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ARMENIA AND CHINA-CASE FOR A SPECIAL PARTNERSHIP
By Simon Saradzhyan
http://noravank.am/eng/articles/detail.php?ELEMENT_ID=6385
02.04.2012
Fellow, Belfer Center for Science and International Affairs
Summary
This article will take stock of the Armenian-Chinese relations to
discern whether Yerevan has been effective in its response to the
ongoing rise of the Middle Kingdom as the two countries prepare to
celebrate the 20th anniversary of the establishment of diplomatic
relations this April. The article will compare Armenia's policy
vis-a-vis China to that of Georgia and Azerbaijan and identify
areas where Yerevan could be doing more to advance the bilateral
relationship. The article will conclude with specific recommendations
on how Armenia can transform the relationship with China into a special
partnership that would increase both Armenia's benefits from the rise
of China and China's stake in the peaceful development of Armenia.
The Rise of China
There is hardly an international affairs expert left who has not
lamented the unpredictability of the post-Cold War world (even if
Francis Fukuyama might still be claiming that history has ended). But
there is one trend in the international affairs that most of these
experts predict will probably continue for years to come: the rise
of China. For many of them, the question is no longer whether China
will become the world's dominant economic power, but rather when
this will occur. The International Monetary Fund and Goldman Sachs
are betting on, 2016 and 2030 respectively.1 The Middle Kingdom
already leads the world in such spheres as exports, manufacturing,
and foreign exchange reserves. As for those who may have doubts about
how far the Chinese economy has progressed technologically since Mao
Zedong urged Chinese peasants to make iron in backyard furnaces, they
should consider the following fact: the world's fastest supercomputer
in 2010 was China's Tianhe-1A.
China's rise is already causing a realignment of geopolitical balances
across the post-Cold War world, in which economic might and abundance
of human capital increasingly matter more, while nuclear weapons and
ballistic missiles lose value, prompting both great powers and smaller
nations to scramble to advance ties with the Middle Kingdom. China has
already become the largest trading partner of such powers, as Japan,
Russia, and India. It is also the largest trading partner of Latin
America and Africa as well as the second largest trading partner of
the United States.
Post-Soviet Armenia's China Policy: Diplomacy Pays Off
The 20th anniversary of the establishment of diplomatic relations
between post-Soviet Armenia and China offers a good opportunity
to review the bilateral relationship in order to determine whether
Yerevan has been effective and pro-active enough in its response to
China's resurgence.
Even a superficial review of Armenia's policy vis-a-vis China
would reveal that Yerevan has been actively trying to advance the
relationship with Beijing, paying particular attention to bilateral
trade, which almost doubled in 2009-2010, with China becoming Armenia's
largest trading partner in 2010.2 The following year saw Russia retake
the top spot in the list of Armenia's trading partners, but China still
generated more trade with Armenia than neighboring Iran in 2011.3 The
current Armenian-Chinese trade statistics look especially rosy when one
recalls that the volume of trade between the two countries was a meager
$370,000 less than 15 years ago.4 However, Armenia still lags behind
both of its South Caucasian neighbors in trade with the Middle Kingdom,
even though the latter was neither among Azerbaijan's or Georgia's top
five trading partners in 2010.5 Armenia's exports to and imports from
China totaled $16 million and $405 million in 2011.6 In comparison,
Georgia's trade with China generated $553 million in 2011.7 As for
Azerbaijan, its imports of Chinese goods totaled $628 million in 2011,
according to the republic's national statistics agency.8 Notably,
China is absent from the Azeri statistics agency's list of major
importers of goods and services from Azerbaijan, although a number
of Chinese companies have been reported to have signed agreements to
develop onshore oil fields in Azerbaijan.9 The obvious explanation
for this disparity is that the economy of Armenia is smaller in size
than that of Azerbaijan and Georgia, which should come as no surprise,
given that Armenia is not only landlocked, but also continues to endure
a semi-blockade.10 Armenia also lacks energy resources, which generate
a steady flow of cash for Azerbaijan, and trails behind Georgia in
economic and public administration reforms.
Nevertheless, the continuing growth in Armenia's trade with China
generates optimism, demonstrating that the personal commitment by the
Armenian leadership to advance Yerevan's relationship with Beijing
is literally paying off. That commitment is best illustrated by the
fact that all of Armenia's presidents and foreign ministers have
visited China.
All in all, top Chinese and Armenian government officials have paid
over 30 visits to each other's countries since the People's Republic
of China and the Republic of Armenia established relations on April
6, 1992. Armenia's incumbent president, Serzh Sargsyan, has paid two
working visits to China, including a trip to the Expo 2010 in Shanghai,
where he opened the Armenian pavilion and pushed for further expansion
of bilateral trade ties during a meeting with Chinese President Hu
Jintao. Sargsyan also traveled to China as an interior minister in
1998 and then as a defense minister in 2001. In comparison, only two
out of post-Communist Azerbaijan's seven presidents-Heydar Aliyev
and his son Ilham Aliyev-have traveled to China. The elder Aliyev
traveled once, while his son made the trip twice.11 Of the three heads
of the post-Soviet Georgian state, only incumbent president Mikheil
Saakashvili has paid a visit to China, according to the Georgian
embassy in Beijing.12
That the Armenian leadership values the relationship with China
is clear not only from the frequency of the visits, but also from
the reception given by the hosts to the guests. A visiting Chinese
official is usually granted the opportunity to meet the president of
Armenia and the republic's top ministers, even if he or she is not
a top dog-as was the case when an assistant to the Chinese foreign
minister came to Yerevan in April 2003.13 Chinese leaders have also
paid appropriate attention to Armenian officials visiting Beijing.
Armenian presidents and prime ministers-who have visited China
six times in the past 20 years- have invariably met their Chinese
counterparts during all but one of such visits.14
China's continuing rise requires Yerevan to be ever more energetic
and persistent in engaging Beijing not only diplomatically, but
also economically. Armenian leaders need to be both pro-active and
relentless if they want to transform the Chinese-Armenian relationship
into a special partnership in spite of the existing geographic and
economic constraints. Otherwise, Armenia won't matter to China much
more than it does now, when Chinese strategists ponder how long a
hike in world oil prices will last if the Karabakh conflict heats up.
