Armenian-Chinese relations19 m. | 2019-05-22
The process of the Armenian-Chinese relations has a centuries-old history, where a special place is occupied by trade routes connecting East Asia with the Mediterranean during Antiquity and in the Middle Ages known as- the Great Silk Road (GSR). One of the GSP’s routes passed through the territory of the Armenian Highland, having played a significant role in the development of not only trade and economy, but also cultural and civilizational ties between the two peoples (see Appendix 1). Moreover, the GSR served as a conduit for the dissemination of innovative technologies, culture and religious ideas. The Great Silk Road was a bridge that for centuries harmoniously interconnected the cultures and civilizations of two worlds - the West and the East. However, with the development of shipping, most land projects for many centuries have faded into the shadow.
Appendix 1. Routes of the Great Silk Road (300 BC - 100 AD)
C hina was among the first countries in the world that officially recognized the independence of the Republic of Armenia - December 27, 1991, and diplomatic relations between Yerevan and Beijing were established in April 1992. At the present stage, trade and economic relations are dynamically developing between the two states, which are based on a number of agreements that were signed by the governments of Armenia and China between 1992-1998. In particular, the “Agreement on the Basics of Trade and Economic Cooperation”, signed in January 1992, which formed a specific legal framework for the further development of bilateral relations.
In the periods from 1995 to 1998, bilateral trade did not exceed $1 million. The situation has gradually begun to change in a positive direction since the late 1990s and early 2000s. In 1999, the volume of Armenia-China trade amounted to about $12 million, which was due to a sharp increase in the volume of Chinese exports to Armenia - from $781 thousand in 1998 to $ 11.6 million in 1999. Let’s see the development dynamics of the Armenia-China trade and economic relations from 1998 to 2018 (see Appendix 2). Since the establishment of trade and economic relations between Yerevan and Beijing, there have been no cardinal changes in the export-import structure of both states. Almost the entire volume of Armenian exports to China accounts for the “copper ore and concentrate” (see Appendix 3). Chinese exports are more diversified, including products of the light, agricultural and chemical industries (see Appendix 4). As we have seen, over the past five years, mutual trade has steadily increased. This is mainly due to an increase in the supply of raw materials from Armenia to China, and the import of textile products, machinery and equipment from the PRC to Armenia.
According to the Armenian statistical service, the trade turnover between Armenia and the PRC in 2018 amounted to $771.1 million with an annual growth of 29.3%, of which 107.2 million fell to Armenia’s exports with an annual decline of 9.5% import share of 663.9 million with an annual growth of 39%. Moreover, according to the data of the same statistical service, in 2018, China’s share in the total volume of Armenia’s foreign trade was 8.9%. Now, China is the second trade and economic partner of Armenia after Russia.
Appendix 2. Dynamics of Armenian-Chinese economic relations from 1998 to 2018 (in US dollars, million)
(The Atlas of Economic Complexity, http://atlas.cid.harvard.edu/, 15.03.2019)
China, of course, is not as active as the Russian Federation or the EU countries in Armenia, but it still invests in the economy. In 2018, there were 50 registered enterprises with Chinese capital in Armenia, which are engaged in the wholesale of food, beverages and cigarettes, textiles and footwear, the restaurant business, the production of household electrical appliances and clothing, the retail trade of medical and medical goods, cosmetics and accessories. In this bilateral economic cooperation, one of the largest projects since 2011 has been the cooperation between the Shanxi-Nairit rubber plant in the Chinese city of Datong, Shanxi Province. The annual capacity of the plant is 30 thousand tons, $220 million was invested in its construction, and the company's annual income is about $100 million. The share of the Armenian side in this project is 40%.
