Domestic Economy

Beijing Makes Sure Ties Stay Strong

Beijing Makes Sure Ties Stay Strong Beijing Makes Sure Ties Stay Strong

Chinese President Xi Jinping arrived in Tehran late on Friday to discuss improvement of economic and political ties after the lifting of western sanctions.

He has also visited Saudi Arabia and Egypt during his Middle East tour, which started on January 19.

A high-ranking political and economic delegation accompanied the Chinese president during his one-day trip, which is the first visit by a Chinese president in 14 years.

Seventeen accords, including a strategic cooperation agreement, were signed between the two sides on Saturday.

Xi is the first leader to visit Iran after international sanctions were lifted on January 16 under a nuclear deal reached with world powers, including China.

“The visit to Iran is aimed at securing ‘early bird’ advantages ahead of western competitors,” wrote Hong Kong-based newspaper the South China Morning Post.

  Ambitious Trade Target

China has been Iran’s top trade partner for six years in a row, with bilateral trade hitting a record $52 billion in 2014. It has also been the number one buyer of Iranian crude since 2011, when many countries, especially in the West, ramped up sanctions to strictly prohibit most forms of business with the country.

In 2015, Iran-China trade fell by 34% after key goods such as oil, gas condensates and iron ore lost much of their value.

“We are happy that President Xi visited Iran after the lifting of sanctions ... Iran and China have agreed to increase trade to $600 billion in the next 10 years,” Iran’s President Hassan Rouhani said at a news conference with Xi on Saturday.

  “One Belt, One Road”

Pang Sen, Chinese ambassador to Iran, says aside from oil and gas investments, Iran is key to Xi’s “One Belt, One Road” development plan, which focuses on trade, infrastructure and the transfer of China’s excess industrial capacity.

Pang noted that progress on the Chinese project will help push bilateral ties to the next level, calling Iran a “key partner” in the project.

The plan aims to create a trading and infrastructure network linking China with Europe and the vision for the overland portion transits right through Iran.

“China would like to deepen cooperation in road, railroad, shipping and the Internet,” Xi said in a signed article published by the Iranian newspaper Iran on Thursday.

“Through that we can facilitate trade and investment between East and West Asia, reduce the cost of the international human, commodity and money flows and reinforce and expand our energy, resource and industrial cooperation.”

Referring to economic ties with China, Iranian President Hassan Rouhani said Tehran would not forget “friends who helped us” in a difficult time.

“Decades of western sanctions had constrained the potential of Iran, which was rich in natural resources and boasted basic industrial development alongside a young and educated population,” said Wang Wen, from the Chongyang Institute for Financial Studies, Renmin University.

With an improvement in the “external environment”, the country was on the eve of explosive growth, Wang said.

“With this timing, President Xi’s visit to Iran is like increasing one’s stock holdings when the price is still at the bottom but is about to surge,” Wang said.

Xiao Xian, head of Middle East studies at Yunnan University, said before the sanctions were lifted, Germany and France had shown interest in reestablishing business ties with Iran, but China had a strong and irreplaceable edge in infrastructure and manufacturing capacity.

“Economic relations between China and Iran will get only closer as there are no more restrictions whatsoever,” said Xiao.

  No Coincidence

It’s no coincidence that Xi will be in Iran for the one-week anniversary of the official implementation of the Joint Comprehensive Plan for Action, wrote the Japanese magazine the Diplomat in a recent article.

“The JCPOA is a double-edged sword for China-Iran relations. On the one hand, it opens the door for much deeper ties without Beijing having to risk international approbation. As such, China moved quickly to capitalize on the deal, pursuing deeper economic and military ties with Tehran,” the article added.

“On the other hand, though, China isn’t the only country looking to capitalize on new access to Iran’s markets, meaning Beijing could lose a privileged position as European companies seek to enter the game.”

Iranian economist Saeed Leylaz told Xinhua in an interview that Xi’s visit “will help China remain Iran’s biggest trade partner” in the face of growing competition from Europe.

Leylaz also argued that focusing economic energies on China in the wake of sanctions relief would be most beneficial for Iran’s economy, calling it the “Chinese solution to Iran’s economy”.

China may face more competition in Iran in 2016, but it already has a sizable head-start in Iranian markets. And Beijing is not resting on its laurels either, but will use Xi’s visit to push forward investment and economic ties with one of China’s top oil majors.