Research and Opinion

The growing presence of China in South East Europe

Dr. Jasna Plevnik

Serbia is China's largest investment destination in South East Europe (SEE) according to Serbian government figures. China's direct investments in Serbia between 2011 and 2016 are on rise and are around 4 billion euros. Nevertheless, the number of contracts is far behind of China’s announcements on investments in Serbia.

China’s leadership assesses Serbia has huge potential for cooperation in its infrastructure sector. China and Serbia are the world’s second – and ninety – first largest economies and have different strengths but each country can offer the other many opportunities as they pursue their development strategies. Serbian energy sector is an example. Serbia needs infrastructure building, high – speed railways and investments in energy supply sector while China has the technology and capital and, work force. China and Serbia are working to join China’s “16 plus 1” and the Belt and Road Initiative with Serbia development plans.

Serbia has invested many efforts in its relations with China making itself the best friend of China in the Balkans. It is home to more than ten thousands Chinese citizens and most of those live in Belgrade. In 2016, China and Serbia have signed a comprehensive strategic partnership agreement and, a Memorandum on establishing Belgrade as a center for coordination of all infrastructure projects under the “16+1” formatin South East, East and Central Europe. In the same year, after long negotiations, Serbia and China signed, in Riga, an agreement on modernisation of the Serbian section of the Belgrade-Budapest railway and that investment strengthens Serbia’s position as a key platform between the Greek port of Piraeus – owned by Chinese capital– and Central Europe.There is a possibility of a delay in realization of this project since the European Commission in February 2017 launched an investigation into the financial viability of the Hungarian part of the fast railway line Belgrade-Budapest and its conformity with European Union procurement rules.

Serbian leadership has been successful in softening China’s approach that majority of jobs should be carried out by Chinese companies.

Serbia has developed strong relations with China; it is a candidate country for the EU membership,has good relations with the United States, has comprehensive relations with Russia and negotiates with the Eurasian Economic Union (EEU) on a trade regime unification. It is a member of the Organization of the Black Sea Economic Cooperation (BSEC).Serbia’s aim is to integrate itself economically in many directions of the world and its diplomacy is attempting to manoeuvre between big economic powers and trade blocs. That foreign policy approach is often criticized as unstable but it does capture a postmodern concept of multilateralism that unfolds in the world order.

Chinese diplomatic initiatives in the Region

China's growing economic presence in the region has started  in 2012, when Croatia, BiH, Macedonia, Montenegro, Serbia, and Slovenia accepted to develop their relationships with China through a new mode of economic diplomacy „China and Central and Eastern European Countries”often referred as the "sixteen plus one". This cooperation is backed with a fund worth about 10 billion euros. China initiated the new format of relationships after an assessment that its trade and investments in that part of Europe are in deep imbalance in respect with its economic relations in post-industrial Europe. China's growing presence in South East Europe reflects its new position in European economic order.

In 2013, China launched a strategic initiative The One Belt, One Road (BRI) that presents China’s development philosophy concept based on innovation, coordination, green economy, opening up and sharing aiming to bring Asia and Europe closer.South East European countries welcome both Chinese diplomatic initiatives. China presents itself politically neutral following its main foreign policy principle of non-interference in domestic, regional and, EU affairs of SEE countries. 

Now an important part of BRI is the "sixteen plus one" diplomacy. This approach is formally confirmed at Suzhou summit 2015, when PMs of China and 16 Central and Eastern European Countries supported developing its cooperation in synergy with Belt and Road and The Investment Plan for Europe. In 2015, China and the EU started to talk on connecting EFSI and Belt and Road developing joint projects, and that approach makes an environment for relationships between China and SEECs more relaxed. The EU pro – Chinese policy helps Macedonia, Montenegro and Serbia as EU candidates, and Bosnia and Herzegovina – has applied for the same status– to build their China relations without constraints from Bruxellles.

Chinese loans for South East European infrastructure

South East European countries will continue to seek China’s funding for infrastructure projects of national importance. China build its economic links with SEE through lending to government’s companies for infrastructure: ports, bridges, roads and, energy sector. This way of economic relations is source of concern because all countries in the Region are heavily indebted. The loans are contracted in US dollars and euros. Financing investment in the ports, railway and highway infrastructures in SEE is part of China’s wider effort to support its Eurasia trade. Since 2011 – 2016 Chinese exports to, and imports from, the SEE region have grown but none of these country could be described as top trade partner or investment destination of China in Europe.

In South East Europe there is an optimism the growing presence of China can play a substantial role in transforming this part of Europe into emerging markets of the Balkans. It will take many skills that the countries of South East Europe take an advantage of China's capital interest in them. Some China's investments in South East Europe are actually exports of its constructing companies that use China's bank funds established for “16 plus China” and the Chinese work forces.

Current relations as a novelty

China and SEE current relations could be described as a novelty in their history of their relations because China is now pretty much focused on developing economic relations on a regional and multilateral basis. That deliberate approach has aim to put relationships with SEE countries in a broader context than bilateral what could be helpful for Chinese capital to accomplish its economic goals easier in the Region that has been characterized by small markets and, weak level of connections.

China's multilateral economic diplomacy approach putting pressure on SEE countries to shape their diplomacies with China not only as self-serving but also regional and global serving.

China's basic diplomacy toward South East Europe is purely economic and it is hard possible to recognise consequences that could be geopolitical in impact. The analysis of implementation of Budapest proposals (2011), The 12 measures of Warsaw (2012), The Guidelines from Bucharest (2013), The Belgrade Guidelines (2014), Suzhou Guidelines(2015) and Riga Guidelines(2016) showing China's relations with the countries of Central and Eastern Europe are developing into economic not political and geostrategic directions.