Serbia-China Economic Cooperation: A Balance of Payments Perspective

Abstract

The more intensive economic presence of China in the Balkan, within the Belt and Road Initiative, has influenced China to become one of Serbia's most significant economic partners. The more dynamic economic cooperation between these economies is evident both from the perspective of foreign trade and capital flows. The focus of this study is to determine how the intensified economic cooperation between Serbia and China reflects on the domestic balance of payments position. Research results suggest that the growing economic cooperation of the observed economies negatively affects the domestic balance of payments position, both in terms of trade in goods and services and in terms of the income account sub-balance. At the same time, the increasing inflow of capital, primarily based on foreign direct investment from China, has provided financing for a significant portion of Serbia's current account deficit over the past few years. However, the ultimate effects on Serbia's balance of payments position will largely depend on whether Chinese investments in the coming period will further deepen the deficit in the primary income account.