Silk Road of Cooperation
China is one of the most important trading and economic partners of Belarus
Belarus and China share more than 20 years of cooperation and friendly relations. The two countries apply common principles in their domestic and foreign policy and have been extending their economic and humanitarian ties in all directions. The main document coordinating the interaction between the two countries is the program on all-round strategic cooperation till 2018. A state visit of China President Xi Jinping to Minsk in May 2015 gave a new impetus to the Belarus-China cooperation. The fact that the head of one of the world’s powerful nations personally came to visit Belarus was deemed as epochal by many experts, especially since an impressive number of long-term agreements and documents were signed.
The diplomatic relations between the Republic of Belarus and the People’s Republic of China were established on 20 January 1992. This very year saw the PRC embassy open in Minsk and in 1993 Belarusian diplomats started their mission in Beijing. The Belarusian-Chinese bilateral relations reached a new summit in July 2013 after a visit of Belarus President Alexander Lukashenko to Beijing at the invitation of China President Xi Jinping. During the visit the two leaders signed a joint declaration on all-round strategic partnership. As early as the next year a program of all-round strategic partnership development for 2014-2018 was adopted. Besides, an agreement on setting up a brand-new coordination mechanism – a bilateral cooperation committee at the level of vice-premiers – was signed.
Since the diplomatic relations were established, the bilateral trade has soared more than 100 times. In 2013, China ranked third among non- CIS trading partners of Belarus, ninth in export from Belarus and second in import to Belarus. The bilateral trade in goods and services in 2014 (including Hong Kong, Macao and Taiwan) made up $4.18 billion with the Belarusian export exceeding $1 billion for the first time. In recent years Belarus’ major exports to China have been potash fertilizers, caprolactam, dump trucks and their components, microchips, micro assembly, chemical products. Among the main imports from China are equipment, components and materials for export-oriented enterprises in Belarus, as well as consumer goods.
The two countries have been successfully absorbing direct investments by creating joint companies such as Midea-Horizont, a producer of household appliances, and Volat-Sanjiang, a producer of off-road vehicles located in Belarus; Sanjiang-Volat Special Vehicle Co, Avic-BelAZ Mining Equipment Company, Harbin Dongjin-Gomel Agricultural Machine Co, and a joint venture for assembling powerful Belarus tractors in China. Minsk has about 50 companies with Chinese capital.
Dozens of important economic projects are being implemented in Belarus with the credit support of Chinese banks in such fields as power engineering, manufacturing, transport infrastructure, real estate, telecommunications and others. In 2008-2013, Export-Import Bank of China and China Development Bank opened $14 billion credit lines for Belarus and offered two governmental concessional loans for $1 billion each. Among the key long-term projects is the Silk Road Economic Belt project, construction of the Chinese-Belarusian Industrial Park Great Stone, and the production of Geely cars.
The Silk Road Economic Belt is a project on setting up a transportation, energy and commercial corridor between European countries and those of Central and South Asia. China intends to allocate $40 billion via a special fund. President Xi Jinping voiced the idea of setting up the economic belt in September 2013. The Economy Ministry of Belarus and the Ministry of Commerce of China signed a memorandum of cooperation on the Silk Road Economic Belt project in 2014. Being practically a link between the European Union and the Eurasian Economic Union, Belarus can become a key hub of this project. To do so Belarus intends to actively develop transcontinental transport corridors and improve logistic infrastructure on its territory with the help of Chinese companies. It
will also increase the utilization of railway freightliners going from Europe to China, boost the use of the Belarusian airports, and optimize cargo delivery systems. In turn, China is ready to offer Belarus its logistic services in Lianyungang seaports.
The Industrial Park Great Stone in Smolevichi District, the largest project in the history of the bilateral relations, will have an important place in the Silk Road Economic Belt. The foundation stone laying ceremony was held on 19 June 2014. According to the development concept, the park will offer comfortable business infrastructure, significant long-term tax breaks for the project participants, and a full package of services for the park residents. Among the priority areas are the development of fine chemicals, biomedicine, electronics industry, mechanical engineering, new materials. The first residents have already been registered. Among them are such major Chinese corporations as Huawei
and ZTE. There are plans to set up manufacturing and residential zones in the park, office premises, trade and entertainment ones, a financial center and an R&D center. In fact, this will be an international eco-smart city. China runs many similar projects, but the park in Belarus will be the largest in terms of the territory.
Passenger car production in Belarus with the participation of the Chinese company Geely is another example of mutually beneficial cooperation. The BelarusianChinese enterprise BelGee (the founders are OAO BelAZ – 50% of the shares, the Chinese company Geely – 32.5%, and the joint BelarusianChinese automotive manufacturing enterprise Soyuzavtotehnologii) was established in December 2011 and registered in the Free Economic Zone Minsk. The first Geely cars rolled off the production line in February 2013 and went on sale in March. Today, the annual production capacity of the BelGee company is 10,000 cars. The second phase of the project involves the construction of the Geely car assembly plant with the output capacity of 120,000 by 1 July 2019.
