Introduction

China is a country whose size of the territory, population, level of economic development, and technological progress are described in large numbers. A turn in economic development policy in the late 1970s, an organized approach to reforms that led to a broader and richer cooperation with the world, and the planned benefits of the globalization process, are determinants that describe the rise of modern China and its position in international economic relations. In contrast to China, Serbia is a small country where the transition process has been going on for three decades. Geographically located between the East and the West, Serbia bases its development policy on the democratic social order and the principles of a modern market economy, respecting the system of values and rules that characterize modern European countries. At the beginning of the transition process, Serbia accepted the policy of opening up to the world and, it is committed to the idea of European integration although in that policy, in parallel, it develops and nurtures all forms of cooperation with other countries of the world. China is one of the countries with which Serbia has a long tradition of good political and diplomatic relations. The continuity of these decade-long relations has generated the establishment and development of the economic cooperation between the two countries and enabled this cooperation to develop in different directions, forms, and degrees of intensity, taking into account the basic differences between them and specific circumstances that have accompanied and defined that cooperation at the individual national level as well as at the international level.

The content of the economic relations between the Republic of Serbia and the People's Republic of China has developed and changed over the decades and, from the aspect of the level of current relations between the two countries, it can be analyzed in several directions. This paper will focus on those cooperation areas that are most visible and whose effect can be quantified and analyzed: first, the cooperation in the field of foreign trade, and second, the cooperation in the field of investment. Both forms of cooperation are the result of the opening, first of the Chinese and later of the Serbian market, to the free movement of goods, services, and capital and the stimulating environment for the development of cooperation created in the globalization process. In recent years, the improvement of the existing and the establishment of new forms of economic relations and cooperation between Serbia and China have taken place through new platforms of cooperation and development. Among them is the Initiative for Cooperation between China and 16 countries of Central and Eastern Europe, popularly called "Initiative 17 + 1", as well as the project "One Belt One Road". Serbia is a signatory of both platforms for cooperation, and further progress of the economic cooperation can be expected in the future, as well as joint engagement of Serbia and China in the realization of infrastructure projects, in the field of agriculture and sustainable development.

China's dominant position in the international economy and the credibility it enjoys in international politics ensure its continued global presence. This presence in the economy is realized and maintained through the export of goods and services, investment projects, foreign investments, and favourable loans, and is especially important from the aspect of small and economically underdeveloped countries such as Serbia. Apart from the cooperation in the field of economy, from the aspect of Serbian-Chinese relations, the political and security support that Serbia has received from China for more than a decade, with the most important element being the non-recognition of Kosovo and Metohija independence, is also important. Thanks to its membership in the international institutions (primarily the United Nations) and the important positions it occupies in them, China has the power to protect Serbia's interests and thus contribute to the preservation of its territorial integrity.

A review of the historical development of the economic relations between Serbia and China

Today, the economic relations between the Republic of Serbia and the People's Republic of China have a basis in the long tradition of their good political and diplomatic relations. In different historical periods, these relations have changed, strengthened, and weakened under the influence of numerous domestic and international factors, and, their intensity, content, and quality have also changed under the influence of various circumstances. October 1, 1949, when the Federal People's Republic of Yugoslavia recognized the independent People's Republic of China and diplomatic relations between the two countries were officially established on January 2, 1955, is taken as a relevant time determinant that marks the beginning of continuously good political relations between Serbia and the People's Republic of China (Čavoški, 2011, p. 562). The events in the international environment, but also the principles on which each of these countries conducted its foreign policy, defined the periods of their closer cooperation or the cooling of diplomatic relations1.

In the second half of the twentieth century, China developed as a politically and economically closed country in which economic and other relations with the world were strictly controlled. In the same period, Serbia was part of former Yugoslavia, which, according to the state system, was a socialist republic on a federal principle (Nikolić, 2017, p. 186). During the 1950s and 1960s, former Yugoslavia was internationally recognized as a country that successfully pursued a foreign policy, balancing between the East and the West. The importance of Yugoslavia on the international political scene in that period is the result of its position in the Non-Aligned Movement and the establishment of triangular diplomacy based on good political relations with the USSR, the USA, and China (Benedetto, 2016, p. 131). The credibility of its foreign policy at the time was confirmed by its membership in other key international organizations: the United Nations, the GATT Agreement, the International Monetary Fund (IMF), the Organization for Security and Cooperation in Europe (OSCE), and the European Organization for Nuclear Research (CERN) (v. Stakić, 2012, pp. 38, 142, 186). As such, former Yugoslavia was a model for China, which relied on the experiences of countries that were proven successful in that regard in pursuing a policy of opening up to the world. The political relations that were established between the two countries in that period were relatively good, with periodic cooling conditions caused by the relations between the Soviet Union and Yugoslavia.

