China brings growth, corporate turnarounds and optimism to Serbia, Macedonia

Until early last year, Serbia's largest steel company, Smederevo, was in deep financial trouble - seven straight years of losses, and its very survival looked precarious.

Now, barely 18 months later, the company is well and truly over its brush with mortality. Its managers say its prospects are rosy.

The company's fortunes began to change in April last year, as did those of Ivan Matkovic, who has worked for Smederevo for 17 years. They owe their good fortune not only to the intervention of one of China's largest iron and steel manufacturers, HBIS of Hebei province, but also to the overarching influence of the Belt and Road Initiative.

The initiative's five most important planks are policy communication, road connectivity, unimpeded trade, monetary circulation and understanding between peoples. President Xi Jinping has stressed that the last of these is a sine qua non of sound relations between countries, and thus requires more commitment.

Paying heed, HBIS went about exploiting new opportunities presented by the initiative. It bought the loss-making Smederevo for 46 million euros ($54 million; ￡39.8 million) and started to manage it within three months.

Now Matkovic earns more than he ever has before.

"HBIS expanded Smederevo's capacity after the takeover. I feel relieved economically and more confident in the company's future. Moreover, the top Chinese executives are very friendly and provide effective management."

The output of Smederevo, which has since been renamed HBIS Group Serbia Iron & Steel (or simply HBIS Serbia), increased by more than 50 percent sequentially in the second half of last year, to its highest level since 2010.

The HBIS takeover ended seven years of losses and pushed the 105-year-old Smederevo back into the black by the end of last year, according to the company's CEO, Song Sihai.

HBIS Serbia's revenue accounted for 2.1 percent of Serbia's GDP ($377.5 billion) in 2016.

"The Belt and Road Initiative is a very important trigger for the acquisition. The supportive attitude of the Serbian government also played an important role," Song says.

Zorana Mihajlovic, Serbia's deputy prime minister and minister of construction, transport and infrastructure, said in an interview that the total investment in the country's ongoing infrastructure projects is close to $1.64 billion. Of that, $704 million, or 43 percent, came in from China on the back of the Belt and Road Initiative.

For instance, construction of the first stage of the Hungary-Serbia railway, China's debut rail line in Europe, will start in November.

Before the rail line, China had completed the 250 million euro Zemun-Borca Bridge, across the River Danube, as well as approach roads in Belgrade, Mihajlovic said.

"China's investment helped us to improve infrastructure facilities and created job opportunities. More important, we are very grateful to the technologies and training opportunities that our Chinese partners bring to us," Mihajlovic said.

"The decision to participate in the Belt and Road Initiative is one of the most important ones we've ever made, and we will definitely continue to get involved in it."

According to Mihajlovic, in the past 40 years, Serbia has been seeking partners in Europe to begin new projects in its energy sector but has failed. Now, the government is in talks with a Chinese company to start the country's largest hydropower station.

"The grand initiative needs boldness of vision but should also be implemented in a way that can moisten things silently," says Xu Li, marketing director in the Western Balkans of YTO International, a Chinese tractor manufacturer.

With years of experience expanding overseas, Chinese enterprises have been attaching much importance to building better relations with local staff members and integrating with local people.

HBIS Serbia, for instance, increased staff salaries by 8 percent soon after the acquisition. It also set up a special fund to help staff members going through difficult times. The company's top management visited retirees during traditional holidays and brought gifts. In August, they gave stationery to staff members with school-age children as schools reopened in September after the summer holidays.

"We also encouraged the staff to advise us on how to improve work processes and management," Song says.

This year, HBIS Serbia will invest heavily in environmental protection and energy-saving techniques. "We want to preserve a good environment for the local people," Song says.

HBIS is not the only Chinese company to ride the Belt and Road Initiative to touch millions of lives. Sinohydro, a Chinese infrastructure builder, is another shining example.

In August 2015, the Macedonian city of Tetovo was caught in a rainstorm that led to a serious landslide, leaving some villages isolated.

Sinohydro's branch office in Skopje organized a rescue team quickly and pressed heavy machinery into service in the stricken areas to clear a road, thus establishing a communication link to the villages.

Liu Zhichao, who headed the rescue team at that time, recalled that a senior Skopje citizen invited Sinohydro's Chinese staff to his home when the latter were having pizza for lunch and standing in the hot sun. The old man offered grapes, cola and beer.

"We paid lots of attention to communicating with the local government and communities while constructing the project," says Wang Jianfeng, manager of Sinohydro's Skopje branch office, which is building the Kicevo-Ohird Motorway.

The hills along the project often experience droughts during summer, so the branch office has paid for the digging of open wells for the residents.

And during local festivals, company staff members get into the spirit by offering gifts to villagers and passing on best wishes to the local government, Wang says.

Such efforts, Wang says, can help cement relations. Kicevo's singing and dancing group, for instance, visited the project for a performance during the Chinese Lunar New Year.

Zvonko Sarafiloski, 51, manager of a food processing factory in Kicevo, says Sinohydro's project there is good for locals, particularly young people, as it has created jobs. Before the project, the residents had limited job opportunities and low incomes.

Since 2014, however, the Kicevo-Ohird Motorway Project has offered new life.

"We have money not only for bread but meat, cheese, candy, alcohol and even new phones and laptops," says Sarafiloski. The motorway project also helped expand local businesses. More new groceries, restaurants and supermarkets sprouted.

"Our life is easier now. We hope Sinohydro can get new projects so that our young boys and girls can work with Chinese engineers for a longer time," Sarafiloski says.

According to Ling Shengli, secretary-general of the International Security Research Center at China Foreign Affairs University, if two nations want to get closer, the process has to start at the level of people.

People need to come together heart-to-heart first, Ling says. Only then will there be closer ties.

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(China Daily European Weekly 09/22/2017 page26)