Editor's note
This article is the 42nd article of the "European Observation Room" column jointly launched by the Shanghai European Society and the "Diplomatic Scholars" of The Paper. cn. On the tenth anniversary of the "the Belt and Road" initiative, China and Serbia signed a free trade agreement. Since the "the Belt and Road" initiative was put forward, Chinese enterprises have made important contributions to the economic development of Serbia. Chinese enterprises in Serbia have developed well with promising prospects. The Serbian government also supports Chinese enterprises to operate in Serbia, but these enterprises also face difficulties or challenges from different aspects.
On October 17th, the Free Trade Agreement between the Government of the People's Republic of China and the Government of the Republic of Serbia was signed in Beijing. This is the first free trade agreement signed between China and Central and Eastern European countries, and Serbia has become China's 29th free trade partner. Xinhua News Agency reported that the signing of the China Serbia Free Trade Agreement is an important measure to implement the consensus of the leaders of the two countries, and also an important achievement of the third "the Belt and Road" Forum for International Cooperation.
This year marks the tenth anniversary of the "the Belt and Road" initiative, and Serbia is the fulcrum country of the "the Belt and Road" in Central and Eastern Europe. In order to effectively understand the production and operation status, challenges faced by Chinese enterprises in Serbia, and the development prospects of China Serbia relations, the China Europe Relations Research Center of Fudan University organized a research team to conduct academic research in Serbia. During their stay in Serbia, the team conducted intensive visits to more than ten institutions and enterprises, including Serbian scientific research institutions, Chinese enterprises, and Chinese news media in Serbia. They went deep into construction sites, factory workshops, and mining sites, interacted with Chinese enterprise management teams, frontline production and operation personnel, and well-known scholars in Serbia, and obtained information on the production and operation situation of Chinese enterprises in Serbia, as well as the relationship between China and Serbia Detailed first-hand information on the future development opportunities of cooperation between China and Central and Eastern European countries.
Overlooking the Belgrade skyline during the expedition. All images in this article are provided by the author
Chinese enterprises help Serbia overcome development bottlenecks
Serbia is located in Central Europe, and its external commodity transportation can be connected to the outside world through land and the Danube River. It has a certain foundation in heavy industries such as steel and mining, and has a relatively complete transportation infrastructure layout. It has signed free trade agreements with the European Union and Western Balkan countries, and enjoys tariff exemption treatment for a large number of products under the United States' System of General Preferences, which has strong economic development potential.
However, after the dissolution of the former Yugoslavia, Serbia's pillar industries were generally affected by factors such as war and economic sanctions. Some key enterprises repeatedly experienced failed mergers and acquisitions, government trusteeship, and other changes, resulting in long-term lower than expected operational results of Serbia's pillar industries. Serbia's economic development potential was not fully realized, and Serbia's economy and society faced serious development bottlenecks, lacking sustained and stable investment incentives, To improve and upgrade its infrastructure and explore new economic growth points.
Since the Chinese government proposed to jointly build the "the Belt and Road" with high quality, Chinese enterprises have actively explored Serbian investment opportunities, participated in the upgrading of Serbian transportation infrastructure, the revitalization and development of manufacturing industry, the construction of mobile communication networks and mineral development, and deeply integrated into the Serbian economic system. At the same time, Chinese enterprises promote mutual learning and learning between the management concepts and corporate culture of China and Serbia, and practice the mutual understanding between the Chinese and Serbian people. Chinese enterprises are making important contributions to the economic development of Serbia.
(1) Chinese enterprises help Serbia's infrastructure and manufacturing industry achieve a "phoenix nirvana". The project consortium formed by China Railway International and China Communications Construction Corporation has successfully participated in the construction of the dual track railway between Belgrade, the capital of Serbia, and Novisad, the second largest city of Serbia, after undertaking the construction task of the Serbian section of the Hungarian Serbian Railway. This railway is Serbia's first high-speed railway, with an average speed increased to 200 kilometers per hour, reducing the commuting time between the two cities from the past 1.5 hours to 32 minutes, changing the way residents live and travel between the two cities. Its passenger seats are difficult to obtain with just one ticket.