In the mid-1970s, after the death of Chinese leader Mao Zedong, an environment was created for a closer political cooperation and more significant development of economic relations with Yugoslavia. The change of government in China contributed to a different understanding of the Yugoslav development model based on a mix of central planning and market mechanisms2. The Yugoslav model of development in that period aroused great interest of the Chinese professional public and generated scientific discourse, and many academic articles of the early 1980s expressed approval of Yugoslav socialism and showed a strong desire to learn from Belgrade (Li, 2018, p. 4). During that period, the joint influence of China and Yugoslavia on many Third World countries to develop socialism following their conditions, while distancing themselves from "some socialist countries that would offer assistance, but that assistance also meant interference in the internal policies of those countries" (Yang 1984, p. 84).

In the second half of the 1980s and early 1990s, China's political and cultural elite advocated strengthening the national identity of their country, which had been weakened by barbaric forces, in less than a century3. During this period, China, as part of the national strategy of global economic integration, established special economic convergence zones between China-Hong Kong and China-Taiwan (Jabbour, Dantas, 2017, p. 157). Under the auspices of the "one country, two systems" policy, by recognizing the globalization process as its development opportunity, China is opening its market to investors and strengthening its position in international trade4. In the same period, Serbia is going through a process of political and economic devastation caused by the disintegration of the SFRY, war conflicts in former Yugoslav republics, economic and other sanctions by the international community, domestic monetary instability, and the NATO aggression. Due to the above-mentioned factors, it is not possible to speak about the development of economic relations between Serbia and China in this period. On the political level, Serbia had the full support of China in preserving peace, with strong condemnation of the NATO aggression in which the Embassy of the People's Republic of China in Serbia was bombed, while three Chinese journalists were killed and other 27 Chinese citizens were injured (Obradović, 2016, p. 126). The full development of economic relations and cooperation between Serbia and China, as we know it today, comes at the beginning of this century. The determinants of the development of these relations are good political and diplomatic relations during the 1990s, whose development proceeded under the circumstances while maintaining the perspective direction of development established in previous decades. Compared to Serbia's relations with other important actors in international politics and economy, such as the EU, the USA, and Russia, relations with China are the most stable because they are based on stable economic interests and the absence of any open issues in political relations (Lišanin, 2012, p. 208). China's reputation on the global political scene makes it a credible partner for Serbia in the struggle to preserve its sovereignty and territorial integrity before international institutions such as the United Nations Security Council5. Along with the strengthening of economic and political power, China has also carried out military modernization, and according to the survey by the "Global Firepower" portal, it is the third largest military power in the world, after the United States and Russia6.

The Republic of Serbia and the People's Republic of China: acceptance of transition and the attitude towards the process of globalization

The directions, content, and dynamics of the economic development of Serbia and the People's Republic of China are determined, above all, by their respective geographical position, the size of the population, the available resources, and the level of economic development. However, in the analysis of success and achievements in terms of their individual development and positions they now occupy on the global stage, another important determinant should not be neglected, and that is the attitude of these two countries towards the transition process and globalization in general. Regardless of the starting positions from which these two countries entered the transition process, opening up to the world was a challenge for both of them, which they approached at different times and in different ways. China has embraced a gradual and systematic path of opening to the world, like other East Asian countries that experienced great economic prosperity in the 1980s, thanks to the opening of new business opportunities based on comparative advantages, gradual inflows of foreign investment, and increased foreign trade. It is precisely the example of China that has shown that capitalism, despite its acquired ideological reputation, is not, as is believed, a "Western project". This is what Professor Cvetković writes about it:

"The market is a necessary, but not a sufficient condition for the development of capitalism. Its existence requires longevity in the form of security of government and constant accumulation of capital, i.e.: a stable political regime and stable economic growth, which creates a society with great social stratification and principled mobility, " (Cvetković, 2017, pp. 28–29)

