Weekly Briefing, Vol. 56. No. 2 (BG) November 2022
Trade and Economic Relations between Bulgaria and China – Challenges and Opportunities
Summary
Economic relations between Bulgaria and China are developing quite dynamically in the recent years no matter of all the challenges and difficulties coming out from the global pandemics or the geopolitical tensions that occurred and have their impact. Trade volumes between Bulgaria and China have almost doubled since the early 2010s and this tendency became more visible in the last few years. However, there is a persistent asymmetry in the relationship: Bulgaria has a large trade deficit with China that shows no sign of shrinking, while total Chinese investment in Bulgaria according to the experts are much below the existing opportunities. Despite everything, we should note that in the last few years, China has taken a leading place in the external world trade of Bulgaria, ranking second among its export partners outside the European Union (after Turkey). At the same time, although according to statistics, Chinese investments in the Bulgarian economy are barely below 1% of all foreign direct investments in the country, they still have a significant importance in the general picture of bilateral economic relations.
In 2019, Bulgarian President Rumen Radev stated that Bulgaria could be a logistics center in Southeast Europe for the transfer of goods from Asia, especially from China. He also expressed the opinion that Bulgaria considers “Belt and Road” initiative, as well as the Cooperation Mechanism between China and CEE, not just as transport connectivity projects, but as an investment in the future and prosperity of the countries participating in them.
On this background we can notice that in recent years, the commercial and economic relations between Bulgaria and the People’s Republic of China have been continuously growing and developing dynamically, regardless the difficulties caused by the global pandemic, as well as the international geopolitical situations.
The priority economic sectors in Chinese-Bulgarian economic relations are those in which Bulgaria has long standing traditions that which can become a basis for future development. These areas are mainly the food and cosmetic industries, as well as wine production.
Bulgarian exports are still limited to a small assortment of goods. Traditional Bulgarian goods such as wines and essential oils remain poorly represented. With potential for export and a wider presence on the Chinese market are goods that are traditional for Bulgaria and which are already well known on Asian markets, such as: Bulgarian wines, milk and dairy products, essential oils and especially rose oil, engineering products, products of the chemical industry, etc.
There are also opportunities for the establishment of joint ventures between Bulgarian and Chinese companies for the production in Bulgaria of goods with an export orientation to the huge European market. Prospective areas are electronics and electrical engineering, information technology and research and development, mechanical engineering, automotive, food industry, agriculture, pharmaceuticals, textile industry, etc.
There is great potential for cooperation in the field of agriculture: the creation of joint Bulgarian-Chinese companies to produce agricultural products in Bulgaria and export to China. In the past few years, China’s agricultural imports have increased at a tremendous rate, fueled by rapid economic growth and rising incomes of the Chinese population. China is emerging as the world’s largest food market. Bulgaria has the necessary potential to export agricultural products and food to the Chinese market.[1]
At the moment, Bulgaria has certificates and protocols agreed with the China for the export of fish and fish products, alfalfa, corn, dairy products, feed and feed additives, sunflower meal, Distiller’s dried grains with solubles (DDGS), honey, peeled sunflower, as well as tobacco from Bulgaria to China. Additionally, negotiations are underway to sign protocols for other plant and animal products, such as fruits and vegetables, chicken meat, etc.
