China's Trade and Investment in the Western Balkans Under the Belt and Road Initiative: Focus on North Macedonia

China's Trade and Investment in the Western Balkans Under the Belt and Road Initiative: Focus on North Macedonia

Iskra Stancheva Gigov, Klimentina Poposka
DOI: 10.4018/978-1-7998-8021-9.ch011
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The China Belt and Road Initiative (BRI) and the 17+1 cooperation platform, as an integral part of it, is the key framework for China's foreign policy towards most parts of the world, including the Western Balkans (WB). Through its global initiative and cooperation platform, China creates a range of opportunities for facilitating trade and increasing export, financial integration and greater Chinese investment, major infrastructure projects, as well as their funding. This chapter analyzes the real situation regarding these aspects in the WB countries, especially focused on North Macedonia. The analysis indicates that there has been some progress in co-operation, but the WB countries (excluding Serbia) have failed to maximize their interests either in bilateral co-operation or in the framework of the BRI initiative and the 17+1 platform. Conclusively, despite all the great expectations, the trade exchange, Chinese investments, and the realized infrastructure projects do not reach a significant level.
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China's progress and extremely rapid economic growth have globally obtained the country, an advantage, both in trade and investment. In the recent years, with its globalized approach, China aims to promote its economic model and experience as an example of supporting the development of other countries in progress, not only in Third World countries, but also in the European Union (EU), including the WB region. The 17+1 cooperation platform and the global BRI initiative, launched in 2012 and 2013 are respectively the most visible examples of China's attempts to cooperate with non-neighboring countries, which has so far been left out of its foreign policy priorities. Such is the case with the five WB countries (Albania, Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia). Despite the minor viable market, opportunities that were offered to Chinese investors since 2012 have been included in the “16 +1” platform1 which existed at that time, both with Central and Eastern Europe (CEE). Later on, this regional platform became an integral part of the BRI and WB and were increasingly targeted for BRI-related projects as a result of their key strategic and geographical position for the Balkan Silk Road through infrastructure networks and logistic corridors between the Port of Piraeus (China's flagship project in the region) and the markets in Western Europe. China's geo-economic and political interests aim to use the region as a gateway and transit trading platform to Western Europe where real Chinese interests are positioned (Zeneli, 2020).

Thereby, the BRI initiative is one of the most ambitious economic and infrastructural endeavors in history that can implicit changes in the balance of power globally and has also a great potential to shift the epicenter of the world politics from West to East. Actually, the initiative leaded that China will take over the dominance of world trade through land and maritime transport networks with the Balkans, considered a strategically important region due to its proximity to the EU. However, China's influence on the WB can be seen not only by the tendency to build the express maritime and land route connecting China with Europe, but also by the indecisive policy pursued by the EU, especially in the WB region. On top of all this, regular annual summits are being held and close relations with the countries on the institutional level are maintained by the means of 17+1 cooperation mechanism which as well enables additional influence within the region.

The global initiative BRI creates opportunities for economic cooperation with the WB countries and offers numerous benefits primarily in the areas such as: trade, investment, infrastructure, etc. The 17+1 platform is also very useful for the WB countries, because it enables constant and regular communication and cooperation with China which at the same time increases the chance for attracting investments, increasing exports and financing infrastructure projects. Regarding the above-mentioned info, this chapter addresses the analysis of economic cooperation, an area in which China has the utmost importance for the WB region, with a special emphasis on foreign trade, investments and various infrastructure projects. Hence, the chapter should demonstrate to what extent and in which sectors the foreign trade is mainly realized, as well as the Chinese investments between the WB countries and China, with a special focus on North Macedonia. One of the main objectives of the BRI initiative is to facilitate the flow of goods, services, capital, people and information. Particular measures need to be taken by both sides to create an appropriate regulatory framework and remove existing barriers to trade and invest. Consequently, this research also analyzes the possible challenges and obstacles faced by the Macedonian economy and other economies of the WB countries in the implementation of import-export activities and attracting foreign investments from China. So, it is expected that certain solutions are envisaged at improving the overall economic cooperation between China and the WB, as well as North Macedonia, and some recommendations are being given to overcome the obstacles and challenges.

Key Terms in this Chapter

Western Balkan Countries: Are located in the western part of the Balkan Peninsula and not yet EU member states. These include Serbia, Bosnia and Herzegovina, Northern Macedonia, Albania, and Montenegro.

FDI Stocks and Flows: FDI Stocks are the total accumulated level of direct investment at the end of a given period (usually quarter or year). FDI flows are transactions recorded during the reference period (usually year or quarter). They are a measure of transactions that change FDI stock over a specific period of time. FDI flows can be negative in certain cases.

Investment: Is the investing of money or capital in order to gain profitable returns, as interest, income, etc.

Cooperation Platform 17+1: Is cooperation mechanism with the countries of Central and Eastern Europe (CEE) that China has been leading since 2012. It holds regular annual summits, which establishes and maintains close relations at the institutional level. This platform for cooperation includes the 11 CEE member states (Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, and the Czech Republic) and 5 countries from the Western Balkans (Albania, Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia). In 2019, Greece also joined this platform.

International Trade: Is the exchange of goods and services between countries, allowing them to expand their products to other markets and access goods and services that are not available in their domestic markets.

Belt and Road Initiative (BRI): Is one of the most ambitious global initiative created by the People’s Republic of China in 2013. It has intention to connect Asia with Africa and Europe trough the land and maritime networks and open up significant potential for economic cooperation with many countries in many areas. the Belt and Road Initiative aims to carry out major infrastructure projects, financial integration, trade facilitation, as well as to achieve cooperation in other areas.

Infrastructure Projects: Infrastructure project means the design, construction and development of a new facility or the renovation, modernization, or expansion of existing facilities; as well as development and maintenance of services and systems. Financing for them can be provided by private companies, public companies or combined through a public-private partnership.

Foreign Direct Investment (FDI): Is the acquisition of a significant share in a foreign business or its full purchase in order to expand operations in a new region. FDI alows lasting interest in or effective control over an enterprise operating outside of the economy of the investor. Greenfield and brownfield investments are two different types of foreign direct investment.

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