Author: Dragan Pavlićević, Institute for Philosophy and Social Theory (Affiliate)

Abstract:

Going beyond the Sino-centric analysis of rapid development of Serbia’s ties with China, the paper explores the international and domestic factors that provide context and have significant impact on making of Serbia’s foreign policy, and more specifically, Serbia’s policy toward China. The analysis encompasses both structural and agent-level variables, and provides an initial assessment about their impact on making of Serbia’s policy toward China. Based on the classification of these factors according to their potential to influence the Sino-Serbian ties in a positive or negative fashion, and to a high or a low degree, the paper put forward policy recommendations aimed to enhance the positive environment and manage the risks to further deepening of bilateral relationship to the mutual benefit.

To analyse Serbian China policy in 21^st century one should naturally start from analysing the country’s overall foreign policy, yet that is to be immediately confronted with a difficult question: Is there a Serbian foreign policy? As Mladenov (2014) convincingly shows, so profound where the turbulences and changes in both internal and external environment of Serbia during the last quarter of the century, that it has not been possible at all for Belgrade to produce a coherent, long-term strategic foreign policy direction.  Even becoming a sovereign  state in 2006 following  the break-up of the federal and con-federal unions within which it existed since 1918 has not ensured emergence of a solid, long-term foreign policy platform. Two issues are mainly to blame: the protracted process of secession of southern province of Kosovo has essentially “hijacked” the Serbian foreign relations. That is, Serbian foreign policy was largely determined by the Belgrade’s efforts to prevent independence of Kosovo, and her foreign relations were in function of this objective, especially in the period following Kosovo’s proclaimed independence in 2008. On the other hand, while nominally oriented toward the EU integration since 2000, Serbia has not reached an internal consensus on this issue until 2008 when all major parties eventually adopted a pro-EU integration stance. Hence, many of policies that were needed to be adopted in order to advance on the EU integration path were impartially, reluctantly or not at all implemented, and the internal struggle appears to have engaged all the resources that could otherwise be directed to the foreign policy front. More importantly, without consensus on such a basic issue, a coherent foreign policy could not be devised.

While these two objectives – maintaining territorial sovereignty, and advancing the EU integration -  can be regarded as to a great extent determining Serbia foreign policy, essentially they are in conflict, as the prospective EU membership cannot be achieved without the recognition of Kosovo’s independence. Even after 2008, the policy of “both Europe and Kosovo” essentially remained intact, keeping Belgrade’s foreign relations activities overloaded with contradictions and inconsistencies (and, it could be argued, making it essentially ineffectual on both of these fronts). While some progress has been recently made both on reaching an acceptable agreement for the Kosovo status and with regards to the Serbia’s path to the EU, Serbia is still in a search of a coherent and consistent foreign policy strategy.

Against such a general background, it might be surprising to note a high degree of continuity in the Sino-Serbian relationship over the last years. In fact, bilateral ties have been steadily developing and deepening over the last decade (Pavlićević 2011). Having reached a status of strategic partnership in 2009, the relationship remained on an upward trajectory and have since significantly expanded in both depth and breadth, illustrated by an ever-growing number of diplomatic visits, exchange mechanisms and bilateral agreements, burgeoning multilateral cooperation within the “16+1” framework and beyond, and ever-larger flows of trade and investment, including concerning several strategically important projects (Vangeli 2014, Pavlićević 2015a). While Beijing is not refered to as one of the four pillars of Serbia's diplomacy anymore as it was during the previous administration, Serbian officials do continuously reitarate a desire to deepen the relationship with China. This sentiment is strongly echoed by their Chinese counterparts.

Given a foundation of already a very solid bilateral relationship and the lack of entrenched Serbia's foreign policy orientation as of yet as discussed above, it could be argued that there is much space for Beijing to pursue a role of an important partner to Belgrade. There is a consensus on both sides that there is a high compatibility of goals that could be pursued within the bilateral relationship. These include deepening economic exchange, especially with regards to facilitating Chinese investment in Serbia and increasing the bilateral trade volume, but also other economy-boosting measures such as expanding cooperation in tourism, agriculture, various types of financial arrangements, and others.  Both sides also appear determined to increase exchange in culture, education, military, and political domains, the latter including both bilateral exchange of experiences on state or party level, as well as cooperation in international forums (Pavlićević 2011,2015a). It appears that the bilateral relationship can be relatively effortlessly taken in a direction the policy-makers in Beijing and Belgrade deem as the most mutually beneficial.  

Despite such rapid development of bilateral ties as described above, the relationship has not yet attracted much attention from the academic and think tank communities, although the number of studies that discuss or touch upon Sino-Serbian relationship in the context of China-CEE multilateral framework or China's One Belt, One Road (OBOR) initiative is growing in step with related developments (e.g., Liu 2013, VPI BIH2014).  It is a prevailing view that China's going-out strategy and Beijing's desire to build up its economic and political influence internationally are the key drivers of China’s relationship with Serbia and other countries in the Southeast Europe and, more broadly, the CEE region (Pavlićević 2011, Vangeli 2014). Among a limited number of studies conducted in Serbia, an analysis by Filijović and Kilibarda (2013) is representative as it suggest that rapid development of Sino-Serbian ties should be primarily  viewed in the context of the comparative advantages of modern China, that is, a desire to “activate” its huge foreign exchange reserves, and within  “Chinese master plan for Eurasia” as embodied in OBOR initiative to re-establish and reinvent the ancient Silk Road in current circumstances. Some analyses provide somewhat corrective lenses by pointing to the developmental need of Serbia as an important contributor to deepening of cooperation between Serbia and China, and complementary to Chinese readiness to provide finances and deliver major infrastructure projects ( Liu 2014, Pavlićević 2014).Yet, all these analysis view China as the driving engine behind  the relationship. 