Taking a Cue from Two Ancient Peoples' Special Partnership
Of, course, it may seem incredulous to some that China would agree to
forge a special relationship with a small state, which a) is located
thousands of miles away; b) has had a diaspora in the Middle Kingdom
for centuries but established diplomatic relations with Beijing only
20 years ago; and c) lacks natural resources but has hostile neighbors
that possess oil and gas that energy-hungry China prizes so much.
To such skeptics, I say: Look at Israel. In fact, the similarities
between Israel's and Armenia's position vis-a-vis China are so striking
that I would argue some of the compliments that the Israeli and Chinese
statesman have recently exchanged on the newly formed partnership
of the two ancient peoples might as well have come from a transcript
of a Chinese-Armenian summit.15 Such complimentary rethoric doesn't
appear out of thin air. It is based on the solid economic relationship
that Israel has managed to build with China after the latter agreed
to establish diplomatic relations with the Jewish state in January
1992. Since then, bilateral trade has increased by 200 times and now
stands at $10 billion a year, with China being Israel's third-largest
export market.16 No wonder international affairs experts talk about
a special partnership between Beijing and Tel Aviv.
It goes without saying, of course, that the Armenian economy is
far less advanced than that of Israel, but what the Jewish state is
exporting to China is instructive for selecting what Armenia should
be selling to the Middle Kingdom to minimize the share of shipping
in overall cost. Israel exports to China mostly high-value goods
such as telecommunications and information, solar energy equipment,
and pharmaceuticals.17
Proposal for a Great Leap Forward in the Bilateral Relationship
When trying to build a special partnership with China, Armenian leaders
should first and foremost focus on deepening bilateral economic
cooperation. Without deep economic ties, Armenia's relationship
with China will remain vulnerable to disruption no matter how
much scholars of the past Great Games theorize about how Beijing's
lingering problems with Uighur separatists should keep the Middle
Kingdom committed to preservation of a viable Armenian state as the
only geographical obstacle to pan-Turkism.
One obvious way to deepen economic cooperation is to attract more
investment from China, which holds a mind-boggling total of $3.2
trillion in foreign exchange reserves-the world's largest-and which
spends tens of billions of dollars on foreign assets every year. China
has been investing an average of more than $40 billion in non-bond
assets abroad over the past several years, but Armenia has been so
far able to attract only a small fraction of this investment.
Armenia attracted $1.4 billion in Chinese investment from 1992 to 2010
and another $2.7 billion in the first few months of 2011, according
to one estimate.18
One way for the Armenian government to entice Chinese companies into
more bilateral trade is to agree to conduct more transactions in
Renminbi, which the Chinese government seeks to promote as one of
the world's reserve currencies.
The Armenian government will also be more successful in attracting
Chinese investments if it improves the general business climate in
the country. It is easier to do business in general and to conduct
import-export operations in Armenia than in Azerbaijan, according
to World Bank rankings. But at the same time, Armenia trails behind
Georgia in the same World Bank rankings-an indication that more could
be done to liberalize the Armenian economy, which continues to suffer
from oligopolies and formidable corruption. (See Appendix I for charts
measuring attractiveness of the business environment in Armenia,
Georgia, and Azerbaijan for investment.)
Armenia should try particularly hard to draw Chinese investors into
developing export-oriented sectors that produce goods or services,
which are of high value but in which shipping accounts for a
lower-than-average fraction of the total cost-such as information
technology.19 Such projects will help to diversify Armenia's trade
with China, which is now mostly limited to exports of minerals and
imports of consumer goods, food, and machinery.20
Anyone unsure how much impact a deepening of economic ties could
have not only on Armenia's bilateral relationship with China, but
also on Beijing's position on issues of vital interest for Yerevan
at international forums, should take a cue from how the depth of
the Chinese-Iranian economic relationship affects the position this
veto-yielding member of the United Nations Security Council (UNSC)
takes on Tehran's nuclear program at the UNSC and the International
Atomic Energy Agency.21
Another aspect of the bilateral cooperation that the Armenian
government should pay greater attention to is military-technical
cooperation. Yerevan should consider following up on recent purchases
of arms from Beijing by proposing a licensed production of such Chinese
defense systems in Armenia that would expand the Armenian state's
indigenous capacity for maintaining a robust deterrence potential.
The Armenian armed forces should also develop other aspects
of cooperation with the People's Liberation Army (PLA), such as
military-to-military contacts. Armenia's ancient commander-in-chief
Vardan Mamikonyan may or may not have descended from the Han dynasty,
but future generations of Armenia's military leaders will benefit
from being sent to expand their knowledge at military academies of a
country that has developed the art of war for millenia and possesses
the world's third largest nuclear arsenal. These ties-which may come
in especially handy in an emergency-would develop to a greater extent
if the two militaries establish regular exchanges of delegations
and conduct joint exercises.22 So far, such military-to-military
contacts between PLA and Armenian armed forces have not been
frequent. Armenia's defense ministers and chiefs of the general staff
have been less-frequent visitors than their commanders-in-chief. They
have paid four visits to Beijing in the past 15 years while visiting
Moscow every year. China's preoccupation with its own territorial
problems and Beijing's aversion to publicly taking sides in the South
Caucasus helps to explain why the Armenian-Chinese military diplomacy
has been rather limited. Armenia's natural choice of Russia as its
main strategic partner, if not a guarantor, is also a factor, as are
more than 5,000 kilometers that separate Armenia from China.
There are, of course, other actions that the Armenian leadership could
take to increase and institutionalize China's stake in peaceful and
steady development of Armenia without undermining its traditional
partnership with powers such as Russia, the European Union, and the
United States.23 (See Appendix II for comparisons of these powers
that are instructive for Armenia's foreign policy choices).
Armenia is a small country, but its vote in such key international
forums, as the UN General Assembly, is as good as everyone else's.
Supporting Beijing's initiatives-such as a ban on deployment of weapons
in space, a differentiated approach to global climate policy, and
World Bank and IMF reforms-at these forums would make this permanent
member of UNSC more supportive of Yerevan on issues that matter to
Armenia most.