The removal of protective barriers in China and the countries of East Asia took place with the strong support of their governments, which first ensured the availability of capital for new business, and then removed barriers to the movement of that capital. This group of countries, popularly called the "Asian Tigers", which consists of Hong Kong, Singapore, South Korea and Taiwan, made large inflows of foreign direct investment during the transition process, while the full liberalization of capital markets was much slower than the dynamics of these inflows. Following the successful pattern of transition and economic growth, China only began to remove barriers at the beginning of this century, twenty years after conquering the global market – a period in which its economy developed extremely fast (Stiglitz, 2002, pp. 73–74). The transition in this country is planned and implemented by relying primarily on domestic forces and with the controlled support of foreign capital (Yeh, Yang & Wang, 2015, p. 2833). The growing process of globalization has also contributed to China's success in overcoming the transition, especially in terms of opening favourable opportunities for trade with different parts of the world and increased access to markets, raw materials, and technology. The process of the world economy globalization has brought China to the very top of the countries that have certain significance in that economy. The biggest contribution to that was made by political and economic reforms in China in the 70s and 80s, but also by the intensification of the globalization process on a global scale, which it used extraordinarily well to start the process of its economic development. Until that time, China was one of the poorest countries in the world and, from the economic aspect, it had no special significance in the world economy and international trade. Professor Yifu Lin writes about the main aspects of economic reforms in that country:

"China's reforms and the opening program had two aspects. On the one hand, the government continued to provide the necessary protection to state-owned companies that belonged to priority sectors, and on the other, it liberalized the entry of private companies into new labour-intensive sectors that were in line with China's comparative advantages (...), the Chinese economy has had remarkable results and created the famous Chinese miracle, which is recording 30 years of sustainable growth" (Yifu Lin, 2016, pp. 14–15).

From the point of view of international trade and international movement of capital, the most important part of the Chinese reforms is the one that led to the opening of China to the world and of the world to China. These changes were the driver of China's economic development, and it came from the periphery of world trade to its very centre, with the forecast that it would soon become a world economic leader and a leader in international trade. Therefore, in summing up the effects of the globalization process so far, China ranks among the winners of that process.

Unlike China, Serbia accepted the transition process and approached its implementation in a completely different way. The formal beginning of the transition process in Serbia, as well as in other countries in the Balkans, is related to the fall of the Berlin Wall and the beginning of major political changes in Europe. These changes had a significant impact on the positioning of certain countries and groups of countries in new depolarized Europe, which conditioned the dynamics and course of their economic development. Serbia entered the transition process abruptly, being politically and economically unprepared for the challenges that would be set before it and with a vaguely articulated attitude towards the new processes of connection and cooperation that took place in Europe (Božić Miljković, 2019, p. 1112).The manner in which the transformation of the republics of the former SFRY into independent and sovereign states was carried out was not in line with the concept that promotes the construction of a new, more modern society. On the contrary, civil war and political (and economic) violence are tools used to build a retrograde, anti-modernization process that will significantly distance Serbia from an efficient and effective approach to the transition process (Šuvaković, 2013, p. 68). The activities which needed to be undertaken and which would be in the function of efficient transition were stopped by the war in former Yugoslavia, economic sanctions, macroeconomic and monetary instability, and the NATO aggression. The postponement of the transition process resulted in the distance of Serbia from the European integration process, and the consequences of that period are still present today (Milenković, 2016, p. 5). Defining the basic postulates of the transition process and its implementation in the Serbian economy are related to the beginning of this century. Awareness of the fact that Serbia is a decade behind other countries of Central and Eastern Europe in the transition process, conditioned the sudden and uncritical implementation of the measures of the transition process with the aim of a quick shift to a market economy. As early as the first years of this century, the process of privatization, reindustrialization in favour of greater participation of services in the structure of the economy, and the liberalization of foreign trade and investment flows were carried out. These measures were implemented abruptly, without respecting the geographical and developmental features of Serbia or the fact that it entered the transition process economically and demographically weaker than in the late 1980s. The consequences of the sudden entry into the transition process and uncritical acceptance of the postulates and rules of the process are still present today: Serbia is still a country in transition, with a vague prospect of exit from the process, characterized by a financial system with the predominant share of foreign capital, a collapsed economy and attempts at reindustrialization, high investments that are entirely aimed at opening the capacities for assembling and finishing products and the capacities of the processing industry. The low standard of living of the population of Serbia has led to an increase in poverty and depopulation due to the migration of a large number of skilled and educated people and a low increase in the number of births (Nikitović, 2019). Despite the candidate status it has had for ten years, the perspective of Serbia's membership in the European Union is extremely uncertain. In contrast to China, globalization and transition in Serbia have not given the expected effects on economic development, so the achievements of these processes cannot be materialized to the extent that is possible in the case of other countries.