However, I argue that the existing scholarship generally overemphasizes China’s expanding global ambitions and presence, essentially reducing Serbia to a “passive  recipient” of resulting China’s foreign policy strategy and initiatives, all devised in Beijing.  Subsequently, Serbian strategic intentions concerning her relationship with China, and how is China policy in Belgrade made are questions that have remained unaddressed so far? More broadly, what are other factors apart from Beijing’s goals and initiatives that are important for shaping the Sino-Serbian relationship? Particularly, on the Serbian „input“ side, what and who influences how the relationship developed and will develope in the future?  

This paper aims to address this knowledge gap. It is ambition of this paper to provide a brief analysis of both structural and actor-level factors in hope to capture more of the context relevant for understanding the making of Belgrade’s policy toward China. To operationalize the inquiry as introduced in the paragraph above, the paper will answer the following questions: What external and internal factors influence how the bilateral relationship is managed on the Serbian side? How important individually are these factors and do they facilitate or constrain development of Sino-Serbian ties? Having worked out the coordinates of the relationship by answering these questions, the article will analyse what such a context suggests about opportunities and obstacles for further deepening of the relationship and propose policy suggestions to improve the prospects of deepening the relationship to the mutual benefit into the future.

The task is complicated by the lack of previous relevant studies, both addressing the key variables influencing Serbian foreign policy, as well as those that would try to shed light on the sources, stakeholders and decision-making mechanisms  related to Serbia’s China policy. Therefore, this paper should be understood as an initial and speculative exploration of the factors shaping Serbia’s policy toward China, rather than a comprehensive analysis. I have relied on the existing literature, media reports and a series of interviews and conversations conducted over the course of 2 years with individuals familiar with or directly involved in some aspects of Sino-Serbian cooperation from academic, governmental and corporate circles in Serbia and China.

Setting the Scene: External Structural Determinants of Serbia’s Foreign Policy

The analysis departs from a classical insight that diplomacy is a two-level game (Putnam 1988), that is, that one must take into account both domestic and international factors when analysing a country’s foreign policy. On both levels, it is necessary to take into account both structural and agent-level variables.  In the following section, I will first briefly describe the relevant structural and then agent-level factors at international level, before I move to domestic factors in the next section.

The EU integration is the most important determinant of Serbian foreign policy as the goal of acquiring the EU membership  is the primary strategic objective of Serbia. This direction has been solidified in the recent years as since 2008 all the mainstream parties pursue this course, with only several non-parliamentary parties pursuing an opposite, anti-EU agenda. This means that synchronisation of key policies, both foreign and domestic, with those of the EU provides the overall context for Serbia’s actions. Notwithstanding both the difficulties the EU is currently facing as well as the issue of Kosovo’s independence where Serbia retains stance that is in opposition to the general policy of the EU, it is to be expected that all the future foreign policy initiatives will need to be negotiated with Brussels, and that Belgrade will defer to the EU’s authorities if the Serbia’s desired policy may jeopardize her European future. As a most recent example, Serbia, along with several other countries, reluctantly “gave up” proposed “South Stream” project, even as the establishment of the this trans-European gas pipeline was arguably in her interest, as benefits from both improved gas supply and the income from transit taxes would be significant. This was done in order to appease policy-makers in Brussels who insisted on a punitive action toward Russia in the aftermath of the Ukrainian crisis.

The second key determinant of Serbia’s foreign policy is Belgrade’s determination to protect Serbia’s territorial integrity, primarily in connection with its commitment not  to accept the secession  of Kosovo. Although over the last two years important steps have been reluctantly made to reach a working solution that would both respect the reality of Kosovo’s de-facto independence and Serbia’s stance, there is not any  indication that in the short- to mid-term Belgrade may change its position on the issue. In defending its position in the international forums, Belgrade often relies on the support of the states sympathetic to its positions, including China. However, it is likely that importance of the “Kosovo factor” for Serbia’s foreign policy-making will gradually decrease as the solution based on the realities on the ground is slowly by steadily being worked towards, and as settling the issue is a key precondition of Serbia’s accession to the EU, which is her primary strategic goal.

The third structural factor is the recent China’s initiative to develop relationship with the countries of  Central and Eastern Europe (CEE).  The rapidly intensifying engagement of China with the CEE region happens through the so-called “16+1” multilateral framework and promises to do much for economic growth and development of CEE region. It is generally warmly welcomed by CEE countries that mostly display enthusiasm about the possibility of tapping into the potential of deeper cooperation with China.  The ever-growing number of initiatives and mechanisms that facilitate deepening of cooperation, as well as Chinese readiness to bankroll the related proceedings provide powerful  incentives for deepening of the Sino-Serbian relationship into the near future. Serbia has so far taken a proactive stance and showed much interest in becoming a key regional partner for China. The existing goodwill on both sides has already materialised through a number of cooperative projects and measures, with many others in the pipeline (Pavlićević 2015a).

