A delegation of the Serbian Government led by President Aleksander Vučić has signed several agreements with China to strengthen bilateral cooperation in the fields of innovation and infrastructure.
As part of an agreement signed by Serbia’s Infrastructure Ministry, Serbia and China’s Power Construction Corporation (PowerChina) will cooperate on the construction of a new metro network in Belgrade, which is expected to start in 2020.
Zorana Mihajlović, Serbian Deputy Prime Minister and Infrastructure Minister, signed agreements with PowerChina that are aimed at implementing a road construction project around Belgrade, as well as the reconstruction and modernisation of railroads close to Serbia’s border with North Macedonia.
Nenad Popović, Serbia’s Innovation Minister, signed three agreements with China’s CRBC on establishing a joint Serbian-Chinese industrial park in Borca.
At the second One Belt, One Road Forum for International Cooperation in Beijing, Vučić voiced support for the initiative.
“We will continue the excellent cooperation that exists between our two countries. Serbia is a relatively small country in Southeast Europe, with seven million inhabitants, and is the largest country in the Western Balkans.”
“I know how many more important players than Serbia there are in the international arena for China. But there is something special that binds our two countries and peoples,” he said.
The Balkans, and consequently Serbia, has been a focus of China as an extension of the BRI in Europe for quite some time- and its presence has become visible in almost every corner of the region.
However, Chinese investments and agreements in the Balkans have caused concern among some EU Member States, as they may create unsustainable debts for Balkan governments. Johannes Hahn, the EU commissioner responsible for negotiating with countries wanting to join the bloc, expressed concern last month that some Balkan countries were borrowing heavily from China.
“China never cares how and if a country is able to pay its loans. And if they cannot pay, there is some pressure that things are transferred into their ownership,” he said.
“Europeans might not be the fastest ones, might seem to demand more than the others, but probably at the end of the day we are by far the fairest partners,” he added.
A look at other smaller economies dealing with BRI related debts does not bode well and concern is legitimate: in Sri Lanka, their Chinese debts spiralled so that China took possession of a strategically valuable Indian Ocean port as part of a repayment deal.
Meanwhile, Uganda has built a $580 million highway from its capital to its largest airport. But there was no competitive bid for the contract, and the road itself may end up becoming a disadvantage and unprofitable. Last year, Sierra Leone scrapped plans to build a China-funded airport (for $318 million) outside the capital, Freetown.
Among the poorest countries in Europe, with fragile economies, high levels of unemployment; corruption and weak democratic institutions have put countries like Serbia in a position of susceptibility to Chinese loans and investments. The region does lack certain and crucial infrastructures and is in dire need of new roads, power plants, and railways (to name a few).
However, Chinese investment has had some immediate and overwhelmingly positive impacts in the region.
For instance, one of the biggest Chinese investments in Serbia was the purchase of the steel mill Železara Smederevo by the He Steel Group for €46 million. The Serbian plant is economical of little relevance to China, but the deal saved 5,200 local jobs – bought China enormous political goodwill and consequently gained Serbia’s political favor.
Most recently, Chinese tire manufacturer Shandong Linglong has begun construction of a production plant in the northern Serbian town of Zrenjanin.
The plant is expected to produce 13 million tires a year and employ 1,200 people. Prime Minister Ana Brnabic, welcomed the construction and even referenced the jobs Železara saved as a point of comparison. As a result, Serbia is slowly emerging as China’s top partner in South East Europe.
But, Chinese loans are often granted under soft and permissible conditions and countries like Serbia (like many others in the Balkans) have lower environmental standards and diminished pressure for transparency in business dealings.
At first glance, a soft loan with few strings attached appears attractive to countries desperate to revive their economies.
From a Balkan perspective, Chinese investments present both opportunities and risks. The BRI can help to completely transform the Balkans (for the better), but the visionary projects can also burden governments with large debts and or economically unviable infrastructure and increase dependency on China.