Domestic Economy

Sino-Iran Ties Shifting into Higher Gear

Heading a delegation of business leaders, the minister of economic affairs and finance paid a three-day visit to China and participated in the 16th session of the Iran-China Joint Economic Commission
Ali Tayyebnia (L) met with Chinese Vice Premier Wang Yang in Beijing, Aug. 17.Ali Tayyebnia (L) met with Chinese Vice Premier Wang Yang in Beijing, Aug. 17.

Minister of Economy Ali Tayyebnia says Iran welcomes Chinese investment in non-oil sectors and hopes to “maintain an active role” in the so-called Belt and Road initiative.

“Iran is willing to expand all-out relations with China in the post-sanction era. China-Iran relations cannot and will not be affected by the turbulent world politics,” he told the Chinese newspaper Global Times in Beijing on Wednesday.

Tayyebnia said bilateral trade has risen 100 times over the past 30 years and in recent years bilateral cooperation has switched from oil trade to infrastructure and investments.

China is Iran’s biggest trade partner. Bilateral trade reached $17.6 billion during the last Iranian year (ended in March), with Iran’s exports to China standing at $7.23 billion, showing a 23% decline and imports amounting to $10.45 billion, down 22%.

Latest data on two-way trade pertains to the first four months of the current Iranian fiscal year (March 20-July 21). According to the Islamic Republic of Iran Customs Administration, 11 million tons of non-oil goods worth $2.9 billion were exported to China during the period, recording a 15% increase compared to last year’s corresponding period.

Petrochemicals, gas condensate, minerals, saffron and carpets were among the main exports. Iran’s import from the world’s second-largest economy stood at 1.38 million tons valued at $2.94 billion. It mainly included machinery, tires, rail tracks, industrial parts, steel products, air conditioners, computer parts and sunflower seed, over the same duration, indicating a 16% decline.

  Active Role in B&R Initiative

Having played an active role in the ancient Silk Road, the minister said Iran hopes to maintain that role under the Belt and Road initiative. “Iran has identified projects for Chinese investment both for the land and maritime Silk Roads. We hope to start discussions on those projects as soon as possible,” he added.

The Belt and Road initiative, also known as B&R, aims to connect China to Europe via Iran, Kazakhstan and Pakistan. It was first proposed by Chinese President Xi Jinping in 2013

Xi paid an official visit to Tehran at the head of a high-ranking political-economic delegation a week after the implementation of Iran’s nuclear deal with the world powers in January. Seventeen memorandums of understanding were signed during the landmark visit and the two sides agreed to expand commercial ties to $600 billion within the next ten years. Long-term contracts in the energy and mining sectors were also discussed.

Tayyebnia said the two countries complement each other in energy resources and investments. “Iran’s energy supply meets China’s current and future demand as Iran has the largest oil and natural gas reserves, and China is one of the largest energy importers.”

He said he predicts China, the world’s top overseas investor, will soon emerge as the world’s largest economy. Iran has the raw materials China needs to support its industrial activities, he told the publication.

Given the country’s crucial geographic location, Tayyebnia said Iran has access to a potential market of more than 400 million people in the region and highly competitive and talented human resources. The abundance and diversity in cultural heritage can also attract investments in tourism.

Following the lifting of international sanctions, Iran, with a population of 80 million, has scrambled to get its economy back on track, and oil is seen as one of the pillars of the strategy.

But Tayyebnia said Iran, an OPEC member, is targeting an annual growth rate of 8% over the next five years through non-oil business, privatization of state assets and improving its investment climate. Reducing the share of energy exports in government revenues can and should be achieved by expanding non-energy exports, he said.

The oil sector’s share in government revenue has been reduced over the years from 80% to less than 30%, he recalled. Last year, non-energy industries posted a trade surplus of over $1 billion. “The sanctions helped us realize our weaknesses,” Tayyebnia was quoted as saying.

During his three-day visit in Beijing, the minister participated in the 16th session of the Iran-China Joint Economic Commission. The 15th meeting of the commission was held in 2014 in Tehran in February. He was accompanied by representatives from the public and private sectors in the fields of economy, industry, commerce, banking and culture to work on an economic roadmap with their Chinese counterpart and strengthen economic ties in the key sectors.

Tayyebnia also met with Chinese Vice Premier Wang Yang on Wednesday, exchanging views on ways to expand trade and investment cooperation.

Wang said the two countries enjoy a long history of friendship, noting their economies are complementary and enjoy huge potential for cooperation.

The two sides should enhance mechanisms under the China-Iran Joint Economic Commission and step up pragmatic cooperation in all sectors to push bilateral cooperation to a new high, he was quoted by Xinhua as saying.

  MoU With Exim Bank

A memorandum of understanding was signed with the Export-Import Bank of China.

The MoU covers key sectors, namely roads, ports, power plants, communications, industrial parks, oil and gas, healthcare, agriculture and tourism.

It was signed with the stated goal of facilitating finance for bilateral economic and infrastructure endeavors, while expanding joint efforts.

One of the important aspects of this MoU was the fact that in addition to the attention paid to financing government schemes, plans related to the private sector managed to steal the limelight. Private sector projects will be implemented after being introduced to China’s Exim Bank.

According to the MoU, no cap has been devised for joint projects, with the possibility of implementing feasible projects. Furthermore, any loans to these projects will be offered on a preferential basis at low-interest rates and with long repayment periods.