Eyes wide shut: How to read China’s playbook in the Western Balkans (Part one)

Summary

• The EU lacks a clear “China conditionality” in its enlargement policy with Western Balkan countries—that is, defining and implementing conditions for candidates to engage with China—and the topic of China remains largely absent from accession talks.
• The EU’s own hesitant China policy is in part to blame. The union’s official stance of balancing cooperation and rivalry no longer reflects EU actions in practice, which lean towards confrontation.
• As membership talks stall, China’s influence in the Western Balkans grows, raising fears that new member states could act as promoters of Chinese interests and veto actions against Beijing in the EU.
• The EU must clarify its China policy and embed it as a clear conditionality in the accession process.
• It also needs to establish a firm timeline for Western Balkan membership and strike a better balance between requirements and incentives to encourage progress.

The red flag ignored

In 2021, one instance of China’s involvement in the Western Balkans set off the EU’s alarm bells: Montenegro was heading towards financial collapse after a huge loan from China’s Exim Bank for a controversial highway project swelled into a debt mountain—at one point topping a third of the country’s annual budget. The EU sprang into action. It rapidly mapped developments on the ground, strengthened its China teams and eventually stepped in to prevent Montenegro from falling into debt bondage with China.

The episode was a wake-up call for the EU on Beijing’s expanding footprint in the bloc’s periphery. Yet, four years later, the EU still does not have a clear “China conditionality” for EU aspirant countries, and the topic of China remains noticeably absent from formal accession talks. The void is made larger by the EU’s own hesitant and ambiguous China policy.

More than two decades since the EU granted a perspective for membership to Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia, accession seems to have drifted ever farther from sight. What was once a time-bound political and institutional effort with a clear goal has shifted into an open-ended, multi-generational journey buffeted by geopolitical headwinds and mounting frustration.

Given this, it is not surprising that Western Balkan countries are increasingly exploring a wider range of partnerships, most notably with China. Beijing’s footprint in the region is evolving from infrastructure projects and loans to investments and acquisitions, with its influence ever more entrenched in the region’s core institutions.

After years of build-up, the risks China’s behaviour poses are apparent: debt and opaque deals, but also a lack of accountability and transparency, a disregard for data privacy, and an undermining of EU laws. If Western Balkan countries join the EU, they could become promoters of Chinese interests in the bloc and wield vetoes over the EU’s actions against China, as Beijing’s interests increasingly clash with those of Brussels.

But there is a deeper, more enduring challenge here. When the EU began its policy of enlargement almost 40 years ago, Western political, economic and social models reigned uncontested. Russia was on the back foot, while China was only a distant rising power. Europe’s eastern and the south-eastern peripheries were perceived solely as vectors of Westernisation.

Today, that context has shifted dramatically. The global order no longer leaves space for unquestioned Western dominance, and Europe’s peripheries are now arenas where multiple global powers compete for influence. The EU’s enlargement framework has not caught up with the new geopolitical reality. Without reforming its approach, the EU risks undermining the transformative potential accession was originally designed to foster.

This policy brief maps China’s presence in Western Balkan countries and decodes its tactics. It also examines the EU’s evolving China policy, including its related legal instruments, expectations and de facto approach. Finally, it looks at how and to what extent “China conditionality” is reflected in the accession negotiation process. 

Geopolitical games

The core assumption behind EU accession negotiations is that they serve to align candidate countries’ laws, norms and institutions with those of the union, thereby socialising and integrating these states into the European legal and political fabric. This process also generates effective constraints on third countries.

While the degree and duration of integration vary—evidenced by setbacks in Victor Orban’s Hungary, for example—the underlying principles remain. Accession drives a comprehensive overhaul of legal systems, administrative practices and public institutions. It is a far more than a technical exercise: it is a profound process of social transformation that aims to embed shared sovereignty and prepare countries for full participation in the EU.

Playing geopolitical games in accession talks clearly runs counter to this wider goal. Yet, the accession process in the Western Balkans has been dominated by such manoeuvring, with some governments using accession as a tool in their broader geopolitical calculations.

A significant part of these calculations is how each country incorporates China into its strategy. Albania and Kosovo persist in their scepticism and distance from China, as previous studies have found. But that is less the case for the other four countries in the region.

