What is China doing in Belarus?

Belarus became an important country for the European Union, and most of all, for Germany and France. It has always been important for Russia. In recent years, however, the group of countries interested in Belarus was joined by another strong player – China.

The close cooperation with China was inspired by the Ukrainian crisis which served as a warning to President of Belarus Alexander Lukashenko: “You could become Moscow’s next target” (which was also largely confirmed by the subsequent events). It is certainly no coincidence that it was precisely the ruler of Minsk who offered to host the talks and agreements – which have not been fully implemented – aimed at ending the war and the crisis in Ukraine.

Enter the Dragon

From Beijing’s perspective this undemocratic regime, which is characterized by a high degree of state interventionism in the economy and a declared allegiance to “socialism” – and which, additionally, isn’t fully dependent on Moscow – certainly had its advantages. And once the Chinese president Xi Jinping announced his ambitious plans in the autumn of 2013 – which involve, among others, the construction of a new Silk Road as part of the One Belt One Road Initiative – the importance of Belarus in China’s calculations rapidly increased, because it is located along the land route of the Initiative.

China’s investment and greater interest in Belarus began in the first decade of this century, as part of Beijing’s “going global” policy (Zou chuqu). It is estimated that in 2000-2014, China provided Belarus with credits and loans for a total amount of USD7.4bn (read more). This means that serious economic and commercial involvement occurred even before the launch of the entirely new geostrategic effort carried out as part of the One Belt One Road Initiative.

A real breakthrough came during Xi Jinping’s visit to Belarus in April 2015, which was the first time the Chinese leader came to that country. Dozens of agreements worth a total of USD15.7bn were signed – this is a lot from the point of view of a relatively poor country with limited business opportunities and contacts. These contracts primarily included infrastructural projects, mainly in the areas of industry and public transport, but also schools, cinemas, and even casinos, as well as Chinese assistance in the development of the “Polonez” rocket system. The offer of cooperation presented by China was therefore very broad.

Of course, these were mainly tranches of Chinese loans – and also, to some extent, assistance funds. However, from the point of view of Belarusian elites this new partnership was equivalent to finding an angel, as it provided an opportunity for their own private enrichment, as well as for gaining more independence from Moscow. Meanwhile, President Lukashenko himself proudly travelled to Beijing, including the summits of the One Belt One Road Initiative, accompanied by his grandson, who is an ambitious student of the Chinese language. The West never wanted to establish closer ties with Belarus due to its confessed democratic values, while Moscow and the Russian President Vladimir Putin were always primarily guided by their own ambitions, which did not necessarily align with the plans of the ruler of Minsk. Meanwhile, the Chinese see these relations as “exemplary”, despite the fact that Belarus remains outside another important Chinese project devoted to cooperation with our region, known as the “17+1 initiative”.

The Great Stone of cooperation

The “Great Stone” Industrial Park quickly became the flagship project in the framework of the Chinese dragon’s strong entry into Belarus. It is being built next to the international airport in Minsk, on a plot of land with a total area of 112 square kilometers by a state-owned conglomerate China CAMC Engineering Co., Ltd. (CAMCE). The “Great Stone” is modeled on a previously built industrial park in Suzhou, which was offered by Singapore to the authorities of the People’s Republic of China. The construction works were launched on the basis of a decree signed by Lukashenko in June 2012.

However, the investment only gained real momentum following Xi Jinping’s visit, when the construction plans were included in the framework of the One Belt One Road Initiative. It was only then that other companies also joined this ambitious project, which now also provides for the construction of a smart city for approximately 130 000 residents nearby. The entry of new companies was followed by the provision of additional lines of credit. The ranks of these new companies joining the project included the well-known Chinese technology giants such as Huawei and ZTE. Ultimately, these investments are not just about infrastructure, but mainly about advanced technologies. Huawei has announced that its investment in the park would involve the construction of a pilot 5G project.

