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Antonella Benedetto University of Trento

Antonella Benedetto holds a Master’s Joint Degree in International Security Studies at Sant’Anna School of Advanced Studies together with the University of Trento. She previously earned a Bachelor’s Degree in Sociology at the University of Urbino. Passionate about EU-China relations, US-China relations, European Affairs and human rights, she has completed internships at the Italian Consulate General in Montréal for the Ministry of Foreign Affairs and International Cooperation” and at the “Foreign Policy Research Institute” (FPRI).

This contribution is part of the book “The Dragon at the Gates of Europe: Chinese presence in the Balkans and Central-Eastern Europe” (more info here) and has been selected for open access publication on Blue Europe website for a wider reach. Citation:

Benedetto, Antonella, The Chinese influence in Serbia and the implications for its EU accession process, in: Andrea Bogoni and Brian F. G. Fabrègue, eds., The Dragon at the Gates of Europe: Chinese Presence in the Balkans and Central-Eastern Europe, Blue Europe, Dec 2023: pp. 247-268. ISBN: 979-8989739806.

1. Introduction

This paper gives an overview of the future of Serbia in the European Union (EU). Serbia’s accession to join the EU has been postponed for years due to the EU’s lack of engagement. As a result of the ensuing dissatisfaction, China has established its economic presence in the area through significant political influence and big infrastructural investments. Firstly, the article addresses Serbia’s foreign policy and its relations with China; then, the economic, infrastructural and cultural cooperation between the two, starting with Xi Jinping’s election by the Congress in 2013, the possible consequent risks and the Union’s mistakes. This article mainly addresses three questions: first, given that Serbia is a candidate member of the EU, why did Belgrade decide to permit China to participate so extensively? Secondly, what methods does Beijing use to position itself as Belgrade’s principal international partner? Thirdly, will the future of Serbia be in the EU?

The 2008-2009 financial crisis and other external crises have slowed EU enlargement, slowing the process of Serbia’s accession. Consequently, the PRC has taken advantage of this chance to establish a strategic presence in Serbia since China’s involvement in other countries’ internal politics is limited together with the willing to ignore specific issues like State aid, corruption, or labour regulations. The increase of Chinese investments in Serbia throughout 2013–2019 had a favourable impact on the nation’s overall economic and social development, primarily through the Belt and Road Initiative (BRI), which also permits access to vital land and sea routes. The BRI is one of the reasons why Serbia, which has been a candidate for membership in the EU since 2012, sees a remote possibility of joining the Community due to the lack of capacity to meet the Copenhagen criteria (stable political institutions, democracy, the rule of law, human rights, free market economy).

2. Serbia’s foreign policy and its relations with PRC

Geographically speaking, Serbia is situated in Southeast Europe at the intersection of a major thoroughfare that connects the Black Sea to the North Sea and Southeast Europe to Central and Western Europe. Its narrow, landlocked region has limited political, economic, social, and demographic potential (Duško and Jokanović 2016, 327). Serbia is a military defensive-focused country with a mixed national identity, cultural heritage, and historical background, so it often engages positive ties with the major world players. Serbia seeks to forge positive relationships with other countries and to advance peace, stability, equality, and mutual trust as a member of the United Nations and other significant international organisations (Ibid., 327).

The PRC is essential in Serbia’s foreign policy strategy (Duško and Jokanović 2016, 327). The Serbian foreign policy plan is based on “four pillars” (Vladislavljev 2021, 23). The first pillar is the European Union, an organisation of which Serbia aspires to be part of. The second pillar is Russia, a solid political global force and a longtime ally of Serbia. The third pillar is the United States, a superpower with whom Serbia historically has erratic ties but whose significance and influence are considered an assurance. China, the second most considerable economic power and Serbia’s longtime partner in international affairs, is the fourth fundamental pillar of its foreign policy approach (Duško and Jokanović 2016, 328). Serbia and China’s relations date back to October 1, 1949. The cooperation between the two is increasingly significant (Dimitrijević 2017, 68). Regarding territorial issues, China and Serbia support one another since both aim to preserve the stability of their political system.

