Digital Leaders in CEE Region Afraid of Doing Business with China

A Study Mapping CEE ICT Business Leaders' Values

29 June 2022

Miles R. Maftean

Editorial Director, Visegrad Insight

The values and attitudes of leading digital business leaders from the region directly impact their decision-making. Our latest study maps out where CEE business leaders stand today and what is to come for the region.

For most CEE Information and Communications Technology (ICT) business leaders, politics does matter — in the case of Hungary and Poland, it is a bit more complicated. Business with China persists, but moral reactions to the Russian invasion of Ukraine closed business operations there.

  • CEE ICT innovators are more likely to do business with China when they perceive their own countries as very undemocratic.
  • Digital business leaders from the region will most likely focus inward, on domestic and regional markets, moving away from a globalised model of business.
  • 80 per cent of CEE ICT innovators state that their business decision-making is affected by their attitudes towards political leaders in China, Russia, and the EU.
  • CEE digital business leaders closed down branches or offices entirely or refused certain business opportunities afforded to them by being in the Russian market
  • The only CEE leaders who do business with Russia are from Poland and Hungary.
  • China-CEE relations are crumbling as 92 per cent of ICT leaders do not engage in business practices there.

Following the aftermath of the war in Ukraine, the return to business as usual does not seem likely for most CEE ICT business leaders. Instead, most are treating this as an opportunity to shift their business practices inward — toward the European Union — or transatlantic — towards the United States — rather than eastward expansion towards China.

While most CEE ICT business leaders lean toward transatlantic and EU ties to bolster their business practices, some Hungarian and Polish business leaders profit from an eastward exodus. Still, the likelihood of the region heading towards this scenario is low.

This — and more — is the insight garnered from a first-ever study conducted by Visegrad Insight, where we surveyed present-day and future leaders, changemakers, and industry leaders who will decide upon the shape of economic cooperation, defence cooperation and diplomatic relations for years to come. The group’s political attitudes to non-Western based businesses — primarily China — negatively impact their business decision-making, playing out in different ways in practice.

How these mapped reactions of CEE business leaders to the Russian invasion of Ukraine play out — and what it means for Chinese business relations in the region — are likely to shift the region’s future inward, towards domestic and regional markets, as opposed to globalised ones.

A Split in Democratic Outlook for CEE

An important first step in the research was to understand how these leading ICT entrepreneurs viewed the democratic score of their own respective countries. On a scale from 0 to 10, the average rating for how democratic their states are was 6.3, with Hungary (2.6 out of 10) and Poland (4.5 out of 10) ranking far below the average. This mirrors the ongoing decline of democratic standards in both these countries, where illiberal governments have held power for many years.  

The story of institutional capture seen in Hungary and Poland — most notably in the media, the judiciary, the civic sector, and elections — has led to the decrease in democratic standards in these countries and is reflected in ICT innovators’ responses. Once all Polish and Hungarian respondents were removed, the average rating for how democratic their governments are in CEE would be 7.64 out of 10, nearly a point and a half more than the average with them included.

The story is quite different in other CEE countries. For instance, within the Visegrad group, Czechia (7.5 out of 10) and Slovakia (7 out of 10) ranked their democracies relatively high, with the Baltic states also averaging 8.9 out of 10 as well.

Still, iable that nearly 80 per cent of CEE ICT innovators state that their business decision-making is affected by their attitudes towards political leaders in China, Russia, the EU, the United States and other emerging powers. As a whole, many CEE ICT innovators are looking to the attitudes of political leaders in all countries to choose whether or not to engage in business practices there. But how does this affect current practices for these leaders?

Denying Business Opportunities from Russia

As the whole European region shifts with the Russian invasion of Ukraine, we wanted to see whether our initial assumption held. This assumption being that many tech companies in the region would have placed some restrictions on their business towards Russia, particularly those who live in countries where they believe it to be more democratic.

We found that many leaders closed down branches or offices entirely or refused certain business opportunities afforded to them by being in the Russian market. Of those who closed down their businesses in Russia, they ranked the democratic standards in their country to be very high (9 out of 10, 10 out of 10, respectively). Some went as far as stating that they no longer invest in Russia and in Russian companies, others cut the business opportunities they had with Russia altogether, and so forth.

Coupled with the attitudes toward democratic standards, several respondents also noted that the war in Ukraine is causing a reorientation of work to other more important topics, most notably, related to migration and transparency in legislation. The business models do not change, but the public mission and personal capacity have dwindled, as many are trying to help people from Ukraine by providing them shelter and pro-bono goods and consultancy services.

The assumption, reversed, also held — for those 8 per cent who stated that they do business in or with Russia, those respondents came from Poland and Hungary, in which they deemed these countries to be mostly undemocratic (2.5 out of 10). For some, the war in Ukraine has actually brought new opportunities for the tech community, as many companies working with Russia are looking toward different markets and refocusing their attention to CEE, mostly towards the Visegrad Region. 

