The geostrategic position of the Western Balkans as a bridgehead to the European Union is very important for China’s economic expansion in Europe and a key corridor for its Belt and Road Initiative. In the region, China has focused not only on trade and investment but also on soft power to influence the public opinion. While China’s increased influence is not viewed as a counter-option to the EU aspirations of the region, its state-led economic model could challenge the EU’s normative power and undermine the democratic reformist agenda.
China is not a newcomer in the Western Balkans but its recent activities there have laid the groundwork for a long-term, multifaceted, and ever-deeper presence. Five out the six Western Balkan countries (Kosovo being the exception) were included in the 16+1 initiative established in 2012 between China and Central and Eastern European countries, and all six are official members of its Belt and Road Initiative (BRI). Chinese interests in the region are mostly in infrastructure projects and strategic assets, access to natural resources, and new markets in the vicinity of the European Union. The China-Europe Land-Sea Express Route, a component of the BRI, aims to link China with Western Europe via the port of Piraeus in Greece and the infrastructure networks in the Balkans.
The Western Balkans represents a small market of less than 18 million consumers, with a total gross domestic product of $132 billion. This is less than 1 percent of the EU market ($17 trillion). Despite the catch-up growth in last thirty years, the average income per capita in the region is only $7,200, less than 15 percent of the EU average.
Trade between China and the Western Balkans has expanded rapidly, from $3 billion in 2012 to $8 billion in 2021, with 60 percent of this with Serbia. Trade balances are very heavily tilted in favor of China (85 percent), causing large deficits for the region. The EU remains the main partner for the Western Balkans, with over 70 percent of its trade, but China has quickly become the second- or third-largest trade partner for the region’s countries.
Chinese investment in the Western Balkans has expanded more than trade, with currently 122 projects with a total estimated value of around $31 billion. This would represent almost 40 percent of the total stock of the foreign direct investment (FDI) in Western Balkan countries—which amounted $86 billion in 2021, according to the United Nations Conference on Trade and Development—but the majority of this Chinese money is in loans instead.
The main form of China’s economic cooperation in the Western Balkans is concessional lending for infrastructure (mainly in transportation and energy) through its state-owned banks, which is then implemented by Chinese enterprises in nontransparent single-bid contracts. Chinese state-owned enterprises (SOEs) enjoy economies of scale and can offer cheaper prices subsidized from the Chinese government, which allows them to take advantage of the urgent need for infrastructure in the region.
The region has been a perfect testing ground for Chinese investment in infrastructure and for Chinese SOEs to familiarize themselves with EU standards and regulations regarding public procurement, labor, and the environment. China’s first big infrastructure investment project in Europe was the Pupin Bridge in Serbia carried out by the China Road and Bridge Corporation and inaugurated in 2014. The first railway project in Europe by a Chinese SOE using funds from the EU was the 10-kilometer segment of the Kolasin-Kos railway implemented by the China Civil Engineering Construction Corporation in 2017.
Cultivating the Image of a Benign Global Power
The key driver behind China’s clout in the region is the promotion of mutually beneficial economic interaction, utilizing its capital as an “economic miracle-maker” to influence public opinion. Beijing’s long-term objectives are strategic, political, and increasingly ideological.
China’s closer relations with the Western Balkans are managed mainly on a bilateral basis and involve state institutions. While Chinese development money is not transparent, data shows that there have been 197 projects involved between 2000 and 2017. About $1.5 billion of Chinese development aid in the region is spent on projects that range from grants to support public administration, donations for agriculture modernization, schools, Confucius Institutes, debt forgiveness, and trainings—and also police and military cooperation in the cases of Bosnia and Herzegovina and Serbia.
China is heavily investing in soft power, from the Confucius Institutes that are present in every capital of the region, cultural centers, and friendship associations to chambers of commerce and Academies of Science. In addition, the Western Balkans became a stage for Beijing’s mask and vaccine diplomacy during the Covid-19 pandemic. China used strong communication campaigns to depict itself as a generous donor and to undermine the EU’s credibility.
Political behavior shapes public perception in the Western Balkans. The region’s political elites see the presence of China as purely economic and opportunistic, with investments easily aligned with political cycles and coupled with nontransparent procurement decisions. As a result, the majority of people in the region view China favorably, from 85 percent in Serbia to 68 percent in Montenegro, 56 percent in North Macedonia, and 52 percent in Bosnia and Herzegovina.
A Counter-option to the EU Aspirations of the Western Balkans?
Membership in the EU remains the main aspiration in the Western Balkans, with 60 percent of citizens being positive about the prospects of their countries joining the EU, although the accession process is burdened with the uncertainties of “enlargement fatigue” and “reform fatigue.” China’s increased influence could in the long term negatively affect these prospects. While Beijing publicly supports the EU integration of the Western Balkans, its state-led economic model could challenge the EU’s normative power and undermine the democratic reformist agenda in the region.
The EU’s revised accession methodology, divided into six negotiation clusters, puts an even stronger focus on fundamental values, rule of law, and economic criteria. Human rights principles are key to democracy and at the core of the EU principles and institutions, and on these China’s standards deviate from those of the EU. The Western Balkans score low in this area, with some even showing downward trends.
Corruption is another big challenge. Inflows of Chinese financing lack transparency and accountability and can threaten good governance. China ranks 66th out of 180 countries in Transparency International’s Corruption Perceptions Index, and several countries in the region have registered big declines in their score in recent years. Chinese infrastructure projects also hinder improvement in public procurement as laws are bypassed and projects are implemented through bilateral government agreements and under special laws without any transparency. China is also funding coal-plant projects in the Western Balkans, which runs contrary to the EU’s goals for the region. This allows governments to avoid costly EU environmental standards in the short run but undermines the future of the region.
China’s injection of money for infrastructure projects, lacking due diligence, is burdening some governments in the region with large debt obligations. Unsustainable deals and sovereign-guarantee risks owned by host countries threaten to trap them in debt servitude to China. Montenegro is the most exposed of the Western Balkans countries as Chinese lending makes up 27 percent of its foreign debt and 22 percent of its GDP. The foreign debt figure for North Macedonia is 16 percent, 13 percent for Serbia, and 8 percent for Bosnia and Herzegovina.
The Western Balkans needs EU-driven economic development with more access to the EU market and serious financial support for infrastructure, innovation, and industrial development. As the largest investor and donor in the Western Balkans, the EU should also incorporate China-specific mechanisms in its enlargement policy, demand increased transparency and scrutiny of Chinese projects, and support the introduction of screening mechanisms on the EU model. In the long run, EU investment in the Western Balkans will be crucial for the security of the continent.
AidData. 2021. AidData's Global Chinese Development Finance Dataset, Version 2.0. Retrieved from https://www.aiddata.org/
Valbona Zeneli is chair of the Strategic Initiatives Department at the George C. Marshall European Center for Security Studies. She was IWM Europe’s Futures Fellow in 2021-2022.