐territorial headquarters of that zone, and the Danube and the Moravia‐ Vardar valley for its integration axis. The main direction of this zone is Athens ‐ Skopje – Belgrade – Budapest. This route leads the shortest way to the European Union market from Piraeus port, which has recently been owned by the majority Republic of China.

OBOR AND WEST BALKAN

The Balkan Peninsula is, historically speaking, a geopolitical space that no great power can resist. The People’s Republic of China is one of them. After the fall of the “iron curtain”, the Cold war ended as well as the disintegration of the Socialist Federal Republic of Yugoslavia, the Balkan region is returning to stability. In the second decade of the 21st century, the People’s Republic of China is sustaining strong links with Balkan countries. The Chinese initiatives span various areas in the Balkans. They include creating logistical corridors (between the China‐owned port of Piraeus in Greece and markets in Central and Western Europe) and building new infrastructure. They also involve

417 distributing some of China’s overcapacity in heavy industries. For example, the Chinese companies have invested in a steel mill in Smederevo near Belgrade and are building numerous coal‐fired power plants, notably in Serbia and Bosnia and Herzegovina. At first glance, the Western Balkans is not a particularly attractive market. However, the fact is that the region can act as a major transport corridor for connecting the Mediterranean to central Europe. In the Western Balkans, the cooperation with China is based on direct lending to governments. These finances are for infrastructure development projects such as roads, railways, ports or power plants. According to Tonchev, the researcher from European Union Institute for Security Studies (EUISS), most Chinese funding comes in the form of a loan from the Exim Bank. The loan covers about 85% of the project capital, with the rest financed by the recipient country where the investment goes. These loans are ‘’offered on favorable financial terms compared to most alternatives: they normally have a long maturity period (of around 20 years) and are subject to low‐interest rates (of around 2%)’’ (Tonchev, 2017, pp.1‐4). The Republic of Serbia, as the central Balkan country, is located in the main direction of the shortest land route from Piraeus Port in Athens to the European Union market and as such is under the influence of the smart power of the People’s Republic of China. This central position of the territory of the Republic of Serbia, located in the main direction of the “New Silk Road” from Athens, through Skopje and Belgrade, to Budapest and further towards the European Union, is an essential reason and basis for the expansion of the overall cooperation between the People’s Republic of China and the Republic Serbia. Serbia stands out once again as Beijing’s key partner in the region. China has already invested more than $1 billion, mostly in the form of loans, to finance the building of transport infrastructure and energy projects in the country. The bridge over the Danube in Belgrade, opened in December 2014 by the Chinese and Serbian PMs, was the first major Chinese‐supported infrastructure project completed in the region, and was built with a significant Chinese labor under the terms of the bilateral agreement. The bridge across the Danube in Belgrade was a highly symbolic and visible project completed in 2014 to the tune of $260 million. It was built by China Road and Bridge Corporation. The most significant Chinese investment in Serbia was realized through a contract signed between the Government of the Republic of Serbia and the Chinese company HESTIL3 on the sale of the property of steel plant Železara Smederevo, which was carried out in June 2016. This was the larg‐

418 est foreign investment in Serbia in 2016. Belgrade and Beijing have also signed an agreement for the construction of a Belgrade‐ Budapest high‐speed railway. Serbian and Chinese officials have signed a loan agreement for the construction of a new 350MW unit at the Kostolac thermal power plant complex. This is the first such investment in Serbia in 25 years (EBRD, 2016, p. 8). The People’s Republic of China and the Republic of Serbia signed a contract in late 2016 to finance the construction of a section of the Pan‐ European Transport Corridor 11 between Surcin and Obrenovac (EBRD, 2016, p.12). Funds for financing this project worth 208 million Euros are provided by the Chinese EXIM Bank. In the same period, two countries signed a contract to build a part of the bypass around Belgrade. In addition to the above projects, the Chinese company HUAWEI is in the process of reconstruction of the telecommunication infrastructure in the Republic of Serbia, the company China Road and Bridge Corporation has signed an agreement with the City of Belgrade on the construction of an industrial zone, and the financing and execution of works at the Termoelektrana “Kostolac” and expansion of coal mine “Drmno” (Danas, 2016). Bosnia has signed the contract for the construction of a Banja Luka‐Split motorway. In the field of energy, China and Bosnia have signed the contracts for: the construction of MW unit at Tuzla thermal power plant, 350 MW Banovici thermal power plant and 300 MW Stanari thermal power plant (Dhimolea:2017). Croatia has introduced several projects to the Chinese in the maritime field (such as port renewal), infrastructure and nuclear energy. In October 2014, Croatia signed a contract with CMBM Chinese Company for the modernization of a terminal port in the south of the country (Dhimolea, 2017). There has been a great interest from the Chinese companies in transportation infrastructure projects in Montenegro. In the framework of the platform 16+1, Montenegro has benefited from loans from China’s Exim Bank, signing contracts for the construction of the Podgorica‐Kolasin highway and the renewal of the ship fleet of Montenegro (EBRD:2016,6). Bar‐Boljare represents the Montenegrin part of the Bar‐Belgrade motorway, a part of pan European Corridor XI, a ferry/motorway corridor linking Italy’s Bari to Romania’s Bucharest via Bar and Serbia’s Belgrade. China Pacific Construction Group has signed a deal to construct a highway between Montenegro and Albania (Tonchev, 2017, p. 2).

3 Chinese Hebei Iron and Steel Company (now the Hesteel Group).

419 Macedonia has benefited from the Exim Bank loans for the construction of the Kicevo‐Ohrid highway and the Miladinovci‐Stip highway. The interest rate will be 2 percent annually and will be paid over the next 20 years (Dhimolea, 2017). China intends to build some hydropower plants on the Vardar River, which is on the key Corridor 10 that is anticipated to comprise the main Silk Road route from the Aegean Sea to Central Europe. China is halfway through constructing two motorways, the Skopje‐Shtip section in the eastern part of the country and the Kichevo‐Ohrid one in the west. The Former Yugoslav Republic of Macedonia is very important in the context of China’s BRI strat‐ egy, as the country which sits on a route connecting the port facilities that the Chinese are operating in Piraeus (Greece) to Budapest (Hungary). This transport corridor is seen as the gateway to markets in Europe.

CONCLUSION

The People’s Republic of China has an economic, but also a geopolitical interest in strengthening intensified cooperation with the European countries in its foreign policy and economic position in conditions of dynamic global changes. In this way, it simultaneously strengthens its influence and its power in international relations on a global scale. Realization of the projects “One belt, One Road” opens the opportunity for the Western Balkans for accelerated economic development and overall prosperity. However, it is necessary to emphasize that the People’s Republic of China invests in this part of the world primarily to expand the market towards the European Union. By emphasizing the strategy of peaceful development, regional and global, with the strengthening of economic mutually beneficial cooperation, the People’s Republic of China is developing bilateral relations with the Republic of Serbia and the Western Balkans as equal partners. Designing the smart power of the People’s Republic of China towards the Western Balkans should be viewed from the point of view of China’s efforts to access a single European market. After the acquisition of Port Piraeus by Chinese investors and joint investments with the Government of the Republic of Serbia in the reconstruction of the Belgrade‐Budapest line, the contours of the Chinese concept were drawn out and the main route for the mainland road that connects Athens, via Belgrade and Budapest with the countries of the western, central and .

420 BIBLIOGRAPHY

Armitag R.L.,. Nye, J.S., CSIS Commission on smart power: A smarter, more secure America, Center for Strategic and Security Studies, Jan 5, 2015. Blooming, available at Internet: http://www.straitstimes.com/asia/east‐ asia/silk‐road‐a‐way‐out‐of‐overcapacity‐woes/last visit 1 July 2017 Danas, available at Internet: Dhimolea, A., Chinese Economic Cooperation in the Balkans: Challenges and Future Expectations May, 2017. Internet:http://www.danas.rs/ekonomija.4.html?news_id=331405&title=Na jve%C4%87i+kineski+projekti+zasad+ostali+na+papiru/ last visit 2nd May 2017 Leer, Yeroen van der, ‘’China’s new silk route The long and winding road’’ PwC’s Growth Markets Centre February 2016. Levitin, О., Milatovic, Ј. Sanfey, P., China and South‐Eastern Europe: Infrastructure, trade and investment links EBRD, July 2016. Murphy, P., The Silk Road, XX I Century: “One Belt One Road” The Institute of International and European Affairs. Nünlist, C. (ed) One Belt, One Road: China’s Vision of “Connectivity” © 2016 Center for Security Studies (CSS), ETH Zurich, September 2016. Tonchev, P., China’s Road: into the Western Balkans, European Union Institute for Security Studies (EUISS), February 2017. Vision and Actions on Jointly Building Silk Road Economic Belt and 21st‐ Century Maritime Silk Road, National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council authorization, Beijing, March 2015. Зарић, И., Србија и евроазијски геополитички простор, Институт за политичке студије, Београд 2013. Михайлович, С.Н., Рамона Александровна, Х., Геннадий Анатольевич, Г., Фактор силы в современных международных отношениях: теоретический дискурс, Санкт‐Петербургский институт внешне‐ экономических связей, Санкт‐Петербург, 2015.

421 IS IT POSSIBLE THAT THE BELT ROAD INITIATIVES COULD ALTER SERBIAN ECONOMY – ACHIEVEMENTS AND CHALLENGES

Đurađ GRUBIŠIĆ, M.Sc. ECPD International Postgraduate Studies, Belgrade, Serbia1

Abstract: This paper analyzes the role of the Belt and Road Initiatives (BRI) in 16+1 countries, trying to estimate the real potential of the Chinese – Serbian economic cooperation in the context of these initiatives. We use the soft system methodology (SSM) in order to do this research. Knowing that SSM approach is suited for the analyses of the complex real‐world situations, we discuss about different options of Chinese‐Serbian economic relations; how we can use the soft system methodology and system thinking with the intention to reveal current and possible problems in economic and political relations between China and Serbia, the achievements and challenges of this cooperation, and how we can do the action in order to alter the Serbian economy as a part of BRI. Key words: Belt Road Initiatives, 16+1, China, Serbia, Soft System Methodology, economics, politics

INTRODUCTION

When the Chinese Prime Minister Xi Jinping (习近平) initiated the project The Belt and Road Initiatives in 2013, few people could assume the greatness of the project. As much as 113 billion dollars has been promised as an additional support for the existing projects earlier in May.2 In a very short time, the a/m term has become widely known in the Chinese public where it was one of the most frequently used terms in 2016, as well as in the rest of the world.3 While

1 E‐mail: [email protected] 2 Huang, Z. (2017), “Your guide to understand OBOR, China’s new Silk Road plan”, available at: Internet: https://qz.com/983460/obor‐an‐extremely‐simple‐guide‐to‐understanding‐ chinas‐one‐belt‐one‐road‐forum‐for‐its‐new‐silk‐road/ (accessed:16 August 2017). 3 Internet:http://mp.weixin.qq.com/s/3gj_W8D7dAecOH73gsRxoA (accessed:26 August 2017).

422 in over 60 countries of Europe, Asia, Africa and Oceania involved in this project, the BRI is viewed with great expectations and hope that it will be the flywheel of economic growth in these countries, it is received with noticeable skepticism and suspicion in the West. The expert public in the West is concerned about the BRI being a kind of counterpart to the Trans‐Pacific Partnership Transatlantic Trade and Investment Partnership projects; behind the BRI, they think, there are hidden geopolitical and geo‐economic motifs aimed at paving China’s road to the world throne. Chinese authors often dismiss such accusations pointing out that the BRI is a purely an economic project and that they cannot understand the suspicions and accusations coming from the West. A special place within the BRI is occupied by the project 16 + 1 Coordination Mechanism, which has to assemble the countries of Central, Eastern and Southeast Europe. Although in most of the 16 + 1 countries, this initiative is initially quite small, it is very quickly realized that Europe does not have any money for investment projects in this region, and it might be wise to see what the Chinese offer and then use the money they have for their much‐needed investment projects. Poland is particularly prominent in this, changing its approach from the root and begins to be the most active in developing economic cooperation with China believing that the 16 + 1 Initiative is fully compatible with their former Intermarium project, which would bring together the Catholic countries of Central and Eastern Europe and serve as a barrier against the expansion of the Russian influence in Europe.4 Of course, complaints are being made targeting the Chinese ‐ in all 16 + 1 projects Chinese companies and interests are being favored and there is no room for a significant growth of the exports of these 16 countries to the Chinese market, i.e. all Chinese initiatives being one‐way traffic. First of all, there is a big general misunderstanding of China’s role in the modern world, which often moves from total underestimation to overestimation of the role and capabilities of China in this region. The reason for this is the lack of adequate and educated technocrats who know China and its civilization and economy, speak the Chinese language and are capable of making an adequate and timely analysis of the current and future situation, i.e. to define a long‐term general strategy of relations with China. This is really necessary because our

4 J. Czerep (2016), “Lessons from the Baltic‐Centered Blocks for the Danube Region”, Thematical Proceeding from the International Scietific Conference:Danube in the Function of the New Silk Road, Institute for International Politics and Economics, (2016), Belgrade, p. 275.

423 and their understanding of time is not the same; they define their strategy and make long‐term, compared to the Europeans who make plans from one to the other election, i.e. change of government. This is particularly present in Serbia, where declarative political support does exist for the development of relations with China in all fields with ambitious goals, although in reality, people who are trying to develop these relations face numerous problems. Therefore, special attention should be paid to studying the problems in the development of economic relations between Serbia and China, with a special emphasis on the issue of the possibility of BRI to alter the Serbian economy. As this problem is badly structured and undefined and the complexity of problematic situations in real life stems from the fact that reality is never “static“and that it contains numerous interactions among a variety of “perceptions of reality“, we shall use the soft system methodology, since this peculiar process and approach should shed light on differences between the world as currently it is and what it is supposed to be.

METHOD, RESULTS AND DISCUSSION

Knowing that SSM approach is suited to analyses of complex real‐world situations (unlike so‐called “hard methodology“, whose postulate implies the formation of a single resolution model followed by trial in finding the best optimal solution), we discuss how we can use the soft system methodology and system thinking which can reveal current and possible problems in economic and political relations between China and Serbia, and how we can undertake action to improve these relations. Knowing that the problems, i.e. issues within a system may be delicately structured and their problematic clearly defined, Peter Checkland et al. developed the Soft System Methodology, which has been conceived to deal with complex problematic situations. It is action‐oriented and systematizes opinions on problematic situations that are to be resolved so that the actions undertaken may bring about a certain level of improvement.5 This methodology, which intends to deal with problematic situations containing pronounced social, political and

5 Checkland P. & Poulter J. (2006.) Learning for Action: A Short Definite Account of Soft System Methodology and its use for Practitioners, Teachers and Students. John Wiley & Sons Ltd., pg xv

424 humanistic components that may in no way be considered a quantitative research technique but a qualitative one, which may be applied for systematic investigation of non‐systemic situations. The complexity of problematic situations in real life stems from the fact that reality is never “static” and contains numerous interactions among a variety of “perceptions of reality“.6 The two a/m facts, opposing worldviews and acting purposefully, are the prerequisites of the soft system methodology for kick‐starting problem resolution and initiating improvement of an existing situation. Out of this comparison arises better understanding of the world (“research”), and some ideas for improvement (“action”). The process of development of suitable models through the proper definition of real issues to be resolved, followed by finding possible solutions and actions to be undertaken, is a learning cycle, i.e. learning for action since action is involved. By comparison of a problem experienced with reality from the real world and application of available action models for problem resolution based on declared worldviews comparison and structured discussion follow, which should result in action for improvement of the existing problematic situation. Taking action with the aim to improve a problematic situation will, by itself, modify the target situation meaning that, in principle, the learning cycle will take another turn. Such action contributes to better understanding of complex situations encouraging multiple perspectives that have to be taken into account when conducting analyses. This does contribute to analytic reliability as well as trustworthiness in debating and action‐taking.7 The traditional approach to SSM comprises seven stages, which deal with the real world and problematic situations awaiting resolution as well as with an ideal conceptual world targeted via systematic deliberation. These seven stages of SSM are as follows: 1. Problematic situation considered problematic 2. Problem situation expressed 3. Root definition of relevant purposeful activity systems 4. Developing the model – conceptual models of the system named in the root definitions

6 ibis, pg xvi 7 Checkland P. & Poulter J. (2006) Learning for Action: A Short Definite Account of Soft System Methodology and its use for Practitioners, Teachers and Students. John Wiley & Sons Ltd., pg xviii

425 5. Compare the model and real world. Gain insights 6. Develop desirable and feasible interventions 7. Action to improve the situation.8 The final aim would be to establish a real and permanent learning process based on experience and new, modified environment, which will provide an opportunity for development of new problem‐solving models via the definition of issues to be resolved with the immediate search for possible solutions as well as actions to be undertaken. That would really be a genuine learning cycle – learning for action. Taking action to improve a problematic situation will, by itself, change the situation that we wish to handle, thus repeating the learning cycle. Respecting the traditional methodological approach of SSM by Peter Checkland, the analysis of the current situation regarding the economic relations between Serbia and China will be done through adjustments and modifications of the seven phases of the SSM mentioned above. So, the methodology to be developed on this occasion will be based on the traditional seven phases of the SSM, but modified in order to suit viewing the present problematic situation through a kind of fusion of the first three traditional phases, analyzing the situation and problems from the viewpoint of the state and from the angle of the businessman, an ideal conceptual model to strive for and finally to develop desirable and feasible interventions and actions, by comparison between the present situation and the ideal model, aimed at improving the situation in the economic relations between Serbia and China. Of course, the ideal goal would be to create the already mentioned genuine learning cycle ‐ learning for action, where problematic situations would, through constant repetition, be analyzed and compared with ideal models, thus continuously creating actions that would lead to permanent improvements.

PRESENT SITUATION

In recent years in Serbia, we have witnessed a growing interest for China, its economic development and projects within the BRI. It is known that Serbia

8 P. Checkland, J. Poulter (2006.) Learning for Action: A Short Definite Account of Soft System Methodology and its use for Practitioners, Teachers and Students. John Wiley & Sons Ltd.

426 is trying to present itself as a successor country to the SFRY, which had very good political and cultural relations with the PRC, and the perception of Yugoslavia in the older Chinese population is very positive. If the period of the first ten years of the 21st century is exempted, when the ruling dogma about the absolute domination of the West and the commitment of the Serbian political leadership to the development of relations exclusively with the countries of the EU and the United States and the relationship between the two countries was a bit futile, Serbia and China really had very fruitful political relations all the time. If the import of Chinese consumer goods to Serbia is excluded, economic relations have never been high in terms of increasing exports of Serbian goods to China, joint investments in opening new production facilities. Because of ignorance and general prejudice, the Serbian public was convinced that China was a country with cheap labor, in whose market there was no place for Serbian goods. However, over the past decade, Serbian awareness of China has gradually started changing due to the more obvious evidence of the growth and overall progress of the Chinese economy. This should be accompanied by slight disengagement from the dogma about the European road at all costs, since the consequences of the 2008 economic crisis, the migration crisis and Brexit, have shown that the EU is not such a perfect and monolithic society. Therefore, the BRI, which was presented four years ago, is warmly welcomed in the Serbian public, unlike other 16 + 1 countries where there was great skepticism and suspicion, and the first infrastructure projects (such as the bridge over the Danube, the fast track Belgrade ‐Budapest, etc.), have been just signed between Serbia and China. These pilot projects were references and flywheels for other projects that China would offer to the countries of the 16 + 1 coordination mechanism. Unfortunately, the growth of Serbian exports to China has not been reached in expected and significant volume of economic cooperation. What are the reasons for this, what problems do we have to deal with and how to solve them, and should the BRI be able to alter the Serbian economy?

Great expectations on political and state level Regarding all major political officials at all levels, one can feel that they are supposedly absolutely committed to cooperating with China. Unfortunately, this support is usually only declarative, and most of these actors have done nothing concrete to improve economic cooperation. On

427 the other hand, there are obviously great expectations from China in terms of supporting the growth of foreign direct investment (FDI) and solving some of the burning problems of the Serbian economy. By analyzing the statements and actions of Serbian state officials, the Serbian economic position towards China can be seen through the following points: 1. Serbia is very interested in investments in infrastructure and projects that are financed from the state budget and foreign loans (Chinese) – the Danube Bridge, the Highway, Thermo plants, fast‐track railways, etc. Such projects help solve the chronic lack of investment in infrastructure in the last few decades, and that such projects are presented as a result of the work of the ruling assembly in the elections. 2. Serbia expects from China to help in collecting FDI in production facilities, in order to reduce the unemployment rate and inject some cash flow into the economy. This is good, but the problem is that the Serbian part is not pointing to the competitiveness and advantages of Serbian economy versus other countries, and not showing a good project in modern industries, which could boost and change the Serbian economy and exports, especially in JV with technically advanced Chinese partners. In contrary – Serbia is only pointing out that the reason for investing in Serbia is cheap and skilled labor and a geographical location in Europe. 3. Serbia expects from China to help solve some of the old problems of State Owned Enterprises (SOEs) that are not of interest to other foreign investors, but still have many workers and there might be a potential social bomb for local communities. (RTB Bor, FAP, etc.) 4. Lack of good and well‐organized institutions and educated staff with knowledge of the Chinese language and economy, which could plan, coordinate and control all projects between China and Serbia, as part of the BRI (PKS do not have enough resources to deal with it, while other institutions do not have any human resources with particular knowledge) 5. Political and economic relations between China and the EU/USA could have a great impact on the decisions of the Serbian side regarding China’s issues.

Lack of vision and initiative from the private sector Serbian businessmen have long been absolutely indifferent to the Chinese economy and the growth of Serbian exports to that country. Only

428 recently has this kind of interest begun to appear and the position of Serbian businessmen, due to the lack of vision and the right initiative for the development of cooperation, can be viewed as follows: 1. Misunderstandings about the modern Chinese economy and its potentials, and how to enter the Chinese market (a classical story‐ we do not have enough goods for China). 2. We do not have enough good companies that could cooperate with Chinese counterparts as part of the BRI, because of the huge differences in the size of their businesses. The fact is that the Chinese are trying to develop cooperation with a large and powerful European company, which can follow the Chinese ambitions and demands. It is known that, in Serbia, there are no more companies that are large enough and offer quality that may meet the requirements of the Chinese market. 3. Real problems regarding Serbian exports to China (import barriers, procedures) exist especially with the agricultural products. Due to the poor technological development of most Serbian industrial companies, Serbia is the most competitive in the field of agriculture, and most of the attempts to export to China were made by companies that tried to export fruit, vegetables, meat and meat products, milk and dairy products, honey, wine, brandy, etc. Unfortunately, the biggest import barriers and most difficult procurement of permits are present in this sector, and the process of obtaining licenses and certificates for export of agricultural products to the PRC is very complicated and time‐consuming. Many Serbian companies whose products have attracted the interest of Chinese customers have no resources or power to solve these problems on their own, and they do not receive real and adequate information and support from the Serbian state in this respect. 4. There is the problem of Project management for Clusters for a project that could be potentially successful in China (how to collect, control, pack and transport agricultural products – fruit, vegetables, honey from many small producers). Unlike small and medium‐sized enterprises in China, which are very inclined to cluster connectivity,9 such practice does not exist in Serbian

9 M. Song (2016), “BOC plays cupid between Chinese and foreign SMEs for an economic cause”, available at Internet: http://usa.chinadaily.com.cn/business/2016‐09/01/content_ 26671627.htm (accessed: 16 August 2017).

