Chinese loans unlikely to become popular in Belarus

Belarusbank will use a loan from China’s State Development Bank to support projects in Belarus. The loan has a five-year grace period for deferred payment. However, due to high interest rate (6% + 6 months Libor rate) only few projects would be implemented. Implementation of the projects will be accompanied by growth in imports from China, due to the 50% Chinese component requirement. In addition, Belarus would try to attract other investors to the ‘Great Stone’ technological part in order to demonstrate favourable investment climate in the country. Meanwhile, Belarusian private sector is likely to apply for untied loans at a higher interest rate, which would not require compulsory imports of Chinese goods and services.