Thursday, September 02, 2021

To Boost Armenian Economy, Economic Cooperation with China is a Must

By Benyamin Poghosyan
Chairman, Center for Political and Economic Strategic Studies, Yerevan, Armenia

File photo: Chinese President Xi Jinping met with Armenian Prime Minister Nikol Pashinyan in Beijing on May 14, 2021. Xi said China is willing to work together with Armenia to stimulate the joint building of the Belt and Road in order to inject new impetus into regional development cooperation. Pashinyan said Armenia views its relations with China from a strategic perspective and will continue to advance international cooperation in the Belt and Road Initiative. / Source: CGTN

The success of China in eradicating extreme poverty has made headlines in international media and discussions of the expert community. Even the most developed countries in the world still face the problem of extreme poverty, and this makes the achievements of developing China even more impressive. Being one of the industrial and intellectual powerhouses of the Soviet Union, Armenia launched a series of economic reforms after gaining independence in 1991. Passing through the difficult transition period in the early 1990s, Armenia stabilized the economic situation in the 2000s and registered an impressive economic performance of an average of 6.5 percent GDP growth in 2017-2019.

Armenia is a member of the Eurasian Economic Union (EAEU) and signed a Comprehensive and Enhanced Partnership Agreement with the European Union (EU) in November 2017. Membership into the EAEU provides Armenia with tariff-free access to the vast Russian market, while the GSP+ system allows Armenia to export 6291 from 9655 of EU products' classification to the EU with zero custom duty. The key sectors of the Armenian economy are mining and production of precious metals, agriculture, tourism, and IT. In recent years IT has become the main locomotive of Armenian economic growth, gradually transforming Armenia into the regional tech hub.
As of now, the main economic partners of Armenia are Russia and the EU member states. However, the Armenian economy suffers from a negative balance of trade, which reaches up to 2.5 billion USD per year. Armenia covers part of this gap by taking loans from international financial institutions, while the remittances of migrant laborers cover another part. To make a qualitative leap forward in its economic development, Armenia needs to increase its exports significantly and decrease its negative trade balance. However, Russian and EU markets are saturated, and Armenia needs to explore new markets for exporting its products. In this context, fostering economic relations with China may play a crucial role in boosting the Armenian economy. 

The development of Armenia–China economic relations is entirely in line with the win-win international cooperation philosophy, put forward by the Chinese President and General – Secretary of the Communist Party of China Central Committee Xi Jinping. As an ancient Chinese saying goes, "Those who only seek comfort for themselves will ultimately be rejected, and those who sacrifice their own interests for the success of others will be supported”. It is also in line with China's "dual circulation" strategy elaborated in 2020 and the new 14th Five – Year Plan for 2021 – 2025. 

In recent years China made significant efforts to further open its economy for the foreign businesses organizing annual China International Import Expos. The fourth China International Import Expo is scheduled to be held in Shanghai from Nov 5 to 10, 2021, and will provide an international businesses platform to showcase products and share opportunities in the Chinese markets. The business exhibition of this year's CIIE consists of six exhibition areas, including Intelligent Industry and Information Technology, Consumer Goods, Food and Agricultural Products, Medical Equipment and Healthcare Products, Automobiles, and Trade in Services.

Armenia may significantly increase its exports to China in two sectors – agriculture and IT products. Armenian fresh and processed fruits, vegetables, as well as wine and brandy have the potential to enter the Chinese market. The agriculture export will contribute to the sustainable development of Armenian rural areas by creating new jobs and preventing the internal migration from villages to the capital Yerevan, which currently holds approximately 40 percent of the entire Armenian population.
The booming IT sector of Armenia is another opportunity for the fostering of bilateral economic ties. Dubbed as a start-up nation and the Silicon Valley of the Caucasus, Armenia has registered more than 20 percent of annual growth in IT in recent years. Many Armenian IT companies work for foreign markets. Given the astonishing growth of the Chinese IT market, there are vast untapped resources for Armenian companies to cooperate with their Chinese counterparts. As start-ups are not concentrated only in Yerevan, the further development of the Armenian IT sector will also contribute to the sustainable development of Armenian provinces. 

The second-largest city of Armenia, Gyumri, hit hard by the 1988 devastating earthquake, has recently become a new center of the Armenian high-tech industry. Armenian start-ups located in Gyumri are looking to the Chinese market as a new source for growth and development. In May 2021, a Digital Silk Road Center was opened in Gyumri with its branch in Chinese Xian to develop mini-programs for the Chinese WeChat messenger. Such innovative projects may become a backbone for the future of Armenia – China cooperation in the IT sector.

In the world of growing economic nationalism and protectionism, China's willingness to pursue win-win economic cooperation with other countries provides hope for solid economic growth for states such as Armenia. Armenia values its millennia-long partnership with the Chinese people and looks forward to boosting its economic cooperation with China significantly.

About the Author:

Dr. Benyamin Poghosyan
Dr. Benyamin Poghosyan is Founder and Chairman, Center for Political and Economic Strategic Studies and also, Executive Director, Political Science Association of Armenia since 2011. He was Vice President for Research – Head of the Institute for National Strategic Studies at the National Defense Research University in Armenia in August 2016 – February 2019. He joined Institute for National Strategic Studies (predecessor of NDRU) in March 2009 as a Research Fellow and was appointed as INSS Deputy Director for research in November 2010. Before this, he was the Foreign Policy Adviser of the Speaker of the National Assembly of Armenia. Dr. Poghosyan has also served as a Senior Research Fellow at the Institute of History of the National Academy of Sciences and was an adjunct professor at Yerevan State University and in the European Regional Educational Academy.

His primary research areas are the geopolitics of the South Caucasus and the Middle East, US – Russian relations, and their implications for the region. He is the author of more than 70 Academic papers and OP-EDs in different leading Armenian and international journals. In 2013, Dr. Poghosyan was appointed as a "Distinguished Research Fellow" at the US National Defense University - College of International Security Affairs and also, he is a graduate of the US State Department's Study of the US Institutes for Scholars 2012 Program on US National Security policymaking. He holds a Ph.D. in History and is a graduate from the 2006 Tavitian Program on International Relations at Fletcher School of Law and Diplomacy.           

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