Issue 4, 2017. August-September

   

GEORGIAN GOVERNMENT UPBEAT ON CHINESE TRADE

The new free trade deal between China and Georgia will allow 94 percent of Georgian products to enter the Chinese market without paying customs fees. The agreement is just the latest in a growing number of bilateral economic deals between the two countries.

Lika Jorjoliani


Georgian goods-including wine, iron and steel ore and many, many other products-are heading to China's 1.3 billion-person market, thanks to the free trade deal signed between the two countries in May.

Under the agreement, 94 percent of Georgian products and services will be exported to the Chinese market without custom fees, at a zero tariff rate. Ambassador of the People's Republic of China in Georgia Ji Yanchi told Investor.ge that the agreement is very significant.

"The agreement provides good perspectives for the further development of mutually beneficial cooperation and partnership; it is also very significant for the construction of the Silk Road Economic Belt initiated by the President of China, Xi Jinping. I think that we are on the right track with Georgia. I am very glad that this year we signed this agreement, and I hope that it will enter into force before November," he said.

The Ambassador noted that China has already signed free trade agreements with 22 countries, including 11-like Georgia-signed under the One Belt, One Road policy.

"These agreements have a great significance, and Georgia can use its geographic location to develop its links and trade/economic cooperation with the CIS, the EU and Turkey. China is the fourth among major trade partners of Georgia; trade turnover for the first quarter of this year reached $176 million," Ambassador Ji Yanchi said.

He noted that Georgia's main exports to China include alcoholic beverages and wine.

In terms of volume, China is the second-largest importer (after Russia) of Georgian wine, the Ambassador said.

"Unique Opportunity" for Agriculture

"The free trade agreement with China represents a unique opportunity for the export of some products to the Chinese market.

"Currently, we do not have sufficient volumes of products to satisfy the Chinese market, but in the future, free trade will stimulate Georgian producers to increase the volumes of their production," First Deputy Agriculture Minister Nodar Kereselidze told Investor.ge.

Currently, the biggest change is likely to be in the wine sector, he said.

"After the removal of customs tax, which was as high as 40 percent of the cost of the product, Georgian wine will become more competitive on the Chinese market," Kereselidze said, noting that Georgia's agreement with China on removing the tariff burden on Georgian wine was "unprecedented."

"Other countries were released from this tax step-by-step over a 10-year or 5-year period," he said.

Kereselidze was also upbeat about mineral water and non-alcoholic beverage exports to China. The Deputy Minister played down fears that Georgia will be inundated with Chinese products.

Noting the current volume of Chinese imports-and the fact that China is a net importer of agricultural goods-he said the government does not expect any radical changes.

China Trains Georgian Farmers

Kereselidze underscored a two-year Chinese training program for Georgian farmers as an example of Beijing's commitment to helping Georgia modernize.

"In Marneuli, we opened a demonstration greenhouse complex that is designed to assist Georgian farmers in the cultivation of vegetables in greenhouses. With the help of experts from China's south-western Hunan province, six large and 27 small solar greenhouses were constructed on a five-hectare area in Marneuli," Kereselidze said.

Around 500 Georgian farmers have been trained in modern vegetable cultivation, with classes both in Georgia and in China, the Deputy Minister said. "The Chinese government allocated 20 million RMB ($3 million dollars in 2015. To summarize the results of two years of work, Georgian and Chinese specialists concluded that this experimental base should continue retraining specialists in order to stimulate the development of greenhouses of such a type in other regions of Georgia."

A second tranche of $3 million dollars is expected to be used to give farmers who are interested in Chinese technology small grants. There are also plans to fund new greenhouses in Georgia's western Imereti region, he said, adding, however, that the specifics on how the funds will be spent are still under discussion.

Chinese Investment Fund

A Chinese company and Georgia's government-run Partnership Fund agreed to create a Chinese investment fund to help other sectors of the Georgian economy as well, according to Partnership Fund CEO Davit Saganelidze.

The fund, officially called the Georgian-Chinese Fund for the Regeneration of Georgia, will create a new investment platform for creating business projects and stable financial instruments, as well as for infrastructure, power engineering, agriculture, industry, tourism, and other sectors, he said.

The Georgian-Chinese Fund will invest around $50 million, with the Partnership Fund holding 49 percent of the capital (around $24 million) and the Chinese partner, CFC, holding 51 percent (around $26 million).

He said the fund will focus on start-up projects and will only operate in Georgia. The fund will start operating this year, according to Saganelidze, who said a Chinese delegation will visit Georgia in the summer to discuss the Georgian-Chinese Fund's organization and management.

Finding Chinese Partners

The Georgian Chamber of Commerce and Industry (GCCI) is already working with Georgian companies in various sectors to help them navigate the ins and outs of the new trade agreement, according to the Head of the Chamber's International Relations Department, Giorgi Vekua.

"Georgian companies address us for explanation about what the agreement means and to ask for help searching for a partner in China. It is very difficult for Georgian companies to find a partner on the Chinese market independently, as there are communication problems," he said. Vekua noted that the Chamber helped organize a trip for Georgian businesspeople to different Chinese provinces.

"Many Georgian manufacturers found partners there. Besides that, Chinese businessmen were interested in a [Georgian] company that manufactures furniture," he said. The Georgian Chamber of Commerce and Industry is planning to open an informational center where anyone may receive answers concerning the agreement on free trade with China. He added that Georgia's Commercial-Industrial Chamber signed an agreement with the head office of the China Council for the Promotion of International Trade (CCPIT).

"It is a Chinese trading organization, which includes representatives of commercial segments of the state, and representatives of different organizations.

"It is very good mechanism to establish trading-economic relations with different Chinese provinces," he said.

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