China's Eurotunnel

China is digging its way into Europe via traditionally ‘peripheral’ states, creating a chasm between those that will accept its money and those that will not accept its dominance.

Paid subscribers can listen to an audio version of the newsletter here!

Two months after receiving Xi Jinping in his home country, Victor Orban, president of Hungary, returned the visit last week, apparently much to everyone’s surprise. The visit follows Orban’s trip to Kyiv and Moscow, all part of a ‘peace mission’ during which Orban discussed the possibility of a ceasefire between Russia and Ukraine. The extra step to China was critical, Orban stated, as China is "a key power in creating the conditions for peace in the Russia-Ukraine war". He did not take the time to visit the US.

All these visits drew ire from fellow European nations, who were quick to assert that despite Hungary’s current presidency of the EU, none of these actions were taken with their support nor did they represent the prevailing views of the EU. Orban, you may or may not know, is a hugely unpopular among other European leaders:

Over the years, the Hungarian leader has acquired semi-pariah status among the majority of European leaders. His government is viewed as authoritarian, illiberal, populist, nationalist and even xenophobic. Most European capitals are extremely wary of any policies originating from Budapest.

To most European leaders, being endorsed by Orban is not a badge of honour.

But this is not something that China would care about. Nor, I think, Orban. There is much to gain from friendly relations and new deals signed between the two countries, and not that much to lose. China is set to become the leader in almost every major field, from defence and energy, to transportation and aerospace technology. Whether or not China governs its people in a way that aligns with traditional European values (whatever that means – we’ll get to that later) is of little consequence to countries that have been left behind or forgotten, despite being just as developed as the average Western European state.

This deepening relationship between China and Hungary is causing some concern in Europe, but is just one of several developments in the past few months that show China may be making in-roads in Europe that may destabilise the centrality of the EU and the leadership of the US. While the countries in question are not poor or in need of critical infrastructure as is often the case when we talk about China in Africa or Southeast Asia, most of them are overlooked, shunned, or even actively disliked by liberal Western democracies (we’ll get to why later).

So what do these countries have in common, why is China focusing on wooing them over their Western European counterparts, and why are these relations so concerning for the future of the EU?

Win-win cooperation

China’s friendship with Hungary, and particularly its current leader Orban, has been well-documented. Hungary was the first European country to join the Belt and Road Initiative (BRI), and the two countries have recently announced their “all-weather partnership” aimed at ushering in a new era of economic cooperation. China has financed a high-speed rail between Hungary and Serbia, and is also one of Hungary’s largest investors:

China’s direct investment in Hungary stood at US$8.12 billion in 2023, constituting 58 percent of Hungary’s total foreign direct investment. Since 2020, China has been the largest source of foreign investment in Hungary.

Moreover, despite European Union countries’ increasing tariffs on Chinese EVs, Hungary is strengthening its cooperation with China. The two countries are expected to sign over 18 new cooperation agreements, covering a range of sectors from automotive to nuclear energy.

Poland was one of the first European countries to sign a Memorandum of Understanding with China about the BRI in 2015. The country is now a key stop on the China-Europe Railway Express, a flagship freight project under BRI, that has transported over 8.7 million containers containing goods valued at more than $380 billion since 2011.

Currently, the logistic hub in Malszewice located on the Polish-Belarusian border is responsible for servicing 90 percent of railway cargo exports from China to the EU; the seaports in Gdansk and Gdynia serve as a gateway for furthering Chinese products to Scandinavian countries. Recent investments in logistic hubs in the region seek to promote this trade route.

Two countries on China’s list are not EU members, but are cause for concern nonetheless. Serbia’s nationalist president Vučić is painted as a wiley chameleon, playing both sides against each other by accepting US investment in luxury tourism while also launching a free trade agreement with China this month. He commits neither to siding with Russia and the BRICs nor to agreeing to sanctions against Moscow. He is uncompromising on the Kosovo issue, a key factor blocking admission to the EU. Belarus has been more blatant in its support for Russia in the war in Ukraine, recently holding joint military exercises with Chinese troops as “a response to the "West's aggressive foreign policy towards Belarus" and to "Ukrainian provocation,"” as NATO forces gather along the border. Unlike Serbia, Belarus is not a candidate for EU membership, and is under constant scrutiny for its human rights record.

The drift away from the EU, even by countries that are not members, is still a cause for concern for the liberal democracies of the West. To take one aspect of EU membership as an example, a major advantage of joining the EU is to integrate one's economy fully into a strong, healthy, ostensibly stable central market. The EU is the third largest economy in the world after China and the US, and is a major trading partner for basically every single country connected to the global economy. A desire to reap these economic benefits - along with other benefits such as the visa-free movement of people and access to major grants and development funds - should, in theory, motivate non-members to fix their ‘problems’. Lack of democracy, lack of a free market, lack of reporting on police brutality, etc.

But here is where China poses a fundamental roadblock. If these countries can get what they want from China, then there is no incentive for them to initiate the changes necessary to join the EU, or to benefit from its presence. Why bother reforming democratic institutions when Chinese companies will invest anyway? Why pretend to not be friends with Russia, why give up claims to that contested piece of land, why keep quiet about NATO? China will invest anyway.

Cause for concern

This, I believe, is the root cause of the EU’s concern with China’s growing influence in Europe, and why they’re working so hard to curb it.

