Sino State Capital and the Strengthening of Serbian Stabilitocracy

Chinese labour workers and their team manager laying the tracks on the Belgrade-Stara Pazova section of the Belgrade-Budapest railway. Source: author’s own.

The Belgrade-Budapest Railway has been lauded as the flagship Belt and Road project of the wider Central and Eastern European (CEE) region, and as such is promoted by Beijing as a successful template for Sino-CEE cooperation concluded via the 17+1 initiative, established in 2012 to foster relations between China and 17 CEE countries. In its host context of Hungary and Serbia, the investment has been politicised from the get-go, wherein criticism has largely focused on the project’s violation of EU public procurement rules, which require competitive dialogue and open-tender processes for projects of substantial size.

We would expect the Belgrade-Budapest Railway to be subject to greater scrutiny in both Hungary, as an EU member state, and Serbia, where external legitimacy of the EU is an important cornerstone of regime legitimacy, stemming from broad-based support for EU integration and cooperation. While this has played out in Hungary where there have been protests and where the EU launched infringement proceedings against the construction for non-compliance, the Serbian section has proceeded relatively unhindered.

The Belgrade-Budapest Railway is a microcosm of a paradigm shift in the constitution of global capitalism. Any system of capital accumulation requires a certain justificatory spirit in order to mobilise the social groups necessary for its continued reproduction. In advanced capitalist societies, the global financial crisis has engendered a crisis of liberal capitalism, providing a rupture for Chinese state capital to penetrate. It is against this backdrop that the external face of regime legitimacy in Serbia, which was derived from the EU and its associated imaginaries of democracy and free market competition, has been given a material and discursive pretext to turn toward China.

Serbia is what Florian Bieber characterises as a competitive authoritarian regime where external legitimacy, manifest in clear government support for EU accession if not actual dialogue, EU direct financial assistance, and EU-bilateral ties, which have been on show during election campaigns, matters for regime endurance. Yet, as Bieber argues, the EU has provided limited support for democratisation, propping up regimes that base their external legitimacy more on the stability that such external legitimacy provides rather than meaningful democratic reform, resulting in what has been characterised as ‘stabilitocracy’.

Somewhat ironically, Chinese state capital feeds the very stabilitocracy that was strengthened by the EU in the first place, to the extent that it is eroding what limited constraints EU legitimacy might place on the authoritarian tendencies of the incumbent Serbian President Vucic’s government. We see this played out in the construction sector where infrastructure investment has been a major economic driver. In the post-crisis period where infrastructural investment in the Western Balkans has dropped from pre-crisis levels of 27% to below 22% annual GDP, Vucic has made public investment a cornerstone of his economic policy, committing EUR 12 billion to fund new public works.

The realisation of the Belgrade-Budapest Railway, along with other Chinese construction projects, have justified the unimpeded introduction of lex specialis laws to accelerate the process of democratic backsliding, superseding what limited restraint on authoritarianism there is, that the external legitimacy of the EU may provide. In this respect, the 2009 Agreement on Economic and Technical Cooperation in the Area of Infrastructure between China and Serbia has been a landmark treaty. The treaty ties financing to construction, clearing the need for pre-selection and open tender of the main contractor, allowing Chinese firms to bypass the hurdle of competitive pre-selection where they would have to compete against European firms. Moreover, the treaty stipulates that contractor and sub-contractor selection procedures be outlined in the (confidential) commercial contract, thus protecting the allocation of loan funds from public scrutiny. In February 2020, the Serbian government introduced 13 new laws and amendments concerning the implementation of public infrastructure works, in particular a law on highway and railway infrastructure that authorises the state to expedite the typically complex land expropriations necessary on public works going forward, including all pipeline projects slated for 2021 and 2022. Such legal reforms are undertaken with the rationale of ‘public interest’, yet they empower the state at the cost of democratic due process, for instance in the relocation of Roma settlements.

The railway, underpinned by the treaty, also signifies the exportation of a Chinese state capital accumulation logic. The treaty empowers any state entity, including banks and state-owned enterprises (SOEs), to act as representatives of China in negotiations with the investor, the Serbian government or SOE. Based on the my own analysis, as of October 2020, there are five active Chinese EPCF (Engineering, Procurement, Construction, Finance) public infrastructure projects worth an estimated EUR 2.075 billion in value, including the Belgrade-Budapest Railway. In all cases they are majority financed by a sovereign-guaranteed China Exim loan and undertaken by Chinese SOEs.

In the realm of labour, the treaty grants immigration clearance exceptions for construction staff, and more generally casts a legal grey area exempting Chinese labour workers from Serbian labour law. Based on recent fieldwork conducted in Serbia, I observed informal, highly flexible, private Chinese migrant labour to underpin the Belgrade-Budapest Railway that conforms to exploitative labour dynamics prevalent in state-coordinated projects in China and elsewhere. The labour sub-contracting is highly discretionary and unstandardized across the construction, despite the fact that final responsibility for delivery of the overall project lies with the main contractor consortium of China Railways International and Chinese Communications Construction Company. One sub-contractor to the Belgrade-Stara Pazova section of the railway who operates out of North-East China pays out a one-time annual lump-sum to workers who are employed in the absence of employment contracts, whereas another sub-contractor operating out of Shaanxi province, pays workers monthly. In all cases, workers work 10-hour days, 7 days a week.

The expansion of Chinese state capital into Serbia is prefaced by a fundamental shift in the organisation of capital accumulation at the global level, to the effect that it is stabilising stabilitocracy in Serbia and facilitating the spread of Chinese accumulation logics abroad. Projects like the Belgrade-Budapest Railway exemplify how, beneath the veneer of diplomatic cooperation, their realisation precedes at once a strengthened state, an authoritarian state, and an exploitative state.

Imogen T. Liu is a PhD candidate at Maastricht University where her research focuses on the transnationalization of state capital. She tweets at @imogentliu.

This article is based on research made possible with support from the European Cooperation in Science and Technology China in Europe Research Network, and the European Research Council supported project SWFsEUROPE.

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