China and Serbia: What did the Belt and Road initiative bring to Belgrade, and what do the new agreements with Beijing mean?

 

Chinese companies have been present in Serbia for years, numerous infrastructure projects were carried out with money from China, and after the signing of the Free Trade Agreement on October 17 during the Belt and Road International Summit in Beijing, the relations between the countries got a new chapter.

 

While Serbian President Aleksandar Vučić describes this agreement as a "big deal" that "opens up new horizons", eyebrows are raised in Brussels ahead of the announced arrival of European Commission President Ursula von der Leyen in Belgrade on Tuesday, October 31.

 

This act will enable the export of 8,930 Serbian products to China under easier conditions, while 10,412 Chinese products will have easier access to the Serbian market, according to the agreement on free trade between the two countries, which was confirmed by the Serbian parliament.

 

Although this agreement is a "huge chance for Serbia", the results for the Serbian economy could be "poor", according to economist Ljubodrag Savić in an interview with the BBC in Serbian.

 

"The bottom line, however, is what Serbia can offer, and what China can offer us, which are very asymmetrical things.

 

"The benefits that the two sides will have cannot be compared, Chinese companies have been present in Serbia for some time and the largest amount of exports to China comes from those companies," explains the professor of the Faculty of Economics for the BBC in Serbian.

 

While Vučić says that the agreement with China "has historical significance and character, which will be seen in the years and decades ahead", a message came from Brussels that the agreements with China will not last long, if Serbia enters the European Union.

 

While official Belgrade is formally on the path to membership in the EU, whose members cannot sign such bilateral agreements, Serbia's candidate status does not prevent it from doing so, said EU spokesman Petar Stano.

 

But, he added, the agreement will have to be terminated no later than the day before joining the bloc.

 

For now, however, there is no clearly established date for Serbia's accession to the EU.

 

The newly signed agreements indicate "the continuity of the growth of cooperation between Serbia and China, which has had the formal status of a comprehensive strategic partnership for 14 years," explains Stefan Vladisavljev, program coordinator of the Belgrade Security Forum, for the BBC in Serbian.

 

But, he adds, they are also "confirmation of the current direction of Serbian foreign policy".

 

"Given that some parts of this contract will be fully implemented only in five years or more, it can be inferred from this that Serbia does not expect EU membership at least during that period," adds this expert.

 

The free trade agreement with Serbia is the first that China has concluded with any of the countries of Central or Eastern Europe, according to the website of the Chinese government.

 

Serbia was one of the 28 founding countries of the global Belt and Road Initiative in 2017, which was launched by Chinese President Xi Jinping in 2013.

 

Today, it includes more than 150 countries and international organizations, according to the Belt and Road Institute in Belgrade in a written response to the BBC in Serbian.

 

In the first decade of cooperation, projects such as the Belgrade-Budapest railway, sections of the "Miloš Veliki" highway, the bypass around Belgrade, the Novi Sad - Ruma, Valjevo-Lajkovac roads, the reconstruction of the Kostolac thermal power plant, the Pančevo thermal power plant, as well as the construction of the Pupin bridge in Belgrade were completed and started. , which has "special significance" as "China's first infrastructure project in Europe", they add.

 

However, although the data on the amounts of Chinese investments and loans in Serbia are transparent, "values of specific projects, methods of financing and other data can be requested exclusively from the competent ministries and bodies of the Government of the Republic of Serbia", the institute notes.

 

The Ministry of Transport and Infrastructure did not respond to the BBC's inquiry about the total value of Chinese investments in Serbia so far, as well as the model by which they were placed.

 

The Office of the National Council for Coordination of Cooperation with Russia and China, which is managed by former Serbian President Tomislav Nikolić, said that they did not want to answer the BBC's questions about the value of Chinese investments and the past strategic cooperation between the two countries.

 

The trade agreement implies the complete or gradual abolition of customs duties on the import of goods.