As the protector of Serbia’s territorial integrity and national sovereignty, as the keeper of UNSC resolution 1244, China assumed and retained a special significance for the Republic of Serbia. China also agreed with Serbia’s position on Kosovo and Metohija, a territory in southern Serbia, which unilaterally declared its independence as the “Republic of Kosovo.” Chinese police personnel participated in the peacekeeping operations in Kosovo and Metohija as well as Bosnia and Herzegovina (Vladislavljev, 25). Conversely, Serbia supports China’s sovereignty, territorial integrity and the “One China” Policy (Duško and Jokanović 2016, 329). The Chinese embassy destruction in one of the aircraft raids on Belgrade during the 1999 NATO intervention in the Federal Republic of Yugoslavia represented a watershed event for both countries (Vladislavljev 2021, 24). The incident has been viewed as a sad turning point in Sino-Serbian history. As former Serbian president Tomislav Nikolic noted, it is also a sign of goodwill, demonstrating that Serbia and China suffered mutual losses (Ibid., 24). It is important to remark that China fully supports Serbia’s aspirations for full membership in the EU without compromising its crucial national interests since, in terms of economic integration, China views the Union primarily as a market with excellent buying power that is appropriate for the placement of its products (Duško and Jokanović 2016, 328).

Between Serbia and the EU: the People’s Republic of China cooperation agreements

After the bloodshed of the 1990s, the EU membership incentives (the possibility of admission, technical aid, and financial support) promoted political and economic transformation. Pro-EU governments took office throughout the WB6 area (Albania, Bosnia & Herzegovina, Montenegro, Kosovo, North Macedonia, and Serbia) between 1996 and 2000. They desired greater integration in the EU and changes in governance and democracy (Soyaltin-Colella 2022, 4). In exchange, the EU expanded its enlargement strategy with the WB6 by stabilisation and association agreements (SAA) (European Council 2003). Serbia received candidate status for membership in the EU on March 1, 2012, while negotiations started in 2013. At the same time, the East European countries (EEC) were building ties with China. The strategic alliance between Serbia and the PRC was created in August 2009 with a joint statement from Hu Jintao and the then-president of Serbia, Boris Tadic (Prelec 2021, 18). The subsequent Joint Statement agreed by Presidents Tomislav Nikolic and Xi Jinping in August 2013 cemented this strategic alliance. The visit of President of the People’s Republic of China Xi Jinping to the Republic of Serbia from June 17–19, 2016 – the first visit of a Chinese President to Serbia in 30 years – was particularly significant for improving relations between the two. The visit coincided with the “Joint Declaration on the Establishment of the Comprehensive Strategic Partnership” between the People’s Republic of China and the Republic of Serbia (Ibid.). Since 2016, numerous Parliamentary cooperation and official visits have followed. In light of this, several bilateral agreements for political and economic cooperation – named the “steel friendship” were reached between Serbia and China were signed (Vladislavljev 2021, 23):

  • Framework Agreement on Economic and Technical Cooperation between the Government of the Republic of Serbia and the Government of the People’s Republic of China[1] (August 20 2009);
  • Joint Statement Between the People’s Republic of China and the Republic of Serbia on Deepening Strategic Partnership (August 26 2013);
  • The “Memorandum of Understanding on Cooperation of the Ministry of Construction, Transport and Infrastructure of the Republic of Serbia and the Import-Export Bank of China”[2] (December 17 2014).
  • Agreement between the Government of the Republic of Serbia and the Government of the People’s Republic of China on Establishment of Cultural Centres[3] (December 17 2014);
  • Joint Statement of the Republic of Serbia and the People’s Republic of China on the Establishment of a Comprehensive Strategic Partnership (June 18 2016);
  • Agreement between the Government of the Republic of Serbia and the Government of the People’s Republic of China on mutual visa exemption for holders of ordinary passports (November 5 2016) (Ministry of Foreign Affairs, Republic of Serbia).

