China in the Balkans: Neutral business partner or a foreign power?

Filip Jirous

June 27, 2019

Originally published by the

European Western Balkans

China’s engagement in international politics has intensified in recent years, especially since Xi Jinping became the general secretary of the Chinese Communist Party. The Western Balkans are no exception. Serbia, Bosnia and Herzegovina, North Macedonia, Montenegro and Kosovo have all seen an increase in interactions with China. In a new Prague Security Studies Institute study, the analyses by Balkan experts show similar patterns in China’s approaches to the region and its local perceptions. The collaborative work is worthy of attention since the region’s relations with the PRC remain underreported.

A new era in Balkan-China relations

The study points to an increase in interactions with China in recent years. This has featured the establishment of the ‘16+1’ platform in 2012, a China-led grouping of European countries from the former Soviet Bloc that aims to strengthen cooperation and political ties. The platform plays an important role in promoting the Belt and Road Initiative (BRI) in the region, but has sparked suspicions internationally, experts and politicians warn that 16+1 is mainly a Chinese tool to drive a wedge between EU’s West and EU’s East.

Balkan politicians (even in Kosovo, a country that is not officially recognized by PRC) seem to be bending over backwards to get Chinese investments and loans to fund their projects and help develop their countries. The study’s findings show that so far, very little investment has materialized, and mostly brought limited benefit to the host countries. The only country receiving substantial amounts from China is Serbia, but even here Maja Bjeloš – the author of the Serbian paper – notes that “the forms of Chinese investment are almost exclusively acquisitions, construction contracts and loans with little added value for Serbia (e.g. using Chinese contractors and thus not creating new job opportunities or providing skills development).”

This seems to be the pattern in most of the Chinese investment projects from the Philippines to Africa, something that has led to considerable international scrutiny of BRI. The study’s authors also highlight the lack of transparency in the way Chinese regime interacts with local governments, even saying that it is endangering the EU accession process:

“China’s non-transparent business practices provide space for corruption to flourish. Since corruption is one of the region’s biggest obstacles to its transition process and European integration, Chinese activities should be closely monitored.”

Most of the projects, the authors agree, belong to the infrastructure and energy sectors. Corruption has indeed been reported in the case of North Macedonia, where the government got caught discussing a “commission” in exchange for making a highway project cost the country extra 155 million Euro. Another trait noticed by the Bosnian and Herzegovinian paper’s author Srećko Latal is the Chinese export of construction capacity and “its older, ‘dirty’ technology, equipment and know-how elsewhere.”

Martin Naunov’s paper on North Macedonia notes that in the case of projects in that country “the contracts envision Chinese courts as the bodies that arbitrate in disputes effectively exempting China from any costs in unfavorable scenarios,” which could turn out to be a major issue should any dispute within the projects arise.

The Western Balkans’ BRI experience, as described in the study, fits patterns observed elsewhere. The lack of substantial investment in the five countries is similar to what Sinopsis, a Prague-based project focusing on China, has called the “the ‘economic diplomacy’ of empty promises”: despite high-profile announcements and agreements, promised projects often fail to materialize. While the Czech Republic is a prime example, similar situations have been described globally, from the Philippines to Poland. Nor are the lack of transparency and China-enabled corruption limited to the Western Balkans. The North Macedonian case is reminiscent of the previous Malaysian government’s dealings with China in the context of BRI projects, where government officials including the PM made deals to raise the costs of infrastructure and split the extra amount between themselves and the Chinese company building the project. The PM also asked China to spy on Wall Street Journal journalists in Hong Kong investigating Malaysian corruption.

Neutral economic partner or a foreign power?

While the authors of the study mostly agree in their description and interpretation of economic cooperation between the countries and China, they differ in the perception of China as a potential threat.

Some seem to suggest that China is more of a neutral power, interested only in business. Others, such as Naunov, underline China’s potential threat to the countries’ stability and political culture. He cites reports and statements by, among others, EU officials, pointing to possible consequences of deals with China:

 “China’s economic engagement in the region–which gives off an impression of ‘a politically neutral force and a reliable business partner’ – belies a formidable strategy in the geopolitical and ideological power struggle with the West. This stratagem is likely the reason behind EU Commissioner Johannes Hahn’s identification of Chinese influence as a much greater danger to the Western Balkans than Russian influence.”

And furthermore quotes a European Union Institute of Security Studies paper:

“[China’s] economic expansion is[…] fostered by its domestic model of business relations, based on a balance between state and market forces which is in stark contrast with the governance reforms promoted by the EU China’s economic expansion, for example, often abets unmitigated corruption, as is best illustrated by China’s financing of two highways in North Macedonia.”

The authors of the report also seem to fear “debt-trap diplomacy”, mainly in North Macedonia and Montenegro.

According to Naunov, since Chinese courts can rule on project disputes, “the North Macedonian government is now compelled to plunge the country into further debt, something that could add North Macedonia to an already sizable list of states in different parts of the world that have fallen into this so-called ‘China debt trap’”.

On the other hand, Bjeloš notes that the “Serbian government still does not seem to have recognized the risk of falling into the so-called ‘Chinese debt trap’”.

China’s global coming out

Internationally, China tries to promote an image as a neutral power just doing business. The messaging still seems to be working in many places, and as the report suggests, even in the Western Balkans. Under Xi Jinping, PRC is getting increasingly active in lobbying and influence operations globally. This was underlined by Xi’s Davos speech in 2017, where he stated that China is aiming for “two leaderships” (两个引导) that is in globalization and in security issues.

China thus actively pushes to change norms and standards to be more aligned with its own worldview and agendas. For this, it has been employing ‘elite capture’ tactics, co-opting local and international actors, at times in exchange for money. For example, former Serbian foreign minister Vuk Jeremić and president [F1] of the UN General Assembly received millions for cooperation with a former Hong Kong minister (and CEFC the conglomerate he worked for) sentenced by a US court to 3 years of jail for bribing politicians at the UN and in Africa,

Xi Jinping also boosted China’s United Front work that is now actively approaching politicians and public alike in order to co-opt them and advance China’s interests abroad. The Leninist nature of China’s Party-state system many interactions with Chinese entities can be more political than is the case with other nations. Even cultural exchanges are often politicized when it comes to China, often with the intent of cultivating local actors rather than simply promoting culture. The activity of the Confucius Institutes should be understood in this context. These organizations are not NGOs, as the Serbia paper calls them, but rather government entities with links to the CCP’s propaganda system.

During an April PSSI conference presenting findings of this study, some of the Balkan experts denied that the Western Balkans could become “Trojan horses” bringing Chinese influence ever closer to the West via EU accession, saying that “even Italy is now joining the BRI”. Indeed, China already enjoys considerable political influence not only in EU countries such as Italy or the Czech Republic but elsewhere in the Western world. But while “the West” is dealing with China extensively, too, and is getting under heavier and heavier Chinese lobbying, some of the malpractice should not be repeated simply because other countries “do it too”.

Based on Naunov’s quotation of a Chinese academic who stated that “North Macedonia’s EU accession would benefit China as well” and other authors’ discussion of the accession process as linked to China’s increasing interest in the countries, the potential risk of China influencing local politics in order to gain more power in EU structures should not be dismissed.

As in other regions, local actors in the Western Balkan could benefit from an increased understanding of China and its politics. A lack of China knowledge may result in failing to see China’s activities abroad in the general context of its political system, which differs markedly from more familiar European models. The need to understand China on its own terms will only become more important as the country continues to become more assertive.