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Uzbekistan-China Relations During the COVID-19 Pandemic

 “As China’s economic power is being reinforced, Chinese growing political influence in the region could be one of the most serious challenges to Uzbekistan and other Central Asian countries, given the growing partnerships both at the bilateral level and in BRI format,” said expert Oleg Limanov in an article just for CABAR.asia


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China has provided humanitarian assistance to the Uzbek military. Photo: Press Office of the Chinese Embassy in Uzbekistan, May 2020

The last few years continued to demonstrate steady growth of PRC’s foreign policy positions and its financial and economic role in all key global and regional processes. The ceaseless development of varied relations between Uzbekistan and China brought two countries on to a new stage, i.e. a long-term strategic partnership and all-round cooperation.

A PRC strategic partnership implementation, along with Uzbekistan’s other foreign policy priorities (Tashkent’s neighbors, the Russian Federation, South Korea, Turkey, Afghanistan, the USA, EU countries, Japan, India) has positively reflected on the full spectrum of foreign policy, trade and economic relations of our country. Relations between the two countries are improving steadily in various areas, ranging from economics, foreign policy, and security to all facets of the humanitarian cooperation (science, education, culture, “people’s” diplomacy, etc.).

All-round cooperation

Currently, Uzbekistan and China are in the most-favored-nation treatment, which facilitates higher mutual trade. According to the Goskomstat of the Republic, the volume of Uzbekistan-China trade turnover in 2019 amounted to $ 7.6 billion, or 18.1% of Uzbekistan’s total foreign trade, and in the first quarter of 2020 reached 1 billion 364 million 300 thousand dollars, of which Uzbekistan’s exports to China amounted to 400.8 million dollars, while imports from China totaled 963.5 million dollars[1].

As of early 2020, there are 1,652 enterprises in the Republic (16% of the total) with Chinese investments, of which 531 were established in 2019, covering the oil and gas, textile, telecommunications, agricultural, pharmacy, the chemical industry and building materials – all provided jobs for more than 20 thousand people. Yet, more than 120 enterprises have 100% Chinese equity[2].

Until recently, the sale of the so-called “Strategic raw materials” (natural gas, copper, uranium, cotton fiber, mineral fertilizers) remained the most lucrative area for ​​economic cooperation between Uzbekistan and China. Selling raw materials account for more than 50% of Uzbek exports. The most significant of these commodities is natural gas, the supply of which to China, according to the bilateral agreement on the sale of natural gas from 2011, is designed for 25 years[3]. Moreover, during Xi Jinping’s state visit to Tashkent in September 2013, parties signed the Protocol to the Agreement on the Principles for the Construction and Operation of the Uzbekistan-China Pipeline, i.e. the fourth line of the Central Asia-PRC gas pipeline with a design capacity of 25 billion cubic meters. That attests to the growing role of Uzbekistan in Beijing’s regional gas transportation policy.

Another important area of ​​economic partnership with China is Beijing’s growing investment in various projects of industry, transport, pharmacy, telecommunications, agriculture, and water management, as well as the creation of joint high-tech industrial parks on the territory of Uzbekistan with the participation of Chinese companies. The latter kicked off with the construction of the first analogous park in March 2013 – Dzhizak Free Industrial Zone with a branch in the Syrdarya region.

Since the beginning of 2020, the State Development Bank of China has extended a credit line for Uzbekistan Havo Yollari Airlines (Uzbekistan Airways) for $309 million to upgrade the fleet. The said Chinese bank in the coming months will also provide Uzbekistan’s National Bank for Foreign Economic Affairs (NBFEA) with a loan of 500 million yuan (69.76 million dollars). It will mark the 7th loan agreement between the two banks, but the first loan in the history of the NBFEA given in yuan, which will reduce the currency conversion costs and mitigate exchange rate fluctuation risks, while also creating a favorable environment for long-term financing[4].

UzbekTelecom will soon receive $107 million from Huawei Corporation to modernize and develop a broadband access network and $50 million from ZTE Corporation to expand the switchgear using NGN technology and modernize the UzMobile, the national mobile broadband access network operator[5]. Since 2018, Taonan Glorius Agricultural has been implementing a project in the Jizzakh region to grow fruits and some crops using innovative irrigation systems worth $ 25 million. Kingland Technology plans to invest $ 30 million this year in construction plant for the production of drip irrigation systems for growing cotton and other crops[6].

