Turkiye And China Focus On Developing The Middle Corridor
Alignment between the BRI and Caspian Corridors a Priority
The 3rd China-Türkiye Communication Forum was held on September 26, 2022. The forum, jointly sponsored by China International Communications Group (CICG), and Turkuvaz Media Group concentrated on the development of deeper bilateral strategic cooperation in politics, economy and trade, culture, education, and science and technology. We discuss the outcomes of these discussions.
Introduction
Ten days ago, in his meeting with President Recep Tayyip Erdoğan of Türkiye in Samarkand, Chinese President Xi Jinping indicated that China is ready to work with Türkiye to elevate the strategic cooperative relationship to a higher level. Erdoğan also expressed the readiness to work with China to promote more fruitful bilateral cooperation in trade and investment. The first half of 2022 saw bilateral trade volume reach a new high of US$20 billion, demonstrating the potential for bilateral strategic cooperation.
Four Cooperation Points
The two sides laid out four main points for cooperation:
- Enhancing political mutual trust to consolidate the foundation for economic and trade.
- Aligning bilateral strategies to expand space for economic and trade cooperation. The two sides can enhance their cooperation in fields like technical innovation, green economy, public health, and infrastructure.
- Putting multilateralism into action to fuel global economic recovery. Note this specifically aligns them closer to Russia than to the United States.
- Deepening people-to-people exchanges to strengthen the bond of the two peoples.
Today’s Situation
Mustafa Tuzcu, Türkiye’s Deputy Minister of Commerce, said that the impressive bilateral trade growth in recent years owed much to the joint promotion of the heads of state of the two countries, bucking the global trend overshadowed by rising protectionism and the COVID-19 pandemic. China has become the second largest trade partner of Türkiye with bilateral trade rising from US $1 billion in 2001 to US$36 billion in 2021. There are now more than 1,200 Chinese companies operating in Türkiye, with their direct investment in the country up to US$4 billion. Tuzcu in particular emphasized the need to further attract Chinese investors to Türkiye and expand the country’s exports to China, to make the bilateral trade and economic cooperation more balanced and sustainable.
Synergy Between the Belt & Road Initiative and the Middle Corridor
Discussed in some detail was alignment between the Belt and Road Initiative (BRI) and the Türkiye-proposed strategy of Middle Corridor (Orta Koridor), increasing China-Türkiye economic and trade cooperation, and promoting regional multilateral cooperation.
Alignment
In the first session, Alignment of the BRI with the Middle Corridor, Zan Tao, director of the Türkiye Research Center at Peking University, said that the concept of a “bridge” has special cultural connotations to both Chinese and Turkish people. The Uzunköprü Bridge, a 15th-century Ottoman stone bridge over the Ergene River in northwest Türkiye, and the Zhaozhou Bridge, first built in the early Sui Dynasty (581-618) in north China, are both the apotheosis of architectural art in the world. Zan noted that it is necessary to build a bridge of friendship and cooperation in academic circles of the two countries, which will be conducive to exchanges and mutual learning between the two ancient civilizations, to cooperation and development between the two as emerging economies, and to the prosperity of the academic circles in the two countries. Chinese President Xi Jinping put forth the initiative of Silk Road Economic Belt in 2013. Based on the concept of the ancient Silk Road, the initiative aims to build a new economic development region extending from West China to Istanbul.
Türkiye was one of the first countries to express support for BRI. The Trans-Caspian East-West-Middle Corridor Initiative, known simply as the Middle Corridor, is a transportation network connecting Europe and Asia. The BRI and the Middle Corridor share almost the same guiding principles and reinforce each other in practice. In November 2019, the first cross-Caspian China-Europe freight train via Türkiye arrived in Prague, capital of the Czech Republic. This is an important achievement of China-Türkiye cooperation in aligning the BRI and the Middle Corridor Initiative. Zan called on academics to take full advantage of their unique role and promote the building of a bridge dedicated to cultural exchanges and mutual learning, economic cooperation and academic prosperity.
Other Regional Involvement
Wang Lincong, a researcher with the Institute of West Asian and African Studies at the Chinese Academy of Social Sciences, indicated that creative measures should be crafted to advance the alignment of the BRI and the Middle Corridor Initiative. The two sides should strengthen cooperation in spurring institutional innovation, move faster in involving more countries to join in the initiatives and improve competitiveness for the alignment of the two initiatives, he proposed.
Complimentary Routes
Derya Ğöçer, head of the Regional Studies Department of the Middle East Technical University, once conducted a two-and-a-half-year field survey and desk research on investment in Türkiye under the BRI framework and the status of Türkiye in the BRI. She believes that despite differences in visions, Türkiye’s Middle Corridor Initiative and China’s BRI are complementary. She thinks that Türkiye’s status in the BRI should not be restricted to its bilateral relations with China. Its unique geographical position connecting Central Asia, the Middle East and Europe, and its influence in the global arena, will affect its status in the BRI, she said. Citing logistics as an example, she found in her field survey that frequent diplomatic and business moves made by Türkiye and Central Asian countries had facilitated the flow of transit cargo with tangible results. Some logistics companies are coming back from Central Asia, and even Europe, with their vehicles fully loaded. She suggested that ports and logistics hubs should play a greater role in the BRI.