3. The “16+1” platform and the “Belt and Road Initiative” …and the EU

In 2013, Chinese President Xi Jinping introduced the “One Belt, One Road” programme to expand the intermittent minor projects China has previously carried out along the historic Silk Road path. The finance of the project was handled by new organisations, including the “Silk Road Fund” and the “Asian Infrastructure Investment Bank” (AIIB), as well as through newly created mechanisms that would be under the control of the “Shanghai Cooperation Organisation” (SCO) (Ladevac 2020, 278). The year before, the PRC officially introduced the “Sixteen plus One” (16 + 1) platform in Warsaw, a regional economic and political framework for cooperation with sixteen “Central and Eastern European countries” (CEECs). The original group included five EU neighbouring countries — Albania, Bosnia and Herzegovina, Macedonia, Montenegro, and Serbia — as well as eleven EU member states — Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. The first sixteen members of Europe were all former socialist nations (Mitrovic, 2023, 2). This kind of partnership alarmed European officials. In 2018, the Commissioner for European Neighbourhood Policy and Enlargement Negotiations, Johannes Hahn, argued that China could represent a more significant concern to the EU than Russia because the latter could act as a “Trojan horse” by using its financial clout to influence the politics of nations seeking EU membership (Zeng 2023, 1). Indeed, after the Strategic Partnership was concluded, Serbia joined the 16 + 1 and the BRI, becoming the group’s primary recipient of Chinese loans and investments. In 2022, China was the second-largest foreign trading partner of the Republic of Serbia, while this last reached a historical maximum of exports to China (Ministry of Foreign Affairs, Republic of Serbia). The increasing economic relations resulted in agreements on cooperation in several capital infrastructure projects in Serbia, among which the most significant is the “Agreement on the Construction of the Belgrade Budapest railway”.

Nevertheless, the project is progressing quite slowly since the European Commission continually examines separate agreements struck by the governments of Serbia and Hungary. Since Serbia is not an EU member – contrary to Hungary – is not subjected to the strictest requirements of European procurement legislation. In contrast, Hungary may face fines and legal action for violating EU procurement regulations (Ibid., 280). In addition to projects supported by loans, Serbia and China successfully collaborated on several direct investment BRI projects in the infrastructure and energy sectors: the “Pupin’s Bridge,” “Milo Veliki” highway segment construction, and “Kostolac” Thermal Power Plant reconstruction as three of the most significant ones (Ibid.). The two most prominent Chinese investors in the Republic of Serbia can be considered the “Zijin Company,” a multi-national mining company which in 2018 invested in the “RTB Bor”, a copper mining and smelting complex, and the “Hestil Company,” a Chinese steel manufacturing conglomerate which bought the “Ironworks Smederevo” in 2016. In addition, the “Shandong Linglong Company” heavily invested in developing a tyre plant in Zrenjanin in 2019. In Kragujevac, a Chinese plant called “Yanfeng Automotive Interiors” manufactures interior automobile parts and opened its doors in November 2019. The trilateral project to modernise and reconstruct the railway track between Belgrade and Budapest (between the Republic of Serbia, the People’s Republic of China, and Hungary) is currently being realised as part of the mechanism of cooperation between China and the nations of Central and Eastern Europe (Ibid).

Risks associated with the BRI

Beyond the risk associated with loans, many other exists. A research based on a literature review (Andrić et al., 2017) tries to identify and categorise the BRI’s possible risks. According to this study, BRI projects, compared to more conventional international projects and bilateral and multilateral agreements, are more susceptible to hazards (Ibid., 7). The findings indicate that in Serbia, cultural differences, language barriers, safety precautions on the job site, inflation and currency exchange, soil and water pollution, force majeure, subpar materials, unpredictable ground conditions, noise pollution, and varying religious backgrounds represent some of the risk connected to highway projects (Ibid., 7).

