Countries like Montenegro, North Macedonia and Serbia are becoming more and more dependent on the People’s Republic. It provides them with loans for major construction projects such as highways.
China’s influence in the Western Balkans is growing. Even the EU, which has long criminally neglected its nearby backyard, is increasingly concerned about this. At the EU foreign ministers’ meeting at the beginning of the week, the German chief diplomat Heiko Maas (SPD) warned: “We are not the only ones there. There are competitors. And they are very uncompromising. “
In fact, China has expanded its influence in the EU waiting room with the help of generous loans in recent years. In the United States, it is mainly used by Chinese construction companies to build highways, bridges and power plants.
With interest rates of two to three percent, the borrowing costs appear to be in line with the market. What makes indebtedness to China so attractive for the Balkans is something else: the easy availability of credit. China does not require lengthy feasibility studies or environmental impact assessments as is usual with EU projects. And the Balkan rulers want to realize their prestige projects quickly.
The downside is that the recipients threaten to take over the loans because of inadequate profitability reviews. They are sinking deeper and deeper into the debt swamp, making them more dependent on China as their creditors. A dreary example of this is the smallest EU candidate, Montenegro. In 2014, the coastal state took out a loan of 944 million dollars for the construction of a section of the planned motorway from the Adriatic port of Bar to Serbia: The Adriatic state, which has been badly hit by the consequences of the corona crisis, is now struggling to pay off the large loan.
The call for help with which Vice Prime Minister Dritan Abazovic addressed the European Parliament’s Foreign Affairs Committee in March sounded almost desperate: “We ask you to help us repay the money so that we can break the Chinese influence.”
But how much is the region’s dependence on Chinese loans exactly? A current study by the Italian bank Unicredit shows in detail how deep the Western Balkans near Beijing is so far in the chalk. China is by no means the largest foreign believer in the Western Balkans. But Beijing’s influence increases with the growing volume of credit.
In addition to Kosovo, which was not recognized by China anyway, Albania, of all places, which cooperated closely with Beijing in socialist times, has not yet taken out any Chinese loans. According to the study, the loans in the other countries in the region are mostly processed through China’s Import-Export Bank (China EXIM), which usually finances around 85 percent of the costs of major construction projects carried out by Chinese state-owned companies.
According to the authors of the study, it is striking that lending is “relatively large” compared to the size of the economies of the recipient countries. In 2020, Chinese loans made up 3.4 percent of GDP in Bosnia and Herzegovina, seven percent in Serbia, 7.5 percent in North Macedonia and as much as 20.7 percent in Montenegro.
According to research by Unicredit, the annual loan installments range between 57 million euros in North Macedonia and 233 million euros in Serbia, where most of the major projects are carried out under Chinese leadership. With the exception of Montenegro, the amount of annual installment payments has so far been less than one percent of GDP in all countries. However, the repayment of the Chinese loans will already account for 40 percent of Montenegro’s total financing requirements in the next two years. In the other states it is less than ten percent.
According to Unicredit, China is so far the third or fourth largest foreign creditor in most of the countries in the region. But with the full disbursement of the loan agreements already agreed, the share of Chinese loans in total foreign debt will climb to 11.4 percent (Bosnia) to 22.7 percent (Montenegro) in the next few years.
The authors of the study believe that the EU could counter the growing importance of China as a lender in the Western Balkans by increasing the financing of infrastructure projects. In turn, they recommend that EU candidates in the region diversify their sources of funding “before the burden of school repayments on China becomes too great”.
–
