China and Türkiye are finding more areas of common interest, such as the Belt and Road Initiative, which has increased bilateral trade and investments. In this article, we provide a short brief on bilateral political relations, Chinese investments in Türkiye, and the state of bilateral trade.
In terms of official visits, in 2008, Jia Qinglin, at the time head of China’s political advisory body and chairman of the People’s Political Consultative Conference, paid a formal goodwill visit to Türkiye and attended the ‘Turkish-Chinese Economic and Commercial Opportunities Forum’ after meeting with Recep Tayyip Erdoğan (at the time was Prime Minister of the country). Shortly after, in 2009, Abdullah Gül has become the first president of Türkiye to visit China in 14 years, marking the beginning of a new phase for the bilateral relationship. On that occasion, the leaders from both countries co-signed eight different agreements on trade, cultural, and technical exchange, among others. During the signing ceremony, the respective prime ministers pledged to increase trade volume by US$50 billion within five years and to realize the building of a high-speed rail (HSR) to connect Ankara and Istanbul.
Bilateral relations strengthened as Türkiye became a key participant in the West Asian corridor of the Belt and Road Initiative (BRI) – the Chinese government-sponsored project aimed at improving regional connectivity across countries through major investment in infrastructure – due to several concurring factors. Türkiye has been keen to use the BRI to grow the volume of its trade involving China and Eurasian nations, and capitalize on logistical proximity to the European Union (EU), Central Asia, and the Caucasus to attract Chinese investments.
The signing of a ‘Strategic Cooperation Agreement’ in 2010 and a series of pronouncements by both parties highlighting the value of economic integration, eventually led to Türkiye becoming a member of the BRI in 2015.
While Türkiye has traditionally been closer to Europe and the United States, changes in Turkish political and foreign policy since 2016 have brought it closer to the Asian continent, including China. Consequently, Ankara will be making efforts to facilitate wider economic engagement with the Chinese market.
Türkiye has managed to catch the attention of foreign investors due to its strong growth rates and structural changes carried out over the past 15 years. Recent foreign direct investment (FDI) reports showing that, despite the undeniable impact of the COVID-19 pandemic, Türkiye has risen to become the 9th most popular FDI destination in Europe, with 160 active projects since 2020. Additionally, among its peer nations in developing Europe, Türkiye qualified as the second-most popular FDI destination after Poland. Indeed, the country has attracted about US$225 billion in FDI inflow between 2003 and 2020, with a large majority of them coming from Europe, North America, and Gulf countries.
Asia is also a rising source of FDI for Türkiye, with China leading the way since Türkiye became an official BRI member in 2015. By 2020, Türkiye had received 1.3 percent of total Chinese investments as part of the BRI – the 23rd highest recipient among 80 other BRI participant countries, according to recent data. Turkish leaders have often expressed their excitement about the BRI’s ability to boost the local economy. By encouraging Chinese investment in the local economy, Turkish businesses wish to absorb technical know-how from Chinese firms in key sectors, such as energy (primarily solar and geothermal energy) and telecommunications.
On June 22, 2021, the Turkish government unveiled the ‘Foreign Direct Investment Strategy (2021-2023)’, offering a clear road map for luring value-added and knowledge-intensive investments, which produce high-quality employment. According to Türkiye’s ‘11th Development Plan’, the major goal of the strategy is to enhance the country’s share of global FDI inflows to 1.5 percent by 2023.
In recent years, economic ties between China and Türkiye have accelerated: in 2000, the total volume of their bilateral trade exceeded US$1 billion for the first time, growing to US$10.079 billion in 2009 and jumping to US$32 billion in 2021.
As of 2021, China has managed to become the top destination for Turkish imports (US$2.412 billion), followed by Russia (US$2.173 billion), Germany (US$2.129 billion), the US (US$1.99 billion), and Italy (US$93 million).
