Belarus attempts to replenish its international reserves at China’s expense
On July 19th, National Bank’s Chairman Ermakova talked about ongoing negotiations with China concerning an untied loan to replenish the gold reserves.
As a result of Lukashenko’s Chinese visit, USD 1.5 billion worth agreements were signed. The Chinese visit’s main purpose was to find further funding to support Belarusian socio-economic model. Belarus offered China a duty-free access to the Russian market at a relatively small cost. China continues evaluating what Belarus has to offer.
Official reports say that as a result of the Chinese visit, a number of economic cooperation agreements were signed, altogether worth circa USD 1.5 billion. On the one hand, Belarusian exports to China are insignificant – mainly potash fertilizers. In January - May 2013 Belarusian exports to China earned USD 279.1 million (of which potash exports were USD 184.1 million). On the other hand, Belarus’ imports from China were USD 1.13 billion during the same period, and trade deficit with China is only worse than Russo-Belarusian. The newly signed contracts will only strengthen the negative trends in Belarus’ foreign trade, but country’s leadership is not particularly worried about it.
The planned potential of the Sino-Belarusian industrial park (USD 50 billion) is already higher than the current exports and for a number of reasons cannot be considered as a potential export growth source. Russia will not allow for all variety of goods to be supplied at its market, irrelevant of the created common economic space. Belarus’ statements about the signed agreements deemed to disguise the main purpose of the visit, i.e. searching for financial resources to replenish the gold reserves. China is the largest international reserves holder – over USD 3.3 trillion – and is searching for profitable investments. Belarus needs financial fueling for its economic model, which is back to negative current account payment balance after a short ‘break’ in 2012.
From Belarus’ view, mutual interest is obvious. At a relatively small costs China can get a base for expansion into the Russian market and other Belarus’ neighbouring markets. As an additional bonus, China receives contracts to expand Chinese exports to Belarus and enhances its long-term impact on the country. Belarusian exports to China should be regarded as development of potential competition for Belarusian goods in the Russian market. China has a successful market expansion tactics: it makes test purchases of marketable products, makes their copies and offers analogues at prices, lower than their market values. Belarus needs financial resources, and China has it. Using Chinese funds, Belarus will attempt to modernize its economy, hoping for further growth in exports, which might lead up to a positive trade balance. So far, Belarus’ progress in this regard is questionable.
Belarus continues searching for additional financing to support its ineffective economic model. In the long term, Belarus will strengthen its financial dependence on the external contractors and will have to agree to projects that are not the most efficient.
During searches of social and "green" activists and anarchists, law enforcement has seized computers, mobile phones and publications. The authorities have also exerted additional pressure on supporters of unauthorized street protests and independent lawyers, who represented defendants in the White Legion case. The security services have stepped up the persecution of opponents before the street protests announced by the opposition. Apparently, the Belarusian authorities aspire that participants in street protests would reduce in number and that the low interest of the population to socio-political agenda before the local election campaign would retain.