In Armenia, the Chinese participate in various energy projects, among them has been the reconstruction and repair of thermal power plants across the country. In particular, 80% of the repair and reconstruction work of the fifth unit of the Hrazdan thermal power station (TPS) was carried out by China. The Chinese Commercial and Industrial Bank (ICBC) is considering opportunities for making investments in the energy sector of Armenia. This, in particular, is about the prospects for organizing the production of solar panels. Cooperation in the field of agriculture takes place in the form of exchange of agricultural crops and the establishment of model gardens. For example, Armenian apricots and grapes are rather successfully grown in the Chinese provinces of Shanxi and Hubei. The Chinese side provides free aid to Armenia in the form of fertilizer supplies (nitrogen, potash, etc.) for agriculture. In February 2019, the well-known Chinese company “Dalian Guoming Group”, which unites manufacturers of aluminum products from China, announced its intention to invest about $100 million in the creation of an industrial zone in Armenia. According to the Minister of Economic Development and Investments of Armenia Tigran Khachatryan, aluminum products will be produced in the industrial zone of 40 hectares. Products will mainly be exported to EU countries. In general, the volume of investment programs reaches $100 million, it is planned to create 300-400 jobs. Within the framework of this project, a logistics hub in Vanadzor (Lori region of Armenia) may be formed, taking into account its proximity to the railway. This will allow to organize the export of products from Armenia more qualitatively. Chinese entrepreneurs also intend to build logistic warehouse centers in Armenia that will serve as trade flows to the EAEU, the EU and other countries. In recent years, China’s Free Trade Zones (FTZ) have become increasingly active around the world. The authorities of the country are working on the creation of a FTZ not only in China, but also develop and implement joint trade and economic projects, industrial parks and special economic zones in the EAEU space. It can be said that the Chinese side would also be represented at the site of the free trade zone in the Syunik region (Meghri Free Zone), either in the form of various Chinese companies or in terms of attracting Chinese investment, or to enter into a separate agreement on free trade between Armenia and China,similar to the PRC’s agreements with other states abound. For example, since this year, the Free Trade Agreement between Georgia and China, signed in May 2017 in Beijing, has come into force. Such an agreement will significantly facilitate the import of Armenian products to the Chinese market. Recall that in August 2017, the Government of the Republic of Armenia decided to include China among the most promising for Armenia in the trade and economic plan of the partner countries.
Appendix 3. Armenia’s export structure to China in 2018
(Statistical Committee of Armenia, https://www.armstat.am/ru/, 01.03.2019)
Yerevan and Beijing are actively deepening and developing cultural and humanitarian ties. We note, the first Confucius Institute in the South Caucasus was opened in Armenia in 2008. Since September 2018, an Armenian-Chinese school has been functioning in Yerevan for 400-450 pupils (grades 5-12), where pupils take an in-depth study of the Chinese language. The school employs both local specialists (including former students who studied in the PRC) and employees (ethnic Chinese) from the Confucius Center. In addition, there are Centers for the Study of Chinese Language and Culture at the Russian-Armenian University and Yerevan State University. Moreover, for several years now, in a number of schools in Armenia, for example, in school number 55 named A. Chekhov and high school number 29 named A. Margaryan, students learn Chinese. Teachers at the above schools are from the Confucius Center in Yerevan. As part of educational cooperation, students are also actively exchanged under various programs. Every year, China is becoming more and more interesting among Armenian students. Now 70 to 80 Armenian students are studying in China. In recent years, students from East and South Asia have come to Armenia, including quite a few students from the PRC, who mostly study Russian here. For them, training in Armenia is more accessible (in price terms) than in Russia. The situation is similar with other EAEU member states, where there are also a lot of Chinese students studying Russian.
Recently, dialogue has been actively developing between academic, think tanks and expert communities of Armenia and the institutes of the Chinese Academy of Social Sciences (CASS). Recall that CASS is considered one of the most famous and influential academic, research institutes not only in the PRC, but also in the world ranking of think tanks. At the beginning of September 2017, the delegation from the Institute of Russia, Eastern Europe and Central Asia of the Chinese Academy of Social Sciences headed by Professor Sun Li. During the meeting with various academic and expert circles of Armenia, opportunities for the development of Armenian-Chinese cooperation in research and development, the development and implementation of joint projects and initiatives were discussed. Within the framework of cooperation in the cultural and scientific fields, various events are organized periodically. For example, in November 2018 a large international conference was held in Yerevan, dedicated to the 40th anniversary of China's reforms and opening-up policy. Conference participants addressed a wide range of political, historical, economic and cultural issues. Representatives of the Armenian government and parliament, representatives of a number of embassies, as well as other experts from Armenia, China and various countries attended the event. Following the results of the conference, Ambassador Extraordinary and Plenipotentiary of China to Armenia Tian Erlong said: “We consider Armenia our friendly partner in the region. We see the development of relations with Armenia in the areas of infrastructure, information and high technologies.”