The debt payment represents another problem. According to research on Chinese investment in Central and Eastern Europe, Serbia would need to spend more than $8 billion over the following two decades only to repay the loans it obtained from Chinese banks to pay for the infrastructure projects that Chinese businesses are funding (Matura 2021). Unsettlingly, these contracts typically provide that disagreements must be resolved in Chinese courts in line with Chinese law, potentially eroding Serbia’s legislative authority (Vladisavljev, 2023). Additionally, the fact that Chinese businesses are in charge of managing these infrastructure projects has limited Serbian people’s access to employment possibilities due to the workforce’s predominance of Chinese workers as described in the “Agreement on Social Security”. Due to China’s assertion of authority over its people while they are on Serbian soil, this arrangement also calls into question Serbia’s legislative sovereignty (Ibid.). Twenty-six members of the European Parliament wrote to Oliver Varheyli, the head of the EU’s enlargement commission, in January 2021 to express their concern over what they described as “growing Chinese influence in Serbia and the impending damage to the environment caused by several heavy industrial projects […]” (Stojkovski et al., 2021). According to the MEPs, Chinese investment projects are opaque, unsustainable and harm the environment (Ibid.).

It is frequently stated that China, in contrast to Western democracy and good governance norms, supports an alternative (authoritarian) way of governance through its BRI-based investment plans (Marjanović, Jovičić, and Stojanović 2021, 44). Nevertheless, there is no research on how and when Chinese BRI policies may affect third-country governance institutions (Soyaltin-Colella 2022, 2). Serbia’s EU accession processes have been restrained due to the Government’s preference for stability over democracy, which, as a consequence, strengthens the possibility of corruption. Serbia’s difficulties fighting corruption is another reason the Serbian EU access is increasingly improbable. Despite having a better state capacity than other Western Balkan nations, it has returned to its past bad governance practices after making some progress towards achieving EU reasonable governance requirements. Indeed, Chinese funding strategies have strengthened patronage networks, fostering corruption in the EU’s “stabilitocracies,” also incentivised by the EU’s stability-oriented agenda – as we will later see – (Subotic 2022, 39). Indeed, according to Freedom House, in 2020, Serbia downgraded to a “hybrid regime” due to the erosion of democratic institutions, media freedoms and the rule of law (Ibid., 38). In 2014, Serbia was still considered a “semi-consolidated democracy”, but Vučić has been taking the country below the queue for years due to increased state capture, abuse of power, and the use of fear.