 

More than 60 percent of customs duties will be completely abolished when the agreement enters into force, and apples, peaches, plums, watermelons, cereals, meat products, water, beer, jams, as well as industrial products will go from Serbia to China under these conditions. of iron and steel, boilers for central heating, fuel pumps, hydraulic turbines, white goods, seats, wood, pharmaceutical and cosmetic products, cleaning products, plastic products, mineral fertilizers, textiles and others.

 

For more than 16 percent of the products on the list, customs tariffs will be gradually abolished and will be abolished in five years, and in that category are wine, potatoes, onions, tomatoes, cucumbers, mushrooms, grapes and other goods.

 

Almost 10 percent of the products of both sides in 10 years will be exported completely without customs duties, about four percent in 15 years.

For slightly less than 10 percent of them, customs duties will continue to apply even after the implementation of the agreement.

 

The free trade agreement includes the establishment of the Joint Committee on Free Trade of Serbia and China, which will monitor and evaluate the implementation of the agreement, monitor the possibility of additional removal of trade barriers and other restrictive measures, and monitor the further development of the agreement.

 

This agreement represents "the pinnacle of the political and economic cooperation between Serbia and China in the last decade and a half", says Aleksandar Mitić, research associate at the Center for "Belt and Road" Studies at the Institute for International Politics and Economy, in a written response to questions from the BBC. in Serbian.

 

"The free trade agreement is logical considering the provisions of the EU on when and under what conditions it should be valid, which is the eventual day of accession.

 

"Given the uncertainty and the impossibility of estimating when that moment might come, it is logical that Serbia wanted to use the opportunity to sign such an agreement, which only Switzerland and Iceland still have in Europe," says Mitić.

 

The trade agreement will enter into force three months after ratification in China and Serbia.

 

After the signing in Beijing, Vučić expressed his expectations that it will happen by May or June next year.

 

Economist Ljubodrag Savić believes that no country in the Balkans has the chance that Serbia got, but he raises "the question of the capacity to satisfy the appetites of China".

 

"The Chinese market is huge, and in that sense, Serbia's first problem is quantity, because you cannot appear on that market with a small amount of goods.

 

"It will be difficult if producers, processors, traders, the Chamber of Commerce and relevant ministries do not realize that they must unite and make a good effort to conquer that market," explains the professor of the Faculty of Economics.

 

In the opposite direction of the trade chain, China will get "an even easier access to the Serbian market", notes Savić.

 

"After the abolition of tariffs, Chinese goods should logically be cheaper.

 

"But I don't expect that - I believe that the goods will be only symbolically lower for consumers, because importers and traders will keep most of that profit for themselves," this expert believes.

 

Last year, Serbia imported goods worth 4.98 billion dollars from China.

 

It exported more than four times less - 1.17 billion dollars, according to the data of the Republic Institute of Statistics (RZS).

 

The three largest exporters from Serbia in the first half of 2023 were precisely companies from China - Ziđin Mining from Brestovac exported goods worth 631.2 million euros, Ziđin Koper from Bor 427.5 million euros, and HBIS Group, the owner of the Smederevo ironworks, 347.3 million euros, announced the Ministry of Finance.

 

The Ministry of Construction, Transport and Infrastructure concluded three contracts on the construction of about 300 kilometers of new roads with Chinese companies.

 

The value of the works is around four billion euros, according to the ministry's announcement.

 

Chinese companies will build the 200-kilometer-long "Smile of Vojvodina" expressway, which will pass through Bački Breg, Sombor, Kula, Vrbas, Bečej, Novi Bečej, Kikinda and Srpska Crnja, said Minister Goran Vesić.

 

A contract on the construction of a highway between Belgrade, Zrenjanin and Novi Sad, which will be 105 kilometers long, was also signed, he added.

 

In the third contract, Serbia committed to purchase five Chinese high-speed trains for 54 million euros, "which will run on the Belgrade-Budapest line", and some of them will be in operation at the beginning of 2025, Vesić said.

