The regional office of the Institute for War and Peace Reporting (IWPR) and the analytical platform CABAR.asia, together with the Kazakhstan’s China Study Centre, held the “China in Central Asia: A Perspective from the Region” international conference.
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On December 5, 2019, prominent regional scientists, political scientists and experts on China from Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, representatives of the state institutions and diplomatic missions, the country’s higher educational institutions, expert analysts, researchers, and journalists have participated in the round table in Nur Sultan. In general, the conference brought together about 130 people. The event was held at the site of the Kazakhstani partner – the China Studies Centre in Kazakhstan. The event comprised presentations of thematic reports, discussions on the current state and issues of China’s role in the economy and politics of Central Asia and each country individually.
China in Central Asia
In the light of increasing revitalization of the PRC in Eurasia and the ongoing implementation of the Belt and Road Initiative, Central Asia today has become the epicenter of major geopolitical processes and the focus of the attention of many international players. This offers new development opportunities, but at the same time creates new challenges for the stability in the region.
China changes, resulting in the change of its behavior in the region. China behaves differently, but equally energetically, in each of the Central Asian countries. The fact that the region is of strategic interest to Beijing makes it essential for the Central Asian countries to discuss Chinese policy and objectively assess cooperation with the Celestial, the stable development and geopolitical positioning of the region.
The expert circles discussions of the above issues enabled better comprehension of the specifics of Chinese policy in Central Asia in its dynamics – 10-20 years ago and today, when the PRC has become more powerful. This basis enabled experts to identify certain trends in the current situation, identify the pros and cons, and discuss possibilities for the cooperation growth with China.
Kazakhstani political observer Marat Shibutov made a short review of Kazakh-Chinese relations based on the analysis of economic trends. He divided the relations between two countries into three stages: the first stage – until 2000; the second stage – from 2000 to 2013; and the third stage – late 2013 to the present.
The first stage is characterized by Kazakhstan’s export of metal and scrap metal, wool, and agricultural products to China. The collaboration was mainly in the form of a simple trade. This stage can be referred to as “metal”.
The second stage is characterized as “oil and gas”. The time of increased oil and gas consumption in China, followed by the purchase of oil and gas enterprises in Kazakhstan. Since 2009, this stage also marks as deciding on and the construction of a gas pipeline from Turkmenistan to China through Kazakhstan. Today, the share of Turkmen and Uzbek gas is 30-35% of total gas imports to China.
The third stage begins with the turning point of 2013. Chinese President Xi Jinping announces the Belt and Road Initiative in Astana. This stage can be named as the time of logistics and industrial infrastructure formation. Rail transit has grown significantly since then. Once it was a thousand containers per year, and now 2018’s results report 289 thousand containers per year. 43% of Chinese containers transit through Kazakhstan. Besides, there is an emerging construction of industrial facilities recorded in the number of 55 industrial projects of the Belt and Road Initiative.
The supply of oil and gas products in the commodity sector is reduced, and the supply of metals remains stable. 2014 marks the formation of China’s uranium reserve, which is mainly Kazakh uranium.
The main risk for Kazakhstan and the entire region is the Sino-American confrontation. The US House of Representatives recently passed a law to support the rights of the Xinjiang population, which may as well include US sanctions on all those working with enterprises operating in the XUAR. This may affect possible trade and economic contacts.
Nevertheless, Shibutov noted the region’s potential for agricultural exports to China, where the demand for meat, vegetables, oil, etc. is growing each year.
Aidar Amrebaev, an expert on China, director of the Kazakhstan’s Center for Applied Political Science and International Studies, spoke about myths that exist in the public mind and are an obstacle to understanding China, and about the inhabitants of the region’s center as sovereign dynamic entities. According to Amrebaev, there are several mythologies and fears of China in Kazakhstan. To overcome them, citizens must clearly understand them in detail. Do fears have real grounds or are these ideologies thrown by countries competing with China?
Amrebaev gave an example of the so-called Chinese debt trap. Over the years of Kazakhstan’s independence, China has invested more than $20 billion in the country. However, there are serious differences in the data of the Chinese and Kazakhstani parties. For instance, Chinese data on the volume of investments and loans reported at the level of 40-50 billion US dollars. China’s statistics consider data on concluded investment contracts, while the Kazakh side keeps records of actual receipts of funds. Very often the data media gives varies from the actual income, i.e. the records kept by the National Bank of the Republic of Kazakhstan. Hence, many different incompetent speculations about the country’s being in Chinese bondage.
There is the issue of transport and logistics cooperation. Kazakhstan has built many railway and automobile corridors. But for the most part, these projects were implemented by ADB and others rather than by China. The question is how and with what will we fill these corridors? Will we actively participate in the added value of those products transported by China or will we stand aside? China has provided us with a seaport in Lianyungang, we have access to the sea. There is also the seaport of Aktau and the dry port of Khorgos. The infrastructure is already available for the use of not Kazakhstan alone, but of all Central Asian countries. We need to exclude the effect of competition between different transport corridors and projects and optimize the opportunities. For the effectiveness of it, the countries should concentrate their forces, if not in one fist, then at least in one center.
