From Recognition to Cooperation

After the dissolution of the Soviet Union in 1991, China was one of the first countries to recognize Georgia’s independence, which came with the establishment of diplomatic relations on 9 June 1992. However, at that time, Beijing only had limited interests in the region. Annual trade between the two countries amounted to a mere $3.7 million at the end of the 20th century. The relations were not deemed to be fruitful in the beginning, but the two countries have evolved into a pair of strategic partners, finding themselves at a crossroads of opportunity and collaboration, with economic cooperation being the main area of their relations. 

Economic Partnership

Ever since 2010, Chinese investment in Georgia has steadily increased. One notable investment is the Khadori Hydro Power Plant by Sichuan Electric Power Corp China. Most visible, an ambitious 51.6 kilometer section of a Chinese-built highway is cutting through Georgia’s rugged and mountainous terrain, featuring an impressive 96 bridges and 53 tunnels and a price tag of nearly US$1 billion. It would be simplistic to attribute these and many other investments only to geostrategic interests. Georgia has long boasted an outstanding ranking in the World Bank’s Ease of Doing Business Index, where it currently ranks seventh amongst all countries in the world, notably including the wealthiest of nations. Since 2014, Tbilisi has paid Beijing frequent high-level visits to improve bilateral cooperation. But economic partnership between China and the small Caucasus nation has not been smooth sailing in the recent past.

Visits Paying Off: Skyrocketing Bilateral Trade

In 2015, Georgia became one of the founding members of the Asian International Investment Bank, a crucial step that made Chinese investments and financing more attractive. Subsequently, China’s Hualing Group became one of Georgia’s largest foreign investors, investing more than $500 million since its entrance into the Georgian market in 2007. May 2017 marked yet another important date for the bilateral relations, when the countries signed a free trade agreement (FTA). The agreement took effect in 2018, removing tariffs on 93.9% of Georgian exports to China and 96.5% of Chinese exports to Georgia. In 2019, China surpassed Russia as the country’s second-biggest export market. Overall, China is Georgia’s 4^th biggest trade partner, accounting for 8 per cent of total foreign trade. Further, it is speculated that China will be one of the main investors for the controversial Anaklia port project, as well as other infrastructure projects. 

Georgia’s Advantage: Trade Agreements

Georgia’s objectives aim to diversify the country’s economy, increase trade volume, attract more investment, and support robust infrastructure development. China seeks to leverage on Georgia’s geographically strategic location, especially in light of Russia’s full-scale war against Ukraine in 2022, which has -mildly put- resulted in a significant deterioration of Russia’s relations with the West. This further elevates Georgia’s importance as a transport hub, as nearby Iran is also not a viable option for trade meaning to reach NATO and EU members. Instead, Georgia’s access to the Black Sea can form a crucial land bridge across the Caucasus for any trans-Eurasian traffic seeking an alternative route to Russia or Iran. It can play a pivotal role in China’s Belt and Road Initiative. Georgia is also the only country in the region with a Deep and Comprehensive Free Trade Area (DCFTA) with the European Union and the FTA with China. 

The Debt-Trap Concern

Over the past few years, those studying China’s international ambitions have coined the term debt-trap diplomacy. It defines that a major power, such as China, lends money and conducts infrastructure projects in lesser developed nations. Subsequently, those nations frequently encounter difficulties around their ability to service the debt payments. This leads China to obtain not only substantial political and economic influence in return for debt leniency but it may also get control over key strategic assets. China rejects these assertions as a “narrative trap”, with the closest example of this strategy existing perhaps being the case of Montenegro’s Bal-Boljare Highway.

While projects such as the East-West highway that runs through the Rikoti Pass can bring enormous economic benefits and local development opportunities, they also rely on significant loans from Chinese institutions. In a scenario where the Georgian authorities fail to manage the loans effectively, or if the projects do not produce the expected economic returns, the country could be next to face the debt trap. With the highway as well as other projects, concerns arose around allegations of corruption, intransparency of the contracts, and construction quality. The latter come to the forefront already, as the Rikoti highway has been open on a restricted schedule for most of 2023 due to damages in the roads built by the Chinese construction firms and safety concerns.

China’s Response to Russia’s Invasion of Georgia

Following Russia’s invasion of Georgia in 2008, China’s response remained neutral. Despite Beijing stating that one of its key five foreign policy principles is respecting the territorial integrity and sovereignty of nations it  also took its strategic partnership with Moscow into account. That neutrality was continued when China abstained from voting on Georgia’s resolutions about internally displaced persons and refugees, and their rights to return home. Nonetheless, China, along with the majority of UN member states, refrained from recognizing two Russian-occupied regions, Abkhazia and Tskhinvali, as independent states.

All is Well that Ends Well?

It may come as somewhat surprising that China and Georgia went on to sign a Strategic Partnership, given China’s consistent neutral stance on topics such as Russia’s continuing occupation of parts of Georgia and even human rights abuses in the country. However, Article 1 (Section 1.1) of the agreement noted that both countries support the territorial integrity of all countries, while Georgia explicitly supports China’s “One China Policy”. China yet again maintains neutrality in the document and it does not mention Abkhazia or Tskhinvali. The agreement between the nations seem to go in tandem with increasing economic cooperation, infrastructure development, and political dialogue. And in September 2023, even visa requirements for Chinese nationals entering Georgia were removed and daily direct flights between the countries commenced.