Traditionally, Serbia has engaged the most with China, even if President Aleksandar Vucic has found it ever more delicate in recent years to do so as EU policies pull Belgrade closer to Brussels, such as through energy connectivity projects. Likewise, Vucic’s relationship with Russia is becoming more difficult to balance, as the EU tightens sanctions on Moscow and the US urges diversification away from Russian energy sources.

The current government of North Macedonia, led by Hristijan Mickoski of the nationalist VMRO, prioritises party identity and electoral positioning over accession, creating more room for hedging. Currently, the VMRO-led government seems unwilling to implement previously agreed constitutional provision that recognises Bulgarians as one of the country’s founding peoples, effectively blocking progress towards EU membership. Previous VMRO-led governments also pursed a “multi-vector” foreign policy, courting projects and partners outside the EU, such as China.

Montenegro’s government shows similar tendencies, signing public procurement deals across various sectors with non-EU countries despite the near-bankruptcy experience with Chinese loans just a few years ago. In fact, public wariness towards China has proven quite short-lived.

In Bosnia and Herzegovina, Milorad Dodik, the former leader of Republika Srpska, uses his ties with Russia and China to ensure political survival and deflect international pressure. In the future, these relationships could be used as leverage to preserve the current constitutional order, which might need reform in accession negotiations.

Of course, China seizes on these games. The European Parliament, which plays a significant role in monitoring progress towards EU accession, recently issued a resolution underlining the importance of countering foreign interference in Albania, Bosnia and North Macedonia, offering specific recommendations for each country.

For North Macedonia, the resolution noted that China has made efforts “to expand its influence through information control, investment diplomacy and coercive clauses in infrastructure loan agreements”. MEPs have urged Skopje to address risks, such as “strategic corruption, opaque financial flows, risk of dependency on Beijing”.

The resolution also noted that Bosnia is being targeted by “malign foreign actors” like Russia and China, despite its formal alignment with the EU’s foreign and security policy. Albania was noted for growing cooperation with Chinese media including its national public radio and TV broadcaster. Foreign interference and disinformation campaigns originating from Russia and China are even targeting Kosovo, according to the report.

The new Chinese playbook

China has long worked to deepen its presence in the Western Balkans across various areas. But as regional and global dynamics shift, its strategy is quickly evolving. While its long-term goals—political positioning in future EU member states, building networks of friendly local actors, and gaining influence in key policy and economic sectors—remain the same, Beijing is expanding its toolkit to achieve these goals.

First, the Western Balkans is gaining strategic importance as a key segment of the “middle corridor” connecting Asia and Europe. This route is becoming more important as the traditional “northern corridor”, or the “Eurasian land bridge”, has diminished in significance due to increased uncertainty and risk stemming from Russia’s war on Ukraine. Similarly, tensions between Israel and Iran also complicate transport and infrastructure connectivity in the Middle East and hamper the development of the China-Pakistan corridor.

At the same time, the diplomatic environment in central and eastern Europe (CEE) is becoming more challenging for Beijing. The once-prominent “17+1”, the format including 17 countries in CEE plus China, established in 2012, began to break apart a decade later amid increasing scepticism about China’s actions—particularly its limited economic engagement and its de facto support for Russia’s war on Ukraine. The departure of the three Baltic countries in 2021 and 2022 further undermined the platform, reducing its role to mere performative diplomacy.

As EU member states in CEE become more cautious towards Beijing, China has adapted its strategies in a number of ways.

A wider-society approach

During its initial years of entry and positioning in the Western Balkans, Chinese policymakers focused on working with local elites using a state-centric strategy. Now, this approach is evolving into a more balanced, all-of-society model that complements Beijing’s earlier methods.

Specifically, China has shifted from large-scale, sector-specific projects, such as in infrastructure and energy, towards a more diffuse, multi-actor approach across several sectors. This includes engaging with cultural, academic, business and educational organisations and using projects and institutional agreements to embed and consolidate cooperation. After the Communist Party launched the “go out” strategy at the start of the 2000s, which was updated and relaunched in 2013 by President Xi Jinping, various Chinese state structures, companies and institutions have adopted internationalisation strategies, now clearly visible in the Western Balkans.

In addition, China has identified “pillar countries”, such as Hungary and Serbia, and has intensified cooperation with them. These countries then serve as hubs to reach the wider Western Balkans region.