Appendix 4. China's export structure to Armenia in 2018
(Statistical Committee of China, http://www.stats.gov.cn/, 25.04.2019)
The two states are not so active in the military sphere, but are steadily developing military-political relations. There is a shift to intensify relations between Yerevan and Beijing in the military direction. In September 2017, at the invitation of the Minister of Defence of the People’s Republic of China, a delegation led by Armenian Minister of Defence V. Sargsyan left for an official visit to China, where he met with her Chinese counterpart Chang Wanquan. As a result of the negotiations, an agreement was signed between the parties, according to which, China will provide Armenia with military assistance in the amount of about $1.5 million. It is important to note that the Minister of Defence of Armenia V. Sargsyan during his official visit to China also met with the leadership of the “Poly group” corporation, which is one of the largest military-industrial companies in China. In recent years, the company has introduced several types of weapons on the international market. During the meeting with the management of the Poly group, the parties expressed their desire to continue active discussions on the prospects for cooperation.
Appendix 5. Map of the ''One belt, one way'' project's potential transport corridors
Regarding the settlement of the Artsakh issue, Beijing clearly reaffirms its position regarding a just and rational resolution of the conflict - within the framework of international law, and not by the use of military force and aggression. Beijing has a low profile in recognizing the Armenian Genocide, and does not interfere with commemorative events that take place on April 24 in the major cities of the PRC: Beijing, Shanghai, Guangzhou and Hong Kong. Such actions are organized by representatives of the small Armenian community of China, numbering from 500 to 1,500 thousand people. For its part, Yerevan officially recognizes the “one-China policy”, which is based on the recognition of the existence of only one Chinese state on the world’s political map, despite the fact that there are two states claiming the name “China” - the People’s Republic of China (mainland part of China) and the Republic of China (Taiwan Island). In the development of Armenian-Chinese relations, the construction of a new Chinese embassy in Yerevan has an important meaning. In its size will become the second largest embassy of the PRC in the post-Soviet space, after Moscow.
Chinese project "One Belt, One Way"
I n the present stage, when most countries are connected to each other by trade, economy and information technology, the world has become much closer. With the development of technologies, the distance between countries is calculated not in years and months, but in days and even hours spent on board the aircraft. There is a blurring of interstate borders, as well as the interpenetration of national economies and the formation of a single economic space, which practically does not allow any country to be isolated from the outside world. Infrastructure and communications passing through the territory of a particular country increases its importance in the international arena, pushing neighbors interested in the smooth operation of communication corridors of any type, to reckon with its interests and needs. One of such communications was the economic project “One Belt, One Way”. In part, it is already functioning, but infrastructure projects continue to be implemented. It is believed that the proposal to create an economic project “One Belt and One Road” was first put forward by PRC Chairman Xi Jinping during his visits to Kazakhstan and Indonesia in the fall of 2013. However, the implementation of the regional program for the revival of the Great Silk Road by representatives of the PRC and the countries of Central Asia began in 2005. The Great Silk Road implies the connection of East Asia with Western Europe by transit through the Russian Federation, the countries of Central Asia and the Middle East, but it cannot be said that the route will follow a particular road, since each country interested in participating in this project publishes own visions of the future route (see Appendix 5). China has repeatedly stated that it will take an active part in the creation and financing of large investment projects for the construction of railways and highways in these countries in order to connect the Asia-Pacific region with Western Europe.
As is known, within the framework of the Chinese economic project “One Belt, One Way”, the creation of three main Trans-Eurasian economic corridors is considered:
Northern Corridor (China - Central Asia - Russia - Europe)
Central Corridor (China - Central and Anterior Asia - the Persian Gulf and the Mediterranean)
Southern Corridor (China - Southeast Asia - South Asia - Indian Ocean).
Within the “Central Corridor”, the South Caucasus, Turkey and Iran occupy an important geopolitical position and are located at the crossroads of trade routes between the West and the East and North-South. In this context, it is worth mentioning the strategic “North-South” transport corridor, 550 km long, which can provide access to Armenia for the Black Sea and European countries, facilitating communication with Iran and Georgia. That part of the construction roads (in the Shirak region) is being implemented by the Chinese company Sinohydro Corporation (under the 2009 loan agreement with the Asian Development Bank). The construction work was to be completed in 2016, however, it began with a delay of 3 years. According to this agreement, Armenia received $ 40 million. The second tranche amounted to $ 50 million; negotiations are underway to provide the third tranche. From 2020, payments on the loan should begin (24 stages, which will end in 2031). In the future, the Armenian North-South project may become part of a more global Chinese project, with further access to Georgia and from there via the Black Sea to Europe. Moreover, Beijing is interested in alternative ways for the following objective reasons:
- Increases its image, involving more countries in its own project;
- Alternative transport routes increase the economic security of the Chinese project.
