The 33-year deal will allow the company, part of Shandong Hi-Speed Group, to charge users of a 42 kilometre road it will build and fund at an estimated cost of 297 million euros to link the northwestern towns of Banja Luka and Prijedor.

The concession fee would include one-off payment amounting to 1.5 percent of the total investment or 4.4 million euros, and an annual fee amounting to 5 percent of revenues earned through concession, the Serb Republic government said in a statement.

According to an agreement signed last November in Budapest, Shandong will project, build, manage, maintain and fund the road construction, while the Serb Republic will pay it an annual concession fee for the road availability, the government said.

The deal represents the first road construction concession for China in the Balkans.

Chinese firms are implementing a raft of projects in the region, mainly in energy but also in the construction sector. These are worth around 3.8 billion euros in Bosnia alone.

(Reporting by Daria Sito-Sucic; Editing by Jan Harvey)