China and Poland: Between Expectations and Disappointments

China and Poland: Between Expectations and Disappointments

It was early 1951.

Young People’s China was desperately fighting with isolation imposed by the West on trade and maritime transport. To cope with the boycott Poland and China launched the concept of setting up joint ship owners company in the port of Tianjin. Onboard of the vessels spot in the Polish flag Chinese cargo could move freely across the seas.

Though the capital should come from the communist Poland there were some vigilant comrades who got principal doubts if any foreign capital should be allowed into China at all. They brought the issue to the highest level .The answer of Chairman Mao was the simplest possible: Haohao gan.

This is how the first ever joint venture company has been established in People’s China and it was the company with the Polish capital.

Less than two years before, on the 7 of October 1949, MFA in Warsaw received letter of approval from PM Zhou Enlai to the Polish proposal to establish full diplomatic relations. Soon Poland became the second nation, just after the Soviet Union , to open its embassy at the new central government of China. That wasn’t just a purely diplomatic act: a lot of Poles shared with millions of other left wing oriented people in the world sincere fascination with victorious Chinese revolution .

Next decades brought various ups and downs in bilateral relations resulting from internal developments in China and international relations, basically between Moscow and Beijing.

The enormous political weight has had Mao Zedong personal pressure on that time Kremlin leadership to stop the plans of the Soviet military intervention to suppress democratisation in Poland in 1956. “ The new Polish party leader Gomulka is their local Mao, the national communist “ – explained Mao at the Chinese Politburo meeting where decision has been taken to send the PRC head of state Liu Shaoqi to curb Khrushchev.

The long-term Soviet-China conflict and then paroxysm of the Cultural Revolution have frozen bilateral relations for almost two decades.

Nevertheless elder generation of Chinese still remember the first ever foreign national choir and ballet to visit China: the stunning Polish “Mazowsze”. I was taken by surprise by Chinese grannies singing to me during Shanghai Expo old Polish song Cuckoo cucoon they turned out to remember after all turmoils of their lives.

The elder Poles recall how in the beginning of 80’s Beijing has provided hefty financial support to improve desperate food supply crisis in Poland.

Historians remember that for 12 years until President Nixon’s trip to China the only place in the world Chinese and American diplomats could meet was Warsaw as the Polish government created a cozy platform for totally secret negotiations. The Warsaw palace became our times destination of pilgrimages of Chinese delegations.

After 1989 China hasn’t been in a hurry to Poland. Firstly, China got that time completely different priorities including successful expansion to Asia, Africa, Western Europe. Secondly, the experience of CEE socio- economic transformation with the Polish shock therapy at the forefront, didn’t appear too interesting as not applicable into Chinese reality and radically different to the concept of gradual reforming by Deng Xiaoping.

Meanwhile, Chinese position in global governance dramatically transformed .

This shift, was due to China’s changing status from a revolutionary state to one embarking on the process of painful growth and reconstruction to, finally ,become the key global player.

For a long time China followed a formula and strategy of keeping a low profile usually identified by the famous motto ‘tao guang yang hui’ (conceal your capabilities and avoid the limelight), as dictated by the reform visionary Deng Xiaoping and known as the ‘Constitution of 28 Chinese Characters’.

However, since late 2012, under the current leadership of the ever-stronger, charismatic president Xi Jinping, this strategy has been abrogated. Chinese leadership under Xi has dramatically been changing its approach to country’s role in global governance. China is moving from low profile in international affairs into growing assertiveness and strong external engagement. There is no doubt China is going to play important global role adequate to its economic power. The major tool in fulfilling China’ s aspirations becomes the Grand Strategy of Belt and Road / BRI/ applied in number of ways. This is enormous infrastructure project attractive to the developing, countries, economic programme enabling Chinese capital expansion and political endeavour- the instrument of Beijing soft power.

China is no longer a shy giant. The question whether on the way has become an aggressive giant. The diagnosis is important first of all in global terms, but at the same is vital to formulate Poland’s national strategy and approach to growing Chinese presence .

It seems that at this stage Chinese leadership objective is to be integrated into existing system of global governance diluting the cure t authority of the West. The Belt and Road Initiative creates a lot of opportunities to its partner countries including EU members. The Chinese Initiatives are getting more attractive to Europeans due to withdrawal of Washington administration from number of principles of free trade and crucial global policies as climate strategy.

