The government tries for Chinese FDI

Given the SWAP agreement between the Chinese and the Belarusian National Banks does not work (Chinese exporters cannot return the claimed VAT back in Yuan), the Belarusian authorities have proposed to China to establish a joint industrial park in Belarus hoping to attract direct investments worth at least USD 1-1.5 billion.

An agreement concerning the creation of the park between the Economy Ministry of Belarus and the “Chinese Engineering Corporation CAMC” was signed on 11 October 2010 during the visit of Alexander Lukashenko to China. However a draft decree has been prepared only recently.

Comment

The increased cooperation and trade with China so far only results in deterioration of the Belarusian trade balance and in the growth of debt in the corporate sector. The government wants to change the type of cooperation with China and benefit from China’s FDI. However it is only dreaming and planning, given the sluggishness of the government officials, the current currency crisis and the fact that Chinese are focused on export of their goods and services rather than investment, ergo, joint industrial park even if it is established, will not be functioning this year. Moreover, the money will be allocated in tranches. All in all, the ongoing Belarusian issue with financing of the deficit will not be solved (also concerning the trade with China) or the more so, the economic crisis.