A growing contradiction is emerging at the heart of Serbia’s economic strategy. While the European Union remains Serbia’s largest export market, largest investor and formal destination for future membership, Belgrade is simultaneously accelerating its economic integration with China through a free trade agreement, industrial investments and expanding manufacturing cooperation. The result is an increasingly complex balancing act between two economic systems whose strategic interests are diverging.
The debate has intensified following the entry into force of the Serbia-China Free Trade Agreement, which provides preferential access for thousands of products and creates a unique position for Serbia among European countries. Chinese manufacturers operating in Serbia gain access to both the Serbian market and preferential access to European markets through Serbia’s existing Stabilisation and Association Agreement with the EU.
For Chinese companies, Serbia offers something increasingly difficult to find elsewhere in Europe: relatively low production costs, state investment incentives, geographic proximity to EU consumers and preferential trade arrangements. As a result, Chinese investment has expanded rapidly across sectors including steel, mining, automotive components, battery supply chains, tires and industrial manufacturing. Since 2015, Chinese investments in Serbia have been estimated at approximately €7 billion, making China one of the fastest-growing foreign investors in the country.
The industrial logic is straightforward. Products assembled in Serbia can potentially enter European supply chains with lower trade barriers than goods shipped directly from China. Critics argue this creates a “gateway” effect whereby Chinese companies establish final assembly operations in Serbia while importing much of the higher-value content from China. Some Serbian economists describe this model as predominantly assembly-based manufacturing rather than deep industrial localization.
The trend is particularly visible in the automotive sector. Chinese suppliers linked to electric vehicle and component manufacturing have expanded operations across Serbia, joining earlier investments such as the Linglong tire plant and a growing network of automotive component manufacturers. The restructuring of Europe’s automotive industry, combined with growing trade tensions between Brussels and Beijing, may further encourage Chinese companies to seek production platforms closer to European customers.
Yet the economic reality remains more nuanced than the geopolitical narrative often suggests. The European Union remains overwhelmingly Serbia’s most important economic partner. EU member states account for the majority of Serbian exports, imports and foreign direct investment. Recent economic data show Serbia exporting approximately €18.9 billion worth of goods to the EU while importing nearly €22 billion, with the EU accounting for around 56% of total foreign direct investment inflows.
This creates a strategic dilemma. Serbia benefits from Chinese capital, industrial projects and market diversification, but its long-term prosperity remains closely tied to European demand, European investment and eventual EU accession. Brussels has increasingly expressed concerns about regulatory alignment, competition policy, state aid practices and the potential for Chinese firms to use Serbia as a platform to access European markets while operating under different standards.
The issue is becoming more relevant as the EU deploys new industrial-policy instruments. Carbon Border Adjustment Mechanism (CBAM) rules, foreign subsidy investigations, battery regulations, critical raw materials policies and supply-chain due diligence requirements are all designed to strengthen European industrial resilience while reducing strategic dependencies. Companies operating in Serbia increasingly face the challenge of satisfying both Chinese commercial expectations and European regulatory requirements.
For Serbia’s mining and processing sectors, the stakes are especially high. Chinese companies have become major investors in copper production, smelting and battery-material supply chains, while the EU simultaneously seeks secure supplies of critical minerals for its energy transition. Serbia therefore finds itself positioned between two competing industrial strategies: China’s outward manufacturing expansion and Europe’s push for strategic autonomy.
The broader question is whether Serbia can continue successfully balancing both relationships. The country’s economic model has benefited from acting as a bridge between East and West, attracting capital from multiple sources while preserving access to European markets. However, as competition between Brussels and Beijing intensifies, maintaining that equilibrium may become increasingly difficult.
For investors, the most likely outcome is not a Serbian choice between Europe and China but a more selective integration with both. European capital will likely remain dominant in banking, infrastructure financing and export markets, while Chinese investment continues to expand in manufacturing, mining, industrial processing and strategic supply chains. The challenge for Belgrade will be ensuring that these parallel relationships reinforce rather than undermine each other.
As Europe raises new regulatory barriers and China searches for alternative routes into global markets, Serbia’s role as an industrial and logistical bridge between the two economic blocs may become one of the most valuable—and most scrutinized—assets in Southeast Europe.