Serbia’s relationship with NATO, although not fully defined yet, is another structural factor that has to be taken into consideration when assessing the playing field available to Belgrade for defining and conducting Serbia’s foreign policy. Serbia is not a NATO member and maintains official position of military neutrality. However, the EU and NATO integration are considered as mutually reinforcing processes, probably even more so in the aftermath of the Ukrainian crisis. In 2006, Serbia signed the Partnership for Peace programme, resulting in cooperation with NATO on issues related to reform of Serbia’s defense system and armed forces. While public opinion in Serbia is overwhelmingly against joining NATO, the relationship can be seen as one of slowly but steadily increasing depth and breadth (Nič and Cingel 2014). It has recently gained new momentum with the adoption of Individual Partnership Action Plan. While there is little to suggest that these NATO-related processes may significantly influence general foreign policy making in Serbia, the deepening ties suggest there might be limits to some aspects of Serbia’s foreign policy, especially in the domain of international security and possibilities for cooperation in military and security-related affairs.

The cumulative influence of these structural factors on the prospects for deeper Sino-Serbian relationship is primarily related to the EU integration and “16+1” and twofold: First, The China-CEE framework incentivizes the development of ties, and is likely to create numerous opportunities for substantially deepen the bilateral relationship.  However, as the EU accession provides the general context of Serbia’s foreign policy, the relationship-building with China can only be of a secondary importance in comparison. In that sense, the stance the EU takes toward development of Sino-Serbian relationship should be seen as the crucial for the prospects of its development (For discussion see the following sections).  The Kosovo issue and NATO integration, at the current time, remain inconsequential.

External Actors and Serbia’s China Policy

Within the contexts provided by the four key structural factors described above, there are three external actors that exert much influence on Serbia’s foreign policy. The EU takes the central place among the three. Brussels not only exerts decisive influence in relation to Serbia’s EU-accession process but is also a key third-party contributor to the relationship between Belgrade and Pristina and a stakeholder in the relationship between NATO and Serbia. Furthermore, it is a participant, although only on the state-level of participating EU-members, in the China-CEE multilateral framework. However, Balkans is a region where Russia historically competed, and still competes, for influence with other major European powers such as Germany, UK and France, which are among the most influential members of the EU. Serbia retains strong links with Russia today. Furthermore, the US played an active role in the developments in the Balkans especially since 1990s and today retains an interest in the region and remains a key stakeholder, with clear-cut preferences on important regional issues (Woehrel 2010).

Consequently, at an  agent-level, the EU, Russia and the US must all be taken into account to understand the context within which Serbia’s foreign, as well as domestic, policies are conceived and pursued. It is the purpose of this section to briefly introduce the position of these actors in Serbia and the region, their influence on Serbian politics, including foreign policy, and summarise their stance toward the growing Chinese presence.

The EU is likely aware that economic weakness may translate into a weak and dysfunctional state and become a source of instability that transcend national borders.  It also has an interest in future EU members, as well as the EU neighbours, such as Serbia to have healthy economies. Therefore the EU is expected to be welcoming of China’s investments in Serbia.  A recently unveiled Investment Plan for Europe (Hereafter IPE, or Juncker's plan) may also serve as a platform through which the EU will try to “co-opt” and channel Chinese investments, or at least part of them, to areas and projects deemed as priorities (Pavlićević 2015b). Of note, as the accession process moves forward the EU is expected to require Belgrade to synchronise Serbia’s foreign policy with Brussels’s on all important issues, yet with a significant leeway to develop relationship on bilateral basis.  Such a restrictive yet balanced approach can be observed in the EU-imposed decision on Serbia and other participating countries in “South Stream” project  to withdrew from this Russia-backed initiative and reformulate their energy security within the EU common energy framework. However, Serbia was left to arrange its economic relationship with Russia in the aftermath of the Ukrainian crisis independently and was not pushed into joining the EU-wide sanctions against Moscow. In the absence of emergence of similar major stumbling blocks in the EU-China relationship, it is likely not to interfere in Belgrade’s relationship with Beijing, apart from making sure that the general legislative and policy orientation of the EU is respected.

The 2014 China-CEE Summit held in Belgrade can serve as an illustration of how such EU stance plays out in reality as well as provide some clues about how the EU may treat China’s growing regional presence in the future. Judging by the reaction from the representatives of the influential European countries in Serbia, as well as by the lack of an official statement from Brussels, it appears that the EU and the most influential European countries have adopted an attitude of “wait and see” and may not pursue a more influential role in the relationship between Serbia ( and CEE countries), on one side, and China, on another, in the short term. Although this illustrates that the EU is not overly and openly enthusiastic about China’s growing involvement in her (back)yard, such general situation is conducive to deepening of Sino-Serbian and Sino-CEE relationship.

However, the alleged but unsubstantiated reports about the EU’s pressure on the CEE countries, including Serbia, to steer clear from those forms of bilateral exchange with China that do not comply with the EU’s procedures and standards, such as invest-and-construct deals that do not follow open and transparent bidding procedures, also illustrate that the EU is not likely to remain totally passive. These reports could be indicative of the direction in which the EU’s stance toward development of the China-CEE and Sino-Serbian relationships will develop in the future, and the action Brussels may take in the short-term: while publicly appearing neutral and disinterested, Brussels may try to assert its opinion and defend its primacy within the Serbia’s political outlook through less formal channels. As the EU economies are searching for a more robust recovery and growth, it becomes more and more important for the EU to ensure that the profit-making opportunities in Europe are cashed-in on by the EU enterprises. The economic competition from China may therefore be silently fought against.

Apart from the EU, Russia is another influential actor in Serbia, as well as in the CEE region. Of note, as a consequence of the on-going crisis in Ukraine, the countries that are simultaneously members of the EU and NATO participate in the economic sanctions against Russia, as do non-EU members Albania (NATO member) and Montenegro (in accession process to NATO). Serbia is subjected to the pressure from the EU to take critical stance toward Russia and not to take the advantage of the opportunities that appeared as a consequence of the breakdown of the relationship between the EU and Russia. While Belgrade restrained from introducing sanctions to Russia, it complies with the requirement from the EU to conduct its Russian policy carefully, and respects demands not to serve as “back door” for imports and exports in and out of under-the-sanction’s Russia. This evidences as much Brussels influence over Serbian foreign policy, as much as importance Russia still holds in Serbian foreign policy outlook.

