Diplomacy suffers in Europe as Estonia and Latvia drop out of forum

welcome to Foreign Police‘s China Brief.

Highlights this week: Estonia and Latvia officially leave the Chinese diplomatic forum in Central and Eastern Europe, the Chinese leaders conclude their secret retreat in Beidaiheand disappointing economic indicators dim hopes of recovery.

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Both Estonia and Latvia have got out of China’s diplomatic and trade forum in Central and Eastern Europe – a group once known as 17+1 that is now down to 14 countries and Beijing, contributing to a slide into insignificance. The latest decision follows Lithuania’s departure last year, leaving the three Baltic states out of the group. Other countries could follow suit, notably Slovakia, which in recent years has become a fierce criticism of China.

The withdrawal shows how Chinese diplomacy has felt the impact of Russia’s war in Ukraine. Beijing’s failure to condemn the invasion of Moscow, as well as its blaming NATO and seeking excuses for Russian President Vladimir Putin, has not gone down well in Eastern Europe, which had previously suffered from Russian imperialism and faced new threats Russian state media. Unsurprisingly, China’s biggest supporter in Europe is Hungarian Prime Minister Viktor Orban, an ally of Putin.

These issues are particularly salient in the Baltic states, which the Soviet Union violently annexed in 1940; they can see some shared identity with Taiwan, a democratic state threatened by a much larger neighbor. China Lithuania bullying last year, after a dispute over Taiwan’s diplomatic status in the country stoked anti-China sentiment; Beijing eventually severed trade relations with Vilnius and sought to force other countries to do the same.

The 17+1 group began as 16+1 in 2012, with Greece added in 2019. Chinese analysts saw it as a major step for China in Europe, while worried Europeans saw a potential way for Beijing to undermine unity on the continent. China has made big promises of investment and infrastructure as part of the grand narrative of the Belt and Road Initiative, oversold in both Beijing and Washington as a masterpiece of diplomatic and economic strategy. But the initiative is far from being a global Marshall Plan, with broken promises and backfire perceived debt traps for developing countries.

The 17+1 is no exception: even before Lithuania’s withdrawal, the corps had become virtually irrelevant. Iconic rail line between Belgrade, Serbia and Budapest, Hungary is well over schedule and over budget; independent Hungarian media estimated that it might take 130 years for the road to generate profits. The construction of power stations has not even started. By 2019, several executives had begun removing Sino-European group events from their schedules.

The countries of Central and Eastern Europe are not the only ones to turn against China; its image is now tarnished throughout the continent. A major trade deal between China and the European Union has been dead in the water for March 2021, when Beijing sanctioned European politicians for speaking out about its human rights record. China’s greatest remaining asset is Germany, where the rulers have always prioritized commercial interests, but public opinion there is change. Meanwhile, European companies in China are increasingly considering leaving the country.

Additionally, Chinese President Xi Jinping’s own reluctance to travel overseas since the onset of the COVID-19 pandemic has created a lingering problem for high-level diplomacy. Xi has not left China since January 2020, although it is unclear whether this stems from concerns over COVID-19 or a loss of control at home in his absence. Recently, there have been conflicting reports about upcoming trips. Saudi sources say Xi will visit Riyadh soon, and Chinese sources reports that he plans to visit Southeast Asia in November, where he could meet US President Joe Biden.

The trip to Southeast Asia seems more likely, not least because it would likely come after the crucial National Congress of the Communist Party of China (CCP) in November. Xi’s power within the party appears to be well established, but the president’s departure for the Middle East at a time of political uncertainty would still be a bold move. Even with Xi back in play, the relentless aggressive The tone of Chinese diplomacy is proving to be a permanent diversion for the developed world.

The CCP summer retreat ends. The annual visit by Chinese leaders to Beidaihe, a resort town that hosts secret meetings in the run-up to political events, appears to have packed up this week. Retirement is theoretically a break for CCP leaders, but in reality this is an opportunity to do politics. Meetings are not officially announced, but officials disappear from the news, as Xi did two weeks ago; he and Chinese Premier Li Keqiang have reappeared in recent days.