Panoramic Model of the Hungarian Serbian Railway
At present, the project consortium will continue to undertake the construction of the double track railway between Novisad and the Serbian Hungarian border city of Subotica, striving to complete and open to traffic ahead of schedule, and enhancing Serbia's overall position in the European passenger and logistics system. The high-speed train unit jointly designed and developed by teams from China and Serbia is also about to be upgraded to Mercedes Benz on the Serbian section of the Hungarian Serbian Railway.
ZTE Serbia has successively participated in the construction of 3G and 4G in Serbia. In recent years, it has undertaken projects such as IP transmission network construction and fiber optic access for Serbian operators, and has significant advantages in terms of price and service quality, helping to transform and improve Serbian communication facilities.
After acquiring Smederevo Steel Plant at market price in 2016, Hebei Iron and Steel streamlined its business model within six months, achieving a turnaround from losses to profits, and invested 300 million euros in equipment upgrading and transformation to achieve stable increase in production capacity.
After acquiring Boer Copper Mine in 2018, Zijin Mining Group has invested nearly 2 billion euros in the project and implemented comprehensive upgrades and renovations to the old metal smelting plant, enhancing the added value of the industry in Serbia. The 996 electrolytic copper produced meets the standards of the London Precious Metals Trading Market.
Bo'er Copper Mine
The green space investment of Chinese enterprises has cultivated a new economic growth point for Serbia. The total investment of Shandong Linglong Tire in Serbia's Zrenyanin project is nearly 1 billion US dollars, making it the largest green space investment project in Serbia and even the Balkans. After being fully completed and put into operation, it is expected to produce 13.62 million high-performance radial tires annually, making the tire industry a new pillar industry in Serbia and a leading foreign exporter.
The Zrenyaning Industrial Park, where Linglong Tire is located, is still under continuous development and construction.
(2) Chinese enterprises actively contribute to Serbia's tax revenue, employment, and export volume. Zijin Mining Group has invested in two branches in Serbia, namely Zitong and Zijin, which are engaged in mining and smelting. They are currently ranked first and third among the enterprises with the highest export value in Serbia, and their industrial added value accounts for 4% of Serbia's gross domestic product (GDP). The Bor mining area alone (Serbian copper) has directly or indirectly contributed nearly 10000 employment positions to Serbia. As of March 2023, it has paid a total of 374 million US dollars in taxes to the Serbian government, and the salary level of local employees employed exceeds the average salary of Serbian society by more than 50%.
After the acquisition of Hebei Steel, the Smederevo Steel Plant project (Hegang Serbia Steel) contributed 1.5% to Serbia's total GDP. From 2018 to 2021, it was Serbia's largest export enterprise, and the unemployment rate in its location decreased from 18% in the year of acquisition to 3%.
Hegang Saigang Smederevo Steel Plant
After the full production of the Shandong Linglong Tire Zrenyanin project, it will contribute more than 1000 job opportunities to the local area and further drive Serbia's external exports to the European Union and other countries.
(3) Chinese enterprises adhere to the principles of Environmental, Social, and Corporate Governance (ESG), effectively improve their environmental protection level, and assume corporate social responsibility. Due to financial constraints, Serbian manufacturing enterprises before the acquisition of Chinese enterprises generally encountered problems such as outdated production equipment and substandard environmental protection. After taking over, Chinese enterprises made huge investments, and their environmental protection level even exceeded EU standards in some areas. Taking Zijin Mining Group's Saizi Copper Enterprise in Bor as an example, the company has invested a total of 200 million euros in environmental remediation, accounting for about one tenth of the total investment. Saizi Copper has introduced technologies such as heavy metal treatment of wastewater, desulfurization and dust removal of exhaust gas, and waste residue recycling. It has actively carried out ecological reclamation and greening in the mining area, striving to build a garden style factory area, and established the production goal of "zero work fatalities, zero environmental accidents, and zero new occupational diseases".
