China gets to work in the Balkans

As region waits to enter EU, Beijing starts to widen its influence in the area

BELGRADE: From coal plants to airports and bridges, China is forking out for investments across the Western Balkans, laying groundwork for a new battle for influence on the European Union’s fringe.

The West has long eyed Russia as its chief rival in this turbulent corner of southeast Europe.

But there is another major player in town, as Chinese firms fill development gaps in these cash-strapped countries, where dreams of entering the EU keep sliding towards the horizon.

The EU accounts for more than 70% of overall direct investment in the region – an area spanning Serbia, Bosnia, Montenegro, North Macedonia, Albania and Kosovo – far above the one per cent contributed by China, according to European Commission figures.

But China has in the past six years leapt forward in infrastructure-related spending, rivalling the sums spent by the EU, and is otherwise making a noticeable impact.

In the Serbian steel town of Smederevo, 54-year-old mill worker Zoran Matic thanks “the Chinese – or as we call them, our friends”, for rescuing a factory that was on the brink of bankruptcy before China’s HBIS group bought it in 2014 for 46mil

(RM212mil).

“Wages are regular. The city has woken up,” adds his colleague Novica Djordjevic.

The purchase was a triumph where Americans had foundered.

Just two years earlier, US Steel sold the plant, and its debts, to the Serbian government for a symbolic US$1 (RM4).

Now production is growing and revenue was up 37% last year, according to the company.

Thrilled, Serbia’s President Aleksandar Vucic urged China to also take over a debt-hit copper mine farther south – which it did last year.

And the requests keep coming. In September, Vucic called for Chinese companies to invest in the tech sector and, ambitiously, turn Serbia into a hub for “flying cars”.

As a gateway to southern Europe, the Balkans form a key link in Beijing’s “Belt and Road” project, a US$1 trillion (RM4 trillion) plan to pave a path for its exports to Europe and beyond.

Surrounded by EU member states, the region connects the Piraeus port in Greece – already controlled by the Chinese – to the heart of Europe.

But the massive concessional loans used to fund much of the building have drawn scrutiny in Brussels.

EU enlargement commissioner Johannes Hahn, who oversees bids to join the bloc, said there are “concerns over the socioeconomic and financial effects some of China’s investments can have”.

He cited tiny Montenegro, where public debt shot up to more than 70% of its GDP after the country

809mil took an (RM3.7bil) loan from China’s state-owned ExportImport bank to build a highway through its mountainous terrain.

There’s fear the country could fall victim to “debt-trap diplomacy” – when nations that default on China’s loans are forced to hand over assets.

“These investments often come with strings attached,” Hahn said.

“And that in return has an impact on our aim, namely to improve the stability and economic development in the Balkans.”