 

Previously, Dubravka Đedović, Minister of Mining and Energy, signed two memorandums of understanding with Ziđin Mining during her visit to China, it was announced on the ministry's website on September 9.

 

The memorandum on the development of the Lower Zone of the Čukaru Peki mine implies additional investments of 3.8 billion dollars in Serbia, and the Memorandum on the development of the 300 megawatt-hour solar power plant project was also signed.

 

Previous bilateral agreements between Serbia and China

Source: Ministry of Foreign Affairs of the Republic of Serbia

 

 

Since the signing of the agreement on economic and technical cooperation in 2009, Beijing and Belgrade have "intensely and continuously improved relations", emphasizes Aleksandar Mitić.

 

"Relations have been extended to other spheres, from scientific, cultural and touristic, even to military - in the field of anti-aircraft systems and drones, which is a special rarity in Europe, and which was also discussed on the sidelines of the Forum in Beijing.

 

"In addition, under the leadership of Xi Jinping, China has been even more active since 2013 in supporting the territorial integrity of Serbia regarding Kosovo and Metohija," says an expert from the Center for "Belt and Road" Studies at the Institute for International Politics and Economy.

 

But what consequences does this leave on the path of Serbia's foreign policy path that leads to the West?

 

Before the first day of Serbia's potential membership in the EU, Belgrade will have to terminate trade agreements with China, as well as the Eurasian Union, said Peter Stano, spokesman for the European Commission, for Radio Free Europe.

 

He added that "it is not a new condition, but a general rule that applies to all candidate countries".

Stefan Vladisavljev from the Belgrade Security Forum assesses that due to this fact, the arrangement with Beijing seems "sustainable in the short term, but very questionable in the long term".

 

"The question we can ask is whether political and economic rapprochement with the EU is the true and sincere interest of Serbia at this moment.

 

"By increasing tensions on the geopolitical level, Belgrade will find itself in a challenging position," Vladisavljev believes.

 

"As a small country, you will hardly be able to stay alone in the windbreak and you will find yourself in a situation where you have to choose priority partners, which Belgrade has not yet done," he adds.

 

 

Serbia and China reached an agreement on the formalization of the Mid-Term Action Plan for the joint development of the Belt and Road Initiative from 2023 to 2025.

 

He is "dedicated to strengthening the comprehensive strategic partnership" and should further improve bilateral cooperation in various domains, the Belt and Road Institute in Belgrade told the BBC.

 

They cite examples of infrastructure projects that were created in Serbia as part of the Belt and Road, such as the Belgrade-Budapest railway, the "Miloš Veliki" highway, the bypass around Belgrade, the Novi Sad - Ruma, Valjevo-Lajkovac roads, the reconstruction of the Kostolac thermal power plant, the Pančevo thermal power plant, as well as and the construction of Pupin's bridge.

 

However, research by BIRN (Balkan Research Network) showed that in Serbia there are 61 infrastructure and business projects made with the help of donations or loans from China, making it the leader in the Balkans.

 

There are a total of 75 more in Albania, North Macedonia, Bosnia and Herzegovina, Montenegro and Greece, and among the largest projects are the Pelješac Bridge in Croatia, the highway in Montenegro, as well as the reconstruction of the largest Greek port, Piraeus, in the suburbs of Athens.

 

Stefan Vladisavljev points out that "all projects, primarily infrastructural" that Serbia has implemented in the previous 10 years in cooperation with China "are to some extent under the auspices of that initiative".

 

"In unfavorable conditions, after the global financial crisis, when it was not easy to get funds, it was very important for Serbia to get those funds quickly, and China was that partner at the end of the first, during the second and the beginning of the third decade of the 21st century. century.

 

"It turned out that Chinese loans come without too many conditions, that local companies were quite efficient in carrying out works, and through this cooperation, Serbia received a significant part of the infrastructure," he says.

 

But he notes that these investments "did not come for free and that Serbia did not pass without consequences, short-term and long-term".