At the end of August 2019, the governments of the two countries signed another agreement on the creation of a joint investment fund with an authorized capital of $1 billion, aimed to implement high-tech projects at enterprises of the chemical and petrochemical industries and Uzbekistan’s oil and gas sector production facilities. The parties are currently finalizing the list of promising projects for export-oriented enterprises located in Uzbekistan’s regions.

One of the main features of collaboration within the BRI framework for Uzbekistan is fostering transport cooperation. Among the core priorities is Tashkent’s high interest in the speedy launch of the China-Kyrgyzstan-Uzbekistan railway that is currently under construction, which, compared with existing routes, will reduce the time for delivery of goods by 7-8 days[7]. That railway’s connection in April 2019 to the China-Kazakhstan-Turkmenistan-Iran railway transport corridor as part of BRI’s “The New Eurasian Land Bridge” project implementation that connects the coastal regions of China with the EU states through Central Asian[8]. According to certain Uzbek analysts, Uzbekistan’s and other Central Asian countries’ participation in BRI projects will boost the economy of both China and its neighbors.   

Humanitarian cooperation between the two countries is being implemented through various events. Over the past two years, for example, the two held a joint Silk Road archaeological exhibition, as well as a round table on “Prospects for Sino-Uzbek cooperation within the BRI initiative”. In September 2018, the Uzbekistan Center for Development Strategy in conjunction with the China Public Diplomacy Association held an international symposium in Tashkent. The event focused on “One Belt, One Road: A Dialogue between think-tanks and the media of China and Uzbekistan” and was attended by research institutes and media representatives of the two countries. In addition to the two Confucius Institutes in Tashkent and Samarkand and the SCO Center for Public Diplomacy, the Great Silk Road innovative cultural center was opened in Tashkent in early May 2019.     

Risks and Coronacrisis

Despite the positive developments in Uzbekistan-China economic and investment cooperation over the past decade and the consistent increase in bilateral trade, it seems that Uzbekistan faces several serious risks. Among them are the growing bilateral trade balance in favor of China and the observed increase of Chinese technologies’ share in several sectors of the Uzbek economy (telecommunications, banking, agriculture).

Although the total volume of Chinese direct investment in Uzbekistan’s economy since 1992 has already exceeded $ 9 billion this year, the number is much lower than that of neighboring Kazakhstan, the Russian Federation, and some other CIS countries[9]. As China’s economic power is being reinforced, Chinese growing political influence in the region could be one of the most serious challenges to Uzbekistan and other Central Asian countries, given the growing partnerships both at the bilateral level and in BRI format.

Moreover, the coronavirus that rapidly emerged in Chinese Wuhan and spread to the whole world, being labeled as a pandemic, had a marked negative impact on the dynamics of Uzbekistan-China relations. It became worse when the coronavirus pandemic exerted considerable pressure on the medical institutions trying to combat COVID-19 and contributed to the global media panic, but even more showed its destructive effects on the economy, finance, and social security system – both at national and global levels.

Uzbekistan-China partnership development, also closely integrated into the modern system of complex international trade, economic, financial, and humanitarian relations, was no exception to this global trend. Five Central Asian states were among the first to close their borders with China after the COVID-19 outbreak. In recent years, Uzbekistan was becoming one of the main agricultural products (primarily fruits and vegetables) suppliers to the PRC. While the import of cherries and mung bean from Uzbekistan increased significantly in 2017, the import increase fell on melon and pomegranate in 2018.

According to official statistics, “for the first time in three years, at the beginning of 2020 China was no longer the main export destination for Uzbek products.”

As PRC closed its border with all neighboring states, including the countries of Central Asia, in February-March banana prices, for example, fell by an average of 90% in Uzbekistan, as consumers fear fruits arrived from China[10].

Besides, Uzbekistan’s authorities have postponed for an indefinite period some major international events, like the investment forum initially scheduled for March of 2020.

As the borders closed and stern quarantine measures were enforced, the flow of tourists from and to Uzbekistan, with China at the forefront, has experienced a dramatic decline.

The restrictions imposed by the two countries due to the coronavirus pandemic have caused a dramatic decline in the flow of Chinese tourists to Uzbekistan over the past few months. Considering that, since 2018, we have observed a positive effect of simplifying the procedure for business and tourist visa issuance for Uzbek citizens to PRC and especially Tashkent abolishing visas for Chinese citizens in January 2020.

The spread of the pandemic is likely to delay considerably the implementation of numerous transport and logistics projects of PRC with other countries both at the bilateral level and within the BRI format.

