*3.2.1 Investment imports*

It's been clarified that imports of goods alone from China depends on the cost of investment projects implemented through tied Chinese loans and direct investments by almost 30%. If we look only at tied Chinese loans, then we notice these have financed at least 20% of imports of Chinese goods in different years. A jump in investment imports has been observed since 2008, after the activation of major investment projects in Belarus, as confirmed by imports of such items as "communication equipment and parts", "computers", "parts for receiving and transmitting equipment" and "lighting equipment". In the following years, imports of these items became annual and predominant, and, in 2018, reached \$606 m, or 18.6% of all imports of Chinese goods.

The dependence on cumulative Chinese imports of both goods and services at the level of over 20% of investment projects implemented with the support of tied Chinese loans was revealed. The correlation coefficient between imports of Chinese goods and services and the sample of Chinese loans provided to the Belarus' Government, or under its guarantee, was 0.93. The connection with services is explained by the fact that the main share of imports of Chinese services is taken by construction and architectural services (from 2010 to 2018, on average, 84.5% per year), used in the implementation of investment projects.

#### *3.2.2 Intermediate imports*

These are imports of components for machine-building and petrochemical enterprises. About 20% account for components and raw materials for industrial facilities in imports of Chinese goods. Among the largest Belarusian importers are industrial enterprises, such as Horizont, BelGee, BMZ, Yunison, MAZ, Grodno Azot, and others. For example, with an increase in the load of Belarusian production facilities and changes in the Russian market, Chinese imports of parts and accessories for cars and tractors are growing: from \$27.1 m in 2008, to \$67.8 m in 2012, \$110.5 m in 2017, and \$129 m in 2018. Further, the volume and share of imports of industrial components in the total imports of Chinese goods will grow along with the launch of production facilities created in Belarus by Chinese companies.

As regards imports of components for light industry enterprises, about 10–15% of imports of Chinese goods are made up of parts for shoes and knitwear, and other components used in light industry. They are used in final production in Belarus and then re-exported to the CIS countries (Megatop is an example of such activity).

#### *3.2.3 Consumer imports*

Due to a great number of commodity items, it is difficult to accurately estimate consumer imports from China. However, its share is noticeable, even for certain products. For example, imports of woodworking products, such as "seat furniture and its parts" and "other furniture and its parts", accounted for \$183.6 m in 2018, while imports of Chinese agricultural products in 2018 was \$53 m (1.7% of total). Given high and growing wages in China, which averaged \$918 per month in 2018, against, for example, the salary in Egypt at \$183, consumer imports were later redirected to other countries [15].

Accordingly, the above-mentioned issue could have a solution. Moving away from tied loans in Belarusian-Chinese cooperation may reduce imports of Chinese goods and services by about 20%. However, with the simultaneous transition to more active investment cooperation between the two countries, Chinese imports may not decrease, but even increase. In this case, the dependence of imports on the implementation of investment projects does not decrease, since only the source of financing changes. When assessing the dependence of changes in imports of goods and services from China on Chinese direct investment, the correlation coefficient was 0.8. Taking into account the further development of the territory of the 'Great Stone' Industrial Park, and construction of facilities through technical and economic assistance from China, imports from China related to the implementation of investment projects will grow — increasing their share in total imports.

#### **3.3 Transition from tied loans to untargeted credits**

There are five ways to switch to unrelated loans.

#### *3.3.1 Transformation of existing tied loans into unrelated credits*

Speculation about the possibility of changing the terms of tied Chinese loans by extending the repayment period, reducing the interest rate, or obtaining a new unrelated loan from an old lender to refinance a previous loan, has not yet been confirmed in the practice of Belarusian-Chinese relations. Attempts to negotiate failed. On the one hand, it is impossible to exclude the lack of reasonableness and perseverance of the Belarusian side, and, on the other, an excessively principled attitude and the threat of default on the Chinese side. In any case, the experience of other countries in improving the terms of tied loans and converting them into untargeted ones, as well as the positive experience of Belarusian banks in this matter (more details below), cannot be excluded from the Belarusian-Chinese agenda.

#### *3.3.2 Attraction of an untargeted loan at state level*

As a rule, China prefers a uniform approach when discussing this issue in order to avoid precedents and a queue of so-called exceptions consisting of other countries. Therefore, if unrelated loans are provided by China at the state level, then they are provided in a closed mode, for a short period of time, and indeed, as an exception. A potential lender of unrelated state loans from the Chinese side may be the Ministry of Finance of the PRC - as a manager of budget resources, which can provide a loan directly or, for example, through Eximbank of China. Another possible lender may be the State Administration of Foreign Exchange of the People's Republic of China, which is subordinate to the People's Bank of China as the manager of currency resources.