429 small and medium‐sized enterprises. As a result, in most cases, they cannot even reach serious Chinese customers, let alone meet their potential orders. 5. High prices of products in comparison with products that have already been imported in China (wines). Some products like wines could be exported without major problems, but there is a price incompatibility vis‐à‐vis some other countries that have more substantial economies of scale, and have already positioned themselves well in the Chinese market (e.g. Chile). 6. There is no money in the Serbian state budget, or in other state agencies (PKS, RAS) for the support of export‐oriented projects to enter the Chinese market, or to attend Fairs, which can help this cause. Most of the Fairs that the Serbian enterprises have attended in the last few years have been the result of improvisations, without serious planning and organization. Support from the state, besides political statements, was almost a zero. On the contrary, other 16+1 countries‐like Poland, Hungary, etc. which all have very ambitious plans for China and, therefore, carefully plan and organize support for their companies which want to enter the Chinese market. On the other side, SMEs have no money for that. The problems we need to face: Taking into account the positions of both the Serbian states and businessmen in the development of economic relations with China, and given the actions and ambitions of other countries, we can identify two major problems that must be addressed. 1. What will happen when Serbia inevitably finds itself unable to offer potentially profitable enough infra‐structural projects, or when there is no longer room for taking loans with government guarantees (due to high indebtedness against GDP) to finance the desired infra‐structural projects. We should be aware that all these loans have to be repaid somehow, that the state already has a high level of indebtedness and, at the same time, there is no consensually strong and agile economy that can bear the burden of new debts and withstand the necessary, new investment cycles that are indispensable for the increase of export competitiveness. 2. If the Serbian companies fail to understand the potential and importance of the Chinese market, and if they do not take advantage of the current momentum of readiness for cooperation within the BRI, companies of other 16 + 1 countries will definitely seize the opportunity to take a piece of the Chinese market. Later, for the Serbian companies, it will be very hard

430 to penetrate the Chinese market and compete with the players that are already present there. In order to have a better picture of the options for creating an ideal model, the PQR formula formulated by Checkland: to P, by Q, and order to achieve R, where PQR answer the question: What? How? And Why?10 Therefore, we need to understand what we need to do to use the BRI momentum and improve economic cooperation between Serbia and China, how to do it, and finally why it is important to do it.

Ideal situation – a model Analyzing the current problematic situation in which Serbia is in its endeavors to improve cooperation with China, as well as all the real problems to be addressed, and find a solution, it will be considered what an ideal situation would be, i.e. an ideal model that it could effectively solve most of the problems mentioned above. This ideal situation, i.e. the model, is something to strive for, despite the awareness that the realization of this ideal model is almost impossible. However, it is important for us to have a vision and a goal to pursue and to which we should target in comparison with the current position in order to constantly carry out actions that improve the situation. In this ideal model, there are three sub‐models of the proposal for solutions to some of the more significant problems: 1. Newly formed Office of the National Council for Cooperation with Russia and China will actively work in order to plan, coordinate and control all economic activities and projects between Serbia and China. It will not be the agency in which will be only politically selected personnel without any technical skills, but will also have professionals with knowledge of the Chinese language and economy who could help achieve some of the goals in order to change the cooperation between the two economies. So in the ideal model, it is assumed that the Council and the Office for Cooperation with China and Russia would have their own powers, material resources and human resources with which they could really unify and coordinate all state

10 P. Checkland, J. Poulter (2006.) Learning for Action: A Short Definite Account of Soft System Methodology and its use for Practitioners, Teachers and Students. John Wiley & Sons Ltd., p. 39.

431 actions aimed at improving the economic cooperation between Serbia and China. In other words, this would be a perfect counterpart to the existing Ministry for European Integration, which is only dealing with the EU, in accordance with the officially proclaimed policy as long as this body would deal with all issues related to China. Ideally, such a body would initiate the development of a general strategy of general relations between Serbia and China in the near as well as in the distant future, which would be a framework for cooperation in all fields between the two countries. 2. The Serbian government and other agencies (RAS, PKS, etc.) that are, otherwise, responsible for helping the Serbian businessmen will work closely with each other in order to benefit from the cooperation between Serbia and China, and will grant some money in order to promote and help the Serbian companies to enter the Chinese market. It is very important to procure funds that would be able to help the Serbian entrepreneurs within the Chinese market. It is also important not to make a big difference between big companies and SMEs, as well as between small domestic companies and large foreign companies supported by their countries of origin, in the plans for assistance and support when targeting the Chinese market. 3. All levels of government from local communities to the Republican government will realize how important for the Serbian economy it is to attract the Chinese investors and companies, in order to establish sustainable long‐term cooperation with mutual benefits. All levels of government will always consider only Serb interests as an absolute priority, defending it at all costs, even when those interests conflict the interests of some other powerful factors. Comparison between the ideal model and the real world, the development of the desirable and feasible interventions, and how to act in order to improve the situation. After viewing the current situation and the problems to be tackled as well as the ideal model which we should strive for, though not completely realizable, one should compare the ideal model with the real world, in order to develop desirable and achievable interventions that would lead to actions aiming at improving the situation. These observations and actions are not final solutions, but should lead to some improvements that are realistically achievable and which will, after their realization, represent a new changed situation that will be utilized in considering new improvements through newer and newer reviews and

432 comparisons between the ideal model and the projected target situation. In fact, the goal is to create a genuine learning cycle ‐ learning for action which would, through constant repetition, analyze problematic situations and compare them with the ideal models, continually creating actions that would lead to permanent improvements, because it is only possible way to create changes in a complex environment which the one we studying through the relationship between Serbia and China certainly is.

What to do with the position of the Serbian state and its need for investment in infrastructure and FDI? The Serbian government will officially advocate support for the Chinese investments and projects, but the scenario where the Council and the Office for Cooperation with China have real power and competence to coordinate all state authorities and actions and allocate more significant financial resources that would lead to results and improvement of the economic cooperation between Serbia and China is quite unlikely. It is much more certain that they will continue with their efforts to take the Chinese loans to finance infrastructure projects for which the EU/USA did not have the resources or interest, as well as to animate the Chinese investors for investments in failed state‐owned enterprises or new Greenfield and Brownfield investments to address the problem of unemployment without a clearer vision or plan of serious technologically advanced industrial development. Local authorities, especially in underdeveloped areas, are much more willing to act in order to develop the cooperation with China, in particular on the FDI plan, because the problem of unemployment and shortage of investment is chronic, although the question arises of the existence of real projects that might be interesting to the Chinese, as well as the relevant cadres who could execute such projects with the Chinese. More important assistance cannot be expected either from the Serbian Chamber of Commerce or the Serbian Development Agency of the RAS, due to the lack of adequate funds and people who could provide this assistance. Therefore, it is necessary to continue to at least push infrastructure projects in cooperation with China to support all projects by Councils, Offices, relevant ministries, PKS, RAS and TOS that would, on the one hand, lead to quality FDIs in technologically advanced and export‐oriented production capacities, and on the other hand, help eliminate all administrative barriers

433 for the export of Serbian products to the Chinese market, as well as for more serious and high‐quality participation of Serbian companies at fairs in China, with active support and organization of the state since with conditionally invested modest means the Serbian economy may have a noticeable appearance and achieve the initial positioning of Serbian products in China. It is also necessary that the civil service should employ individual technocrats, who speak the Chinese language and know the culture, who would lead and assist in developing projects related to cooperation with China, free from all political pressures, which could possibly hinder them.

What to do with Serbian businessmen? All Serbian state structures, as well as SCC and RAS, should raise the quality of Serbian companies with the aim of starting the export of Serbian products to China. Particular attention should be paid to the cooperation between Serbian and Chinese SMEs. Serbian SMEs employ almost 2/3 of the workforce in the non‐financial sector and account for 32% of GDP,11 while Chinese SMEs make up to 60% of GDP, own 70% of their patents and employ over 80% of the population in urban areas.12 Serbia has a large number of highly successful SMEs, which already produce high‐quality and competitive products for the EU market, and have adopted stringent international quality standards, succeeding in combating numerous and aggressive competition in the very demanding EU market. Such companies usually have turnovers between several hundred thousand Euro up to 10 million Euros. Also, they are very flexible in adjusting their products and performance in new markets. On the other hand, in the eyes of Chinese consumers, these companies and products will be accepted as well as other European quality companies and their products from countries 16 + 1 cooperation mechanism, without showing prejudice concerning the image of Serbia or the quality of Serbian products, which, unfortunately, is often the case in the EU markets. A selection of the best products and companies that have the opportunity to break into the Chinese market should be made and provide them with all

11 Internet:http://www.pks.rs/PrivredaSrbije.aspx?id=20&p=0& (accessed:19 August 2017). 12 Song,M. (2016), “BOC plays cupid between Chinese and foreign SMEs for an economic cause”, available at Internet: http://usa.chinadaily.com.cn/business/2016‐09/01/content_ 26671627.htm (accessed: 16 August 2017).

434 possible assistance, releasing at least funds for the appearance of such companies at fairs organized within the BRI and 16 + 1 in numerous Chinese cities. Further to this, the Serbian state should initiate and propose models and platforms for cooperation between SMEs within the BRI and 16 + 1, in order to fully exploit all the potential for cooperation between Serbian and Chinese SMEs within these initiatives. The problem of the lack of staff, which speak the Chinese language and know the market, should be solved in cooperation with Chinese colleges, so that a greater number of our graduates could do professional training in China, where they would have the opportunity to learn the Chinese language and become familiar with the Chinese culture, customs and economic opportunities. It should be noted here that, within the BRI, there is a platform for the cooperation between the educational and scientific‐research institutions, and that China grants numerous scholarships to students from the countries that are members of the initiative.

CONCLUSION

Taking into account all the plans and envisaged financial support for projects under the BRI and 16 + 1 cooperation mechanism, it can be said that not all the potentials for the development of economic cooperation between Serbia and China have been utilized. In order to take advantage of all the possibilities that already exist within these initiatives, and those that should only be proposed and established in order to find some new, more fruitful mechanisms for cooperation of Serbian companies, Serbia needs to work on improving state support for the development of economic cooperation with China, as well as on the animation and support of the best Serbian companies that could achieve something on the Chinese market. The Serbian state should look to other countries that have recently succeeded in developing cooperation with China, such as Poland and Hungary, where state plans have been very specifically implemented, due to the obvious economic interest that can be achieved; that is why such projects gained priority. This requires precise coordination of all state structures and agencies, which would set clear objectives for the purpose of increasing cooperation with China. If these were to be achieved, it would be possible to use all the potentials of the BRI to position the best quality

435 companies in the Chinese market, which would create predispositions for a significant growth in exports and hence the growth of the economy. A constant evaluation of all processes and flows that would accompany this development of the situation is necessary in order to carry out new analyzes and comparisons between the current and the ideal situation, i.e. to continuously carry out corrective actions that would lead to the improvement of Serbian‐Chinese economic cooperation. Special attention should be paid to the development of personnel who speak the Chinese language, know the culture and the market, and who would be able to fulfill all the tasks related to the improvement of such cooperation.

BIBLIOGRAPHY

Checkland P. & Poulter J. (2006) Learning for Action: A Short Definite Account of Soft System Methodology and its use for Practitioners, Teachers and Students. John Wiley & Sons Ltd. Czerep, J. (2016), “Lessons from the Baltic‐Centred Blocks for the Danube Region”, Thematical Proceeding from the International Scientific Conference: Danube in the Function of the New Silk Road, Institute for International Politics and Economics, (2016), Belgrade Huang, Z. (2017), “Your guide to understand OBOR, China’s new Silk Road plan”, available at Internet: https://qz.com/983460/obor‐an‐extremely‐ simple‐guide‐to‐understanding‐chinas‐one‐belt‐one‐road‐forum‐for‐its‐n ew‐silk‐road/ (accessed: 16 August 2017). Internet: http://mp.weixin.qq.com/s/3gj_W8D7dAecOH73gsRxoA (accessed: 26 August 2017). Internet: http://www.pks.rs/PrivredaSrbije.aspx?id=20&p=0& (accessed: 19 August 2017). Song, M. (2016), “BOC plays cupid between Chinese and foreign SMEs for an economic cause”, available at Internet: http://usa.chinadaily.com.cn/ business/2016‐09/01/content_26671627.htm (accessed: 16 August 2017).

436 SERBIA AS CHINA HUB TO EUROPE AN MBA PERSPECTIVE

Boris NIKOLIĆ Cheung Kong Graduate School of Business / Ross School of Business MBA CPO & Founder at RENW, Cleantech Open Accelerator, Boston, USA1

Abstract: Back in 2014 when I was deciding where to get my graduate degree I looked at the world map. Although my true passion lies in international relations I wanted to continue my business administration education for practical reasons. Initial thoughts went towards the European and US business schools. However, since half of my life I have spent in different European countries and the US, I took another look at that world map. I travelled to the Peoples’ Republic of China (China) as a tourist a few years back and felt the “optimistic” atmosphere as the country’s economy was growing strongly. By that time it was common to hear from many international scholars, economists and policy advisors that China is in the process of “taking over the world” from the current US leadership. I was raised and educated to experience other countries and cultures before making my own conclusions. That is why in order to understand the phenomena of “China taking over the world”, I decided to pursue MBA in Beijing ‐ the political, traditional and economic centre of the country. My hope was that 20 years from now when I look at the world map again, I will be in a better position to understand the world affairs. When I speak to my Chinese friends, especially the older generation they know about Yugoslavia while Serbia tends to represent a new word. On the Yugoslavia (南斯拉夫) wave we continue to maintain close bilateral (governmental) relations with China. Chairman Mao Zedong, the founder of today’s China closely watched Tito’s Yugoslavia. As world international relations evolve together with the Chinese Communist Party, I will try with my own China experience to set out the opportunities for Serbia to position itself as an economic hub for the Chinese expansion westwards. Key words: culture, governance, Internet “plus”, urbanization, migration, domestic consumption.

1 E‐mail: [email protected]

437 ZHONGGUO (中国) – MIDDLE KINGDOM

One seasoned expat that has been living in Beijing since 1983 (the year I was born) told me once: “You do not change China, China changes you”. That has resonated so strongly with me as I looked at my life in Beijing. I was not the first and the last foreigner ”waiguo ren” (外国人) that found some of the Chinese ways so different to what we know in the west. Nevertheless, not only that I have embraced the difference, I have been fortunate to integrate fully into the Beijing’s everyday life. The informality, system in the making, adaptation and improvisation turned out to be the Chinese features closest to me. However, as I have learned over time, do not be fooled by the hectic and the dysfunctional appearance of everyday life in China. There are features of this society that go way back thousands of years and that never change even as the Middle Kingdom went through immensely rich history including the recent transformation from imperialism to a republic. One example of tradition and the strong influence that goes way back and is still very much present in the Chinese society is the philosophy of Confucius. I lived in Italy for eight years and people usually say that this country’s society is family based. We also saw many movies that portray Italy as a country with the family values at its core. The Italian economy is famous for being family owned businesses based. Yet, I would recommend everyone to experience the family values in China and what family represents to an average Chinese. In my (short) life experience nowhere have I felt such a strong family bond as it was the case in China. Namely, everything one does is for his or her family. Many parents move into more urban areas to earn money that is then used to support the education of their children. The migration is, however, an irony as families physically tear apart. Parents move to urban areas, leaving their children to be raised by the grandparents. This brings major challenges down the road since the physical separation leads to generational misunderstanding between parents and the children. The Middle Kingdom name is self‐explanatory, whereby the Chinese perceived themselves as the centre of that part of the world. One cannot blame them as, at that time, China represented a major power with navigating ships and long before Colombo had found the US. However, the Chinese territories have evolved over time when different dynasties (minorities) ruled the Kingdom. That is why today’s China is very diverse as you travel from north to south and from east to west. The climate, food, culture, traditions,

438 languages and religion (many banned by the Communist Party) are diverse in different parts of this vast country.

MODERN CHINA

Torn apart from within and colonized by different regional and world powers during much of the 20 century, China did not resemble the vast territories we see today under one system. Today’s China covers a major strategic position on the world map with mostly natural borders. It is also showing readiness to increase the maritime routes’ influence, i.e. the South China Sea dispute. The Peoples’ Republic of China as it was found in 1949 is a rather young country. I will never forget the Victory Day parade of 2015 when China was celebrating the 70th anniversary of the liberation in World War II from the Japanese occupation. At that time my home was at the street where the military parade was rolling through (there was no access to the public due to security measures) and I can tell you that China wanted to show to the world that it has indeed risen from the 20th century’s hardship. When Chairman Mao Zedong famously said that “Women Hold up Half the Sky” that unleashed the women resource that would drive the subsequent unprecedented economic growth. Chairman Mao also pushed for “mechanization of agriculture” as he believed that the country can only develop with strong agriculture in parallel with heavy industry. Even though it is widely accepted that the opening up of China was started by then‐leader Deng Xiao Ping with his “1992 Southern Tour”, the kind of economic growth that followed would not have been possible without the two policies introduced by Chairman Mao. Finally, the major trigger for what is to become one of the fastest economic transformations and growth in the history of humankind was the 1972 President Nixon’s visit to Beijing. That in itself is a remarkable story as it took President Nixon five days to fly to Beijing. At that time China was so isolated that Nixon’s plane was boarded by a Chinese navigator on the final leg from Shanghai as otherwise the plane would not have been able to locate Beijing. Many of the traditions and family values that go back thousands of years are still at the centre of Chinese society. I see as the core China’s capability ‐ to evolve and adapt while preserving the old ways. The Communist party is a relatively young organization but has managed to evolve and adapt to different challenges inside and outside the

439 country. When you talk modern China, you talk sheer scale and numbers. One of the major successes of the Chinese Communist Party is the historical numbers of people lifted out of poverty. However, the economic growth came at the cost of unprecedented environmental damage. Nevertheless, knowing how China is able to adapt I am sure that they will deal with the environmental challenge through an economic opportunity. I believe this to be the case especially now that the US is showing lack of leadership in fighting the climate change. To give you an idea of how bad the pollution is in Beijing ‐ many times I had to wear a mask protection while walking or biking. I have an app that would tell me the level of pollution which was often up to 20 times over the limit advised by the World Health Organization as safe to breathe. PM 2.5 fine particles are particularly bad as being so small they are able to penetrate any protection and deposit inside our lungs. Economically, we can speak today of at least two different “Chinas” – first tire cities, i.e. Shanghai, Beijing, Tianjin, Shenzhen, Guangzhou, Chongqing and the rest of the country represented by “smaller” cities and villages. The two “Chinas” constantly interact and even conflict each other. It is very common to find the “Urban Villages” in first tier cities. These are the informal settlements located in the middle of first tier cities on rural land whose use rights have been passed on between generations of villagers for thousands of years. The rural land is not covered by cities’ planning and consists of bad living conditions with lack of light and adequate public services’ infrastructure. The migrant workers that settle in these informal shanty towns are not legal residents. They do not possess “hukou”, which is essentially a residence permit that allows one to enjoy the local education, healthcare and other public services. With the migration of people never seen in the history of humankind, the meeting and friction of rural and urban has been a major challenge for the Communist Party. The local governments have closed an eye to the informal settlements as they needed the workforce to build the infrastructure and high rise property. The informal economy has also helped employ the migrant workers. This phenomenon, in turn, is very much related to the state of economic growth and is a sort of an incessant cycle with rural and urban love and hate relationship. The sheer number of people lifted out of poverty in China cannot be matched, but the challenge is to continue finding new jobs for the migrant workers. Then, there is the food. When I started the MBA program in Beijing many of my classmates would ask me “Ni chi le ma” (你吃了吗) or “have you eaten”. Only after a while, I have

440 realized that this is how Chinese people say “hi” to each other. That is the same as in the western countries people would say to each other “how are you”. I find that astonishing as it shows how deeply ingrained the food culture is in the Chinese society. Eating is a family moment, social moment, and highlight of the day. Where does it come from? Well, we know that during the Great Leap Forward many people starved to death so it might be that the older generations cherish food as a very important family moment. However, the strong food culture also goes way back as other Chinese long traditions with so many ethnicities and different climates introducing their own dishes in this vast country. In today’s China, you would regularly see people taking the Smartphone picture of their meals and post it on Chinese social media such are Weibo or Wechat. Regarding the Internet, Facebook, Google, Youtube and Twitter are blocked in China. This makes sense to me as I believe the Chinese government would rather have personal data access through the domestic internet giants such as Baidu (Chinese version of Google) and Tencent (Wechat – Chinese version of Whatsapp) than allowing to the third countries access the vast personal data of Chinese citizens.

CHINESE ECONOMY

The traits of flexibility and agility of the Chinese society can also be found in their economic system. The Chinese economy is officially dubbed the “Socialist Market Economy”. It is essentially a paradoxical hybrid with free market heavily influenced by the state (primarily through state‐owned enterprises). I remember that every time I had to go to a Chinese bank I was gearing up for a headache. China only has state‐owned banks since the capital inflow and outflow is heavily controlled in order to influence the foreign exchange value of Renminbi (local currency). The state‐owned banks are notoriously slow in providing services and are heavily bureaucratic. However, due to the Chinese agility and flexibility, there are disruptive trends in the banking industry with e‐commerce and social networks such as Alibaba and Tencent offering online banking. The state was caught off guard until it realized that people want mobile data banking. Again, in accordance with the Chinese ways of adapting, the state had no choice but to allow the “fintech” (financial technology) to flourish and has only subsequently regulated the industry. Nowadays, most western countries can envy the level

441 of sophistication in the Chinese Smartphone banking but also the mobile data usage in general. In today’s China of “improvisation” first there is a market breakthrough and then the state steps to write the regulation. This is an important difference from the western countries and the way innovation is brought about. It ironically gives China the ability to innovate with less bureaucracy, but it also brings an increased risk for foreign companies entering its market. China has essentially skipped the desktops and is increasingly closing down the traditional shopping malls. This has also been the case in the west, but not before we have gone through cycles of desktops and traditional shopping experience. The Chinese simply order everything online and increasingly through M‐commerce (mobile commerce). In addition to the retail industry, we have seen the transportation, hospitality, education, travel, tourism and the list goes on of industries heavily modified by mobile data usage. The phenomenon has been labelled the “Internet plus” and now represents a substantial part of the Chinese economy. At this very moment, there are people planning to disrupt the remaining industries by mobile data usage. On the other hand, the Chinese economy has also grown in a very traditional way with heavy state infrastructure investment. Even more traditional was the rapid growth of real estate and construction. The reliance on the traditional economic growth paths has brought major challenges for the Communist Party. They have been struggling to cool down the property market for a number of years now through different regulatory policies. However, the bubble has already burst in many peripheral places if just by looking at the common “ghost towns” built but with no residents. It is difficult to decouple the Chinese economy from heavy infrastructure investment by the state. It is believed that improved domestic consumption would essentially lead to a healthier economic structure that is less dependent upon the state spending. However, there are many practical and political challenges for improving the domestic consumption. However, the unplanned urbanization that once believed would lead to higher individual spending has now left suburbia high rise buildings empty with high local government debt. The Chinese people prefer doing things in groups that comes from their family‐oriented social system. This is not the individualistic society that is common in the west and that is why the classic consumption patterns have not been taking off (at least not for now). Steering the huge Chinese economy ship through treacherous waters is probably one of the most difficult governing challenges

442 in the world. So far, the Communist Party has shown resilience in navigating it. The last of the initiatives is the One Belt One Road (OBOR) with overcapacity being distributed along the route, thereby helping the Chinese exports and employing Chinese workers while exhibiting the soft power foreign policy. China is not aiming to conquer by force and many would argue that historically this country has not shown an open aggressiveness towards other countries. However, the “high speed train foreign policy” has managed to influence much of Africa and now through OBOR China aims to expand the influence over Eurasia. However, by closing an eye in front of the political and conflict challenges on the OBOR route, China is taking a substantial risk hoping that it will manage to keep everything intact and potentially help resolve some of the local issues the routes’ countries are facing. I would argue that the success of OBOR will depend upon the cultural exchange with China more than anything else.

