International economic Chronicle – joint ventures of Serbia and China

During the recent visit of Prime Minister Aleksandar Vucic to China, the possibilities for improving the cooperation between the two countries were discussed, and the most important result was the agreement to have the summit of 16 countries of the Central and South East European countries in Belgrade at the end of this year. It is expected that an agreement be attained about the realization of certain infrastructural projects, especially the fast railroad Budapest-Belgrade. Biljana Blanusa prepares today’s Economic Chronicle feature.

China is one of the biggest investors in the world, and it is present in Serbia through several projects. China always does business along the same lines – the approval of favorable loans for infrastructural projects is arranged on the government level, with the condition that the main contractors are Chinese companies. It is according to this principle that the bridge Zemun-Borca is being built, as are some sections on traffic corridors. During the Prime Minister’s visit to China new projects were discussed, but particularly the modernization of the railway from Belgrade to Budapest, in order to create conditions for the faster transportation of merchandise and passengers. According to Vucic, that project is of immense importance for Serbia and the chance should be taken. Other countries are also interested for its realization, because that section is on the international Corridor 10. The realization of this project was set last year, among the prime ministers of Serbia, China and Hungary, at the summit in Bucharest, but the contract has not been signed yet, so it is expected by the end of the year. The worth of the works on the railroad section through Serbia is around 880 million euro, and the finances should come from the credit line that the Chinese Government had envisaged in its Investment Program for Central and South East Europe, with the total amount of 10 billion euro. However, due to the fact that the state is already over-indebted, Serbia would prefer another model of financing, such as concessions or the private-public partnership.

The Chinese are interested in a few other projects in Serbia, too. Namely, the Chinese People’s Development Bank is ready to grant a favorable loan so that their companies could approach the realization of projects in the field of energy supply. After taking part in the revitalization of the power plant “Kostolac”, the Chinese companies have prepared a technical proposal for the reconstruction of the thermal power plant “Kolubara A”, while also being interested in completing the construction of the plant “Kolubara B”. Another plan is the building of the industrial zone Stublenica, near Ub, the worth of that investment being estimated to 1.2 billion dollars. The construction ought to commence in the spring of 2015, and it is envisaged to open 10-15 thousand new working places. The Chinese companies are showing increasing interest in the process of privatization, and the largest tractor manufacturer in China wishes to invest in the machine industry. At issue are the enterprises “Motor Industry Rakovica”, “Industry of Motors and Tractors” and “DMB Holding”, which include the factory of automotive parts, factory of tools and equipment as well as a casting plant.

According to the announcements, the agreement on the realization of those projects is expected in the next few months. The joint ventures of the two countries should help the improvement of the economic cooperation, especially since so far the trade was mostly consisting of the import of Chinese merchandise. The data of the Serbian Chamber of Commerce shows that in 2013 the worth of the Serbian exports to the Chinese market amounted to 9.2 million dollars, while the imports from China surpassed 1.6 billion!