China and CEE Countries Push for Broader Economic Cooperation in Riga

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Chinese Prime Minister Li Keqiang's historic visit to Riga, Latvia, on November 4, marked the opening of a new chapter in relations between Central and Eastern Europe (CEE) and the People's Republic of China (PRC). During his three-day visit, Li met together with the heads of governments of 16 CEE countries. The summit resulted in a string of far-reaching economic agreements. Notably, officials signed a memorandum of understanding (MoU) on cooperation in the Silk Road economic zone and the 21^st Century Maritime Silk Road initiative. MoUs were also signed regarding cooperation between Chinese and CEE think tanks, on the promotion of cooperation in the field of tourism, as well as cooperation between small- and medium-sized enterprises (Lsm.lv, November 5).

The Chinese prime minister's visit to Latvia was a milestone event in the sense that it enhances the opportunities for Europeans to attract new technology, investment and knowledge. At the same time, China is exploring new ways expand its exports, looking for secure and reliable channels. The CEE region is becoming a distinct link within China's new Silk Road, which will more directly connect East Asia to Europe. With this collection of strategic transit projects, Beijing is hoping to carve out new export markets for its companies as China's domestic economy slows (NRA, November 4).

The aforementioned "16 + 1" summit hosted by Riga was in fact initiated by Beijing. And in addition to the meeting of heads of government, the event brought together 650 representatives of companies from China, Latvia and other CEE countries. The participating businesses spanned the transport, finance, investment, trade and tourism sectors. During the 16 + 1 summit, China launched a 10 billion euro ($10.67 billion) investment fund to finance projects in Central and Eastern Europe. The fund is aiming to raise a total of 50 billion euros ($53.47 billion) in project financing for sectors such as infrastructure, high-tech manufacturing and consumer goods. While targeting the CEE region, it could extend to the rest of Europe and other areas, if relevant to China-CEE cooperation. China’s Deputy Commerce Minister Gao Yan noted that, last year, Chinese companies already invested more than $5 billion in CEE countries (Lsm.lv, November 6).

Symbolically, during Li's visit to Latvia, the first rail cars loaded with containers arrived in Riga from the Chinese city of Yiwu, on November 5. Carrying textiles, plumbing and household goods, the train traveled more than 11,000 kilometers across Russia to Riga in 16 days (Yiwu–Zabaikalsk–Riga). "Riga has already become one of the major global transit points, and direct rail transport to Latvia is being considered the most promising mode of freight to Europe," said Yiwu's Deputy Mayor Kyong Tao (Delfi.lv, November 5). This route is planned to be developed for regular railway consignments every month. Given the great interest in this rail corridor, additional trains will to be organized from Yiwu to Riga in the nearest future.

Since Latvia established diplomatic relations with the PRC 25 years ago, bilateral cooperation has covered health care, culture, education and science. An agreement on defense cooperation was also signed between the two countries in Beijing, in December 2006. And since that time, military observers from the two countries have been present at each others' military exercises and participated in several exchange programs. A high-level Chinese military visit took place in April 2015 (Mfa.gov.lv, accessed November 6).

China is becoming an increasingly important trading partner for all three of the Baltic States—Latvia, Lithuania and Estonia—as their access to and interest in the Russia market has gradually eroded following the restoration of their independence from the Soviet Union in 1990. Moreover, the Baltics' exports to China have been growing. Ten years ago, in 2006, Latvian exports to China accounted for only 10 million euros, while currently they have grown to more than 100 million euros ($106.75 million). Latvian food exports to China, in particular, have found new niches thanks to the certification of a number of dairy and fish manufacturers. In addition, Latvian timber products, cosmetics and electrical equipment have also been making substantial inroads in China (Tvnet.lv, November 5). According to the Latvian Minister of Economy Arvils Ašeradens, Latvia is a destination point for 13,000–15,000 tourists from China annually. He suggested that in order to multiply this number, establishing direct flights between the two countries could help a lot. Such a plan was in fact discussed in a business forum during the 16 + 1 summit in Riga (Tvnet.lv, November 4). Moreover, according to Minister Ašeradens, "Chinese companies are currently looking for opportunities to cooperate with the port of Riga and other Latvian ports [Ventspils and Liepāja], and they are looking at the other promising projects in the transport and logistics sector, such as 'Rail Baltica' [planned railroad that will connect Poland, Lithuania, Latvia and Estonia] for example" (Tvnet.lv November 4).

Estonian Foreign Policy Institute researcher Aap Neljas has noted that the idea to reduce barriers to Chinese investment and cooperation are frequently discussed among European countries. But paradoxically, current Chinese-European cooperation most strongly reflects China's direct interests, rather than Europe's. "Until now most of the projects that have been implemented reflect China’s priorities alone. In turn, the Central European countries, such as Estonia, would like to see more new investments that can provide jobs, promote exports and also increase more direct cooperation between the partners. In addition, I think that cooperation between Central European countries and China should be conducted in accordance with the EU's general standards and rules," Neljas argued (LSM.lv, November 5).

The Baltic States and the other CEE countries are actively looking forward to expanding their cooperation with China. And the recent 16 + 1 summit in Riga certainly generated new instruments for cooperation. Increased economic relations with China and East Asia are clearly a high priority for EU member states, which are seeking new markets and investments. But the challenge for them to navigate will be ensuring that local and European interests, norms, and legislation are properly safeguarded and defended.