GUANXI (关系)

When I arrived in Beijing and was settling down at my school, I was told by the career advisors two things: study the Chinese language and network if you want to eventually work for a Chinese company. Guanxi (关系) or “relationship” is at the core of Chinese way of doing business. Namely, when you first interact with a Chinese company with the aim of doing business together, you will not get much feedback or you will get a vague positive response. However, different from the Western culture one needs to look deeper for answers when communicating with Chinese business partners. It takes time and effort to develop a deeper relationship with Chinese counterparts. It was funny how we had many workshops on intercultural communication during the MBA program. Time and again we would hear that if you want to close a business deal in China you have to be ready for long, informal dinners with lots of alcohol. During my internship at a Chinese company, I was privileged to go to a company celebration dinner. I found it truly remarkable how people would get tipsy and in ease with themselves and then develop more open discussions. After a while, we would mix around different tables in order to make good wishes for the business and friendship. In particular, every employee would go to the main table with the CEO and make good wishes for the company before downing a glass of

443 drink. It is important to say that building close relationships in order to pursue a business agenda has been present throughout the world. It is, therefore, not surprising that one of the oldest civilizations is practicing stronger personal relationship before doing business. The only difference is the way you would build closer ties with business partners in the west as compared to China. Myself being from the Balkans I found the human touch that the Chinese bring into building relations closer to my heart. One other noticeable difference in organizational structure and the overall society is the hierarchy. While in the west it is very common to have completely flat organizational structures, the Chinese have a very clear top‐down approach. This is understandable as the sheer size of the population with different parts of the country does require a level of centralized hierarchical approach. This approach then translates into the Chinese corporate culture. The almost unquestionable respect for the authority has been present long before the Communist Party was founded in China. It is misleading to think that China would just implement the western way of organizing the political system. Nevertheless, underneath the seemingly stable and frictionless Communist Party, every 10 years when new leadership is selected there are many inner party struggles. One of the most noticeable examples was the administration selection of President Xi Jinping when a different party line led by Bo Xilai proved to be a hard nut to crack. The good aspect of having one party system in China is that anybody aiming for the top position takes gradual steps from the local government all the way to the central government thereby going through lifelong governance training.

LANGUAGE

I have been studying the Chinese language for about two years with months of breaks in between. I love the characters and how I can talk to my Chinese friends through “Wechat”. I find it very interesting how I would make up sentences as compared to my Chinese friends. Namely, while people in the west use letters, words and then form sentences, the Chinese people use pictures to express themselves. It cannot be stated enough how this is profoundly different to the way we communicate in the west. I can have a discussion with my Chinese friends and use a common English word, but since they have no “picture” of it in their mind they cannot understand what I am

444 talking about. This has deep repercussions in communication between the West and the Chinese. It is not enough to learn the Chinese language but to be tolerant for miscommunication and the different way we apply critical thinking. I found their way of communication to be deeper and more profound than ours even though the grammar is simpler. The bond among people is stronger when it is more challenging to learn to communicate with each other. My lack of the Chinese language skills has not stopped me develop warm relations with neighbours in old Beijing (Hutongs). In what is my favourite town after Belgrade I felt close to the “Lao Beijing ren” (老北京人) or “old local (Beijing) people” when just a smile and their response back would make me feel part of this amazing city.

MIDDLE KINGDOM CHALLENGES

Although we regularly hear about the Chinese economy growing at 6‐7% per year there are questions about how reliable is this figure. I remember the research presented to us during the MBA program on the sentiment survey of more than 4,000 manufacturers. The results showed a rather discouraging picture with the manufacturing growth being largely flat. This would mean that the services (increasingly important part of the Chinese economy) and agriculture would need to grow by at least 15% in order for the GDP to be growing around 7% as the official statistics show. The reason that the professor took the manufacturing survey herself is that the official statistics in China are known to be unreliable. Even the Chinese premier Li Keqiang once decided to do his own statistics on the economy as the official statistical bureau data were unreliable. China has been for some time in a very challenging economic crossroad. We are waiting to see whether the landing will be soft or (god forbid for the global economy) a hard one. The real estate bubble is a common theme that increasingly fewer people are disputing. State infrastructure investment has limits in employing workers and growing the economy, usually only during the actual works and spending. The question remains how to make that built infrastructure to operate at a decent return or at least to break even. I will never forget one of the best subways I have ever experienced and at a very low (subsidized) ticket price in Beijing. Only a few years ago the city raised the ride prices. Residential electricity prices are also subsidized and do not reflect true costs. The stock market is heavily

445 influenced by the state in order to keep it from going into unpredictable roller coasters. Many of the stock investors are average Chinese people that have very limited knowledge on stock market investments while institutional investors are still being developed. I remember that so many of my Chinese classmates during the MBA were active investors in the stock market. At the same time, we had Value Investing course which is more analysis based way of investing in the stock markets. The classmates would tell me that it is all good in theory, but the Chinese people invest on information they can obtain about a specific company or just gamble invest and that is why the stock market wiped off a third of its value in summer 2015. As previously stated, the urbanisation as a way to improve domestic consumption has been met with many challenges, not least the displacement of locals, empty high rise buildings, and high local government debt. At the same time, the domestic consumption does not seem to go up with the Chinese people preferring to save money for the retirement as the pension system is still under development. It was very interesting when I was visiting my friend in Shanghai who is an expat that lives in China for a long time, married to a Chinese and speaks perfect Mandarin. We visited “People’s Park” and there were many older Chinese holding signs of their daughters and sons with something like: age, physical description, education and in particular “looking for a husband or wife with income of specific amount”. I asked my friend why they would state how much income the future wife or husband should have and he told me younger married couples take care of their parents in China. The majority of Chinese families have two or three generations living together. The private pension and life insurance industry is a mature one in the west. I always like to say who is in life insurance business in China and does it properly will be hugely successful. The major problem that China is facing that is similar to Japanese is the aging population. However, the former has been more open to immigration than the latter, which brings fresh blood and skills into the economy. I believe the openness towards immigration will prove to be the reason that China will not suffer the same destiny as Japan did when eventually its real estate and stock markets burst. Japan has never truly economically recovered from the bubble since three decades now. Another important difference is that China has managed to control the capital inflow and outflow that in turn keeps its currency artificially low which is crucial for its export‐oriented economy. However, that comes at a huge cost with almost all the capital inflow heading straight out to buy the US debt. The US‐China

446 relationship is the most important one for the whole world. If our “parents” the US and China have a misunderstanding in trade or even have military conflicts, then the humankind as we know it would be in jeopardy. I highly doubt that this is possible with the two economies being so intertwined together, almost as one.

NOT A BUBBLE?

China has been learning from its foreign acquisitions but has also invested heavily in domestic research and development. We have seen that China now has its own military aircraft carrier, has launched people into space and has locally manufactured the first commercial aircraft. These are all signs that China has gone a long way since the “copy‐paste” growth. Many have become billionaires by taking one concept from outside and replicating it in China. Nevertheless, today’s China increasingly resembles an innovator country where many western companies are eager to tap into the locally made technological breakthroughs and the knowhow. The increasing number of Chinese students is studying at the best US school and then return home to use the skills. I remember during my studies in the US that many of the students came from India and China and are planning to go back home after graduation. China is indeed in the position to take over the world, especially now with the US being increasingly isolated. However, this country’s future seems to be very challenging. I always like to remember my MBA school dean’s words during China module when he said: “these people are smart and know what they are doing”. We must trust that the current Chinese leadership and the one that will follow are indeed able to maintain the course of the ship in the increasingly unstable waters.

SERBIA

Taken as a whole we should start learning about China on a more structured way, i.e. by organizing more visits and exchanges for younger generations. That is crucial in order to make the most of our two countries’ relationship. Just as China, Serbia is flexible and is also used to improvising as we have been in the transition for almost three decades now. We also

447 have a significant part of the economy as an informal structure where personal relationships are very important. Serbian people are friendly and build deep relations just as the Chinese. I will never forget about my life next to Houhai Lake of Beijing as one of the best periods ever for me. Serbia also has a formal hierarchical organizational structure, especially in governing institutions. The Chinese partners can see that as a familiar way of governance. Finally, we have historically close relations with China that together with the above distinguish Serbia as a natural Chinese hub to Europe. The Chinese companies can set up headquarters in Serbia in order to make their reach to the European market. The Chinese find many challenges of going directly to the EU market. I remember the unsuccessful Chinese acquisitions of European companies’ case study during the MBA program. Due to more paperwork requirements, the Chinese company had to back down and try to make another attempt to acquire the European counterpart. This is where Serbia can act as a local partner and essentially as a buffer that allows the Chinese companies to “put a toe in the water” with low or no risk as they enter the EU market. China is at the economic crossroad and in need to export the excess capacity. Serbia has low bureaucracy, competitive and competent workforce, it is the EU candidate member and has free trade agreements with east and west. It is up to two countries to start benefiting from the close relationship by understanding the culture and ways of doing business on both sides.

448 COOPERATION BETWEEN THE PEOPLE’S REPUBLIC OF CHINA AND THE REPUBLIC OF SERBIA IN THE FIELD OF FOOD SAFETY

Dušan DABOVIĆ, Ph.D. Research associate Senior advisor Ministry of Agriculture, Forestry and Water Management Belgrade, Serbia1

Abstract: The aim of this paper is to determine the basic elements of cooperation between the People’s Republic of China and the Republic of Serbia in the field of food safety. We have used the following methods: formal‐legal method, comparative method, text analysis method and statistical method. When it comes to materials and sources, the applicable regulations of the People’s Republic of China and the Republic of Serbia in the field of food safety were used, and reports from the relevant institutions, newspaper articles and statistical data. It was found that the People’s Republic of China and the Republic of Serbia concluded the Memorandum of Understanding in the Field of Food Safety in May 2017, and signed a veterinary document on the prevention of a cattle disease (Nodular Dermatitis). In addition, the People’s Republic of China and the Republic of Serbia concluded a Memorandum of Understanding in the Field of Agriculture, in January this year. Beside the main elements of the memorandums, this article presents a comparative overview of the most important issues of the Food Safety Law of China (2015) and the Serbian Food Safety Law (2009). The following issues have been presented: responsibilities of laws, competences of food operators, registration of food business operators, risk assessment, food safety standards, measures on import and export, a crisis plan, food and feed hygiene, as well as special food and other food. It is concluded that the signed memorandums enable greater export of agricultural products from Serbia to China. Moreover, there is the possibility for companies from China to invest in the production of agricultural products in Serbia. Additionally, it is concluded that both laws in the field of food safety are in accordance with each other because

1 E‐mail: [email protected]

449 they are significantly harmonized with international regulations and standards in this area. Key words: People’s Republic of China, Republic of Serbia, food safety, agriculture, laws, harmonization.

INTRODUCTION

Political cooperation between the People’s Republic of China and the Republic of Serbia is very successful. Nevertheless, it is a general assessment that the economic cooperation does not follow political co‐operation, especially in the field of agriculture which traditionally is a strategic economic branch for both countries. Namely, according to the data for 2015 China is not among the top ten largest export destinations when it comes to the export structure of Serbia, whereas China, in terms of the structure of Serbian imports, is in the fourth place with a total amount of about 1.4 billion USD. Also, according to the data on foreign direct investments in Serbia, China is not among the first seven investing countries, not only by the number of projects, but also by the total value of investments. Regarding this, the signing of the Memorandum of Understanding in the Field of Food Safety, and the Protocol on the Prevention of Livestock Diseases (Nodular Dermatitis), in May 2017, as well as the Memorandum of Understanding in the Field of Agriculture, signed in January this year, consisted a legal framework for improving both Serbian exports of agricultural products to the China’s market and China’s investment in Serbia. It is necessary to determine, in the legal framework, the level of mutual harmonization within the Food Safety Law of the People’s Republic of China and the Food Safety Law of the Republic of Serbia, regarding the fact that food safety measures are non‐tariff measures which could restrict the mutual trade of agricultural products, as well as investment in the field of agriculture. In this article, we have used the following methods: formal‐legal method, comparative method, text analysis method and statistical method. As for materials and sources, we have used China’s and Serbian regulations in force on food safety. Additionally, we have used reports from the relevant institutions, newspaper articles and the statistical data.

450 MEMORANDUM OF UNDERSTANDING IN THE FIELD OF FOOD SAFETY

The General Directorate for Quality Control, Inspection and Quarantine of the People’s Republic of China and the Ministry of Agriculture of the Republic of Serbia concluded the Memorandum of Understanding on Cooperation in the Field of Granting Food Safety Guarantees for Import and Export in May 2017. Moreover, on this occasion, a protocol was signed on the exchange of scientific information related to Nodular dermatitis, i.e. lumpy skin disease of cattle. The memorandum is an umbrella document which is supposed to allow Serbia to export goods of plant and animal origin to China, primarily regarding various types of meat, milk and dairy products, corn, sugar beet and dry plums. The signed protocol on Nodular dermatitis is important since Serbia got the disease under control last year and received recognition from the EU for defending Europe’s territory. Additionally, China’s representatives submitted a questionnaire to the Serbian side. The questionnaire is related to the Serbian export of pork meat, which is the starting point for the realization of exports of this type of meat, especially the frozen one, in China. Serbia has committed itself to submit a completed questionnaire on the export of products of plant origin, primarily mercantile corn, dried plums and molasses. It is expected that the export of these goods will start soon (The Ministry of Agriculture, Forestry and Water Management, 2017a). Besides, a questionnaire was conducted on the possibility of exporting milk, dairy products, and milk for babies from Serbia to China. Apart from the companies from Serbia, which currently want to export to China, there are several investors from China that are interested in investing in the of Serbia. Conditions for these investments, in the milk and meat sector, must be realized smoothly after solving administrative barriers related to food safety. It is estimated that Serbia and China have traditionally good relations that are currently at the highest level and that the signing of these documents is of great importance for ensuring food safety, i.e. conditions of the Serbian agricultural products which could be exported to the China’s market (Министарство пољопривреде, шумарства и водопривреде, 2017a). In January this year, as an introduction to the memorandum on food safety, the Minister of Agriculture of the People’s Republic of China and the Minister of Agriculture of the Republic of Serbia, signed a Memorandum of Understanding on Cooperation in the Field of

451 Agriculture which envisages the arrival of investors from China in Serbia and the increased export of Serbian agricultural products to China’s large market. This document is related to investments of China’s large companies in the food and processing industry of fruit and vegetables, and meat processing, as well. The goal is to use the existing raw materials in Serbia and to export them with higher value. This memorandum also refers to the deployment of protocols related to Serbia’s exports to China, with a view to increase exports and cooperation of scientific‐research institutions (Министарство пољопривреде, шумарства и водопривреде, 2017b). China stated that the MOU serves as the starting point of bilateral cooperation in agriculture while urging the two sides to enhance the cooperation within the Belt and Road Initiative and the “16+1” cooperation mechanism (Xinhua, Jan 18, 2017).

COMPARATIVE OVERVIEW OF MAIN ISSUES OF LAWS ON FOOD SAFETY

In 2015, China amended the Food Safety Law regulating this very important area in a modern way, in accordance with international standards, primarily with the Agreement on Application of Sanitary and Phytosanitary Measures (SPS Agreement), Hazard Analysis and Critical Control Points (HACCP) standard, etc (Sim, April 19, 2016). Besides, not only a draft law on the implementation of the FAS was prepared, but also many standards were updated and amended (See Ettinger et al., 2017). Regulating for the first time this area, Serbia adopted a law with the same title in 2009. As the Chinaʼs Food Safety Law, the Serbian Food Safety Law was harmonized to the relevant international regulations and standards. Moreover, 30 by‐laws based on this law have been adopted and are currently in force (Dabovic, 2017, pp. 71‐82).

RESPONSIBILITIES OF LAWS ON FOOD SAFETY

The Food Safety Law of China regulates the following: food production and processing, production of and trade in food additives, production and trade of food‐related products, use of food additives and food‐related products by food producers and traders, storage and transport of food, safety management

452 of food, food additives, and food‐related products as well. Primary edible products derived from agriculture are subject to the law on agricultural products. However, the market sales, formulation of related quality and safety standards, and release of related safety information of edible agricultural products, as well as agricultural inputs are covered by the Chinaʼs Food Safety Law. (FAS, p. 3). Thus, according to this law, food means any substance that has been processed or not processed, that is suitable for eating and/or drinking, including substances used as food and traditional Chinese medicine, excluding substances solely used as medicine. Food safety means the assurance that the food is nontoxic, harmless, and compliant with reasonable nutritional requirements, and will not cause any acute, chronic and potential hazards to human health (FAS, p. 43). The Serbian Food Safety Law governs the general conditions for food and feed safety, duties and responsibilities of food and feed business operators, rapid alert system, emergency measures and crisis management, food and feed hygiene and quality. However, this law provisions should not be implemented to the primary food production and preparation, handling and storage of food for private domestic use, and feed for non‐food‐producing animals (Дирекција, p. 3). By the law, all food in Serbia is classified according to its origin in five groups: food of animal origin; food of plant origin; mixed food, the ingredients of plant and animal origin; food of neither plant nor animal origin (mineral substances, salt); and other food, i.e. novel food, genetically modified food and genetically modified feed (Дирекција, p. 5). The purpose of the Food Safety Law of China is prevention, risk management, and full process control, as well as social governance, establishing a set of scientific and stringent supervision and the administration system (FAS, p. 3). In the same manner, ‘the purpose of Serbian law is to provide both a high‐level of protection of human life and health, and protection of the consumers’ interests, including the principle of honesty and scrupulousness in the food circulation, considering, whenever it is possible, the protection of the health and well‐being of animals, as well as the health of plants and environmental protection’ (Дирекција, p. 3).

COMPETENCIES OF FOOD OPERATORS

The law of China stipulates that food producers and traders are responsible for the safety of the food they produce or deal with. It is also

453 assumed that they produce and distribute food in accordance with relevant laws, regulations, and food safety standards. Moreover, they should ensure food safety, be creditable and self‐disciplined, and be accountable to the society and the public (FAS, p. 3). The Serbian law prescribes that all authorities and operators which apply to this law are responsible for any action or failure in the field of food and feed safety (Дирекција, p. 8). At the country level, China’s State Council authorized the Food Safety Committee for the body in charge. Also, the health‐related ministries, commissions, and departments organize the risk monitoring and assessment of food safety. The local governments above the county‐level are in charge of the supervision and administration of food safety within their territory. They lead, organize, and coordinate the supervision and administration of food safety in a centralized manner. Besides, county‐level food and drug administrations may set up food safety offices in towns or specific regions (FAS, p. 4). It is also prescribed that any organization or individual may report illegal acts or other information relating to food safety (FAS, p. 5). Other entities in Serbia, apart from the aforementioned primary subjects of the food safety (food operators which are registered in the Central Register), are the Ministry of Agriculture, Forestry and Water Management (as the central authority) and the Ministry of Health, as well as the authorized laboratories (Дирекција, p. 7). Division of competencies was determined between the state administration authorities in various fields of food and feed: primary production; production, processing and wholesale; import and transit; and export (Дирекција, pp. 7, 8). It is prescribed that the international obligations in the field of food safety should be executed in accordance with the recommendations of relevant international organizations (The World Trade Organization ‐ WTO) and the international conventions (the SPS Agreement) as well. In addition, information should be exchanged with other national organizations responsible for food safety (Дирекција, p. 8).

REGISTRATION OF FOOD BUSINESS OPERATORS

According to the law of China, the state adopts a licensing system for the food production and distribution. Namely, it is stipulated that a food producer or trader must comply its business with the food safety standards and satisfy the prescribed requirements. Moreover, if the applicant meets

454 the prescribed conditions, a permit (i.e. license) would be granted (however, no license is required for the sale of edible agricultural products). It is stipulated that the food and drug administration inspects the applicant’s production or distribution premises. Conditions should be fulfilled about: premises for processing food raw materials and for processing, packaging, and storing food; equipment or facilities; food safety technicians; equipment layout and processing procedures; hygiene; etc. Thereby, small food production or processing workshop or a food vendor must meet the food safety requirements of the law suitable for its production or trade scale and conditions. Furthermore, it is prescribed that the specific administrative measures for small food workshops and food vendors should be formulated by each province, autonomous region, and municipality (FAS, p. 12). Any legal person or entrepreneur in Serbia may be engaged in production and trade of food and feed, if it is entered in the Register of Economic Operators and the Central Register of Facilities, kept by the Ministry of Agriculture. A natural person who is entered in the Central Register may be engaged in the production of food and feed intended for trade in accordance with regulations governing veterinary matters or plant protection. Besides, the Central Register includes data on the approved facilities, and registered facilities. However, the food and feed production and circulation facilities must be approved or registered in accordance with the special regulations (Дирекција, p. 9). The food safety is established based on the following: conditions at each stage of food production, processing and circulation should be in accordance with its intended use; the information should be accessible to the consumer, including data on the declaration concerning the prevention of specific harmful effects of certain types or categories of food on human health (Дирекција, p. 15).