The military parade organized by Serbian government in Belgrade in honour of President Putin’s visit to Serbia in October 2014, as well as joint military drill hosted by Serbia in November, illustrate the Serbia’s desire to maintain good relationship with Moscow. Indeed, Serbia has many important reasons for maintaining a close relationship with Russia. Among others, an important characteristic of the relationship between Belgrade and Moscow is reliance of former on the supply of gas from Russia, and more generally, Russian monopoly over the Serbian oil industry and oil supply. Additionally, apart from the possibility to draw on Russian state-to state loans and a promise of Russian markets for its goods, the two have also developed mechanisms for security and military cooperation ( Djordjevic 2014). Serbia also appreciate that it is able to occasionally draw on Russia’s support in international arena, as is the case with regards to the secession of the Republic of Kosovo, who supports official Serbian stance that Kosovo  is a Serbian province. In addition, Serbia is hopeful of advancing the South Stream project  should it be revived,  or the currently promoted  “Turkish Stream” that would further ensure supply of gas to domestic markets, and moreover, sizeable revenues from the gas transport charge for the gas pipeline that crosses Serbia on its way to several other countries. For all these reasons, Russia enjoys some leverage over Serbia.

Russia never made a clear statement that summarises her official stance toward the China’s growing presence in Serbia, and the wider Balkan region. Russia is likely to constrain from meddling in the Sino-Serbian relationship, although it may perceive Beijing as an economic competitor in the country, as another source of economic and political support diminishes Moscow’s leverage. Russia’s current international standing and its rift with the West make it a necessity for Moscow to seek closer relationship with China. A broader context of Sino-Russian relationship suggests there are further constraints for Russia to adversely affect deepening of Sino-Serbian ties.  On one hand, Moscow’s foremost concern is to ensure cooperation with Beijing and/or counter China's growing influence in its immediate Eurasian neighbourhood, that will certainly be further the case given  OBOR funds and projects.  On the other, Russia benefits greatly from its relationship with China, especially since getting in conflict with “West” in the context of the Ukrainian crisis.  It is therefore quite unlikely that Russia has neither resource nor intention to devise counter-strategies for Chinese presence in Serbia and the Balkans. The recent complications around the “South Stream” project make it even less possible for Russia to dramatically influence proceedings in Serbia as without the pipeline Moscow has fewer instruments and less leverage that could apply to influence decision-making in Belgrade.

The US is another regional actor to be taken into consideration.  While it is commonly perceived that Washington has largely withdrawn from actively shaping developments in Serbia and the Balkans, leaving the EU to play the major role, it still holds significant leverage and influence that can effectively put to use to promote the US’s interest in the region if deemed necessary. The US’s interests with regards to Serbia remain tied to promoting Serbia’s integration in the EU and NATO, and in the process minimising the regional influence of Moscow. Given such context, the US is not invested deeply enough in Serbia to be sensitive to a potentially larger role of China in the country and region. After all, it is difficult to imagine China could affect the regional security architecture and derail the commitment to Euro-Atlantic integration of the ex-Yugoslavian space, including Serbia, that remains firmly on track, even in long-term. Therefore, in at least mid-term, the situation is likely to remains the same, even if China has much stronger economic presence in the region than it does now, and can project military and “soft” power much more strongly, as compared to currently non-existent Chinese military role in the region and a limited "soft power" influence of Confucius Institutes and sporadic cultural programmes. For all the reasons touched upon in this paragraph, the US is likely not to devise a counter-policy for development of Sino-Serbian ties.

In short, due to a complex pattern of multilateral arrangements and mutual relationships in Serbia and the region, the development of Sino-Serbian relationship overlaps with several existing integrative mechanisms and spheres of influence, and inevitably collides with the interests of other regional powers.  However, the quick analysis of external structural and agent-level factors suggests that there are not any substantial obstacles for China to pursue closer relationship with Serbia. While support of Serbia’s efforts to maintain territorial sovereignty over Kosovo and the establishment of “16+1” have laid down foundations conducive to deepening of bilateral relationship,  other factors can all be regarded as neutral or positively inclined toward deepening of Sino-Serbian ties. However, as it will be addressed in the penultimate section, there must be an active risk management to prevent collision and conflict with some other regional actors or Serbian general foreign policy priorities .

Key Domestic Structural Determinants

On the domestic front, the tone is set by the incumbent government’s efforts to implement a variety of measures to create what it regards as the sound foundation for economic development. These include deep-reaching reforms such as downsizing of state’s administrative apparatus including a high number of layoffs, privatisation of state-owned enterprises, liberalisation of prices for many basic services and goods, such as electricity and gas, for example, rewriting of labour laws and other measures that aim to support entrepreneurship and “marketization” of economy . While at the time of writing these reforms are largely still ongoing  and whether they could be fully and effectively implemented still remains to be seen,  it is clear that inducing economic growth is the top priority of current government.

Within this general context there are two structural factors that have important implications for Serbia’s relationship with China: reliance on foreign investment for economic growth, as well as commitment, backed with relevant measures being put in practice, to fiscal reform and consolidation.

