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China – the leader in investments in Serbia
In 2024, Serbia attracted 5.1 billion euros in foreign direct investment, including 37.2% from EU countries and 34% from Asian countries. At the same time, China came out on top in terms of investments in Serbia, said in an interview with Radio Television of Serbia Deputy Minister of Foreign Affairs for Economic Diplomacy Jagoda Lazarević.
According to her, for the first time China has overtaken the Netherlands, which has long held the palm of the championship. China’s indicators are especially significant, since it is not only Dutch capital that is at stake, but also transnational corporations from all over the world registered in the Netherlands.
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In recent decades, countries on the Balkan Peninsula, including Serbia, have been facing a significant shortage of foreign direct investment. The reasons for this were numerous internal and external factors – conflicts, economic crises, sanctions and structural problems in the economies. In the early 2000s, political risk and low market attractiveness deterred foreign investors. However, over the past 15 years, there has been growing interest from international partners, among which the People’s Republic of China stands out.
Progress in Serbia’s credit rating
In October 2024, the rating agency Standard & Poor’s raised Serbia’s long-term credit rating to “BBB- with a stable outlook”, classifying the country as investment attractive. According to the agency, despite global economic turbulence, Serbia has managed to maintain stability, investor confidence and a significant inflow of foreign direct investment.
China as a strategic partner
China has established itself as a key economic partner of Serbia since the signing of the Strategic Partnership Agreement in 2009. Since then, Beijing has played a leading role in numerous infrastructure and industrial projects in the country. Serbia considers China as the “fourth pillar” of its foreign economic policy, alongside the EU, the US and Russia.
Of all the countries in the 17+1 initiative, bilateral relations between Serbia and the People’s Republic of China are at the highest level. According to a study by FDI Markets, in 2019 the Republic of Serbia was the leader in terms of infrastructure investments among all countries participating in the cooperation mechanism
Infrastructure projects
Chinese investments cover a number of significant infrastructure projects. In 2009, the first large-scale project was launched – the Mihail Pupin Bridge over the Danube River in Belgrade, implemented by the China Road and Bridge Corporation (CRBC). Later, the modernization of the Belgrade-Budapest railway line, part of China’s Belt and Road Initiative, was also agreed. China financed this project with $1.1 billion. Beijing subsequently expressed interest in extending the line to North Macedonia and Greece.
Investments in energy and industry
In the energy sector, China is involved in the reconstruction of the Kostolac TPP with an investment of nearly €1 billion. In addition, the countries have made progress in renewable energy projects – wind turbines and industrial waste power plants.
Of particular importance was the acquisition of the Smederevo metallurgical plant by HBIS Group, as well as Zijin Mining’s entry into the Bor mining basin, one of the largest in the region for the extraction of copper, gold and silver. China’s Shandong Linglong also began construction of a tire factory in Zrenjanin – the company’s first such project outside of China.
Within the framework of Chinese infrastructure projects, the People’s Republic of China is present in Serbia not only as an investor, but also as a general contractor. In the process of designing, negotiating and subsequent construction of infrastructure projects, Chinese companies increasingly strictly adhere to local rules and laws, even EU ones, and are subject to supervision by local Serbian regulatory authorities.
Disputes and environmental concerns
Although Chinese investments bring economic benefits, there is no shortage of challenges. Some of the projects are subject to criticism due to a lack of transparency and gaps in environmental assessments. For example, the Shandong Linglong plant in Zrenjanin has sparked outrage over concerns about the legality of state aid and the lack of an environmental impact assessment. Chinese mining operations have also been linked to increased air pollution in Belgrade and other regions.
Risks of economic dependence
Significant loans from Chinese banks financing infrastructure projects in Serbia are raising concerns about excessive indebtedness. Serbia’s debt to Chinese creditors is expected to reach $9-10 billion in the coming years. Another serious problem is the lack of public tenders for the selection of contractors and opaque contract terms.
An additional issue is the cooperation between the Chinese technology giant Huawei and the Serbian Ministry of Interior in the construction of a facial recognition video surveillance system. European organizations have already expressed concerns about the potential violation of the law on the protection of personal data.
Geopolitical dimensions
The increased Chinese presence in Serbia creates a competitive environment for other external investors, including the EU, Russia and some Middle Eastern countries. Chinese companies often win tenders that could be implemented by competing companies.
In economic terms, Chinese investments in coal-fired power plants in Serbia and Republika Srpska can be seen as an alternative to Russian natural gas and illustrate China’s strategic political motivation. At the current stage, China is moving towards renewable energy sources, while Russia remains focused on the oil and gas sector and the nuclear industry, which is why the two countries are not rivals in Serbia.
China’s main rival in Serbia is the EU, which is becoming increasingly suspicious of Belgrade’s partnership with China, as evidenced by the warning to Serbia to terminate the Free Trade Agreement with China and some recent legal steps regarding Chinese projects in the Balkans. By displacing Russia in the Balkans, China risks taking on its role as a scarecrow for the West, which has traditionally been played by Russia.
This requires the EU to take into account the Chinese factor when building its own foreign economic strategy in the Balkans.
Conclusion:
Chinese investments in Serbia are of strategic importance and bring substantial economic benefits – infrastructure modernization, industrial revival and job creation. However, the risks of debt dependency, lack of transparency and environmental consequences should not be underestimated. It will be crucial for Serbia to balance economic benefits with the long-term sustainability and independence of its economy.