As a scenario mapped out in the report, there is a negative output by the closing of the space of ICT innovation in CEE. The ongoing conflict with Russia changes the opportunities in the market negatively. The migration of Russian specialists that become available on the market can play out negatively for ICT innovators in the region, with global HR efforts shifting their focus toward a new wave of Russian expats. Global companies and ICT specialists who worked in and around Russia, Belarus, and Ukraine may be providing their service elsewhere, with these specialists taking their business away from employers and companies in CEE to other locales (i.e. China).

Though CEE ICT leaders are clear in their principled stance — albeit for a few outliers such as Polish and Hungarian innovators — the question then turns to whether China can be seen as a threat for European unity or whether it can serve as a strategic and economic player for CEE. 

Crumbling China-CEE Business Relations

When it comes to doing business in China, 92 per cent of ICT leaders in CEE do not engage in business practices there. Of those who do, half live in countries where they believe their government is completely undemocratic (1 out of 10) or mostly undemocratic (5 out of 10).

China’s ’17+1′ initiative, formed in 2012 by the Chinese Ministry of Foreign Affairs, seems to have missed the mark in promoting the business and investment relations between China and CEE countries. Despite China sending several delegations to nearly ten countries in the region, many CEE countries designated lower officials to meet with the Chinese delegates. In Poland specifically, officials from the Polish Foreign Ministry did not meet with them.

It is interesting to note how officials from the Polish government did not meet with China, yet some of our target group from Poland do, they continue to do business with China. Still, with the 10th anniversary of the ’17+1′ initiative, hosting their annual summit in CEE proves difficult — no CEE country is even willing to host it, showing that many CEE countries are wary of doing business with foreign powers.

Our limited data is exploratory, but the insight garnered reflects current business relations with China and CEE. Namely, investment is low (3 per cent of total Chinese investment in Europe for 2020) and limited to only a few countries like Poland and Hungary. For those flagship projects (i.e. Romania’s Cernavoda Nuclear Power Plant), China’s image in CEE did not improve, as delays were faced or even projects were abandoned outright. An all-time low was when Lithuania left the initiative when its Parliament condemned China’s treatment of its Muslim Uighur minority through a resolution.

Still, in our report, a mapped-out scenario could be an Eastward expansion toward China. While unlikely, what could fuel this scenario is what many top ICT business leaders have done in the aftermath of the Russian invasion of Ukraine — closing down whole businesses or branches and significant loss in partners and investment opportunities. 

With this exodus from the Russian market — a trend that will most likely only continue further — businesses will look for more opportunities and could adjust toward China to continue to expand (or at times, even survive) the instability in the Russian and Ukrainian markets. 

Targeting CEE ICT Business Leaders

Collecting quality data and garnering insight from the region’s top ICT business leaders was the first step in our research agenda. One contribution of this exploratory study lies in its unique target group. These are the top CEE ICT innovators in regards to the international dimension of their past success and growth prospects and how this links to their approaches, practices, and opinions on democratic security, cybersecurity, and non-Western economic superpowers — i.e. China. 

The group surveyed was among those New Europe 100 (NE100) leaders — a group of most successful innovators — entrepreneurs, experts, investors and activists— in the CEE region recognised by the Res Publica Nowa expert community since 2014. Taking previous NE100 participants and including a more up-to-date group of leading ICT innovators, the target group are those who can be understood to be present-day and future leaders, changemakers and industry leaders. They decide upon the shape of economic cooperation, intelligence, defence cooperation, and diplomatic relations for years to come.

These would include some of the top CEOs of new businesses or c-level executives influential in business decision-making at the top level. The countries where these leading ICT business leaders operate include the Visegrad group (Czechia, Hungary, Poland, Slovakia), the Baltics (Estonia, Latvia, Lithuania), and the Black Sea region (Romania, Bulgaria).

ICT Innovation in CEE Escapes the Global Trend?

With political attitudes serving as a principled role for leading ICT innovators in CEE, the question remains as to what the future holds for the region. Given that this report is one of the first to map out the political sentiments of leading ICT innovations in CEE, one of the most important recommendations is that more research on this topic must be conducted. Still, one scenario seems most plausible, and it is an optimistic one for the region.

The sector may suffer losses in the interim (through resources and time) or may not be able to expand as rapidly as they have seen in recent years, but they still will adjust their operations due to the flexibility of their business models in the first place. As many respondents showed a clear threat of cybersecurity attacks from Russia (78.4 per cent) and China (64.7 per cent), coupled with their unwillingness to do business with these leaders from a democratic perspective, many ICT businesses are aware of the consequences that can occur and are offering contingency plans. 

Most likely, the focus will be inward, with less globalisation and more domestic and regional markets. As we have seen that only 7.8 per cent of CEE ICT businesses are already active in the Chinese market, this would mean that the number — at best — stagnates, and at worst will decrease even more so which will bring more opportunities for the growth of ICT counterparts in other (particularly South and Eastern Asian) emerging economies.

Miles R. Maftean

Editorial Director, Visegrad Insight

A political theorist whose work examines the rise of political extremism and illiberal politics in Central and Eastern Europe. He has a Ph.D. from Central European University where he researched how democratic states respond to the current populist crisis of pluralist democracy.


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