Belarus-China: negative balance and debt of $3 billion, falling investment and persistent optimism

When Chinese leader Xi Jinping was the first world leader to congratulate ALEXANDER LUKASHENKO on his electoral victory on August 10, it was taken as serious support. However, since then the second world economy has provided little assistance to the Belarusian regime.

In 2020, CHINA quite quickly changed its ambassador to Belarus. But MINSK has been selecting a new HEAD of the diplomatic mission in China for 5 months. As a result, the choice fell on the chairman of the State Customs Committee Yuri Senko. Lukashenka said that China is a "special country" whose leadership "always appreciates when a 'heavyweight' is sent there." He set the task of increasing exports.

The trade turnover between Belarus and  China increased to $4.6 billion in 2020. Thus, China became the second trading partner of Belarus after RUSSIA (in 2019, Ukraine ranked second, China third).

Belarusian exports to China rose to $776.9 million. Chinese products were purchased for 3.84 billion dollars. This means that a large negative balance remains for Belarus - more than $3 billion.

At the same time, the Belarusian Foreign Ministry draws attention to the decrease in the share of potash exports. If in 2015 the share of potash fertilizers in total exports was 81%, in 2016 - 63%, then in 2020 it decreased to 43%. "Non-potash" exports to China - $443.1 million. The driver of Belarusian exports to China was agricultural and woodworking products, demonstrating a two-fold increase.

At the same time, Chinese imports are growing at a fast pace, having increased by about $1 billion in recent years.

Bilateral trade turnover in services for 2020 amounted to $808.1 million, exports - $419.4 million, imports - $388.7 million. There is a positive balance in favor of Belarus - $30.8 million. The growth of the Belarusian EXPORT of services was due to construction, transport and other business services.

Investments from China to Belarus fell to a multi-year low last year. Investments amounted to $104.5 million, which is 38.4% less than in 2019, including direct investments - $54.4 million. The largest volume fell on industry, construction, transport activities and logistics. The decline in investment was caused primarily by the negative consequences of the novel CORONAVIRUS pandemic, the Belarusian Embassy in China said in a statement.

China is not yet offering Belarus new projects or loans. The last significant infusion dates back to December 2019, when China first provided Belarus, which at the time could not agree with Moscow on a $600 million Russian loan, an urgent loan of 3.5 billion yuan (about $500 million). In this way, part of China's debt was refinanced.

Debt - $3 billion

Previously, China actively invested in the economy of Belarus. As follows from the Eurobond prospectus of the Ministry of Finance, as of March 31, 2020, Belarus signed loan agreements with the Export-Import Bank of China and the China Development Bank for a total of $4.8 billion. In particular, the resources went to the implementation of projects in the following industries: the cement industry ($28.2 million); power industry ($1.339 billion); pulp and paper industry ($960.3 million); road construction ($662.1 million); railroad ($64 million); development of the Great Stone Park ($170 million), auto industry ($158.7 million); telecommunications ($258.6 million); textile industry ($51.8 million) and agriculture ($604.8 million).

 

Belarus' outstanding debt to China as of March 31, 2020 was $3.3 billion. In 2020, Belarus transferred $430.3 million in the equivalent of the principal debt to China, while raising $126.2 million.

The Belarusian authorities took relatively cheap Chinese loans to modernize enterprises and implement infrastructure projects, as well as to launch new industrial projects with Chinese participation (in particular, the Great Stone industrial park and the assembly production of Geely cars). Another thing is that these were tied loans: Minsk undertook to purchase equipment from Chinese manufacturers and attract labor from China. At the same time, several force majeure events occurred. The Svetlogorsk plant of bleached sulphate pulp and the plant for the production of cardboard at the Dobrush paper mill "Geroy Truda" were not commissioned on time. The Belarusian authorities were forced to terminate contracts with Chinese general contractors. Alexander Lukashenkowas even going to complain to Xi Jinping about the work of Chinese contractors who failed projects in Belarus. Whether there have been negotiations on this topic, it is not reported. At the same time, Beijing is in no hurry to make concessions to Minsk. This, in particular, is evidenced by the fact that China refused to write off $230 million to Belarus for the creation of a satellite.

