28.10.2024.

Why are Chinese companies dominant in Serbia?

"Our goal should not be to attract foreign investors who will exploit our resources and export raw materials at the cost of ecology, but to have companies come to us that will market modern technology here and that will encourage technological development."
New data from the Agency for Business Registers (APR) show that Chinese companies are achieving a kind of "dominance" in Serbia. This applies mostly to the spheres of mining, but also construction, where among the top five companies with the highest profits last year, as many as three were from China.
According to the APR report "One hundred most... business companies in 2023", we see that the total business income of the first 100 companies amounted to 5,308 billion dinars or about 45 billion euros, which, when compared to 2022, is 3.6 percent more.  
What is interesting here is that a good part of this growth is caused by the operations of Chinese companies in Serbia, and above all, Ziđin's two companies operating in Bor.
That is why it is not surprising that the "dominance" of Chinese companies is most prominent in the mining sector, but also in the construction sector.
Of the 100 companies on this list, 90 made a profit last year.
As Danas already wrote, the total profit of the hundred largest companies last year amounted to 431 billion dinars or 3.7 billion euros. This is a growth of 27.6 percent compared to 2022.
Among the 100 companies, according to the income they achieved in 2023, two Chinese companies are among the top 10 - Ziđin Mining in fifth place with revenue of 131.4 billion dinars and Ziđin Koper in eighth place with 119.1 billion.
If you look at the list of 100 companies according to net profit, these two companies are in an even narrower circle, i.e. in the top five.
"Ziđin Mining" came in second place on this list with a profit of 82.3 billion dinars, while "Ziđin Koper" was in fifth place with a profit of 19.2 billion dinars.
 
Chinese companies also dominate the list of companies with the highest growth in business income last year, as three of the top five are from China.
The first is convincingly the "Cajna civil engineering construction" company, which increased its revenues by 180.1 percent compared to 2022. In third place on this list is the Chinese company "Mint", which increased its revenues by 114 percent, and in fourth place is "China Railway" with 110.8 percent higher revenues compared to the previous year.
The biggest increase in profit last year, compared to 2022, was achieved by the Chinese factory "Mint". From 74 million in 2022, the profit jumped 20 times, to 1.5 billion dinars last year.
In the construction sector, three from China were also among the top five companies with the highest net profit last year.
On the second position of that list was the company "Cajna Railway" with a profit of 4.6 billion dinars, then "Jinšan Construction" on the third position with 3.5 billion and on the fifth position "Cajna First Highway Engineering" with a little more than 3, 3 billion.
Professor of the Faculty of Economics in Belgrade Ljubodrag Savić tells Danas that this is not a surprise.
"It's not surprising that these Chinese companies stand out on the APR list, because the Chinese have bought big companies and in particular they have invested quite a lot of money in RTB Bor and they have rapidly increased copper production," he explains.
Savić points out that they are especially dominant in construction.
"First of all, they are present in the construction of infrastructure, they work on large projects in Serbia, such as highways and the like," he says.
 
As for the gains of the Serbian state from Chinese companies, Savić believes that they work differently, but that the outcome is similar.
 
"When a German company comes, it hires some of our people here, but it's different with the Chinese. They bring their own workers, so there are no salaries for ours," our interlocutor points out.
However, we have a different kind of prosperity here, he adds.
"Those workers of theirs who come have to live somewhere and pay for accommodation, just as they also have to buy food. So they spend money here. When you compare it, it comes to the same thing," Savić believes.
He also explains that Chinese companies operate like this everywhere in the world, that this is not the case only here.
"All foreign companies have the same interest, to take advantage of the benefits offered by the state - subsidies, cheap land, cheap labor... and to earn as much as possible," concludes Savić.
Economist Danilo Šuković believes that the list should be dominated by Serbian companies and companies from the European Union (EU).
"We need to join the EU, and by nature we belong to it. We need companies from the West that are dominant and the most prestigious in terms of modern technologies, that would be the best thing for Serbia," he says.
It is a wrong strategy to rely on Chinese companies that are problematic, points out Šuković.
"First of all, they are harmful in terms of ecology, and they are not world leaders in terms of technological solutions either. These are all factors that will not contribute to the development of Serbia, as it would have been had we oriented ourselves differently. And I think that this mistake in strategy will be very expensive", warns our interlocutor.
Šuković sees the culprit for that in the decision makers.
"It is the fault of those who choose foreign investors, who give conditions and who allow Chinese and Korean companies to have their workers wear diapers, instead of working in a dignified way," he points out.
Instead of having companies that will use artificial intelligence, as he says, we are focused mainly on manual activities.
 
"Our goal should not be to attract foreign investors who will exploit our resources and export raw materials at the cost of ecology, but to attract companies that will market modern technology here and that will encourage technological development," stresses Šuković.
Economist Milan R. Kovačević states for Danas that China continues to develop rapidly economically, technologically and financially.
"Even the large domestic market is narrow for them, they strongly increase exports and invest in their companies around the world." And we are attractive to them by offering more favorable conditions than those offered by others," he explains.
That is why, as he adds, we have numerous Chinese companies in Serbia and their companies are among the most successful in our country.
"By accepting whatever contracts they offer us, we miss out on jointly investing and acquiring technological and other knowledge and getting a share of the profits, instead of giving them money, locations and subsidies," Kovačević points out.
He reminds that the most successful Chinese investments are in cheap copper and gold mining, because we poorly regulated that area.
"We have more and more foreign ownership of more and more of our economy and real estate, and thus we are gradually losing sovereignty in our economic and some other policies," warns Kovačević.
 

CONCLUSION

Data from the Agency for Business Registers (APR) in Serbia show a kind of dominance of Chinese companies when it comes to revenues and profits. However, what worries analysts is the fact that the largest revenues are generated by Chinese companies that are involved in the exploitation of natural resources (ores and metals) in Serbia, while these companies are often the target of public criticism for non-compliance with laws and environmental standards. Earlier in the texts we pointed out the fact that most of the investments of Chinese companies in the countries of the Western Balkans relate to investment in resources, whereby products with a lower added value (raw materials) are exported, most often to China, where products are then made from those raw materials with a higher added value values. In the process of using resources, Chinese companies often violate the legislation of the host country and do not take measures to protect the human environment and apply ecological standards.

As the countries of the Western Balkans are still at a low level of application of environmental standards (even when their application is legally binding), Chinese companies use insufficient supervision and inadequate use of measures to sanction violations of legal provisions when it comes to protecting the human environment. Unfortunately, the authorities in Serbia, as well as in other countries of the Western Balkans, do not sufficiently deal with the methods used by Chinese companies in their work, which often leads to endangering the human environment and the health of the population.