China, a relatively recent entrant in the South Caucasus, is increasingly keen to expand its footprint, particularly in the economic sector. Although Beijing established diplomatic relations with Armenia, Azerbaijan, and Georgia in the early 1990s, it largely refrained from engaging in the intricate geopolitics of the region. In 1999, Armenia procured Chinese-made WM-80 multiple-launch systems, yet these acquisitions exerted little influence on its military dynamics with Azerbaijan, highlighting China’s initial limited role in regional security matters.
The early 2000s marked a pivotal era for Chinese economic ties in the South Caucasus, propelled by the rapid expansion of China’s own economy. The landscape shifted dramatically following President Xi Jinping’s introduction of the Belt and Road Initiative in 2013, which envisaged the South Caucasus as a strategic land corridor linking China to Europe and enhancing its role in regional connectivity.
World Bank statistics reveal a staggering surge in Chinese trade turnover with Armenia, Azerbaijan, and Georgia between 2005 and 2018, showcasing remarkable growth rates of approximately 2,070%, 380%, and 1,885%, respectively. While investments have notably increased since then, they remain unevenly distributed across the region, reflecting varying levels of economic engagement.
Since the early 2000s, China’s investment landscape in the South Caucasus has transformed significantly, although these investments have yet to be equitably shared among the three countries. Armenia has attracted the least amount of Chinese investment, yet bilateral trade continues to flourish: during the first nine months of 2024, trade between Armenia and China soared to $2.08 billion, marking an impressive 34.7% increase from 2023. The launch of direct flights connecting the two nations in September 2024 further underscores the growing momentum in their economic relationship.
In Azerbaijan, Chinese investments have been largely concentrated in sectors such as natural resources, infrastructure, and transit networks. By 2019, Chinese firms had invested over $800 million into Azerbaijan’s economy, while Azerbaijani businesses reciprocated with investments amounting to $1.7 billion in China, as stated by Shahin Mustafayev, who served as Azerbaijan’s Minister of Economics at the time.
Conversely, China has made substantial investments in Georgia, particularly focusing on ground transportation initiatives. In 2017, the Asian Infrastructure Investment Bank, headquartered in Beijing, lent $114 million to construct a vital bypass around Batumi, enhancing international transit at a strategic juncture near the Black Sea. The Hualing Group, a leading Chinese investor, has been instrumental in developing several large-scale projects, including residential complexes near the Tbilisi Sea, the Tbilisi Sea Plaza shopping mall, and a free industrial zone in Kutaisi. A free trade agreement signed between Georgia and China in 2017 further stimulated trade and investment dynamics.
China’s engagement in the South Caucasus has notably intensified over the past two years. In July 2023, Georgia formalized a strategic partnership with China focused on four essential domains: political engagement, economic cooperation, cultural exchange, and international collaboration. Both parties reaffirmed their commitment to respecting the sovereignty, independence, and territorial integrity of all nations, with Georgia publicly adhering to the One China principle. Furthermore, both nations expressed their willingness to facilitate mutual investments, enhance trade, and cooperate on various fronts including transportation, infrastructure modernization, digital technologies, and food safety. A significant development occurred in 2024 when Georgia awarded a Chinese consortium the contract for constructing a new deep-sea port in Anaklia.
Azerbaijan followed suit by signing a joint strategic partnership statement with China in July 2024. This agreement encapsulated mutual respect for territorial integrity and sovereignty, with Azerbaijan standing firmly behind the One China principle, recognizing the existence of only one China, asserting that Taiwan is an inseparable part of Chinese territory, and opposing any form of “Taiwan independence.” Additionally, both sides committed to advancing projects across sectors such as transport, green energy, digital economy, and agriculture, with China expressing a willingness to contribute actively to the construction and operation of the Middle Corridor.
Despite China’s burgeoning involvement in infrastructure and economic ventures, its influence in the South Caucasus remains primarily driven by economic interests rather than geopolitical maneuvering. However, there has been a noticeable uptick in military cooperation, exemplified by the Azerbaijani Minister of Defense’s visit to China in October 2023, followed by a delegation from the Main Directorate of International Military Cooperation of the People’s Liberation Army visiting Azerbaijan in June 2024. Although China currently trails behind Russia, Turkey, Iran, the European Union, and the United States in influencing the region’s geopolitics, shifts in the global order toward a multipolar structure may present new opportunities for China to enhance its role.
