Negative Friendship: How Trade with China Hits Belarusian Industry

The crude Chinese model of economic development played a cruel joke on Minsk.

The Busel edition analyzes the economic relations between China and Belarus, which led to the appearance of a negative balance.

Belarus is not a country with a raw material economy, but at present, the raw materials group forms the basis of the export of goods to the Chinese market. So, in 2020, the bulk of exports was made up of potassium chloride (43%), livestock products (27%), and the rest - wood, cellulose, timber, sugar, flax, and graphite products (1.7%). Over the past 15 years, China has completely replaced in the domestic market all products previously exported from Belarus with high added value: tires, polymer semi-finished products, and trucks.

In the structure of merchandise imports from China, the largest product groups are telephones for cellular networks, computers, processing machines, car bodies, engines, and the entire range of light industry products - from children's bicycles to shoes.

Defeat according to plan

The reasons for the economic expansion of the PRC lie not only in the Soviet past of Belarus, which became the assembly shop of the entire USSR but also in the model of economic policy that Lukashenka has adhered to since 1995. Belarus, having lost part of the chains of cooperation within the CIS, replaced them with supplies from China. At the initial stage, this made it possible to partially reduce production costs and make Belarusian products even more attractive on the CIS market in comparison with Western models, but only in those niches where Belarusian products had no Chinese competitors. Later, the crude Chinese model of economic development played a cruel joke on Belarus. The bulky public sector, from which China, by the way, moved away in the early 2000s, did not allow to respond quickly to the rapidly changing market and lost the competition with cheap Chinese goods.

The command-planning system of the economy of Belarus has also "added devastation." Government-dictated production of non-competitive goods led to overstocking of enterprises, an increase in accounts payable, and subsequent bankruptcy. History does not know the subjunctive moods but, in the event of a change in the form of ownership or giving the management of enterprises freedom of action, the currently destroyed factories of Belarus at least had a chance to exist. This is in the worst-case scenario, but in a real situation, they could fill the domestic market of Belarus with their own products.

Even though in 2020 China became the third most important economic partner of Belarus (after Russia and Ukraine) with a trade turnover of $ 4.5 billion, in fact, the trade growth was provided only by the colossal volumes of Chinese imports.

Negative friendship

The only result of the rapprochement between Belarus and the PRC was the large-scale import of Chinese goods to Belarus, which completely destroyed the prospects of the Belarusian industry. The strategic partnership between Beijing and Minsk cannot be called equal, if only because, before the rapprochement of these states, Belarus managed to maintain parity in foreign trade with the PRC. A negative trade balance with China leads to an outflow of currency from the country and, as a result, to instability of the national currency of Belarus.

The result of this economic "friendship" was a negative balance that exceeded $ 3 billion in 2020, which is 80% of the total negative trade balance of Belarus in foreign trade.