There are also fears that there would be a deceleration in the flow of Chinese investment to the Uzbek economy and the pace of bilateral trade during the pandemic. UzAnalytics experts, for instance, argue that China’s BRI promotion was driven by the domestic policy needs related to the economic slowdown in China over the past 10 years[11]. They believe that its implementation, on the one hand, boosts up the economies of the lagging Chinese western provinces, and on the other hand, stimulates the growth of domestic consumption and optimizes the size of industrial capacities in the Chinese economy at the expense of neighboring countries.

Many foreign experts, even before the coronavirus pandemic, could not agree on whether China would dispute the geopolitical dominance in Central Asia once the Initiative is successfully implemented. In the present situation, it seems to be even more difficult to answer this question.

However, some analysts believe that Tashkent’s acquisition of EAEU observer status will “reasonably reduce the pace of China’s hastily growing trade and economic activity in Uzbekistan while balancing the trade turnover that is now in favor of China for Tashkent and other Central Asian EAEU participants “[12]. Suzdaltsev, the Russian expert on CIS issues, however, believes that “a quick resolution on Uzbekistan’s integration into the Eurasian Economic Union should not be expected either way”.

Conclusion

The coronavirus pandemic-imposed restrictions have had a certain negative impact on the Uzbekistan-China cooperation in the trade, economic and humanitarian areas, and more broadly on the deferred nature of relations between the two states. The governments and the people of the two countries, nonetheless, are making serious efforts to minimize the negative consequences of the process. The two countries are to pursue their efforts preventing a sharp decrease in bilateral trade, optimizing the structure of Uzbekistan-China trade, and resuming the implementation of planned joint projects.

Also, considering the growing volumes and areas of cooperation between individual regions of Uzbekistan and China in recent years, a better alternative would be to focus on combining trade, economic and humanitarian efforts in the medium term. In the longer term, however, all Central Asian states might consider coordinating their approaches and practice joint decision-making to develop mutually beneficial multilateral cooperation within the framework of international organizations like the SCO, as well as conjugating partnerships in the EAEU and BRI formats.


This material has been prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project. The opinions expressed in the article do not reflect the position of the editorial board or donor.


[1] Russia ousted China from being Uzbekistan’s main trading partner. – 04/09/2020. [site] – URL: https://ia-centr.ru/publications/rossiya-vytesnila-kitay-s-pozitsii-glavnogo-torgovogo-partnyera-uzbekistana/ .

[2] Kutbitdinov Yu. Chinese vector of the Uzbek economy. // Economic Review No. 2 (242) 2020 [site] – URL: https://review.uz/ru/post/kitayskiy-vektor-uzbekskoy-ekonomiki.

[3] Uzbekistan’s Chinese hope: to escape raw material dependence. Interview with Uzbek expert B. Ergashev. – 02.03.2018. [site] – URL: https://www.sonar2050.org/publications/uzbekistan-v-2050-godu/ .

[4] Stolpovsky, O. The strategic partnership between Uzbekistan and China intensifies. – The rhythm of Eurasia, 11/05/2019. [site] – URL: https://www.ritmeurasia.org/news–2019-11-05–strategicheskoe-partnerstvo-uzbekistana-i-kitaja-nabiraet-oboroty-45760.

[5] Stolpovsky, O. The strategic partnership between Uzbekistan and China intensifies. – The rhythm of Eurasia, 11/05/2019. [site] – URL: https://www.ritmeurasia.org/news–2019-11-05–strategicheskoe-partnerstvo-uzbekistana-i-kitaja-nabiraet-oboroty-45760.

[6] Ibid.

[7] Kutbitdinov Yu. Chinese vector of the Uzbek economy. // Economic Review No. 2 (242) 2020 [site] – URL: https://review.uz/ru/post/kitayskiy-vektor-uzbekskoy-ekonomiki.

[8] Geopolitical games in Central Asia. Review of opinions. – 10.21.2019. [site] – URL: https://caa-network.org/archives/18292 .

[9] Uzbekistan Economy 2020: Crisis in the economy sectors, cashless payments, and budget deficit. – 05/07/2020. [site] – URL: https://stanradar.com/news/full/39472-ekonomika-uzbekistana-2020-krizis-v-sferah-rost-beznalichnyh-platezhej-i-defitsit-bjudzheta.html.

[10] The coronavirus pandemic affects the fruit market in Uzbekistan. – 04/17/2020. [site] – URL: https://kun.uz/.

[11] Central Asia on the new Silk Road map. – 05/08/2019. [site] – URL: https://caa-network.org/archives/16044.

[12] Karmazin I. Final consideration: will Uzbekistan join the Eurasian Union. / Izvestia, 04.02.2020.

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