* Chinese banks to finance cellulose plant project
* Belarus wants to repay loan by exporting produce to China
* Beijing boosting presence in ex-Soviet commodities sector
* Minsk is seeking IMF bailout loan
(Writes through context, background)
By Andrei Makhovsky
MINSK, June 14 China boosted its presence in the
ex-Soviet bloc's commodities sector on Tuesday by lending over
$1 billion to Belarus just a day after signing two large deals
in Kazakhstan, another former Soviet republic.
A bulk of funds provided to Belarus will be used to build a
cellulose plant which may then export its produce to China, the
Belarussian government said, while Monday's Kazakh deals
included a loan to a major copper producer.
The two large investments in countries flanking Russia to
the east and the west marked the beginning of Chinese President
Hu Jintao's tour across the region during which he is visiting
Kazakhstan, Russia and Ukraine.
And for Belarus, whose government is struggling to keep a
currency crisis in check, deals with China provide not only
much-needed investment, but also an important counterbalance to
Moscow's growing influence.
Chinese banks will lend Belarus over $1 billion to finance
industrial and infrastructure projects, the Belarussian
government said on Tuesday.
The deal is likely to be linked to supplies of Chinese goods
and services and thus contribute very little towards Belarus's
efforts to plug its large current account deficit.
But the investments could help the Minsk government prop up
economic activity at a time when it is cutting spending and
tightening monetary policy.
China's Eximbank and the Industrial and Commercial Bank of
China will provide $654 million towards a $700 million cellulose
plant construction project as well as $340 million for a road
improvement project, Deputy Prime Minister Anatoly Tozik said.
The banks will also finance a smaller railroad
electrification project, he said.
The plant, due to be built in two years, will have the
capacity to produce 400,000 tonnes per year of bleached
cellulose, used in paper and cardboard production. Belarus
consumes just 200,000 tonnes a year.
"We are discussing the possibility of repaying the loan by
supplying extra cellulose to China," Tozik said.
Urbanisation and the rise of China's middle class is
fuelling demand for tissue and toilet paper and driving global
growth in the sector. [ID:nL3E7DB18K]
Resource-hungry China has already been competing with Russia
on Moscow's ex-Soviet home turf for almost a decade but has so
far focused on Central Asia, where Beijing has invested heavily
in oil, gas and metals sectors.
This week, Beijing signed a currency swap deal worth $1
billion with its Central Asian neighbour Kazakhstan and agreed a
$1.5 billion loan to Kazakh copper miner Kazakhmys (KAZ.L)
The deals were signed during Hu's visit to Kazakhstan, part
of a tour that will also take him to Russia and Ukraine, though
not to Belarus.
For Minsk, the Chinese money could provide a much-needed
replacement for government loans that have been fuelling
economic growth so far.
Belarus devalued its rouble BYR= by 36 percent last month
after losing a quarter of its foreign currency reserves this
year due to excessive pre-election public spending in 2010 by
the government of President Alexander Lukashenko.
It has since pledged to halve its budget deficit and sell
off state assets in order to secure a $3 billion loan programme
from a Russian-led regional bailout fund. Minsk is also seeking
an IMF loan of up to $8 billion.
(Reporting by Andrei Makhovsky; Writing by Olzhas Auyezov;
Editing by Ron Askew)