At the end of April 2019, the second International Forum “One Belt, One Way” (Belt and Road Initiative, BRI) was held in Beijing. Heads of state and government from about 40 countries of the world arrived in the Chinese capital. For comparison, in 2017, leaders of less than 30 countries participated in the first summit. As of the beginning of May 2019, the PRC signed cooperation agreements under the “One Belt, One Road” initiative with 126 countries and 29 international organizations. However, representatives of the top leadership of Armenia were not invited to this forum. We believe that the main reason for this was the lack of specific transport routes that might interest the Chinese side. In the coming years, the construction work of the North-South transport corridor will be completed, which will increase Yerevan’s chances of full participation in the upcoming forums of the One Belt, One Road Economic Project. The second forum significantly surpassed the first forum in all quantitative indicators, but the atmosphere was far from festive, because over the years the project has accumulated a lot of problems. Beijing is determined to resolve them and restart the BRI. As we have previously noted, the rapid and stable economic development of Armenia in the long term is possible in the case of the construction of a railway that will connect Armenia with Iran. In the future, the Armenian-Iranian branch of the railway will connect with the longer branch “Tabriz-Tehran-Gorgan (Iran) - Etrek-Bereket-Gyzylgaya (Turkmenistan) - Zhanaozen-Aktau-Nur-Sultan-Dostyk (Qazaqstan) - Urumqi (China)”. This railway is of strategic importance, because it will connect Yerevan not only with Tehran, but also with all the countries of Central Asia. Moreover, the presence of such a route will radically change the significance of Armenia for the Chinese project “One Belt and One Road”. The total length of the Armenian-Iranian railway is 470 km, of which 410 km is within Armenia, and the cost of the project, according to various estimates, reaches $ 3.2 billion.
To add, the representatives of Turkey also did not come to the second forum either, relations of which with China were aggravated because of the “Uygur Issue”. Considering that the main routes of the IDP from the PRC will pass through the territory of the Xinjiang Uygur Autonomous Region (XUAR), where representatives of the Uygur ethnic group live, it can be assumed that Beijing has the following goal: to make internal and external efforts to develop the North western regions of the PRC. By implementing this idea, the Chinese government will be able to resolve three significant issues for its state:
- Large domestic investment in XUAR;
- Foreign investment in the region and the interest of foreign countries in stability in the XUAR;
- The presence of domestic and foreign capital will contribute to the development of socio-economic life in the region;
Thus, among the priorities of the Chinese economic project “One Belt, One Way” is to increase the level of socio-economic life in XUAR, and here, as we see, representatives of the political elite of Turkey have a certain negative influence. In this regard, Armenia can not be a priority for China, which competes with Turkey in Central Asia and the Middle East, and is also concerned for the safety of its citizens living in the north-west of China.
F rom January 2, 2015, Armenia is a member of the Eurasian Economic Union (EAEU) along with four other post-Soviet countries. At the moment, China is the second most important foreign economic partner of the EAEU (13.6% of total trade), significantly behind the EU countries - 48.9%. However, the partnership with Beijing is strategic and long-term in nature, while China’s share in the foreign trade of all EAEU countries has been showing permanent growth since 2014. China is not trying to achieve quick results; it advances its interests slowly, patiently waiting for results over the decades. In this sense, the “One Belt, One Road” economic project may become for the EEU countries, including Armenia, a good foundation for long-term economic development, but at this stage it is necessary to have ready-made transport routes that may interest Beijing.
For almost three decades Armenia and the People's Republic of China, have had a sufficiently high level of bilateral relations in various spheres have been developed, but it is not yet possible to fully exploit the existing potential. This is partly due to the complexity of the freight-logistics communication system between the two countries due to the lack of direct transport links; regional problems that violate rational and profitable trade routes, both through the Caspian Sea and Abkhazia, as well as the underdeveloped transport infrastructure of Armenia. Of course, such objective reasons have a destructive effect on the development of Armenian-Chinese relations, but they are not an insurmountable obstacle to building trust and successful bilateral relations in the long term.