Free-trade agreements

After years of limiting free trade agreements (FTAs) while China’s domestic firms matured, Beijing is now actively seeking market-opening agreements. In July 2024, its free trade agreement (FTA) with Belgrade entered into force, eliminating tariffs on 90% of traded goods.

China has concluded similar agreements with Georgia, Switzerland, Iceland and Belarus, and is currently negotiating deals with Norway and Moldova. In June, it granted duty-free access to its market for all African countries with the exception of Eswatini, which recognises Taiwan. China seems set to expand this approach in the coming years.

Infrastructure

Infrastructure has been at the core of China’s efforts to position and embed itself in the Western Balkans. Rapid Chinese activity—and the attendant risk of economic and political capture in countries such as Montenegro—prompted belated scrutiny from EU institutions, including the European Commission and the European Parliament. The European Parliament in particular flagged multiple vulnerabilities and urged corrective measures in the entire Western Balkan region. Montenegro’s near-debt crisis linked to the Bar-Boljare motorway, and the EU’s reaction to it, foreshadowed more barriers for Beijing to secure new projects in the country and its neighbours.

However, that has not been the case. In August 2023, Montenegrin authorities awarded a €54m contract for a Budva-Tivat motorway section to two Chinese contractors, Shandong Foreign Economic and Technical Cooperation and Shandong Luqiao Group. Strikingly, Podgorica recently shortlisted three Chinese companies (Shandong Hi-Speed Group, Power Construction Corporation of China and China Communications) and the Azeri firm Azvirt for the construction of a 23km stretch of nothing less than the Bar-Boljare highway. Shortly after that, the European Commission and the European Bank for Reconstruction and Development, which are funding about a third of the €605m project, requested Montenegro cancel the pre-qualification tender. This was in response to local protests and because “only firms from China, Turkey and Azerbaijan were shortlisted,” according to local media.

Moreover, the government of Montenegro has signed bilateral agreements in infrastructure and other areas with Hungary and the UAE that contain exemptions from open public procurement procedures, inviting problems similar to those created by the Bar-Boljare highway, such as lack of transparency and unsustainable financial commitments.

In addition, actors with significant links to Chinese and Russian business interests continue to expand their influence in the Western Balkans. One example is ArcelorMittal, one of the world’s largest steelmakers, which recently sold its steel mill and iron ore mine in Bosnia to Pavgord Group—a local company linked to Dodik, who has close ties with both Beijing and Moscow.

Additionally, Bosnia’s investment promotion agency signed a memorandum of understanding in February 2025 with the China-Europe Association for Technical and Economic Cooperation with the stated goal of identifying new investment opportunities.

Telecommunications

Despite US efforts to contain its expansion, Huawei remains entrenched in the Western Balkans. Recently, it signed a network capacity upgrade agreement with BH Telekom, Bosnia’s main telecom provider.

Chinese engagement in this sector is now taking multiple forms. First, new operators are installing Huawei-made core hardware. This is the case with the Hungarian firm 4iG, which signed an wide-range agreement for strategic development with Huawei in May 2024, covering research and development, AI and other areas. The firm is present in Montenegro and Albania, following a series of aggressive acquisitions in 2021 and 2023 respectively, and it entered North Macedonia in 2024.

Significantly, 4iG is providing not simply telecom services, but also IT services, data and cloud management, and software, and it recently entered the defence market in cooperation with the Hungarian government. The inclusion of AI is noteworthy when considering China’s “AI Plus” policy, which seeks to introduce and integrate AI capabilities across all of its industries and processes. From this perspective, firms such as Huawei no longer focus only on hardware or control of data flows, but also supplying the entire ecosystem of telecommunications. Over the last few years, both Huawei and ZTE have intensified their internationalisation strategies and efforts to penetrate various markets.

Diversified financial cooperation

Financial cooperation between China and the Western Balkan countries is diversifying. The North Macedonian government, headed by Mickoski, sought to secure loans from Beijing and obtained €500m from the Hungarian state-owned Export-Import Bank, which appears to have acted as an intermediary. Hungary itself obtained loans worth €1bn euros from Chinese lenders (the Exim Bank and the Hungarian branch of the Bank of China).

China is also promoting yuan clearing in the region. In 2024, the Bank of China in Serbia launched yuan-clearing services and completed its first cross-border remittance linked to a Chinese-owned steel plant. As a leading actor in yuan internationalisation, the Bank of China is likely to promote wider yuan settlement across the Western Balkans.

