Study: In Chinese investments, Serbia stays in front of Central European countries

Stefan Vladisavljev

06. June 2019

Study: In Chinese investments, Serbia stays in front of Central European countries

The Belgrade Fund for Political Excellence (BFPE), in cooperation with the Prague Institute for Security Studies from the Czech Republic (PSSI), the Institute for Asian Studies (Slovakia), the HAS Center for Economic and Regional Studies (Hungary) and the Center for International Relations (Poland) has prepared a study that deals with the development of relations between China and Serbia, as well as the state of the Visegrad Group for the past 10 years. The study also focuses on the structure of Chinese investments in these countries and the most significant projects being implemented in cooperation with China.

In the EU countries, there is currently a debate about the potential risks arising from foreign direct investment, and in this study, attention is paid to the mechanism that all EU countries need to introduce in order to monitor the impact of foreign direct investment. Serbia is in a different situation and occupies a different position in cooperation with China from the countries belonging to the Visegrad Group (Czech Republic, Slovakia, Hungary, Poland).

According to Stefan Vladisavljev, researcher of the Belgrade Fund for Political Excellence and one of the authors of the publication, the Government of the Republic of Serbia sees ‘steel friendship’ with China as one of the most important aspects of its foreign policy, which, he said, reflects on significant Chinese projects in energy and infrastructure projects. “Numerous financial contracts and Chinese companies present on the territory of Serbia have prompted EU officials to express concern that there can be an excessive increase in Chinese influence in Serbia,” Vladisavljev said.

On the other hand, the countries of Central Europe belonging to the Visegrad Group have similar relationship with China. Jakub Tomašek from the Prague Institute for Security Studies explains: “All the countries of the Visegrad Group have a long-term and high trade imbalance in relation to China. That is why nearly all of the countries mentioned since 2010 have made an extraordinary political effort to meet China’s interests in Central Europe and attract new investments.”

“However, after initial enthusiasm almost all countries came to disappointment first of all because a small number of the promised projects were realised and there was no opening of the Chinese market for entrepreneurs from the countries of Central Europe,” Tomašek said.

In the context of Chinese investments, there is concern that they could effectively be used to spread the influence of the Chinese state apparatus in the countries in which they are exercised and this leads to increasing caution in the EU countries where investments are made. The screening mechanism, which aims to assess whether foreign direct investment is detrimental to national security and internal order, has become a compulsory instrument for EU countries since April 2019.

Although some Visegrad Group countries already have similar mechanisms, and others will have the obligation to implement it through their national legislation, it is considered that this will not significantly contribute to changing the current trend of Chinese investments. In Hungary, for example, where a similar instrument came into force in January 2019, it believes that it will not endanger further Chinese investments, primarily because there is a strong political will to further improve relations with China’s teaching.

“Serbia, as a state that is not yet a member of the EU, still has no obligation to introduce this kind of screening mechanism. However, given the candidate status and the obligation to further align with EU regulations, the screening mechanism will at some time become a commitment of Serbia, “Stefan Vladisavljev noted, explaining why he should be cautious with the further increase of the Chinese presence in Serbia:

“In addition to the potential harmful effects of national security and internal order, there is a growing concern of the EU that China’s increased influence in Serbia will increase.”

Download the study:

http://www.pssi.cz/download/docs/681_final-report.pdf

This publication is prepared as part of the project “Comparative analysis of the approach towards China: V4 + and One Belt One Road” implemented by BFPE in cooperation with Prague Security Studies Institute (Czech Republic)Institute of Asian Studies (Slovakia)HAS Center for Economic and Regional Studies, Institute of World Economics (Hungary) and Center for International Relations (Poland).

The International Visegrad Fund (IVF) supports this project.