RISK ASSESSMENT

China and Serbia formulated their provisions on risk assessment of food safety according to the Article 5 of the SPS Agreement. Namely, China prescribed that the national risk monitoring plans for food safety formulate and implement health administration, together with the Food and Drug Administration and the Quality Inspection Administration. Having become aware of any risk information on food safety, the Food and Drug

455 Administration and other relevant departments instantly verify it and report it to the health administration. Risk information about food safety is analysed and studied by the health administration and relevant departments under the State Council. The national risk monitoring plan for food safety is forthwith adjusted at its discretion. The health administrations at the provincial, autonomous region, or municipal levels, together with the relevant departments, formulate and adjust the risk monitoring plan for food safety on their territory, by considering the characteristics of their jurisdiction, and submit it to the health administration at the country level. Technical institutions in charge monitor food safety under the risk monitoring plans, ensure the authenticity and accuracy of the monitored data, and submit the data and analysis results pursuant to the plans. If the food safety risk monitoring results suggest any possible risk of food safety, the health administrations circulate such information to other relevant departments. The Food and Drug Administration and other departments organize and launch a further investigation. Risk assessment of food safety organizes the health administration at the country level. Therefore, an expert committee of risk assessment of food safety consisted of experts regarding medical science, agriculture, food, nutrition, biology, and environment is established. It is stipulated that no fees shall be imposed upon producers and distributors for any food safety risk assessment, while collected samples shall be paid at the market price. (FAS, pp. 5, 6). According to the Serbian law, risk analysis is a process consisting of three interconnected components: risk assessment, risk management and risk communication. The risk assessment is based both on the available scientific evidence and the opinion of an expert body, especially while the risk management is based on the results of the risk assessment and other relevant data. On the other hand, the risk communication means an interactive exchange of information and opinions between food safety operators. If the possibility of a harmful effect on health is identified following the assessment of available information, and there is not enough scientific data and information for making an objective risk assessment, provisional risk management measures can be applied for achieving a high‐level of health protection. The measures, however, must be appropriate, and not more restrictive to trade than it is necessary to achieve the purpose of this law. Depending on the relevant circumstances, also, the measures applied must be reconsidered within a reasonable period (Дирекција, p. 6). The food and drug administrative department and the

456 quality supervision department of the people’s government in China, at or above the county level, identify the key aspects, methods, and intervals of supervision and administration and implement the risk classification administration based on the risk monitoring of food safety, risk assessment results, and food safety status. The food and drug administration, quality supervision administration, and agriculture administration are organized by the local government in order to develop the annual plan of supervision and administration on food safety within their respective jurisdiction, make it available to the public, and organize its implementation (FAS, p. 28). The minister of agriculture in Serbia, with the consent of the minister of health, establishes a special working group ‐ Expert Council for Risk Assessment in the Field of Food Safety ‐ which applies and uses recommendations, guidelines and information available through the European Food Safety Authority. The Expert Council performs the following activities: prepare expert and scientific opinions regarding risks related to food and feed; enhance and coordinate the application of the methods for risk assessment; provide scientific and technical assistance upon request of ministries and other state administration authorities in interpretation and considering attitudes on risk assessment; etc. (Дирекција, pp. 13, 14)

FOOD SAFETY STANDARDS

In accordance with the Law on Food Safety of China, the national food safety standards are formulated and issued by the health administration, together with the food and drug administration under the State Council. Provisions on the limits of pesticides and veterinary drug residues in food and their inspection methods and specifications are thereby formulated by the health administration and the agriculture administration, together with the food and drug administration under the State Council. Moreover, inspection specifications related to the slaughter of animals and poultry are formulated by the agriculture administration, together with the health administration. The health administrations at the provincial level and above publish formulated and filed national, local and enterprise food safety standards on their websites for free review and download by the public. Besides, in order to be applied within the enterprises, the State encourages food production enterprises to formulate their enterprise standards much more stringently

457 than national or local standards for food safety. It is determined that thirteen categories of food, food additives, or food‐related products cannot be produced or distributed (FAS, pp. 5, 10, 11). Regarding their competencies, food safety standards in Serbia are formulated and adopted exclusively on the republic level by the Ministry of Agriculture, and the Ministry of Health. It is prescribed that a food is to be deemed unfit for human consumption if it is unacceptable for intended use due to contamination by an external or some other factor, as well as due to decay, spoilage or decomposition. Forbidden food is stipulated in the similar manner in the Serbian law as in the China’s law, in three categories: possible harmful effects on the health of consumers, as well as on the health of future generations; possible cumulative toxic effects; susceptibility of a specific category of consumers. In case of reasonable suspicion about food safety, the ministry of agriculture and/or the ministry responsible for the public health act towards restricting or prohibiting and withdrawing such food from the circulation, until the suspicion about its safety is dispelled. If it is established that food is unsafe, the action is to be taken towards restricting or prohibiting and withdrawing such food from the circulation. (Дирекција, pp. 14, 15). Both China’s (Art. 32) and Serbian (Art. 32) laws regulate traceability of food and feed in the same manner. Namely, they stipulate that food producers and distributors establish the traceability system for food safety in accordance with the law. In addition, the state shall encourage food producers and distributors to collect and preserve production and distribution information and establish the traceability system for food safety by means of information technology. The issue on declaration and marking is regulated by both laws in the same way as well. The Serbian law in Article 30 prescribes that the marking, declaration, advertising and displaying food and feed, including their form, appearance and packaging, packaging material, arrangement and mode of display, as well as the information on food and feed which is available to consumers must not be misleading to consumers (the Serbian language is mandatory according to a special law). China’s provisions determine whether imported pre‐packaged food shall be provided with labels and instructions in Chinese and, if required under the law, instructions in Chinese. Labels and instructions should thereby indicate the country of origin and name, address, and contact information of the domestic agent. If pre‐packaged food is without a label or instructions in Chinese or if its label or instructions do not comply with the Law, it shall not be imported (FAS, p. 25).

458 MEASURES ON IMPORT AND EXPORT

In accordance with the Article 3, paragraph 3 of the SPS Agreement about the implementation of international standards, guidelines and recommendations on food and feed safety measures in Serbia, it is determined that food and feed safety measures are applied in such a way as to avoid arbitrary and unjustified discrimination between the countries in which the same or similar conditions prevail, and in a way which does not represent a disguised restriction of foreign trade as well. In order to achieve a level of protection of the life and health higher than the one achieved through the measures based on international standards, guidelines and recommendations, other food and feed safety measures may also be applied when there exists scientific justification, or when such measures could result in a protection level different from the one in Serbia (Дирекција, p. 18). Considering the Article 4 of the SPS Agreement, Serbian Food Safety Law stipulates that the food and feed safety measures applied by other countries will be deemed equivalent to the measures prescribed in Serbia if the exporting country objectively demonstrates that they are scientifically based, and that the appropriate level of human life and health protection are ensured by their application. Thereby, the prescribed food and feed safety measures must be adjusted to the characteristics of the region, if the food and feed safety could be affected either in the country as a whole, or a part of the country, several countries, or parts of several countries, from which the product originates or from which the product is destined, taking particularly into account the level of prevalence of certain diseases or pests, the existence of eradication or control programs and relevant criteria and recommendations of relevant international bodies. (Дирекција, p. 18). In accordance with the Article 6 of the SPS Agreement, the Serbian Food Safety Law states that the food and feed imported in Serbia for placing on the market must meet the requirements in accordance with regulations on food or the requirements thereto recognized as equivalent by Serbia, or if an international agreement exists within the therein contained requirements. Thereby, the exported food and feed, or imported for being exported from Serbia, must meet the requirements in accordance with regulations on food, unless it is requested by the responsible authorities of the importing country, or unless it is provided by the regulations, standards and code of practice applicable in the importing country. Food and feed may also be exported or imported for

459 being exported if the responsible authorities of the country of destination have expressly agreed to being fully informed about the reasons and circumstances preventing placing food or feed on the market in Serbia. If the provisions of an international agreement between Serbia and the importing country are applicable, the food and feed exported from Serbia to this country must meet the requirements contained in the international agreement (Дирекција, p. 19). In the case of risk alert, China’s LFS prescribes a special procedure in the field of food safety. Namely, it is stipulated that if a food safety incident occurs overseas that may impact China, or if a major food safety problem has been detected in imported food, food additives, or food‐ related products, the state entry‐exit inspection and quarantine administration issue a risk alert or take control measures in a timely manner and notify relevant food and drug administration, health administration, and agriculture administration. These departments take the corresponding actions immediately after receiving the notification. In case of discovering any serious food safety issues, the food and drug administration forthwith circulate them to the state entry‐exit inspection and quarantine administration, which take the corresponding actions immediately (FAS, p. 25).

CRISIS PLAN

China’s Governments of all levels formulate emergency plans for food safety incidents within their jurisdiction, and submit their plans to the higher‐ level government for official record. The emergency plan for food safety incidents includes the following: provisions on the grading of food safety incidents, organizational demand system and duties in case of incidents, prevention and pre‐warning mechanisms, disposal procedures, and emergency counter measures. The organization in which a food safety incident has occurred takes immediate actions to prevent the incident from spreading. The organization in which the incident has occurred, and the institution that receives and treats the patients, report immediately to the health administration of the competent government at the county level. If the health administration of the government at the county level, or above, having investigated infectious diseases or other sudden public health incidents detects any information related to food safety, it is instantly reported to the food and drug administration of the same level. Upon

460 receiving the food safety incident report, the food and drug administration of the government at the county level, or above, works in tandem with the health administration, quality supervision, and agriculture administration of the same level on the investigation and handling of the incident and takes the following measures to prevent or mitigate the hazard which could be exposed to the public (FAS, pp. 26, 27). On this issue, Serbian LFS prescribed rapid communication and alert system, emergency measures and crisis management. It was decided that the ministry of agriculture, the ministry of health, the Expert Council, a reference laboratory and other relevant laboratories participate in the rapid communication and alert system. A central information system was established for the exchange of data with other institutions involved in the risk assessment and management in the Republic of Serbia and relevant foreign institutions, and the contact person was appointed. If the ministry of agriculture, or ministry of health, find that a food or feed, whether of domestic origin or imported, may pose a serious threat to the health of humans, health of animals or the environment, as well as that such risk cannot be eliminated in a satisfactory manner, the minister orders one or several of the stipulated emergency measures. Based on the Crisis Management Program in the Field of Food Safety, the minister of agriculture, adopts, with the consent of the minister responsible for public health, a special crisis management plan depending on the types of risks and forms (FAS, pp. 13, 14). Serbian Food Safety Law states that the Minister of Agriculture and/or the minister responsible for public health adopt planning document containing the structure and organization of the food and feed control system, objectives, control priorities, manner, time limits and funds for conducting official controls, coordination between the authorities responsible for official controls in the field of food and feed safety (Дирекција, p. 28).

FOOD AND FEED HYGIENE

Concerning the fact that the SPS Agreement in its Introduction recommends the use of international standards, guidelines and recommendations, both laws on food safety, China’s and Serbian, stipulate the implementation of international standards in the field of food hygiene (Hazard Analysis and Critical Control Point ‐ HACCP). By its law, China

461 encourages food producers and distributors to comply with good manufacturing practices and to implement the HACCP system in order to improve the food safety management level. Since food enterprises have been certified by Good Manufacture Practice and the HACCP, the certification institutions conduct the follow‐up investigations according to the law. Otherwise, the certification institutions cancel the certificate according to the law and report in a timely manner to the relevant food and drug administration and make such cancellation information available to the public. Thereby, the certification institution does not charge any fees for the follow‐up investigation (FAS, p. 15). The Serbian Food Safety Law determines that food business operators must ensure the fulfillment of the prescribed food hygiene requirements in all stages of food production, processing and circulation under their control. Thereby, minister of agriculture and minister of health, within the scope of their responsibility, prescribe the food hygiene requirements for all food business operators. However, it is noted that the prescribed requirements related to food hygiene do not apply to the direct supply of consumers with primary products in small quantities. According to these provisions, a food business operator must establish a system for ensuring food safety in all stages of food production, processing and circulation, excluding the primary production level, in all facilities under its control, in accordance with the principles of Good Production Practices and the HACCP. Also, a food business operator is obliged to have a full‐time employee who is responsible for conducting of good production practices and application of the HACCP system (Дирекција, pp. 22, 23).

SPECIAL FOOD AND OTHER FOOD

Under special food the China’s Food Safety Law implies health care food, food for special medical purposes and infant formula food. Thereby, the alleged health care function of health care food has scientific grounds and may not produce acute, sub‐acute, or chronic diseases in humans. The catalogs of raw materials of health care food and alleged health care functions of health care food are formulated, adjusted, and issued by the food and drug administration of the country. Health care food made of raw materials not included in the catalog of raw materials for health care and imported health care food is subject to registration with the food and drug

462 administration on the State level (FAS, pp. 20, 21). The Serbian Food Safety Law prescribes a special treatment to ‘other food’. Thereby, ‘other food’ means novel food, genetically modified food and feed, while novel food means food or food ingredients that have not been used previously for nutrition. In order to place a novel food, genetically modified food and feed for the first time on the market in the territory of the Republic of Serbia, or if such food/feed is already on the market, the food or feed business operator must have a license in accordance with this law and special regulations (Дирекција, pp. 22. 23).

CONCLUSION

In 2017, China and Serbia began the cooperation in the field of agriculture and food safety by signing documents on agriculture, food safety and veterinary medicine. The memorandum on food safety opens the possibility of increasing exports of food and feed from Serbia to China, especially corn, dried plums, dairy products and some types of frozen meat. In addition, the conditions for investing companies from China in Serbian agriculture are created. The national regulations of China and Serbia in the area of food safety have already been mutually harmonized since they have adopted new laws on food safety that are in line with the relevant international regulations and standards.

BIBLIOGRAPHY

Dabovic Dusan, Agricultural Law of Serbia, Lambert Academics Publishing, 2017, Saarbrucken. Ettinger, David J. et al., ‘China Food Law: Year in Review 2016 ‐ Out with the Monkey, in with the Rooster: A look back and a look ahead on China’s Food Safety System’, Keller and Heckman LLP, Feb 24, 2017, Internet: https://www.khlaw.com/China‐Food‐Law‐Year‐in‐Review‐2016 FAS Staff, ‘China’s Food Safety Law (2015)’, 2015, Beijing, Internet: https:// gain.fas.usda.gov/Recent%20GAIN%20Publications/Amended%20Food %20Safety%20Law%20of%20China_Beijing_China%20‐%20Peoples%20 Republic%20of_5‐18‐2015.pdf

463 Sim Andrew, Esq., and Yang Yilan, Esq., ‘China: An Overview of the New Food Safety Law’, Food Safety Magazine, April 19, 2016, Internet: https:// www.foodsafetymagazine.com/enewsletter/china‐an‐overview‐of‐the‐ new‐food‐safety‐law/ ‘WTO Agreement on the Application of Sanitary and Phytosanitary Measures’, Internet: https://www.wto.org/english/tratop_e/sps_e/spsagr_e.htm Xinhua, ‘China, Serbia sign MOU on agriculture’, Jan 18,2017, Internet: http://english.gov.cn/news/international_exchanges/2017/01/18/conte nt_281475544759472.htm Дирекција за националне референтне лабораторије, ‘Food Safety Law’, Београд, Internet: http://www.dnrl.minpolj.gov.rs/download/dokumenta /food.pdf Министарство пољопривреде, шумарства и водопривреде, ‘Потписан Меморандум између Србије и Кине о гаранцијама за безбедност хране’, 24.04.2017., Београд, Internet: http://www.minpolj.gov.rs/ potpisan‐memorandum‐izmedju‐srbije‐i‐kine‐o‐garancijama‐za‐bezbe‐ dnost‐hrane/#more‐6750 Министарство пољопривреде, шумарства и водопривреде, ‘Потписан Меморандум о сарадњи Србије и Кине у области пољопривреде: нове инвестиције и већи извоз’, 17.01.2017, Београд, Internet: http://www.minpolj.gov.rs/potpisan‐memorandum‐o‐saradnji‐srbije‐i‐ kine‐u‐oblasti‐poljoprivrede‐nove‐investicije‐i‐veci‐izvoz/

464 THE STUDY OF KEY FIELDS AND PROJECT DESIGN WITH RESPECT TO AGRICULTURAL COOPERATION BETWEEN CHONGQING AND CENTRAL AND EASTERN EUROPEAN COUNTRIES AT THE BACKDROP OF THE BELT AND ROAD

YAN Weitao Research Fellow Chongqing CEEC Research Centre Rural Institute, Chongqing Academy of Social Sciences, Chongqing, China1

Abstract: At the Backdrop of The Belt and Road, strengthening of the regional agricultural cooperation between Chongqing and Central and Eastern European countries (CEEC) helps bring the comparative advantages of agriculture between Chongqing and CEEC into a full play and to their realization. To facilitate the establishment and development of the cooperative relations between the Chinese inland area and CEEC helps promote smooth propulsion of overall development of The Belt and Road. Therefore, this paper studies the difference and complementarity of agriculture between Chongqing and CEEC by focusing on the development characteristics and advantages of agriculture between Chongqing and CEEC. Consequently, the key cooperative fields between Chongqing and CEEC have been proposed. A framework of six supportive projects has been conceived and designed. All these serve as a reference for facilitating The Belt and Road agricultural cooperation on a regional level and in trade of agricultural products. Key words: The Belt and Road Chongqing – CEEC Agricultural Cooperation, Trade of Agricultural Products.

INTRODUCTION

Trade of agricultural products has been a key function of the Silk Road since the ancient times. Entering a new era, all countries along The Belt and

1 270 Qiaobeicun, Jiangbei District, Chongqing, China.

465 Road have been confronted with challenges of food security at various levels. With this in mind, the international agricultural cooperation is definitely the best joint among all countries with respect to the joint establishment of interest’s community and community with a common future. At the Backdrop of The Belt and Road, strengthening of the regional agricultural cooperation between Chongqing and CEEC helps bring the comparative advantages of agriculture between Chongqing and CEEC into a full play and realization of complementary advantages. To facilitate the establishment and development of the cooperative relations between the Chinese inland area and CEEC helps promote smooth propulsion of overall development of The Belt and Road.

THE BACKGROUND OF AGRICULTURAL COOPERATION BETWEEN CHONGQING AND CEEC

The total volume of trade of agricultural products of China and CEEC grew at an average rate of 24.33% from 2002 to 2015, which is higher than that of South Asia, Central Asia, as well as Mongolia and Russia along the Belt and Road. (Namely 22.52%, 22.36% and 11.81% respectively) For this purpose, the China‐CEEC Agricultural Cooperation Promotion Federation was founded in Bulgaria in June 2015. The Vision and Action to jointly Facilitate Progress of the Belt and Road Agricultural Cooperation has been issued by The Ministry of Agriculture of the People’s Republic of China, National Development and Reform Commission, Commerce Department and the Ministry of Foreign Affairs in May 2017. The agricultural cooperation between Chongqing and CEEC will be more frequent in such a harmonious and friendly atmosphere. Trade of agricultural products will be on a steady rise, with the formation of complementary advantages and a promising beginning of common development. Chongqing is located at the link of Silk Road Economic Belt and Y‐shaped Channel on the Yangtze River Economic Belt as well as at the intersection of the railway from China to Europe along the New Eurasia Land Bridge. Consequently, Chongqing is well‐positioned to conduct the international agricultural cooperation with CEEC. The Conference of China– CEEC National Leaders held in Chongqing in July 2013 initiated the Chongqing Initiative and affirmed positively such proposals as advising Chongqing use the Chongqing‐Xinjiang‐Europe International Railway Multimodal Transport Channel to facilitate trade cooperation between China

466 and CEEC and set up the China – CEEC Innovation Industrial Park in Liang Jiang New Area and others.

THE CHARACTERISTICS AND ADVANTAGES OF AGRICULTURE OF CHONGQING AND CEEC

The Characteristics and Advantages of Agriculture of Chongqing In recent years, Chongqing made great efforts to facilitate modernized agriculture with a focus on modern agriculture with characteristic benefits. Depending on local special resources and in combination with the real situation of hilly and mountain areas, Chongqing was focused on the development of 7 specialty industries with full industry chain, namely orange, ecological fishing, herbivorous livestock, tea leaf, preserved Szechuan pickle, traditional Chinese medicinal materials and condiment as well. The data show these specialty industries achieved comprehensive output value of nearly RMB 90 billion through all chains in 2015. Chongqing is known as the Home to Orange. The orange orchard features an area of 310mu across Chongqing in 2016. At present, the emphasis has been laid on optimizing the structure of the industry and variety. The effort has been made to grow mature oranges and make orange juice. The enhancement and releasing of aquatic organism has been carried out for many years in Chongqing. As a result, the quality of water in reservoirs has been improved significantly. Much progress has been made in the construction of ecological fisheries in Three Gorges Reservoir Region, successfully building the Three Gorges Ecological Fish as a brand. With reliance on abundant meadows and straws across Qinling‐Daba Mountains and Wuling Mountain, some 640,000 calves and 2.5 million goats are delivered a year at present in Chongqing. In addition, the project of importing beef from Australia will be facilitated, with the formation of two cycles, namely “Importing and raising beef” and “Planting grass and breeding livestock”. Herbivorous livestock production area will be developed in southern Chongqing as an advantageous industry. Chongqing Rongchang pig is a leading variety of top 3 varieties of the pig in China, known as the Treasure of Chinese Nation. Shizhu County of Chongqing is the largest in size production base for the wool rabbit. In addition, Chongqing is focused on developing preserved Szechuan pickle, traditional

467 Chinese medicinal materials, and tea leaf and condiment industry chain represented by Chongqing Hotpot Seasoning. The effort has been made to promote the region‐based and diversity‐oriented development of the characteristic industry area. Chongqing is endowed with abundant resources of medicinal plants, serving as one of national key traditional Chinese medicinal material production areas. There are more than 2,000 varieties of wild and cultivated traditional Chinese medicinal materials growing across most parts of mountainous areas, mainly featuring goldthread, honeysuckle, dangshen and so on. The production volume of goldthread in Shizhu County of Chongqing ranks first. Shizhu Count is the Home to Goldthread. And, Fuling District of Chongqing is the well‐known Home to Preserved Szechuan Pickle.

Agricultural Advantages and Characteristics of CEEC The 16 Central and Eastern European Countries vary in their current situation of agriculture. However, most of them attach importance to investing in agricultural development. Of these 16 countries, 11 ones have joined the EU whose agricultural policies have a great impact on CEEC. To be exact, Poland carried out the National Strategic Plan for Poland, granted greater support to farmers and small‐and‐medium‐sized rural enterprises, increased subsidies in new agricultural varieties, agricultural organic product and increased investment in agricultural technology promotion depending on EAFRD. As a result, Poland is relatively powerful in agricultural scientific research. Agricultural natural conditions in Romania, Bulgaria, Croatia, Lithuania, and Bosnia and Herzegovina are superior. They all enjoy a long‐standing food processing industry. Bulgaria is relatively developed in urban agriculture, traditionally known as the Kingdom of Rose. In addition, Bulgaria’s dairy product industry has been around for a long time, with a wide range of varieties. Bulgaria is the cradle of yoghourt. Agricultural specialized cooperatives of all kinds in Romania are relatively developed. In addition, Bulgaria and Romania along with other countries are highly productive in grape of premium quality. They all are the key countries in the world for producing and exporting wine. The Czech Republic is focused on the study and protection of germplasm resources, equipped with advanced mechanized production. Agricultural mechanization has been realized in Hungary, which is focused on the research into agricultural science, especially the research into breeding. In addition, Hungary also boasts highly developed food processing industry.