Lukashenka expects more from China

Speaking at the All-Belarusian People's Assembly in Minsk on February 11, Alexander Lukashenko repeated that the development guidelines of Belarus and China "in many respects coincide", which is the basis for further strengthening ties between the two countries. He insisted on the need to attract more Chinese companies and banks to the country, praising China's policy and support.

Photo: REUTERS

At the same time, Lukashenka argued that the interaction between Minsk and Beijing was one of the reasons for the West's attack on Belarus in 2020. But he cannot block “the only way to Europe, this window through Belarus” for China, because “he remembers how five or six years ago, when the EU and the  usa attacked us and the economy of Belarus,” China unconditionally supported us.

Minsk began courting Beijing as it faced pressure from EU sanctions and tensions with Moscow over control of oil supplies in the 2000s. But it was only after Moscow’s annexation of Crimea in 2014 that Belarus came to the center of China’s attention. Prior to this, Beijing considered Ukraine as a strategic step for China's entry into Europe. China over the past decade has dramatically increased its foreign economic presence in the world through the One Belt, One Road Initiative, which is considered an ambitious project of Xi Jinping.

Against the backdrop of deteriorating relations with the European Union and the prospects for attracting European investment due to the political crisis in the country, the Belarusian authorities expect to intensify investment cooperation with China.

“Beijing will start returning money to Belarus on the same scale only if Minsk can normalize its relations with Europe,” said Peter Braga, an expert on Belarusian-Chinese relations from University College London. He believes that China will keep up appearances, but deep relations are currently frozen.

EU sanctions against Belarus may threaten the stable operation of rail express trains on the China-Europe route. Although until recently, the German Duisburger Hafen, the managing company of Duisport, the world's largest inland port, announced the start of construction in 2021 of a bimodal railway terminal at the Great Stone. The goal of the project is to put into practice the status of the park as a key point of the One Belt, One Road concept, since most of the trains passing through Minsk from China and to China are received and formed in the port of Duisburg.

Xi Jinping is in no hurry

Although on August 10, 2020, Chinese President Xi Jinping was the first world leader to congratulate Alexander Lukashenko on his re-election, their first telephone conversation since then took place only on January 26, 2021, that is, almost six months later. The key topics were the increase in sales of Belarusian potash fertilizers in China and the supply of Chinese vaccine to Belarus.

On February 10, the Belarusian Potash Company announced that it had signed a one-year contract with a consortium of Chinese buyers (Sinochem, CNAMPGC, CNOOC) based on a price of $247 per ton. At the same time, Russian and Canadian producers and exporters of potash fertilizers, Uralkali and Canpotex, criticized this contract, saying that its price "does not correspond to current market trends." In other words, they accused Minsk of dumping.

On February 19, 100,000 doses of the Chinese coronavirus vaccine were delivered to Belarus.

Xinhua News Agency also reported that Xi Jinping urged Alexander Lukashenko to make progress in the operation of the Great Stone Park near Minsk.

At the end of 2020, there were 68 residents in the Chinese-Belarusian Industrial Park. At the same time, only 27 companies began to implement their business projects and carry out production activities.

Recently, not only have investments in the park sunk, but foreign investors are in no hurry to become its residents.

The head of the administration of the "Great Stone" Alexander Yaroshenko said today that the economic processes in the country and in the park last year, if slowed down, then only slightly. At the same time, several projects have been launched, the implementation of which began even before the pandemic and the political crisis in Belarus. These are projects in the engineering industry, the Fast-MAZ gearbox production plant launched last year, as well as Zoomlion-MAZ, which produces heavy-duty cranes on the platform of MAZ vehicles.

“We look at the future with great optimism. We would like to maintain the pace of attracting investors and reach 85 residents this year. Two have already been signed this year - one of them will be engaged in traditional Chinese medicine, - said Yaroshenko.