Should the European Union Be Worried about Growing Chinese Influence in the Balkans?
By Dušan Popov
The countries of the Balkans consists of small and underdeveloped economies unable to compete against their prosperous European neighbours. The state of affairs in the region is largely a consequence of an uneasy economic and political transformation after the fall of the Berlin Wall and the violent disintegration of a country once known as Yugoslavia.
One would wonder why China would ever invest in a region of Europe known for such volatility. The answer to this question can be found in the geopolitical and strategic importance of the Balkans combined with the loose regulation practices of the countries in the Balkans. These factors make the Balkans a lucrative market for Beijing.
One more motive for increasing Chinese investment in the region could be found in its European perspective. Most of the countries in the region are currently in the process of joining the European Union and some are already members. Nevertheless, negotiations between the former and the Union have recently stalled. China is actively taking advantage of the predicament by investing in large infrastructure projects. China could later use these as a corridor through which it could place its increasingly competitive products on the European single market.
The European Union currently accounts for seventy percent of direct investments in the region.However, this is rapidly changing. China is increasing its investment in the region and is matching the sums spent by the Union. This trend is most prominent in Serbia. Serbia is the largest economy in the region outside of the European Union and is crucial to its stability. Chinese enterprises have recognised the geopolitical and economic importance of Serbia and are planning to invest around 2.5 billion euros in various infrastructure projects.
Serbia is also a country in which sentiments against the West are still prominent due to a bombing campaign which took place twenty years ago. Therefore, it comes as no surprise that increased Chinese involvement in the country has been winning the hearts and minds of the population. The successful Chinese takeover of a steel factory in the town of Smederevo has further brought good publicity to their investors in the country and fostered closer relations between Belgrade and Beijing.
The most significant Chinese infrastructural project in the region is the planned upgrade of the Belgrade — Budapest railway line. The project would establish a significant transportation corridor between the recently procured port of Piraeus and Central Europe and facilitate the entrance of Chinese products into the European single market.
However, the loose approach of China to these projects could create fiscal instability for the governments in the region, which take on large loans that are difficult to pay off. Montenegro owes around forty percent of its sovereign debt to China due to a loan which is meant to finance a motorway through its mountainous terrain. In other countries of the region, the percentage ranges between ten and twenty. The funding is further conditioned by the implementation of projects by Chinese companies and workers which does not help develop local economies.
The countries of the Balkans could therefore end up in debt servitude to China. Brussels should be especially worried about this possibility as the countries of the region are all prospective members of the European Union. The economic relations of the prospective members with China could influence the way in which they vote on issues critical to the Union. China would therefore have a channel through which it could indirectly influence the agenda in Brussels.
It nevertheless seems that this is something that Brussels is aware of. Commissioner Johannes Hahn has warned of the implications of investment from China on the prospective member states of the European Union. The Commission has opposed plans for the development of a coal powered plant in Bosnia and Herzegovina financed by a Chinese company.
The European Union must revitalize its efforts to integrate the Balkan countries in order to successfully repel the threat from China. It must provide them with new economic and political incentives in order to boost confidence in the European project in regional capitals. If not, the Union would have to face a dangerous competitor in a region that is strategically important to its foreign policy goals.