468 The Study of Difference and Complementarity of Agriculture between China and CEEC Compared to the Chinese inland area with Chongqing serving as a key opening‐up support, the 16 Central and Eastern European Countries are remarkably different in natural resources, advantageous agricultural product industry, consumption structure of agricultural products and other aspects. This means that there is great potential for agricultural cooperation and trade in agricultural products between China and CEEC. However, the development of The Belt and Road poses as a valuable opportunity for promoting mutual progress and common development.

The Remarkable Difference in Agricultural Natural Resources Leading to the Difference in Development Orientation for Agricultural Industry Located in south‐western China, Chongqing is surrounded by Daba Mountain in the north, Wushan Mountain in the east as well as Wuling Mountain and Dalou Mountain in the south. Chongqing’s terrain is predominated by hills and mountains, with slope land in tremendous size. 70% of Chongqing’s landform is represented by hills and mountains. On the contrary, CEEC is located in the plain in northern Central Europe (including Poland and three countries around the Baltic Sea), Bohemia Plateau (including the Czech Republic) and the Danube Basin (including Bulgaria, Hungary, Romania, Slovakia and Slovenia). Their land conditions are far better than that of Chongqing. There is an area of 62,740,000 hectares of agricultural land in these 16 countries, with an area of 0.34 hectares of arable land per capita, three times that of China and 4.53 times that of Chongqing (an area of 0.34 hectares of arable land per capita in Chongqing). The natural difference in geography leads to the difference in development orientation of agriculture of Chongqing and CEEC.

Difference in Advantageous Agricultural Products between Chongqing and CEEC with High Complementarity in Trade of Agricultural Products The exported agricultural products between Chongqing and CEEC are markedly different in terms of comparative advantages. For Chongqing, the

469 comparative advantages lie in labour‐intensive industries, with the rest of agricultural products featuring low competitiveness. However, CEEC tends to be strong in facility‐driven agriculture, food processing, recreational agriculture and other fields, being highly complementary to Chongqing’s agricultural products.

Discrepancy in Consumption Structure of Agricultural Product between Chongqing and CEEC with Discrepancy in Demands The GDP of these 16 countries amounted to USD 1481.667 billion in 2013. The GDP per capita was more than USD 10,000. Especially, Slovenia’s GDP per capita exceeded USD 20,000. However, Chongqing’s GDP per capita stood at USD 8,700 in 2016. Moreover, the GDP per capita for other cities or provinces in the Chinese inland area was below USD 10,000. Generally speaking, the GDP per capita for a given region is in proportion to the economic development level of that region. The consumption level per capita goes up and the economic growth goes up. As a result, the consumption level of agricultural products in these 16 countries tends to be higher than that of Chongqing as a whole. In addition, we see a greater discrepancy in the consumption structure of agricultural products between Chongqing and these 16 countries since there is much difference in living habits, religious belief, dietary concept and others.

Varied Volume of Agricultural Trade of China with CEEC The total volume of agricultural trade of China with CEEC amounted to USD 1.097 billion in 2013. Poland takes up the highest percentage (48.78%) of the total volume of agricultural product trade of China with these 16 countries, followed by Romania (10.87%), the Czech Republic (8.33%), the Republic of Lithuania (6.52%), and Bulgaria (4.33%). The 5 countries mentioned above account for 78.83% of the total volume of trade of these 16 countries, with the total volume of trade attaining to USD 0.851 billion. The rest of CEEC accounts for less than 4%. However, Macedonia, the Republic of Montenegro, Slovenia, Bosnia and Herzegovina each account for less than 1%.

470 KEY FIELDS AND PROJECT DESIGN WITH RESPECT TO AGRICULTURAL COOPERATION BETWEEN CHONGQING AND CEEC

Key Fields with Respect to Agricultural Cooperation between Chongqing and CEEC Over the years, these 16 countries have been traditionally the key region for international agricultural cooperation with Chongqing and the rest of the Chinese inland area. There have been numerous fruitful mutual cooperative projects. A huge potential in cooperation regarding agriculture has been seen between Chongqing and CEEC. The author believes that the future cooperation will be focused on the key fields as follows: First, cooperation in agro‐ technology with focus on biotechnology and germplasm resources; Second, strengthening cooperation in agriculture and quality testing to enhance mutual trust, to set up a quarantine inspecting mutual certification system for agricultural products and to promote global food security; Third, cooperation in the processing of agricultural products based on the local agricultural products of Chongqing and CEEC, extending the agricultural product industry chain of Chongqing and CEEC, increasing benefits from agricultural product; fourth, carrying trade of agricultural product and trade of complementary premium agricultural product; Fifth, cooperation in agricultural infrastructure like irrigation, water‐saving technology, equipment and so on; sixth, multi‐level academic exchange in the fields of agricultural policies, law and others.

Carrier Project Design with Respect to Agricultural Cooperation between Chongqing and CEEC In order to expand the fields of agricultural cooperation between Chongqing and CEEC, platforms and channels are required, with a range of physical projects acting as the support. According to the study, the author conceives a framework of the following projects for discussion:

To develop Chongqing into a port of transhipment for China‐CEEC agricultural product trade According to The Vision and Action to Facilitate the Joint Development of Silk Road Economic Belt and the 21st Century Maritime Silk Road issued

471 by the Chinese government in 2015, efforts will be made to facilitate regional interactive cooperation and development of industry agglomeration in order to develop Chongqing as a key support Western Development and Opening‐ up. Thus, it can be seen that Chongqing serves as a critical support and gateway for development of the Chinese inland area and play a role as the port of transhipment for the China‐CEEC trade cooperation. Since there is an extensive agricultural plantation in the Chinese inland area, agricultural cooperation is definitely a key part of Chongqing as the port of transhipment.

To build supporting service platforms and enlarge the size of carrying trade for Europe‐Chongqing‐ ASEAN agricultural products Cantering on developing Chongqing into a port of transhipment for international trade between China and CEEC, Chongqing needs to set up a series of carrying trade service platforms. For example, to set up electronic port public service platforms, large‐sized cross‐border E‐commerce platforms, inspection and quarantine platforms for international agricultural products, quick customs clearance platform and others. The premium agricultural products from CEEC can be transported to ASEAN countries through the carrying trade platforms in Chongqing. Thus, the size of carrying trade for Europe‐Chongqing‐ASEAN agricultural products will have a progressive expansion, which drives the development of countries located between Europe, Chongqing and ASEAN.

To establish a quick inspection‐exempted and customs clearance green channel for China‐CEEC premium agricultural products Import & export customs declaration and inspection window exclusive for agricultural products shall be set up at the port in Chongqing by setting up a trust mechanism for quality of food. Thus, the customs declaration and inspection documents for imported & exported agricultural products can be reviewed immediately; pollution‐free food and organic food certified by the national agencies from both sides and food with the inspection and quarantine qualification certificate issued by inspection and quarantine institution shall have the inspection‐exempted clearance. The import & export enterprises for agricultural products and transport vehicles which are

472 in compliance with qualifications shall be granted Green Channel identification. The transport vehicles quickly pass through the special Green Channel at the port upon inspection and release.

To set up a China‐CEEC agricultural academic exchange and cooperation centre with Southwest University acting as a platform The Chongqing CEEC Research Centre is the exclusive director unit of China CEEC Think Tank Exchanges and Cooperation Network (namely, the top‐ level think tank network with the widest coverage and the highest level between China and CEEC) in south‐western China, which promotes exchanges and cooperation between China and CEEC in economic, political and cultural fields. Chongqing has technological advantages in pigs, citrus and soil. CEEC has advantages in vegetables and fruit processing technology, germplasm resources, genetic breeding, agricultural mechanization, biotechnology, crop cultivation and animal disease prevention and control. Based on the Chongqing CEEC Research Centre, Chongqing can integrate the strength of the Chongqing Academy of Social Sciences and relevant universities and make deep cooperation with relevant think tanks, research institutions and universities from these 16 countries in order to jointly establish a Chongqing – CEEC Platform for Agricultural and Academic Cooperation. This platform focuses on deepening agricultural cooperation and scientific & research exchanges between the Chinese inland regions and the 16 countries. In addition, based on this platform, international conferences, symposiums and training relevant to agriculture should be regularly organized and held between the Chinese inland areas and CEEC, which gradually makes close relationships among relevant institutions, organizations, associations and enterprises between Chongqing and CEEC, and provides convenience for mutual business, technological and information exchanges.

To set up the Chongqing‐CEEC Agricultural Cooperation Data Base in Liangjiang New Area Acting as the first state‐level development and opening a new area in the Chinese inland areas and a core area of Chongqing Free Trade Zone, Liangjiang New Area has established the Chongqing – Central & Eastern

473 Europe Agricultural Cooperation Data Base, which provides a more open and convenient cooperation for collecting and analyzing agricultural production data and big agricultural data. Based on big agricultural data cooperation, this base can further carry out a deeper cooperation in modern smart agricultural fields, including agricultural e‐business, industrial poverty‐ alleviation and agricultural planning, which provide decision‐making consulting services for agricultural development in Chongqing and Central & Eastern Europe.

Joint development of the Chongqing‐CEEC Agricultural Cooperation Park Chongqing and CEEC can attempt to jointly develop an agricultural industrial park, with a goal to realize mutual benefits and facilitate “Chongqing‐CEEC” two‐way investment in the agricultural industry. Consequently, the agricultural industrial park becomes the first stop for Chongqing’s agricultural enterprises to enter CEEC and also the first stop for the 16 countries to enter the market of Mainland China. By joint development of the Chongqing‐CEEC Agricultural Cooperation Park, both Chongqing and CEEC will further strengthen cooperation in the fields of plantation, cultivation, deep processing, agricultural product logistics and agricultural infrastructure and others. This helps both Chongqing and CEEC improve the agricultural industry chain, enhance agricultural benefits and also helps provide an easy market entry of their own advantageous agricultural products from the other side.

BIBLIOGRAPHY

Yu Chunyan, The Strategic Research into Comparatively Advantages of Trade of Agricultural Products, Complementarity and Agricultural Cooperation between China and CEEC[D].Wuhan, Huazhong Agricultural University. Li Dan, Xia Qiu, Zhou Hong, the Research into the Potential of Trade of Agricultural Products between China and CEEC at the Backdrop of the Belt and Road [J]. Xinjiang State Farms Economy2016 (8)

474 Zhong Juntao, Development of Modernized Agriculture in Chongqing under The Belt and RoadStrategy [J], South Wind2016 (8) Li Haoxue, Li Shenghui, The Study of the Potential of Trade of Agricultural Products between China and the Countries along The Belt and Road— — based on HM index and random frontier gravity model[J], The Price Monthly, 2016 (11).

475 CHINA, EU AND SERBIA AND THEIR STATUS IN INTERNATIONAL ENVIRONMENTAL AGREEMENTS

Dragoljub TODIĆ Professor Sanja JELISAVAC TROŠIĆ, PhD, Research fellow Institute of International Politics and Economics, Belgrade, Serbia1

Abstract: The paper aims to overview the similarities and differences between the People’s Republic of China, the European Union (EU) and the Republic of Serbia (RS) regarding their membership in the international environmental agreements. At the beginning of the paper, the authors point out to the growing importance of international agreements in the field of environmental protection, as instruments of contemporary politics and environmental law. The focus is on global environmental issues and on international agreements in this area (climate change and ozone layer protection, water resources management, soil protection, biodiversity protection, hazardous chemicals and hazardous waste management, etc.). In the central part of the paper, the authors address the status of China, the EU and the Republic of Serbia in the most important international multilateral environmental agreements. The bases of the analysis are international multilateral agreements with the global character. The length of time required to become a party to certain international agreements of a global character is examined. The general framework of the discussion is determined; on the one hand, by the estimates that China is a country with serious environmental problems and, on the other hand, by the fact that the EU is one of the leaders in global environmental policy. The position of the RS, as a country candidate for the EU membership, is largely determined by the obligations regarding the harmonization of national regulations with the EU regulations, including ratification of a relevant international agreement in the field of environment. In conclusion, it is noted that there are no significant differences between China and the EU in terms of the length of time needed to become a party

1 E‐mails: [email protected], [email protected]

476 to the most important global international environmental agreements, but there are differences in terms of the several protocols and the speed of acceptance of amendments to several international agreements. Due to various circumstances, there are some differences in terms of the RS membership in international environmental treaties. Key words: China, EU, Serbia, international agreements, environment, global problems.

INTRODUCTION

In literature, China is usually taken as an example of a country facing tremendous environmental problems, mainly because of the accelerated economic development and the changes it brings with it.2China has made significant efforts in terms of defining the elements of a contemporary environmental policy and law, but many of the country specificity should be respected. On the other hand, the EU is usually considered one of the most important leaders in international environmental policy, especially when it comes to efforts to address the most important global environmental problems.3 The policy and legal system of the Republic of Serbia in the field of the environment over the last fifteen years have almost been completely determined by the formally proclaimed goals related to the EU membership. During this period, all adopted laws and strategic documents were aimed at harmonizing with the EU regulations and strategic objectives.4 One of the common elements of China, the EU and RS policy in the field of environment is the issue of how they relate to global environmental problems. This issue is examined through an analysis

2 For the official reports on the state of the environment in the last few years, See: Ministry of environmental protection the People’s Republic of China, 2017; Xibing Huang, Zhao Dingtao, Colin G. Brown, Wu Yanni, Waldron A. Scott, 2010. 3 For the state of the environment, See: European Environment Agency, 2017; Zito, R. Antony, 2005; Karin Bäckstrand & Ole Elgström, 2013. 4 For basic information on the state of the environment, see Ministry of Agriculture and Environmental Protection, Belgrade, 2015. For more detailed reports on the situation in certain areas, see the Serbian Environmental Protection Agency, 2017. Regarding the current state of the regulations in the field of environment, including international agreements, as well as plans for the future period, See Office for European Integration, 2016.

477 of signing and ratification of the most important international multilateral global agreements grouped into three groups: agreements in the field of climate change and protection of the ozone layer, agreements in the field of nature protection and cross‐border resources and agreements regulating the management of hazardous chemicals and hazardous waste. The question of the possible limitations of this type of analysis could be considered in more details depending on the various factors including the objectives of the analysis.5

INTERNATIONAL AGREEMENTS IN THE SYSTEM OF INSTRUMENTS OF CONTEMPORARY ENVIRONMENTAL POLITICS AND LAW

To the significance of international treaties, as instruments for solving problems in the field of environment, contribute their general characteristics in particular, especially in comparison with other sources of international law (a large number of them, relative reliability, relatively clearly defined obligations, relatively fast procedure of creation and changes in the agreements, clearly expressed will of the contracting parties, etc.). Increased awareness of the possibility of solving common environmental problems, both global and regional ones, has helped to

5 The status in international agreements could be taken as one of the criteria for assessing the state’s attitude towards a particular type of environmental problem. However, for more precise conclusions, it is necessary to analyze the practical attitude towards a problem in the form of, among other, the implementation of international obligations under international agreements. This, of course, requires much larger space and another type of methodology that goes beyond the scope of this paper. The question of how the EU is understood (as an international organization or a confederate state, or something else, etc.) could also have an impact on the results of a more detailed analysis. For the purposes of this paper, this issue is not addressed separately, but it starts from the fact that the EU has an international legal subjectivity, i.e. it can conclude international agreements in accordance with the relevant provisions of the EU Treaty and the Treaty on the Functioning of the EU. The question remains how to determine RS membership in international agreements, since Yugoslavia has ratified a number of international agreements, but RS has been registered as a member from a later date i.e. the date of the notification of succession (from Yugoslavia). Finally, since the paper is the attempt to apply some kind of comparative method, one should also bear in mind the dilemmas related to this method and the comparative environmental law as a whole. See: D. Todić, 2016.

478 strengthen the recognition of the need to regulate certain issues of common interest throughout international agreements. Although there are still many problems in the system of international environmental agreements, first in the part relating to their application, international agreements remain one of the most important instruments for solving environmental problems during the age of globalization. Since the world has become globalized, the impact of interconnection between the countries has increased (Antevski, Jelisavac Trošić, p. 123). If we look at the dynamics of concluding multilateral and bilateral environmental agreements, we can observe that, in the period 1990‐2000, there was an increase in the number of both (European Environment Agency, 2010). In addition, a huge increase in the number of concluded bilateral agreements was registered in the period after 1970. We can also observe that there is a decline in the number of concluded agreements between 1996 and 2010. The phenomenon of the increase in the number of agreements concluded (multilateral and bilateral) from the early 1970s and 1990s should be linked to overall activities that took place before, during and after the two major international global environmental conferences (Stockholm and Rio Conference). It is usually considered that the history of international legal regulation of certain environmental issues, or of issues of relevance for this area, begins in the second half or at the end of the nineteenth century. Since then, a huge number of international treaties of different character and different relevance for the environment have been concluded. The UNEP Register of International Treaties and other Agreements in the Field of the Environment contains, until the year 2005, a total of 272 international treaties, including amendments to the contracts (UNEP, 2005; Mitchell, 2002‐2016). The list of multilateral environmental agreements deposited with the Secretary‐General for the Chapter XXVII (Environment) includes a total of 17 basic international treaties (global and regional), among more than 560 contracts of different characters in the other areas. In addition to 17 basic contracts in the UN treaty database, there are 35 protocols annexed to the individual international agreements (total of 18) or changes to basic contracts (a total of 17) (UN Treaty Collection, 2017). There are some differences, but also some consents, in the literature dealing with global environmental problems on several issues that are considered to have global characteristics. Without considering whether it is the scientific articles,

479 analysis of another character or official reports of certain international organizations dealing with issues of importance for the field of environment, several deep‐seated problems are considered as a subject of regulation in different ways. UNEP’s Global Environmental Outlook provides an overview of the situation in each of the following areas: atmosphere, soil, water, biodiversity, chemicals and waste (UNEP, 2012). In the context of the consequences of demographic and economic trends for the next four decades, the OECD takes on, for the key issues of global concern, the issues related to climate change, biodiversity, water and the effects of environmental pollution on human health (OECD, 2012). In the document ‘The future we want’ adopted at the Rio + 20 conference in 2012, in the part defining the ‘framework for activities’, among other things it is specifically discussed about problems related to water management (para. 119‐124), energy (para. 125‐129), sustainable transport (para. 132‐133), sustainable cities and human settlements (para. 134‐137), ocean and seas (para. 158‐177), reduction risks of accident (para. 186‐189), climate change (para. 190‐192), forests (para. 193‐196), biodiversity (para. 197‐204), desertification, soil protection and droughts (para. 205‐209), mountains (para. 210‐212), chemicals and waste (para. 213‐223), etc. (United Nations, 2012). If we take for the bases of the analysis the international agreements of universal character in the field of the environment (or agreements with the tendency of universality), the most significant global problems in the field of environment can be considered the problems for which the appropriate international legal framework (‘regime’) has been developed at the global level. In this regard, the following global problems could be considered the most significant: air pollution, climate change, ozone layer damage, protection and sustainable use of water resources, protection and sustainable use of biodiversity (and forests), protection and sustainable use of land, hazardous waste management and dangerous chemicals management. For the purposes of this article, all international agreements of a global character are grouped into three groups: international agreements in the field of climate change and protection of the ozone layer, international agreements in the field of nature protection and protection of cross‐ border natural resources and international agreements in the field of hazardous chemicals and hazardous waste management.

480 CHINA, THE EU AND SERBIA – MEMBERSHIP IN THE GLOBAL INTERNATIONAL ENVIRONMENTAL AGREEMENTS

China, the EU and Serbia – parties to the international environmental agreements For the purposes of this analysis, Table 1 takes into account key international agreements of a global characteristic, without entering into a specific discussion of the relevance of some of them, or the relevance of the issues they regulate, for the state of the environment in China or in the EU. We start from their comparability with the global dimensions of the problem they regulate.6 All global international agreements are grouped into three groups, depending on the subject of regulation (climate change and protection of the ozone layer, nature protection and cross‐border natural resources management and chemicals and waste management).

6Also this question is mentioned in: M. Oksenberg, Economy E., 1998.

481 Climate change and ozone layer protection Table 1. Membership in the multilateral environmental agreements (climate change and protection of the ozone layer) CN EU RS UNFCCC (1992) 2005 2005 2001 KP (1997) 2005 2005 2007 KP Amendment (2006) 2010 ‐ 2009 DA (2012) 2014 ‐ 2017 PA (2016) 2016 2016 2016 VC (1985) 1989 1988 1990 2001 (s) MP (1987) 1991 1988 2001 (s) LA (1990) 1991 1991 2005 CA (1992) 2003 1995 2005 MA (1997) 2010 2000 2005 Beijing A (1999) 2010 2002 2005 Kigali A (2016) ‐ ‐ ‐ Source of data: International agreements official sites Abbreviations: UNFCCC – UN Framework Convention on Climate Change, KP – Kyoto protocol, DA – Doha Amendment, PA – Paris Agreement, VC – Vienna Convention on Ozone Layer Protection, MP‐ Montreal protocol, LA – London Amendment, CA – Copenhagen Amendment, MA – Montreal Amendment, BA – Beijing Amendment, KA – Kigali Amendment.

482 Chart 1. The length of time required to become a party to international agreements in the field of climate change and protection of the ozone layer (in years)

Source of data: International agreements official sites.

From Table 1 and Chart 1 can be seen that there is a certain overlap in the length of time needed to become a party to some international agreements in the field of climate change and protection of the ozone layer. China and the EU needed about the same time to ratify UNFCCC (13 years), KP (8 years) and PA (1 year). In the case of Serbia, it took a little longer (in relation to China and the EU) to ratify the KP (10 years) and VC (5 years), while the UNFCCC was ratified before China and the EU (9 years). Serbia became a PA member in the same year as China and the EU. In terms of the Vienna Convention on Ozone Layer Protection it took 3 years to the EU to become a member, China 4 years, and Serbia 5 years. For the Montreal protocol, it took 1 year to the EU, China 4 years, while the Serbia took over the obligations from the Montreal protocol in 2001 based on the Socialist Federal Republic of Yugoslavia (SFRY) succession. Otherwise specified, the SFRY had ratified this agreement in 1990, which is 3 years since its adoption.

483 Nature protection and management of cross‐border resources Table 2. Membership in the international environmental agreements (nature protection and cross‐border resource management) CN EU RS CBD (1992) 1993 1993 2002 CP (2000) 2005 2002 2006 NP (2010) 2016 2014 ‐ NKL SP (2010) ‐ 2013 ‐ 2001 CITES (1973) 1981 ‐ (all EU countries) 2006 (S) RAMSAR (1971) 1992 ‐ (all EU countries) 1992 CMS (1979) ‐ “RS” 1983 2008 WHC (1972) 1985 ‐ (all EU countries) 2001 (s) UNCCD (1994) 1997 1998 2007 UNWC (1997) ‐ ‐ ‐ Source: International agreements official sites Abbreviations: CBD – Convention on biodiversity, CP – Cartagena Protocol, NP – Nagoya Protocol, NKL SP – Nagoya Kuala Lumpur Supplementary Protocol, CITES – Convention on International Trade in Endangered Species of Wild Fauna and Flora, RAMSAR ‐ Convention on Wetlands of International Importance especially as Waterfowls Habitat, CMS – Convention on migratory species, WHC ‐ Convention Concerning the Protection of the World Cultural and Natural Heritage, UNCCD – UN Convention to Combat Desertification in Those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa, UNWC ‐ Convention on the Law of the Non‐Navigational Uses of International Watercourses, ‘RS’ – ‘Range state’.