Leading commodity groups in trade with China in 2021
| Exports from Bulgaria | % of exports | Imports from China | % of imports |
| Refined copper and copper alloys | 52.5 | Parts and accessories for motorcycles and bicycles | 4.8 |
| Copper ores and their concentrates | 11.5 | Lighting fixtures | 4.1 |
| Flakes and other solid residues obtained during the extraction of vegetable fats or oils | 6.7 | Electric apparatus for wire telephony, incl. corded telephone sets with cordless handset and carrier current or digital telecommunications apparatus; videophones | 3.4 |
| Maize | 3.4 | Machines and apparatus for air conditioning | 2.8 |
| Sunflower seeds | 3.0 | Chairs and seats | 2.7 |
| Hydrometers, hydrometers and other similar floating instruments, thermometers, pyrometers, barometers, hygrometers and psychrometers | 2.3 | Electric boilers and pressure cookers; electric heating apparatus; electric heating devices for hairdressing purposes | 2.0 |
Source: Bulgarian Ministry of Economy and Industry[2]
In the last three years, trade with China represents 1% – 2% of Bulgaria’s total agricultural trade with all countries and about 4% – 7% of that with non-EU countries. In 2021, the exchange of agricultural goods between the two countries increased sharply to USD 264.4 million and with 76.1% above the level of the previous year. The value of Bulgarian agricultural exports to the Chinese market doubled on an annual basis, reaching USD 190.1 million. The import of agricultural goods from China amounted to USD 74.3 million, without significant change compared to 2020 (+0.3%). Compared to the previous year, there was a certain decrease in the supply of rice and preparations used for animal feed, which was compensated by an increase in the value of imported animal or vegetable fats. Thus, in 2021, a positive trade balance was formed for Bulgaria in the amount of USD 115.8 million, at USD 1.9 million, for 2020.[3]
In 2021, bilateral trade reached a peak value of USD 3230.1 million (growth of 33.9% compared to 2020), of which Bulgarian exports to China in the amount of USD 1119.19 million (+21.7%) and imports from China in the amount of USD 2111.18 million. (+35.7%).
| EXPORTS, IMPORTS AND TRADE BALANCE BETWEEN BULGARIA AND CHINA IN 2020 AND 2021 | ||||||||
| Country | Exports | Imports | Trade balance | |||||
| 2020 | 2021 | Change compared to the same period of the previous year – % | 2020 | 2021 | Change compared to the same period of the previous year – % | 2020 | 2021 | |
| Million USD | Million USD | Million USD | ||||||
| China | 919.3 | 1119.01 | 21.7 | 1555.93 | 2111.18 | 35.7 | – 636.63 | – 992.18 |
Source: Bulgarian National Statistical Institute[4]
In September 2022, Counselor Xia Xiaoxi from Secretariat for Cooperation between China and Central and Eastern European Countries of Chinese Ministry of Foreign Affairs visited the Bulgarian Chamber of Commerce and Industry (BCCI). In a conversation with the chairman Tsvetan Simeonov, she underlined that despite the stagnation in the world economy and the global Covid crisis, in the period 2017-2021 trade between China and Bulgaria has doubled and reached 4.5 billion USD. For the first seven months of 2022 an increase of 12% was observed.
For the first half of 2022, the most imported from China in Bulgaria are solar panels. Only for the first 3 months of the year, Bulgaria has imported about 266,006 panels worth USD 34,113,706.[5]
In terms of exports, the most exported things from Bulgaria this year are products such as honey and corn. In the first quarter of 2022, Bulgaria exported 1,519 kilograms of honey to China, worth 10,718 US dollars. This is an increase of nearly 50% compared to 2021. Only for the first two months of the year, Bulgaria exported 48,700 tons of corn to China.[6]
The wish of the Chinese partners that has been pointed out was with the support of the BCCI, more Chinese companies to invest in the Bulgarian economy. As potential sectors were pointed the infrastructural facilities such as roads, railway infrastructure, export of high-quality agricultural products for the Chinese market. The Chinese government has budgeted USD 170 billion for the next five years, for the import of goods in line with the cooperation between China and the countries of Central and Eastern Europe. It is also planned to increase by 50% the export of agricultural goods from the countries of Central and Eastern Europe to China.
In its cooperation with China, Bulgarian side strives to attract serious Chinese investments in sectors in which Bulgaria has traditional advantages and those that provide high added value and increased competitiveness of the economy – mechanical engineering, automobile construction and production of auto parts, electronics and electrical engineering, information and communication technologies, agriculture and food industry.
According to Bulgarian National Bank data, at the end of 2021, the total invested funds (with accumulation) from China in Bulgaria amounted to EUR 131.1 million.[7]
However, from the point of view of Chinese investments in Bulgaria, it must be said that the largest ones are in the field of agriculture which is one of the Bulgarian economy’s most important sectors. This sector has emerged as an expanding area of bilateral engagement, with three of the biggest Chinese investments in the Bulgaria occurring in this industry. Since 2013, Heera Agro is estimated to have invested approximately EUR 35 milion in the cultivation of corn, wheat, and other crops around the town of Parvomai. In the north-eastern region of Dobrich, the Bulgarian Tianshinong Feed Company, which specialises in feed production and the cultivation of corn, began initial investment activity in 2012. And this has now grown to around EUR 15milion. Since 2015, TerraLand is estimated to have invested approximately EUR 8 million in vine growing around the Danube town of Lom.[8]
Bulgaria is also home to China’s largest construction engineering company – China Communications Construction Company Limited (CCCC), a leader in the construction and design of railway and port infrastructure, roads and bridges all over the world. In a consortium with Trace – Sofia, CCCC won the tender for the third lot of the modernization of the Elin Pelin-Kostenets railway line in the section from Ihtiman to Kostenets. China Communications Construction Company Limited has chosen Sofia as its office for Central and Eastern Europe.