4. What about the European Union?

Vucic claimed in March 2020 that China is the only nation that can support Serbia in its fight against the COVID-19 pandemic since he considered the Chinese president not only a “friend of the Serbian people” but also a “brother of this country”. In the same breath, he claimed the inexistence of European solidarity” calling it “a fairytale on paper” (Ladislavljev 2021, 29). That claim alarmed President von der Leyen, who at the March 2020 virtual (due to the covid pandemic) EU-Western Balkans meeting, remarked that “Western Balkans countries belong in the EU” and agreed to begin accession negotiations with North Macedonia and Albania – the only two countries out of the WB6 – after more than ten years. In the meantime, Serbia has fallen behind in the EU accession process since it managed to close only two of the 35 negotiation chapters. Beyond Serbia’s domestic problems concerning corruption and patronage, the literature provides several explanations for why the EU could not solve the governance issues. First, domestic factors and structural problems, including communist legacies, secessionist/nationalist movements, unsolved border conflicts, ethnic tensions, and underdeveloped state capacity. Among other reasons, we can find firstly the EU’s declining reputation, stricter admission requirements, and “enlargement fatigue”, phenomena that emerged after the “Big Bang” 2004 expansion (Soyaltin-Colella 2022, 5). Secondly, some political declarations have complicated the scenario: Jean-Claude Juncker, former EU Commission President, said in 2014 that there was little chance of a new member state joining the EU in the following five years. The French president, Emmanuel Macron, rejected membership discussions with North Macedonia and Albania, stating that further EU enlargement would weaken Europe (Ibid., 5). Thirdly, in contrast to previous enlargements, the EU prioritised domestic problems like organised crime, human smuggling, terrorism, and irregular migration in the region, which were seen as potential threats to the EU’s internal security. Fourthly, the EU prioritise stability over democracy. Instead of being pushed to enact democratic reforms, the Western Balkan countries were urged to cooperate regionally and to work towards fulfilling several international obligations relating to justice and good neighbourly relations, such as cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) in The Hague, the Dayton Peace Accords, and the Ohrid Agreement (Ibid., 7). Indeed, the Balkans advanced in accession not because they met the EU’s democracy requirements but because they prioritised justice for war crimes and friendly neighbourly ties. For instance, Serbia received EU candidature in 2012 following a deal between Belgrade and Pristina on the regional representation of Kosovo and the extradition of Ratko Mladic, a Bosnian Serb war crime suspect, to the ICTY. The EU’s emphasis on stability above democracy makes it more likely that authoritarian countries would cooperate with illiberal foreign powers. Indeed, the EU let Serbia’s Vučić serve two terms in Government, and both long-serving presidents of the Western Balkans have been permitted to advance in the integration process without tackling the systemic corruption of their regimes, expanding their patronage networks and strengthening their control over state institutions (Ibid., 7). After the SNS (Serbian Progressive Party) won the elections twice in 2014 and Vučić was elected president in 2017, Serbia’s authoritarian turn grew more pronounced. Vučić gained control of centralised authority due to the breakdown of independent institutions, including the ombuds office, media, and judiciary, and his tiny network of close economic cronies. Serbia’s growing economic ties with non-Western nations have been exploited by the Serbian Progressive Party (SNS) to advance a “winning” narrative throughout their period of power consolidation (2012-2020). He created a nationwide network deeply ingrained in the public administration thanks to unequal access to public and private resources, the politicisation of state institutions (particularly public procurement agencies), and strict media control. This situation created additional opportunities to redistribute subsidies to foreign investors supporting government policies (Ibid., 12). Under Aleksandar Vucic, the Serbian Government has adopted a “sitting on several stools” policy. At the same time, Vucic’s “two-stools” plan is typically thought of as a binary decision between the West and the East, including the implied warning to the EU that “if you do not court us enough, we have other partners to rely on” (Prelec 2021, 12).