A Chinese-Armenian summit would provide a perfect opportunity to
achieve a great leap forward in bilateral cooperation. Armenian
diplomats should, therefore, exert maximum efforts to organize
Sargsyan's first state visit to China before a rotation of power occurs
in the Middle Kingdom.24 The Armenian leader should meet both Hu and
Vice President Xi Jinping before the latter becomes the next president
in early 2013. The summit should elevate the status of the existing
Armenia-China intergovernmental commission to that of a bilateral
presidential commission, which would feature working groups headed
by relevant ministers and which would hopefully repeat the success
of two similar commissions that the United States and Russia have
established. Most of the projects I propose above and below could be
pursued within the framework of such a commission. During the summit,
Sargsyan should also secure Xi's consent to become the first Chinese
leader to visit Armenia.
Nor should Armenia shy away from expanding the people's diplomacy,
promoting educational exchanges between the two countries to ensure
that not only the current, but also future, leaders of China can
do much more vis-a-vis Armenia than simply locate it on the map.25
Establishment of the Confucius Institute in Yerevan at the Yerevan
State Linguistic University of Armenia in partnership with China's
Shanxi University in 2008 was a step in the right direction. It should
be followed by the establishment of an Armenian institute in China,
preferably on the premises of a top public administration or diplomatic
graduate school.
Armenians living abroad could, of course, play a role in promoting
relations between China and Armenia, especially in the economic
sphere.26 The Armenian diaspora in China is small, but there are a
plenty of Armenian businessmen that live in other countries and do
business with Chinese companies. Armenia's foreign affairs and diaspora
ministries should engage such businessmen in efforts to secure joint
Chinese-Armenian financing of development projects in Armenia that
would edge the two nations closer to the special partnership I propose.
Thinking Outside the Box
The proposed mission of establishing and maintaining a special
partnership with China- whose daily subway commuters in the nation's
capital outnumber the population of Armenia-would prove impossible
without unorthodox approaches.
Hence, in addition to pursuing the useful but customary projects
proposed above, the Armenian leadership should also think of outside
the box. To advance military ties, for instance, the Armenian
leadership could consider embedding an Armenian unit into a Chinese
contingent the next time the PLA decides to commit troops for a
UN operation. If Armenian peacekeepers can serve under the German
command in a NATO-led operation in Afghanistan, then why can't they
serve under the Chinese command in a UN mission?
Armenian policymakers looking for unorthodox ideas on how to make
Armenia matter much more in the eyes of their Chinese counterparts
should also take a cue from Beijing's reaction to treatment of Chinese
diasporas in third countries. If loss of income by several hundreds
of Chinese traders caused by closing of a Moscow market warrants a
note from China's foreign ministry, then one might ask: Would China
have a greater stake in Armenia's security and prosperity if there
were several thousands of Chinese peasants working on those Armenian
agricultural lands that suffer from shortage of labor? The answer
to that question is obvious, as is the fact that Armenia's chances
of peaceful, sustainable development will be enhanced greatly if
it becomes a special, if not indispensable, partner of the rising
superpower.
__________________________________________________ __________________________
Simon Saradzhyan is a native of Nagorny Karabakh's Shahumian
district. The author would like to thank Temirbek Aituganov,
ex-director of the public debt department at the Finance Ministry of
Kyrgyzstan, Emil Sanamyan, Washington editor for The Armenian Reporter;
and Ali Wyne, research associate at Harvard University's Belfer Center
for Science and International Affairs; for their advice.
__________________________________________________ __________________________
Appendix I. Business Climate in Armenia, Georgia, and Azerbaijan:
A total of 184 countries ranked. The higher the score, the better
the business climate. Source: Heritage Foundation.
A total of 183 countries ranked. The higher the score, the lower the
corruption. Source: Transparency International.
A total of 183 countries ranked. The higher the ranking, the easier
to do business. Source: World Bank.
Appendix II. Comparing Present and Future of Prospective Partners:
Sources: World Bank, Goldman Sachs, Economist Intelligence Unit.27
1In 2016, China's GDP in purchasing power parity (PPP) terms will
be $18,976 billion, while the United States' GDP in PPP terms will
be $18,807, according to the IMF's forecast. (World Economic Outlook
Database, IMF, April 2011); Goldman Sachs predicts that China's GDP
will total $25,610 billion in 2030, while America's GDP will total
$22,817 billion that year at market exchange rates. (Dominic Wilson
and Anna Stupnytska, Global Economics Paper No. 153, Goldman Sachs,
March 28, 2007)
2"Armenia, China to Hold High-Level Business Forum," Xinhua, April
7, 2011.
3China generated 7.7% of Armenia's external commercial turnover in
2011, compared to Russia's 20.3%, Germany's 7.4%, and Iran's 5.9%.
(Country Report Armenia, 1st Quarter 2012 Main Report, Economist
Intelligence Unit, February 2012)
4Trade volume for 1997. "Kitaisko-Armyanskie Otnoshenia"
("Chinese-Armenian Relations"), web site of the People's Republic
of China's embassy to the Republic of Armenia, undated. Available at
http://am.chineseembassy.org/rus/zygx/t392051.htm. Accessed on March
14, 2012.
5Azerbaijan's largest trading partners in 2010 were Italy (26.8%),
the U.S. (8.4%), Germany (7.1%), France (6.7%), Czech Republic (4.9%),
and Russia (4.4%). Azerbaijan, CIA World Fact Book, undated.
Available at
https://www.cia.gov/library/publications/the-world-factbook/geos/aj.html.
Accessed on March 14, 2012. Georgia's largest trading partners in
2010 were Turkey (15%), Ukraine (9.2%), Azerbaijan (8.5%), Russia
(6.5%), and Germany (6.1%). Georgia, CIA World Fact Book, undated.
Available at
https://www.cia.gov/library/publications/the-world-factbook/geos/gg.html.
Accessed on March 14, 2012.
6External trade database by country in 2011, web site of the National
Statistical Service of Republic of Armenia, undated. Available at
http://www.armstat.am/en/?nid=380&thid[]=156&years[]=2011&submit=Search.
Accessed on March 14, 2012.
7Georgia's imports from China totalled $525 million in 2011, while
its exports totalled $29 million. Decimals rounded to closest whole
number. Main Statistics External Trade and FDI External Trade, web
site of the National Statistics Office of Georgia, undated. Available
at http://www.geostat.ge/index.php?action=page&p_id=137&lang=eng.