Anton Bugaenko, a sinologist, an expert at the Institute of World Economy and Politics under the Fund of the First President of the Republic of Kazakhstan, carried forward the topic of trade and economic relations with China. According to him, trade with Central Asian countries makes up only about one percent in China’s trade turnover. The export of Kazakhstani oil varies between 1.3% and 1.5% of all oil and oil products imports to China. In this sense, China does not see “storehouse of resources” in Central Asia for its future development. China is also focusing on traditional, lighter and more basic ways of delivering oil from the Gulf countries.
The main interest of China in Central Asia is primarily the interest of security. Given the separatism issue in Xinjiang, China is committed to maintaining stability in the region. That dictated all China’s actions in Central Asia accordingly. In that regard, China is ready to invest in the economies of the countries, including the oil sector.
According to Bugaenko, Central Asia is an economic periphery. Based on this, the region has to integrate into various economic chains and China can provide this opportunity. On the other hand, modernization and integration into “chains” is dependent on China. However, this can also be considered as interdependence. In this context, Kazakhstan has an interesting lever. The Chinese “One Belt – One Road” simply cannot fail for the Chinese bureaucracy because this project is generated and associated as the Xi Jinping’s project. Accordingly, the project of the PRC leader cannot fail. In this regard, Kazakhstan can seek any preferences, and the Chinese themselves give access to their market, while new investments are also possible.
Bugaenko too commented on the growing possibility of exporting agricultural products to China. According to him, the world witnesses a reduction of agriculture’s share in global GDP. However, this business is related to social stability within Kazakhstan. It provides jobs for many rural people. In that regard, export promotion to China is extremely important, while China is willing to support for maintaining the stability.
Speaking on the economy, Muratbek Imanaliev, former SCO Secretary-General, and former Kyrgyz Foreign Minister noted that Kyrgyz-Chinese economic relations need an honest and fair assessment. First of all, cooperation in the light of the Chinese Belt and Road Initiative causes more concern and anxiety than positive emotions and a surge of strength.
As Imanaliev argues, it is regrettable to admit that so far, in Kyrgyzstan, no project has been implemented in the framework of the Belt and Road initiative. Relations with some Chinese companies operating in Kyrgyzstan are not very successful.
He also noted that one of the most frequently discussed issues in the framework of Kyrgyz-Chinese relations is the external debt of our country to the PRC: as we know, it reached the figure of $ 1.7 billion and amounted to more than 40% of Kyrgyzstan’s total foreign debt. All external debt is approximately 53% of the state’s GDP. However, Imanaliev asserts that the problem is extremely politicized. In the absence of economic development, the mass of virtual debt grows exponentially and exerts a very impressive influence and pressure on the political, social and other forms of people’s lives.
Muratbek Imanaliev concluded that the new Country Development Strategy brings Kyrgyzstan to the need to update agreements on the integration of national projects and development programs. The problem is in the required study mode and entails continuation possibly at a higher quality level. It is also obvious that the Kyrgyz-Chinese pairing should be organically squeezed into the China-EAEU pairing.
Continuing the theme of economic relations between China and Kyrgyzstan, Nargiza Muratalieva, Ph.D. in political sciences, an expert in Central Asia from Kyrgyzstan identified several strengths of cooperation:
- Consistency of China’s foreign policy through the conceptualized form of “Belt and Road”;
- Rejection of institutionalized establishment of trade and economic relations that do not oblige to adhere to a particular foreign policy line;
- China’s commitment to huge financial injections, broad scope of the “Belt and Road” initiative.
Along with strengths, there are weaknesses economy-wise:
- A debt trap problem in Kyrgyzstan and Tajikistan. These countries have corruption in the highest echelons of power. It is worth recognizing the weakness of governance in the countries of the region than in cooperation with the Chinese side. A vivid example is a cooperation to modernize the thermal power plant when its cost was overstated, and the funds were irrationally redistributed. This led to a series of high-profile corruption scandals and anti-Chinese sentiments.
- Lack of transparency in financing Belt and Road projects; not all information is available to the public, researchers, and civic activists.
What will happen? What are the trends?
When it comes to Kyrgyzstan, environmental problems have become quite a mobilizing factor in society and cause an active growth of anti-Chinese sentiment.
The Chinese side is not much interested in involving NGOs to assess and monitor environmental standards. To attract a foreign investor, a host country like Kyrgyzstan can deliberately lower environmental standards. Environmental standards would have to adjust for a project to obtain financial investments.
What are the forecasts?
Based on the situation, we can assume that China, with careful consideration of emerging serious issues in several countries – participants of the “Belt and Road” initiative and the escalation of financial contradictions, might start reviewing its strategic approaches to implementation. This implies the adjustment of the projects list under the Initiative.
There is also a chance that Beijing will revise the practice of lending to projects, shifting its focus to ensuring commercial return and guaranteeing the safety of investments.
What can be done in our countries?
The work to prevent the escalation of social conflicts should be carried out in enterprises and settlements, in the regions of Chinese capital presence.
It should also be noted that unlike Kazakhstan, which has successfully implemented and adapted to the “Belt and Road” initiative by proposing its “Nurly Zhol” strategy, Kyrgyzstan still does not have any conceptual design for cooperation with China under the “Belt and Road”.
