News Ticker

Belarus and China: Commerce Before Politics

Against the backdrop of problems within the international arena and the ever-increasing political and economic isolation of Minsk, the role of China within Belarusian affairs continue to grow. Should we expect cooperation with the Celestial Empire as stated by Belarusian authorities, which has been called a “strategic partnership”?

Belarus - China

Against the backdrop of problems within the international arena and the ever-increasing political and economic isolation of Minsk, the role of China within Belarusian affairs continue to grow. Should we expect cooperation with the Celestial Empire as stated by Belarusian authorities, which has been called a “strategic partnership”?

The extent to which China has become an important partner of Belarus in the political, economic, and military spheres can be assessed by the number of visits that Aliaksandr Lukashenka has had to Beijing – twelve. Apart from Russia, Lukashenka –has never visited any other country on a regular basis for official talks.

In the 1990s, the basis of cooperation was the sale of military hardware and weapons from the Union of Soviet Socialist Republics (USSR) to China. Military expert Alexander Alesin pointed out that the most significant piece of technology that Belarus had to offer China in anticipation of future cooperation was the production of special-wheeled tractors:

A factory was built in China and a joint venture Xinjiang-Volot was established. Over the years, the Chinese have not only successfully copied everything, but have also created on this basis a wide range of tractors and chassis, which now carry intercontinental ballistic missiles, anti-ship, anti-aircraft, and multiple rocket launchers, i.e., the entire range of their weapons. The Chinese are grateful for this because they have greatly changed their strategic power and have become more resilient to a possible U.S. attack.

There is also the satellite technology, which allowed for the creation of digital electronic maps and revealed areas containing high-precision weapons. Beyond that, there were other projects of less  significance. A new level of cooperation with China’s assistance included a sparing amount of technology, which made it possible to create the Polonez Multiple Launch Rocket System (MLRS). By providing their firing ranges, the Chinese also helped to create the missile industry in Belarus. And we have a missile with a range of up to 500 km and a 50 kg warhead – a serious weapon for our region, which is called “Eurostrategic”.

In the 2000s, the logical continuation between the two countries was through political contacts, which were supported by the allocation of Chinese loans, usually –tied to equipment and materials. This was also against the backdrop of U.S. sanctions.

Two factors contributed to the flourishing of the Belarusian-Chinese relationship: China’s “One Belt, One Road” initiative, which was launched in 2013, and the Russo-Ukrainian Conflict, which began in 2014. Against this background, as well as the thawing of relations with Western countries, China launched a project to build the Great Stone Industrial Park in Belarus.

In 2015, Chinese President Xi Jinping flew to Minsk, which clearly indicated China’s interest in Belarus  and its geographical importance on its way to the European Union (EU) and the New Silk Road. In addition, the Geely Auto Belarussian CKD plant for assembling Chinese cars was launched, as well as the Chinese built Vitebsk Hydroelectric Power Plant and several enterprises across Belarus. Yet, such undertakings have not been without scandal, such as in Svietlahorsk (Svetlogorsk) during the construction of a bleached pulp plant. However, trade between the two countries increased significantly.

At the same time, Belarusian exports to China are small. This is largely due to logistical problems – thousands of kilometers between the two countries makes the supplying of Belarusian goods unprofitable. Despite this, the export of dairy products to China is growing, and Belarusian timber has recently been going there as well. Nevertheless, the volume of exports to the Celestial Empire is very modest in comparison to delivering to the Russian market – ten times less.

However, this did not and has not hindered the increasing rapprochement within the political arena. The Belarusian authorities have constantly mentioned that it was Xi Jinping, not Putin, who first congratulated Lukashenko in August 2020.

 

Two Faces

How can the relationship between Belarus and China be described today? The newspaper “Belarusians and Market” turned to Olga Kulai, a China researcher and expert on Belarusian-Chinese relations with this question:

It is important to separate the political and economic overtones, she replied. In 2016, the Declaration on the Establishment of a Trustful Comprehensive Strategic Partnership and Mutually Beneficial Cooperation was signed. The Belarusian side considers it to be “the highest level of relations in history.” The assessment of the Chinese side is different. At the same time, in my opinion, the biggest beneficiary today is Belarus, which fits into China’s initiatives and projects, including the “One Belt, One Road”.

Since August 2020, the Chinese Foreign Ministry has been supporting the Belarusian authorities and the principle of non-interference in the country’s internal affairs. According to Olga Kulai, it should be emphasized that China, which is always under pressure from the United States, broadcast this principle at all times, regardless of the situation, and not only with regards to Belarus.

