12.04.2015 Author: Sofia Pale

On perspective partnerships between Georgia and China in 2015

_58967475_jex_1344631_de27-1According to official statistics, in 2015 China has become the largest investor in Georgian economy, leaving in its wake Azerbaijan, Kazakhstan and the Russian Federation.

The period of most intensive trade-economic development relations between the PRC and Georgia reached its peak in the last decade. So, if in 2000 the trading volume between the two nations was only $4.1 million, then by 2015 it equaled no less than $690 million (by Georgian data) or even $960 million (by Chinese data). Thus, in the beginning of 2015 China became Georgia’s third major trade partner, supplying 8.3% of the country’s total foreign trade turnover, losing first place to Turkey (15.7%), and second to Azerbaijan (11.4%). The main article exported from Georgia is copper ($12 million in January-February 2015), as well as organic grape Georgian wines enjoying a growing demand from Chinese consumers ($1 million over the same period). It is important to note that in the beginning of 2015, Georgian export to China rose by 271% compared to the beginning of 2014.

Starting from 2012, the PRC planned to invest $1.7 billion in Georgian economy in the coming five years. These criteria were completely fulfilled: in the following years until now the volume of Chinese investments was an average of $300 million yearly, and in the future, it promises only to increase. Moreover, participation of Chinese capital in Georgian economy enables creating 1,000 new jobs yearly. For the Georgian population of only five million, this is no small number.

Chinese-Georgian relations are considerably strengthened by the Georgian governmental economic reforms policy, thanks to which in 2014 Forbes magazine rated Georgia as the 47th best country for starting a business. This position is higher than its neighbors in the region: Turkey received 50th place, Armenia – 56th and Azerbaijan – 60th. An inviting environment for investments in Georgia is created by a fairly low tax level in the country and minimal corruption, as well as current free trade agreement with the CIS countries. In the interests of simplifying business practices for Chinese investors in Georgia, there are also free industrial zones in Kutaisi, Poti, Batumi and Tbilisi.

However, mutually profitable cooperation between China and Georgia is based on, first of all, Georgia’s geographic position, thanks to which the country can become a vital player in the transportation of goods between China and the EU.

In particular, as one of the priorities of the Georgian economy strategy adopted in 2014, “Georgia – 2020”, the need to reinforce the nation’s role as a transit government in the planned “New Great Silk Road” proposed in September 2013 by the Head of the PRC, Xi Jinping at a high level meeting in Kazakhstan, is emphasized. At the base of the “Silk Road Economic Belt” lies the goal of connecting transport routes in Central, Eastern, Southern and Western Asia. These goals are being reached through the support of Asian Infrastructure Investment Bank and the Silk Road fund and have been made into reality so successfully, that in 2015 the “Silk Road Economic Belt” has every opportunity to become one of the key topics in the region.

It won’t be wrong to note that Georgia is the shortest and fastest trade route between China and Europe.

For Georgia to participate in the “New Silk Road” project, in March 2015 in Beijing, an agreement was signed between China’s largest state-owned energy company “Power China” and Georgian company “Anaklia Industrial Eco Park and Port Ltd”. According to the agreement, in six months the Chinese will, for their part, begin construction of a major port on the Black Sea in the village of Anaklia with a capacity of 100 million tons of cargo annually. Chinese investments in this project will come to the tremendous amount of $5 billion.

This year, to these projects the railway route Baku-Tbilisi-Kars will be added, which is also called the “Iron Silk Road”, designed to link the Beijing and London, reducing travel time by 20-25 days, in order to transport Chinese goods to Europe.

A noteworthy fact is that the PRC has already confirmed its participation in the planned 2015 conference in Tbilisi, “Great Silk Road”, during which future infrastructure and financial projects will be discussed.

In connection with China’s reinforced position in recent years, in Georgia there has been noted a spark of interest in learning Chinese. Particularly, in 2013 during the joint project of Georgian and Chinese Ministries of Education, “Teach and Learn with Georgia’, 10 teachers-volunteers arrived from the PRC to begin teaching Chinese in ten Tbilisi schools. As estimated, today 350 students study Chinese at school.

One of the first landmarks in the development of cultural and educational connections between China and Georgia became the opening of a Sinology Department in 2007 in the Humanitarian Faculty of the Tbilisi State University.

Chinese is studied in Tbilisi at the Free University where the Confucius Institute functions, established in 2010, supported by the Ministry of Education of China and the Chinese embassy in Georgia. Currently, 50 Georgian students are studying Chinese at the Confucius institute.

Likewise, in 2013 the “Chinese Language Bridge” program was established, in which the winners of a contest on Chinese language skills receive and opportunity for a year-long internship in China.

Regular exchange programs and guaranteed employment for the best graduates hired by Chinese companies operating on the territory of Georgia demonstrate high efficiency rates of educational programs for studying the Chinese language.

In conclusion, it is necessary to note one more aspect of the Georgian-Chinese collaboration, which consists of the “de-dollarization” of economic relations between governments, i.e. the gradual replacement of dollars with Yuan through trade and financial operations. In the past few months, China has actively implemented the policy of “de-dollarization” with countries that are partners of Georgia. In December 2014, the PRC switched to direct Yuan-Ruble trading pair with the Russian Federation. In March 2015, they signed swap agreements with Kazakhstan and Armenia. Such steps are mutually beneficial, since Yuan is likely to receive the status of the world reserve currency soon. And this makes Georgia’s partnership with China even more promising.

Sofia Pale, PhD, Researcher for the Center for Southeast Asia, Australia and Oceania, Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.

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