Eastern Team
22 July 2019

Roman Romantsov
Komentarze (Commentaries) IEŚ 47 (47/2019)

Economic cooperation between Belarus and China – the pursuit of independence from Russia (Roman Romantsov)

Economic cooperation between Belarus and China – the pursuit of independence from Russia (Roman Romantsov)

ISSN: 2657-6996
Komentarze IEŚ 47
Publisher: Instytut Europy Środkowej

An evident intensification of cooperation between Belarus and the People's Republic of China has been observed since 2017. Alexander Lukashenko’s latest presidential visit to China occurred on 25-27 April in the framework of the 2nd Belt and Road Forum for International Cooperation. During the trip, the president met with several politicians, e.g. Xi Jinping, the President of the People's Republic of China, Shavkat Mirziyoyev, the President of Uzbekistan, and Aleksandar Vučić, the President of Serbia. The consolidation of cooperation between Belarus and China, as well as attempts at establishing relations with other countries indicate that Lukashenko pursues a greater degree of economic independence from the Russian Federation, while maintaining friendly relations with China, and prospectively the EU.

China’s position in the Belarussian economy. Belarus established diplomatic relations with China in 1992. Since that time, China has become one of the key trade and investments partners of Belarus. The first visit of Xi Jinping to the country occurred in 2010. He also visited Belarus in 2015 as the General Secretary of the Communist Party of China. Apart from growing trade (dominated by import from China), whose volume amounted to approx. 3 billion dollars in the past few years, a boost of Chinese investments in the Belarussian economy is visible. According to the Belarussian Embassy in China, 35 agreements of various character have been signed with state banks – China Exim Bank and China Development Bank. This enabled Belarus to obtain 9 billion dollars’ worth of credits. Recently, Chinese direct investments (non-credit based) soared: in 2015 these amounted to 77.7 million dollars, and in 2018 to 112.2 million dollars. Joint companies in the Great Stone Industrial Park near Minsk constitute approx. 43% of Chinese investments. Such a structure proves that Lukashenko offers China extensive opportunities for the development of innovative technologies in the Belarussian economy.

The impact of cooperation for Belarus. By consolidating cooperation with China, Lukashenko aims to attract new investments in the economy of the country. On the one hand, Chinese investments will boost Belarussian economy. On the other hand, they will somewhat limit the country’s dependence upon Russia with regard to the mechanical engineering and hi-tech sectors. Lukashenko seeks to introduce Belarussian products to China. Belarus has been exporting chemical (potassium nitrate), agricultural and dairy products. However, the export of these to China offers limited independence from the Russian market, which still remains a priority one for Lukashenko. The following constitute chief barriers for maintaining Belarussian products on the Chinese market: strong competition of equivalent products from other countries – primarily from Russia and USA, and swift and cheap supply of goods from Belarus to China. Significant distance between the countries (the distance from Minsk to Beijing amounts to 6400 km, time difference is 5 hours), as well as maintaining control over railway and road transit routes between Russia and Kazakhstan pose difficulties for the distribution of goods. As a consequence, Lukashenko has been strongly invested in the Chinese initiative of the Belt and Road (One Belt – One Road). He is also expecting logistics support from Xi Jinping. In terms of geography, the initiative spans considerable territory. It extends from Western Europe to South Asia, South-East Asia and Africa. It also encompasses the post-Soviet states. Several fields of cooperation are scheduled in the framework of the initiative, primarily in international trade and infrastructural projects. Politically speaking, by demonstrating the pursuit of consolidation of cooperation with China, Lukashenko sends a clear signal to the Russian Federation that in the event of further Belarus – Russia crises, he can count on allies. However, this may be of little significance if the country remains completely dependent upon Russia with regard to the energy sector.

The impact of cooperation for China. In light of the trade war with the United States and deteriorating economic relations with the EU, China is actively seeking new partners. The country is clearly aware of the Belarussian trump card – its location on transit routes between the EU and Russia. For that reason, China seeks to anchor their businesses in Belarus with the hope of improved access to the markets of the former USSR as well as Central Europe. The Great Stone China-Belarus Industrial Park constitutes a good example of Chinese engagement in the economy of Belarus. In 2012, Lukashenko signed a decree establishing the park 25 km away from Minsk. Tax exemptions for investors were introduced for the period of 50 years. In addition, critical infrastructure was also developed – an airport and the M-1 Berlin-Moscow international land route are located in the vicinity. New investments amounting to 2 billion dollars, as well as the employment of 120 thousand in production plants located in the park have not materialized so far. The Great Stone Industrial Park occupies 112.5m2. The park includes 56 occupants the majority of whom are Chinese and Chinese-Belarussian companies employing 20-50. The following established their plants in the park: in the electronics sector – Huawei, ZTE, China Electronics Technology Group Corporation, Corehelm, Shenzhen Junchi Technology, China-Belarus High-Tech Aerospace Research and Development Center, in the Artificial Intelligence sector – ZhuiYi, in the automotive sector – Maz-Fast, Maz-Weichai, Xinzhu Corporation. By investments in the economy of Belarus, China seeks to consolidate its position both in industry and trade in the post-Soviet space and in Central Europe. The production of Chinese companies in Belarus, especially in the high-tech sector, may become competitive to the products of the Russian Federation and the EU. There exist several threats for the delivery of such projects. The currently low production level of Chinese companies in Belarus is associated with restrictions present in the neighboring Russian and EU markets, as well as the competition of plants already in operation on these. For example, the Belarussian-Chinese Maz-Weichai specializing in the production of motors for Belarussian Maz trucks, declared the annual capacity of 10 000 motors. However, in 2017, merely 182 vehicles powered by the Weichai motor were produced. In 2018, the production amounted to 300 vehicles 90% of which were sold in the Russian Federation. In the coming years, the most pressing objective for Chinese-Belarussian companies will be to obtain a significant share of markets in East-Central Europe. The lack of successive development of Chinese companies in Belarus is not synonymous with the failure of China in the economies of Eastern European states. By investing in joint companies in Belarus, China is lying in wait until the markets of the Russian Federation and the EU are open.

Prospective Belarus-China relations. Due to the engagement of Chinese capital in the Belarussian economy, further cooperation between the two states will be possible. China will continue to apply various crediting models in the individual fields of the Belarussian economy, and to establish companies specializing in innovative technologies in the electronics and mechanical engineering sectors. Further development of Chinese-Belarussian companies will be possible if, on the one hand, the relations between Belarus and the EU normalize and the cooperation agreement is signed, and on the other hand, relations with the Russian Federation remain friendly. Due to Belarus becoming open to Chinese investments, Lukashenko will be forced to pursue relatively open foreign politics and to maintain balance in relations with China, the EU and Russia.

Trans. Tomasz Kuraś