On the other hand, Kyrgyzstan needs to learn how to use the project approach in its “One Belt – One Road” initiative participation, that is, selectively integrate into those projects that meet the country’s national interests.
Raymalikhon Nuriddinov, Ph.D. in Political Sciences, Head of the International Relations Department in Tajik National University, argues that Central Asian countries are of interest to China as suppliers of energy resources, markets for Chinese goods, transit corridors for delivering goods to Europe through the implementation of the One Belt – One Road initiative.
Nuriddinov notes that the apparent priorities of the “One Belt – One Road” project and the Chinese strategy as a whole – the development and promotion of Chinese business – have twofold consequences for the countries of the region. On the one hand, they certainly contribute to economic growth, but, on the other hand, they become a strategic challenge for the states in the region. For instance, the likelihood of political and debt dependency on China, as well as the growth of Chinese labor migration and the possibilities for ethnic conflicts.
If we talk about the role of superpowers in the context of relations between the region and China, Russia, facing reinforced sanctions from the West and expanding cooperation with China, can reconsider its approach to the growth of the Celestial in the region towards greater realism and cooperativeness.
China’s attempts to limit the ability of Western powers to acquire and expand their strategic military positions in Central Asia remain the country’s main strategic goal. The region is objectively the “rear” of China if we consider diplomatic confrontation with America over Hong Kong and Taiwan as the frontiers of Chinese foreign policy.
According to Nuriddinov, China’s diplomacy in the region seeks to avoid competition with Russia, which is perceived as a partner in preventing the consolidation of the West’s place here rather than a rival. Therefore, China focuses on multilateralism by enhancing its role in regional affairs within the framework of the Sino-Russian bilateral partnership and multilateral cooperation, in which the states of the region take part along with China and Russia.
Farrukh Irnazarov, director of the Central Asian Development Institute, argues that the Uzbek government attempts to strengthen export potential, the value chain, and enable Uzbek exporters to enter the Chinese market. China is introducing the so-called “import protocol” – a specific product range that undergoes a thorough examination and selection. Today, Uzbekistan can import five types of goods into the PRC: cherries, melons, honey, peppers and “mash” cereals. In parallel, negotiations are underway on the supply of Uzbek lemon and grape to China.
The biggest potential for Uzbekistan lies in agriculture and technology. According to official statistics, China is the topmost trading partner of Uzbekistan accounting for 19.8% of the trade balance. However, most likely Russia is the number one partner because those numbers attributed to the trade balance between Kazakhstan and Uzbekistan very often belong to the trade between Uzbekistan and Russia.
There is a great demand for cherries in China, and we can assert that China is dependent on California cherries. If the situation between the US and China changes for the worse, Uzbekistan may end up in a winning position.
According to Irnazarov, two things characterize the omissions in the cooperation possibilities with China: a) ignorance of the Chinese market b) undeveloped logistics routes. The Belt and Road Initiative should help fill this niche. In 2017, the PRC signed an agreement with the Uzbek side on the implementation of projects and investments worth 17 billion US dollars, and now this phase has begun actively.
Irnazarov also noted the growing role of Chinese tourism. He affirmed that while there is a belief in Uzbekistan that Chinese tourist is a generous tourist, there is a lack of understanding of needs and desires the exact Chinese tourist has. Considering that Uzbekistan liberalized the visa regime with the PRC in November, one shall expect an increased flow of Chinese tourists. The question of how Uzbekistan will create an image for other Chinese tourists remains open.
Temur Umarov, a sinologist, an expert on Central Asia, a consultant at the Carnegie Moscow Center, argues that bilateral relations between China and Uzbekistan have always been central. President Xi Jinping called the first president of Uzbekistan a friend of the Chinese people. Relations were at a high level and were regarded as important.
In the last years of Karimov’s reign, China has shifted Russia, which traditionally used to hold the largest share in trade. Russia has since been in second place. Along with this, the investments of Chinese corporations in infrastructure, energy, and telecommunications have grown. Similar processes take place in other countries.
An important event was the announcement of the Belt and Road Initiative. China’s investment in Uzbekistan is nearly $8 billion. If until 2016-2017 almost all investments were concentrated in agriculture, energy, and infrastructure, now the focus shifted to the real estate. There is also an increase in number of enterprises with the participation of Chinese capital, and the growth in trading volume. Now it makes up 19% of the total turnover of Uzbekistan.
Countries in the region share similar problems with China. Often problems go into their intrasystem complexities.
Alarmists’ arguments on Central Asia becoming a raw materials appendage do not pose a challenge. These are structures and part of the economic relationship.
Tourism in Uzbekistan is surely under the development and China is a promising partner in this regard. However, the problem may be that Chinese tourism, for the most part, is group tourism organized by the Chinese side, which takes the investments out of the domestic business’s pocket. In this respect, there is the challenge that we, the countries of the region, do not understand the market, do not speak Chinese and cannot advertise our travel companies in the Chinese market. Therefore, Chinese competitors are doing much better in that.
Watch a short video about the conference: