Riding the Dragon or the Trojan Horse? EU Accession and Chinese Investment in CEE Countries

Chinese investment in Central and Eastern Europe (CEE) has been expanding in recent years. As the economic ties deepen, security concerns also rise with arguments decrying Chinese investment and loans as a Trojan horse aiming at buying off political support and influence. On the other hand, some recent studies suggest that the flow of Chinese capital has been exaggerated by politicians from different fronts. My study contributes to the understanding of Chinese investment in CEE by examining whether it follows a "divide and rule" strategy. I argue if such a strategy holds Chinese capital should increase disproportionally in CEE countries that have recently joined the EU after adjusting for the inflation that can be attributed to the economic advantages of EU membership. Using the latest Global Chinese Development Finance Dataset from AidData, I apply a difference in differences (DID) design to test whether Chinese capital in CEE is driven mostly by geopolitical or economic motivations.