Saturday 18 May 2024 | 23:08

BelarusDigest: Will Belarus Lose The Chinese Market In 2016?

21.06.2016  |  Politics   |  Aliaksandr Filipau, BelarusDigest ,  
BelarusDigest: Will Belarus Lose The Chinese Market In 2016?

On June, 9 the Council of Ministers of the Republic of Belarus appointed high-ranking officials personally responsible for implementing a number of investment projects.

Prime Minister Andrej Kabiakou became supervisor of the BelGee project (vehicles production).

This move emphasises the importance which the Belarusian authorities attach to relations with China, even in spite of permanent criticism of their policies in this regard from independent experts.

The Belarusian government has declared three pillars in this cooperation: mutual support in the international arena, loans and investments from China and growth of Belarusian exports to the Chinese market.

However, exports have always been a weak point in Belarusian foreign policy, particularly in relations with China. In spite of numerous optimistic promises, for many years China has remained the most unfavourable trading partner of Belarus.

Although the years 2014 and 2015 witnessed some seemingly positive changes in this situation, Belarusian exports to China are becoming increasingly counter to the national interest.

Belarus-China trade in 2011-2014: optimistic promises and disappointing results

Belarus-China trade has always been a matter of serious discussion in Belarusian expert circles, due to the fact that it clearly goes against Belarus' declared export-oriented foreign policy. One can hardly expect a positive trade balance between any country (excluding oil and gas exporters) and China.

However, in the case of Belarus the imbalance between Belarusian exports to China and Chinese imports to Belarus has been particularly acute. The clear discrepancy between the officially proclaimed goals of Belarusian foreign policy in general – export growth – and the trade deficit with China has always been a source of tension in the development of Belarus-China relations.

The table below illustrates the export-import balance in Belarus-China trade in 2011-2014:

Such an imbalance can hardly be compared to that with Belarus’ other key trade partners – Poland, Germany and Russia. All are countries with both significant exports and imports, as well as a significant variety of traded commodities:

Moving towards improvement in 2015?

However, the year 2015 witnessed more positive changes in bilateral trade, a trend which started in the year 2013. The table below illustrates these changes:

In spite of the low growth in Chinese imports, Belarusian exports to China demonstrated significant growth. A number of Belarusian and Chinese officials pointed to these figures as a successful achievement in bilateral relations and even as a qualitatively new trend in mutual trade. Unfortunately, this trend was not sustained in January-March 2016. The table below illustrates this:

No new trend, the same decline

The dramatic fall in Belarusian exports to China combined with the comparative slow down in Chinese imports to Belarus are grounds to examine more carefully the reasons for the positive trends in 2015.

Potash fertilisers contributed $650m, or 83.16 per cent, of Belarus’ exports to China in 2015. In 2014 the share of potash fertilisers totaled 71.1 per cent of Belarusian exports to China. This means that de facto Belarus reduced its exports in China.

This reduction corresponds with the general trend in Belarusian foreign trade since 2012 and, as some experts believe, illustrates the processes of de-industrialisation in Belarus and the decline of its economy. The emergence of competitors in the potash fertiliser market and the decrease in the value and amount of other commodities mark the first main trend in the Belarusian export to China.

The decrease in prices for Belarusian exports to China marks the second basic trend in bilateral trade. The table below illustrates this trend via the medium price (in USD K.) for the five most significant groups of commodities:

Unfortunately, Belarusian statistics do not include the prices for potash fertilisers exported to China. The figures in the table reflect the export prices for Belarusian potash fertilisers sold beyond the CISmembers. Usually, Belarus sells these fertilisers to China at even lower prices.

For example, Bloomberg reported that in 2015 Belarus sold potash to China for $315 per metric tonne, including shipping costs. Competitors considered this price to be unsustainably low. No clear information is available on the prices in 2016. However, according to data from VTB bank, market prices may go below the psychologically important level of $200.

Two other main commodities – polyamides and heterocyclic compounds with nitrogen atoms – have also seen a decrease in their export price to China. Polyamides experienced the lowest price level compared with export prices to other countries.

Is China playing on this scenario?