The legal framework of the Belarus-China bilateral relations is well developed and covers a wide range of areas, including diplomatic relations, trade and economic cooperation, avoidance of double taxation, investment protection, cooperation in science and technology, arts and culture, education, tourism, air transport, health, military and technical cooperation, the provision of legal assistance in civil and criminal matters, protection of intellectual property rights, visa-free travel, lending and gratuitous aid.
Thus, the cooperation between the two states is really comprehensive, filled with real projects and promising ideas. Political, trade and economic relations of Belarus and China are developing dynamically, primarily due to the similar principles in domestic and foreign policies, similar views on major issues of international relations. The parties regularly exchange visits at the highest and high levels, are engaged in an active inter-parliamentary dialogue, dynamically develop interagency contacts.
The visit of the Chinese delegation in May 2015 became the first visit by a Chinese president to Belarus over the past 14 years and heralded the beginning of the new era in the cooperation between the two states. The three-day stay of the Chinese leader in Belarus turned out very eventful and successful. After the welcoming ceremony at the Palace of Independence Belarus leader Alexander Lukashenko and Chinese President Xi Jinping held talks and signed a number of documents. The leaders also took part in the Belarusian-Chinese Interregional Business Forum and a ceremony of presenting the registration certificates to the first residents of the Chinese-Belarusian Industrial Park Great Stone, visited the Belarusian State Museum of History of the Great Patriotic War.
The visit of China’s President resulted in a record high number of agreements and memorandums. The heads of state signed the Treaty of Friendship and Cooperation between Belarus and China, and also adopted a joint declaration on further development of the relations of all-round strategic partnership. The parties agreed to promote, on the basis of mutual benefit, the establishment of the Silk Road Economic Belt and to expand cooperation in trade, economic, financial, investment, science and technology, energy, space, transport, IT, agriculture, humanitarian and other areas.
In particular, the two states announced the intention to promote payments in national currencies in the bilateral trade. A practical step in this regard was a currency swap agreement valued at Br16 trillion and RMB7 billion signed by the National Bank of Belarus and the People’s Bank of China.
The two countries signed dozens of agreements and memorandums to boost cooperation in economy, trade, science, education and culture, the defense industry, and implement joint projects. Experts estimate the agreement portfolio following
China President Xi Jinping’s visit to Belarus at $18 billion at least.
Belarusian Potash Company and Sinochem Group signed a five-year memorandum of cooperation for 2015-2019. The document envisages the sales of 4 million tonnes of Belarusian potash fertilizers to China at the total cost of nearly $1.4 billion in current prices. The contract will help Belarus maintain its leading position in the sales of potash fertilizers on the Chinese market.
New prospects for Belarus come with a memorandum of cooperation that was signed between the Finance Ministry of Belarus and China’s leading independent rating agency Dagong. The document aims to build up Belarus’ national rating industry, provide an independent objective assessment of the credit status of Belarusian companies and joint Belarusian-Chinese projects. The document also creates opportunities for Belarus to access the financial markets of China and the special administrative district of Hong Kong.
The package of agreements traditionally comprised a big number of loan arrangements. The parties agreed on two loans for Belarus: $3 billion in concessional lending and $4 billion as a commercial loan, as well as a grant – technical assistance in the amount of RMB800 million for three years. Technical assistance will be used to finance social projects, including the construction of new homes. Loans will help Belarus develop infrastructure and implement projects of small and medium-sized business.
A memorandum of understanding concluded by the Belarusian Finance Ministry, China Development Bank, Belarusbank, and Slavkaliy can be cited as another great example of cooperation between the countries. In line with the document Belarusbank will borrow up to $1.4 billion. The money will be spent on building a new mining and processing factory. The factory will use raw materials of the Nezhinskoye section of the Starobin potash salts deposit. The money will be borrowed against guarantees of the Belarus government.
The Belarus government also acted as the guarantor for allocating a total of $1 billion in two 15-year-long credit lines to implement projects in the transport industry, power engineering, production sector, infrastructure, and the small and medium business sector of Belarus. The relevant agreement was reached by China Development Bank, Belarusbank, and the Development Bank of the Republic of Belarus.
The Belarusian Railways and the Export-Import Bank of China signed three 12-15–year loan agreements to the tune of more than $175 million to develop the Belarusian rail system. Apart from that, the parties concluded a framework agreement to step up cooperation in the implementation of the Silk Road Economic Belt project. The agreement envisages assistance to long-term comprehensive cooperation in the development of the Belarusian railway infrastructure. Chinese loans of up to $500 million will be raised to implement the relevant investment projects. Loans will be provided against guarantees of the Belarus government.
“The Chinese-Belarusian relations are currently at an important stage of development. I hope that my visit will add a new impetus to the further development of bilateral relations. Taking into account the results of the fruitful talks with President Alexander Lukashenko I can make a conclusion that the expected results of the visit have been fully achieved. The states will cooperate on the basis of mutual respect and equality, and will support each other on the issues of mutual interest,” the Chinese leader said during his visit to Minsk.