Macroeconomic indicators of development of Serbia and the People's Republic of China and basic aspects of their cooperation

Modern China is the most populous country in the world, characterized by a large domestic market, huge development potentials, and a large volume and dynamics of foreign trade. The term Chinese economy includes the economies of the mainland and coastal China, the region of Hong Kong, Macao, and Taiwan. China covers an area of 9.6 million km² (World Bank). The total population of China is 1.4 billion, which is one-fifth of the total world population and one-third of the total population of Asia (World Population Prospects, 2017, p. 24). In 2019, China's economy was the second largest in the world, achieving a GDP of 14.401 billion dollars and a 16.38% share in world GDP (IMF)7. The rapid growth of the Chinese economy is the result of dynamically growing production, especially in the previous three decades8. China's size in terms of population and orientation towards mass production also determines its consumption of agricultural products and raw materials, which is significant on a global scale9. China builds its presence in the global market on mass production, cheap products, large participation of transnational companies in its economy, and on its current macroeconomic stability. One of the key drivers of China's economic development is its foreign trade. Foreign trade was, without doubt, a generator of the inflow of a large volume of foreign capital into the Chinese economy, which has also recorded a trend of continuous growth from the beginning of the century until today10. In line with the growth dynamics of its economy, China has developed foreign trade relations with all parts of the world. Its most important partners are the countries that also have a large share in world trade, that is, those whose economies have been characterized by dynamic growth and development in the last twenty years.

At the end of 2019, the first case of infection with the new SARS-COV-2 virus was recorded in China. The epidemic spread to the whole world in a very short time, taking on the characteristics of a global pandemic, and the outcome of human casualties and economic damage is still not possible to state precisely. Thanks to the stability of its economy, developed foreign trade, and the huge potential in the field of science, especially in medicine, China has managed to reduce the pandemic to a controlled framework and preserve the positions it had in the world economy before the pandemic. The fight against the pandemic was based on active case monitoring, rapid diagnosis and case management, strict monitoring and quarantine of persons with close contacts, and issuing guidelines that would help the public understand and adhere to control measures (Xu et al., 2020). In addition, the exchange of experiences of China with other countries on the nature and behaviour of the virus, fast and efficient high level of decision-making on anti-virus policy, full activation of the public health system, and full mobilization of society were of great importance.

Based on the data in Table 1, which are given comparatively for the year before the COVID-19 virus pandemic and the year in which global economic activity took place under the influence of the pandemic, we can conclude that macroeconomic stability in China has been preserved despite all health, social and economic challenges, and constraints.

Table 1. Basic macroeconomic parameters of China’s development in 2019 and 2020
Табела 1. Основни макроеономски параметри развоја Кине у 2019. и 2020. години

	2019.	2020.
БДП (у милијардама долара)/ GDP (billion USD)	14.401,73	14.860,77
БДП по глави становника/ GDP per capita	10.216,6	10.582,1
Стопа раста БДП/ GDP growth rate (%)	5,9	2,3
Стопа инфлације/ Inflation rate (%)	2,9	1,4
Незапосленост/ Unemployment (%)	3,6	3,8
Биланс иностране трговине (у милијардама долара)/ Balance of external trade (in billion USD)	421,9	535
Прилив директних инвестиција (у милијардама долара)/ FDI Inflow (in billion USD)	140	163

Source: The World Bank https://databank.worldbank.org/source/world-development-indicators#; UNCTAD https://unctad.org/statistics; IMF Database https://data.imf.org/?sk=388dfa60-1d26-4ade-b505-a05a558d9a42

In 2020, GDP growth was 2.3% (World Bank). Lower growth rates were due to the sporadic and temporary closures of two major markets in Europe and the United States, declining global consumption, and the negative impact it had on Chinese exports. The positive growth rate is the result of China's rapid action in combating the epidemic, measures taken in terms of economic recovery, primarily, encouraging employment, government spending, and tax cuts (Vasiev et al, 2020, p. 9). Thanks to macroeconomic stability, diverse production, and good organization in the first months of the pandemic, China maintained its position as the world's leading exporter in 2020 as well. The surplus in the balance of trade in goods increased by 27% in 2020 compared to 2019, thanks to the great demand on the world market for medical equipment, pharmaceutical products, and products and technologies that enable work from home (bloomberg.com).