Now, it is China’s round

Before the world economic crisis 2007, Southeast European countries (SEE) concentrated on luring investment from wealthy and industrialised European nations. The financial crisis drastically reduced the amount of European foreign investment, making them particularly appealing for Chinese business investments. After 2016, the United Arab Emirates (UAE) stopped playing the dominant “friend coming to the rescue” role with Serbia, and China gradually but steadily stepped into its place (Prelec 2021, 17). During this time, Chinese businesses took advantage of the financial crisis affecting European nations, diversify their assets, and boost their profits and market share (Marjanović, Jovičić, and Stojanović 2021, 43). With rising illiberal tendencies in the European periphery, especially Serbia, in an era of global democratic crisis, the Chinese model has emerged as a compelling alternative to autocratic regimes for different reasons: unconditional low-interest loans are an example. Chinese banks often offer low-interest loans and credits with lengthy maturities as the primary source of the country’s financial resources. Chinese loans are not subject to good governance norms like the “US Foreign Corrupt Practises Act”, which mandates anti-corruption procedures from credit export institutions in the US. The “Paris Club of Creditor Governments” and the “Organisation for European Cooperation and Development” (OECD), two of the biggest creditor bodies that publish information on government financing, do not include China among their memberships. As a result, most governments in developing nations can obtain – and, in fact, welcome – affordable, below-market loans from China to develop infrastructure. While the EU loans provided by European investment banks for development projects are subject to a long list of requirements regarding financial viability, environmental sustainability, the quality of infrastructure development, adequate labour conditions and transparency of procedures, China as an alternative lender rejects all these conditions (Soyaltin-Colella 2022, 9). However, these practices might undermine the macroeconomic stability of the nation, the so-called “debt diplomacy” (Marjanović, Jovičić, and Stojanović 2021, 52). Another possible risk is the “crowding-out effect”, when technologically advanced and financially strong investors – in this case, Chinese companies -push local competitors off the market, creating a monopoly. In this scenario, the negative consequences are numerous: the unfair distribution of domestic accumulation under the influence of Chinese capital, the possibility of worker dismissal and rising unemployment, the threat to national sovereignty, unfair competition, the overexploitation of domestic resources, the outflow of some domestic accumulation through the transfer of profits and interest abroad, the irrational distribution of domestic accumulation under those influences (Ibid., 52). Government-to-government agreements represent a second incentive, the primary means of achieving accords in China. Over 80% of Chinese-funded projects in the Western Balkans lacked a formal competitive process. Beijing forms alliances with governing parties and administrations by negotiating direct agreements with them that get minimal legislative scrutiny. In this method, contracts are given to Chinese corporations directly by governments as opposed to via an open bidding procedure. This strategy provides several potentials for corruption and rent-seeking and goes against the EU’s open and transparent bidding procedures policy. The World Bank (2019) has highlighted the corruption risk surrounding Chinese BRI infrastructure projects that disregard norms such as open and transparent public procurement (Soyaltin-Colella 2022, 10). The third reason regards political propaganda opportunities by soft power. Beyond infrastructural projects, fifteen information and communications technology (ICT) projects were launched in the region in 2018–2019 due to China’s expansion of its investment to include digital infrastructure, giving more chances to increase its influence in several non-economic areas (tourism, culture, and education). Visits from China to the Western Balkans are made easier by the relaxation of visa requirements, as in the case of Montenegro, or by the elimination of visa requirements entirely, as in the cases of Serbia, Albania, and Bosnia. China has established Confucius Institutes at the top institutions in most Western Balkans nations. The projected arrival of Chinese businesses in Serbia represents a fresh opportunity for the country’s economy to expand and for its industrial production capacity and standard of life to rise. However, the Chinese presence already influences and complicates the Serbian EU access. Serbia’s unwavering support for China’s actions, even when they blatantly violate human rights (as in the case of Xinjiang), and the progress Serbia-Chinese cooperation has made in 2020 suggest that this relationship may grow even stronger and more significant over time, while the one with the EU is getting worse. With such a predicament, Serbia is found to be in a constant state of limbo, with just 18 of the 35 chapters opened (the most recent one having been opened over two years ago) and only two chapters closed (the most recent having been closed more than five years ago) (Subotic 2022, 38).

5. Conclusions

Serbia established and remained the hub of the PRC’s economic and political presence in South-Eastern Europe during the last ten years of the Sixteen Plus One platform and the nine years of the BRI presence in Europe. Through loan agreements for infrastructure projects, commerce, FDI, and other forms of economic cooperation decided upon at the highest government level and supported from there, it demonstrated an active openness to accept economic cooperation. Serbia strengthened its relationship with China on various levels and capacities through collaborative networks in culture, education, health, infrastructures, technology, digitalisation, industrial zones, smart cities, and other initiatives. In the meantime, the EU seems farther and farther from the engagement with Serbia. The political patronage networks that persisted as a result of the EU’s stability above democracy position were sustained through Chinese-funded infrastructure projects, even when they were disguised as EU financial support and conditionality. This result raises concerns about the EU’s capacity to reform unjust governance systems through its accession plans in the area, as new outside actors have grown more significant in recent years.

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Endnotes

  1. https://www.fmprc.gov.cn/eng/zxxx_662805/200908/t20090828_411582.html
  2. http://demo.paragraf.rs/demo/combined/Old/t/t2015_01/ENG_2015_01_002.htm.
  3. http://lawinfochina.com/display.aspx?id=8405&lib=tax&SearchKeyword=&SearchCKeyword=&EncodingName=big5.
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