The paper prepared by the authors Ana Krstinovska, Zlatko Simonovski and Aleksandra Davitkovska-Spasovska at hand analyzes North Macedonia’s vulnerabilities towards economic pressure from the People’s Republic of China in three main areas: trade, investments and external public debt. It draws on the experience of other countries around the globe, namely Lithuania, Sweden, Japan and Australia, to raise awareness about China’s economic coercion as a tool enabling China to use its economic advantage against these countries to pursue political goals, with different outcomes. In that context, it examines aspects specific to North Macedonia’s economic relationship with China, in order to flag the country’s potential “weak spots”. The conclusions provide a broad sketch on the dependence on China in each of the three examined areas.
In terms of trade, North Macedonia depends on China for its exports of extractive goods and raw materials, as well as on imports with higher value added, such as consumables, electronics, electrical equipment and machinery. In case of a potential fall out, there will be a short-term negative effect on consumers and a mid-term negative effect on companies that source their inputs from China. A more thorough analysis and diversification efforts could ease the burden and mitigate potential risks. When it comes to direct investments, there are no major companies with Chinese ownership in critical sectors or among the top exporters to China, which implies a commercial logic: any economic repercussion including these two economic operators would certainly have an immediate effect on the local economy, but ultimately will harm the Chinese companies in question as much. In the area of infrastructure, North Macedonia’s public debt owed to China accounts for a small portion of the total foreign debt and the country’s GDP. However, the loan contract, which follows a Chinese model agreement, reveals a high level of asymmetry, making it very difficult for the North Macedonia to get out of a deal which has become in recent years a liability to its public finances and local economy.
The main conclusions and findings of the analysis were presented with in a panel discussion which took place on May 16 in at the Faculty of Law “Iustinianus Primus”-Skopje.
In terms of trade, North Macedonia depends on China for its exports of extractive goods and raw materials, as well as on imports with higher value added, such as consumables, electronics, electrical equipment and machinery. In case of a potential fall out, there will be a short-term negative effect on consumers and a mid-term negative effect on companies that source their inputs from China. A more thorough analysis and diversification efforts could ease the burden and mitigate potential risks. When it comes to direct investments, there are no major companies with Chinese ownership in critical sectors or among the top exporters to China, which implies a commercial logic: any economic repercussion including these two economic operators would certainly have an immediate effect on the local economy, but ultimately will harm the Chinese companies in question as much. In the area of infrastructure, North Macedonia’s public debt owed to China accounts for a small portion of the total foreign debt and the country’s GDP. However, the loan contract, which follows a Chinese model agreement, reveals a high level of asymmetry, making it very difficult for the North Macedonia to get out of a deal which has become in recent years a liability to its public finances and local economy.
The main conclusions and findings of the analysis were presented with in a panel discussion which took place on May 16 in at the Faculty of Law “Iustinianus Primus”-Skopje.