Serbian developmental strategy heavily relies on foreign investment.  Since 2008 and the onset of the Global Financial Crisis, the investment in Serbia from developed countries has declined as compared to the previous period.  This enlarges the space for other potential investors and sources of capital to enter Serbia. The cash-strapped and debt-ridden government adopted an aggressive strategy to stimulate the economy and cut unemployment that is according to an authoritative source expected to reach 20% before 2016. Premier Vučić has been repeatedly on record saying that Serbia is ready to beat any competition from other investment-seeking countries in Europe by offering “the best conditions for investors”. Comparatively low labour costs, proximity of the EU as well as a free-trade area of 800 mil people have been key elements of the Serbia’s “sales pitch” to the foreign investors, including  China (Pavlićević 2011).

However, parallel with this FDI-growth model envisioned by the Serbian leadership, the ongoing fiscal consolidation features as an important corrective factor. In an attempt to reduce public debt and ensure its sustainability, the Serbian government is committed to keep the external debt in control. The measures are implemented on both the revenue and expenditure side of the budget to rapidly reduce budget deficit and publicdebt within a short time-span.

In terms of implications for the prospects of the Sino-Serbian economic relationship, that means that while China’s FDI is welcomed, as a consequence of Serbia’s current fiscal policies, state-to-state loans that have so far proved preferred modus operandi for joint projects, may not be preferred cooperative method in the future. It should be expected, and there are signs that this issue already features as an important point in the dialogue between Belgrade and Beijing, that possibilities to explore other modalities of cooperation, such as private-public partnerships, concessions and joint ventures may increasingly be explored by the Serbian side in order to achieve both objectives of increased FDI flows and fiscal discipline(See also Pavlićević 2015c).

Domestic Actors and Stakeholders  in Serbia’s Relationship with China

A disclaimer is necessary here before taking the analysis to the actors at the domestic level.  The main corporatist and interest groups, including state bureaucracy, large state-owned enterprises, public service institutions including higher education and research centers, labor unions and other forces that may be expected to have influence on political development and policies, are aligned with the political elites or marginalised in policy process. Therefore, it is debatable whether they could be regarded as fully constituted, authentic and independent political actors that exert tangible influence on the policy formation and output, including the foreign policy. The policies are dominantly devised within the small circle of party leaders and their inner circle in position of power. Therefore, within such a context it is not likely that these policy-makers will seek to build coalitions with these groups, but rather, the latter are better perceived as recipients of the policies devised and implemented in a top-down fashion.

Nevertheless, there are some domestic actors who may have a tangible impact on the prospects for development of the Sino-Serbian relationship. These are Serbian political parties,  general public and media, NGOs, the state-owned enterprises  and businesses (especially those in sectors where Chinese presence is strongest),  and labourers.

All political parties in Serbia favour, or at least do not object to, the development of stronger Sino-Serbian ties. The 2014 China-CEE Summit held in Belgrade is a point in case. The official narrative emphasized the importance of strong relationship with China. This narrative has not been challenged by the political opposition in Serbia and any sort of criticism toward the content and ratio of the Summit or, more generally, deepening of ties between Serbia and China was absent during and in the aftermath of the Summit. Opposition remained silent and did not criticise Serbian government, even when the news about the problematic handling of the new loan arrangement for Kostolac B3 and the incident related to the detention of Falungong activists were publicised (Pavlićević 2015a). This is worth emphasizing for several reasons. First, the current Serbian opposition parties position themselves as proponents of the human rights and political freedoms, often criticising the incumbent government on these grounds. This reaction was now absent even as a clear opportunity for such action presented itself as Serbian police detained the activists. Second, in other countries, opposition often uses  agreements with China to advance criticism of the incumbent government. For example, in the neighbouring Montenegro, opposition harshly criticised agreement to finance a loan-and-construct project for major highway between Montenegro and China. Because these loans increase state’s debt level and will largely be spent on Chinese enterprises they presented a very attractive opportunity to opposition to capture attention of the general public. However, this sort of reasoning was also missing. Third, as fight against corruption is at the heart of current Serbian government’s reform agenda, the irregularities related to the negotiation of the loan for Kostolac B3 offered a great opportunity for opposition to damage the credibility of the government. However, the criticism on these grounds also did not materialise. Furthermore, several oppositional leaders were on record evaluating the “16+1” summit as “very important” for Serbia. Finally, the opposition parties in Serbia still take part in governance on sub-national level. If any was opposed to strengthening of ties with China, it would complicate development and implementation of many bilateral initiatives, out of which many interface with sub-national and functional governmental units that may be staffed and influenced by the parties currently in opposition on the national level.

Public opinion, including media establishment through which it is articulated and formed, features as another potentially important stakeholder. A 2014 Summit can serve as a good illustration in this regard as well. The enthusiasm from official communication and media coverage spilled to the general public. According to the influential daily newspaper Politika, 84% of public survey respondents paid “relatively close” or “close” attention to the proceedings of the Belgrade Meeting, 84% of respondents stated that the Belgrade Meeting “largely” or “mostly” fulfilled the expectations, 58% stated that the Meeting represents “great success of Serbian government”, 56% thought that it “ presents Serbia as regional leader”, 65% thought that it had “significant economic and political importance”, and 85% stated that it “ provides incentives to economy”. Previously, to serve as another illustration, the Balkan Monitor (Gallup 2012) measured approval rates for foreign leadership in world politics in 2012. In Serbia, Russia and China came first, with approval standing at 51 per cent and 47 per cent respectively, while the West did much worse (Germany 35 per cent; UK 23 per cent; USA 20 per cent) (Mladenov 2014: 167).

