China-Türkiye: Bilateral Trade and Investment Profile

• China is Türkiye’s third largest trading partner, second largest source of imports, and 15th largest export market. In 2023, the total trade volume between China and Türkiye reached US$43.4 billion.
• The bilateral investment relationship between China and Türkiye is characterized by promising opportunities in various sectors, including automotive, renewable energy, and infrastructure.
• Chinese investments are increasingly focused on establishing manufacturing facilities for electric vehicles and smartphones, while collaborative projects in energy infrastructure enhance Türkiye’s capabilities.

Situated at the crossroads of Asia, Europe, and Africa, Türkiye occupies a pivotal role in the global supply chain, facilitating the distribution of goods, services, capital, and technology worldwide. In recent years, the political relationship between China and Türkiye has gained significant momentum, which has been marked by high-level meetings and strategic collaboration. In July 2024, Turkish President Recep Tayyip Erdoğan met with Chinese President Xi Jinping at the 24th Summit of the Council of Heads of State of the Shanghai Cooperation Organization (SCO). Türkiye, which expressed its desire to become a full member of the SCO in 2022, views stronger ties with China as a key aspect of its broader strategic realignment.

This realignment was further reinforced in June 2024, when Turkish Foreign Minister Hakan Fidan visited China, meeting with Chinese Foreign Minister Wang Yi to discuss bilateral relations. During this visit, Fidan also made a significant trip to the Xinjiang Uyghur Autonomous Region, the highest-level visit by a Turkish official to the region since 2012.

The foundation of China and Türkiye’s Strategic Partnership was laid in 2010, followed by Türkiye’s inclusion in China’s Belt and Road Initiative (BRI) in 2015. Since then, economic cooperation between the two countries has strengthened. While China is not yet one of Türkiye’s largest sources of inward FDI, the trend is clearly on the rise.

Türkiye’s ambition to become a production hub for next-generation vehicles aligns with China’s expanding presence in the automotive industry, as evidenced by BYD’s billion-dollar deal to open a plant in Türkiye. This venture is expected to create thousands of jobs and provide Chinese vehicles with a route to bypass EU tariffs and gain easier access to European markets.

China-Türkiye bilateral trade

In 2022, the total import and export volume of bilateral trade between China and Türkiye reached US$38.55 billion, a year-on-year increase of 12.8 percent. Of this, China’s exports to Türkiye were US$34.03 billion, up by 16.9 percent year on year; while imports from Türkiye totaled US$4.52 billion, a decrease of 10.5 percent year on year. This makes China Türkiye’s third-largest trading partner, second-largest source of imports, and 15th-largest export market.

In 2023, the total trade volume between China and Türkiye reached US$43.4 billion, marking a 12.6 percent year-on-year increase. Of this, China’s exports to Türkiye amounted to US$39.07 billion, reflecting a 14.81 percent increase, while Türkiye’s exports to China totaled US$4.33 billion, representing a 4.2 percent decline compared to the previous year.

From January to August 2024, the bilateral trade volume between the two country amounted to US$28.6 billion. Of this, Türkiye’s exports to China totaled US$3.1 billion, an increase of 6.3 percent year on year.

Türkiye’s exports to China

Turkey’s exports to China have continued to grow in recent years and show a diversified product pattern. Mineral products rank first in Turkey’s exports to China. Furthermore, as the economic and trade relations between China and Türkiye continue to strengthen, Türkiye’s export structure to China is gradually evolving into a new phase characterized by diversification and the addition of higher value-added products.

The top five products Türkiye exported to China in 2023 are as follows:

Source: ITC

What has sharply increased from 2019-2023:

• Mineral fuels, mineral oils: Increased by 65%
• Natural or cultured pearls, precious stones: Increased by 58%
• Aluminum: Increased by 39%
• Nickel: Increased by 36%
• Preparations of cereal, flour, starch, or milk; pastry cooks: Increased by 34%

Moreover, in the first quarter of 2024, vehicles and auto parts emerged as one of the main exports from Türkiye to China, accounting for 12.46 percent of the country’s total export value. This highlights Türkiye’s strong capabilities in the automotive manufacturing sector.

China exports to Türkiye

As the fifteenth-largest vehicle manufacturer in the world, Türkiye is experiencing a shift in its industrial landscape, attracting major foreign automakers to establish plants. Consequently, imports of electrical machinery and vehicle accessories from China are increasing, reflecting their growing importance on Türkiye’s import list. In addition, Türkiye is a powerhouse in steel processing, ranking first in Europe and seventh globally, further solidifying its position as a key player in multiple industrial sectors while relying on Chinese imports to support its continued industrial growth.

The top five products Türkiye imported from China in 2023 are as follows:

Source: ITC

What has sharply increased from 2019 to 2023:

• Iron and steel. 80 percent increased
• Toys, games, and sports requisites. 65 percent increased.
• Vehicles other than railway or tramway rolling stock. 55 percent increased.
• Miscellaneous manufactured articles. 51 percent increased.
• Man-made filaments. 40 percent increased.