This year’s retreat may have been particularly Machiavellian, given the upcoming National Congress in which Xi will get his third term. Chinese technocrats and Western businesses have vowed to hope that China’s recent economic and diplomatic failures will bolster faceless reformers within the CCP, creating a counterweight to Xi. There is little evidence of this happening, although Li pay homage at the statue of former leader Deng Xiaoping in Guangdong sparked rumors. (Deng’s unheralded southern tour in 1992 was a support movement for economic reform.)

However, there are no signs of diminished power for Xi, who continues to receive full praise— or any abandonment of the priority given to political control and Restrictions related to COVID-19 on economic growth.

Tours in Taiwan. US House Speaker Nancy Pelosi’s visit to Taiwan was followed by a more routine visit congress delegation on the self-governing island this week as China’s shows of force continue. Official drills have ended, but aerial intrusions across the median line dividing the Taiwan Strait are becoming more common. Taiwan unveiled a shiny new fighter jet in response, although he may not have the personnel to pilot it.

As Hilton Yip writes in FP, Taiwan only trained 21 pilots between 2011 and 2019; China’s tactics are designed to weaken the island’s defense and to normalize intrusions to provide potential cover for an actual assault.

Culture shocks. The wave of anti-Japanese sentiment in China following the Nanjing temple incident continues to produce ridiculous results, such as the detention of a Chinese woman this week for wearing a Japanese style kimono in public. In the video, the police are shouting that they should wear instead hanfu—an ancient Chinese style of dress related to ethnonationalist revivals. This reflects a small part of the growing cultural interference, caused in part by the police and censors who have to justify their existence.

Online, popular in China web novels, epics often crafted by gig writers, something like 19th century serialized fiction, come under intense scrutiny, with even kissing scenes cut by overzealous watchdogs. Some new drafts in WPS Office, the free Chinese equivalent of Google Docs, were censored, likely algorithmically, before being published, leaving authors locked out of their works.

Disappointing economic data. Many from China economic indicators entered below expectations this week, dampening hopes the economy could recover after dire numbers followed COVID-19 lockdowns earlier this year. China’s retail trade rose just 2.7% from a year ago, while property prices and new projects continued their nearly year-long decline. (In China, real estate accounts for 25% of GDP by some estimates.) In the first half of the year, GDP only grew by 2.5 percent— not on track to meet this year’s 5.5% target.

China’s central bank responded by cutting two interest rates by 0.1%, while Premier Li, called to the six most populous provinces, which account for 45% of China’s GDP, to shoulder the burden of growth. But the economic problems will continue at least until the government lifts its zero-COVID policy. The uncertainty of lockdowns makes many personal and professional decisions difficult, from opening new restaurants at To go on holiday.

Meanwhile, there is little good news in the once vibrant tech sector, despite hope that the government had finished rolling out new restrictions. Internet giant Tencent has released its first-ever drop in revenue after the limits of game for young people and government pressure to sell its stake in the delivery service Meituan. Government intervention could lead to the emergence of new businesses while monopolies are brokenbut the atmosphere for entrepreneurs is worse than ever.

Electricity shortages. China is suffering worst heat wave since record-keeping began in 1961. In the southern province of Sichuan, daily temperatures of around 104 degrees Fahrenheit have strained energy supplies. Not only does energy consumption increase 19 percent compared to last year, but production also fell nearly 7 percent due to low water levels for hydroelectricity. Therefore, factories in 19 out of 21 cities in the province were ordered to close for six days.

China’s power grid has improved significantly over the past two decades; after all, power outages in Beijing were once routine. But as analyst Lauri Myllyvirta pointed outthe obsolete operation of the network still causes problems, such as severe shortages last fall. Paradoxically, the gloomy economic outlook could pose problems this winter for both energy and the environment. When GDP growth declines, restrictions on energy-intensive and polluting industries also tend to ease.