Lukashenka's Chinese Dream
On 17 July, the Belarusian state leader completed his visit to China. According to Lukashenka, Belarus will become a pillow for the Chinese Empire in Europe. The meetings were full of pomposity, but the results seem modest.
Although Belarus has signed the Joint Declaration on the Establishment of Relations and Comprehensive Strategic Partnership, a number of contracts and agreements, the authorities have not achieved their main goal - to attract direct investments.
Lukashenka's regime has been repeating the mantra of a strategic partnership with the Middle Kingdom for years, but Belarus so far failed to receive significant benefits from this cooperation. China sets strict conditions for lending to Belarusian and is in no hurry to invest. Some Chinese projects in Belarus slip because of the poor quality of Chinese equipment and services.
The future of economic relations remain an uncertain one for Belarus. As a result of the low level of Belarus' public administration, its non-modernised economy and a lack of sinologists, the relationship will develop according to a Chinese-led scenario. Belarus will play a passive role.
Lukashenka in the Middle Kingdom
Lukashenka had many reasons to visit China. First, Belarus wants direct investments, and does not get any. Secondly, Lukashenka wants to soften the strict demands typically placed by China during joint projects. It is unusual for Lukashenka that someone dictates to him what to do, even Russia has no such power. In addition, the Belarusian authorities keep trying to sell overflowing stocks of agricultural machinery.
It should also be noted that the Chinese lobby inside the Belarusian authorities has strengthened. A Former employee of the embassy in China, Kiryl Rudy, recently became an economic advisor to Lukashenka.
In China, the Belarusian ruler has had several important meetings. He held talks with head of the PRC Xi Jinping, Premier of the State Council Li Keqiang and Chairman of the National Committee of the People's Political Consultative Conference Yu Cheng-sheng. On 16 July, Lukashenka and Xi Jinping inked a Joint Declaration on the Establishment of Relations and Comprehensive Strategic Partnership.
The sides traditionally mentioned that no one could interfere in the internal affairs of a country using human rights issues. Belarus reaffirmed their commitment to the principle of "One China" and China has pledged to support Belarusian sovereignty.
During the visit, the countries signed 36 documents for $1.5 bn worth of projects. However, most of these contracts relate to China's exports to Belarus. Moreover, Belarus will pay for Chinese goods or services with Chinese soft loans. As Belarusian economist Syarhei Chaly noted, "the Chinese give credit to Belarus to expand its own exports."
Belarus Lose in Relations with China
Lukashenka likes to hyberbolise the benefits of relations with China. The results of the cooperation remain rather poor.
Although official Minsk does have credit lines for $16bn, this credit remains restricted – and they lead to an increase in Chinese imports.
Although official Minsk does have credit lines for $16bn, this credit remains restricted – and they lead to an increase in Chinese imports, usually of low quality, and to the and an increase in foreign debt. China has hardly made any direct investments in Belarus and cannot grant Belarusian workers the conditions that Western investors would likely grant.
In addition, the Chinese demand from Lukashenka's regime more than any other country. Political activist Mikhail Pashkevich said that at present the Chinese authorities are demanding an enlargement of the area for the Belarusian-Chinese industrial park by 1,000 acres, the construction of an internal communication and logging park using Belarusian money, as well as the right to use subsoil.
However, as Belarus cannot get cheap loans or credit in any other place, the authorities continue to borrow money from China. 30-50 % of credit winds up back in China in the form of goods or services. Chinese credit does have a significant upside – payments start after 3-5 years, and the interest rate is about 3-4 %.
The actions of the Chinese manufacturers caused a blast at the Minsk Thermal Power Plant and the introduction of new capacities at cement factories has been postponed for two years, which in effect led to a $0.5bn loss for Belarus.
According to the National Statistics Agency, Belarus' exports to China remains five times less than that of its imports, and a negative balance of trade is $2bn. Potash fertilizers make up half of Belarusian exports.
Can Belarus Win?
According to the Economist, the Chinese economy may leave American economy behind by 2019. The fact that China is may becoming the largest economy in the world in six years time ,and has a lot of money to invest, prompted the Belarusian authorities to strengthen their relationship with China.
The Belarusian authorities know what they want, but have no idea how to get it. Belarus lacks enough sinologists with a proper knowledge of Chinese industry. This is the first reason why Belarus is on the losing end of its relations with the Middle Kingdom.
China's domestic market is growing at an incredible pace, but Belarus remains unable to capitalize on it. To gain a foothold in the Chinese market Belarus should carry out a real modernisation of its economy and create a number of strong brands with a touch of top luxury. For example, Belarusian vodka or underwear could become significant brands in China.
Other causes of poor results in the relations with the Middle Kingdom remain standard. Belarusian officials need lectures in English and generally improve the functioning of its public administration. According to leaked US diplomatic cables, former Ambassador of China to Belarus Wu Hong Bin privately admitted to an American ambassador that "even the Tajiks are more open and less bureaucratic."
Until Belarus becomes capable of improving its public administration and understanding of China, getting the benefits of the bilateral relationship will remain just a dream of the authorities.