Hebei Iron and Steel has introduced mature Chinese technology in the Smederevo Steel Plant project (Hegang Saigang), transforming the waste generated in steel smelting from waste to revenue generating by-products, and promoting the upgrading and revision of relevant laws and standards in the Serbian side. When the team visited the above-mentioned factory and mining workshop on site, they did not feel any harmful odors, noise, or other stimuli during the production and operation process of the relevant enterprises. The city where the factory and mining workshop is located is green mountains, blue sky, and a good environment. Chinese enterprises are also actively undertaking green infrastructure construction projects in Serbia. For example, China Road and Bridge Corporation has undertaken a major project of the Serbian government's "Clean Serbia", renovating and constructing sewage discharge pipelines and sewage treatment plants in 73 cities within Serbia, helping to improve the natural environment of Serbia and enhance the quality of life of the Serbian people.
Exhibition of Achievements in Central and Eastern Europe by China Road and Bridge Corporation and China Communications Construction Corporation.
(4) Chinese enterprises are deeply integrated into local social networks, achieving exchange and mutual learning of corporate culture and business philosophy. Most of the Serbian enterprises taken over by Chinese enterprises are "old state-owned enterprises", with a good employee base, especially the overall level of technical staff is excellent, and they also have a high sense of identification with the enterprise. After completing the acquisition, Chinese enterprises took advantage of the situation and mostly only sent a small number of senior management personnel and technical backbone to adjust their business management methods in a targeted manner, fully respecting the corporate culture and work habits of Serbian employees. For example, at the Smederevo Steel Plant with a total workforce of over 5000, the total number of Chinese personnel dispatched by Hebei Iron and Steel is only 12. The management team of Hebei Iron and Steel adheres to the principles of "localization of interests, localization of employees, and localization of culture", and respects the production and living habits of Serbian employees. The Zijin Mining Bor Project (Seychelles Zitong), with a total workforce of over 6100, accounts for 97% of the Seychelles workforce.
Under a highly localized business model, relevant enterprises properly handle their relationships with the Serbian management team and trade unions, innovate employee incentive models, and achieve a win-win situation between workers' rights and production efficiency. At the same time, Chinese (holding) enterprises in Serbia generally engage in in-depth cooperation with local law firms, public relations companies, and research institutes, maintain close communication with the central and local governments of Serbia, and the management team strives to gain a deeper understanding of Serbia's political, legal, and public opinion environment.
Serbian workers in the Bor copper mine.
Currently, Chinese enterprises generally hold a positive and optimistic attitude towards their future development in Serbia, and have a strong willingness to continue deepening production capacity cooperation between China and Serbia. For example, Zijin Mining Group plans to establish an overseas operation center in Serbia to coordinate the global project management of the group. Shandong Linglong Tire regards the Serbia project as an important part of its future global production base layout. Other Chinese enterprises are also actively exploring and searching for new projects in Serbia, striving to integrate into the local market and operate for the sustainable development of enterprises overseas.
Concerns and challenges faced by Chinese enterprises in Serbia
Although the overall development of Chinese funded enterprises in Serbia is good and the prospects are promising, and the Serbian government also supports Chinese enterprises to operate in Serbia, these enterprises face different difficulties or challenges from different aspects.
In terms of market risk, Chinese companies in Serbia are concerned about the negative impact of the EU economic recession. Chinese manufacturing enterprises in Serbia are deeply embedded in the EU supply chain, and their production and operation are closely related to the development of the EU manufacturing industry. However, under the influence of such complex factors as the Federal Reserve's interest rate increase, the Russia-Ukraine conflict, and the EU's economic sanctions against Russia, the EU economy has suffered serious drag recently, with weak production and significant inflation, especially the obvious rise in electricity and energy prices, whose negative effects have been transmitted to Chinese enterprises in Serbia. In addition, the revenue of steel and mining enterprises is highly dependent on global commodity prices and vulnerable to market fluctuations. Some Chinese funded projects in Serbia have a high investment level and long cost recovery time, which brings hidden concerns for future sustainable operations.
