China To Bankroll Construction Of Entire New City In Belarus

by


China will spend close to $5 billion to build an entire city from scratch in the forests near Minsk, the capital of Belarus, reported Bloomberg on Sunday, with the area set to be transformed into a gigantic industrial hub, offering Chinese exporters tax-free entry into Russia and Kazakhstan.

According to Bloomberg, the new city will be approximately 40 per cent larger than Manhattan and will include enough housing to accommodate approximately 155,000 people.

In addition, the site is set to surround Belarus’s international airport, while being located on the M1 highway, which links Moscow and Berlin via Belarus and Poland.

The hub is expected to give Chinese exporters tax-free entry into Russia and Kazakhstan, as they currently share a customs union with Belarus, noted Bloomberg.

It will also allow Chinese companies to tap into a highly educated, yet relatively cheap, workforce – whereby 99.6 percent of employees are literate, but earn just $560 a month on average.

China National Machinery Industry Corp, will have a 60 percent stake on the project, with the Belarus government owning the remaining 40 percent. The new city is expected to be powered by a $10 billion nuclear plant, which Russia has agreed to finance and build by 2018.

“This is a unique project… Nobody will be able to build anything like this industrial park anywhere else in Europe anymore. The infrastructure is so powerful,” said Gong Jianwei, China’s ambassador to Belarus, on May 17.

Besides Chinese companies, any enterprise that pledges to invest at least $5 million and work in an “advanced sphere” such as biomedicine or electronics can receive a 10-year waiver on profit and property taxes, according to the project’s website. In the following 10 years, taxes will still be halved for these companies.

Bloomberg noted that Chinese leaders had long been seeking to establish a manufacturing base for their exporters within the EU for years. In 2010, talks with Bulgaria on establishing a similar park to the one in Belarus stalled after a change in leadership in both countries.

Related: Chinese Business Enters the EU Via Eastern Europe

Related: Can China Alone Save the Eurozone?

Related: China Will Struggle To Wean Its Addiction To Investment-Led Growth: Michael Pettis

The first stage of the new city’s construction is scheduled for construction by 2020, with the second stage taking another 10 years. Since 1992, Chinese investment in Belarus has grown from $34 million to over $2.5 billion in 2010, according to New Europe Online.

“Further, China stands as involved in Belarus’s politics as it does in its economics. From Minsk to Beijing, evidence of growing economic and diplomatic links suggests a mutually beneficial relationship that will continue to develop in the coming years,” wrote the site.