Not so many evidence could be find to prove China’s policy is aimed undermining the global system with some radical revisionist agenda.

However, as the global position of China is relatively new phenomenon negative scenarios can not be excluded.

Whatever long term aspirations of Beijing are at the current it seems powerful China wants to be first violinist in global symphony orchestra rather than to create its own philharmony. As Shaun Rein, Managing Director of CMR, the world’s leading strategic market intelligence group is repeatedly convincing American policymakers to understand China is not looking to challenge and replace the American-led world order as the Soviet Union wanted during the Cold War. President Xi wants China to have a greater say in international affairs that an economic power of China’s size deserves.

Is China economic threats to CEE and, first of all Poland ?

First of all, it must be remembered that from the Chinese perspective, not only Poland, but the entire region of Central and Eastern Europe is of marginal character. Only after 2011 the formula 16 + 1, including 16 countries from Estonia to Macedonia plus China / since last year 17+1 as Greece has been added / placed the region on the agenda of Chinese foreign policy at all.

The real dimension of 16 + 1 platform, the major tool of Chinese policies in the region as seen from Beijing has been clearly expressed by CASS – China Academy of Social Sciences – Dr. Chen Xin as the platform designed mostly for people-to-people exchange, and far less about investment and trade. Moreover, he added, that presumably, it can be treated just as a complementary format to BRI. The level of involvement of China in the region is mostly based upon press speculations and politician’s expectations and hopes rather than active Chinese measures aimed at economic or political conquer. This is partly the result of the fact China with typical approach of the great power and without too much concern about local differences put into one basket of its CEE policies countries united by merely one fact : they used to be communist before the fall of previous regime. Consequently, they made an effort to pursue the same approach to members and non members of EU and so different areas as the Balkans and the Baltic states.

The outcome is that within the platform there are in fact two separate groups 5+1 and 11+1. In case of five nations of the Western Balkans we may notice progressing success of Chinese strategy tested before in many underdeveloped regions of Asia and Africa: coming with infrastructure projects based on loans by China policy banks. As simple as that – if Chinese corporations wouldn’t build bridge in Belgrade or highway connecting Skopje with Albanian boarder nobody would do it. Limited access to any other financing is definitely opening doors wide to Chinese influence.

As far as 11 EU member states are concerned having access to many other sources of the infrastructure financing, instruments offered by China are not attractive enough even though Beijing is making some efforts by creating tailored cut investment funds for the region in addition to classical loans.

When it comes to Poland, the largest country of the region, despite numerous high-level meetings and memoranda signed, they have a minimal effect on the Polish economy and real Warsaw – Beijing cooperation. This opinion is shared by Prof Bohdan Goralczyk while stating that for now, the implementation of the proposed projects and ideas is weak, due partly to unpreparedness on the European side, but also to the differing business mentalities and a lack of trust.

However, according to Goralczyk, the debate in which the 16 + 1 and BRI are framed in terms of the threat they pose to European unity should be treated as exaggerated. If both trade and investments are taken into consideration, the picture is clear. Currently some 90% of all bilateral Eu–China trade still takes place within the bigger EU markets with CEE playing in reality a marginal role in relations with China. Moreover, in the 21st century, deficit of Poland’s foreign trade with China increased more than nine times, reflecting the inability of Polish businesses to make good use of their export potential in relation with the Chinese market.

Mixed signals flow from Warsaw to Beijing. On the one hand, we have had visits of both heads of state and the Polish ex- PM, the unequivocal support for the cornerstone of China’s global policy, BRI – the vision which aims, inter alia, to increase the Chinese presence in Europe through the construction of land and sea communication routes. “The greatest geopolitical vision of the 21st century” – that’s how clearly stunned Poland’s President Andrzej Duda described BRI.

Couple years ago it was hard to resist the impression that the flagship project of the government camp – Central Communication Port – is cut to fit into Chinese financing and contracting. The same with some bold investments in the Polish ports and harbours.

On the other hand, besides political declarations, tape-based government agreements and enormous number of business delegations travelling to and fro little is happening in practice. None of these and other infrastructural projects went an inch beyond the stage of politicians’ declarations, studies and journalistic polemics.

