Chinese Ambassador to Turkey Deng Li has announced that by 2021, China seeks to double foreign direct investments into Turkey with a goal of reaching $6 billion. China and Turkey also look to work together to boost tourism between the two countries. As a key participant in the Belt and Road initiative, it is crucial to understand China-Turkey relations within the wider context of Pacific-to-Mediterranean trade.
China’s Belt and Road initiative represents a multi-continental project that will help to link south-east Asia with northern Europe and Africa through multiple maritime belts and terrestrial roads that seek to resurrect the spirit of the ancient silk roads and harness this magnetism to the most modern forms of transport technology the world has seen. Chinese policy makers have recently placed a great deal of emphasis on increased positive interaction with the Association of South East Asian Nations (ASEAN) with the aim to create a manifold maritime road stretching from Malacca and other important destinations in the southern most parts of the Asia-Pacific region to Chinese ports in north east Asia. The recent agreement to establish a dialogue mechanism as a means of resolving lingering issues surrounding the South China Sea helps make clear that in ASEAN China is seeking long term partners while the more enlightened ASEAN states seek to capitalise on China’s good will for their own long term sustainable development goals.
As the Korean peninsula’s leaders embrace the path towards peace, the possibility for north-east Asia to become more integrated remains another major leap forward in terms of creating a more cohesive Belt and Road. The advancing Russo-Japanese rapprochement combined with a more open Korean peninsula will help to further incentive more connectivity projects in the north-west Pacific region. Thus, the north-south trajectory of Belt and Road is coming to fruition in the form of both greater Sino-ASEAN cooperation and in respect of more meaningful cooperation in north east Asia.
In terms of linking China’s Pacific ports with the wider Afro-Eurasian space, the China-Pakistan Economic Corridor (CPEC) represents a key artery in making this all important journey possible. A future China-Myanmar Economic Corridor will help to compliment CPEC, while an Arctic maritime belt based on the strong Chinese partnership with Russia also holds a great deal of promise for the future.
In between CPEC and the Arctic however lies a trans-central Asian road which will ultimately stretch from China’s border with Kazakhstan to Turkey via a southward turn in the Caucasus. Such a road represents a close approximation to some of the most widely used paths of the ancient silk roads which linked the Mediterranean cultures with those of the north Pacific.
As part of China’s plans to intensify building works on this particular road, Beijing intends to construct a modern Kazakhstan to Baku railway which will then merge with the existing Baku-Tbilisi-Kars railway. From there, China intends to build a railway linking the eastern Anatolian city of Kars to Edrine on the European side of the Bosporus. In this sense, a trans-Anatolian railway into continental Europe will help to complete this central leg of Belt and Road, thus replicating one of the most important ancient trading routes whose modern benefits to the world are substantial.
Against this background, it is not surprising that Chinese investment into Turkey and bilateral trade between Ankara and Beijing continues to grow. The modern infrastructure and economic health of Turkey are clearly vital to the central leg of Belt and Road just as sure as Pakistan’s economic health is vital to the all important Pacific to Afro-Eurasian portion of the global megaproject.
Turkey’s President Erdoğan was among the earliest and most enthusiastic backers of the Chinese One Belt–One Road initiative which was originally introduced in 2013. Since then, the economic partnership between two of Asia’s most important powers has continued to blossom.
Turkey’s rapidly growing economy is likewise a substantial point of interest for Chinese investors looking for growing, young and dynamic markets in western Eurasia. A report from Turkey’s Daily Sabah details how over 1,000 Chinese firms are now active in Turkey across a variety of sectors. According to the report,
“Chinese firms that have been operating in Turkey’s logistics, electronics, energy, tourism, finance and real estate sectors are expanding their businesses in the country. With the entry of Bank of China and Industrial Commercial Bank of China (ICBC), the flow of Chinese companies into Turkey has accelerated and also expanded into the e-commerce sector in the recent period.
The world’s second largest trader, China invests $120 billion annually in various countries across the world and Turkey has been enjoying China’s overseas investments in the recent decade.
Accordingly, the number of Chinese firms operating in Turkey had neared 1,000 by April, according to the data of Economy Ministry.
Drawing attention to the significance of Turkey within the “Belt and Road Initiative” (BRI), an infrastructure development project designed and launched by Chinese President Xi Jinping in 2013 and spanning over 65 countries, Foreign Economic Relations Board (DEİK) Turkey-China Business Council Chairman Murat Kolbaşı stressed that the entry of two Chinese banks to the Turkish financial sector and the acquisition of a port by Chinese investors indicate the country will expand its investments and business operations in Turkey in other sectors, as well, including in energy, logistics, tourism, transportation, infrastructure and e-commerce.
