Spotlight

The official three-day visit of Turkey's Prime Minister Recep Tayyip Erdogan to China earlier this month – the first prime ministerial visit to the country in 27 years -- has commentators saying that relations have entered a honeymoon phase, built around budding economic and commercial ties.

As a first stop, Erdogan visited Urumqi, the capital of China’s far western region of Xinjiang, home to the Uyghur, a Turkic ethnic group with cultural and linguistic ties to Turks. In 2009, relations between China and Turkey hit a low over China's repression of anti-government Uyghur protestors. Now, Turkey is planning to establish an industrial zone in the region.

Erdogan also attended the Turkey-China Economic and Commercial Co-operation Forum. Turkish and Chinese businesspeople signed a number of deals, ranging from the construction of a 1,980-megawatt thermal power plant in the northern Turkish province of Bartin, to the development of a 600-megawatt wind power plant in Turkey and production of solar panels with Chinese know-how.

Salih Tinmaz, a China expert from BILGESAM, an Istanbul-based think tank, accompanied Erdogan. "The visit of the prime minister, with Turkey’s trade, energy and tourism ministers, as well as a group of almost 300 businesspeople, demonstrates to what extent Turkey accords importance in its economic and commercial relations with China," he told SES Türkiye.

The trip was preceded by Chinese Vice President Xi Jinping's visit to Ankara and Istanbul in February, when several co-operation deals in energy, agriculture, finance and banking sectors were also signed.

As the global economy struggled last year, Turkey's economy grew by 8.5%, making it the second fastest growing economy after China's 9.2% growth.

According to official figures, in 2011, Turkey's exports to China amounted to $2.5 billion, while imports from China reached almost $22.5 billion. Turkey currently conducts 10% of its foreign trade with China and the two countries pledged to increase trade volume to $50 billion by 2015, and to $100 billion by 2020.

Despite these lofty growth targets, a consistent complaint is that the balance of trade remains heavily in China’s favour.

According to Tinmaz, the deficit leads to claims from opposition parties and consumers that the Turkish market is becoming open to cheap products. "So the main target of this visit [was] to increase the export volume of Turkey to that country and to attract much more durable investments from China."

Goksin Duman, Asia-Pacific regional co-ordinator at the Foreign Economic Relations Board (DEIK), says that one-third of Turkey’s imports from China consist of consumer goods. "So, we have to balance this trade deficit through direct investments and services like tourism," she said.

Each year almost 85 million Chinese tourists visit foreign countries, but Turkey has only managed to attract 79,000 Chinese visitors. "If we can increase this number to two million, this will have a very positive impact on the trade deficit between the countries," Yunus Ilkay, secretary-general of the Turkish Chinese Industrialists & Businessmen Association, told SES Türkiye.

Erdogan's visit to China came in the wake of the recently announced investment incentive package, which experts say is likely to attract investors to strategic investments in technology, textiles, defence, transportation and aerospace, by assisting them in finding land for their businesses and helping with insurance premiums, interest rates and taxes.

However, one criticism leveled at Chinese investments in Turkey is that they are not greenfield investments, where the parent company starts a new venture by constructing facilities from the ground up, thereby promoting new employment and technology transfer.

To increase employment and technology transfer, Turkey adopted "the five to one rule" in July 2011, requiring the employment of at least five citizens of Turkey for every foreigner.

"It is a double-edged sword," explained Duman. "On the one hand, this rule will prevent the Chinese from employing just their nationals in the factories set up in Turkey, while they are now discouraged to open representation offices in Turkey because this rule will also apply in this case, obliging them to employ at least six people although it will be just a small-scale office."

But according to Ilkay, the newly signed agreements should provide the two countries with an opportunity to complement each other in their business practices.

"Turkey and China have been competing in two main sectors: construction and textiles. So, in any partnership established in these fields, Turkish quality should be integrated into Chinese know-how to exploit complementary advantages," he said.

As an EU candidate country with rising political and economic clout in its region, Turkey is fast becoming an attractive gateway for international investors in search of new markets.

Huawei Technologies, a large Chinese networking and telecommunications equipment company, has enjoyed a rapid growth in the Turkish market since launching operations in 2002.

Zhao Xiaobin, director of Huawei Technologies Central Asia & Caucasia Region’s public affairs and communications department, describes the company’s main motivation for investing in Turkey.

"Turkey is important for Huawei because of the opportunities in the market and its young and dynamic population of over 74 million. Also, the stable economy and fast development are among the key reasons," he told SES Türkiye.

"More Chinese companies are coming to Turkey and opening subsidiaries or offices. Also, Chinese and Turkish businessmen should [reach] much more co-operation. I personally think that after the prime minister’s successful visit to China, commercial relations between China and Turkey will take a new step."