China’s economic support has always been viewed through the prism of politics. However, according to the Kulai, Chinese companies, including state-owned enterprises, are increasingly applying the principles accepted in international practice such as rational behavior and real assessment of investment risks, including the consideration of international ratings. Kulai also says the following:

According to information from Chinese sources and the general opinion of the expert community, it is obvious that Beijing has told and continues telling Minsk the same things and giving the same advice as the World Bank. Their recommendations are similar – the same words about transparent legislation, respect for private property and so on. So, there is nothing controversial that the expression of a political position is not accompanied with a loan.

 

Not So Much Money

According to Olga Kulai, it is necessary to understand that the political support of the Belarusian government does not apply to sovereign loans in Minsk – the last one issued to the National Bank was dated December 2019 for half a million dollars.

Kulai said the following as it relates to this matter:

You can estimate the scale yourself as this is the price of one modern machine tool. The political lending practice of Beijing has decreased for a number of years. So, it would be naive to hope that an exception will be made for Belarus. China has made it clear to its partners around the world that if you want to receive funding from our state banks, then go for the commercial track, or at least move towards that direction.

Will the Belarusian government be able to take on such loans, as well as more commercial-related ones? Kulai believes the following:

That’s an excellent question. China’s approach has changed in terms of both the selection, which has become stringent, as well as the conditions for granting money. It is difficult to say what will happen next. We should ask the question in a different manner – Will the Belarusian government be able to offer China something in return that they will peak their interest, and under what conditions they will be willing to allocate the money?.

 

 

Will the Chinese Buy Belaruskali?

The “collective West” has allocated a considerable amount of money (hundreds of millions of dollars per year) to the Belarusian government for infrastructure projects. Rather than coming in the form of loans, it has come in the form of gratuitous aid. Now, when building bridge projects are stalled, they began to fall apart. When water pipelines and sewage treatment projects collapse, accidents occur and result in low-quality water being supplied to millions of Belarusian homes. Will China be able to fill this financial void?

Kulai said the following as it relates to China filling this financial void:

If we analyze China’s behavior in other countries within close proximity to us, there is not the case. One possible option  would be technical and economic assistance, but the customer must meet certain conditions. More importantly, the money does not go into the Belarusian system, but circulates within the project and is entirely controlled by China.

Another option for cooperation between the two countries is through investments. It was assumed that they would come through the Chinese park near Smolevichi. That was the one on which the bet was placed, and it is increasing all the time. For example, with the last decree, large investors received new preferences.

Joint ventures are being developed in the Great Stone. New ones are opening up, but the speed and scale leaves much to be desired. Based on public information, it is China that is acting as the managerial driver in developing the park, influencing the benefits for its residents, their mode of operation, and what industries will be developed in the park. This is because Velikiy Kamen has people from the China Merchant Group that have great managerial experience on an international level –in Europe and China.

Are there some companies that the Chinese are willing to buy in Belarus? Belaruskali is certainly one of them. They have made a few offers, and these negotiations have sometimes been very specific. One such example is for Gomselmash. However, the requirements imposed on the potential investor such as maintaining jobs,  management structure, and debts did not suit him.

Belaruskali is of interest and China could potentially purchase it. The question is, will the Belarusian government want to sell it? And on what terms? If on the Gomselmash conditions, then the result will be the same.

Regarding potential purchases, Kulai said the following:

It is important to note that China will assess the risks associated with sanctions, the impossibility of carrying out settlements through the Belarusian state banks, and the ability to successfully integrate into the global financial system. This later is the most important to them. Therefore, the decision to acquire any assets will be extremely deliberate.

It’s no secret that the Belarusian government is under great financial stress. Not only are they unable to receive another loan from Russia, but they are unable to place bonds. The financial markets of Western countries are closed. Could China loan a few billion dollars?

Kulai said the following regarding a loan from China:

It can, but it is unlikely to do so. I assume that Belarus has brought up the issue of state loans and has done so more than once. However, since December 2019, we have not received a state loan from China. If the issue could be solved, then it would have been solved.

What should we expect from the Belarusian-Chinese partnership in the coming year? According to Kulai, China will continue to support the Belarusian government on the international level. Close cooperation with various international organizations will continue. The anti-sanctions rhetoric will also remain unchanged, and the sanctions will probably bring Beijing and Minsk closer than ever.

To summarize, Kulai said the following:

As for the economic aspect, China’s behavior will be traditional here as well. In case of political crises, China will use the wait-and-see approach. One should not expect large Chinese investments into the Belarusian economy. As for China, there is no rational or commercial advantage. The trade turnover will certainly grow, but the growth will be modest and will not be able to replace the losses incurred by the Western approach.

1 Comment on Belarus and China: Commerce Before Politics

  1. I am a bit puzzled why China which was so close to Belarus in terms of ideology do not support Lukashenko that much as it is supposed to do. Maybe, China does not want to make enemies with European Union? That’s the only reasonable explanation.

Leave a comment

Your email address will not be published.


*


3 + 12 =