NGOs, and to less extent, academics and think tanks, are also active participants in debates of Serbian foreign policy. Sino-Serbian relationship and its prospects however, have not been in the focus of their interests, except possibly around the time of China-CEE Summit in Belgrade.  During this time, academic and analytical community was unison in its positive assessment of the prospects of Sino-Serbian relationship. Representatives from NGO have not taken a prominent place in a limited number of related discussions over the last years.  A well-documented case of detention and deportation of Falungong activists during the Summit also went under the radar of Serbian NGOs, out of which many otherwise have background and are interested in rights-based activism and protest. This clearly suggests that China does not feature as an important issue for the Serbian NGO community. However, with the themes of political and human rights at the center of activism of many NGOs and think-tanks, as well as a tendency  among a number of influential actors to  adopt pro-EU and pro-NATO values and recommendations  it could be expected that the Sino-Serbian relationship will increasingly come under scrutiny, and possible under fire, in the coming period.

Finally, the corporate and industrial interests can exert important influence on policy-making. Particularly, SOEs and, to much lesser degree, private-sector enterprises operating within energy and construction industries have a stake in and participate in the development of related sectors. The previous research suggests these Serbian enterprises have less favourable view toward Chinese investment in Serbia (Pavlićević 2014). The main reason is the perception that the projects, and hence the lucrative opportunities, are being taken away from them. To illustrate: although Serbian enterprises do not have experience and technology for building and maintenance of a high-speed railway, the perception is that the skills and technology for the delivery of projects such as construction and maintenance of transport infrastructure (bridge, regular railway, road) or upgrade of power plants are readily available in Serbia. The same goes for production of railway equipment and machinery:  for example, there is more than half a dozen of state-owned and private enterprises in Serbia that are specialized for such endeavours.

My interviews with insiders from relevant industries also revealed that the selection of sub-contractors for projects financed by China is also often deemed non-transparent and favouring Chinese subcontractors at the expense of domestic enterprises. There are also widespread fears that Chinese enterprises “steal” technologies of their Serbian counterparts (although it is doubtful whether Serbian enterprises in question possess the technological advantage over Chinese companies). Finally, the contribution of Chinese companies is often regarded as of poor professional and technological standards and quality. These concerns are not to be found in official statements and media, but are frequent in informal discussions, especially with industry insiders.

Also, businesses perceive “import” of Chinese workers to work on the related projects - when Serbia boasts high number of unemployed yet skilful labour force – as problematic, as do the labourers  themselves, both in these industries as well as more generally. However, given the lack of strong unions and other forms of political organization, it is highly unlikely that the Serbian labour force is an emerging actor capable of exerting substantial influence over Serbia’s China policy. Similarly, since state-owned corporations are run by political appointees, they are likely to follow the general state policies even if these come at expense of enterprises’ business prospects and balance sheet.

In conclusion, the internal political environment is very favourable to the deepening of Sino-Serbian relationship. On a structural level, reliance on foreign sources of capital and technology to kick-start stumbling Serbian economy is extremely conducive to foreign investment, and the related policies and general investment environment make Serbia attractive investment destination. While fiscal consolidation may make the feasibility of state-to-state, loan –and-construct investment schemes less straightforward, there appears the willingness on both sides to consider modes of cooperation that respect Serbia’s commitment to improve its governmental balance sheet but does not act as an obstacle to a more intensive economic exchange. On the actor level, all relevant political actors appear as favouring a good relationship with China and are supportive of further developing of the bilateral relations. Media and public also have favourable views toward cooperation with China, although the unbalanced reporting may also create a climate of unrealistic expectations. While corporate stakeholders and labourers may not harbour such positive views, they are not likely to be in position to influence policy-making. The same goes for Serbian civi sector, that, while neutral at the moment, may become more critical of deeper relationship in the future, but may not have instruments to affect development on the policy level.

Key Variables in the Two-level Game

The logic of two-level game stipulates that the external and internal factors are in constant interplay that may influence perceptions, preferences and developments on any of the two levels.  The policy, therefore, is a product of policy-makers’ attempts to juggle domestic and international preferences, incentives and imperatives. Furthermore, leaders may consciously seek to leverage situation on one of the levels to influence developments on the other.  

How does the two-level game play out in terms of the factors that may influence Sino-Serbian relationship on the Serbian input side? A 2014 China-CEE Summit can serve as an illustration once again. The cooperation with China has been painted in official discourse in an especially positive light, as a real partnership with a durable history, and China was hailed as a strong and dependable partner. Serbian government - prior, during and after the Belgrade Summit  - has emphasized the importance of these events for Serbia, presenting them as an enormous opportunity to raise its international profile, attract foreign investment and promote both domestic and regional cooperation. Serbian government has also used the Belgrade Summit to boost its own credentials domestically. For example, government representatives put much emphasis on Serbia’s role of the Summit’s host, building a narrative of Belgrade being a key regional player, interested in and instrumental for developing regional and bilateral cooperation within the CEE region. Additionally, it prominently pictured Serbia as a reliable partner, and as a stable, business-friendly and reform-minded environment suitable for foreign investment, in order to boost reformist credentials of the government. In a message directed equally at foreign dignitaries and domestic audience, Serbian Premier Vučić stated that Serbia is the place where West creatively meets with East, and expressed hope that Serbia can act as a new platform, a place where future business deals, investment plans and the opening of new joint companies can be agreed and organised. In other words, among others, Serbia used the ocassion of hosting the China-CEE Summit to boost domestic support for the cooperation with China, ensure that the related diplomatic activities were perceived as benefitial to wider region of CEE and Europe, as well as facilitate its FDI-driven growth strategy.

