January 23 (SeeNews) - Serbia's government said Bank of China officially opened on Saturday its first branch office in Serbia, which will coordinate the activities of the bank in Southeastern Europe (SEE).
Serbia expects Bank of China to finance the construction of industrial facilities which will sell their production to markets where Belgrade has free trade agreements, such as Russia, some EU member states and other countries, under preferential conditions and with no customs duties, Serbian president Tomislav Nikolic said at the opening ceremony, as quoted by the government.
Speaking to national broadcaster Radio Televizija Srbije (RTS), finance minister Dusan Vujovic said the presence of the Chinese lender will allow Serbia to finance its public debt at low cost via financial instruments in yuan.
"The most important expected indirect effect of the presence of Bank of China in Serbia will be the reduction of the cost of financing of the country's public debt. Bank of China provides an opportunity for Serbia to have open access to the growing market of financial instruments in yuan," Vujovic said. "First of all, I think the panda bonds would enable Serbia to finance its debt and to continue reducing not only the share of debt in GDP, but also the cost of borrowing."
Panda bonds are Chinese yuan-denominated bonds from a non-Chinese issuer, sold in China. In June 2016, Bank of China signed a Memorandum of Understanding on panda bonds issuance with Poland's Ministry of Finance, making Poland the first European country to issue such securities. The Polish government issued 3 billion yuan ($437.6 million/407.7 million euro) worth of three-year panda bonds in China in August, and Bank of China was its leading underwriter. Bank of China launched its first Polish branch office in August 2012.
Last week, Vujovic said Serbia plans to issue 3.5 billion euro ($3.76 billion) worth of dinar-denominated securities and 1.6 billion euro in debt instruments denominated in euro this year to finance budget deficit and refinance outstanding debt. Treasury bonds trading also have a positive influence on the Belgrade stock market performance, as they attract investors to Serbian equities. Treasury bonds contributed 38.109 billion dinars ($3.3 million/3.07 million euro) to the total trading turnover of 44.574 billion dinars on the Belgrade bourse in 2016.
The opening of the branch office in Serbia represents an important step made to satisfy the rising needs of the Serbian-Chinese cooperation and the services offered by Bank of China will contribute to the One belt, One road initiative, the president of the Chinese bank, Tian Guoli, said.
Earlier this month, Bank of China appointed the former governor of Serbia's central bank, Dejan Soskic, as management board member of its Serbian unit, together with former Serbian economy minister Zeljko Sertic. Slavisa Aleksic, former manager at Findomestic Banka and Astra Banka, in turn, was appointed as executive board member.
Bank of China Hungary owns the entire capital of the Bank of China's Serbian subsidiary - Bank of China Serbia a.d. Beograd - which will initially support Chinese and Serbian companies jointly entering third markets and will also offer services to retail customers.
Bank of China Serbia a.d. Beograd will coordinate the activities of the bank in Bulgaria, Romania, Hungary, Croatia, Slovenia, Bosnia and Herzegovina, Montenegro and Albania.
($ = 0.9318 euro)