Regions in the Focus
Regional cooperation has an untapped potential for further development of Belarus-China ties. The Belarusian-Chinese Business Forum that took place during Xi Jinping’s visit to Minsk testifies to the fact. Attending the forum were the two heads of state. The forum gathered about 450 people, including 300 representatives of China. The plenary meeting held under the motto “New Platforms, New Opportunities”
included a presentation of the Chinese-Belarusian Industrial Park Great Stone project, speeches by representatives of the administrations of Chinese cities and provinces, Belarusian regions.
The business forum resulted in the signing of 25 agreements, the establishment of new business contacts and the demonstration of the mutual economic and scitech potential. A memorandum of cooperation was signed between the administrations of Minsk and Beijing. The parties agreed to strengthen cooperation in science, high technology, education, culture, tourism, construction and other areas. Minsk City Hall invited Chinese partners to take part in the “smart city” project. It is expected that Minsk and Beijing will conclude a town-twinning agreement soon.
The documents signed at the forum also included the friendship and cooperation agreement between Gomel and Harbin, the establishment of twin town relations between Grodno and Lunnan (Gansu Province), Polotsk and Mudanjiang, Brest Oblast and Hubei Province.
A number of agreements were signed between enterprises from various regions of the two countries. For example, during the business forum the Chinese company Zongshen signed agreements with OAO MTZ and OAO Gomselmash on setting up joint ventures with Chinese and foreign capital. The Belarusian holding company Amkodor and China National Corporation for Overseas Economic Cooperation signed an agreement on cooperation in the development of machine-building industry, petrochemical industry, agriculture and civil engineering in Belarus. An agreement on expanding strategic cooperation and setting up a new manufacturing enterprise was signed between the Belarusian holding company Horizont and Midea Corporation.
Alexander Lukashenko emphasized that such a large-scale interregional business forum of Belarus and China testifies to the new level of bilateral relations based on all-round strategic partnership. Direct ties between Belarusian and Chinese regions and enterprises should be a driving
force of inter-personal and business cooperation between the countries, the Belarusian leader is convinced. Belarus has created very good conditions for investment. Besides, by opening manufacturing facilities in Belarus the Chinese business will be able to use free access to the market of the Eurasian Economic Union.
“Frankly speaking, the People’s Republic of China can advance to the big Eurasian union without Belarus’ help. But, if we talk about the cooperation with the European Union, and it is China’s important trading partner, such a hub would be very useful for the country. Belarus can become this kind of a hub,” Alexander Lukashenko said.
The President of the People’s Republic of China, in turn, noted that Belarus has unique advantages for the development of the Silk Road Economic Belt as the country is located in the center of Europe and on the new Silk Road route. Xi Jinping called for the Chinese businessmen to use the opportunity and study the cooperation prospects with Belarusian partners. He expressed confidence that active regional participation will raise the Belarusian-Chinese relations to a higher level.
A Token of Friendship
Experts believe that the state visit of the leader of such a superpower as China to Belarus is an explicit signal to the Chinese authorities and business that Belarus is a close partner who gets a broader access to the market of the People’s Republic of China and enjoys other opportunities and benefits in trade and economy. The matter is not only about new jobs but also the inflow of investments to Belarus and popularization of Belarusian goods in China.
A package of agreements signed by the two countries in May will be a driving force for bolstering partnership in various fields, first of all, in civil engineering and modernization of the infrastructure, interbank cooperation, technical and economic lending and
investment cooperation. The sides are planning to exchange technologies and raise the share of sci-tech innovations, create the legal conditions for exchange programs in tourism, education and culture, enhance military-technical ties. Plans have been made to double the bilateral trade and optimize its structure: the Chinese side is going to expand the import of highquality and competitive Belarusian products.
It is important that the countries are gradually switching from credit cooperation to investment one. In fact, Belarus is becoming a fertile ground where Chinese businessmen can make deals and set up ventures which will promote their products to the EEU member states and the EU. Our country, in turn, will raise the inflow of long-term investments.
On the whole, Belarus’ strategic geographical position in the Silk Road Economic Belt is a boon to our economy. As a result, our country will enjoy direct and indirect benefits. If everything pans out and our country becomes part of important transit routes, then the domestic hospitality business, roadside services, logistics, transport, communications and the entire services sector will get a big boost for growth. Nowadays these are the strategic sectors shaping Belarus’ gross product.
China remains a good, close and reliable friend, a promising partner of Belarus, Belarus President Alexander Lukashenko said after the talks with President of the People’s Republic of China Xi Jinping. The development of the comprehensive strategic partnership between Belarus and China is based on the principles of mutual respect, support and multifaceted cooperation. High-level contacts and sincerity of intentions shape the long-term policy of the joint development of Belarus and China.
“We have only one goal, which is to improve the well-being of our people. We do not build our relations and our friendship against anyone or with an aim to harm anyone. Evidence of this is the Silk Road concept which will give a strong impetus to the development of all states involved, to their economies. Consequently the well-being of people in those states will be improving,” the Belarusian leader emphasized.