In terms of political risks, Chinese enterprises in Serbia are concerned about the impact of the domestic political situation on the legitimate rights and interests of enterprises. Affected by the diverse political landscape, some opposition forces in Serbia have maliciously bound Chinese enterprises with the ruling party of Serbia, attempting to attack the ruling party by attacking Chinese enterprises, thereby achieving the goal of party rotation. Therefore, some opposition parties in Serbia often use unfavorable accusations against Chinese enterprises in Serbia (such as environmental issues) to hype up relevant topics, and use this to attack the Serbian political parties and their government that support the development of Chinese enterprises in Serbia, making Chinese enterprises to some extent a tool used by opposition parties in Serbia for political struggle. In addition, Chinese enterprises also maintain close attention to the potential security risks caused by the escalation of the Kosovo issue, and are concerned that the potential impact of the Kosovo issue on the stability of Serbia and even the region will have a negative impact on the production and operation of Chinese enterprises in the region.
In terms of social risks, Chinese enterprises are deeply concerned about the continuous interference of non-governmental organizations in Serbia. Many non-governmental organizations in Serbia intend to continue to closely monitor the production and operation activities of Chinese enterprises in Serbia, seizing some transitional issues (such as environmental protection issues) that arise during the construction and transformation process of Chinese enterprises, or problems caused by improper management of individual subcontractors of Chinese enterprises (such as worker rights issues). They often create negative public opinion through the above platform, coupled with the driving force of Serbian opposition forces, This has caused sustained public pressure on Chinese enterprises and even led to a delay in project progress.
According to relevant Chinese enterprises, some of the accusations made by these non-governmental organizations are deliberately aimed at misleading the public and putting Chinese enterprises at a disadvantage. If a Chinese enterprise implements the process of updating old and new equipment after acquiring a local enterprise, and the new equipment has not yet been put into use, the enterprise's business activities must continue to use old and old equipment that does not meet environmental standards. This is a normal process of updating old and new projects and equipment, but local environmental protection organizations seize it and do not let it go. Even though the equipment renovation is completed and the environmental standards have already been met, some Chinese enterprises have been labeled as environmentally damaging by these organizations. It is also reported that some organizations even have Western funding backgrounds, specifically used to "target" Chinese enterprises and suppress their operations in Serbia.
Of course, Chinese enterprises in Serbia should continue to improve their compliance awareness, increase their compliance cost budget, attach importance to local and EU environmental and human rights standards, actively assume social corporate responsibility, strive to win local public recognition with a highly responsible corporate image, and defeat false accusations and slanders from non-governmental organizations.
In terms of the risks posed by the international situation, Chinese companies are concerned about improper intervention by the European Union and the United States. Chinese companies in Serbia have been paying attention to the frequent use of national security and foreign subsidies by the European Union to review and hinder China's investment in Europe. Especially in the field of infrastructure construction, the EU's scrutiny is becoming increasingly fierce, and some EU member states even prohibit countries that have not signed bilateral trade agreements with the EU from investing in their own infrastructure projects. This trend has led some EU candidate countries in the Western Balkans to follow suit in order to meet the accession standards, limiting the business expansion space of infrastructure Chinese enterprises.
The US factor also poses important challenges for Chinese enterprise investment. Some Chinese enterprises in Serbia actually control, manage, or operate related business activities of their superior companies in neighboring Serbia, so they are highly sensitive to the influence of the United States in the Balkans. The United States, taking advantage of its dominant position in NATO, directly intervened in European countries to refuse Chinese enterprises to participate in port construction, citing the need for NATO military equipment to be transported through ports. In the field of digital communication, the United States has put a lot of pressure on the normal business activities of Chinese enterprises in Europe, and the Balkan region is no exception. For example, due to the crackdown by the United States, China's communication companies have encountered resistance in promoting 5G equipment in the Balkan region, and have been unfairly excluded from participating in related project bidding. This has also posed great challenges to China's transportation infrastructure construction companies in exploring new infrastructure projects.
In addition, Chinese enterprises in Serbia are also highly concerned about the prospects of China Europe relations. In the context of the game between China and the United States, the implementation of the "decoupling" or "de risk" policy towards China by the United States may have an impact on China Europe relations. Chinese companies are concerned that if there is a retrograde trend in China Europe relations as a result, it will have an impact on the export of products by enterprises in Serbia, and will also affect the development of friendly relations between China and Serbia.