Accessed on March 14, 2012.
8Foreign Trade Relations of Azerbaijan for 2011, web site of the
Ministry of Economic Development of Azerbaijan, undated. Available
athttp://www.economy.gov.az/eng/index.php?option=com_content&view=article&id=6
41.Accessed on March 14, 2012. No estimates of Azerbaijan's exports
to China are available at this site.
9Fariz Ismailzade, "Azerbaijan and China Move to Increase Security
and Economic Cooperation," Eurasia Daily Monitor, March 21, 2005.
10At current prices Armenia's GDP in 2011 was $9.3 billion,
Georgia's was $11.6 billion, Azerbaijan's was $51.7 billion. World
Bank Data Bank, web site of World Bank, undated. Available
athttp://databank.worldbank.org/ddp/editReport?REQUEST_SOURCE=search&CNO=2&cou
ntry=&series=SM.EMI.TERT.ZS&period=. Accessed on March 14, 2012.
11Arguably the Aliyevs' predecessors in the early 1990s lost the
Azeri presidency too quickly to visit all the countries they may have
wanted to.
12Relations between Georgia and the People's Republic
of China, web site of the Republic of Georgia's embassy
to the People's Republic of China, undated. Available at
http://china.mfa.gov.ge/index.php?lang_id=ENG&sec_id=552. Accessed
on March 14, 2012.
13"Kitaisko-Armyanskie Otnoshenia" ("Chinese-Armenian
Relations"), web site of the People's Republic of China's
embassy to the Republic of Armenia, undated. Available
http://am.chineseembassy.org/rus/zygx/t392051.htm. Accessed on March
14, 2012.
14The only exception was when President Sargsyan attended the opening
of the Olympic Games in Beijing in 2008. He had no public meetings
with the Chinese leaders during that visit.
15"We are two ancient peoples whose values and traditions have left an
indelible mark on humanity," Prime Minister Benjamin Netanyahu said
during his visit to Beijing this past January. China's ambassador to
Israel Gao Yanping returned the compliment several days later, saying:
"As two ancient civilizations, we have a great deal in common. Both
of us enjoy profound histories and splendid cultures."Oren Kessler,
"Shalom, Beijing," Foreign Policy Magazine March 13, 2012.
18"Armenia, China to Hold High-Level Business Forum," Xinhua, April 7,
2011. Statistical Yearbook of Armenia-2011 of the National Statistics
Service of Armenia contains no data on investments from China in 2010
while estimating the total gross inflows from China in 1998-2010 at
a meager $1.3 million compared to Russia and France, which forked
over $2.1 billion and $589 million over the same period of time,
respectively.
19It won't be easy to attract Chinese investment into sectors such as
software development, given that investment into technology totaled
a meager $1.5 billion out of $216 billion that China invested abroad
in 2006-2010. In comparison, China invested more than $100 billion
into energy and power assets abroad over the same period of time,
according to Derek Scissors, "China's Investment Overseas in 2010,"
Heritage Foundation, February 3, 2011.
20"Dvykhstoronnie otnoshenia: Kitai" ("Bilateral
Relations: China"), web site of the Ministry of Foreign
Affairs of the Republic of Armenia, undated. Available at
http://www.mfa.am/ru/country-by-country/cn/. Accessed on March 15,
2012.
21Iran has been by far the largest recipient of
Chinese non-bond investments in 2005-2011 in West Asia,
attracting more than $17 billion, with Kazakhstan and Russia
trailing behind. Derek Scissors, "China Global Investment
Tracker: 2012," Heritage Foundation, January 6, 2012. Available
athttp://www.heritage.org/research/reports/2012/01/china-global-investment-tra
cker-2012.Accessed on March 14, 2012.
22When the Russian Navy's AS-28 mini-submarine got entangled in
fishing nets in 2004, a Russian admiral who had attended a U.S.-Russian
generals program at Harvard defied SOPs and called a fellow participant
from the U.S. side who was at that time working in the U.S. Embassy in
Moscow. The phone call, between two men who met at the John F. Kennedy
School of Government's U.S.-Russia Security Program in 2004, began a
chain of events that resulted in U.S. and British equipment rushing
to the scene and a British undersea rescue vehicle ultimately freeing
the AS-28 and saving the sailors' lives.
"U.S. Admirals Talk to Save Sub," Harvard Gazette, October 20, 2005.
23Russia has always balked at expansion of U.S. and EU influence
in former Soviet Union, but has been much more tolerant of China's
cooperation with post-Soviet states. In fact, American policymakers may
still be debating how to avoid being eclipsed as the sole superpower
by the Middle Kingdom, but Vladimir Putin of Russia has already
acknowledged the inevitability of China's rise, noting that Moscow
has no plans to quarrel with China over the global domination.
"Putin, otkazavshiisya borotsya s Kitaem za mirovoe gospodstvo,
smutil Pekin i zastavil obyasnyatsya" ("Putin refused to fight with
China for global dominance in what embarrassed Beijing and prompted
it to explain its view"), Newsru.com, October 18, 2011.
24As noted above, Sargsyan has been twice to China as a president,
but neither were state visits. He first went to attend the opening
of the Olympic Games in 2008, and he returned two years later for
the opening of the Expo 2010.
25One sign of the level of the current Armenia expertise, if not
attention that China pays to Armenia, is that that the web site of the
Chinese embassy in Yerevan has Russian- and Chinese-language versions,
but no Armenian version.
26Armenian merchants began to trade with China soon after
the latter opened its port in Macao for international trade
in 1685, and there was a thriving Armenian community in
Harbin in the beginning of 20th century. Irina Minasyan,
"Kitaisko-Armyanski Kontakty" ("Chinese-Armenian Contacts"),
21st Century, Issue No. 1, 2012, Noravank. Available at
http://noravank.am/rus/jurnals/detail.php?ELEMENT_ID=6339. Accesed
on March 16, 2012.
27The author could not find ready-to-use projections of the EU's
GDP in 2025 and 2030, so he took the Economist Intelligence Unit's
prediction that the EU's GDP will grow by some 10 percent in 2010-2015
and extrapolated it to the 2015-2025 period.