The tables above illustrate that the Belarusian authorities, who desperately need foreign currency, have concentrated their efforts on increasing the volumes of exported potash fertilisers on account of prices cuts. Such a policy will lead to positive results only in the short-term, while in the medium- and long-term it can have only negative outcomes.

Sad to say, Chinese policy-makers are well aware of this and have an elaborate strategy to protect their economic interests on the potash market. Bloomberg’s and VTB’s experts report that

China is sitting on above-normal inventories of up to 5 million tonnes, domestic production is running at full speed and railway deliveries from Russia as large as 120,000 tonnes per month continue, so the country is not in a rush.

Some of this 5 million tonne stock certainly came from Belarus in 2015.

It is not the first time that the Chinese have adopted this strategy of buying low-priced potash fertilisers, accumulating large stocks and promoting further competition between suppliers to keep prices low. In particular, the same scenario occurred in 2013.

However, the Belarusian authorities do not have many choices: the country needs currency now, and it seems that nobody is thinking even in a medium-term perspective. The logical results of this policy already came to bear in the first half of 2016 when Belarus failed to make significant exports to China, including of potash fertilisers, and now risks facing a dramatically low price of $200 per metric tonne.

Shaping results for the year 2016

There is no doubt that any exporter to China faces great challenges in this market. However, the analysis of Belarusian exports to China since 2013 reveals a substantial narrowing in the range of exported commodities, lowering of medium prices and a growing share of potash fertilisers in the overall export market. This policy brought moderately positive results in 2013-2015, promoting slow growth of exports and reducing the imbalances between exports and imports.

Unfortunately for Belarus, trade results for January-March 2016 demonstrate that such a policy has exhausted its capacities.

The year 2016 is going to be a catastrophe for Belarusian exports to China due to low prices for potash fertilisers and the total absence of any opportunity to compensate these prices by increasing volume of supplies, as well as the lack of capacity to propose other goods to the Chinese market.

It seems Belarus is going to see significant currency losses in its trade with China this year in the context of a deepening economic crisis in the country.

Originally published at BelarusDigest

Other news section «Politics»