Within the logic of the two-level game, the importance of some variables identified in this paper may go beyond their direct influence on Serbian foreign policy and Serbia’s China policy. Rather, their importance may be enhanced due to their ability to influence other variables. International-level variables appear to potentially have much more influence on how the future of Sino-Serbian relationship is shaped as these factors might intervene to affect the domestic climate is much more likely than otherwise.  For example, 16+1 framework greatly influenced more positive views of political elites and general population toward China and Sino-Serbian relationship. Also, due to the importance of the EU integration for the overall political context in Serbia, The EU remains the single most important “influencer”. What are the requirements within the Serbia’s EU integration path and how the EU, that is, Brussels, as an actor goes about negotiating and enforcing them within the EU-Serbian relationship can influence the inclination of other actors, such as Serbian political parties, or civil society, to pursue closer ties with China, as well as affect general economic policy and environment. In decreasing order and in much lesser extent the same conclusion is valid for the US and Russia.  

 Among the domestic-level variables, an FDI-driven growth model to an extent structures the opportunities for deeper engagement between all mentioned international actors and Serbia, serving as an incentive for deeper engagement between FDI-providing countries and Serbia. Also, political parties are the domestic-level actors that decisively influence the relationship with foreign countries as well as general foreign policy orientation. Foreign policy analysis approach stresses that the understanding of the decision-makers, and the process of decision-making, is crucial for understanding foreign policy outputs and outcomes (Breuning 2007). Political parties are the key-decision-makers on domestic level. Therefore, these two factors weight significantly more than other domestic-level factors.

Enhancing the Advantages and Managing the Risks

In the two previous sections I described the major variables for development of Sino-Serbian relationship. I put forward some basic assumptions about  the weight of these variables individually for Serbian foreign policy- and China policy-making, and whether these factors can be expected to facilitate or constrain deepening of relations between Beijing and Belgrade, at least in short-term. I have also pointed out why some of these variables may have more importance as they can exert influence on other actors and their disposition and ability to influence Sino-Serbian ties. In this section, I aim to briefly discuss the potential impact of the identified variables for the Sino-Serbian relationship in a structured form, with a view of producing the targeted and relevant policy recommendations.

To measure the “impact factor” of the identified variables, the Figure 1 below provides a context by locating these variables within a two-dimensional field. Vertically, the factors are placed according to the level of impact they are perceived to have (low vs. high). Horizontally, the factors are distributed according to whether they are positively or negatively inclined toward the deepening of Serbia’s ties with China. The horizontal dimension effectively consists of four sub-areas, proceeding from left to right from negatively inclined to positively inclined, via neutral-to-negative, and neutral-to-positive. The latter two are designed to capture those factors that may appear more or less neutral at the moment but lean or are expected to somewhat lean toward one side as the expected further development of the Sino-Serbian relationship proceeds.

Figure 1. Serbia’s China Policy - Variables

An explanation regarding the “impact factor” of the EU integration and the EU, as an actor, is due here: As analysed in the previous section, Serbia’s commitment to the EU integration, and the EU as an actor wielding influence over Serbia’s foreign policy are of highest importance. They can be best placed in the neutral zone in terms of the “positive/negative dichotomy”, with the possibility that in near future they may have both positive and negative impact. However, in my analysis, these factors are more likely to be facilitators, rather than obstacles, for more substantial relationship between Beijing and Belgrade. At one hand, deeper relationship, especially economic exchange, between China and Serbia can contribute to higher economic growth and living standards in Serbia, which is a desired development for a future EU member. At another, EU-China relationship is amicable and slowly but steadily deepening. Furthermore, it can be observed that Beijing and Brussels share some specific common goals in Serbia, as well as broader CEE region, in terms of development of infrastructure and connectivity, as indicated by the overlap of the agendas of China’s One Belt, One Road initiative and the so-called Juncker’s Plan in the region. The dialogue on how to integrate these, within the broader deepening of developing EU-China relationship, is an indicator that the two sides are committed to coordinate the Chinese growing presence in the region, including in Serbia (Pavlićević 2015b).While it is likely that the EU may have favourable views toward some aspects and modalities of China’s involvement in Serbia, CEE region, and Europe, and less favourable toward others, the general context suggests the differences can be managed and incentives acted upon in mutual interest.

The figure above suggests that, importantly, there are not any variables who have negative and high impact on the relationship. There are five variables with expected positive and high impact, and additionally two variables that have positive although low impact. Such context bodes well for the immediate future of Sino-Serbian relationship. However there are six variables that may potentially negatively impact the relationship, although their impact individually is deemed to be low.

To bring the analysis one step forward we can note that, essentially, there are two main clusters of variables (Please see Figure 2).  The Cluster 1 encompasses the variables that may have high and positive impact on further development of Sino-Serbian ties. The Cluster 2 encompasses the variables that have relatively low but possibly negative impact on the bilateral relationship. There is a third mini-cluster of variables with positive but low impact on the relationship, that includes Serbia’s commitment to maintain sovereignty over Kosovo, for which it has Beijing support, as well positive opinion of Serbian public toward China. Given the limited space available here, I will not further discuss these variables, as they have least potential to affect the development of the relationship.

Figure 2. Factors Influencing Serbia’s China Policy: A Cluster View

Policy Recommendations

To manage the risks and further improve the overall context that is generally beneficial for further deepening of Sino-Serbian ties, China and Serbia should focus on further solidifying and enhancing  the positive inclinations of Cluster 1 factors, as well as addressing the issues associated with Cluster 2 factors. Below, I propose several policy recommendations to achieve these objectives.