 

"First of all, all infrastructure projects implemented with the help of Chinese companies and with Chinese loans will have to be returned, they were signed for the long term, they have become part of the Serbian foreign debt and burden the budget."

 

Vladisavljev also points to reports on the negative impact of Chinese companies on the environment, air pollution, harmful exploitation of land in Bor and violation of workers' rights at the Ziđin factory.

 

"These are the short-term and long-term effects of the compromises that Serbia made in order to ensure the conditions in which Chinese companies operate here today.

 

"They could influence the level of the rule of law and non-compliance with standards, which tomorrow could further burden the process of European integration of Serbia," he believes.

 

In addition to the Balkan states, the initiative has reached "more than 25 European countries", among which "the majority of Central and Eastern European countries, but also Austria, Luxembourg and Portugal", says Aleksandar Mitić.

 

"The total value of the projects exceeded one billion dollars this year, and for the first time investments represented more than 50 percent of the total engagement within the framework - in the first half of 2023, 59 percent," he adds.

 

Read more about China's global initiative here.

 

Mitić, however, sees differences in the attitude of European countries towards the Belt and Road.

 

He cites Serbia and Hungary as examples of countries whose cooperation with China is "at the highest possible level" due to political will, Greece due to a large project in Piraeus, while other European countries, such as the Baltic states and the Czech Republic, have reduced engagement under pressure from Western powers in previous years. , primarily America, he points out.

 

In the meantime, the delivery of Chinese weapons arrived in Serbia, including combat drones and the FK-3 anti-aircraft system, which can destroy flying targets at a distance of up to 100 kilometers.

 

In the past decade, China has given Serbia various military equipment, from IT to rubber boats, trucks and excavators.

 

During the previous years, official Belgrade concluded more trade agreements, primarily with the countries of the Western Balkans and Asia.

 

After three years of negotiations, in March 2019, Serbia signed a free trade agreement with the Eurasian Economic Union (EAEU), whose members are Russia, Belarus, Armenia, Kyrgyzstan and Kazakhstan.

 

According to that act, 99.5 percent of products from Serbia are placed duty-free on the market of those countries, which have a total of more than 180 million inhabitants.

 

This agreement was "a kind of supplement to the existing bilateral agreements", because at that time Serbia already had such an agreement with Russia, but not with any other members of the union, explains Stefan Vladisavljev.

 

In November of the same year, Serbian President Aleksandar Vučić met in Novi Sad with Edi Ram, Prime Minister of Albania, and Zoran Zaev, then Prime Minister of North Macedonia.

 

The epilogue of the meeting was the creation of cooperation informally called "Little Schengen", which was supposed to enable "full freedom of movement, circulation of goods and services", said Vučić at the time.

 

This initiative was formalized on July 29, 2021 under the name Open Balkans, and was joined by Serbia, Albania and North Macedonia.

 

The remaining countries of the Western Balkans, which are not members of the EU, such as Bosnia and Herzegovina, Montenegro and Kosovo, have not yet joined this initiative.

Vladisavljev states that the Open Balkans was created due to the "dysfunctionality" of the Berlin process, bringing the possibility for members to implement some aspects, "which due to the lack of consensus in the EU, could not be implemented".

 

The Berlin Process is an initiative of the European Union created in 2014 and brings together six Western Balkan countries that are not EU members - Serbia, Montenegro, Albania, North Macedonia, Bosnia and Herzegovina and Kosovo.

 

"The question is what will be the fate of the Open Balkans now that the Berlin process has again become a priority among EU members and the countries of the Western Balkans.

 

"But it can again be an option for the countries of the Western Balkans if it 'squeaks' in the implementation of the Berlin process," explains Vladisavljav.

 

Serbia's cooperation with China, however, differs from the previous ones due to the fact that it is "the only bilateral agreement with an individual country", points out the program coordinator of the Belgrade Security Forum.

 

"All three agreements show that Serbia continues to promote a multi-vector foreign policy - unlike other countries in the region, we do not have clearly defined priorities or they are defined very broadly," he adds.