China's Hebei Iron & Steel Group (>> Hebei Iron And Steel Co Ltd) bid 46 million euros (37 million pounds) for the state-owned Zelezara Smederevo steel mill and pledged to invest $300 million (213 million pounds) in expanding production, Serbia's Economy Ministry said on Tuesday.

The European Commission will assess whether the deal complies with an agreement between the European Union and aspiring EU member Serbia which says Belgrade must halt state aid for restructuring its steel industry by February 2015.

Vucic, campaigning for re-election on April 24, said he hoped the EU would back the deal.

"If we complete that ... everything will be much easier for Serbia ... You can immediately up our (GDP) growth figure from 1.75 percent forecast for this year to significantly higher. Next year, it can be 3.5 to 4 percent," he told reporters.

While Hebei's offer, saving 5,050 jobs, is a political boost for Vucic, who is committed to privatising or closing loss-making state companies, its plans to ramp up production, when Europe's steel industry is suffering from oversupply and competition from cheap Chinese imports, could annoy other European governments and steelmakers.

Britain is battling to save its steel industry after India's Tata Steel (>> Tata Steel Limited) put its loss-making British operations up for sale last week. In Finland Europe's biggest stainless steelmaker Outokumpu (>> Outokumpu Oyj) announced up to 600 job cuts on Tuesday.

NO STATE AID

Serbia's Zelezara Smederevo plant is one of the country's biggest exporters but has lost more than $100 million annually over the past two years.

Sasa Djogovic, an analyst with the Belgrade-based Institute for Market Research, saw Hebei's expansion plans having only a small impact on Serbia's economic growth this year but a more tangible effect from next year.

The Serbian firm's Chief Executive Bojan Bojkovic said he expected the deal to be signed within the next two weeks.

Mills in Hebei's home province in China are struggling with surplus capacity and the province has urged its steel firms to shut capacity at home and replace it with projects overseas.

Hebei plans to invest in a new galvanisation line and to raise the Serbian plant's production - 875,000 tonnes last year - to 1.76 million tonnes in one to two years and 2.1 million tonnes a year in three to four years, Bojkovic said.

He said the plant had not received state aid since Feb. 1, 2015, in line with the EU agreement.

From 2012, when Serbia bought the steel plant back from U.S. Steel (>> United States Steel Corporation) for $1 to avert its closure, until Feb. 1, 2015, the plant had received $470 million in subsidies, he told Reuters.

A European Commission official said Serbia must show that past state aid complied with the EU agreement, which sets strict criteria.

(Writing by Adrian Croft; Editing by Susan Fenton)

By Ivana Sekularac and Aleksandar Vasovic