Chinese investment in the Turkish economy: assistance in the restoration of pre-crisis indicators

Chinese investment in the Turkish economy: assistance in the restoration of pre-crisis indicators Recently, China has made several serious investments in the development of the Turkish economy. Will it be able to restore its pre-crisis level of indicators with the help of the Asian power?
Recently, Turkey has shown an increasing dependence on Chinese investment. Last week, China raised the swap lines provided to the state to $ 400 million. Turkey intends to use the funds received to restore its economy from the effects of the COVID-19 pandemic and to pay off its growing external debts.

On the part of Beijing, such an investment in Turkey is a guarantee that the state will become a participant in the Chinese initiative called "one belt, one road", which involves the global development of the infrastructure of the participating countries and their return investment in the project.

Recently, a Chinese logistics company acquired a 48% stake in the Kumport terminal, located on the northwestern coast of the Marmara sea, at a cost of $ 940 million. Kumport is the third largest terminal for receiving liquefied natural gas and oil in Turkey and its strategic link with Europe.

In November 2019, the first cargo train from the Chinese city of XI'an arrived in Turkey via the Marmaray tunnel, which was built and financed by China. Gao Tian, project Manager of the Sino-German railway, says that such events mean that Turkey will soon become part of the Chinese infrastructure project, which aims to connect the countries of the East and West. This concept involves the re-qualification of Turkey from a simple transit hub for LNG, cargo and other products to an active global center of international trade, the so-called "middle corridor" of the Chinese silk road project.

However, it is also worth noting that Chinese investment can not compensate for all the consequences of the currency crisis in Turkey or the long-term problem of external debt, which has increased to more than $ 300 billion after recent events.

Despite attempts to stabilize the economy and a number of initiatives aimed at restoring it after the removal of restrictions related to coronavirus, it is noted that some government actions have not had much effect. For example, a temporary ban on layoffs, coupled with bonuses for employees, only helps hide the scale of the disaster in the economy. Official data shows that the unemployment rate in Turkey in February and April was 13.2% — slightly lower than the figure shown by the country in the first quarter.

However, the number of employed people and those who depend on monetary support from the government tells a different story. The percentage of the population that has a job or is looking for one declined by 4.5% year-on-year falling to 48.4% in February-April. This is the lowest figure for the past eight years.

While Europe's largest economies could afford to spend more than 100 billion euros on compulsory leave programs for citizens from March to may, Turkey was forced to take a more moderate path, as its budget was already depleted by the effects of the short-term recession that followed the currency crisis.

By may, about 3.1 million people had benefited from the government's short-term benefits program, which provides benefits to workers whose activities were suspended because of measures to contain the outbreak. In April and may alone, the government spent 10.3 billion Lira on this program. Another 1.4 million Turks who are not eligible for this type of benefit took advantage of another monetary support initiative. In April and may, Turkey spent an additional 1.7 billion Lira on this program.

It is noted that if this trend continues with an increase in unemployment, the state will expect a crisis. In this case, even large investments from China will not play a special role. However, it is also expected that after the recent lifting of restrictive measures and the resumption of production operations in July, the situation will change in a positive direction.