March 2012
By Simon Saradzhyan
http://noravank.am/eng/articles/detail.php?ELEMENT_ID=6385
02.04.2012
Fellow, Belfer Center for Science and International Affairs
Summary
This article will take stock of the Armenian-Chinese relations to
discern whether Yerevan has been effective in its response to the
ongoing rise of the Middle Kingdom as the two countries prepare to
celebrate the 20th anniversary of the establishment of diplomatic
relations this April. The article will compare Armenia's policy
vis-a-vis China to that of Georgia and Azerbaijan and identify
areas where Yerevan could be doing more to advance the bilateral
relationship. The article will conclude with specific recommendations
on how Armenia can transform the relationship with China into a special
partnership that would increase both Armenia's benefits from the rise
of China and China's stake in the peaceful development of Armenia.
The Rise of China
There is hardly an international affairs expert left who has not
lamented the unpredictability of the post-Cold War world (even if
Francis Fukuyama might still be claiming that history has ended). But
there is one trend in the international affairs that most of these
experts predict will probably continue for years to come: the rise
of China. For many of them, the question is no longer whether China
will become the world's dominant economic power, but rather when
this will occur. The International Monetary Fund and Goldman Sachs
are betting on, 2016 and 2030 respectively.1 The Middle Kingdom
already leads the world in such spheres as exports, manufacturing,
and foreign exchange reserves. As for those who may have doubts about
how far the Chinese economy has progressed technologically since Mao
Zedong urged Chinese peasants to make iron in backyard furnaces, they
should consider the following fact: the world's fastest supercomputer
in 2010 was China's Tianhe-1A.
China's rise is already causing a realignment of geopolitical balances
across the post-Cold War world, in which economic might and abundance
of human capital increasingly matter more, while nuclear weapons and
ballistic missiles lose value, prompting both great powers and smaller
nations to scramble to advance ties with the Middle Kingdom. China has
already become the largest trading partner of such powers, as Japan,
Russia, and India. It is also the largest trading partner of Latin
America and Africa as well as the second largest trading partner of
the United States.
Post-Soviet Armenia's China Policy: Diplomacy Pays Off
The 20th anniversary of the establishment of diplomatic relations
between post-Soviet Armenia and China offers a good opportunity
to review the bilateral relationship in order to determine whether
Yerevan has been effective and pro-active enough in its response to
China's resurgence.
Even a superficial review of Armenia's policy vis-a-vis China
would reveal that Yerevan has been actively trying to advance the
relationship with Beijing, paying particular attention to bilateral
trade, which almost doubled in 2009-2010, with China becoming Armenia's
largest trading partner in 2010.2 The following year saw Russia retake
the top spot in the list of Armenia's trading partners, but China still
generated more trade with Armenia than neighboring Iran in 2011.3 The
current Armenian-Chinese trade statistics look especially rosy when one
recalls that the volume of trade between the two countries was a meager
$370,000 less than 15 years ago.4 However, Armenia still lags behind
both of its South Caucasian neighbors in trade with the Middle Kingdom,
even though the latter was neither among Azerbaijan's or Georgia's top
five trading partners in 2010.5 Armenia's exports to and imports from
China totaled $16 million and $405 million in 2011.6 In comparison,
Georgia's trade with China generated $553 million in 2011.7 As for
Azerbaijan, its imports of Chinese goods totaled $628 million in 2011,
according to the republic's national statistics agency.8 Notably,
China is absent from the Azeri statistics agency's list of major
importers of goods and services from Azerbaijan, although a number
of Chinese companies have been reported to have signed agreements to
develop onshore oil fields in Azerbaijan.9 The obvious explanation
for this disparity is that the economy of Armenia is smaller in size
than that of Azerbaijan and Georgia, which should come as no surprise,
given that Armenia is not only landlocked, but also continues to endure
a semi-blockade.10 Armenia also lacks energy resources, which generate
a steady flow of cash for Azerbaijan, and trails behind Georgia in
economic and public administration reforms.
Nevertheless, the continuing growth in Armenia's trade with China
generates optimism, demonstrating that the personal commitment by the
Armenian leadership to advance Yerevan's relationship with Beijing
is literally paying off. That commitment is best illustrated by the
fact that all of Armenia's presidents and foreign ministers have
visited China.
All in all, top Chinese and Armenian government officials have paid
over 30 visits to each other's countries since the People's Republic
of China and the Republic of Armenia established relations on April
6, 1992. Armenia's incumbent president, Serzh Sargsyan, has paid two
working visits to China, including a trip to the Expo 2010 in Shanghai,
where he opened the Armenian pavilion and pushed for further expansion
of bilateral trade ties during a meeting with Chinese President Hu
Jintao. Sargsyan also traveled to China as an interior minister in
1998 and then as a defense minister in 2001. In comparison, only two
out of post-Communist Azerbaijan's seven presidents-Heydar Aliyev
and his son Ilham Aliyev-have traveled to China. The elder Aliyev
traveled once, while his son made the trip twice.11 Of the three heads
of the post-Soviet Georgian state, only incumbent president Mikheil
Saakashvili has paid a visit to China, according to the Georgian
embassy in Beijing.12
That the Armenian leadership values the relationship with China
is clear not only from the frequency of the visits, but also from
the reception given by the hosts to the guests. A visiting Chinese
official is usually granted the opportunity to meet the president of
Armenia and the republic's top ministers, even if he or she is not
a top dog-as was the case when an assistant to the Chinese foreign
minister came to Yerevan in April 2003.13 Chinese leaders have also
paid appropriate attention to Armenian officials visiting Beijing.
Armenian presidents and prime ministers-who have visited China
six times in the past 20 years- have invariably met their Chinese
counterparts during all but one of such visits.14
China's continuing rise requires Yerevan to be ever more energetic
and persistent in engaging Beijing not only diplomatically, but
also economically. Armenian leaders need to be both pro-active and
relentless if they want to transform the Chinese-Armenian relationship
into a special partnership in spite of the existing geographic and
economic constraints. Otherwise, Armenia won't matter to China much
more than it does now, when Chinese strategists ponder how long a
hike in world oil prices will last if the Karabakh conflict heats up.