Strengthening the "Iron Pole Friendship" between China and Serbia through the Three Major Communication Pillars
The development of Chinese enterprises in Serbia has promoted the continuous and stable improvement of economic and trade cooperation between China and Serbia, laying an important foundation for establishing long-term political mutual trust and deepening cultural exchanges between the two countries. Political mutual trust and cultural exchanges have created a stable and predictable macro environment for the improvement of economic and trade relations. The three pillars of economic and trade, politics, and cultural exchanges complement each other, jointly promoting the continuous deepening of the "iron friendship" between China and Serbia.
Chinese enterprises have been rooted and operated in Serbia for a long time, laying a solid economic foundation for the "iron friendship" between China and Serbia. The significant changes brought by Chinese enterprises to the economic and social landscape of Serbia are closely related to the business philosophy of entrepreneurs. In this survey, some entrepreneurs pointed out that they will never be speculators who "kill the chickens and lay the eggs". Instead, they aim to operate in Serbia for a hundred years, continuously introduce advanced technology, and contribute to Serbia's economic growth and people's well-being in the long term. Chinese enterprise operators uphold an attitude of being responsible for the times, history, and China Serbia relations, which is an important secret to consolidating the foundation of China Serbia's "iron friendship" and a concrete manifestation of the concept of a community with a shared future for mankind.
At present, China is Serbia's second largest trading partner and largest source of investment, and the signing of the China Serbia Free Trade Agreement is expected to further enhance bilateral economic and trade cooperation. In the future, Serbia is expected to continue to firmly rely on the special strategic position of the European Union and China, and play a role as a bridge of communication between the East and the West. Chinese enterprises should keep up with the times, continuously upgrade their business philosophy, broaden their international perspective, and maintain a hard-earned economic and trade environment.
The interdependence of China and Serbia in economic and trade, as well as a high degree of political mutual trust, complement each other and achieve mutual success. In this survey, the leadership of Chinese enterprises in Serbia generally pointed out that when choosing to invest in Serbia, in addition to considering market factors such as the Serbian business environment, labor quality, and tariff preferences, a high level of political mutual trust between China and Serbia is also an important factor. The leaders of the two countries personally led the development of China Serbia relations, especially on the highly sensitive Kosovo issue that concerns Serbia's "national character". China has always supported the Serbian government's efforts to safeguard sovereignty and territorial integrity; On the Taiwan issue, the Serbian government has always adhered to the One China principle and strongly condemned the then US House Speaker Pelosi after his visit to Taiwan. The mutual understanding and support between China and Serbia on core interests issues, as well as the profound political mutual support established since the Cold War era, have become an important foundation for political mutual trust between China and Serbia. This foundation allows Chinese enterprises to invest more solidly in Serbia without worrying too much about significant changes in bilateral relations, which will impact their business operations.
Driven by economic and trade cooperation and political mutual trust, cultural exchanges between China and Serbia have become increasingly frequent. The frequent interaction between Chinese and Serbian leaders, as well as the increase in Chinese investment and migrant workers in Serbia, have driven an increase in the interest and attention of the Chinese and Serbian people towards each other. In 2017, China and Serbia mutually waived visas, making Serbia an important destination country for Chinese tourism to Europe. When the research team returned to China, they chose to take the direct flight from Belgrade to Beijing, which was carried by domestic airlines. They found that the flight was nearly full and the passengers seemed to be mainly Chinese tourist groups, indicating that the "popularity" of tourism to Serbia has rebounded after the epidemic.
In addition, language education exchanges between the two countries are becoming increasingly close. Ten years ago, only Beijing International Studies University in China offered the Serbian language program. Nowadays, the number of universities offering this program has increased to 7, and there are still 4-5 universities in the process of preparation. Chinese education in Serbia is attempting to refine and transform the existing loose "interest class" model, striving to incorporate Chinese courses into the Serbian national education system, making Chinese an important foreign language that Serbian students can independently choose and systematically learn. In addition, China has also established the "Luban Workshop" in Serbia to help improve "vocational education" and further deepen cultural exchanges between China and Serbia.
Belgrade New City Development Zone, where multiple Chinese enterprises are located.
Cultural exchanges have a promoting effect on bilateral economic and trade cooperation. Currently, Chinese companies in Serbia are widely hiring proficient Chinese companies