Sino-Belarusian cooperation is not up to expectations of Belarusian authorities

Official Minsk has inflated expectations from economic and investment cooperation with China, which base on similarity of political views and concessions on foreign policy issues. So far, the Belarusian authorities have not managed to step up political and economic relations with China. The implementation of large-scale projects with direct investments from China is unlikely to meet Belarus’ expectations in the coming years either.

While meeting with workers at JSC Peleng, President Lukashenko said that Chinese President was scheduled to pay a three-day visit to Belarus in May 2015.

The Belarusian authorities have repeatedly stated that cooperation with China was a priority for Belarus’ foreign policy and emphasised the ‘strategic nature’ of Sino-Belarusian relations. So far, however, political and economic contacts between Minsk and Beijing are not reaching the level of cooperation between China and other countries in the region.

Currently, Belarus is implementing about 20 joint Sino-Belarusian projects worth circa USD 5.5 billion and hosts more than 40 offices and subsidiaries of Chinese corporations. In recent years, Chinese have invested in modernisation of cement plants, electrical and pulp industries, and road construction in Belarus. In order to implement these initiatives, the Chinese government has opened a credit line for Belarus totalling USD 16 billion.

President Lukashenko underscored the importance of economic cooperation with China – mainly as a priority export market for Belarusian goods, “This is a country, which is looking for partners today, which has the sea of money. If we become, as we are now, their partners and develop cooperation in all areas, we could get loans and orders. Orders is the main thing for us”.

The Belarusian government is keen to implement trade and logistics projects within the Chinese ‘Silk Road’ construction project. Official Minsk also wants Beijing to use Belarus as a platform to promote Chinese products on western European markets. However, China is unlikely to take Minsk’s initiatives seriously, other eastern European countries, such as Poland, have offered much more favourable conditions for Chinese goods’ access on the European market. In addition, Belarus has claimed a strong interest to be included in Sino-Russian industrial cooperation projects.

However, the Belarusian leadership’s hopes to develop economic cooperation with China have not yet materialised. Chinese share in Belarus’ total trade turnover is small – 4% in 2014 and 4.2% in 2013 with a significant misbalance in favour of China. Unlike indirect investments, direct Chinese investments in the Belarusian economy are low. In September 2014, the Belarusian Finance Ministry signed an agreement with the Chinese Development Bank to open two long-term credit lines worth up to USD 1 billion.

The most successful large joint Sino-Belarusian project was Geely cars production. The Belarusian government has projected to produce 120,000 cars a year between 2012 and 2020. During the project’s first stage, between 2012 and 2015 Belarus has increased cars production from 10,000 to 60,000 cars a year. However, due to the collapse of the Russian automobile market, Geely’s prospects have dimmed.

The Belarusian government hopes to fill the gap in direct investment from China by creating the “Big Rock” Sino-Belarusian industrial park. However, this large-scale project is still in the initial implementation stage. For example, in October last year, the Chinese government confirmed its intention to provide Belarus with an intergovernmental grant aid worth 150 million yuan within the framework of the industrial park electrification project and other projects of technical and economic assistance. The park’s construction began in June 2014, however, Chinese business is in no hurry to enhance its presence in Belarus and only declares its intention to implement investment projects. In addition, Chinese officials underscored the importance of making the industrial park project attractive to investors from the ‘third countries’.

The Belarusian authorities should not expect a major breakthrough in the Sino-Belarusian relations after the Chinese President’s visit. Beijing is likely to adhere to current level of political and economic relations with Minsk.