Geostrategically, Serbia is of great importance to China. This significance is determined by the geographical position of Serbia, which is mostly spread in southeastern, and to a lesser extent in central Europe. Serbia is a continental country; it belongs to the Danube basin, which connects the Black, North, and Baltic Seas and provides access to the Atlantic Ocean. Serbia is located at the crossroads between the East and the West and is a very important transit and logistics area in the international trade of goods and services. Looking from a more precise geographical perspective, Serbia is located on the Balkan Peninsula, while according to the recent geopolitical division, it belongs to the group of countries in the Western Balkans. The fact that it is surrounded by the European Union member states, i.e. bordering Hungary in the north, Romania in the northeast, Bulgaria in the east, and Croatia in the west, is also a very important reference for Serbia in its relations with China. China places a good part of its production in the market of the European Union, and in that respect Serbia is important as a link and transit area between those two large markets. Also, Serbia's neutral attitude towards military-political blocs and its support to Beijing regarding foreign policy issues that are treated as key interests for China, as well as the support that China provides to Serbia in preserving sovereignty and territorial integrity, are important aspects of their relations11. Despite the great geographical distance, differences in terms of culture, language, and tradition, the disproportion in the volume and structure of production and market orientation of that production, there is interest in the development of mutual economic cooperation. The factors influencing the development of the economic cooperation between Serbia and China, especially in terms of trade, correspond in general to those that can describe China's foreign trade and its path to the leading positions in international trade: large volume and diversity of goods and services in the structure of its exports; imports, the focus of exports on meeting the needs of the global market, sporadic non-compliance with regulations and international conventions on the protection of industrial property rights in the production of products intended for export, the large role of the Chinese diaspora in the promotion and realization of Chinese exports, etc (Božić Miljković, 2018, p. 150).

From the economic aspect, Serbia is one of the countries in transition. Observed on a European and world scale, its economic power is negligible, and therefore its position in international economic relations is not significant. Accordingly, China does not recognize a significant economic partner in Serbia or a market from which it can ensure continuous and sufficient supply. In 2019, China's exports to Serbia accounted for 3.5% of its exports to Europe and only 0.06% of its total exports to the world market. (Source: europa.eu and https://oec.world/en/profile/country/chn#trade-products).

Also, Serbia in China, even from the point of view of investment activity, is not recognized as a significant or potentially significant country of origin of investments. Lack of domestic accumulation and development dependence on foreign capital inflows impede Serbia's investment activity, but at the same time, its needs for foreign capital, great opportunity to invest in various industries, favourable conditions granted to investors to invest their capital, cheap skilled labour and the proximity of the European Union markets make Serbia an attractive destination for foreign investment, so from that point of view it is of great importance for China.

An insight into the basic macroeconomic indicators of Serbia's development (Table 2) provides an even deeper picture of the differences in the level of development of the two countries.

Table 2. Basic macroeconomic parameters of Serbia’s development in 2019
Табела 2. Основни макроеономски параметри развоја Србије у 2019. години

БДП (у милијардама долара)/ GDP (billion USD)	51,5
БДП по глави становника/ GDP per capita	7.411,8
Стопа раста БДП/ GDP growth rate (in %)	4,2
Стопа инфлације/ Inflation rate (in %)	1,8
Незапосленост/ Unemployment (in %)	10,4
Биланс иностране трговине (у милијардама долара)/ Balance of external trade (in billion USD)	-6.517
Прилив директних инвестиција (у милијардама долара)/ FDI Inflow in billion USD	4,6

Source:The World Bank https://databank.worldbank.org/source/world-development-indicators#; UNCTAD https://unctad.org/statistics;

Serbia, as a country in transition that at the beginning of this century accepted the model of development on the principles of sudden privatization, deindustrialization, and liberalization, in a short time became developmentally dependent on foreign capital. The closure of a large number of industrial companies that formed the backbone of economic development in the second half of the 20th century generated a decline in production and unemployment as new problems that will remain relevant in the Serbian economy for a long time and affect the dynamics and quality of its economic development. In the year before the COVID-19 pandemic, Serbia was a country with a high unemployment rate, foreign trade deficit, and a relatively high GDP growth rate, which is the result of a low statistical base used in the calculation, rather than a real increase in production, government spending, investment, and exports. In the past two decades, China's presence in the Serbian economy can be viewed in two key dimensions: first, from the aspect of foreign trade, i.e. increased imports of goods and services for which there is solvent demand in the Serbian market, and from the aspect of the increased presence of Chinese companies in the Serbian market, in the form of foreign investment. Their main interest in coming to the Serbian market is favourable business conditions, availability of resources, and cheap qualified labour. From the aspect of Serbia, the presence of Chinese companies in the structure of the economy means an increase in production and exports, a reduction in unemployment, and further strengthening of good political, diplomatic, and other relations.

Economic relations between the Republic of Serbia and the People's Republic of China from 2000 until today

The economic relations between the Republic of Serbia and the People's Republic of China started becoming relevant and gaining importance only at the beginning of this century12. Until the end of the 1970s, China's political and economic isolation from the world and the conditions in which Serbia developed its economic relations with the world did not allow for significant development of the partnership and economic relations between the two countries. Geographical distance, differences in the volume and structure of production, and differences in the market orientation of that production were also factors that limited the development of their economic relations. At the end of the 1980s, the process of creating a global market, which was generated by the development of international cooperation and connections, opened the space for building economic relations and cooperation between Serbia and China in various fields. However, the political situation, social unrest, economic instability, and the international community's attitude towards Serbia at the end of the 20th century had a disincentive effect on its inclusion in global economic relations, so in that context, the possibility of connecting and having the economic cooperation with China was postponed for a more prosperous period.

