OBOR Serbian cash puts China on collision course with EU
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OBOR Serbian cash puts China on collision course with EU

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An investigation by the European Commission into a Chinese-funded rail link between Serbia and Hungary is a sign of concern over China’s focus on the western Balkans as a key link its $900bn One Belt, One Road route for bringing Chinese goods to Europe.

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Copyright - Reuters

Serbia is emerging as a key flashpoint between China and the European Union in the wake of Beijing’s concerted push to buy assets across the western Balkans, and to invest directly and heavily in infrastructure projects. China increasingly views Serbia as its premier trading partner in the CEE region. It sees the country as a crucial location because of its place on the map — and its future role as a conduit for shipping Chinese goods directly into the wider European market — rather than because of its size and clout.

The European Commission has launched an investigation into whether a Chinese-funded $2.9bn rail project — which would link the Serbian capital Belgrade with the Hungarian capital Budapest, 350km away — broke EU public procurement laws.

China-based experts said the Chinese government had been careful about selecting Serbia as its chosen medium through which to access Europe via Chinese president Xi Jinping’s showcase $900bn One Belt, One Road (OBOR) project, which is designed to build new overland and maritime trade routes linking East Asia with Europe.

“The Balkan region is key to OBOR,” said Xiang Songzuo, chief economist at Agricultural Bank of China. “It makes perfect sense to turn the Balkans into a processing hub for Chinese-made goods.”

Marinos Vathis, CEO of Serbia-based lender Vojvodanska Banka, said the one question that China has when it comes to Europe is how to access it. “They want to sell as much Chinese made goods as possible into wealthy European markets.” 

WIN-WIN RELATIONSHIP

He pointed to the decision by Cosco Shipping, China’s largest shipping firm, to buy a 51% stake in Piraeus, Greece’s largest port, for €280.5m ($305m) last August. The port’s new Chinese managing director, Qiu Fucheng, has pledged to boost capacity by 35% by end-2018, by building new facilities, upgrading existing infrastructure and transforming Piraeus into a key transit point for Chinese exports destined for key European markets. 

“Piraeus is a key Chinese entry point into Europe,” said Vathis. “At a stroke, they have solved the problem of how to offload products cheaply. The next challenge is how to transport goods through the Balkans and ship them quickly and cheaply into Europe, and what better way than via Serbia’s rail network. Serbia is the natural route into Europe. It’s low-cost, it needs the money, and it’s a flat country. It’s a win-win relationship that is all about logistics.”

Xiang added: “Serbia has long been a good friend to China. It is a country that needs capital and it is desperate to create stronger trade links with the rest of Europe. And of course, it is where OBOR ends.”

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