484 Chart 2. The length of required time to become a party to international agreements in the field of nature protection and cross‐border resource management (in years)

Source of data: International agreements official sites

In terms of international agreements in the field of nature protection and cross‐border resource management, the shortest period for accepting obligations from the most important international treaties was needed by the EU, followed by China and eventually Serbia. The same time was needed for both China and the EU to ratify the CBD (1 year) and similar period for the UNCCD ratification (3 and 4 years respectively). In the case of Serbia, it took a longer period to accept obligations under the following international agreements: CITES (20 years), the Ramsar Convention (21 years) and CMS (29 years). The ratification of the CBD took 10 years, which is also much longer than in the case of both China and the European Union. Still, neither China, nor the EU and the RS are members of the UNWC.

485 Chemical and waste management Table 3. Membership in the international environmental agreements (chemicals and waste management) CN EU RS PIC (1998) 2005 2002 2009 POPs (2001) 2004 2004 2009 MC (2013) 2016 2017 ‐ 1999 BC (1989) 1991 1994 2000 (s) BS Am (1995) 2001 1997 2002 (a) BC PL (1999) ‐ ‐ ‐ Source of data: International agreements official sites Abbreviations: PIC ‐ Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, POPs ‐ Stockholm Convention on Persistent Organic Pollutants, UNCD ‐ United Nations Convention to Combat Desertification in Those Countries Experiencing Serious Drought and / or Desertification, Particularly in Africa, MC ‐ Minamata Convention on Mercury, BC ‐ Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, BS Am ‐ Basel Convention Amendments, BS PL ‐ Basel Convention Protocol on Liability.

Chart 3. The length of time required to become a party to international agreements in the field of chemicals and waste management (in years)

Source: International agreements official sites.

486 In the case of global international agreements in the field of chemicals and waste management, there are certain differences and similarities between China, the EU and the RS, in the length of time needed to sign and ratify the international agreement. A shorter time was needed for the EU to become a member of the PIC, as well as the Amendment to BC. China became a member of the BC sooner. POPs required the same time for both countries (3 years). On the other hand, for Serbia it took much longer to become a member of all three key international treaties in this area (PIC, POPs and BC), while the MC has not yet been ratified. The Basel Convention Protocol on Liability has not been ratified by any of the three analyzed countries.

Ratification of international agreements in China, the EU and Serbia

In this part of the paper, we point out only to the basic provisions of the relevant regulations governing the ratification of international agreements in China, the EU and Serbia (“Ratification”, “acceptance”, “approval” and “accession” mean in each case the international act so named whereby a State establishes on the international plane its consent to be bound by a treaty (Article 2. Paragraph 1.b. of the Vienna Convention on the law of treaties, 1969). For a more detailed analysis, a different format of the research paper is needed. The authors considered that, in the context of the debate on the length of time necessary for the acceptance of obligations under international agreements, the issue of the internal procedure could be relevant. That is why in the following we are exploring the internal procedures in each of the countries studied, in the domain of ratification of international agreements with the focus on the environmental agreements.

China

According to the provisions of Article 67, paragraph14 of the Constitution of China, the Standing Committee of the National People’s Congress decides on the ratification and termination of contracts and important agreements concluded with other states (The National People’s

487 Congress of the People’s Republic of China, 2015). In accordance with Article 7 of the Law on the Procedure of the Conclusion of Treaties (1990), the term ‘important contracts and agreements’ includes: contracts of friendship and cooperation, peace agreements, other contracts of a political nature; contracts and agreements regulating border issues; contracts and agreements on judicial assistance and extradition; and contracts and agreements containing provisions that do not comply with national laws (Todić, 2015). The State Council has the authority to conclude contracts and agreements with other states (Xue H., Jin Q., 2009). When it comes to the question of the relationship between international and domestic law, the Chinese constitution is not determined explicitly, but this issue is addressed by the norms of some laws (Ibid). Thus, Article 46 of the Environmental Protection Law (1989) provides that if an international environmental agreement, of which the People’s Republic of China is a contracting party, contains provisions other than those contained in the laws of the People’s Republic of China, the provisions of an international agreement shall apply, with the exception of those provisions in respect of which the People’s Republic of China has declared a reservation. China is a member of all key international environmental agreements of a global nature. The main attention in a global environmental policy is attracted by the China’s policy in the field of climate change. China is a member of the United Nations Framework Convention on Climate Change and the Kyoto Protocol from 1994 and 2005 respectively. China delivered the Second National Communication on Climate Change in 2012. In the broadest sense, strategies and goals in the field of climate change are the part of the measures envisaged in the Twelfth National Economic and Social Development Plan (2010, a five‐year plan), with GDP growth projections of 7% a year. For the first time, a 17% reduction in CO2 emissions per unit of GDP is envisaged, and also are envisaged the measures for strengthening the capacity for adaptation to climate change, strengthening the international cooperation, etc. (UNFCCC, 2013).

European Union

Article 37 of the Treaty on European Union provides that the Union may conclude agreements with one or more states or international

488 organizations in areas governed by Chapter 2 (it is referred to ‘Special Provisions on a Common Foreign and Security Policy’). In the European Union, the provisions of Articles 218 and 219 of the Treaty on the Functioning of the European Union (TFEU) regulate the procedure for concluding an agreement and conducting negotiations. Paragraph 2 of Article 216 of the TFEU provides that ‘agreements concluded by the Union are binding upon the institutions of the Union and of its Member States. Paragraph 1 of the same article states that the Union may conclude an agreement with one or more third states or international organizations in the following situations: ‘where the Treaties so provide or where the conclusion of an agreement is necessary in order to achieve, within the framework of the Union’s policies, one of the objectives referred to in the Treaties, or is provided for in a legally binding Union act or is likely to affect common rules or alter their scope‘. Naturally, to understand the scope of this formulation, one should bear in mind the overall competence of an organization such as the EU, and in particular the issue of sharing competencies between the EU and the member states. When it comes to the issue of the relationship between international and EU law, usually in support of the thesis on the monistic nature of EU law, the provision of Article 216 of the TFEU (paragraph 2) is stated, which stipulates that ‘agreements concluded by the Union are binding upon the institutions of the Union and on its Member States’.7 Some authors associate the EU’s leading position in the field of environment with international environmental contracts, (Jordan A., 2008; Schlosberg D., Rinfret S., 2008) and some are associated to the organization’s efforts to manage globalization processes through impacts in regulating particular issues and strengthening international institutions, i.e. through concrete interests (Schaik V. L., Schunz S., 2012). Hence, it is not surprising that all EU Member States are the members of the most important international agreements in the field of environment that have a universal character.8 In the part relating to climate change, one of the key strategic documents in which climate change is defined as a priority area for the functioning of

7 For some aspects of this debate look: V. R.A. Wessel, 2011. See: Medović, 2008. 8 For a complete list of international environmental agreements in which the EU has the status of a signatory, See: EU, 2016.

489 the European Union is the Europe 2020: A European Strategy for Smart, Sustainable, and Inclusive Growth (European Commission, 2010; Todić, 2011).9 This is primarily due to the system characteristic of the document, the context in which climate change is placed and the ambitions that are set before the EU. Through three formulated EU objectives in the field of climate change (reduction of greenhouse gas emissions by at least 20% compared to 1990 levels,10 20% share of renewable energy sources in electricity consumption and improvement of energy efficiency through reduction of primary energy consumption for 20% compared to the projected levels) strongly emphasizes the fundamental character of the energy sector and the necessity of an integral approach to objectives and instruments in different sectoral areas of importance for climate change.

Serbia

The general provision of Article 16 paragraph 2 of the Constitution of the Republic of Serbia (‘Official Gazette of the Republic of Serbia’ No. 98/2006) stipulates that ‘generally accepted rules of international law and ratified international agreements are an integral part of the legal order of the Republic of Serbia and are directly applicable’. In addition’ ratified international agreements must be in accordance with the Constitution’ (Todić, 2013; See also Vukasović, Todić, 2012, para 109‐120). This ‘direct application’ emphasizes the importance of the method of ratifying

9 In formal terms, the basic framework of the EU’s activities is related to the fact that the EU is a member of the UN Framework Convention on Climate Change of March 21, 1994, and the Kyoto Protocol of 16 February 2005. See: UNFCCC, 2014a; UNFCCC, 2014b. 10 The increase in emission reductions to 30% by 2020 is proposed provided that others, both developed and developing countries, are committed to a fair share in the future global climate agreement after the expiry of the first binding period under the Kyoto Protocol. In May 2010, the European Commission released a Communication containing an analysis of the implications of different levels of ambition (targets of 20% and 30%) and the assessment of the risk of carbon leakage. European Commission, 2010. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Analysis of options to move beyond 20% greenhouse gas emission reductions and assessing the risk of carbon leakage, {SEC(2010) 650}, Brussels, 26.5.2010, COM(2010) 265 final.

490 international agreements and opens up various dilemmas. A serious ‘technical’ problem with regard to ‘immediate application’ may be related to the interpretation of the meaning of this term, bearing in mind the fact that the application of (some) international agreements involves the prior adoption of internal regulations, in the state signatory of an international agreement.11 The complexity of the various situations related to the ‘direct’ application of international agreements is analyzed by Etinski, finding several situations in which one can be found by interpreting the regulations.12 Vukadinovic estimates that ‘from the point of view of Serbia’s accession to the EU’ for such a constitutional solution of the ratified international agreement, it ‘does not have to be an obstacle until the signing of the Treaty of EU Accession’. The author also points to the possibility that ‘the provision on blind direct application’ could ‘provoke the issue of mutual compliance with the provisions of the Constitution’ (Vukadinović, 2010, p. 31). ‘Hence the issue of the law‐making process as a whole can be significant for the

11 It is interesting that the Law on the Conclusion and Execution of International Treaties (Zakon o zaključivanju i izvršavanju međunarodnih ugovora) does not mention these issues, except in the case of ‘technical regulations made on the basis of an international agreement (Article 24) and indirectly when it comes to ‘securing the financial means necessary for the execution of an international agreement’, as a compulsory part of the content of the Law on the ratification of an international agreement (Article 12, point 2). Bang explains the practice of the United States to sign and not ratify international environmental agreements by the absence of a compromise among the political actors of this country, in the regard to the passing regulations ensuring the implementation of international agreements. Guri Bang, 2011. 12 ‘In cases where there is no corresponding national legal rule, it is clear that the rule of international agreement is directly applicable. If there is a domestic rule, which does not contradict international, different situations are possible. If the domestic rule is equal in its effect to the rule of the international agreement, the domestic rule is applied, taking into account the international rule, ... If the domestic rule is not equal in scope and content of its effect with the rule of international agreement, the rule from an international agreement applies directly as a supplement to the domestic rule. If, however, the domestic rule provides for higher protection of basic human rights, the application of the rules of the international agreement cannot reduce this protection. The third group of situations are situations in which there is a contradiction between the domestic rules and the rules of the international agreement... The most complex situation is when a domestic rule contradicts the rule of international agreement, which does not appear as les specialis ....‘R. Etinski, 2013. For some dilemmas, See Vukadinović, 2010.

491 quality of the implementation of the international agreement. Regarding the implementation of international agreements by Article 142 (the judiciary principles), prescribes that the courts ‘shall be separated and independent in their work and they shall perform their duties in accordance with the Constitution, Law and other general acts, when stipulated by the Law, generally accepted rules of international law and ratified international contracts.’. Court decisions are based on the Constitution, the law, the ratified international agreement and the regulation passed on the basis of the law’ (Article 145, paragraph 2). At the same time, it is stipulated that ‘Public Prosecutor’s Office shall perform its function on the grounds of the Constitution, Law, a ratified international treaty and regulation passed on the grounds of the Law ’ (Article 156, paragraph 2) (emphasis added). The provisions on the jurisdiction of the Constitutional Court indicate the manner in which the place of international agreements is defined in the hierarchy of legal regulations. In this sense, the first two points of paragraph 1 of Article 167 of the Constitution provide for the Constitutional Court to decide on: ‘the conformity of laws and other general acts with the Constitution, generally accepted rules of international law and ratified international agreements’, or ‘the accordance of ratified international agreements with the Constitution’. The formulation of the provision of Article 194 of the Constitution is also on the track of this solution.13 Lastly, when it comes to the jurisdiction for the ratification of international agreements, the Constitution stipulates that for the ratification of international agreements the National Assembly is competent ‘when the law provides for the obligation of their confirmation’ (Article 99, paragraph 4).14 The Constitution

13 In paragraphs 4 and 5 is, inter alia, stipulated that ‘ratified international agreements must not be in conflict with the Constitution’, that ‘Laws and other general acts adopted in the Republic of Serbia must not be in conflict with ratified international agreements and generally accepted rules of international law’. 14 Article 14 of the Law on the Conclusion and Execution of International Treaties (Zakon o zaključivanju i izvršavanju međunarodnih ugovora) distinguishes several types of international agreements that are confirmed by the National Assembly. These are: (1) ‘military, political and economic agreements, 2) ‘agreements creating financial obligations for the RS’, 3) ‘agreements requiring the issuance of new or amending existing laws’ and 4) ‘agreements deviating From the existing legal solutions’. At the same time, the law stipulates that other international treaties ‘are not subject to verification procedures’, although it is not entirely clear what this could be related to, taking into account the previously described category.

492 does not make any difference between international agreements when it prescribes the number of votes of the members of the Parliament required for a positive decision on the acceptance of an international agreement. In Article 105, paragraph 3. point 6. It is stipulated that ‘laws regulating: ... the conclusion and ratification of international agreements’ shall be decided by ‘the majority of votes of all members of the Parliament’.15

CONCLUSION

There are significant similarities between China and the EU in relation to global environmental problems, if we take as the basic criterion the number of years required to obtain membership in a global international treaty Membership in UNFCCC, KP, PA, CBD, POPs, etc. started in the same year, both for China and for the EU. Similarities also exist regarding the membership in VC and UNCCD. Also, both China and the EU are not members of the UNWC, although some EU member states are parties to this international agreement. It is not clear if similarities between China and the EU could be attributed to the global characteristics of the two entities (country and international organization) of international relations, regardless of the differences based on many other criteria. There are some differences between China and the EU in terms of acceptance of obligations from the MPs and amendments to this protocol, as well as differences in relation to the PIC, in which the EU became the signatory before China. On the other hand, China has become the signatory before the EU to BC and MC. It is likely that the interpretation of these differences could be attributed, in part, to the specifics of China as a developing country. The differences are related to the date of acquiring the membership in some amendments and protocols of those basic international agreements. Regarding Serbia, there are significant differences in relation to China and the EU in terms of the length of time needed to become a party to some international environmental agreements of a global character. This is the case with CBD, CP, CITES, UNCCD, as well as with the basic contracts in the field of hazardous

15 For the analysis of the solution envisaged by the Constitution of Yugoslavia, See: Milojević, 2005.

493 chemicals and hazardous waste management (PIC, POPs, BC). Unlike China and the EU, the Republic of Serbia has not ratified MC. Differences between China and the European Union on the one hand, and the Republic of Serbia, on the other hand, is conditioned by a large number of factors. They are most probably in one part the consequence of international isolation in the last decade of the 20th century, and in the second part, the result of a lot of effort to compensate the lagging behind in taking over these international obligations under the international agreements during the process of Serbia’s accession to the European Union. Regarding the procedures for ratification of international agreements, it is difficult without a detailed analysis to discuss how and to what extent the procedure in itself affect the dynamics of assuming international obligations. Naturally, when it comes to the European Union, it also remains the issue of the EU membership in international agreements, in regards to the membership of the EU member states in the same international agreements.

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497 CULTURAL DIMENSIONS OF “SUMMIT 16+1” COUNTRIES: HOFSTEDE MODEL

Katarina ZAKIĆ, PhD Faculty of Business Studies, John Naisbitt University, Belgrade, Serbia1

Abstract: The “Summit 16+1” was established in 2011 under the initiative of the Chinese Government. The initiative is dedicated to the promotion and improvement of the Chinese relations with countries coming from Central and Eastern Europe (CEE). The main goal is to build stronger connections with the CEE countries in the field of economy, politics and culture. Infrastructure is the focal point of the Chinese interest in this region, and infrastructural projects are the most important part of this initiative. As a region with more than 128 million citizens, the CEE countries are not so big in size, but their geographical position is very important because they can be regarded as a bridge between the Eastern and the Western World. Unfortunately, most of the countries from this region belong to middle‐level developed countries that need to develop more. Also, some of the countries involved in this project, such as countries that belonged to former Yugoslavia, the SSSR and Czechoslovakia are still having difficulties in mutual cooperation, due to unsatisfactory political relations. So, it will be interesting to find out, if there are some other factors besides political and economic, which can influence cooperation between those countries and also their cooperation with China. In order to do that, the Model of cultural dimensions that was developed by Geert Hofstede will be used to conclude if cultural differences can be the obstacle for mutual cooperation. Key words: “Summit 16+1”, cooperation, cultural dimensions, Hofstede Model.

INTRODUCTION

In the last five years, China experienced a lot of changes, both on the internal and the external level. Those changes are a part of reforms conducted under the guidance of President Xi Jinping and his Government. On the internal

1 E‐mail: [email protected]

498 level, China is conducting the New Normal Policy. That policy is concentrated on the restructuring Chinese economy.2 The main idea is to change things that are urgent at the moment in China – finances, infrastructure, regional development, in an effort to give the new boost for China’s future development. Also, on the external level, China is momentarily conducting many projects aimed at stabilizing China’s global economic power. At the same time, China is trying to make new connections with the countries that were not significantly included in its former foreign policy. It can be said that that economic internationalization process started with establishing BRICS association in 20093. Then, in 2011 China created the Summit 16+1, and finally in 2013 President Xi introduced to the world so far the most ambitious Chinese project and one of the biggest world development projects (in scale) in modern economic history: The One Belt ‐ One Road initiative. Having in mind that China is paying undivided attention to both internal and external activities, it is necessary to state that it is very courageous and difficult to have such a scale of reforms and projects at the same time and to be able to have so many partners involved in this process of changing. However, China’s strategic planning has been famous for centuries – who can forget Sun Tzu and his teaching? So, although there are many things that can go wrong, at the moment, these projects are progressing in a good way. In addition to that, there are some facts that need to be emphasized. Whenever there are projects or initiatives that are gathering so many countries, there are always some problems and misunderstandings. Many of those problems are connected with historical circumstances or with national culture. It does not matter that every day there are so many articles about respecting different cultures or public pleas about respecting other nationalities…There are still so many problems worldwide. In order to at least try to prevent this type of problems, we need to learn more and understand more. So, the main aim of this paper is to use Hofstede Model of cultural dimensions in order to explain similarities and differences between countries that belong to the Summit 16+1. There are two reasons to choose this initiative and not One Belt ‐ One Road. The first reason is methodological. Hofstede model is mostly used to compare two or

2 More about that in Stakić Nikola, Zakić Katarina, “Challenges of Business and Financial Transformation of China in New Normal Economy” Review of International Affairs, Institute for International Politics and Economy, Belgrade, 2016, Vol. LXVII, No. 1161, p. 80–100. 3 Originally South Africa was not part of this association, and it joined them in 2010.

499 three countries. There are also papers that explain one region using this model, but usually they do not compare one country with one region, as will be done here. Since the OBOR initiative has 67 countries, it is very complicated methodologically to compare all those countries, so the Summit was more convenient. The second reason is the involvement of Serbia in the Summit 16+1. Actually, Serbia was from day one the supporter of this Summit, and there was and still is a great public support for this initiative. On the other hand, Serbia signed a memorandum about joining the OBOR initiative in 2015. So, technically speaking, Serbia is longer and more involved in the Summit. From the Serbian point of view, the Summit 16+1 represents better our national interest and we have more connections with countries in Central and Eastern Europe than with countries coming from Central and East Asia, the Middle East or Africa. Those are the reasons for choosing this model and these countries. Through the next phase, it will be determined if there are regional differences in the CEE region, and we will see if those differences can influence and jeopardize connections between China and the CEE countries. Furthermore, it will be pointed out that besides cultural and historical, some political factors are playing very important role in setting up and promoting this initiative.

ECONOMIC COOPERATION BETWEEN CHINA AND CEE COUNTRIES

Economic internationalization process that China started some 15 years ago (“Go Global” strategy), was not at the first moment concentrated on the EU, and more precisely not on the CEE region. That process started later, but it progressed very fast. According to the reports from 2015 that were made by the European Commission, China is the EU’s biggest trade partner, and the EU is China’s second biggest trade partner after the USA (European Commission, Trade, 2015). Why is China so interested in the EU, why does it invest so much in Europe and what are the reasons for Chinese companies to buy so many European companies?4 The answer to these questions is very simple – the

4 More about that in Zakić Katarina, Radišić Bojan, “Strategies of Chinese Companies when entering Global Market”, Economic and Social Development, 21st International Scientific Conference on Economic and Social Development, Varaždin Development and Entrepreneurship Agency in cooperation with John Naisbitt University, University North, Faculty of Management – University of Warsaw, Belgrade, 18‐19th May 2017, p. 169‐180.

500 profit. However, that answer is in a way too obvious and too simplified. The profit is always important, but besides that China can achieve so many things through spreading its business abroad. Goals that are achieved so far through the process of internationalization are in some part economic, but also political and they are connected with the world security issues. These are the reasons why China chooses the EU as one of its strongest partners. In recent years, with the Summit 16+1, China unexpectedly gave much attention to one specific part of Europe ‐ meaning its Central and Eastern part, and not to the EU per se. It is also more surprising when we look at the history of diplomatic, politic and economic relations between China and the CEE countries in the last 30 years. According to Kong Tianping, the genesis of the development of relations between China and CEEC can be divided into three stages: 1. 1989–1998 period of mutual disengagement, 2. 1999‐2008 period of internationalization on both sides (not among them) and 3. From 2009 until now – period of improvement and mutual cooperation (Kong, 2015). When we look deeper into the reasons that separated China and this part of the World (e.g. failing of communist system), we can say that all those circumstances were a part of the reason that China and CEEC did not have such strong connections as they have today. How did that change? Cooperation initiative 16+1 actually was first promoted in Budapest in 2011, at the first China ‐ Central and Eastern Europe Business Forum held by the Chinese Premier Wen Jiabao (Kong, 2015). Next year in Warsaw, China held a first Forum that gave the guidelines for the further development of the cooperation framework 16+1. In upcoming years many Forums and meetings on the ministry level were held in China and CEEC. Through those meetings all the parties involved5 discussed how to develop and implement this cooperation framework, in hope that different projects and initiatives can improve not so good economic situation in this region of the Europe. The main fields of cooperation between China and the CEE countries will be infrastructural projects, high technology, green technology, agriculture, finance, education, science and culture. As previously stated, the CEE region has approximately 128.3 million people. Most of the countries in it are in economic sense middle level developed, with many problems that are not only inherited from the communist period, but are also part of the transition process into liberal capitalism. Many of those countries resolved some of their problems after joining the EU and that helped them in establishing better economic

5 In the table 1 is the list of all countries that are part of this initiative.

501 results. On the other hand, within this region we also have countries that are at some stage of joining the EU and they still have to change many things in economic development in order to reach this final goal.6 One of the major concerns for any kind of integration process here is the political stability of this region and the Balkan countries are particularly problematic. With so many disputes and conflicts that are present for more than one century, and the most intense in the last 30 years, it is a region that could be potentially very challenging in terms of mutual cooperation. Regarding the CEEC trade with China, in 2014 it surpassed 60 billion US$ (Kong, 2015), which is a great improvement from the beginning of the century. But, considering that at the same time China has with the EU the trade of about 600 billion US$ (Xinhuanet, 25.11.2015), we can say that there is a lot of space for improvement of the cooperation between China and the CEE countries and for the further development of mutual benefits.