In 2020, Chinese exports to Türkiye amounted to US$22.1 billion, divided into three main categories of products: broadcasting equipment (US$1.98 billion), computers (US$1.24 billion), and non-retail synthetic filament yarn (US$459 million).
On the other hand, Turkish exports to China were worth US$2.93 billion, with marble, travertine, and alabaster being the top traded products (US$540 million), followed by precious metal ore (US$175 million) and refined copper (US$162 million).
Since 2001, economic ties between China and Türkiye have considerably improved. Yet even as bilateral trade has noticeably increased, Turkish imports from China are worth nearly nine times more than its export earnings.
In 2021, the EU was Türkiye’s biggest export partner when compared to China, accounting for over 33 percent of the country’s imports while also absorbing 41 percent of its exports. In comparison, just two percent of total Turkish exports were directed to China, resulting in a significant bilateral trade deficit for Türkiye.
Another significant metric of China-Türkiye economic ties is FDI. China had 1060 registered businesses in Türkiye as of 2021, with most investments accumulated between 2014 and 2019. Clearly, Chinese investors have significant interests in Türkiye, with some notable examples both from the public and private sectors.
China’s Asian Infrastructure and Investment Bank (AIIB) finances the construction of the Trans-Anatolian Natural Gas Pipeline Project (TANAP), which will transport Azerbaijani gas through Georgia and Türkiye to Europe. ZTE, a leading manufacturer of smartphones in China, acquired 48.8 percent of Turkish Telekom in December 2016. In 2017, the Bank of China was given operational privileges in Türkiye by the Turkish banking authority BDDK. Further, that same year, the Turkish deputy prime minister, Mehmet Imsek, met in Beijing with his Chinese counterpart, Wang Yang, to discuss luring Chinese capital to infrastructure projects.
The Turkish tourism industry has also shown growth prospects. According to the Ministry of Culture and Tourism, China sent over 403,739 tourists to Türkiye in 2019, up from 369,952 during the previous year.
A major pain point for Türkiye, however, remains its trade deficit with China and limits to Chinese market access for Turkish businesses. Moreover, China-Türkiye bilateral trade has stayed at around US$28 billion for the past five years, well shy of the US$50 billion goal established in 2015 and dominated by Chinese exports.
While Türkiye can compete with China in certain traditional industries, like textiles, it confronts difficulties in fields utilizing cutting-edge technology, such as telecommunications and electrical machinery. Another sticky issue is a lack of mutual trust and confidence. Beijing expresses “cautious optimism” about relations with Ankara in the future, but it takes care not to get too close to Türkiye for fear that Ankara’s actions toward Syria, Iran, Russia, or Western countries may endanger their own interests. On the other hand, Ankara’s China policy rests midway between attempting to deepen its ties with major economies like China and Russia and transitioning away from its past orientation towards the West.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
Previous Article « Belt and Road Weekly Investor Intelligence #95
Next Article Compliance with China’s Advertising Laws – Common Pitfalls and Red Flags »
Dezan Shira & Associates´ brochure offers a comprehensive overview of the services provided by the firm. With its team of lawyers, tax experts, auditors and...
A firm understanding of China’s laws and regulations related to human resources and payroll management is absolutely necessary for foreign businesses in...
Doing Business in China 2022 is designed to introduce the fundamentals of investing in China. Compiled by the professionals at Dezan Shira & Associates in...
With the scope and penalties of China’s social credit system being further clarified in 2021, legal and regulatory compliance has become more important than...
As a legitimate tool for reasonable tax planning and cost saving, tax incentives play an important role. Companies also use tax incentives as a useful...
Over the last few months, China has been quickly expanding the pilot program on electronic special value-added tax (VAT) fapiao (hereafter special VAT...
Dezan Shira & Associates helps
businesses establish, maintain,
and grow their operations.
Stay Ahead of the curve in Emerging Asia. Our subscription service offers regular regulatory updates,
including the most recent legal, tax and accounting changes that affect your business.