China’s growing clout in Eastern Europe

Eastern Europe has long been dominated by the economies and politics of Germany and Russia, but slowly and quietly a new player is emerging – China. Chinese influence is still small compared to its impact on other emerging economies, but its businessmen and political delegations are seen more and more at trade fairs and at meetings with the region’s governments who are all eager for a slice of the Chinese investment pie. Below I provide a snapshot of Chinese trade and investment in some of the countries across the region.

Poland

Poland has seen Chinese imports flood into the country with a total of US$ 22.5 billion in 2014 (the second biggest after Germany). On the other hand Poland has not had much success in exporting to China (only exporting US$ 2.4 billion), and the government and businesses will be looking at ways to increase this figure.

Chinese investment has also been successful in Poland, the Liugong Machinery Company from Guangxi Province purchased the formerly state owned Huta Stalowa Wola (HSW) Group, which specialised in building heavy machinery, such as bulldozers, cranes and wheel loaders.

 Hungary

Chinese premier Wen Jiabao described Budapest as a pearl on the Danube, kind words, but there is substance behind them; Chinese companies have placed a great deal of money into the central European state. There are plans to turn the forgotten Szombathely airport into a major cargo hub, complementing the Chinese built logistics centre that already exists in the country. In addition there are now plans to build solar panels, critic acid plants and a whole host of other projects. Wanhua Industrial Group recently spent US$1.6 billion on purchasing Hungarian biochemical giant, BorsodChem.

Czech Republic

Chinese investment in the Czech Republic was slow to take off although Czech car maker Skoda has been highly active in China successfully setting up car plants in conjunction with the Shanghai automotive company. Now Chinese investment is picking up a more rapid rate and companies like Sichuan Changhong are setting up TV and other assembly lines as they realise the nation’s strength in manufacturing capability, relatively low costs and Central European location. The Czech Republic also recently enjoyed a high level delegation from China which has help cement strong ties between the two nations.

Slovakia

Chinese investment has started to take route in the Central European country, with China’s Flameshoes opening a factory to produce footwear in the East of the country. Slovakia’s central location and proximity to other markets was seen as crucial to the decision to go there.

Lithuania

The Baltic state has looked to the EU as its main trade partner following its independence from the USSR, but has also found success in selling agricultural products to China. But a meeting between Lithuanian officials and the Dalai Lama will put a hold on relations warming any further for some time now.

Moldova

Moldova and China have developed strong trading links, primarily in China’s favour, which has become the third biggest importer to the country after neighbouring Ukraine and Romania. However Moldova has started to have some success in exporting its wine to China. Red wine is taking off in a big way as Chinese consumers want to try new drinks aside from beer and local spirits. Although Chinese purchases of vintage French reds have taken the headlines, there is also a demand at the lower end of scale where Moldovan produce can fill a niche.

Estonia

Economic relations between China and Estonia remain low key – total trade was worth around US$270 million in 2012 along with Chinese direct investments totalling $10 million.

Latvia

Chinese – Latvian relations have grown considerably in recent years, aided by an active business council. Latvia exports wood and electronic products to China at the same time importing machinery and electronic goods. Latvia is seen as the hub for Chinese investment throughout the Baltic region, with companies viewing its low tax and light bureaucratic touch as highly attractive. A rail link from Urumqi in the West of China to Riga can now transport goods in just 15 days.