1. Partners or Rivals? China and Central Eastern Europe
Dr Marta M. Golonka

2. Big Debates
The more we know about China, the better prepared we will be for its potential impact; dangers and opportunities
Identity Crises
Power, values, interests
Perception
Role of the state versus business
Domestic and international politics

3. China’s Growth

4. Medium Term Forecasts of GDP

5. Kuexue Fazhan Guan Hu Jintao’s Sientific Outlook on Development
Incremental policy reform- transition to Xi Jingping
CEE- shock therapy versus gradualism
Development; sustainable and inclusive growth models
Consumption versus investment
Unbalanced & uncoordinated- UNSUSTAINABLE
Middle Income country trap- CEED Institute

6. Shift to the East- China and CEE in international relations
China’s potential as well as internal instability
CEE recovery from global financial crisis
Chinese Five year plans -
Peaceful rise and Going Out strategies - to new and previously neglected regions and sectors
Public Finance / sovereign debt crisis in Europe
Current account imbalances in CEE
Europe –
getting rid of non-performing assets in need of capital and trade diversification
Poland as an exception to recession
Shifting dynamics to the East - growth economies
Crisis and Opportunity
Vulnerability
Similarity between CEE and African investments
EU as main factor in differentiation

7. Scramble for Europe- ECFR
Chains of influence
transport, logistics, distribution, local assembly
Trade relations
Capital, bonds, and reserves
Credit and Bank financing - EU needs it
Foreign Direct Investment
M&A, branches and capital investment, joint ventures
EU - targeting going up the value chain sectors; high and green-technology, brand names, know how, and supply chains
Sectors
IT, software development, automobile parts manufacturing, advertising agencies, water pollution control
CEE- secondary sector

8. Partners or Rivals? Chinese Investments in CEE
Going Out Strategy
Intentions? Pragmatic, analytical, geopolitical, and economic
Sun-Tzu Charm offensive and psychological diplomacy
Strategic Partnership - April 2012, Warsaw, Wen Jiaobao
12 Step Strategy
Economic and public diplomacy
Big Investments: SOE’s, China Investment Corporation, private investors
Diaspora- economic migrants and networks of Chinese (Wolka Kosowska, Jaworzno)

9. China’s growing presence in CEE
Less than seven years ago, Chinese investments in the region were almost non-existent. In 2004, the total flow of China’s FDI in the Czech Republic was only 0.35 mln Euro; in Poland, 0.08 mln euro
In recent years, China has significantly increased its foreign investments in the whole CEE region. China’s outward FDI stock in the area, which was only of mln Euro in 2004, augmented to mln euro in 2010
2010- CIS/ EE- geopolitical strategy (loans, infrastructure)
2010- CE - low-tech factory
In 2011, 633mln Euro went to Pl making it the region’s largest recipient of Chinese FDI
Poland exported 1.35bln Euro to China in 2011, imported 13.2bln Euro, with a 5% increase on overall volume of trade. HSW was taken over by LiuGong

10. China’s outward FDI stock in CEE in MLN’s US$

11. China’s outward FDI stock in the CEE region, 2010, mlns of US$

12. China’s main outward FDI stock in the CEE region, 2006&2010, millions of US$

13. Global distribution of China’s outward FDI flows by industry, 2010

14. CEE & China Active states - Hungary, Czech Republic Passive - Poland
Traditional Allies: Bulgaria and Romania
Smaller states: Baltic's (Estonia); Slovakia, Slovenia
Human Rights - Dalai Lama Effect
China’s own strategy: choosing partners
Regionalism according to China - political will is clear
Opportunity for Poland - Strategic Partnership

15. Chinese - business, ethics and politics
Sacred Continent and ancient civilisation- isolation, barbarians
Old China versus New
Personal Relations- transaction versus relationship- Guanxi
Psychological charm offensive
High Level delegations
Long term strategy – geopolitical and economic motives
Confucius society- partnership?
Double sword and situational ethics
Divide and conquer
Reward and punish- human rights
Gradual observation- five year plans ( )

16. Multicultural Management
The Covec fiasco May 2012
Miscommunication and misperception
Regulatory issues
Respect for authority
Political ties
Budget and competition policy
Local competition in Poland
Media
Consequences

17. Public Diplomacy and perception
Is China really a threat?
Low success rate of Chinese ODI especially in European M&A’s- 55%
Lessons of Covec
Culture and local customs
Absentee landlord
Consultants and advisors- young, inexperienced management
Chinese networks
Media and public diplomacy offense campaign of the Chinese

18. The way forward What can CEE sell to China- CA and empty container
Competitiveness - enterprises unprepared; however adaptable such as EU market experience
Economic Diplomacy/ Commercial Services
Importance of institutions & regulation
Local presence
Polish Go China programme- and The Delta of the Yangtze River
Sectors: amber, jewellery, furniture, cosmetics, food, healthcare, software programming, culture, education and tourism
Energy
Joint ventures and partnerships- win-win
Global supply chain and production
EU as platform

19. Barriers to investment- speculation and analysis
Trust and miscommunication
Power
Values
Interests
Diaspora and Big Firm examples
Lack of knowledge and understanding
Stereotypes
Chinese protectionism of its market and in CEE
Weak commercial diplomacy in CEE
Pragmatism versus naivety and ignorance
Strategy?

20. Situational ethics Sun-Tzu in practice Calling white, black
Negotiations tactics
Saving face and not offending your partner
The law is powerful, the one breaking it, is even more
Cultural clashes- misinterpretation
Chinese lessons- learning by imitation of others
We should not say yes to every investor
Unilateral Chinese win

21. Eating the Emperor’s Grain
New China and Old
Hiding their brightness? (financial crisis changed this)
Chinese Nationalism
Contentious intentions
Uneven development and inequality
Lack of institutional stability
Corruption
Climate for investment into China

22. EU policy towards China
With rising Chinese investment in EU, we should understand what kind of China we are dealing with
Chinese Going Out Strategy is long term and cohesive - while flexible/ EU is inconsistent and fragmented
Power imbalance
Lack of prioritisation and coordination in EU
Shale gas example
Dangers of divide and conquer
Not grand idealism, but concrete cases of pragmatism and mutual interest