Andrei Yahorau — Al Jazeera: “Lukashenko is irresponsible”
Andrei Yahorau — Al Jazeera: “Lukashenko is irresponsible”
He said Belarus would likely face economic tightening not only as a result of the coronavirus pandemic but also a Russian trade oil crisis that worsened this past winter.
Shhh! Belarus Wants You to Think It’s Turning Over a New Leaf
Shhh! Belarus Wants You to Think It’s Turning Over a New Leaf
Minsk’s muddled media clampdown could jeopardize warming of relations with the West.
Statement of the BNP in connection with the wave of searches in the editorial offices of the Belarus
Statement of the BNP in connection with the wave of searches in the editorial offices of the Belarus
The Belarusan National Platform of the EaP CSF issued a statement in connection with the wave of searches in the editorial offices of the Belarusan media and the detention of journalists.
Statement of the Belarusan EaP CSF National Platform on solidarity with the civil society of Armenia
Statement of the Belarusan EaP CSF National Platform on solidarity with the civil society of Armenia
The Belarusan National Platform of the Eastern Partnership Civil Society Forum issued a statement on solidarity with the civil society of Armenia.
"Vilnius Consultations": Key points and recommendations on the future of EU Eastern Partnership
"Vilnius Consultations": Key points and recommendations on the future of EU Eastern Partnership
On September 11, the inaugural „Vilnius Consultations“ conference was organized by Vilnius Institute for Policy Analysis and Lithuanian Ministry of Foreign Affairs.
From farewell to a new Eastern policy and towards a new development
From farewell to a new Eastern policy and towards a new development
Poland and Germany were both initiators and drivers of a New Eastern policy linked to the Eastern neighborhood and Russia/Soviet Union.
Uladzimir Matskevich: The sooner the "Union State" is denounced, the better for Belarus
Uladzimir Matskevich: The sooner the "Union State" is denounced, the better for Belarus
Not only does the "Union State" undermine the establishment of civilized relations with Europe, but it hinders the possibility of normal relations between Belarus and Russia.
Uladzimir Matskevich: The regime can no longer control the situation in the country
Uladzimir Matskevich: The regime can no longer control the situation in the country
The authorities are unable to prolong the social contract with the people: there is no way out of the social crisis.
Press release in connection with the dialogue in the format of the EU-Belarus Coordination Group
Press release in connection with the dialogue in the format of the EU-Belarus Coordination Group
Belarusan National Platform of the EaP CSF welcomes the dialogue process in the format of the EU-Belarus Coordination Group, the third round of which was held in Minsk on 3-4 April 2017.
Statement of the BNP in connection with the events of March 25-26, 2017 in Minsk and other Belarusan
Statement of the BNP in connection with the events of March 25-26, 2017 in Minsk and other Belarusan
Belarusan National Platform of the EaP CSF issued a statement in connection with the events of March 25-26, 2017 in Minsk and other Belarusan cities.
Statement by the Eastern Partnership Civil Society Forum on mass repressions in Belarus
Statement by the Eastern Partnership Civil Society Forum on mass repressions in Belarus
The EaP CSF Steering Committee issued a statement on repressions against civil society activists and journalists in Belarus, in view of the demonstrations planned on 25 March 2017.
Uladzimir Matskevich: Belarus-Ukraine relations need to be re-established
Uladzimir Matskevich: Belarus-Ukraine relations need to be re-established
"Case of Zhadan" demonstrated that Belarus does not actually have a clear policy - neither domestic nor foreign.
Belarus
Belarus's Lukashenko alleges “fifth column” plot as unrest continues
Belarusan President Lukashenko said on Tuesday a “fifth column” was plotting to overthrow him with the help of foreign-backed fighters, days before a planned street protest in Minsk against a new tax.
In Belarus, a rising fear: Will we be the next Ukraine?
In Belarus, a rising fear: Will we be the next Ukraine?
The relationship between Russia and Belarus has never been an easy one.
Andrei Yahorau: European window of opportunity is slowly closing, relations take form of fatigue
Andrei Yahorau: European window of opportunity is slowly closing, relations take form of fatigue
The Belarusian regime is not able to pursue a truly multi-vector policy, and the EU cannot decide what it needs in the region on the whole and from Belarus in particular.
Uladzimir Matskevich: Today Belarus is in a very difficult situation
Uladzimir Matskevich: Today Belarus is in a very difficult situation
But even under the circumstances the authorities have various ways out.
Uladzimir Matskevich: Lukashenka does not disrupt Russian plans to annex Belarus
Uladzimir Matskevich: Lukashenka does not disrupt Russian plans to annex Belarus
But Lukashenka is afraid for his fate and position - he needs Belarus to be sovereign to fully exercise his power.
Andrei Yeliseyeu: Russia is taking drastic unconstructive steps  
Andrei Yeliseyeu: Russia is taking drastic unconstructive steps  
There should be no actual passport control for the Belarusians arriving in Russia within the framework of the existing Belarusian-Russian agreements.
Uladzimir Matskevich: Visa-free regime is not a political concession to the West
Uladzimir Matskevich: Visa-free regime is not a political concession to the West
It is a process of normalization of Belarus-EU relations. Belarus just fulfils its international commitments.
Andrei Yahorau: Belarusian regime is self-improving, the only threat so far is the economy crisis
Andrei Yahorau: Belarusian regime is self-improving, the only threat so far is the economy crisis
Political analyst emphasizes that Belarus is the first modern authoritarianism in the European space, a phenomenon not yet studied by anyone.
Gintautas Mažeikis: The relation of political field and arena in the framework of information war

In his report, philosopher Gintautas Mažeikis discusses several concepts that have been a part of the European social and philosophical thought for quite a time.

“It is our big joint work”

It is impossible to change life in cities just in three years (the timeline of the “Agenda 50” campaign implementation). But changing the structure of relationships in local communities is possible.

Shhh! Belarus Wants You to Think It’s Turning Over a New Leaf

Minsk’s muddled media clampdown could jeopardize warming of relations with the West.

Mikhail Matskevich: How to create a local agenda and make it a problem solving tool

To achieve changes, you need to be interested in them and stop pinning all hopes on the state.