China and Turkey have cultivated a strategic partnership that has significantly fostered trade, investment, and access to European markets over the years. However, a recent setback involving a major Chinese investment could potentially hinder one of Beijing’s crucial economic alliances in the region. This situation is particularly relevant for businesses and investors looking for insights into international relations affecting the global market.
Growing Connections: China and Turkey
The relationship between China and Turkey has been bolstered by Turkey’s advantageous position as a member of the EU Customs Union. This arrangement makes Turkey an appealing destination for Chinese investments. Products manufactured in Turkey can enter the European market without incurring additional customs fees, allowing firms to sidestep recent tariff increases on Chinese goods. Additionally, Turkey’s location along the Middle Corridor transport network enhances its logistical advantages, significantly shortening shipping times and supply chains to Europe compared to traditional maritime routes.
In terms of trade, Turkey is an essential partner for China. By 2025, it is projected that Turkey will import approximately $45 billion worth of Chinese goods, solidifying its role as China’s third-largest trading partner globally. This economic relationship allows Turkey to assert greater independence while simultaneously leveraging its interactions with China to gain strategic leverage over its Western allies. Furthermore, Turkey’s involvement with the Shanghai Cooperation Organization (SCO) underscores its growing alliance with China, despite its existing ties to NATO and the United States.
Setbacks: The BYD Investment Collapse
Recent strains in the China-Turkey relationship arose when BYD Company Ltd, a prominent Chinese electric vehicle manufacturer, suspended its $1 billion investment plan in Turkey. This modification of plans, announced in July 2024, was viewed as a major blow to Turkish President Recep Tayyip Erdoğan’s aspirations to establish Turkey as a hub for electric vehicle manufacturing.
In the past month, BYD shifted its focus towards expanding its production capabilities within the European Union, planning to open a plant in Szeged, Hungary, by the fourth quarter of 2026. This strategic move allows BYD to bypass the EU’s 27% tariff on Chinese-made electric vehicles. The inability to gain favorable terms through Turkey’s Customs Union has made the European option more appealing, prompting the company to pull away from its Turkish commitments despite substantial incentives offered by Ankara.
Chinese Propaganda and Diplomatic Moves
Following the disappointing news regarding the BYD investment, Beijing has engaged in a public relations offensive aimed at restoring its image in Turkey. The Chinese embassy in Ankara has disseminated promotional materials highlighting cooperation between the Chinese Communist Party and Turkey’s ruling Justice and Development Party. Additionally, the Turkey-China Friendship Foundation organized a media tour to China, focused on Xinjiang, a region that has faced human rights scrutiny due to allegations against the Chinese government.
This propaganda campaign comes at a time when Turkey, home to the largest Uyghur community outside of Central Asia, shouldered the dual burden of foreign relations and domestic pressures. Past reports have documented human rights abuses against the Uyghur population in Xinjiang, presenting a complex situation for Turkey as it seeks to balance its economic interests with ethical considerations.
The Road Ahead for Turkey
Despite these challenges, Turkey is navigating a precarious economic landscape marked by high inflation and reduced foreign reserves. In light of this, Ankara has indicated it intends to pursue legal action against BYD to recover investment incentives lost after the project’s cancellation. Furthermore, the Turkish government has revoked tax benefits previously granted to BYD, highlighting its determination to safeguard its economic interests.
Turkey’s recent diplomatic successes with its Western allies, including hosting a NATO summit and the lifting of sanctions by the U.S., juxtaposes starkly with the BYD debacle, emphasizing the delicate balance Ankara must maintain. As Turkey continues to grapple with its economic struggles, it will likely find itself further entrenched in the balancing act between bolstering ties with Beijing and adhering to obligations and alliances with Western nations.