China in a Belarus Pickle
Updated: Sep 16, 2020
September 6th 2020
The massive ongoing protests starting in August 2020 in capital city Minsk and throughout the country, galvanized by President Alexander Lukashenko's fraudulent reelection, have Chinese leaders in a pickle.
Why is China interested in Belarus? Belarus' location puts it at the center of the crossroads of China's Belt and Road trade route to Europe. According to a German study, some 80% of Chinese trade to the EU goes through Belarus, mostly by road. China views Belarus as a key transit hub on the BRI, and the latter hopes to handle 10% of China-EU rail container traffic by 2022. While rail transport is more expensive than shipping by sea, the former is currently 20 days faster and could potentially reduce transit time to 14 days from China to Germany.
In 2019, container freight service began between Belarus and China, facilitating Chinese electronics, automobile parts, and clothing exports to Europe and agricultural exports from Belarus to China, including dairy and meat. Because of swine flu, China has sought to expand its sources of meat imports. Growing Chinese demand for dairy products also drives efforts to diversify imports. Agricultural products amount to 1/5 of Belarusian exports to China. While still modest, they nevertheless increased by 45% to $60.8 million in the first eight months of 2019, and amounted to $120 million by the end of the year. In April 2020, Belarusian Potash Company, a former distributor for Russia's Uralkali, signed a major deal to sell potash to China's SinoChem, although at such a low price that Uralkali accused the Belarusian company of undermining the market. China is the leading market for potash, used in fertilizer, and of which Belarus is a major supplier.
Belarus was an early participant in the Belt and Road Initiative, signing on in 2014. For China, this was fortuitous--just as Ukraine became a less stable entry point for China's Europe-bound trade, Belarus became a new "gateway to Europe." Belarus' trade with China overall reached $5.8 billion in 2019, a 58% increase over 2018. China is the country's number three trading partner and its largest in Asia. Belarus, which depends on the Russian market for 90% of its agricultural exports, has turned to China to diversify its agricultural export destinations. Over the past decade, Russia has used the leverage its large market share affords to cut off Belarus' agricultural imports over economic and political disagreements, most notably during the 2009 "milk war," the 2014-15 embargo, and the 2017 restrictions on meat exports.
In 2012, prior to the development of the BRI, China agreed to build, just outside Minsk, the Great Stone Industrial Park, the largest foreign investment in Belarus and the biggest Chinese industrial park in all of Europe. Inspired by the Suzhou-Singapore Industrial Park in China, Great Stone is a 68% Chinese-owned joint stock company. Key shareholders include construction equipment maker Sinomach (30% stake) and China Merchants Bank (20% stake). In 2015, Xi Jinping and his wife Peng Liyuan met with Lukashenko at Great Stone Park, an indication of its political importance to both leaders.
As of 2020, there are 63 companies in Great Stone Park, at least half from China, bringing in $1 billion in investment. According to Global Times, more than 70% of the projects are production-oriented. One such project involves a collaboration between China's diesel producer Weichai and MAZ, a well-known Belarusian vehicle producer, to build diesel engines. Nevertheless, critics of the park note that Great Stone has failed to live up to its promise and claim that much of the Chinese capital has come in the form of non-transparent loans, requiring Chinese equipment purchases, rather than direct investment.
Where's the Risk?
For China, the protests in Belarus portend unwelcome changes, and it is not surprising that Xi Jinping was the first to congratulate Lukashenko for his victory in an election that is widely considered to be fraudulent. Zhao Lijian, Ministry of Foreign Affairs spokesman, expressed China's opposition to "foreign intervention," though the latter could well include some form of overt Russian intervention. Additional sanctions on Russia and on Belarus would further complicate the Sino-Russian partnership and create new obstacles to Chinese trade bound for Europe along the Belt and Road.
In recent years, Lukashenko has sought to reduce Belarus' dependence on Russia by improving relations with China, especially as tensions between Russia and Belarus have escalated. Animosity between their two leaders has led to more pressure from Moscow and fewer Russian loans and subsidies. Greater interest from Belarus suits China fine, and benefits its Belt and Road agenda, though Lukashenko's efforts to achieve greater autonomy pose a problem for Putin who aims to draw Belarus more closely into Russia's own economic integration scheme, the Eurasian Economic Union.
Should Russia take advantage of Lukashenko's current plight, and increase its influence over a weakened but generally pro-Russian leadership, this would strengthen Russia's integration plans, while potentially causing new headaches for China's Belt and Road Initiative. On the other hand, this scenario might strengthen Russia's own support for the Belt and Road, particularly the corridor involving Belarus. Considering that Russia is a key strategic partner, China is unlikely to directly oppose a more direct Russian role in Belarus, though as with Ukraine, Chinese officials would be cautious in supporting such an overt intervention.
If China's thriving relationship with Ukraine is any indication, regardless of the political outcome in Belarus, agricultural ties between China and Belarus are likely to continue to grow. Food security represents the greater priority for China, as it faces unprecedented risks from the trade war with the U.S., record summer floods, and the COVID-19 pandemic.
The global risk in the unfolding situation in Belarus largely centers on the potential implications for the immediate European neighborhood, especially Ukraine, and the security consequences for the EU and NATO. Nevertheless, China plays a small but noteworthy role in Belarusian security which bears watching as Lukashenko seeks to maneuver between Russia and China.
China and Belarus began military cooperation in 2010, including production of equipment, training, and education. Chinese companies have contributed to the development of Belarusian military equipment, including the Polonez missile launcher, and Belarus' first telecommunications satellite. The Polonez missile launcher began production in 2015, and is now being sold to other countries including Azerbaijan. Huawei, a participant in Great Stone Industrial Park, has set up a video surveillance system for the Belarusian border.