The economic relations between Serbia and China have been continuously progressing in the past two decades, thanks to the significant activities undertaken in their establishment and the activities undertaken for their development. The basis of these relations lies in the political factors from the Serbian-Chinese past, which generated the development of the cooperation between the two countries in different areas of the economy. The highest achievements have been recorded in the field of foreign trade and investments.

The rapid growth of imports from China in the observed period was accompanied by the dynamic growth of Serbian exports to the Chinese market (Chart 1).

Chart 1 Serbia’s foreign trade with the People’s Republic of China in the period from 2001 to 2020
Графикон 2
Tрговина Србије са НР Кином у периоду од 2001. до 2020. године

Source: Statistical Office of the Republic of Serbia https://data.stat.gov.rs/Home/Result/170301?languageCode=sr-Latn

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The growing foreign trade deficit indicates that the growth of exports does not follow the dynamics of the growth of imports. Although 2020 was marked by a slowdown in economic activity at the global level due to the COVID-19 virus pandemic, Chinese exports to Serbia increased by as much as 31% during that year compared to 2019. The expansion of China's merchandise exports to Serbia in the past two decades should be viewed in the context of China's inclusion in the global economy and the expansion of its exports on a global scale. From the aspect of China, Serbia, especially in the first decade of this century, was an extremely attractive market for the placement of cheap consumer products, various raw materials for the processing industry, and high-tech products. The determinants of the dynamic growth of China's exports to Serbia were the high absorption power of the Serbian market and low solvent demand, as well as the deindustrialization process in which some branches of the processing industry as the previous source of demand for raw materials survived and maintained their respective positions. Despite the presented data that speak in favour of the expansion of Chinese exports to Serbia, it should be noted that Serbia, on a European and global scale, is not a market of great importance for China13. China is 108 times larger than Serbia in terms of territory and has 183 times more inhabitants than Serbia (Obradović, 2016, p. 123). When it comes to Serbian exports to the Chinese market, it can be noticed that these exports are modest, although in recent years there has been a growing trend14. The Chinese market is large and export activity presupposes large and continuous deliveries, for which Serbian economy independently has no potential, so it is not realistic to expect that there will be a significant change in the volume and structure of its exports in the future. Also, geographical distance and insufficient knowledge of the needs of the Chinese market represent additional obstacles to achieving better export results of Serbia to that market. The Bank of China, which started operating in Serbia in 2017, in addition to being one of significant Chinese investments in Serbia, also represents support for the development and improvement of economic cooperation between the two countries.

The second segment of the economic cooperation between Serbia and the People's Republic of China is the field of investments. At the beginning of this century, Serbia opened its market to Europe and the world, not only in the exchange of goods and services but also in the field of investments. As a country in transition characterized by a low level of domestic accumulation, Serbia has been pursuing an active policy of attracting foreign direct investments in the first years of this century, and they are becoming a key part of its development policy. The policy of attracting foreign investments is based on giving high subsidies and providing land for greenfield investments. This policy is applied to all countries whose companies invest in Serbian economy and is the result of Serbia's geoeconomic position, i.e. the fact that it is surrounded by the countries that have the same or similar economic problems and are also dependent on foreign capital inflows. High demand for foreign capital generates determinants of the fight against the competition in this area, such as high subsidies, more favourable tax treatment, providing opportunities for repatriation of profits, and the like. The most important role of investments is to reduce unemployment and preserve social peace, while their effect on the overall economic development is insufficient to stimulate economic growth and ensure stable development.

In terms of investments, China is one of Serbia's most important partners, just behind the countries of Western Europe. The structure of investments is dominated by those that are focused on the automotive and electronics industry, mining, rubber industry, but also banking. The largest investment in terms of value was recorded in 2018 (Table 3) when the Chinese company Zijin bought the majority package of shares in the Mining and Smelting Basin Bor.

