The Far End of the Silk Road: China in the Balkans

This week I take a look at those nations in the Balkans region that have interesting and growing ties with China, but which have not yet received much attention or scrutiny thanks to the region’s focus on intergration with the EU and internal transformation after living through Communism and then widespread conflict. China has a lot to offer the Balkans, much needed investment and trade links as well as an economic success story not based on the Western model. For China the region represents another part of the world to pick up companies, sell products too and for Bulgaria and Romania a cheap way of locating within the EU and accessing the common market. For now Chinese relations with the region remain of secondary importance compared to other parts of the world but nonetheless definitely worth following and also a demonstration that Beijing’s influence will soon be felt in every part of the globe. Below I provide a brief take on China’s engagement with each country in the region.

Croatia

The Balkan state recently entered the EU, but has suffered badly from the financial crisis and has welcomed Chinese investment, like so many others seeing it as a panacea to the economic downturn in Eastern Europe. China International Investment Stock recently took control of a Croatian papermill. The Qingdao based group took a 70% holding in the project, which will make it the biggest greenfield project in Croatia and a sign of things to come.

Serbia

China and Serbia have strong political relations, dating from a time when the Balkan state was internationally isolated in the 1990s, these ties have manifested themselves in Chinese immigration to the country. Chinese migrants often sell consumer goods and have set up small shops and restaurants across the country. Large Chinese companies have set up a major wholesale centre in Belgrade and telecom company Huawai has also been actively investing in the country. Finance also has also made an appearance, the country recently receiving a €1 billion loan from the Chinese EXIM bank to help upgrade the country’s national grid.

Bosnia & Herzegovina

The Balkan country has been the scene of large scale Chinese investment in the power sector. Dongfang Electric group borrowed € 350 million from the China Development Bank to build a power plant in energy exporting Bosnia. However Dongfang are not looking to make a profit on this project, they see the investment as a stepping stone to greater things across Europe, particularly with so many decrepit power facilities in the region and a lack of capital to repair them.

Albania

China has a long standing alliance dating from the heights of the cold war, when Albania rejected the post-Stalinist USSR in favour of Maoist China. Both countries have moved on politically since that point and now view relations through a commercial lens. Albanian trade with China is still relatively small, as is inward investment, but the government are trying to woo Chinese companies into what is still one of Europe’s poorest countries, but so far activity has been thin on the ground. Bilateral trade has soared between the two nations, mainly in China’s favour.

Romania

Chinese – Romanian links have been small to date, but that could change in the near future, as representatives from the China Development Bank, China EXIM Bank and China Investment Corporation recently visited the country, looking for new opportunities. A new wave of privatisations across Romania is creating opportunities for investors looking for assets in Eastern Europe and if Chinese companies are involved, it be no great surprise.

Moldova

Moldova and China have developed strong trading links, primarily in China’s favour, which has become the third biggest importer to the country after neighbouring Ukraine and Romania. However Moldova has started to have some success in exporting its wine to China. Red wine is taking off in a big way as Chinese consumers want to try new drinks aside from beer and local spirits. Although Chinese purchases of vintage French reds have taken the headlines, there is also a demand at the lower end of scale , which is where Moldovan produce can fill a niche.

Bulgaria

Sino-Bulgarian ties have strengthened dramatically in recent years; trade between the two countries soared to EUR 1.9 billion in 2012. Inward investment by Chinese companies has also increased, most notably a deal between Chinese Great Wall Motors and Bulgarian Litex Motors, which allowed China to assemble its first cars in the European Union, a significant milestone, particularly after so many years of European car manufacturers investing in China. By 2015 the plan is for the plant to produce 50,000 Voleex, Hoover and Steed models for tariff free export across the continent.

FYR Macedonia

Trade and investment between China and the landlocked Balkan state has been up til now quite insignificant, with Macedonia looking to its neighbours and of course the European Union as its main economic and political partners.