The EU has now announced tariffs on EVs and ecommerce giants such as Shein and Temu, in an attempt to stop cheap Chinese goods flooding the European market at the expense of local businesses. But this move is unlikely to be popular with the average consumer, who looks to Chinese products for quick, cheap shopping that is increasingly out of reach in the stagnating economies of Western European countries. This is why the EU seeks to take action to block China as a unified body, limiting individual countries to small, specialised deals with China while the EU itself remains passive-aggressive.

Ironically, these special relationships may undermine the EU’s attempts to impose costly tariffs on Chinese goods. Chinese carmaker Geely recently entered into a deal with state-backed Polish firm ElectroMobility Poland “to develop an electric car that is expected to start mass production in two year’s time”.

Meanwhile, another joint venture between the Chinese EV producer Leapmotor and the European firm Stellantis has started building cars at a plant in the Polish city of Tychy.

Elsewhere on the continent, the Chinese car firm BYD has invested in a plant in the Hungarian city of Sezeged, with a second European site under consideration, while SAIC said this month that it “plans to bring China’s new energy technology and green factories to Europe”.

What good are taxes imposed on outsiders if the products are being made inside the house?

As well as getting around these tariffs, China has decided to retaliate against these pseudo-sanctions too, targeting Spanish pork, which has grown increasingly popular in China, for a probe and possible tariff imposition. This puts the EU in an awkward position, pitting existing individualistic aims against the greater good of the union:

Beijing is deploying a playbook it has used in previous trade skirmishes with Europe, the US and Australia. By targeting agriculture, the soft (pork) belly of Europe, China achieves two objectives: It keeps the conflict contained and leverages the outsized influence of Europe’s farming lobby.

Beijing obviously hopes that EU nations would now pressure Brussels into softening the EV tariffs… Germany was already unhappy with the duties, fearing for its own car sales in China; Spain and France, which appeared undecided, could join Berlin against Brussels.

It’s unlikely that pork will be the straw that breaks the camel’s back, but it is a sign that China knows what it's doing when it comes to working the EU. While it appears as a united front on paper, often the individual desires of a particular nation rub up against the central body. These desires are the threads China pulls on to draw countries closer to it, unravelling the tight-knit fabric of the EU in the process.

Rich people problems

I wouldn’t rule out a certain level of spitefulness in the movement of Balkan and Eastern European countries away from the West and towards China. The hierarchy of European countries is apparent to anyone who lives here, EU membership or not. It’s also solidified in membership in global decision-making bodies like the G7, G20 and NATO.

Again, it’s not that these countries are poor, even by comparative standards, but they’re different from your typical Western European state. All of them are former Communist countries. Most of them are friendlier with Russia than Ukraine. The majority of them have right-wing populist nationalist governments, and one of them is an outright dictatorship. These are shadows that loom large over Europe.

It’s also worth noting that no more than five years ago, it was Western European countries that were welcoming China with open arms. Germany, France and Italy all sought deals and closer ties between the EU and China, as one article points out:

“Italy became the first developed nation to join the Belt and Road Initiative, Greece positioned itself as a logistical hub between Asia and Europe, and France inked a deal to sell 300 Airbus planes to China. All of Europe was open to China, even amid pressure from the US.”

Why, then, should smaller or less prominent countries in Europe block their own opportunities just because others have tried and didn’t like it. Unlike the UK, France, or Germany, countries like Serbia or Hungary do not need to be the bigger party in a deal to think it’s worthwhile. They’ve never been the big fish, even in the small pond of Europe. Why should they care that China may take advantage of them in some way; isn’t that the ultimate goal of any trade relationship?

“Core European Thinking”

We probably didn’t need China’s interference to reveal cracks in the European Union, or in Europe more broadly. Debates over what to do about the war in Ukraine aside, euroscepticism is rising up across the continent in the wake of Brexit eight years ago, and countries like Serbia that were once keen to join the union now seem apathetic. The fact that Hungary can play both sides without fearing repercussions is a clear sign of the waning power of the institution over its individual members.

German Vice Chancellor Robert Habeck said on Monday that Orban does not speak for Europe and that Hungary's politics often do not represent the core of EU thinking. But if the current president of the whole EU doesn’t actually represent the EU, then who does? What is this ‘core European thinking’ of which you speak? Membership of the EU is limited to countries with:

“stable institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; a functioning market economy and the capacity to cope with competition and market forces in the EU; the ability to take on and implement effectively the obligations of membership, including adherence to the aims of political, economic and monetary union.”

It does not say that the democracy must be left wing, that right-wing ideologies or xenophobic policies may not be enacted. It does not state that the market economy must be practised within the confines of what the richest handful of countries dictate, and that ideological allegiance must always be given to the US over China or Russia. Like it or not, Hungary is just as much a member of the EU as Greece, and while its particular political views may not represent the entire EU, they do represent a portion of it.

And this is all besides the fact that the true ‘core’ of Europe is, in reality, its reliance on US global dominance to assure its place in the world. Europe’s empires have long collapsed, and its close relationship with the US is what has allowed the EU to maintain some semblance of global importance after decades of economic stagnation. If China becomes the new world leader, dominating international trade and co-opting developing nations to its political ideology, the EU will be left behind, clinging to the ideology of the old world. 

Unless, of course, the EU as a whole makes a decisive switch to China’s side - a piecemeal adoption by a handful of states will only create a gap. And this is exactly the gap that is beginning to appear between Western European states and ‘peripheral’ ‘Eastern’ ‘Balkan’ ‘non-EU’ states. A gap that is getting wider, and will soon be impossible to bridge.

This gap will eventually pull the EU to pieces.