Taking a Cue from Two Ancient Peoples' Special Partnership
Of, course, it may seem incredulous to some that China would agree to
forge a special relationship with a small state, which a) is located
thousands of miles away; b) has had a diaspora in the Middle Kingdom
for centuries but established diplomatic relations with Beijing only
20 years ago; and c) lacks natural resources but has hostile neighbors
that possess oil and gas that energy-hungry China prizes so much.
To such skeptics, I say: Look at Israel. In fact, the similarities
between Israel's and Armenia's position vis-a-vis China are so striking
that I would argue some of the compliments that the Israeli and Chinese
statesman have recently exchanged on the newly formed partnership
of the two ancient peoples might as well have come from a transcript
of a Chinese-Armenian summit.15 Such complimentary rethoric doesn't
appear out of thin air. It is based on the solid economic relationship
that Israel has managed to build with China after the latter agreed
to establish diplomatic relations with the Jewish state in January
1992. Since then, bilateral trade has increased by 200 times and now
stands at $10 billion a year, with China being Israel's third-largest
export market.16 No wonder international affairs experts talk about
a special partnership between Beijing and Tel Aviv.
It goes without saying, of course, that the Armenian economy is
far less advanced than that of Israel, but what the Jewish state is
exporting to China is instructive for selecting what Armenia should
be selling to the Middle Kingdom to minimize the share of shipping
in overall cost. Israel exports to China mostly high-value goods
such as telecommunications and information, solar energy equipment,
and pharmaceuticals.17
Proposal for a Great Leap Forward in the Bilateral Relationship
When trying to build a special partnership with China, Armenian leaders
should first and foremost focus on deepening bilateral economic
cooperation. Without deep economic ties, Armenia's relationship
with China will remain vulnerable to disruption no matter how
much scholars of the past Great Games theorize about how Beijing's
lingering problems with Uighur separatists should keep the Middle
Kingdom committed to preservation of a viable Armenian state as the
only geographical obstacle to pan-Turkism.
One obvious way to deepen economic cooperation is to attract more
investment from China, which holds a mind-boggling total of $3.2
trillion in foreign exchange reserves-the world's largest-and which
spends tens of billions of dollars on foreign assets every year. China
has been investing an average of more than $40 billion in non-bond
assets abroad over the past several years, but Armenia has been so
far able to attract only a small fraction of this investment.
Armenia attracted $1.4 billion in Chinese investment from 1992 to 2010
and another $2.7 billion in the first few months of 2011, according
to one estimate.18
One way for the Armenian government to entice Chinese companies into
more bilateral trade is to agree to conduct more transactions in
Renminbi, which the Chinese government seeks to promote as one of
the world's reserve currencies.
The Armenian government will also be more successful in attracting
Chinese investments if it improves the general business climate in
the country. It is easier to do business in general and to conduct
import-export operations in Armenia than in Azerbaijan, according
to World Bank rankings. But at the same time, Armenia trails behind
Georgia in the same World Bank rankings-an indication that more could
be done to liberalize the Armenian economy, which continues to suffer
from oligopolies and formidable corruption. (See Appendix I for charts
measuring attractiveness of the business environment in Armenia,
Georgia, and Azerbaijan for investment.)
Armenia should try particularly hard to draw Chinese investors into
developing export-oriented sectors that produce goods or services,
which are of high value but in which shipping accounts for a
lower-than-average fraction of the total cost-such as information
technology.19 Such projects will help to diversify Armenia's trade
with China, which is now mostly limited to exports of minerals and
imports of consumer goods, food, and machinery.20
Anyone unsure how much impact a deepening of economic ties could
have not only on Armenia's bilateral relationship with China, but
also on Beijing's position on issues of vital interest for Yerevan
at international forums, should take a cue from how the depth of
the Chinese-Iranian economic relationship affects the position this
veto-yielding member of the United Nations Security Council (UNSC)
takes on Tehran's nuclear program at the UNSC and the International
Atomic Energy Agency.21
Another aspect of the bilateral cooperation that the Armenian
government should pay greater attention to is military-technical
cooperation. Yerevan should consider following up on recent purchases
of arms from Beijing by proposing a licensed production of such Chinese
defense systems in Armenia that would expand the Armenian state's
indigenous capacity for maintaining a robust deterrence potential.
The Armenian armed forces should also develop other aspects
of cooperation with the People's Liberation Army (PLA), such as
military-to-military contacts. Armenia's ancient commander-in-chief
Vardan Mamikonyan may or may not have descended from the Han dynasty,
but future generations of Armenia's military leaders will benefit
from being sent to expand their knowledge at military academies of a
country that has developed the art of war for millenia and possesses
the world's third largest nuclear arsenal. These ties-which may come
in especially handy in an emergency-would develop to a greater extent
if the two militaries establish regular exchanges of delegations
and conduct joint exercises.22 So far, such military-to-military
contacts between PLA and Armenian armed forces have not been
frequent. Armenia's defense ministers and chiefs of the general staff
have been less-frequent visitors than their commanders-in-chief. They
have paid four visits to Beijing in the past 15 years while visiting
Moscow every year. China's preoccupation with its own territorial
problems and Beijing's aversion to publicly taking sides in the South
Caucasus helps to explain why the Armenian-Chinese military diplomacy
has been rather limited. Armenia's natural choice of Russia as its
main strategic partner, if not a guarantor, is also a factor, as are
more than 5,000 kilometers that separate Armenia from China.
There are, of course, other actions that the Armenian leadership could
take to increase and institutionalize China's stake in peaceful and
steady development of Armenia without undermining its traditional
partnership with powers such as Russia, the European Union, and the
United States.23 (See Appendix II for comparisons of these powers
that are instructive for Armenia's foreign policy choices).
Armenia is a small country, but its vote in such key international
forums, as the UN General Assembly, is as good as everyone else's.
Supporting Beijing's initiatives-such as a ban on deployment of weapons
in space, a differentiated approach to global climate policy, and
World Bank and IMF reforms-at these forums would make this permanent
member of UNSC more supportive of Yerevan on issues that matter to
Armenia most.