Future Prospects
All three nations—Armenia, Azerbaijan, and Georgia—are diligently working to bolster their relations with China, seeking economic gains and enhanced leverage in interactions with other global and regional powers. As China’s economic growth continues unabated, its involvement in the South Caucasus is expected to expand, creating opportunities that regional stakeholders should be prepared to seize.
Source: Benyamin Poghosyan is a Senior Fellow on foreign policy at APRI Armenia and the founder and Chairman of the Centre for Political and Economic Strategic Studies in Yerevan.
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**What are the potential challenges faced by South Caucasus countries in their increasing economic ties with China?**
**Interview with Dr. Elina Sorokina, Expert on Sino-Caucasian Relations**
**Interviewer:** Thank you for joining us today, Dr. Sorokina. China has been increasing its presence in the South Caucasus, particularly in the economic sector. Can you provide some context on how this shift has developed over the years?
**Dr. Sorokina:** Absolutely. China has had diplomatic relations with Armenia, Azerbaijan, and Georgia since the early 1990s, but its active engagement has been somewhat limited until recently. Initially focused on military exports, such as the WM-80 multiple-launch systems sold to Armenia, China did not significantly impact regional security dynamics. This changed dramatically with the introduction of the Belt and Road Initiative (BRI) in 2013, which positioned the South Caucasus as a vital link between China and Europe, thereby opening the door for deeper economic involvement.
**Interviewer:** The statistics on trade between China and these countries are striking. Can you elaborate on these figures and their implications?
**Dr. Sorokina:** Certainly! Between 2005 and 2018, trade turnover saw exponential growth—2,070% with Armenia, 380% with Azerbaijan, and 1,885% with Georgia. This reflects not only China’s booming economy but also the South Caucasus’ strategic importance. However, the investments are uneven; for instance, Armenia has drawn the least Chinese investment despite enjoying robust bilateral trade, like the $2.08 billion in trade during the first nine months of 2024, a 34.7% increase from the previous year [[1](https://caucasuswatch.de/en/insights/china-and-the-look-to-the-south-caucasus.html)].
**Interviewer:** Speaking of investments, how have they been distributed among the three countries?
**Dr. Sorokina:** Investments have varied considerably. In Azerbaijan, for example, Chinese firms have invested over $800 million primarily in natural resources and infrastructure. By contrast, Georgia has been a prime destination for Chinese investment, particularly in transportation projects, such as the significant bypass around Batumi funded by the Asian Infrastructure Investment Bank. Georgia also benefits from a free trade agreement with China, further boosting its economic landscape [[1](https://caucasuswatch.de/en/insights/china-and-the-look-to-the-south-caucasus.html)].
**Interviewer:** Recent developments include strategic partnerships that have been formalized with both Georgia and Azerbaijan. What are the key elements of these agreements?
**Dr. Sorokina:** The strategic partnership agreements, particularly those signed in July 2023 and 2024, highlight a commitment to political engagement, economic cooperation, and mutual respect for sovereignty. For instance, Georgia reaffirmed its commitment to the One China principle, which emphasizes that Taiwan is part of China. These partnerships aim to facilitate investments and bolster cooperation in sectors like transportation and infrastructure modernization [[1](https://caucasuswatch.de/en/insights/china-and-the-look-to-the-south-caucasus.html)].
**Interviewer:** Looking ahead, what does the future hold for China’s involvement in the South Caucasus?
**Dr. Sorokina:** The future looks promising for both China and the South Caucasus nations. As China continues to invest in infrastructure and deepen economic ties, we can expect a more integrated regional economic landscape. However, it will be crucial for these governments to strategically navigate their relationships to avoid over-dependence on China, ensuring sustainable growth and stability in their economies [[1](https://caucasuswatch.de/en/insights/china-and-the-look-to-the-south-caucasus.html)].
**Interviewer:** Thank you, Dr. Sorokina. Your insights shed light on the evolving dynamics in this region and China’s role within it.
**Dr. Sorokina:** Thank you for having me!