China-Türkiye investment

China invests in Türkiye

China’s investment in Türkiye has expanded significantly across various sectors, particularly in automotive, infrastructure, and renewable energy. Historically, Chinese enterprises have engaged primarily in Engineering, Procurement, and Construction (EPC) projects. However, there is a marked shift toward direct investments, especially as Türkiye’s economy continues to grow, and its export capabilities strengthen.

A key area of focus for Chinese investment in Türkiye is the automotive sector. The Turkish automobile industry has shown robust growth, with exports increasing by 5.3 percent year-on-year in the first nine months of 2024, totaling US$26.93 billion and accounting for 16.2 percent of the country’s overall exports. This upward trend in automotive exports is partly driven by Chinese-owned motor manufacturers establishing production facilities in Türkiye, which not only enhances local manufacturing capabilities but also facilitates access for Chinese electrical vehicles to European markets. As these investments continue to grow, they are expected to further strengthen Türkiye’s position as a key player in the global automotive supply chain, fostering economic development and job creation in the region.

In addition to automotive investments, significant contributions have been made by Chinese smartphone manufacturers. Companies such as Vivo, OPPO, and Xiaomi have established factories in Türkiye, aligning with the government’s policy of promoting domestic production.

Also notably, Transsion Holding, a major Chinese smartphone manufacturer, announced plans to invest US$3 billion over five years, starting with an initial US$500 million phase to build a mobile phone factory in Türkiye. This investment aims to reduce Türkiye’s reliance on imported smartphones, helping to lower the country’s $7 billion annual smartphone import bill by producing high-quality, affordable devices locally.

Furthermore, the collaboration between China Railway Rolling Stock Corporation (CRRC) Zhuzhou Electric Locomotive Co Ltd and Türkiye’s MNG Holding in the establishment of CRRC-MNG Rail System Vehicles Industry and Trade Ltd has significantly enhanced Türkiye’s transport infrastructure. This joint venture, launched in 2013, provides metro vehicles and services for key Turkish cities, including Istanbul and Ankara.

Recently, CRRC-MNG signed a long-term cooperation agreement with 46 Turkish suppliers, emphasizing localization in product supplies, assembly, and project management. This strategic partnership not only boosts local R&D capabilities but also creates jobs and strengthens Türkiye’s economy. Nurettin Ozdebir, president of Ankara’s Industry Chamber, highlighted the importance of CRRC-MNG’s contributions to Türkiye’s transportation systems and the local economy.

Moreover, China’s investments extend to energy infrastructure, with significant projects aimed at enhancing Türkiye’s energy capacity. For instance, China Power Investment Corporation (CPI) and AVIC International invested US$1.7 billion in the construction of the EMBA Power Plant, demonstrating their commitment to supporting Türkiye’s energy sector. Additionally, the partnership between China Electronics Technology Group (CETC) and Türkiye’s Kalyon Group on a photovoltaic solar industrial park has progressed through multiple phases, with plans for a 1.2 GW module engineering project set to further advance Türkiye’s renewable energy capabilities.

Source: MOFCOM, China

China-Türkiye agreements

China-Türkiye Bilateral Investment Treaty

China and Türkiye have signed a bilateral investment treaty (BIT), which provides essential protections for investors and their investments from both countries within each other’s territories. The BIT, which came into force in 1994, includes a “most-favored nation” (MFN) clause, ensuring that investors from one contracting country receive the same rights as those extended to investors from the other contracting country or any third country.

The following types of investments are protected under the BIT:

• Movable and immovable property and related property rights, such as mortgages, pledges, or liens;
• Shares, stocks, debentures, and other similar interests in companies;
• Claims to money or to contracts with financial value;
• Intellectual property rights, including patents, trademarks, industrial designs, and trade names, along with technical know-how;
• Business concessions granted by law or contract, including concessions to explore or exploit natural resources.

The BIT also guarantees investors the right to repatriate their invested capital or profits back to their home country and offers a dispute resolution mechanism, which includes arbitration in an impartial international court.

China-Türkiye Double Tax Agreement

The Double Tax Agreement (DTA) between China and Türkiye is a tax treaty designed to prevent double taxation and fiscal evasion with respect to taxes on income. The DTA was signed on May 23, 1995, and aims to enhance economic cooperation by providing clarity on tax obligations for individuals and businesses operating between the two countries.

Key features of the China-Türkiye DTA include:

• Reduction of withholding tax rates: The agreement reduces the withholding tax rates on certain types of income, such as dividends, interest, and royalties, which facilitates cross-border investments and strengthens economic ties.
• Prevention of double taxation: The DTA ensures that income earned in one country is not taxed twice, either in China or Türkiye, through mechanisms like tax credits and exemptions.
• Mutual agreement procedure (MAP): The DTA allows tax authorities from both countries to resolve any disputes or issues related to the interpretation or application of the agreement, ensuring smoother tax compliance.

