Serbia’s economic cooperation with China is significant, and if the coronavirus crisis does not end soon, Serbia would have to find other partners and “show flexibility”, says Dragana Mitrovic, a professor of political economy at the Faculty of Political Science. She said that domestic firms could engage in areas where cooperation with China was significant, such as infrastructure projects or procurement.
In economic theory, “black swan” is a term used for unusual, unpredictable events that have the potential to deeply disrupt the world of finance and economy. Will coronavirus, a global health problem, harm the global economy? Impact estimates are being cautious for the time being, first and foremost because it is still uncertain how the epidemic will develop further.
“One can understand why everyone is wary, no one can say – then and then the epidemic will end and normalization in China will start. It depends on sector by sector how long they can withstand the crisis and freezing economy in China, whose negative effects are already being noticed. Most of the analysis says that if the epidemic stopped in the next two months and then the recovery of the Chinese economy started, then that economy itself, which had previously shown resilience in the challenges, would have its negative effects. They would stay in the first four months, and that would leave many branches of space to recover”, Mitrovic said.
She explained that the least affected are those with the least institutional support, and in China, these are small and medium-sized enterprises.
“Which, again, gives most of China’s GDP. It’s about 63 million of these firms. Their problem could be that they not only lack liquid assets, because by the nature of the economic system in that country, they have poorly available credit which are given by state-owned banks, but also because their crisis may jeopardize their position as a supplier in the world market”, she said for N1.
If their actions and orders are absent, their customers around the world could look for other suppliers, the professor adds.
“It is certain that other countries with growing economies can be, and it is legitimate for others to jump in, in the end, it is good to have as little downtime in the global trade chain as a kind of shock absorber”, Mitrovic emphasized.
She also added that the Chinese government in the eastern and southeastern provinces, where the epidemic was smaller, gave the green light to reopen facilities and ports.
“But now there’s a problem with workers, it’s missing 50 percent and more, and the problem is transportation”, she says.
She said there was overwhelming evidence that the epidemic in Hubei province and Wuhan, a large and headquartered auto industry with 10 universities, showed that the outbreak occurred in November and that a coronavirus was registered in hospitals in December.
Asked how the coronavirus epidemic and the downturn in China’s economy will affect Serbia, Mitrovic said: Our economic cooperation with China is significant; These companies behave very responsibly, workers who have returned and are quarantined here first, and only then can they continue to work. But this will not prevent what is affecting the whole world, which is that parts, equipment, supplies, Chinese tourists, which are important to everyone, do not arrive here. We will have to turn to some other markets in the meantime”.
Every branch of the economy, she says, must show flexibility.
“For example, our companies and workers can jump into procurement. On the one hand, it is also a message that we are less dependent on other countries for imports, because why can’t we say there are subcontractors from Serbia”, Mitrovic said.
The crisis could also affect investments in Smederevo steelworks and RTB Bor.
“Of course, this crisis and the suppression of the epidemic on the Chinese economy will affect in the sense that the Chinese leaders do not have many options. Tthe fiscal deficit is more than 3 percent, which was the red line. On the other hand, they have no option but to pump money again, which means that it will be less for investments on the side”, said Mitrovic.
However, she believes that this should not affect Serbia much.
“I do not believe that this will be reflected so directly in terms of some sudden deterioration of the investment position in Serbia, but they will have to reconsider their work and strategic decisions”, she said for N1.