A Chinese-Armenian summit would provide a perfect opportunity to
achieve a great leap forward in bilateral cooperation. Armenian
diplomats should, therefore, exert maximum efforts to organize
Sargsyan's first state visit to China before a rotation of power occurs
in the Middle Kingdom.24 The Armenian leader should meet both Hu and
Vice President Xi Jinping before the latter becomes the next president
in early 2013. The summit should elevate the status of the existing
Armenia-China intergovernmental commission to that of a bilateral
presidential commission, which would feature working groups headed
by relevant ministers and which would hopefully repeat the success
of two similar commissions that the United States and Russia have
established. Most of the projects I propose above and below could be
pursued within the framework of such a commission. During the summit,
Sargsyan should also secure Xi's consent to become the first Chinese
leader to visit Armenia.
Nor should Armenia shy away from expanding the people's diplomacy,
promoting educational exchanges between the two countries to ensure
that not only the current, but also future, leaders of China can
do much more vis-a-vis Armenia than simply locate it on the map.25
Establishment of the Confucius Institute in Yerevan at the Yerevan
State Linguistic University of Armenia in partnership with China's
Shanxi University in 2008 was a step in the right direction. It should
be followed by the establishment of an Armenian institute in China,
preferably on the premises of a top public administration or diplomatic
graduate school.
Armenians living abroad could, of course, play a role in promoting
relations between China and Armenia, especially in the economic
sphere.26 The Armenian diaspora in China is small, but there are a
plenty of Armenian businessmen that live in other countries and do
business with Chinese companies. Armenia's foreign affairs and diaspora
ministries should engage such businessmen in efforts to secure joint
Chinese-Armenian financing of development projects in Armenia that
would edge the two nations closer to the special partnership I propose.
Thinking Outside the Box
The proposed mission of establishing and maintaining a special
partnership with China- whose daily subway commuters in the nation's
capital outnumber the population of Armenia-would prove impossible
without unorthodox approaches.
Hence, in addition to pursuing the useful but customary projects
proposed above, the Armenian leadership should also think of outside
the box. To advance military ties, for instance, the Armenian
leadership could consider embedding an Armenian unit into a Chinese
contingent the next time the PLA decides to commit troops for a
UN operation. If Armenian peacekeepers can serve under the German
command in a NATO-led operation in Afghanistan, then why can't they
serve under the Chinese command in a UN mission?
Armenian policymakers looking for unorthodox ideas on how to make
Armenia matter much more in the eyes of their Chinese counterparts
should also take a cue from Beijing's reaction to treatment of Chinese
diasporas in third countries. If loss of income by several hundreds
of Chinese traders caused by closing of a Moscow market warrants a
note from China's foreign ministry, then one might ask: Would China
have a greater stake in Armenia's security and prosperity if there
were several thousands of Chinese peasants working on those Armenian
agricultural lands that suffer from shortage of labor? The answer
to that question is obvious, as is the fact that Armenia's chances
of peaceful, sustainable development will be enhanced greatly if
it becomes a special, if not indispensable, partner of the rising
superpower.
__________________________________________________ __________________________
Simon Saradzhyan is a native of Nagorny Karabakh's Shahumian
district. The author would like to thank Temirbek Aituganov,
ex-director of the public debt department at the Finance Ministry of
Kyrgyzstan, Emil Sanamyan, Washington editor for The Armenian Reporter;
and Ali Wyne, research associate at Harvard University's Belfer Center
for Science and International Affairs; for their advice.
__________________________________________________ __________________________
Appendix I. Business Climate in Armenia, Georgia, and Azerbaijan:
A total of 184 countries ranked. The higher the score, the better
the business climate. Source: Heritage Foundation.
A total of 183 countries ranked. The higher the score, the lower the
corruption. Source: Transparency International.
A total of 183 countries ranked. The higher the ranking, the easier
to do business. Source: World Bank.
Appendix II. Comparing Present and Future of Prospective Partners:
Sources: World Bank, Goldman Sachs, Economist Intelligence Unit.27
1In 2016, China's GDP in purchasing power parity (PPP) terms will
be $18,976 billion, while the United States' GDP in PPP terms will
be $18,807, according to the IMF's forecast. (World Economic Outlook
Database, IMF, April 2011); Goldman Sachs predicts that China's GDP
will total $25,610 billion in 2030, while America's GDP will total
$22,817 billion that year at market exchange rates. (Dominic Wilson
and Anna Stupnytska, Global Economics Paper No. 153, Goldman Sachs,
March 28, 2007)
2"Armenia, China to Hold High-Level Business Forum," Xinhua, April
7, 2011.
3China generated 7.7% of Armenia's external commercial turnover in
2011, compared to Russia's 20.3%, Germany's 7.4%, and Iran's 5.9%.
(Country Report Armenia, 1st Quarter 2012 Main Report, Economist
Intelligence Unit, February 2012)
4Trade volume for 1997. "Kitaisko-Armyanskie Otnoshenia"
("Chinese-Armenian Relations"), web site of the People's Republic
of China's embassy to the Republic of Armenia, undated. Available at
http://am.chineseembassy.org/rus/zygx/t392051.htm. Accessed on March
14, 2012.
5Azerbaijan's largest trading partners in 2010 were Italy (26.8%),
the U.S. (8.4%), Germany (7.1%), France (6.7%), Czech Republic (4.9%),
and Russia (4.4%). Azerbaijan, CIA World Fact Book, undated.
Available at
https://www.cia.gov/library/publications/the-world-factbook/geos/aj.html.
Accessed on March 14, 2012. Georgia's largest trading partners in
2010 were Turkey (15%), Ukraine (9.2%), Azerbaijan (8.5%), Russia
(6.5%), and Germany (6.1%). Georgia, CIA World Fact Book, undated.
Available at
https://www.cia.gov/library/publications/the-world-factbook/geos/gg.html.
Accessed on March 14, 2012.
6External trade database by country in 2011, web site of the National
Statistical Service of Republic of Armenia, undated. Available at
http://www.armstat.am/en/?nid=380&thid[]=156&years[]=2011&submit=Search.
Accessed on March 14, 2012.
7Georgia's imports from China totalled $525 million in 2011, while
its exports totalled $29 million. Decimals rounded to closest whole
number. Main Statistics External Trade and FDI External Trade, web
site of the National Statistics Office of Georgia, undated. Available
at http://www.geostat.ge/index.php?action=page&p_id=137&lang=eng.