Table 3. Chinese investments in Serbia
Табела 3. Кинеска улагања у Србију

Ранг/ Rank	Компанија/ Company	Година/ Year	Сектор/ Sector	Износ улагања (у милионима ЕУР)/ Investment amount (in million EUR)	Број запослених/ No of Employees
1	Johnson Electric	2013.	Електроника/ Electronics	65	3.400
2	Health Care	2015.	Производња намештаја/ Furniture	50	1.200
3	MEI TA	2015.	Аутомобилска индустрија / Automotive	120	3.100
4	HBIS Serbia	2016.	Гвожђе и челик/ Iron &Steel	300	5.000
5	Bank of China	2017.	Банкарство/ Banking	50	30
6	ZiJin	2018.	Рударство/ Mining	1.260	5.000
7	MINTH	2019.	Аутомобилска индустрија/ Automotive	100	1.000
8	Yanfeng	2019.	Аутомобилска индустрија/ Automotive	22	700
9	Linglong Tire	2019.	Каучук (гуме)/ Rubber (Tires)	800	1.200
10	Xinsyuco.Ltd	2020.	Електроника / Electronics	60	1.000

Source: Invest in Serbia – Opportunities for Investors from China, September 2020, Government of the Republic of Serbia, p. 13 http://www.ras.gov.rs/uploads/2020/10/eng-opportunities-for-investors-from-china-ras-1.pdf

The dynamic inflow of investments from China continued in the following period, both in the economy and in the development of infrastructure (Chart 2).

Chart 2 FDI from China to Serbia including FDI from Hong Kong and Taiwan (in million EUR)
Графикон 2
Прилив директних улагања из Кине у Србију, укључујући и прилив из Хонгконга и Тајвана (у милионима евра)

Source: National Bank of Serbia https://nbs.rs/export/sites/NBS_site/documents-eng/finansijska-stabilnost/presentation_invest.pdf

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An agreement on economic and technical cooperation in the field of infrastructure between China and Serbia was signed in Beijing in August 2009. Serbia is the only country in the Western Balkans that has achieved this form of partnership with China (Igrutinović, Janjić, Subotić, 2020, 4). As an international agreement ratified in Serbia's National Parliament, it is legally equal to Serbian national legislation, so that it enables free signing of preferential financial agreements with China. These preferential agreements regulate debtor-creditor relations between Serbia and China, emphasizing the role and importance of China as a creditor of infrastructure projects in Serbia.

The portfolio of joint projects in the field of infrastructure includes the construction of the Mihajlo Pupin Bridge, the construction of the Kostolac thermal power plant, the construction of the main section of the 11 highway corridor, and the construction of the Belgrade-Budapest high-speed railway. The infrastructure projects whose realization is in progress and which are also a product of Serbian-Chinese cooperation are the Preljina-Požega highway and the construction of the Belgrade-Novi Sad high-speed railway. In the realization of previous infrastructure projects, China was not only present as an investor, but also the performance of works is entrusted to Chinese companies, and such a policy of cooperation will be maintained in the future (Obradović, 2016, p. 89). China's role in Serbia is great from the aspect of suppressing the COVID-19 virus pandemic. Serbia was among the first countries to accept the vaccine produced by the Chinese company Sinopharm, and thanks to the deliveries of that vaccine, it is possible to establish continuity and dynamics of immunization of the population in Serbia. The new dimension of cooperation between the two countries implies the construction of a factory in Serbia that will produce this type of vaccine. In the year of the pandemic, Chinese companies continued their investment activity in Serbia by building new factories for the auto industry in Šabac and Niš.

Platforms for the economic cooperation development

The establishment of new cooperation and development platforms has also contributed to the rapid development of investment and other forms of cooperation between Serbia and China in recent years. The initiative for cooperation between China and 16 countries of Central and Eastern Europe, popularly called the "16 + 1 Initiative", was signed in Warsaw on April 26, 2012 (Đukić, 2015, p. 39). The main pillars of the platform, which form the essence of the cooperation between China and 16 countries of Central and Eastern Europe, including Serbia, are economy and trade, infrastructure and transport, development of green economy, cooperation in agriculture, and financial and cultural cooperation (Liu, 2016, 33). In addition to developing the cooperation, this initiative also aims to better connect China with the market of Western and Northern Europe and facilitate access to that market. Since 2019, with the accession of Greece, the name of the initiative has been changed into "Initiative 17 + 1". Another cooperation platform created at the initiative of China, which, among other countries, includes Serbia, is the "Belt and Road" project15. This project connects three continents and brings new opportunities for the development of trade and investment between China and the countries along this road. In Chinese rhetoric, the Belt and Road initiative means building a community that has a future and is believed to be a situation where everyone can be a winner (García-Herrero et al, 2017).From the aspect of China, the interests of this project are strategic: achieving China's energy security by importing oil and gas from Kazakhstan and Turkmenistan, creating an alternative land route for transporting Chinese goods to the European market, creating a favourable climate in the region for better understanding and faster development of the cooperation. China's intention in realizing this project is simple and downright pragmatic: to enable its own development in synergy with other countries (Cvetković, 2018, p. 26). The "Belt and Road" project rightfully bears the epithet of multidimensional, globally most comprehensive and most expensive. It covers a wide area of Eurasia and Africa with the population of more than 4.4 billion people. The projects are financed through the "Silk Road Fund", which was established in December 2014 with the initial capital of 40 billion dollars, intended for financing projects in the field of infrastructure as well as industrial and financial cooperation (Bak, 2019, 14).