Table 1. Countries that are part of the project of cooperation between China and Central and East European countries (so called Summit 16+1) Countries that participate in Summit 16+1 1. The People’s Republic of China 2. The Republic of Serbia (former SFRY) 3. The Republic of Albania 4. Bosnia and Herzegovina (former SFRY) 5. The Republic of Bulgaria 6. The Republic of Croatia (former SFRY) 7. The Czech Republic 8. The Republic of Estonia (former SSSR) (former Czechoslovakia) 9. Hungary 10. The Republic of Latvia (former SSSR) 12. The Republic of Macedonia 11. The Republic of Lithuania (former SSSR) (former SFRY) 13. Montenegro (former SFRY) 14. The Republic of Poland 16. The Slovak Republic 15. Romania (former Czechoslovakia) 17. The Republic of Slovenia (former SFRY) Source: Stakić Nikola, Zakić Katarina, “Challenges of Business and Financial Transformation of China in “New Normal Economy”, Review of International Affairs, Institute for International Politics and Economy, Belgrade, 2016, Vol. LXVII, No. 1161, p. 80–100.

6 Note: we have here eleven EU countries (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia) and five are EU candidate countries (Albania, Bosnia and Herzegovina, FYROM (Macedonia), Montenegro and Serbia)

502 HOFSTEDE DIMENSIONS OF CULTURE

In order to understand how the culture is affecting the way of doing business, Hofstede Model of Cultural Dimensions will be used. Besides this model, there are many contemporary models that scientists and business people use when they want to compare different cultures and to discover how they are affecting the way of doing business, such as: Fons Trompenaars model, Schwartz model or GLOBE model. Of course, each model has its advantages and disadvantages, but Hofstede model was chosen because of two reasons. First, it is the most widely known model and the most popular one and second, its methodology and results can be used in a very simple and understandable way, so many people who do not know a lot about the culture can use it and understand it. In his latest version of Cultural Dimensions Model (2010), Hofstede stated that there are six dimensions within each culture and a dimension: “is an aspect of a culture that can be measured relative to other cultures” (Hofstede, 2011, p. 3): 1. Power distance index (PDI): “is related to the different solutions to the basic problem of human inequality” (Hofstede, 2011, p. 8) or we can say “that this index defines the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally.” (Hofstede, 2011, p. 9). Societies that have a high level of PDI have the tendency to be more autocratic, leaders do have a power that is not changeable, a family is very important (more important than individuals), and people follow norms that are given and accepted by society. Societies that have a low level of PDI are those who are more democratic, political power is easily changeable, leaders are those who are in most ways equal to ordinary people and social norms are more flexible than in those that have a high level of PDI. 2. Individualism versus Collectivism (IDV) ‐ “related to the integration of individuals into primary groups”. (Hofstede, 2011, p. 8). In societies that are individual, more important is individualism than society or group. Personal beliefs and values are a priority and everybody is expected to look after themselves. Collectivistic societies are those in which immediate and extended family members are very important and one person always needs to take into account what the group wants and thinks. Also, personal wishes come on a second place, after family wishes. One’s most important task is not to disgrace their group members.

503 3. Masculinity (MAS) ‐ “related to the division of emotional roles between women and men.” (Hofstede, 2011, p. 8) Masculine societies are those who are oriented toward material things, success and ambition. There is a strict division of roles in society, with emphasis on what men and what women are doing. Feminine societies are those in which love and empathy are prevailing all material stuff and those societies do not have a strict differentiation between gender roles. 4. Uncertainty avoidance index (UAI) ‐ “related to the level of stress in a society in the face of an unknown future.” (Hofstede, 2011, p. 8). A high level of UAI means that in this kind of society people are afraid of changes, they do not perceive them as good. There are strict rules to be followed in politics, religion and everyday life. A low level of UAI means that people do accept changes and they do not consider them as something negative. Rules are there to be changed and people do not follow them strictly. 5. Long term orientation (LTO) ‐ “related to the choice of focus for people’s efforts: the future or the present and past.” (Hofstede, 2011, p. 8). LTO is describing the way that people perceive their future. According to this dimension, the most important events in life will happen in the future, people should save and not spend money immediately, traditions can change. On the other hand, in a short term oriented society everything is oriented towards past and on‐going events, traditions are sacred and there are guidelines in everyday life that need to be followed. 6. Indulgence versus restraint ‐ “Indulgence stands for a society that allows relatively free gratification of basic and natural human desires related to enjoying life and having fun. Restraint stands for a society that controls gratification of needs and regulates it by means of strict social norms.” (Hofstede, 2011, p. 15).

HOFSTEDE MODEL – SUMMIT 16+1

In table 1 there are results of Hofstede indexes for countries that are a part of cooperation framework 16+1. Countries that are coming from the CEE region are put in a geographical order coming from the north and ending with the south. Also, as it was previously mentioned, countries in this region have the so‐called “communist background”, and unfortunately many of them

504 were part of bigger countries, but eventually they disintegrated. After that process, all of them went through the path of privatization and changing from a centralized economy to a capitalist economy (which is one thing that they have in common with China). Besides that, in most of these countries the main religion is Christianity (Catholic or Orthodox) and in some of them Islam is the main or very important religion with a lot of followers (Albania, B&H, Macedonia). So, those are the similarities within the CEE countries. Since they share a similar historical background in modern history (devastation in World War II, the influence of communism after war ending, the transformation process in 1990‐ties), many people perceive this region as very similar. Is that the case after all? In order to explore that question, it is a very good thing to look upon results that we can find in table 2. For start, just by looking at these results, we can see that there is a large discrepancy in the values of indexes presented. For example, the most obvious thing is Masculinity/Femininity index, which goes from 100 in Slovakia (very high level of this index ‐ masculinity) until 9 in Latvia (very low level ‐ femininity). So, these results are actually showing us that there are significant differences between countries and that we need to regard them carefully so that we can learn something from them. If we can learn about them, then we can understand them, in order to accept them. The next step in this process will be to compare these cultural indexes in the CEE countries with China and try to look upon potential problems that can have a background in different cultures.

Table 2 – Hofstede cultural dimensions results for countries that are involved in Summit 16+1 Country PDI IDV MAS UAI LTO IND China 80 20 66 30 87 24 Estonia 40 60 30 60 82 16 Lithuania 42 60 19 65 82 16 Latvia 44 70 9 63 69 13 Poland 68 60 64 93 38 29 Czech 57 58 57 74 70 29 Slovakia 100 52 100 51 77 28

505 Country PDI IDV MAS UAI LTO IND Hungary 46 80 88 82 58 31 Romania 90 30 42 90 52 20 Bulgaria 70 30 40 85 69 16 Serbia 86 25 43 92 52 28 Croatia 73 33 40 80 58 33 Slovenia 71 27 19 88 49 48 * Bosnia and Herzegovina / / / / / / * Macedonia / / / / / / * Montenegro / / / / / / Albania 90 20 80 70 61 15 Source: https://geert‐hofstede.com *Note: there are no official data about HCDM in these three countries. Usually, scientists use Hofstede dimensions from SFRY – that are (scores) somewhere in the middle of Serbia, Slovenia and Croatia. There were some efforts to try to conduct a survey in order to attain this data, and they showed more or less the same results. For this research only data from Hofstede official web site will be used, omitting the results for these three countries in the charts. Also, in explanation of the results for these three countries the indexes from former Yugoslavia will be used.

Since there are 16 countries from CEE and since it is already presented that those countries are very different, it is easier to group these countries into clusters that are more similar, in order to have better structure and understanding of the problem itself. This kind of “mapping clusters” is more similar to GLOBE model and Schwartz model than to Hofstede model7 but for this paper, the experience with mapping clusters from previously mentioned models will be used. Comparing all the results that are available

7 More about comparing these three models in: Zakić Katarina, Milutinović Olivera, “Doprinos interkulturnog menadžmenta razvijanju tolerantnosti u međunarodnom poslovanju”, Anali poslovne ekonomije, Novembar 2013, Godina V sveska 2, Univerzitet PIM, Banja Luka, p. 162‐177.

506 on the official web site of Geert Hofstede, countries can be grouped into three different clusters that have most similarities, as presented in table 3. Estonia, Lithuania and Latvia are the countries that can be put into the Baltic cluster; Poland, the Czech Republic, Slovakia and Hungary are making the Central East European cluster and all other countries are put into the Balkan cluster. Of course, the titles of the groups (clusters) do correspond to their geographical position, and this is done intentionally.8

Table 3 – Clusters of CEEC done by using Hofstede Model of cultural dimensions China Estonia Lithuania BALTIC CLUSTER Latvia Poland Czech CENTRAL EAST EUROPEAN CLUSTER Slovakia Hungary Romania Bulgaria Serbia Croatia Slovenia BALKAN CLUSTER Bosnia and Herzegovina Macedonia Montenegro Albania

8 The colors of these clusters presented in table 3 are used in the same way on all other graphics in this paper.

507 By doing this kind of differentiation, we can more precisely interpret the results and make the conclusions. In this one, as well as in all other graphs that will be used in the paper, the same order will be applied: first goes China, then we have results for Baltic, then CEE and in the end Balkan countries. First of all, on the graph 1, there are results for first Hofstede index and that is power distance index (PDI). In this graph, we can see that China is the country with a high level of PDI, and it means that hierarchy, authority and centralization are some of the main characteristics of this culture. In that sense, the most similar with China is the Balkan cluster, and after that the CEE cluster. The Baltic cluster is completely different because it consists of countries that have a low level of PDI, meaning that they are more decentralized, have less authority and hierarchy.

Graph 1 – PDI index for Summit 16+1 countries

The second graph shows the results for Individualism (IDV) index. China is, according to these results, a collectivistic society, like the Balkan countries. This means that in this type of countries values, beliefs and norms of the society are more important than the individual norms. Also, the interests of the group are more important than individual ones. In such kind of culture, family and friends are valued as integral and influential part of individual life. On the other hand, the Baltic and CEE countries are individualistic societies, where individual values, beliefs and norms are perceived as more important than collective ones.

508 Graph 2 – IDV index for Summit 16+1 countries

Masculinity is the main characteristic of the Chinese society, as well as in the CEEC cluster. In those cultures, the main values are material wealth, success and ambition. In both, the Baltic and Balkan clusters (except Albania), we have femininity society. In these countries, values such as love, empathy and helping those that are not in a position to help themselves (children, older people, people with special needs, etc.) have a stronger impact on society.

Graph 3 – MAS index for Summit 16+1 countries

509 China has a low level of uncertainty avoidance index (UAI), and this indicates that China is a society that is not afraid of the unknown future and what it will bring. On the other hand, we have societies that have a high level of UAI, and in that type of culture there is a strong need to escape all things in life that are new and unknown. According to Hofstede, the results for all countries in the CEEC region as a whole (not cluster) are like that. So, in that sense, they are more similar to each other than to China.

Graph 4 – UAI index for Summit 16+1 countries

Long term orientation is an index that Hofstede did not put into his research immediately, but only after he conducted his research in China. During that time, his Chinese researchers helped him to understand that China9 has some other cultural characteristics that are not included in his first four indexes. LTO is related to the choice of focus for people’s efforts: the future or the present and past. Long term orientation means that there are societies that are oriented towards the future, and short term societies are more oriented towards the present and the past. In the end, Hofstede named that index Long term/short term orientation, instead Confucianism/

9 Note: And all other countries in Asia that have a strong tradition of philosophical teaching Confucianism.

510 Non Confucianism index. Knowing that, we can see why China has a high level of LTO. Besides China, the Baltic countries also have a high level of LTO and after that, we have the CEEC cluster in which most of the countries have a medium or high level of LTO. Most of the countries coming from the Balkan cluster have a low level of LTO. Indulgence versus restraint is the last index in Hofstede model. According to this model, all countries that are a part of this Summit, except Slovenia, are the countries in which restraint prevails. Slovenia is the only country in which indulgence is more important. In restrained societies, strict social norms and hard work are viewed as very important, while in indulgent societies we have less strict social and working norms.

Graph 5 – LTO index for Summit 16+1 countries

511 Graph 6 – IND index for Summit 16+1 countries

CONCLUSION

The Summit 16+1 is obviously a very ambitious and important cooperation framework, which can potentially bring many benefits both to China and to the CEE countries. Some of the planned projects are well on the way, but some of them are still waiting to begin. Although there are many advantages that can be achieved with the implementation of this summit, there are also many problems that need to be solved in order to have a successful project. Some of the obstacles for mutual cooperation within the CEE countries are coming from political backgrounds of the countries involved that have unresolved issues from a previous time. Also, from the economic point of view, some of the CEE countries are part of the EU, and some of them are not, which makes further problems especially regarding economic cooperation, but also from the legislative point of view. Besides that, in this paper, it is demonstrated that the cultural background in the CEE countries is not as similar as one may think, and that can also be a problem in the way of the fulfilling expectations of the countries involved. Regarding the presented results of the Hofstede model, the country that is the most similar to China from the cultural point of view is Albania (5 dimensions out of the 6), then we have Bulgaria and Slovakia (4/6), and after that Poland,

512 the Czech Republic, Hungary, Romania, Serbia, Croatia, B&H, Macedonia and Montenegro (3/6). The countries that have the least similarities with China are the Baltic countries and Slovenia. All three clusters have two dimensions that are the same as in China: the Balkan cluster has PDI and IDV the same, the Central East European cluster has MAS and IND, and the Baltic cluster has UAI (not a match, but close enough) and LTO. According to the previous researches that the author of this paper conducted over time, it can be concluded that the three dimensions in Hofstede model which mainly influence everyday business life are: PDI, IDV and LTO. Having that in mind, the Balkan countries are in a way the most similar to China and its way of doing business. Since one of the most prominent sayings in the Chinese promotion of OBOR and the Summit 16+1 framework is a win‐win situation for all the parties that are involved, it is very important to further expand the research about all the potential problems that can arise in the way of implementing these two initiatives. Because the cultural background and differences are among the potential problems, this kind of analysis should be conducted more extensive in order to better understand and accept different cultures. This can be considered as a way for prevention of potential misunderstandings. In Serbian language, there is an old saying that can be used as a conclusion (or highlight) of this paper, and it says: “It is better to prevent something than to fix (heal) something”, meaning that if we can be careful and proactive ‐ then everything will be much easier.

BIBLIOGRAPHY

Hofstede Geert, “Dimensionalizing Cultures: The Hofstede Model in Context”, The Berkley Electronic Press, 2011, Internet: http://scholar works.gvsu.edu/cgi/viewcontent.cgi?article=1014&context=orpc, visited 15.12.2016 Internet: http://ec.europa.eu/trade/policy/countries‐and regions/countries/ china, visited 25.02.2017. Internet: http://news.xinhuanet.com/english/2015‐11/25/c_134851088.htm, visited 15.01.2016. Internet: https://geert‐hofstede.com, visited 25.06.2017.

513 Kong Tianping (12.03.2015.), “16+1 Cooperation Framework: Genesis, Characteristics and Prospect”, Institute of European Studies, CASS (http://16plus1‐thinktank.com/1/20151203/868.html), visited 15.05.2017. Stakić Nikola, Zakić Katarina, “Challenges of Business and Financial Transformation of China in New Normal Economy” Review of International Affairs, Institute for International Politics and Economy, Belgrade, 2016, Vol. LXVII, No. 1161 Zakić Katarina, “Mogu li srpski i kineski menadžeri uspešno da sarađuju – kritički osvrt”, Međunarodni problemi, Institut za međunarodnu politiku i privredu, 2015, Vol. LXVII, No. 2‐3/2015 Zakić Katarina, Milutinović Olivera, “Doprinos interkulturnog menadžmenta razvijanju tolerantnosti u međunarodnom poslovanju”, Anali poslovne ekonomije, Univerzitet PIM, Banja Luka, Novembar 2013, Godina V sveska 2 Zakić Katarina, Milutinović Olivera, “Kulturni konflikti u globalizovanom svetu”, Godišnjak Fakulteta za kulturu i medije, Megatrend univerzitet, Beograd, 2014, 6/VI. Zakić Katarina, Sun Xinquan, “Sličnosti i razlike u poslovnoj kulturi u NR Kini i Republici Srbiji”, Zbornik Matice srpske za društvene nauke, 2014, 4/149, Novi Sad. Zakić, K., Radišić, B., “Strategies of Chinese Companies when entering Global Market”, Economic and Social Development, 21st International Scientific Conference on Economic and Social Development, Varaždin Development and Entrepreneurship Agency in cooperation with John Naisbitt University, University North, Faculty of Management ‐ University of Warsaw, Belgrade, 18‐19th May 2017.

514 CONSULAR PROTECTION: A NEW AGENDA OF CHINA – CEECS COOPERATION?

ZHAO Jizhou, Ph. D. Assistant Professor Institute of European Studies, Chinese Academy of Social Sciences, Beijing, China1

Abstract: Many of today’s threats have transcended national borders and are interrelated. Consular protection by the diplomatic agents of a country is playing an increasingly important role in providing help and advice to its citizens who are living or travelling overseas. With the “One Belt and One Road” (OBOR) initiative introduced, it points out a new direction, provides the opportunity and adds a new impetus for the China ‐ Central and Eastern European countries cooperation. This paper first looks at the connotation of consular protection, then discusses the changes of the common consular protection mechanism of the European Union, as well as some shortcomings of the consular protection in the European countries, and also reviews the consular protection mechanism of the status quo in China. It argued that both China and CEECs need to improve their cooperation in consular protection in the future, although besides the possibilities there will be some challenges in such cooperation. Key words: Consular Protection, China‐CEECs Cooperation, “One Belt and One Road” Initiative, EU, Possibilities and Challenges

INTRODUCTION

Many of today’s threats have transcended national borders and are interrelated. Despite the end of the cold war, globalization has accelerated the interdependence and mutual cooperation of all countries, and the security of overseas enterprises and citizens has become a common need for all countries. Consular protection is playing a progressively important role in the diplomatic work of, usually, nation states in the world. Consular assistance refers to help and advice provided by the diplomatic agents of a

1 E‐mail: [email protected]

515 country to its citizens who are living or travelling overseas.2 With the implementation of the “One Belt and One Road” (“OBOR”) initiative3 and the promotion of the China‐Europe relations, Chinese enterprises and individuals are increasingly going abroad for overseas investment, tourism and/ or studies. At the same time, more and more Europeans are travelling across the world. In this case, consular protection for both the Chinese and Europeans is a great demand, especially in the context of both sides now jointly promoting the “OBOR” initiative. Therefore, in order to better protect the overseas interests of their citizens and enterprises, China and Central and Eastern European countries (CEECs) on the one hand need to continue to improve their own consular protection mechanism, while both of them should strengthen the cooperation on consular protection in practice on the other hand. Such cooperation is believed to be conducive to deepening the connotation and promoting the level of China and CEECs relations. This paper aims to conduct a tentative study of exploring the possibilities and challenges of cooperation in promoting the “OBOR” initiative between China and CEECs in the specific field of consular protection, based on a brief review of their existing consular protection mechanisms.

CONSULAR PROTECTION: CONNOTATION AND EVOLUTION

In the post‐Cold War era, the significance and necessity of consular protection and international cooperation in this field are greatly highlighted. With the deepening of economic globalization, countries and their people around the world are faced with increasing threats and challenges which are usually difficult to predict and cope with. Sovereign states, such as China and the CEECs, are the main actors in protecting their citizens in foreign countries,

2 In Article 5, the Convention gives the most broad, detailed, and internationally accepted definition of ‘consular functions’‐Thirteen functions of a consul are listed, including protecting in the receiving state the interests of the sending state and its nationals, as well as developing the commercial, economic, cultural, and scientific relations between the two states. See Vienna Convention on Consular Relations, http://legal.un.org/ilc/texts /instruments/english/conventions/9_2_1963.pdf 3 “Yi Dai Yi Lu”, literally “One Belt One Road” (OBOR), is an initiative launched by Chinese President Xi Jinping through a speech given in Kazakhstan in 2013 to promote investment and economic trade along the New Silk Road Economic Belt and the Maritime Silk Road.

516 mainly in the form of consular protection (and sometimes diplomatic protection). Consular protection and assistance are carried out by consular officers or consular representatives of a country, according to international law (such as the Vienna Convention on Consular Relations, the Vienna Convention on Consular Assistance, in accordance with its national interests and foreign policy). In international consular practice, consular protection can be broadly divided into narrow and broad categories. First, consular protection, in the narrow sense, means that when one’s legitimate rights and interests are infringed by the wrongful act in violation of international law, he/ she could turn to his/her country’s consular officials positioned in the host country who negotiates with the local authorities to stop such wrongful acts and resume the rights, so that his/ her damages of legal interests can be compensated for. If the authorities disregard or reject such efforts made by the consular officials, relevant questions may be referred to their diplomatic representatives for diplomatic protection with the foreign ministry of the local state. Secondly, in the broad sense, consular protection also includes consular officials providing necessary assistance. At present, the major international convention for the international community to regulate consular activities is the Vienna Convention on Consular Relations.4 Protection of interests of overseas citizens reflects the changes in the connotation of security. In December 2004, the High‐level Panel on Threats, Challenges and Change appointed by Annan adopted the R2P concept for the first time when designing the report “A More Secure World – Our Shared Responsibility”5 regarding the collective security system in the new era, stating that human security has become an important element in the concept of non‐traditional security. The 2003 European Security Strategy (ESS)6 states that Security is a precondition for development. Europe faces new threats which are more diverse, less visible and less predictable. In April 2014, General Secretary Xi Jinping first put forward the overall national security concept, to build a set

4 China joined the Convention in 1979. 5 the United Nations, A More Secure World: Our Shared Responsibility Report of the Secretary‐General’s High‐level Panel on Threats, Challenges and Change (2004), Internet: https://documents‐dds‐ny.un.org/doc/UNDOC/GEN/N04/602/31/PDF/N0460231.pdf? OpenElement 6 EEAS, European Security Strategy ‐ A Secure Europe in a Better World, 12/12/2003 http:// europa.eu/globalstrategy/en/european‐security‐strategy‐secure‐europe‐better‐world

517 of political security, homeland security, military security, economic security, cultural security, social security, science and technology security, information security, ecological security, resource security, equal to one national security system.7 With the evolution of the connotations of consular protection, citizens living or travelling overseas become an important aspect of non‐ traditional security in this globalizing world and a new era of human security. To do so, consular protection must meet an ever higher requirement of more active and more effective response.