Turkey’s unique position in the BRI makes the country a gate to Europe and Africa for China’s trade operations on the project’s route. Therefore, Kolbaşı highlighted that Turkey will naturally become a logistics hub for trade on the three continents.
With the aim of expanding Turkish-Chinese cooperation in the logistics sector, Turkey’s national flag carrier Turkish Airlines (THY) announced that it will form a logistics company in Hong Kong in partnership with China’s ZTO Express and Hong Kong’s PAL Air.
The partners aim to make the new joint venture one of the world’s largest integrator, and generate revenue of $2 billion within the first five years of its operation. They expect growth performance in proportion to the rising demand in the e-commerce sector.
The new joint venture and Istanbul as a mega transport hub is expected to enable THY to deliver to its customers around the world with excellent service quality“.
The report goes on to detail further Chinese investment in Turkey’s shipping and rail sectors while China and Turkey are also cooperating in the energy sector.
The following major Chinese projects in Turkey look to help elevate both Turkey’s internal economic connectivity and energy independence while readying the west Eurasian power to play a vital role as a key hub in One Belt–One Road:
–A high-speed Ankara to Istanbul railway
–A third nuclear power station to compliment those presently being constructed by Turkey’s Russian partner
–The modernisation of Turkey’s Kumport container port which is now operated by the Chinese company Cosco Pacific
–Working cooperatively to expand Turkish eCommerce platform Trendyo which just received an investment from Chinese global eCommerce leader Alibaba.
Additionally, China and Turkey plan to conduct bilateral trade in a combination of Lira and Yuan in a move that will ultimately make the growing trade between the two nations Dollar free and thus sanctions proof. In 2017, China sold $23 billion worth of goods to Turkey while China imported $3 billion worth of goods from Turkey. Officials in both countries have expressed their desire to rapidly increase these numbers.
Furthermore, while Russians continue to represent one of the biggest single national groups to visit Turkey as tourists, Ankara and Beijing are working to expand the number of Chinese tourists in the country who last year increased their spending in Turkish businesses by 166%. Turkish authorities have already begun work to make the country increasingly appealing to both Chinese visitors and investors.
Today, Turkey is taking the next logical step in strengthening its already strong and growing economic partnership with China. On the 1st of July of 2018, I stated,
“The next big step for Turkey is to gradually divest financial assets from the US and EU and move them towards Shanghai and other Asian financial centres that are more comfortable with working with Turkey as a partner for mutual development throughout future decades.
While the American military-industrial complex is keen not to alienate Turkey further, other forces of the broader US deep state including intelligence agencies, the financial sector and many powerful ethno-confessional groups have already begun acting and speaking as though Turkey is a rival or adversary of the US”.
Just over one month after this was written, the suggestion become the new status quo for Turkey’s economic relations and its monetary strategy. With Erdoğan further stating that small and medium sized businesses are the economic engine of the Turkish economy, this helps give an indication that there will be no immediate plans for rapid hikes in domestic interest rates. Instead, Turkey is opting to continue existing policies aimed at economic growth while further encouraging foreign investment including and especially from China in order to off-set inflationary spirals.
At the same time as China continues to solidify an important future partnership with Turkey, Germany too is engaging in an economic rapprochement with Anakra in spite of Germany’s dubious record of relations with Turkey in recent years.
As the economic engine of Europe and as an economy that will become increasingly reliant on the Chinese market in an era when the US continues to threaten more tariffs on European goods, Germany simply cannot ensure its economic future without healthy relations with Turkey. As the Turkish Straits and the city of Istanbul in particular have long represented Europe’s gateway to Asia, European producers will be looking to secure trade with Turkey as part of a wider aim to define their role as one of the outlets of Belt and Road that will see European goods traversing Anatolia and then heading towards the Caucasus before turning towards central Asia and finally to China.
In this sense, just as Pakistan represents the ‘zipper of Asia’ which helps to link western Eurasia and Africa to north and south east Asia, Turkey is the central fulcrum that will link all of Europe to the wider Asian space. Because of this, while Turkey’s domestic economy continues to grow in spite of monetary pressure from the United States, by once again positioning itself as the central element in the largest east-west trading route in the modern era, Turkey will become an invaluable partner to any nation that seeks to take advantage of the great opportunities of the Belt and Road initiative. China clearly understands this as do Turkey’s leaders. While Europe has been slow on the uptake, it will become increasingly apparent that without Turkey, Europe’s major inroad to the wider global east will not be as free and open as it needs to be.