Accessed on March 14, 2012.
8Foreign Trade Relations of Azerbaijan for 2011, web site of the
Ministry of Economic Development of Azerbaijan, undated. Available
athttp://www.economy.gov.az/eng/index.php?option=com_content&view=article&id=6
41.Accessed on March 14, 2012. No estimates of Azerbaijan's exports
to China are available at this site.
9Fariz Ismailzade, "Azerbaijan and China Move to Increase Security
and Economic Cooperation," Eurasia Daily Monitor, March 21, 2005.
10At current prices Armenia's GDP in 2011 was $9.3 billion,
Georgia's was $11.6 billion, Azerbaijan's was $51.7 billion. World
Bank Data Bank, web site of World Bank, undated. Available
athttp://databank.worldbank.org/ddp/editReport?REQUEST_SOURCE=search&CNO=2&cou
ntry=&series=SM.EMI.TERT.ZS&period=. Accessed on March 14, 2012.
11Arguably the Aliyevs' predecessors in the early 1990s lost the
Azeri presidency too quickly to visit all the countries they may have
wanted to.
12Relations between Georgia and the People's Republic
of China, web site of the Republic of Georgia's embassy
to the People's Republic of China, undated. Available at
http://china.mfa.gov.ge/index.php?lang_id=ENG&sec_id=552. Accessed
on March 14, 2012.
13"Kitaisko-Armyanskie Otnoshenia" ("Chinese-Armenian
Relations"), web site of the People's Republic of China's
embassy to the Republic of Armenia, undated. Available
http://am.chineseembassy.org/rus/zygx/t392051.htm. Accessed on March
14, 2012.
14The only exception was when President Sargsyan attended the opening
of the Olympic Games in Beijing in 2008. He had no public meetings
with the Chinese leaders during that visit.
15"We are two ancient peoples whose values and traditions have left an
indelible mark on humanity," Prime Minister Benjamin Netanyahu said
during his visit to Beijing this past January. China's ambassador to
Israel Gao Yanping returned the compliment several days later, saying:
"As two ancient civilizations, we have a great deal in common. Both
of us enjoy profound histories and splendid cultures."Oren Kessler,
"Shalom, Beijing," Foreign Policy Magazine March 13, 2012.
18"Armenia, China to Hold High-Level Business Forum," Xinhua, April 7,
2011. Statistical Yearbook of Armenia-2011 of the National Statistics
Service of Armenia contains no data on investments from China in 2010
while estimating the total gross inflows from China in 1998-2010 at
a meager $1.3 million compared to Russia and France, which forked
over $2.1 billion and $589 million over the same period of time,
respectively.
19It won't be easy to attract Chinese investment into sectors such as
software development, given that investment into technology totaled
a meager $1.5 billion out of $216 billion that China invested abroad
in 2006-2010. In comparison, China invested more than $100 billion
into energy and power assets abroad over the same period of time,
according to Derek Scissors, "China's Investment Overseas in 2010,"
Heritage Foundation, February 3, 2011.
20"Dvykhstoronnie otnoshenia: Kitai" ("Bilateral
Relations: China"), web site of the Ministry of Foreign
Affairs of the Republic of Armenia, undated. Available at
http://www.mfa.am/ru/country-by-country/cn/. Accessed on March 15,
2012.
21Iran has been by far the largest recipient of
Chinese non-bond investments in 2005-2011 in West Asia,
attracting more than $17 billion, with Kazakhstan and Russia
trailing behind. Derek Scissors, "China Global Investment
Tracker: 2012," Heritage Foundation, January 6, 2012. Available
athttp://www.heritage.org/research/reports/2012/01/china-global-investment-tra
cker-2012.Accessed on March 14, 2012.
22When the Russian Navy's AS-28 mini-submarine got entangled in
fishing nets in 2004, a Russian admiral who had attended a U.S.-Russian
generals program at Harvard defied SOPs and called a fellow participant
from the U.S. side who was at that time working in the U.S. Embassy in
Moscow. The phone call, between two men who met at the John F. Kennedy
School of Government's U.S.-Russia Security Program in 2004, began a
chain of events that resulted in U.S. and British equipment rushing
to the scene and a British undersea rescue vehicle ultimately freeing
the AS-28 and saving the sailors' lives.
"U.S. Admirals Talk to Save Sub," Harvard Gazette, October 20, 2005.
23Russia has always balked at expansion of U.S. and EU influence
in former Soviet Union, but has been much more tolerant of China's
cooperation with post-Soviet states. In fact, American policymakers may
still be debating how to avoid being eclipsed as the sole superpower
by the Middle Kingdom, but Vladimir Putin of Russia has already
acknowledged the inevitability of China's rise, noting that Moscow
has no plans to quarrel with China over the global domination.
"Putin, otkazavshiisya borotsya s Kitaem za mirovoe gospodstvo,
smutil Pekin i zastavil obyasnyatsya" ("Putin refused to fight with
China for global dominance in what embarrassed Beijing and prompted
it to explain its view"), Newsru.com, October 18, 2011.
24As noted above, Sargsyan has been twice to China as a president,
but neither were state visits. He first went to attend the opening
of the Olympic Games in 2008, and he returned two years later for
the opening of the Expo 2010.
25One sign of the level of the current Armenia expertise, if not
attention that China pays to Armenia, is that that the web site of the
Chinese embassy in Yerevan has Russian- and Chinese-language versions,
but no Armenian version.
26Armenian merchants began to trade with China soon after
the latter opened its port in Macao for international trade
in 1685, and there was a thriving Armenian community in
Harbin in the beginning of 20th century. Irina Minasyan,
"Kitaisko-Armyanski Kontakty" ("Chinese-Armenian Contacts"),
21st Century, Issue No. 1, 2012, Noravank. Available at
http://noravank.am/rus/jurnals/detail.php?ELEMENT_ID=6339. Accesed
on March 16, 2012.
27The author could not find ready-to-use projections of the EU's
GDP in 2025 and 2030, so he took the Economist Intelligence Unit's
prediction that the EU's GDP will grow by some 10 percent in 2010-2015
and extrapolated it to the 2015-2025 period.
March 2012