Bilateral Economic and Trade Cooperation Gaining Steam
Wei Min, a researcher with the Institute of West Asian and African Studies under Chinese Academy of Social Sciences, argued that both as emerging economies, China and Türkiye have encountered challenges in trade due to resurgent protectionism since 2018. On September 21, 2021, at the General Debate of the 76th Session of the United Nations General Assembly, President Xi Jinping proposed the Global Development Initiative from the perspective of the well-being of all humankind, highlighting the importance of global cooperation in digital economy and connectivity in the digital era. In recent years, China-Türkiye cooperation in digital economy, green economy, new energy and other fields has continued to gain momentum. Through effective utilization of digital resources and technologies, Türkiye is now shaping itself into a digital producer other than just a digital consumer, with digital platforms being established to provide contactless shopping experiences. Thus, the potential for China-Türkiye cooperation in digital economy is huge.
Zhou Yanquan, president of Turkish Chinese Enterprises Chamber of Commerce, has been doing business in Türkiye for many years. When sharing his experience of working in Türkiye, he said that although inflation in the country was still high, its economy was resilient. Their surveys show that manufacturing enterprises are generally doing well. Many Chinese enterprises have increased their direct investment in Türkiye’s manufacturing sector since 2021, thanks to an array of economic policies introduced by the government to alleviate economic pressure. In addition, Türkiye is one of the associate members of the European Union, which is also one of the main factors for many Chinese manufacturers to invest and build factories in Türkiye.
Furkan Karakaya, deputy director of the Presidential Investment Office, highlighted Türkiye’s important strategic position enabling the country to provide international corporations with convenient access to markets in Europe, Middle East, North Africa and Central Asia. Well-equipped with manufacturing and logistic infrastructure, and facilitated by its high-level service industry and vibrant young and qualified human resources, Türkiye could be an ideal destination for Chinese investors, Karakaya said.
Jointly Building Regional Multilateral Cooperation
In the third session, Jointly Building Regional Multilateral Cooperation, Gao Xiangyang, chairman of ICBC (Türkiye) Co., Ltd., who has worked in Türkiye for more than eight years, said that Türkiye’s economic development has unique advantages. First, it has a sound industrial foundation and a resilient economy. In 2021, its economy grew by 11.4 percent. Second, it has a vigorous economy with construction of infrastructure booming. Third, it has an inclusive culture and a highly qualified workforce. However, Gao pointed out that the Turkish economy also faces many challenges, which have hampered the deepening of economic and trade cooperation between China and Türkiye and the implementation of the BRI. Gao suggested that the Turkish economic policy should focus on maintaining the balance and stability of economic growth, so as to further build a favorable investment environment and expand foreign direct investment. Application of the currencies of the two countries should be expanded in bilateral trade, and the two countries should strengthen multilateral cooperation and jointly develop third-party markets. He said the two countries have a huge potential to jointly develop third-party markets and benefit from them, Gao said.
Zou Zhiqiang, a researcher at the Center for Middle Eastern Studies of Fudan University, indicated that China and Türkiye would find more cooperation fields as their common interests expand amid the changing global economic landscape. Therefore, there is a huge potential for the two countries to explore regional multilateral cooperation.
He emphasized five points in his speech: First, the alignment of the BRI and the Middle Corridor, while offering great opportunities for bilateral economic and trade cooperation, is also conducive for the two countries to carrying out tripartite cooperation in Central Asia, the Middle East, and the Balkans, and promoting economic connectivity in the Eurasian region.
Second, the fact that Türkiye has signed free trade agreements with 28 countries, coupled with its geo-economic advantage, enables it to radiate to a huge market with a population of 1 billion. China’s capacity in investment can facilitate the joint development of markets in Europe and surrounding regions.
Third, China and Türkiye are both major countries in infrastructure construction and project contracting, which has laid an important foundation for their cooperation in the third-party market.
Fourth, both countries are victims of trade protectionism, unilateralism and economic bullying. The two countries share common interests in maintaining the global free trade order and multilateral trading system.
Fifth, the cooperation between China and Türkiye on the G20 and global governance is promising. As global partners that can rely on each other, the two emerging powers, through their cooperation, are bound to make greater contribution to world economic development and the reform of global economic governance.
In the opinion of Dr. Altay Atlı, a researcher with the Center for Asian Studies at Bogacchi University, the current severe inflation in many parts of the world, worsened by the geopolitical turmoil, has made the global economic system very vulnerable. To establish a more sustainable, effective and sound global economic order, it demands global cooperation. In his opinion, in the long run, it’s important for the two countries to set up a new goal for their cooperation with regards to establishing a healthy economic system. The three fields of manufacturing and supply chain, digital economy, and local currency settlement for bilateral trade should be the focus.
Summary
The changing geopolitics of 2022 have repositioned supply chains and moved Europe closer to the United States, while at the same time created barriers for East-West trade. This has impacted not just Russia, but all other countries south and east of the European Union.
Turkiye is strategically positioned to take advantage of this, with access to the Black and Mediterranean Seas, as well as to the Persian Gulf via routes such as the Caspian Middle Corridor and the INSTC via Iran. That gives access to East Africa, the Middle-East and South and East Asia, both by maritime, road and rail routes.
China of course has for many years been the great Eurasian infrastructure developer, and the emergence of new trade corridors is of immense importance as it strives to both maintain and develop new energy, food, and consumer supply chains to and from China.
This coming together of similar needs and transportation routes is undoubtedly having a huge impact on bilateral trade but also in manufacturing and third-country logistics and trade – such as with Russia, which remains a hugely important partner for both.
Dezan Shira & Associates assist foreign investors throughout the Eurasian region and provide market intelligence, legal establishment, tax advisory and related services. We have 13 offices in China and a partner firm in Istanbul. To discuss China-Turkiye trade and investment please contact us at asia@dezshira.com
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