Serbia under pressure from Chinese investments – New Eastern Europe
The last decade has seen Belgrade and Beijing become close economic partners. Although this cooperation has brought many benefits to the Balkan state, its unilateral dependence on Chinese investments could pose problems in the future.
November 29, 2021 – Ihor Levchenko –
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Today, China is the world’s second-largest economy and a major technological center. At the same time, its totalitarian political system and its specific approach to promoting its global interests increasingly worry the democratic world.
The United States, NATO and Europe increasingly see China as a competitor to be challenged. This position in the West is already reflected in various government strategies. Despite this, China often plays on its own apparent contradictions by offering itself as an alternative to other states.
The countries of the Western Balkans are no exception to this process. These states are now living their second decade of attempts to join the European Union. Today, in 2021, the end of this process remains a distant prospect.
A new regional reality
China remains one of the main economic partners of the Western Balkans. As a result, it is understandable that the issue of Beijing’s presence became a key topic of debate at the Belgrade Security Forum at the end of October. Indeed, two panels were devoted to this subject during the event.
Most experts agreed that Serbia can be seen as China’s main partner in the Balkans. Vuk Vuksanović, of the Belgrade Center for Security Policy, is convinced that the main issues in this relationship are Serbia’s geographic location, the status of its candidacy for the EU and the country’s general economic situation. Serbia remains the region’s largest economy and shows steady growth. On the whole, it seems that China sees Serbia as a kind of “window” on the Balkans and even on the whole of Europe.
It was noted during the conference that China’s regional interests correspond well to the development of the Open Balkan initiative. Today, Serbia plays a leading role in this group, which aims to encourage trade and cooperation between countries in the region.
A close partnership between Serbia and Hungary is also in China’s interest. Serbian President Aleksandar Vučić is happy to participate in various political initiatives with his colleague Viktor Orbán. This cooperation is supposed to demonstrate a “different” position in Europe. It is interesting to note that Slovenia has also joined many of these initiatives. Hungary remains at the forefront of promoting China’s interests in the EU. A good material example of this cooperation can be seen with regard to the Beijing-funded high-speed railway project from Belgrade to Budapest.
Serbia is Hungary’s only neighbor that it does not accuse of violating the rights of its Hungarian minority. Budapest, on the other hand, actively supports Serbia’s policy towards this group. Belgrade promotes this relationship in order to deflect allegations that it violates the rights of other national minorities.
Vuksanović noted that Belgrade’s shift to China began after 2008. Overall, it appears that this shift was caused by Kosovo’s declaration of independence and the global financial crisis. As a result, Serbian leaders realized that early EU membership was unrealistic. Betting on China has become an easy way for the country to diversify its partnerships and cover risks.
China is able to finance large and expensive infrastructure projects in the Balkans, which gives it a great advantage in the region. Local governments often cannot afford such developments and the EU does not seem in a rush to invest in the region’s infrastructure. On the other hand, China is interested in developing transport routes to Western Europe from the Eastern Mediterranean, where it has also invested in port infrastructure in Turkey and Greece.
China is also not afraid to invest in Serbia’s obsolete steel and mining companies. These investments provide jobs for Serbs and breathe new life into declining industrial areas. Although many environmental issues arise as a result of these movements, many social issues are solved with Chinese money. Simply put, the Serbian government is incapable of solving these problems on its own.
A one-sided relationship?
Obviously, the Serbian government understands that it has developed a dependence on Chinese investment. Perhaps more importantly, the Chinese understand this addiction. After all, it creates jobs not only for people but also for voters. Serbia’s continued struggle with the COVID-19 pandemic has only worsened this dependence. Belgrade was clearly the least virus-affected state in the Balkans and this was in part the result of Chinese investments designed to support the economy.
Experts say Chinese investments also influence Serbian foreign policy. It is clear that any change in political direction in Serbia is likely to have little effect on China’s position in the country. Indeed, Beijing maintains links with the Serbian opposition parties, as well as with the government. For this reason, it seems that Chinese investments in the Serbian economy will continue in the future.
In addition to political issues related to China’s presence in the Balkans, concerns persist about the country’s involvement in the region’s digital and communications industries. For example, Chinese “Smart City” technology is actively offered to local municipalities in Serbia.
Western countries are traditionally very cautious about Chinese communications and digital technologies. They have reason to suspect that this technology is designed to collect information and even spy for the Chinese Communist Party.
Today, Chinese investment in Serbia is valued at seven billion euros. Most of these funds are Chinese loans. As a result, Belgrade’s relations with China are characterized by factors typical of Beijing’s foreign economic activities. This includes trade imbalances and questionable quality of investments (more words than money).
Another problem for Chinese investment concerns the big differences that exist between the legal and regulatory frameworks of China and the European Union. This could potentially create additional problems for Serbia’s European integration.
According to Igor Novaković, research director at the ISAC Fund, the presence of China could potentially put Serbia “in the crossfire”. In a world of growing tensions between the West and China, the Serbian government could face a difficult future.
Ihor Levchenko is the head of the strategic modeling section at the New Geopolitics Research Network. His research covers a wide range of security and defense issues in Eastern and Southern Europe as well as the wider Black Sea region.
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Aleksandar Vučić, China, Chinese investment, Hungary, Serbia