The mutually transforming effect: European and Chinese development finance in the CEE and Western Balkans
02 Jun 2026
How do Western and Chinese development finance influence each other, and how do their interactions shape each other’s lending behaviour and development policies? The literature has focused on the diversification and competition between Western and Chinese creditors. However, less has been written on the interaction between Western and Chinese development finance actors in different regions of the global economy. By examining the lending practices between Chinese and European-led development banks in the CEE and Western Balkan regions, this study argues that a mutually transforming effect exists between Chinese and European development finance. While Chinese banks have started to cooperate more with European development banks and the EU’s regulatory framework to overcome their structural weaknesses, the European banks have provided greater credits to financially riskier infrastructure projects and cooperate more with state-owned enterprises.
KEYWORDS: Mutually transforming effect, development finance, CEE and Western Balkans, Europe, China
