China's strategic interests in the Western Balkans

Briefing 24-06-2022

The six Western Balkan countries (Albania, Bosnia and Herzegovina, Kosovo,* Montenegro, North Macedonia and Serbia) are all countries with substantial economic catch-up potential. The EU-led Berlin Process estimated an annual investment need of some €7.7 billion, which would provide the region with an additional 1 % GDP growth and a positive employment effect of up to 200 000 people. However, quality investments are scarce, or often attached to political, environmental and social conditionalities; China took the initiative to benefit from this opportunity. According to the Balkan Investigative Reporting Network (BIRN), China invested €32 billion in the region in 2009-2021. In Serbia alone, Chinese investment reached €10.3 billion. However, despite inflows of Chinese capital, the EU remains the leading economic partner, with 70 % of total foreign direct investment and 81 % of exports. China has endeavoured to portray itself as a strategic investor, who does not intervene in internal political affairs and is willing to close its eyes to some aspects such as State aid, corruption or labour laws. An early focus on transport infrastructure (through Piraeus and Belgrade to reach Duisburg) has expanded to industry, energy and communications/IT. The Belt and Road Initiative (BRI) serves as the main framework for expanding China's economic presence in the region and enables it to access key land and maritime routes. Loans and investments in undertakings further enhance China's position and create dependencies, even debt-traps, for the six Western Balkan states. An increasing number of Balkan countries now perceive the limits of China's presence, and are concerned regarding public procurement, environmental protection, human rights violations, and promotion of the authoritarian model, which all limit cooperation and impact EU accession prospects.