Serbia taps into rich stream of Chinese investment

Serbia taps into rich stream of Chinese investment
Serbian President Aleksandar Vucic (L) shakes hands with China's Xi Jinping during his latest visit to Beijing. / Serbian presidency
By bne IntelliNews September 19, 2018

Serbia’s government signed a raft of deals with Chinese companies that will bring billions more euros of investment into the Balkan country during Serbian President Aleksandar Vucic’s latest visit to China. 

Belgrade has sought to position itself as the main destination for Chinese investment in Southeast Europe, as Chinese industrial and engineering companies seek opportunities in the region. Serbia is part of the transport corridor between the majority Chinese owned Greek port of Piraeus, but it also has relatively cheap industrial assets, and Belgrade is open to working with Chinese construction companies and financiers on numerous infrastructure projects. 

The main deal signed during Vucic’s latest trip, with China Road and Bridge Corporation (CRBC), was on the construction of an industrial park in the Belgrade suburb of Borca. Borca is already attached to another Belgrade suburb, Zemum, by the "Friendship Bridge” built by CRBC in the early part of this decade.

CRBC will now invest €220mn in the construction of the industrial park. At the same time, investments by companies that set up facilities in the park are expected to reach €2bn, the government said in a statement. The industrial park will be built on 320 hectares of land and is expected to attract around 1,000 Chinese companies, creating 10,000 new jobs.

Aside from the industrial park, the two parties agreed to intensify talks on a project to repair the railway line linking the Serbian capital Belgrade to Nis, the largest city in southern Serbia.

The modernisation of the railway section is significant for the efficiency of the rail connection between Piraeus port and Hungary's capital Budapest.

In July, Serbia and China signed a €943mn commercial agreement on the modernisation and reconstruction of the Belgrade-Budapest high-speed rail link in the territory of Serbia.

The 350km rail link is expected to cut travel time between Budapest and Belgrade from the current eight hours to less than three. The project is part of Beijing’s aim to create a fast lane for importing and exporting products between China and Europe. The Balkans is a key part of this corridor, as it is on the transit route between the Greek port of Piraeus, owned by China’s Cosco, and Central Europe. The route will run 184km across Serbia and 166km across Hungary and passenger trains will travel at 160km per hour.

Also during Vucic’s visit to Beijing, the Serbian finance ministry announced that a Chinese company intends to build a zinc oxide factory in the northern Serbian city of Zrenjanin, an investment worth €85mn. 

The zinc oxide plant is expected to create 280 jobs, the finance ministry said in the statement, which did not disclose the name of the company.

Also in Zrenjanin, Serbia signed an agreement with Chinese company Shandong Linglong Rubber Co. Ltd, which, as earlier reported, plans to open a rubber factory in Zrenjanin and to invest nearly $1bn.

Vucic’s visit to China follows swiftly on two major deals signed in Serbia’s mining and metals sector. At the end of August, Serbia selected China’s Zijin Mining Group to become strategic partner in copper smelting and mining complex Rudarsko Topionicarski Basen Bor (RTB Bor). The Chinese company will invest $1.26bn in RTB. In addition, Zijin Mining is obliged to recapitalise the miner with $350mn.

Just a few days later, Zijin agreed to buy Canada’s Nevsun Resources, which is the 100% owner of the high-grade copper-gold Timok Upper Zone and 60.4% owner of the Timok Lower Zone in Serbia. The deal, agreed on September 5, was valued at CAD1.86bn (€1.2bn). 

Following Zijin’s investment into RTB Bor and the earlier acquisition of the Zelezara Smedereveo steel mill by China’s HBIS, Chinese companies are increasingly seen as saviours for Serbia’s industrial assets, many of which are in dire need of investment. Finding buyers or strategic partners for these companies is a priority for Belgrade, as they are both major employers and a considerable burden on the state budget.

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