At the same time, China is expanding financing instruments that support corporate internationalisation, such as increased venture capital support for AI and IT firms. This broadening of financial channels marks a shift from the earlier dominance of large, state-led frameworks such as the Belt and Road Initiative, and the 17+1 (later 14+1) format. Now, financial cooperation happens increasingly through Chinese banks and corporate lending.

Defence

There are notable developments in the areas of defence and military equipment. China has supported in particular the emergence and strengthening of a domestic drone sector in the Western Balkans, which has matured rapidly and is now aggressively pursuing international markets. Serbia is a primary focal point of China’s defence engagement. In 2020, Belgrade received shipments of CH-92 and CH-95 military drones, bundled with eight laser-guided missiles. The cooperation has since expanded to include an air-defence system, the FK-3, which is now operational within the Serbian air forces.

Along with China, Turkey is also making significant strides in penetrating the drone market in the Western Balkans, with sales in countries such as Bosnia, Kosovo and Albania.

Media and more

In the field of media and information, recent data in North Macedonia and Kosovo indicate an increase in media activity driven by China. Beyond that, China has been attempting to create new international institutions to circumvent what it sees as Western-dominated structures. A few months ago, it launched the International Organisation for Mediation as a new platform for dispute settlement made up of 33 founding states, including Serbia.

The EU’s China policy: Evolving toolkit, no clear policy

As Western Balkan states deepen their ties with China, the EU still has not found its footing. In an effort to capture the complexity of its evolving relationship with China, as well as the diversity of perceptions among EU member states, the EU has framed its China strategy around three coexisting tracks: partnership, competition and rivalry. In practice, however, these strands have pulled the strategy in different directions in recent years, weakening the original compromise and producing fragmented policy.

Rhetoric remains strong in the cooperation track, particularly on climate change, green industries and AI. However, practical cooperation is limited and has now become mostly ritualistic, centred on ceremonial summitry statements of little consequence. Meanwhile, green industry has turned into a space of competition and even rivalry. China’s dominance in rare earth minerals, and its willingness to use that dominance to achieve its geopolitical goals, has foreclosed substantive cooperation, pushing Europe to seek out other partnerships in this field.

In relation to AI, the EU and China have exchanged views, but they have not undertaken any substantive discussions on AI governance. Deteriorating security ties make any prospect of changing this status quo even less likely. In fact, this space is becoming an arena for competition with China, as the EU launches initiatives such as InvestAI (€200bn) and its AI Gigafactory Fund (€20bn).  

Such competition is becoming the defining feature of EU-China relations and extends to an increasing number of fields, ranging from electric vehicles, specialised machinery, advanced manufacturing, electrical equipment, chemicals, renewable energy technologies, high-tech products and more. As China has shown little appetite to change its industrial model—subsidies, export support, overcapacity and restricted market access for foreign firms—this list can only be expected to grow, reinforcing the competitive dynamics of the past few years.

In addition, the EU and China are increasingly facing each other off in third markets across the globe, particularly in South-East Asia and Latin America. This dynamic has accelerated during the second Trump administration as both the EU and China seek to diversify away from a protectionist America.

Increasingly, the EU and many member states see China as a rival. This perception is driven predominantly by Chinese support for Russia’s war on Ukraine. But Beijing’s intransigent refusal to address EU concerns over unfair trade practices is also producing systemic effects, even if the EU hesitates to define them in this manner. Policymakers in seem to prefer to preserve some space for geopolitical maneuvering, particularly as tensions with US president Donald Trump are so heightened. For similar reasons, Britain has refrained from including China in the top tier of its “covert foreign influence” register.

Drifting towards decoupling

The EU’s core policy dilemma towards China is routinely described as a choice between de-risking and decoupling. The former means reducing dependencies in selective sectors; the latter, a total disentanglement across all sectors. In practice, however, competition is accelerating, and the EU’s actions appear to reflect this reality—undermining the possibility of a deliberate policy  choice.

As the EU tries to reverse asymmetries with China (like unequal market access) that it tolerated in an earlier era, it is facing strong Chinese resistance. This is turning discrete trade grievances into a widening set of disputes across many sectors. In this context, not only is the EU itself likely to continue to clash with China, but some member states such as France are even keen to go further and apply much wider, generalised tariffs in order to protect French and EU industries from China.