Perspectives of Enhancing Cooperation: Can Rapid Acceleration of Bilateral Merchandise Trade and Chinese FDI Inflows into Serbia Be Sustained?

Nikolić, Ivan and Nikolić, Goran (2023) Perspectives of Enhancing Cooperation: Can Rapid Acceleration of Bilateral Merchandise Trade and Chinese FDI Inflows into Serbia Be Sustained? In: The Great Silk Road Conference: Opportunities and/or Challenges for the Development of Eurasia. Bournemouth University (BU), United Kingdom and Westminster International University in Tashkent (WIUT), Uzbekistan, Tashkent, p. 4. ISBN 978-1-3999-6856-0

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Abstract

The 14+1 framework under the Belt and Road Initiative in Europe is on a slippery slope. The relationship between Brussels and Beijing is rapidly transformed from competition through systemic rivalry to decoupling in many areas. In these circumstances, Serbia, the most prominent Western Balkans country, is the exception that proves the rule. Even if it finds itself politically between a rock and a hard place, the country has managed to preserve its independence and a balanced relationship between the West and the East. Serbia refused to join EU sanctions against Russia, although it supports Ukraine. With the EU's irrational unwillingness to expand to the Balkan, China is successfully filling the geopolitical vacuum with a win-win outcome to accelerate economic development through increased connectivity. Apart from loan-based projects, Chinese investment is becoming an increasingly important field of bilateral cooperation. Investment has been directed mainly towards Serbia's export-oriented manufacturing areas and vital infrastructural projects. China's investments in Serbia in recent years have grown faster than total Chinese OFDI along BRI countries. In 2015, investments from China in Serbia amounted to a modest 66.5 million euros (or 3.1% of the total FDI inflow), but in 2022, investments reached 1,399.3 million euros (or 31.7% of the total FDI inflow). Moreover, 98.2% of these investments were in the mining, processing, and construction sectors. In this period, the value of trade exchange between Serbia and China increased 4.15 times, and Serbia's merchandise exports to China increased 59.5 times. After Germany, China has become the second most important economic partner for Serbia. This analysis aims to examine to what extent the vitality of economic relations with China helped Serbia as a buffer against negative exogenous shocks caused by the COVID-19 pandemic and Russia's full-scale invasion of Ukraine. At the same time, the perspective of this cooperation will be evaluated, especially concerning the signing of the Memorandum of Understanding, which marked the formal beginning of negotiations on free trade between Serbia and China. Are there any grounds for optimism about cooperation in producing emerging technologies, a more coordinated and efficient approach to the green industrial policy that awaits us in the future? The reasons for promoting foreign direct investment from China have been different so far. In this part of Europe, the recipe for Serbia will be a panacea for others. That is why it is a mutual challenge. Therefore, this work can be helpful to policymakers of both countries.

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