Key withholding tax rates outlined in the China-Türkiye DTA include:

• Dividends: 10 percent.
• Interest: 10 percent.
• Royalties: 10 percent.

Potential growth cooperation opportunities

Automotive sector

The automotive sector emerges as a pivotal area for collaboration between China and Türkiye. As the world’s largest automotive market, China boasts advanced manufacturing capabilities and a well-established supply chain. Furthermore, in light of the international trade barriers confronting China, the partnership between Chinese automotive brands and Türkiye presents a promising opportunity for expanding the electric vehicle (EV) market in Europe.

Turkish automotive brands, such as Togg, have achieved impressive delivery numbers with their pure electric luxury vehicles since their launch. However, international automotive brands continue to dominate the Turkish market. Although Türkiye is not a formal member of the EU Customs Union, it signed a comprehensive bilateral customs union agreement with the EU in 1995. This framework allows the majority of products manufactured in Türkiye and exported to the EU to benefit from zero-tariff trade. Recognizing this advantage, many international car manufacturers have invested in Türkiye to access the European market, and Chinese brands are increasingly following suit. Currently, Türkiye imposes a 40 percent import tariff on Chinese EVs, but this tariff can be significantly reduced if companies opt to manufacture vehicles locally in Türkiye.

At present, BYD and Chery are exploring the possibility of establishing EV plants in Türkiye, while other leading Chinese automotive companies, such as SAIC Group and Great Wall Motors, are also in negotiations. In response to the 100 percent tariff on EVs imposed by the U.S. and increasing challenges in the EU, China is actively promoting the construction of EV factories to open new pathways into Europe. Therefore, Türkiye, as a strategically advantageous location, holds substantial potential for cooperation with China. The investments made by Chinese automotive companies are expected to further catalyze the development of Türkiye’s EV industry, capitalizing on these unique investment opportunities.

Battery and energy investment

As Türkiye intensifies its focus on renewable energy and advanced technologies, it presents substantial opportunities for Chinese battery and energy companies to invest and expand. The Turkish government is actively promoting initiatives to bolster its energy sector, making it an attractive destination for foreign investments, particularly in battery production and energy storage solutions.

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One significant development is Türkiye’s first gigawatt-level energy storage project, a collaboration between Harbin Electric International Engineering Company and Turkish Progresiva Energy. With a total investment of approximately US$400 million, this project will feature a storage capacity of 250 megawatts and a maximum storage capacity of 1 gigawatt-hour. This initiative is vital for enhancing Türkiye’s energy security and supports the nation’s goal of achieving carbon neutrality by 2053.

To further facilitate investment, the Turkish government has announced an ambitious US$30 billion green finance aimed at attracting investments in sectors such as electric vehicles, battery manufacturing, and energy technologies. This initiative reflects Türkiye’s commitment to becoming a key player in the renewable energy landscape and underscores the supportive environment for Chinese firms looking to invest. Recognizing these opportunities, Chinese companies, for example, Ganfeng Lithium has announced plans to establish a joint venture with Turkish Yigit Aku to invest US$500 million in a lithium battery production line with a designed capacity of 5 gigawatt-hours. Additionally, Hai Chen Energy has formed a strategic partnership with Maxxen, a local firm, to enhance their market presence in Türkiye.

Through a combination of government support and rising demand for renewable energy technologies, Türkiye offers significant growth potential for Chinese battery and energy companies looking to enter or expand in this evolving market.

Tourism

As Chinese tourists increasingly seek diverse and enriching travel experiences, Türkiye is well-positioned to leverage this trend, with significant economic opportunities highlighted by robust figures and data. In the first five months of 2024, Türkiye welcomed approximately 150,000 Chinese tourists, marking an impressive 125 percent increase compared to the same period in the previous year. This surge is part of a broader growth trend in Türkiye’s tourism sector, which saw foreign visitor numbers reach 26.1 million in the first half of 2024, representing a year-on-year increase of 13.9 percent. The total revenue generated from tourism during this period rose by 9.3 percent, amounting to US$23.7 billion, with an average daily expenditure of US$98 per tourist.

The growing interest from Chinese travelers is critical as Türkiye aims to achieve its ambitious goal of attracting 60 million tourists and generating US$60 billion in tourism revenue by the end of 2024. Türkiye’s diverse cultural and historical offerings are particularly appealing to Chinese tourists. Moreover, the Turkish government has invested in targeted marketing efforts to attract global tourists which includes over 10 promotional films distributed monthly across 200 countries, generating more than 700 million views online.

In conclusion, the influx of Chinese tourists presents a considerable opportunity for Türkiye to bolster its economy, strengthen bilateral relations, and underscore the potential for mutual benefits. By continuing to focus on targeted marketing, enhancing travel experiences, and fostering cultural exchanges, Türkiye and China will have a solid foundation for cooperation looking ahead, paving the way for collaborative initiatives that promote tourism, cultural understanding, and economic growth in both nations.