Serbia’s emergence as China’s new strategic hub

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

In the centre of Belgrade, Chinese President Xi Jinping's face now peers out from a billboard with the words "Thank you brother Xi", a message paid for by a pro-government tabloid. [@Serdjosega Twitter]

Membership of the EU remains Serbia’s strategic goal, as two thirds of its trade exchange is with the EU. However, Serbia has become increasingly close to China in recent years in a plethora of areas, writes Serbian journalist Darko Čačić.

This article originally appeared in EURACTIV Bulgaria.

The Balkan region has become a Chinese strategic hub that could finally connect the Port of Piraeus in Greece, which China acquired in 2016, with central European countries, and thus EU markets, says Giorgio Fruscione from the Italian Institute for International Political Studies. Therefore, China is fighting for influence in Serbia, in its effort to override Russia, Turkey and the Gulf countries, primarily the United Arab Emirates. Serbia remains dependent for energy on Russia, with which it also cooperates militarily. UAE has become Belgrade’s main partner in the Arab world over the past nine years, with growing partnership in the fields of aviation, urban construction, agriculture, and defense.

On the other hand, Beijing has recently expanded cooperation with Belgrade in various fields. The total trade between Serbia and China has been steadily growing over the last decade. According to the Development Agency of Serbia’s data, China accounts for 8.9% of the total value of foreign direct investments. In 2016, after a visit by Chinese President Xi Jinping to Serbia, China’s Hesteel took over a troubled steel mill, previously owned by US Steel.

In 2018, China’s Zijin Mining acquired the country’s only copper mining complex, burdened by debt. The Chinese company Linglong, the main sponsor of Serbia’s top soccer league, is building a nearly $1 billion tyre factory. In January 2021, Chinese company Power Construction Corporation, together with French firms Alstom and Egis, signed a memorandum with the Serbian government on the construction of the initial two lines of the Belgrade Metro.

While the government is welcoming Chinese investors who take over old industrial sites, locals and activists say they are suffering the environmental consequences. In a recent report, the European Parliament expressed concern about the lack of transparency and environmental and social impact assessment of Chinese investments and loans in Serbia and across the Western Balkans.

No public tenders

Many large infrastructure projects in Serbia have been financed by Chinese loans in the past decade and all contracts have been awarded to Chinese companies without public tenders. China is not the main external creditor but its share in government external debt will likely increase if loans are disbursed in line with contracts, noted Mauro Giorgio Marrano, a senior CEE economist at UniCredit Research, in April. These loans are typically for 15-20 years, with a five-year grace period and interest rates of between 2% and 3%. The contracted amount of China’s lending in Serbia is equivalent to 7% of last year’s GDP. Modernization and reconstruction of two sections of Hungarian-Serbian railway connection are among these projects.

Beijing has recently expanded cooperation with Serbia in the security field. Over a thousand cameras of the Chinese giant Huawei, with facial recognition software, have been installed in Belgrade, although such security equipment is not in line with the EU standards adopted by Serbia. Intelligence sources, city officials, academic experts, and security industry executives interviewed in Europe, the US and Asia, told the Financial Times that Chinese “safe” and “smart” city systems carry a plethora of potential security and human rights threats.

MEPs sound the alarm over Chinese mass surveillance project in Belgrade

The European Parliament is taking a close look at China’s high-tech present to Serbia, a mass surveillance system that involves the installation of thousands of smart surveillance cameras equipped with facial recognition features, MEP Gwendoline Delbos-Corfield (Greens/EFA, France) told EURACTIV in an interview.

China is also increasing military cooperation with Serbia. In June 2020, Serbia’s air force received six combat drones armed with laser-guided missiles, the first such deployment of Chinese unmanned aerial vehicles in Europe.

Chinese ‘Soft power’

Growing cooperation among Chinese and Serbian universities and schools continues unabated. Three Serbian universities have signed a cooperation agreement with Shanghai’s Jiao Tong University. Serbia also hosts two Confucius Institutes, run by the Chinese government. These examples of soft-power widening should be seen as part of a broader Chinese effort to promote its culture and values. Also, new a Chinese Cultural Centre is being finished in Belgrade on the site of the former Chinese embassy, destroyed by NATO in 1999.

The new partnership between China and Serbia also includes close political bonds. Serbian President Aleksandar Vučić has frequently spoken about the “steel friendship” between the two countries. Belgrade didn’t support EU resolutions strongly critical of Beijing. China has refused to recognize Kosovo’s independence. In exchange, Belgrade supports China policy in relation to Taiwan.

Vučić last month highlighted achievements made by the Communist Party of China over the past 100 years, stating that it set a successful example for the world.

Serbia ignores West’s concerns, praises China’s Marxism

There is no other party or political organisation in the world that could boast what the Chinese communist party has achieved, Serbian President Aleksandar Vučić told an online summit to mark the 100th anniversary of the Chinese Community Party, adding …

“I’m very thankful to the Communist Party of China on having a good cooperation with the party I’m leading. We see how you made this kind of connection and cooperation between the citizens, party and state institutions. That’s something that we really learned a lot from the Communist Party of China. And we believe that we can build it up in the future”, Vučić said for CGTN.

The relationship has deepened during the coronavirus pandemic, with China providing medical aid and doctors. Almost overnight, China became the greatest friend of Serbia in the country’s media outlets. A video of Vučić enthusiastically kissing the Chinese flag went viral. Serbia’s COVID-19 vaccine roll-out has been significantly quick in the first couple of months thanks to the Chinese giant Sinopharm. Serbia imported 4.2 million Sinopharm vaccines, accounting for almost 60% of doses obtained so far.

In early June, the Belgrade-based Torlak Institute became the first facility outside Russia to produce Sputnik V vaccine. A month later, Serbian Government signed a memorandum of understanding and cooperation with partners from China and the UAE to produce the Chinese Sinopharm COVID-19 vaccine in Serbia.

The rise of Chinese power in Serbia is based primarily on the support of the state. Chinese investors see the advantages of Serbia, which has trade agreements with Brussels, but is not subject to the bloc’s strict rules, since it is not the EU member. China’s influence in Serbia is undoubtedly growing and is poised to continue, but its further strengthening will depend on the country’s progress on the European path.

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