Azerbaijan-China: Riding the wave of investment Strategic deals to drive growth

The three-day state visit of President Ilham Aliyev of Azerbaijan to China became a landmark event for the rapidly developing Azerbaijani-Chinese business cooperation in recent years. During the visit, productive negotiations took place between the Azerbaijani leader and President Xi Jinping of China, as well as with Premier Li Keqiang of the State Council of the People's Republic of China. Meetings were also held with the leadership of a leading Chinese company in the field of "green" energy. Approximately one and a half dozen key cooperation agreements were signed in the fields of industry and renewable energy sources (RES), the development potential of the Middle Corridor was discussed, and joint initiatives in the agricultural sector were reviewed.

China and Azerbaijan, rapidly increasing their trade turnover, are now focused on expanding investment cooperation and implementing joint initiatives in manufacturing, energy, agriculture, transport, and other sectors. These trends became a key theme of the high-level negotiations and meetings held in Beijing over the past three days. In particular, while referring to the Joint Declaration on Strategic Partnership adopted during the meeting in Astana last year, President of China Xi Jinping expressed satisfaction, noting that the level of comprehensive strategic partnership had been elevated further following the Joint Statement signed by the heads of state on April 23. The meeting addressed the results of the recent session of the Intergovernmental Commission and emphasised cooperation in the business sector. The growth of trade turnover between the two countries by more than 20% in recent times was positively assessed, and Azerbaijan's participation in China's "Belt and Road" initiative was highly praised. President Xi Jinping invited President Ilham Aliyev to the upcoming Shanghai Cooperation Organisation summit in China, along with a series of ceremonial events that will be organised within its framework.

The meeting between the President of Azerbaijan, Ilham Aliyev, and the Prime Minister of China, Li Qiang, was equally productive. The high dynamics of Azerbaijan-China trade and economic relations were highlighted, with trade turnover increasing by 20% last year to $3.7 billion. Moreover, trade dynamics grew by 40% in the first quarter of this year. Emphasising that the Declaration on Strategic Partnership is being successfully implemented in all areas, President Ilham Aliyev noted that the two countries are making active efforts in the field of transport and logistics cooperation, which spans many countries across Eurasia. Further efforts by Baku and Beijing to expand the capacity of the Middle Corridor were discussed.

Since April 2022, China has begun sending cargo trains from Xi'an, transiting through Kazakhstan, Azerbaijan, Georgia, Romania, Hungary, Slovakia, and the Czech Republic to Germany. Container block trains formed in China, when using the Trans-Caspian route, take approximately 20-25 days, which is half the time compared to shipping goods from China and Southeast Asia via sea through the Suez Canal, which typically takes 40-50 days. These circumstances enhance Baku’s role within China’s "Belt and Road" initiative, strengthening bilateral strategic partnership. Since last year, Azerbaijan Railways (ADY) and its partners in China have been in talks about the possibility of increasing the number of railway routes to Europe. It is possible that in 2025, the transit of goods from China through Azerbaijan and in the reverse direction using multimodal container block trains on the "Baku-Xi'an" route could triple, reaching a thousand trains.

During the meeting with the Prime Minister of China, the possibilities for cooperation between Azerbaijani and Chinese companies in the field of renewable energy sources (RES), as well as in the oil and gas sector, were discussed. Issues related to the widespread use of Chinese technologies in Azerbaijan were also addressed, with large investment opportunities identified in this direction. It was emphasised that China supports Azerbaijan’s policy on economic diversification and the country’s Concept of Digital Transformation and Digital Development. Among the priorities of bilateral business cooperation, the agricultural sector was highlighted, with mention of partnership initiatives in silkworm farming, cotton growing, and agricultural machinery.

As part of the state visit, specialists from the Ministry of Economy, including representatives from the Export and Investment Promotion Agency (AZPROMO), participated in the signing of several memoranda for the creation of joint ventures with Chinese companies. These included agreements for laptop assembly with Shenzhou Hasee, pipe production with Zhongjing United (Beijing) Trading Co., Ltd., textile manufacturing with Shandong Huafang Co., Ltd., tractor production with Changzhou Dongfeng Agricultural Machinery, and with Sino-Foreign for the implementation of investment projects. 

Additionally, an agreement of intent was signed between the Agency for the Development of Economic Zones (ADEZ) and Vencou Vanhong for establishing a cardboard production facility in the Sumgayit Chemical Industrial Park. A cooperation agreement was also signed between Azeraluminum LLC and China Machinery Engineering Corporation (CMEC) for the implementation of investment projects with the support of Chinese financial institutions.

During high-level negotiations, President Ilham Aliyev highlighted the significant opportunities for bilateral cooperation in the field of renewable energy. It was noted that numerous agreements have been signed between the relevant Azerbaijani structures and Chinese companies in the area of "green" energy, and practical cooperation is being implemented. For example, the day before, the president met in Beijing with the chairman of China Energy Engineering Corporation Limited (Energy China), Song Hailiang. It is worth noting that this largest company in China is implementing 416 projects and controls 50% of the renewable energy market in China, as well as having 256 subsidiaries in 147 countries worldwide. Its areas of activity, in addition to renewable energy projects, include hydrogen energy, energy storage systems, and the construction of large power grids. Currently, Energy China is implementing several projects in Azerbaijan, including being the contractor for a 1-gigawatt wind energy megaproject in the Caspian Sea, and has invested in the construction of a solar power station and other projects in the Fuzuli district. The head of Energy China proposed cooperation with Azerbaijan in the development of energy corridors.

Noting the priority and strategic nature of cooperation with China Energy Engineering Corporation Limited, President Ilham Aliyev exchanged views on a long-term joint energy planning project: a relevant document was also signed during the state visit. Among other matters, discussions included the creation of an Energy Research Center in Azerbaijan in the future, as well as, given Energy China's extensive experience in water management, an exchange of views on potential cooperation in this field.

Notably, during the state visit on April 23 in Beijing, six industry documents, memoranda, and agreements were signed between the Ministry of Energy of Azerbaijan and Chinese companies in the field of alternative energy. These documents cover the construction of solar power plants with a capacity of 260 MW, a floating solar power plant with a capacity of 100 MW, an energy storage system based on battery technology with a capacity of 30 MW, the development of a marine wind energy project with a capacity of approximately 2 GW, and the expansion of a wind energy project with an additional 2 MW capacity.

New vectors of Azerbaijan-China cooperation in the renewable energy sector are presented in an article published by Caliber.Az.