Serbia is actively participating in the "17 + 1" cooperation project as well as in the "Belt and Road" initiative. Both of these platforms are not only economic motives, but above all China's ambition to strengthen its foreign policy influence in countries that are directly involved in activities and projects implemented within these platforms. China, on the one hand, uses its economic power and political position, and on the other hand, it strengthens its soft power based on cultural exchange, various types of cooperation, and high-level diplomatic dialogue (Peppermans, 2018, p. 182). Thanks to the relations so far, especially those that belong to the soft power corpus, Serbia is achieving a higher degree of bilateral cooperation with China compared to other countries in Southeast Europe. Many of the projects agreed between the two countries are already in one of the implementation phases or have been completed. The result of the permanent development of various forms of strategic partnership in the past ten years is visible in the number of agreed projects and the number of funds allocated for their implementation (Manchang, 2016). According to the research by relevant institutions, in 2019, Serbia received the largest amount of foreign direct investment among the countries of the "17 + 1" group (FDI Markets). These are investments in four joint infrastructure projects in Serbia: construction of the Belgrade-Budapest high-speed railway, construction of the Mihajlo Pupin Bridge, construction of Corridor 11 of the Miloš the Great highway, and Preljina-Požega highway (Lianqi, 2016, 90). These projects were done under the auspices of the mentioned platforms, where their holders are Chinese construction companies, and the funds for the realization of the works are mostly provided by the loans from Chinese banks and financial institutions. The success in the realization of these projects is an additional motive for China to be present in Serbia in the future, with further investments, and to strengthen economic and other ties with Serbia, and indirectly with other parts of the world16. From the aspect of Serbia, there is interest in further cooperation in the field of investment and it will continue to be an open market with great potential for Chinese capital. In the future, simultaneously with the investments in infrastructure, large investments in the energy sector should be expected. By signing the agreement on the production of electricity from wind and biomass, the cooperation between China and Serbia in the field of renewable energy sources was initiated (Dželetović, 2020, p. 148). Such intensive cooperation between the two countries should be expected in the field of agriculture, production of healthy food, tourism, telecommunications, and projects of ecology and sustainable development.

Conclusion

China's importance in the global economy is growing, and thus its influence on political and economic relations in the world is growing. The economic ties and relations existing between Serbia and China today have their historical dimension and are based on good political and diplomatic relations. In recent times, these relations have strengthened their credibility with the support that these countries provide to each other before international institutions in defense of interests that each of them sees as crucial from their respective points of view. Serbia has an interest in maintaining the direction of good economic relations with China and striving to improve those relations in the future, especially in the field of foreign trade activity and policy. There is no doubt that China will maintain an expansive performance in its exports to all markets in which it has been present so far, including Serbia. In that respect, Serbia faces a great challenge to find a way to pay far more attention to the strategy of increasing exports to the Chinese market than it has done so far. The power of the Serbian economy to respond to these challenges on its own is not great. China's import needs are huge about Serbia's ability to satisfy them, at least in part, with its exports. The way out of the vicious circle of disproportion between China's import needs and Serbia's export potential can be found in the application of a strategy based on Serbia's regional connection and cooperation with neighbouring countries for joint production and joint appearance on the large Chinese market. Also, Serbia should remain open for further inflow of direct investments from China. In addition to the positive economic effects of investments on the Serbian economy, the development of various forms of cooperation with Chinese companies leads to better understanding of the needs of the Chinese market, which is necessary to Serbia if it wants its production to be present in that market to a greater extent and thus to strengthen and improve other forms of the cooperation with China.

Active participation in the "17 + 1" cooperation platform and the "Belt and Road" initiative has brought great economic benefits to Serbia. With the huge investments of China in the form of greenfield or other investments, as well as the use of loans from Chinese banks, a large number of infrastructure projects have been completed in Serbia, and a certain number is in the implementation phase. Opportunities for Chinese capital investments in Serbia are great: there are untapped potentials in the field of energy, ecology, and sustainable development, agriculture, tourism, telecommunications, etc. Through its investments, especially through these cooperation platforms, China secures its presence and strengthens its economic influence in Serbia and other signatory countries. Serbia, on the other hand, has economic and political motives to continue such prosperous cooperation with China in the future. The basis of that cooperation will be current political ties, the interest of Serbian companies in Chinese investments, as well as joint political and economic projects.