Moreover, there is a little doubt that all intergovernmental project have been put on hold as a result of dramatic swift in global policies i.e Poland’s no 1 ally firm containment strategy.

It was enough, however to forcefully formulate warnings from some of the influential government circles in Poland on the threat created allegedly by China to not only Polish economic independence , but also emphasizing the threat to Poland 's sovereignty.

The major problem causing emissions of chaotic signals to China or /and Poland’s passivity is lack of long term national strategy in relations with Beijing. The decision making is split between not only various state bodies – Prime Minister, President, various ministries – but even worse – various factions within the ruling camp. Polish policies is purely reactive, motivated by various international impulses, mostly Donald Trump’s scenarios, and event-to event decision making. The think tankers are frequently amazed seeing as after long period of demonstrating negative approach to China – on the eve of top of level meeting Poland starts unexpected diplomacy of compliments. All in all, zigzag political line is a rule, not exception.

China’s approach to the countries of the CEE region do not necessarily match with the situation with Germany. Germany which is struggling to protect producers of unique technologies from Chinese purchases as recently with the leader of the robotics market, taken over by the Midea fund.

Seen from Beijing, Central and Eastern Europe, including Poland is the source of too little modern technologies to engage into major industrial investments.

Beijing is also taking into account possibility of rising confrontation between Poland and China as a result of following the current US pattern.

The practice brings examples of further risk elements: blind entry into the market – the Covec group participation in the construction of the A2 motorway section or a risk of inadequate local management conditions – casus of Liugong buying civil part of the plant in Stalowa Wola. All these factors are analyzed by Beijing think tanks and undoubtedly slow down the involvement of Chinese capital in Poland.

It wasn’t case of the Chinese political elites only to express indignity after some widely covered by Chinese social media facts of detention of Huawei employee, and last November Duda – Pence declaration on China.

From the other side what is visible is a deep mismatch between Polish expectations and China’s actual propositions, particularly as far as financial instruments delivered by the Chinese side are concerned.

For the Polish business community entering Chinese market seems too troublesome to get out from the European cocoon. Moreover, Poland’s companies being more and more successful in Europe and lacking ample capital to get into China with almost zero governmental support.

There is a dramatic asymmetry limiting chances of the Polish economic expansion – on level information about each other. On obvious reasons Poles know much more about China than Chinese know about Poland, especially about real face of the Polish economy. It’s enough to mention that a few years ago almost half of Chinese survey respondents were not sure if Poland is in Europe, bravely pointing out at Russia There are no image building operations aimed at passing through to Chinese decision makers and business message to get closer in touch with Poland. Poland’s image doesn’t exist at all or is deeply outdated being limited to vision of agricultural country at the outskirts of Europe. The recent reform of Poland export promotion system turned out to be disaster in case of China: lack of any presence in Beijing and replacing weak offices with diplomatic status with two one man show companies in Shanghai and Chengdu. All efforts to set up the Polish chamber of commerce in China failed . The government abandoned run since 2013 program Go China designed to encourage bilateral trade and investments.

The asymmetry in trade balance is indisputable: one to fourteen. No one sane dreams about the parity but no wonder the requirement to improve the balance is the very first message the Polish leaders are conveying to Zhongnanhai.

There are some positive aspects of growing import from China softening pessimism of pure static imbalance. According to data of the Ministry of Development roughly 60 per cent of the imports are components and semi products to Polish industries. China is the major sourcing place for automotive, pharmaceutical, household appliances . As for years by now Poland is attracting manufacturing FDI in practice each progress in re industrialisation means automatically growing imports from China.

As government to government initiatives are not of any success so far in business to business relations are more optimistic. The Chinese corporations already now are regulating rivers, building highways and electrical grid as they manage to win the public procurement processes – hard to imagine in the majority of other EU countries. However, all what happens in the economic area is below China’s potential and growing role of Poland.

The key question is: will China, in the next few years, be interested in economic expansion in Poland or vice versa – should Poland see the benefits of building the New Silk Road and seriously set about soliciting more Chinese economy in Poland and the Polish in China.

Then it may turn out that the threat is not Chinese economic aggression, but the inability to attract Chinese investments into the region and replacing policy of complaints with policy of facts.

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