Trade, transport, investment - three pillars of cooperation between Baku and Beijing Review by Caliber.Az

Azerbaijan and China are consistently expanding economic cooperation and, along with the growth and diversification of trade, they are striving for investment cooperation and the creation of joint ventures. Baku fully supports Beijing's Belt and Road Initiative.

Chinese companies are investing in the industrial clusters of Azerbaijan, including being invited to participate in reconstruction work in the Garabagh region. A significant contribution to the promotion of business ties between the two countries was the conclusion of a framework agreement on the development of production potential and investment cooperation: the document was signed the day before between the Ministry of Economy of Azerbaijan and the State Committee for Development and Reforms of China.

The dynamically developing Azerbaijani-Chinese trade and economic ties are traditionally built on a solid foundation of friendly interstate relations. The two countries do not have any contradictions on the foreign policy agenda, they recognize the territorial integrity of each other and categorically reject separatism. The key driving force behind dynamic bilateral cooperation is the political will and friendship of the heads of state - President Ilham Aliyev and President Xi Jinping. The efforts of the leaders of the countries to strengthen partnerships create great opportunities for establishing mutually beneficial Azerbaijani-Chinese business ties, bringing them to a strategic level.

Thus, over the past decades, Azerbaijan has invested about $1.7 billion in the Chinese economy, which exceeds Chinese investments in Azerbaijani projects, totaling $800 million. About 120 companies with Chinese capital operate in Azerbaijan; Chinese contractors took part in various projects, the total cost of which is more than $600 million. At the same time, Azerbaijan is China's largest trading partner in the South Caucasus region: our country accounts for over 43% of all regional trade. It is not surprising that in a prosperous 2019, bilateral trade reached $2.18 billion, and despite a significant decline during the COVID-19 pandemic, mutual trade steadily stabilized in the next two years. Note that in 2021-2022. China occupied the fourth position among the main trade partners of Azerbaijan. Moreover, in 2022, the volume of bilateral trade almost approached the pre-pandemic period, amounting to $2.159 billion and increasing by 21% year on year.

According to information Caliber.Az received from the Azerbaijani Economy Ministry, the above positive trends in the Azerbaijani-Chinese trade have been significantly improved over the seven months of 2023. In particular, in January-July 2023, bilateral trade exceeded $1.619 billion, an increase of more than 41% compared to seven months last year. And despite the fact that the lion's share of turnover still falls on Chinese products, during the reporting period, the dynamics of Azerbaijani exports increased by 2.21 times. The main volume of Azerbaijani exports to the Chinese market this year fell on petroleum coke, primary polyethylene, iodine, equipment and components (including air and gas compressors), jet fuel, organic chemicals, cotton fiber, medicinal plants, and perfumes, as well as food industry products - chocolate, cigarettes, pomegranate juice, wine products, etc.

Against the backdrop of this positive economic cooperation, the delegation of the Ministry of Economy of Azerbaijan, headed by Minister Mikayil Jabbarov, visited China the day before.

“During the meeting with Chairman of the State Committee for Development and Reforms of China Zheng Shanjie, a bilateral framework agreement was signed on the development of production potential and investment cooperation between China and Azerbaijan,” Minister of Economy Mikayil Jabbarov tweeted on the X (Twitter) social network. The implementation of the agreement contributes to the strengthening of bilateral economic ties and cooperation in the investment sphere.”

The framework agreement provides for cooperation in various sectors of the economy, including in the field of knowledge-intensive industry and innovation, and is aimed at implementing best practices and applying technologies from the Fourth Industrial Revolution (4.0).

Another major success of the visit of the delegation of the Ministry of Economy of Azerbaijan to China was the talks with President of the Asian Infrastructure Investment Bank (AIIB) Jin Liqun.

“Discussions were held with the leadership of the AIIB on the prospects for projects implemented in our country with the financial support of the bank, as well as the priorities of our joint work,” M. Jabbarov tweeted.

During the meetings in China, discussions also took place on new initiatives being implemented to develop the Azerbaijani-Chinese economic undertakings, such as Azerbaijan's participation in the Belt and Road Initiative, expanding trade ties and encouraging mutual investment, strengthening cooperation in the field of ICT, energy, transport and transit, tourism and other areas.

The parties also discussed the work carried out on the basis of significant agreements concluded within the framework of the 22nd meeting of the Council of Heads of State of the Shanghai Cooperation Organization in Samarkand. In particular, they discussed the active position of Azerbaijan on the Belt and Road Initiative, and the prospects for bilateral cooperation aimed at the effective use of the transit potential of the Middle Corridor.

Let us clarify that during the visit of the delegation of the largest Chinese port operator, Shandong Port Group, to Azerbaijan in April 2023 and negotiations with the leadership of Baku International Sea Trade Port CJSC (BISTP), the parties agreed to further increase the volume of transit of Chinese cargo through Azerbaijan through the Trans-Caspian international transport route (BISTP). After the launch of the China Railway Express container train in 2019, Chinese container multimodal transit has significantly expanded in terms of the range of goods and the geography of Chinese sending cities where block trains are formed. Such trains are on the way for approximately 20-25 days, which is significantly less than the transshipment of goods from China and Southeast Asia by sea through the Suez Canal, which takes about 40 days on average.

It is noteworthy that along with the development of cargo transportation, the two friendly countries are striving to expand mutual passenger traffic and develop tourism ties.

It is expected that new agreements and memorandums on investment, transport, and other joint projects will be included in the agenda of the ninth meeting of the Azerbaijani-Chinese Intergovernmental Commission (IGC) on trade and economic cooperation, which is scheduled to be held by the end of 2023 in China.

At the same time, the issues of increasing and diversifying mutual trade remain the most important aspect of the Chinese-Azerbaijani business agenda, and Azerbaijan is showing significant activity in this regard. In order to expand domestic exports to the capacious Chinese market, in recent years, Azerbaijan has created an extensive system of representative offices in China to promote its industrial and agricultural products under the Made in Azerbaijan brand, as well as to participate in Chinese exhibitions, organize advertising and promotion campaigns in the leading retail chains of the Greater China.

In particular, Azerbaijani trading houses operate in Liuzhou and Liaoyuan, Qingdao, Zhangjiajie, and there are branches of Azerbaijani trading houses in Shanghai, Zhinan, and Harbin. Wine houses have also been set up in Urumqi, Shanghai, and others. The opening of another trade mission of Azerbaijan was timed to coincide with the current visit of the delegation of the Ministry of Economy to China, within the framework of which the opening ceremony of the fifth trading house in Beijing is planned.

All of these structures play a huge role in supporting trade missions, promoting the goods of Azerbaijani companies in the Chinese market, thereby ensuring the diversification of domestic non-oil exports.