EUROPEAN CONSULAR PROTECTION MECHANISMS AND CHARACTERISTICS

From the point of view of international law, the practice of consular protection (and diplomatic protection) is closely related to the development of international law. In the 1990s, there have been some new trends in the evolution of consular protection in the context of globalization, such as the strengthening of state responsibility, the diversification of consular protection forms, the improvement of protection contents and the standardization of protection. As for the diversification of consular protection forms, in addition to the common form of national protection, there is also another form of consular protection carried out by a certain international organization, namely, the EU’s collective consular protection. The EU regards common consular protection as an important connotation of EU citizenship. The EU collective consular protection is the result of European integration, marking a major change in the development of global consular protection mechanisms: the Western consular protection system has evolved from a single protection to multiple participation. “The Commonwealth of the European Union, along with the emergence of EU citizenship, is the result of the development of European integration.”8 The 1992 Maastricht Treaty (hereinafter referred to as “TEU”) created the “EU Citizenship“, Article 8 of

7 Xi Jinping, Adhere to the Overall National Security View and Take the National Security Road with Chinese Characteristics. Xinhua News Agency, 2014‐04‐15, Internet. http://news.xinhuanet.com/2014‐04/15/c_1110253910.htm 8 Xia Liping, Review of the progress of common consular protection in the European Union, Chinese Journal of European Studies, No. 2, 2010, pp. 46‐58.

518 the Treaty of Maya provides that “every person who has a nationality of a Member State shall be a citizen of the Union”. Article 8 (c) also states that: “Every EU citizen shall be entitled to the protection of a diplomatic or consular representative body of any other EU Member State in a third State other than the EU, which does not have a representative office in the third State and shall have the same conditions of their nationals”. At first, the implementation of the EU consular protection9 was progressing slowly. However, the practice of the common consular protection in the EU has made great progress over the past decade. Today, the EU has built an official website on consular protection. The common EU consular protection has introduced a number of resolutions and recommendations, providing the basic content of common consular protection. For example, in 1993, the Council of the European Union established the Working Party on Consular Co‐operation (COCON), which was composed of representatives from the consular departments of the Ministry of Foreign Affairs of the Member States. The main task was to exchange information and expertise to jointly improve consular practice. In addition, the Working Group has also worked with the Member States to deal with the major consular crisis affecting the safety of EU citizens. In December 1995, the Council of the European Union adopted resolution 95/553 / EC, which provided the basic content of the consular protection. The resolution also stipulates that “in the case of a third country, a citizen of the European Union shall, in the event of any other difficulty, make any request as soon as it is within the scope of the State’s power.”10 In addition, a number of guidelines have been developed to share information between the EU member states during the period of 1995‐2004, for example, the 2000 EU Charter on Fundamental Rights lists the right of consular and diplomatic protection as an essential element of EU citizenship, and later the Lisbon Treaty also entitles EU citizens to the rights of consular protection.11 However, in fact, these guidelines are not legally binding. At

9 Internet: https://ec.europa.eu/consularprotection/content/home_en 10 “Decision of the Representatives of the Governments of the Member States Meeting Within the Council of 19 December 1995 Regarding Protection for Citizens of the European Union by Diplomatic and Consular Representations”, Official Journal L314, 28/12/1995 pp. 73–76. 11 See Dai Bingran, Interpretation of Lisbon Treaty, Chinese Journal of European Studies, Issue 2, 2008, p. 55.

519 the same time, in the context of economic globalization, more and more EU citizens go to third countries for various purposes. As a result, the crises involving EU citizens in third countries occurred frequently and the demand for consular protection has increased dramatically. In particular, a series of large‐scale catastrophic events that took place in the twenty‐first century have largely contributed to the progress of EU consular protection. As a matter of fact, since the introduction of the provisions on the construction of a consular protection mechanism in 1992, the EU consular protection has made some progress in rules construction and practice. Especially after the “9 • 11” terrorist attacks in 2001, European countries recognized that EU citizens may be affected by catastrophic events, and that there is a need to strengthen cooperation to deal with the crisis. The 2004 Indian Ocean tsunami and the 2006 chaos in Lebanon have fully exposed the under‐ protection of EU citizens. Meanwhile, it is important to note that there are still some problems with the collective protection of the EU. Since the consular or representative body set up by the EU member states in a third country is not balanced in number and scale, it is not sufficient to implement and complete consular protection in emergencies. Therefore, the existing EU consular protection mechanism has its own disadvantages and faces some challenges, concerning such issues as the allocation of responsibility and burden‐sharing, which affect the effective implementation of the common consular protection. In this case, the EU member states need to strengthen their cooperation, among and beyond the EU, in consular protection through joint efforts to protect their overseas citizens. For those EU member states such as some CEECs, in particular, their consular agencies in third countries are uneven in distribution and inadequate in number. This, on the one hand, inevitably affects their overseas citizens to get immediate and sufficient consular protection in third countries, while on the other hand easily lead to the actual “equality” situation among the EU as European citizens and in the sharing of responsibilities in consular protection in reality. After all, not all EU member states have established diplomatic bodies or consular agencies in third countries except in China, Russia and the United States. Let alone their ability of providing consular protection for their people in third countries when crises and emergencies occurred like terrorist attacks, political turbulence, natural disasters and so on.

520 CHINA ‘S CONSULAR PROTECTION: MECHANISM AND PRACTICE

At the time of traditional and non‐traditional security threats that are often intertwined, overseas Chinese citizens and enterprises involved with consular protection are increasingly faced with various challenges to their lives and properties. In recent years, China has been actively implementing the “OBOR” initiative to promote economic and trade as well as personnel exchanges with the CEECs. All these activities are inevitably and closely related to the maintenance and protection of the overseas interests of Chinese citizens and therefore have been raising ever higher requirements for the Chinese government’s capabilities and its cooperation with the CEECs in consular protection in the new era. Consular protection is high on the agenda of the Chinese diplomacy and foreign policy, which strongly adhere to concepts like “people‐oriented” and “diplomacy for the people”.12 To protect the fundamental interests of its people is regarded as not only the starting point but also the goal of China’s consular protection.13 Since the reform and opening up, especially after entering the 21st century, the construction of the Chinese consular protection mechanism has developed rapidly with remarkable achievements. Currently, the Chinese consular protection mechanism with major features of prevention and emergency coordination has been well established.14 At present, China has more than 270 embassies and consulates in the world, as the main body of conducting consular protection. The Chinese Ministry of Foreign Affairs has overall responsibility for coordination and has developed a series of measures, particularly in regard to preventive protection. For example, the Ministry’s official website issues and updates travel warnings to recommend the Chinese citizens to avoid the turbulent situation and domestic chaos of certain countries and regions, namely “China consular protection and service

12 “Chinese Ministry of Foreign Affairs set up consular protection center”, http: //news. Xinhuanet.com/, August 24, 2007. 13 Shi Hongtao, “China will establish five mechanisms to protect the safety of overseas citizens ‐ Interview with Deputy Director of the Ministry of Foreign Affairs Wei Wei”, China Youth Daily, December 28, 2005. 14 Ministry of Foreign Affairs Consular Protection Center in Beijing officially established Yang Jiechi speech, the central government portal www.gov.cn August 23, 2007 http://www.gov.cn/jrzg/2007‐08/23/content_725761.htm

521 guide”.15 Besides providing timely information about the prevention, another important content and feature of China’s consular protection mechanism is rapid and efficient disposal in time of emergencies and in the troubled and turbulent countries and regions. For example, as early as the 1991 Gulf War, China evacuated its people from Iraq. In 2015, China successfully carried out nearly 80,000 consular protection and assistance cases, including evacuation of more than 6,000 Chinese citizens from regions suffering war and natural disasters and rescued more than 50 Chinese citizens who were unfortunately hijacked. From 2005 onwards, the Chinese government continues to systematically evacuate its citizens from areas of crisis and war, fulfilling its commitments of foreign policy to better protect the interests of Chinese enterprises and citizens abroad. Over the past decade of 2006 ‐ 2015, China has implemented a dozen large‐scale evacuations of its overseas citizens, such as from the Solomon Islands, East Timor, Lebanon, Tonga, Chad, Thailand, Haiti and Kyrgyzstan, and the total number of the withdraws reached 6,000. In particular, the year of 2011 is a landmark year in China’s consular protection, when China successfully evacuated from Egypt, Libya and Japan 48,000 its citizens in total. The number of evacuations in that single year is five times more than the sum of the past 30 years from 1980‐ 2010! Also, the withdrawal and evacuation from Libya in 2011 is particularly significant for China’s consular protection. China and some European countries carried out a lot of diplomatic cooperation during the evacuation from Libya, which therefore is a milestone in the China‐Europe consular cooperation. For example, Greece and Italy became the transit of tens of thousands of Chinese people from Libya, and Malta provided services for those evacuated Chinese citizens. Also, in the preparatory stage, China sought for advice and views of some European countries (such as the United Kingdom) that had a valuable evacuation experience by means of military assets and operations. From the above, it is evident that the Chinese government attaches great importance to consular protection, and makes continuous improvement of relevant mechanism and practice.16 China’s overseas citizens thus can get quick and significant consular protection, when

15 ”China Consular Protection and Assistance Guide” (2015 edition), Internet: http://cs.mfa. gov.cn/gyls/lsgz/ztzl/lsbhzn2015/ 16 Global Consular Protection and Service Emergency Call Center of Chinese Ministry of Foreign Affairs, Internet:http://cs.mfa.gov.cn/gyls/lsgz/ztzl/lsbhyfwyjzx/

522 their personal safety of life and property is under threats. During the years, China’s ability of large‐scale evacuation and consular assistance has been improved and promoted as well. In doing so, China has won universal praise from the international community. However, with the international and regional security situation increasingly complex, and with a surge of Chinese overseas citizens, China’s consular protection is facing some challenges. According to a report of threat warning from 2008‐2010 by the Chinese Ministry of Foreign Affairs, “the special reminder” information on the Western Europe, North America, Eastern Europe and South Asia, accounted for 15.9%, 15.2% and 5.5 % respectively in the total number, and Sub‐ Saharan Africa and the Middle East and North Africa were 27.2% and 6.2% and the Asia‐Pacific region was 21.9%.17 The Chinese consular protection is facing much pressure of meeting the increasing needs of protecting its overseas people. In this context, it is necessary to promote the international cooperation in the area of consular protection, and the CEECs are expected to become important partners of China in the implementation of the “OBOR” initiative in the future.

CHINA – CEECS COOPERATION: POSSIBILITIES AND CHALLENGES18

The significance of protecting the safety of overseas citizens lies not only in the ability of a country to adjust the system and improve its capacity but also in the development of its external relations. China and Europe face the same risks and threats in protecting overseas citizens. As said in the above, consular protection does not only deal with sudden or crisis events, more importantly, it needs to strive for preventive measures. China’s consular protection mechanism and concrete practice in this regard have made remarkable achievements, demonstrating to the world a good image of China

17 See Wang Duanyong, Chinese Overseas Citizenship Security: Based on the Quantitative Interpretation of the Ministry of Foreign Affairs’ Special Reminder (2008–2010), Chinese Journal of Diplomatic Review, No. 1, 2011, p. 65. 18 The part is based on and extracted from the author’s earlier study on “Consular protection: Security Cooperation between China and Europe under the OBOR framework and its Outlook”. See Zhao jizhou, “Consular protection: China – Europe Security Cooperation under the OBOR framework and its Outlook”, in Huang Ping and Zhao Chen (eds.), The Belt and Road Initiative and Europe, Current Affairs Press (Beijing, China), March 2017.

523 as a responsible big power. In particular, China has also provided assistance and protection to foreigners, including Europeans in third countries, such as in the 2011 Libya, and thus enjoyed a good reputation from Europe by building China’s soft power. It is undoubtedly necessary and beneficial to strengthen the mutual understandings and friendship between China and the European countries including the CEECS and their people, by promoting exchanges and cooperation in consular protection. To enhance the cooperation in consular protection between China and the CEECs, like the implementation of evacuation operations in third countries, is helpful in making their concepts of foreign policy closer, for example, “human security” and “win‐win situation”, etc. For the CEECs, the expansion and promotion of China’s consular protection will be of help for their citizens more effectively through exchanges and coordination with China in the face of crises and emergencies. In addition, the CEECs can also learn from China’s experience of providing consular protection for larger expatriate groups, which is particularly important for European countries with a smaller population.

CHINA AND THE CEECS AS INDISPENSABLE PARTNERS IN THE “OBOR” INITIATIVE

In fulfilling the “OBOR” initiative, China and the CEECs are indispensable partners which should work together to promote peace, stability and development. The “OBOR” initiative serves as an important link in enhancing the political and economic relations between China and the CEECs. Also, both sides have a common interest in dealing with the Eurasian continent’s religious extremism and potential terrorist activities. This can be a solid foundation for China and the CEECs to cooperate in consular protection. Therefore, the “OBOR” initiative not only helps to promote trade and investment between China and the CEECs, but also provides a good opportunity for them to carry out the cooperation to cope with many non‐ traditional security issues. China and the CEECs should cooperate in consular protection to assume their international responsibility for peace and stability by gradually taking a more constructive attitude under the “OBOR” framework. In doing so, the “OBOR” initiative will open up new possibilities for China and the CEECs to strengthen their mutual trust and political cooperation. There is already some basis and new opportunities for China

524 and the CEECs to carry out their cooperation in consular protection. For example, in the 17th China‐EU Summit Joint Statement of June 2015, China and the EU pledged to support the “OBOR” initiative to interface with the EU Strategic Investment Plan. Based on the “China‐EU Strategic Plan for Cooperation 2020”, the “OBOR” initiative involves two major areas of Sino‐ EU cooperation: trade and investment, peace and security. In the future, China and the CEECs can strengthen cooperation in the area of consular protection in accordance with these official statements. Also, in consular protection, sovereign states are usually the most important actors that bear full and ultimate responsibility to protect their overseas citizens. Therefore, the China‐EU cooperation in the field of consular protection will be mainly carried out between China and the EU member states, including 11 of the 16 CEECs. Such cooperation will range from conducting simulated operations to holding evacuation exercises, etc. Also, at the EU level, China can strengthen the exchanges of experience and skill‐training with relevant institutions and officials of the EU. Both sides can learn from each other on legal mechanism construction and conduct closer communication on consular protection.

TO STRENGTHEN COMMUNICATION AND COORDINATION BETWEEN CHINA AND CEECS

Consular protection, in reality, is often facing a number of challenges and even risks, while it remains limited if compared with the highly increasing demands from the citizens who are getting into trouble abroad. In recent years, political turmoil in some countries and regions threatened both Chinese and European citizens’ lives and property security. However, consular treaties are mostly conservative in the exercise of consular protection, and often require consular officials to perform their duties only in the territorial districts, except where the consent of the host State is available. As a result of the above factors, in the event of certain emergencies or conflicts, it is not possible for consular officials to exercise consular protection immediately and efficiently if according to the current consular treaties. Otherwise, consular protection would turn into a diplomatic intervention that will, in turn, affect the efficiency of protecting the overseas nationals and their property. Therefore, it is necessary for countries including

525 China and the CEECs to strengthen communication and coordination before and during certain consular protection cases. Furthermore, if there is crisis happening in some third countries or other regions in the future, China and the CEEC might need to work jointly to carry out withdrawals or evacuations of their overseas citizens. At such time, timely and frequent coordination is obviously important and beneficial for both China and the CEECs. In particular, in operating an evacuation, some countries concerned will inevitably compete with others for local resources, especially those security and transport resources such as ships, planes and even troops and police. In the case of evacuation, first, China and the CEECs can start with the expert‐ level dialogue which includes practitioners as well, in order to summarize lessons from the past, identify common challenges, and so on. Second, China and the CEECs can hold joint exercises of handling crisis to assess the need for coordination and cooperation. Such exchanges may require the participation of not only diplomats and consular officials but also representatives of overseas companies, to realize a similar effect of a joint military exercise. Finally, China and the CEECs can also explore how to reduce the cost of consular protection and even evacuation and to overcome some technical problems. Also, China and the CEECs can implement specific consular protection through international cooperation, by holding international conferences and/ or publish works and manuals in multiple languages on consular protection, and even organize some training courses for the Chinese and the CEECs companies and their employees who can thus be well‐prepared with safety warning, operating procedures and risk management concerning consular protection. Such efforts will become the new driving force for cooperation to tackle threats and risks faced by the Chinese and Europeans.

PROSPECTS OF CHINA – CEEC COOPERATION IN CONSULAR PROTECTION

After entering into the 21st century, China’s exchanges and cooperation in consular protection with European countries are more frequent and more in‐depth. For example, on 15 October 2014, the first round of consular consultations between China and the Czech Republic was held in Prague to exchange an in‐depth exchange of views on the maintenance of the legitimate

526 rights and interests of both countries’ citizens. Efforts made by China and the CEECs to strengthen cooperation in consular protection are conducive to protecting and improving the safety of both citizens overseas. However, at the same time, the China ‐ CEECs Cooperation in Consular Protection still faces some challenges and obstacles. Firstly, China‐CEECs need more political will and mutual trust to exchange and cooperate in consular protection. The embassies and enterprises of China and European countries in third countries may consider it more important for them to work closely with the governments, political parties and local political forces in third countries on their own, to improve their image in a local country and to avoid becoming targets of threats. However, such goals usually require long‐term efforts and investment of human resources and other technical expertise. Moreover, because of the sensitive nature of consular protection, sovereign states sometimes, if not always, are more willing to take unilateral actions, such as withdrawal and evacuation from troubled countries and areas. In addition, 11 of the 16 CEECs are the EU member states which may tend or mostly choose to implement consular protection through bilateral cooperation between the EU member states, rather than turning to non‐European actors like China for help, and vice versa. Also, it is not likely that both China and the CEECs will prioritize consular protection simultaneously on their policy agenda. Secondly, for the CEECs one of the obstacles to their cooperation with China in consular protection is their own capacity gap. Some of the CEECs may not have a lot of experience and practice in evacuation operations, which is another challenge for them to cooperate with others. As a matter of fact, the population size and foreign policy priorities are quite different among CEECs, some of which are the EU countries and will mainly turn to the EU and its big member states concerning consular protection. Those non‐EU CEECs, however, have their own legal mechanisms while their capabilities are also uneven. These factors may hinder their cooperation with China’s substantive and reciprocal cooperation in the future. Therefore, some CEECs need not only to continue to construct their crisis response mechanisms, but also to improve their resources and capacity of dealing with various crises. As for China, it also needs to continue making more efforts in training consular officials and company staff, improving its early warning system and enhancing exchanges and cooperation with the CEECs in the future. Last but not least, the cooperation between China and the CEEC in consular protection should also take into account the actual and especially potential risks in third

527 countries and regions, where there are often problems of failed governance, backward economy and the accumulation of social and political conflicts. Therefore, the cooperation between China and the CEEC in consular protection should, when necessary, jointly discuss both technical issues and political ones and sign some agreements on consular protection mechanism and skills, to carry out timely and effective communication and collaboration by integrating the use of relevant policy and material resources; at the same time, China and the CEECs can also consider the combination of their respective development aid policies towards a specific region or third countries, which can contribute to mitigating, reducing conflicts or crises and other chaotic situations and fundamentally promote peace, stability and development in there. However, from a historical perspective, such goals cannot be easily achieved overnight.

CONCLUSION

This paper introduced the connotation of consular protection, discussed the common consular protection mechanism of the EU, and the consular protection mechanism of China. Then, it explored some possibilities and difficulties of cooperation between China and the CEECs in consular protection. It argued that with increasing political mutual trust between China and the CEECs, the “OBOR” initiative provides a good environment and opportunity for their cooperation and exchanges in consular protection. Meanwhile, there are still some obstacles. This study argued the necessity of consular protection for European and Chinese citizens under the context of the “OBOR” initiative, and exchanges and cooperation between China and the CEEC in the field of consular protection are conducive to the promotion of China‐CEECs relations.

BIBLIOGRAPHY

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528 Shi Hongtao, “China will establish five mechanisms to protect the safety of overseas citizens ‐ Interview with Deputy Director of the Ministry of Foreign Affairs Wei Wei”, China Youth Daily, December 28, 2005. the United Nations, A More Secure World: Our Shared Responsibility Report of the Secretary‐General’s High‐level Panel on Threats, Challenges and Change (2004), Internet:https://documents‐dds‐ny.un.org/doc/UNDOC/ GEN/N04/602/31/PDF/N0460231.pdf?OpenElement Vienna Convention on Consular Relations, http://legal.un.org/ilc/texts/ instruments/english/conventions/9_2_1963.pdf Wang Duanyong, Chinese Overseas Citizenship Security: Based on the Quantitative Interpretation of the Ministry of Foreign Affairs’ Special Reminder (2008‐2010), Chinese Journal of Diplomatic Review, No. 1, 2011. Xi Jinping, “Adhere to the Overall National Security View and Take the National Security Road with Chinese Characteristics”, Xinhua News Agency, 2014‐04‐15, Internet: http://news.xinhuanet.com/2014‐04/15/ c_1110253910.htm Xia Liping, Review of the progress of common consular protection in the European Union, Chinese Journal of European Studies, No.2, 2010. Zhao jizhou, “Consular protection: China ‐ Europe Security Cooperation under the OBOR Framework and its Outlook”, in Huangping and Zhao Chen (eds.), The Belt and Road Initiative and Europe, Current Affairs Press (Beijing, China), March 2017.

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INTERNATIONAL Scientific Conference Initiatives of the 'New silk road' ‐ Achievements and Challenges (02 ; 2017 ; Beograd) Initiatives of the 'New Silk Road' ‐ Achievements and Challenges / edited by Duško Dimitrijević and Huang Ping. ‐ Belgrade : Institute of International Politics and Economics, 2017 (Belgrade : Donat graf). ‐ 529 str. : tabele ; 24 cm

"Thematical Proceeding from the International Scientific Conference: Initiatives of the 'New silk road' ‐ Achievements and Challenges Belgrade, July 12‐13, 2017" ‐‐> spor. nasl. str. ‐ "In co‐operation with the Institute of European Studies (IES) and the Chinese Academy of Social Sciences (CASS) from Beijing, the Institute of International Politics and Economics (IMPP) organised the second annual scientific conference: Initiatives of the 'New Silk Road' ‐ Achievements and Challenges. The international conference took place in Belgrade on 12 and 13 July 2016. ‐‐> Preface. ‐ Tiraž 100. ‐ Napomene i bibliografske reference uz tekst. ‐ Bibliografija uz svaki rad.

ISBN 978‐86‐7067‐246‐8 a) Међународна трговина ‐ Кина ‐ Европа ‐ Зборници b) Геополитика ‐ Кина ‐ Европа ‐ Зборници COBISS.SR‐ID 250946060