Regarding the policy options that predominantly seek to further enhance the Cluster 1 “positive-high impact” factors, China and Serbia could:

Further develop 16+1 framework, diversifying and intensifying exchange and cooperation across different fields. The more diverse the platforms and mechanisms for cooperation within the 16+1 framework, the more likely is that the common interests can be realized. Cooperation in some sectors, such as health industry, education, green energy and environmental protection, has not been explored as of yet, although there is likely mutual interest. Initiating and coordinating private sector exchange between the countries is another aspects that should be worked on.

Enhance cooperation between political parties on both sides, in order to foster mutual understanding and cooperation. While important for fostering mutual understanding of the two sides’ worldviews and policies, it can also be used to improve governing capacity of state administration. Training and study tours programmes between two governments should be established.

China and Serbia should acknowledge concerns of the EU. China particularly has an important role to play in this regard, and must actively discuss with the EU how it envisions advancing the China-Serbia, and more broadly, China-CEE cooperation. Beijing should proactively seek to resolve all issues and uncertainties. Concerning official communication, and more broadly public diplomacy, Beijing should stress that it understand and respects Serbia's commitment  to ascending to the EU. It should also emphasize that deepening Sino-Serbian cooperation is also part of the broader efforts to further substantiate and improve the China-EU relations.

Encourage projects that develop strategically important infrastructure for the EU and the region, such as EU’s transport network, and other major, integrative or strategic projects, such as harnessing Serbia’s green and hydro energy potential. This would also go some way toward removing the suspicion on the EU’s behalf about China’s modus operandi in the region. The arrangements that that the major projects in Serbia and CEE are co-financed by China and the EU, for example integrating Chinese funds with Juncker’s plan, should be explored.

Regarding the policy options that predominantly seek to prevent possible complications arising from the “negative-low impact” variables within the Cluster 2, China and Serbia could:

Promote Chinese FDI in Serbia but Diversify Modalities for Investment. To gel well with developmental priorities of Serbian government, while FDI Is welcome, the budgetary discipline must be ensured. As suggested by the preference of Serbian government to utilize other means of financing for the HSR project (instead of the state-to-state loan from China)(Pavlićević 2015c), other modalities of investment and economic cooperation should be explored, including joint ventures, mergers and acquisitions, concessions, greenfield and brownfield investments and others, that may ease the burden on the Serbian state budget, but in turn may lessen the risks for Chinese investors. Serbia should strive to ensure a predictable legal and institutional environment that appropriately protects the interest of Chinese investors.

Ensure the participation of Serbian enterprises in the delivery of construction projects. According to the Serbian Minister of Transportation Mihajlovic, so far on existing projects delivered jointly with China, there is about 60 percent of participation of Serbian companies. For Belgrade-Budapest HSR project, Serbia and China reportedly agreed that at least 50 percent of the enterprises involved are Serbian companies. While this itself is a positive, considerate arrangement, one should note that the most negative reactions toward China-financed and projects delivered abroad have been attracted by Chinese companies employing numerous Chinese laborers in the implementation phase. For countries like Serbia, with high-number of unemployed laborers, this may present even a bigger problem and is likely to attract much critique. Serbian laborers should make up the majority, if not the all, of the labor force on the construction project.

China should stress the “win-win” model of cooperation and non-interference in Serbian internal and external issues. To do so would help to remove suspicion on behalf of not only Brussels, but also other influential regional players, such as US and Russia, pointing that China does not seek to meddle in the current big power status-quo in Serbia and the region. In addition, Serbia’s civil society is bound to be increasingly concerned whether  closer relationship with China may mean Serbia departing from western liberal practices. Adhering to the principle of non-interference can be greatly helpful to prevent such discussions and to maintain the favourable public opinion toward China too.

Conclusion 

In summary, the general environment for development of Sino-Serbian ties is very favourable.  However, the honey-moon Belgrade and Beijing enjoyed so far is probably over. With the growing interest of all key constituencies in Serbia, as well as external stakeholders and international audiences, in the development and nature of Sino-Serbian relations that naturally increases with deeper engagement between the two, it may be expected that the related initiatives, measures and projects will be faced with increased scrutiny in the future.

Hence, to pursue further deepening of ties with Belgrade presents a test case for Beijing’s foreign policy credentials and a low-risk, high-gain opportunity to demonstrate that China wants to play a constructive role in the international community. Although Serbia plays a relatively minor role within the China’s foreign policy, due to its strategic value as a CEE country and a future EU member, as well as a vanguard “recipient” of China’s go-out policies in Europe and the so-called “West”, managing the relationship in a mutually satisfactory fashion and with respect for broader international environment will be a good sign of China’s intentions and capabilities as the global power.  Serbia, on her side, must make most of the opportunity provided by the favourable momentum and  general context to rapidly and substantially advance comprehensive exchange with China, and use this bilateral relationship as a springboard for a more influential role internationally, especially within the CEE and European regions. At the same, it should integrate this relationship within a broader foreign policy platform and make it in function of its overall goals and objectives.

Therefore, while the foundation is solid and the prospects are bright, developing the Sino-Serbian relationship will need much skill and effort. The author hopes that the analysis and policy recommendation presented here may contribute to discussion about how best to reach the common goal of strengthening the ties between the two countries. From the scholarly perspective, the author hopes that the further studies will investigate more deeply the policy-making mechanisms behind Serbia’s China policy to shed more light on how Serbia’s China policy, and foreign policy, is conceived and implemented.

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From Huang Ping, Liu Zuokui edited, Stakeholders in China-CEEC Cooperation, China Social Sciences Press, 2016.