Conclusion
As every year, this year as well, despite the restrictions of the pandemic, Shanghai hosted the fifth edition of China International Import Expo (CIIE) which took place from 5th to 10th of November 2022.
This exhibition is one of the important events after the 20th CPC Congress, because in the context of the decisions of the congress, China would pursue an open strategy of mutually beneficial cooperation with other countries in order to promote the construction of an open world economy. This was also understood from the greeting of President Xi Jinping at the opening of the exhibition.
Unfortunately, for another year, Bulgaria did not present its goods and products at this year’s exhibition. According to the chairman of the Bulgarian-Chinese Chamber of Commerce and Industry, Lachezar Dinev, this is indeed a very difficult question, since Bulgaria was represented only by the Bulgarian consul in Shanghai, who participated in one of the business forums related to the “One Belt, One Road” initiative. But the idea of this exhibition is to present Bulgarian companies that have the opportunity to export their products to China, and Bulgaria has not taken advantage of this.
During the CIIE the Consul General Vladislav Spasov presented Bulgaria at the Forum on Two-way Cooperation between Countries and Local Governments along the “Belt and Road”, organized by the China Association for International Economic Cooperation under the Chinese Ministry of Commerce. He took part in several other events as well.[9]
Again, according to Lachezar Dinev, Bulgaria’s non-participation in this exhibition is a kind of “short-sighted” act, since it could give Bulgarian companies the opportunity to reach the huge Chinese markets in any way. [10]Hopefully next year the country will take the chance to present its business opportunities on next edition of CIIE, which in turn will surely contribute to the promotion of Bulgarian-Chinese economic relations.
[1] https://old.mi.government.bg/bg/themes/kitai-192-333.html?p=eyJwYWdlIjo1fQ==
[2] https://old.mi.government.bg/bg/themes/kitai-192-333.html?p=eyJwYWdlIjo1fQ==
[3] https://bulgarian.cri.cn/2022/08/30/ARTIqu52ZpyDzjIayxyNNbxY220829.shtml
[4] https://nsi.bg/en/content/7510/main-trade-partners
[5]https://bccci.net/bg/blog/2022/05/05/%d1%81%d0%be%d0%bb%d0%b0%d1%80%d0%bd%d0%b8%d1%82%d0%b5-%d0%bf%d0%b0%d0%bd%d0%b5%d0%bb%d0%b8-%d1%81%d0%b0-%d0%bd%d0%b0%d0%b9-%d0%b2%d0%bd%d0%b0%d1%81%d1%8f%d0%bd%d0%b0%d1%82%d0%b0-%d1%81%d1%82%d0%be/
[6] https://bccci.net/bg/blog/2022/05/02/%d0%bf%d1%87%d0%b5%d0%bb%d0%b5%d0%bd-%d0%bc%d0%b5%d0%b4-%d0%b7%d0%b0-%d0%ba%d0%b8%d1%82%d0%b0%d0%b9-%d0%bd%d0%be-285-%d0%bf%d1%8a%d1%82%d0%b8/
[7] https://old.mi.government.bg/bg/themes/kitai-192-333.html?p=eyJwYWdlIjo1fQ==
[8] Shopov, Vladimir. Let a thousand contacts bloom: How China competes for influence in Bulgaria – https://ecfr.eu/publication/let-a-thousand-contacts-bloom-how-china-competes-for-influence-in-bulgaria/, Policy Brief 10 March 2022.
[9] https://www.mfa.bg/en/news/35507
[10] https://bulgarian.cri.cn/2022/11/11/ARTIIPjut9iQqTcT2WsITWPp221111.shtml