Right now, there are more than 60 companies active in the park, including as many as 33 from China, and only 12 from Belarus (the rest are Western companies, mainly from Germany). China has invested more than USD2bn in the “Great Stone” industrial park, and according to the Chinese embassy in Minsk the total invested amount is ultimately expected to reach USD5.5bn. Initially, when China first entered Belarus with its investments, the elites in Minsk hoped that their value across the country could reach USD30bn. This was classic wishful thinking because that amount is equal to half of the country’s annual GDP. Even so, the cumulative value of Chinese loans, grants and investments is estimated by the renowned Chinese Academy of Social Sciences in Beijing at USD20bn.

It’s also worth nothing and emphasizing that the range of these investment offers is constantly growing. The most recent loan, amounting to CNY3.5bn (approx. USD500m) and signed in December 2019, was granted by the Shanghai branch of the state-owned China Development Bank. In this case, the financing was allocated on the development of the domestic oil processing industry in Belarus (which has thus far been dependent on Russia). Further loans and forms of cooperation were planned, but the outbreak of the coronavirus pandemic has changed the situation. However, its effects will likely not lead to a reduction in Chinese involvement in Belarus. This is because the geostrategic considerations are clear — it is necessary for China to be present in Belarus, and Beijing is not withdrawing from this strategy.

This is especially the case since this relationship also provides the lucrative benefits resulting from the bilateral trade, whose structure resembles the trade exchange with China’s other partners in the region (including Poland). China is primarily selling high-tech products and equipment to Belarus, while the value of its purchases is much lower, and they mainly include agricultural goods and raw materials. In 2017, Chinese exports to Belarus amounted to USD2.7bn, while the value of China’s imports from that country only reached USD360m (in the next year the value of Chinese exports exceeded USD3.5bn, and China’s surplus in the bilateral trade exchange with Belarus remained huge). These volumes are obviously somewhat modest compared to China’s trade with Russia, which amounted to USD84bn in the same year. However, what counts the most in this case are the geostrategic calculations, and not just the commercial interests.

Lies, damned lies, and statistics

Of course, these figures and data may be disputed, especially if we consider the famous British saying that “there are three kinds of lies: lies, damned lies, and statistics”. But instead of arguing that in reality only 15 per cent or 20 per cent of the granted loans and funds were actually used, we should note the fact that we see the entirely new phenomenon of strong Chinese presence. Chinese investments, including, among others, the project (still in the concept stage) of a high-speed rail line reaching all the way to the Polish border (the idea was presented by the China Railway Construction Corp. in 2017), should not be ignored and passed over. Just like the fact that Belarus is now an observer state in the Shanghai Cooperation Organization, which in this way — regardless of its perceived importance and role — has literally reached the Polish borders.

Meanwhile, the Chinese presence in Belarus is constantly growing. Of course, it is not as large as originally planned. This is due to the fact that the entire One Belt One Road Initiative is now assessed as overly ambitious and too costly even for Beijing’s enormous potential, which was confirmed by reliable and independent analyses and evaluations. However, Chinese investment in Belarus is constantly growing while the range of credit offers and initiated projects continues to increase.

For example, Chinese state-owned conglomerate, China Railway Construction Corporation (CRCC), has already become involved, alongside Swiss entities, in the construction of the third line of the subway in Minsk (a section with a length of 17.2 kilometers is currently being put into use).

According to the data carefully collected by the Belarusian-Chinese Intergovernmental Committee on Cooperation, the Chinese are even engaging in projects such as the construction of nursery schools, kindergartens, apartment houses and even care homes (they supported the construction of 22 such objects). As in the case of other partners, production intended for exports to China is also promoted, because the excessive trade deficit is a major issue for the Belarusian authorities.

The latter are not hesitant about expanding this cooperation, however, as they see that Chinese involvement brings lucrative benefits both for the country and for themselves. Moreover, the Belarusian authorities are applying for a permanent membership in the “17+1” cooperation formula (they recently started participating in the summits, at least at the expert level). Belarus is also praised by China for being “one of the countries most involved in the One Road One Belt Initiative projects”. Despite the fact that many initial plans failed, which is strongly emphasized in Western analyses and studies, the Chinese are apparently not discouraged by these setbacks and still pursue cooperation.

Only some independent analysts, including those in Belarus — which is significant — are accusing their own business and political elites (which are often the same people) that they are allocating public funds and resources to Chinese projects which are not fully defined and transparent, but are quite expensive from the point of view of the budget.