CHINA MONITOR
Date: 18 April 2020 Author: Paweł Paszak
The Chinese “window of opportunity” in Serbia
Since Aleksandar Vučić became President in 2017, bilateral contacts with the PRC have clearly intensified, resulting in a number of joint projects and infrastructure investments. Since 2005, their total amount has exceeded USD 10 billion, which is five times more than in the case of Poland (USD 2.18 billion). Despite a relatively small economy, Serbia has become the leader in cooperation with China in Central and Eastern Europe under the “17+1” format (“16+1” by 2019) established in 2012. Beijing’s policy aims not only at achieving economic benefits but also at building sustainable geopolitical influence in countries aspiring to EU membership.
Companies from the Middle Kingdom are responsible for the construction of the Belgrade – Budapest high-speed railway (EUR 943 million), the Belgrade Metro (total cost of EUR 3 billion) and the Kostolac B3 power plant (USD 293 million). Over the last three years (2017-2020), Chinese companies have initiated or completed the following production facilities: Linglong Tyre (EUR 880 million), MINTH Automotive (EUR 100 million) and Xingyu Automotive Lighting Systems (EUR 50 million). Moreover, in 2019, the construction of the industrial park in Borca has started (EUR 330 million), which is expected to become the largest project of that kind in Central and Eastern Europe. According to the announcement of Minister of Innovation Nenad Popovic, the Borca park may attract additional EUR 2 billion of investments, mainly from the Middle Kingdom.
It is worth mentioning that these investments are classified to the greenfield category, i.e. they do not consist in taking over an existing company but in creating a factory from scratch. This is the most desirable form of investment, as it provides the host country with the greatest benefits in the form of new jobs and capital inflow. In total, these projects have a chance to provide over 5 thousand new jobs in industry and related services.
Cooperation between Serbia and China also has an important symbolic dimension. On March 16, President Vučić declared that with regard to the coronavirus, “European solidarity exists only on paper”. At the same time, the Serbian President expressed his admiration and gratitude for China’s action, saying that [China] “is the only one who helps us”. On March 22, following the arrival of the Chinese transport with masks and medical equipment, Vučić kissed the flag of the PRC as a gesture of gratitude, which caused many critical comments in Europe. The President was accused of exaggerating the importance of Chinese aid and depreciating the real actions taken by the European Union.
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The narrative of President Vučić’s administration with regard to the coronavirus is a logical continuation of his previous pro-Chinese policy. The symbolic support given to China may turn out to be crucial for maintaining or increasing Chinese investment commitment. Serbia, like other Balkan countries, is facing underinvestment of its economy and infrastructure. The Chinese commitment is able to strengthen those areas where investments from developed countries and Russia are not able to develop their full potential.
The relations between China and Serbia are also enhanced by anti-Western sentiments present in both countries. In the case of Serbia, these include conflicts related to the collapse of Yugoslavia and Kosovo’s declaration of independence. In Serbia, China’s role is deemed positive, because China, together with Russia, do not recognise Kosovo’s status as an independent state. The favourable political climate should be indicated as a factor determining the exceptional, as for the 17+1 standards, scale of contracts and investments. In the coming decades, Serbia, as the most important country in the Western Balkans, is likely to join the European Union. The Beijing authorities need to build a strong economic and political position in the country as long as investments and contracts are not subject to rigorous public procurement policies. If Serbia’s EU accession process is successful, Beijing will gain an important ally and be able to shape the policy of the European institutions to a greater extent.
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