Indian Council of World Affairs

On January 25^th, 2022, Chinese President Xi Jinping hosted the five leaders of Central Asia to commemorate the 30^th anniversary of diplomatic relations between China and Central Asian countries.[i] In this Summit, China announced to increase the trade target between China and the region to USD 70 billion by 2030.[ii] A provision of USD 500 million was made to assist Central Asian countries over the next three years in their implementation of “socially significant” projects.[iii] This Summit is one such instance of China’s increasing engagement with the region. It becomes important to understand why Central Asia has become significant for China, particularly in recent times.

The Belt and Road Initiative (BRI) was launched during Chinese President Xi Jinping’s visit to Astana in September 2013 where he highlighted the Central Asian nations’ critical role in China’s pivot to Europe.[iv] BRI is a major initiative to increase China’s economic links to Southeast Asia, Central Asia, Russia and Central and Eastern Europe. This paper aims to discuss why China is investing heavily in Central Asia as part of BRI and examine the response of Central Asian countries on growing engagement of China.

Significance of Central Asia for China

Central Asia had relatively a lower strategic priority for China prior to the 2000s, however, it has risen in prominence in China’s foreign policy.[v] Few of the reasons for this are- (a) it has become a zone of strategic interest for the security of Xinjiang in western China- as it shares borders with three of the Central Asian countries i.e., Kazakhstan, Tajikistan and Kyrgyzstan; (b) for its commercial and resource interests- the Central Asian region is rich in natural resources: gas in Turkmenistan; oil, gas and uranium in Kazakhstan; uranium and gas in Uzbekistan; hydropower in Tajikistan and Kyrgyzstan; (c) as a ‘testing ground’ for China’s foreign engagements, including multilateral institution building[vi]; (d) the region is characterised by cheap wages and a willingness by governments to provide tax breaks and other subsidies for foreign investors in strategic industries; and (e) access to the European market.

Significance of China for Central Asia

China now has the biggest economic footprint in Central Asia, principally owing to its massive project, BRI. For Central Asian Republics, China is the biggest source of Foreign Direct Investment as it brings in technological expertise and large investments.[vii] Trade volume between the two sides has increased 100 times over the past 30 years.[viii] Since Central Asian countries do not have direct access to the ocean and major maritime shipping routes, China’s railway and road projects could go a long way towards improving their trade connectivity. The BRI initiative could help to create jobs and boost tax revenues from the projects. Trade and commerce between the two sides, has given access of the Chinese market to the Central Asian countries. For decades, China has had an appetite for Central Asian oil and gas; now it is opening up its market for a range of agricultural products of Central Asia. China’s rapid advance into Central Asia has made Central Asia emerge as a new vanguard for global trade and connectivity.[ix]

Central Asian Countries’ response to China’s growing engagement

Kazakhstan 

The Kazakh government welcomes Chinese trade and investments in the region. China has invested USD 19.2 billion in the country between 2005-20 and 56 Chinese projects worth USD 24.5 billion are due to finish by 2023.[x] Almost 25% of the Kazakh oil output is bought by China. As part of BRI, Beijing is rapidly investing in east-west infrastructure projects across the Central Asian region. China is therefore seen as an important partner by the Kazakh government.

Although, public opinion seems to be counter to that of the government’s. Ordinary citizens are worried about the country’s connections with China, with discussions of the "China threat" a part of public discourse on security and the future of the country. The two countries share a border of almost 1100 miles and there is a sizeable presence of ethnic Kazakh population in the Chinese north western region of Xinjiang. There is a resentment among the citizens over the treatment of Muslim brethren by Chinese authorities in Xinjiang. In 2016, protests broke out in western Kazakhstan over a government proposal to make rural land available to foreigners.[xi] Similarly, in 2019, the construction of Chinese factories prompted a string of anti-China protests.[xii] While the government is aware and concerned about the potential for public mobilisation on issues related to the growing Chinese presence in the country, the Kazakh government is nevertheless determined to use the opportunity to jump-start and diversify the economy.[xiii]

Kyrgyzstan 

The diplomatic relations between China and Kyrgyzstan were established a year after the Kyrgyzstan attained its independence. The relations between the two have been friendly since the past three decades but have not been without tensions. Disputes over land borders were a point of contention but were later resolved by a border deal in 1999.

The construction of the China– Kyrgyzstan– Uzbekistan railway, which is supposed to provide the first trans-Central Asian railway line from east to west, was viewed as a major opportunity in the initial stage. However, the railway project has thus far failed to get off the ground.[xiv] This is due to difficulties in the adoption of technical standards and norms; and the Chinese requirement to have a deposit for the project in the form of access to natural resources in Kyrgyzstan.

Most of the Kyrgyz society views China’s economic expansion rather negatively. In many cases, Chinese companies bring their employees with them, meaning the projects may not create as many jobs as the host countries expect. This creates resentment among the local youth over Chinese immigrants ‘stealing’ their jobs as was observed in the clashes between the local and the Chinese workers at the Tebian Electric Apparatus (TBEA) Company.[xv] Similarly, after a series of protests at At-Bashy in Central Kyrgyzstan, the government cancelled a USD 275 million investment project of China for free-trade zone.[xvi]

Tajikistan 

Tajikistan is one of the firm supporters of BRI and was the first to sign a cooperation MoU with China on the Silk Road Economic Belt. China is the biggest source of investment, accounting for USD 142 million foreign direct investment in 2020, and the third largest trading partner of Tajikistan.[xvii] Many Tajiks believe that China can strengthen the region’s stability and is viewed as a neighbour who is increasingly becoming an ally.[xviii] Tajikistan’s relations have grown closer with China during the last few decades while the U.S. investments have declined.[xix] This has resulted in dependency on Chinese loans. By 2019, 40% of the external debt of Tajikistan comprised of loans from the Chinese EXIM bank.[xx] In 2021, the Tajik government decided to increase its external debt to complete the implementation of development projects, China’s EXIM bank remained to be the largest creditor of Tajikistan.

China is using its debt diplomacy in ‘low income countries’ like Tajikistan. There have been instances where Tajikistan and Kyrgyzstan had to cede lucrative mines as well as agricultural land to China due to inability of repayment of loan.[xxi] A territorial dispute between the two countries over the eastern Pamir mountains was settled in 2011 when Tajikistan ratified a deal (signed in the year 1999) wherein Tajikistan ceded 1158 sq. km of territory in Pamirs to China and in return Tajikistan received a partial debt written-off.[xxii] However, in 2020, the Chinese state media repeatedly published articles written by the Chinese historian Cho Yao Lu, which suggested that “the entire Pamir region belonged to China and should be returned”.[xxiii] Such statements worries the government as well as the people in Central Asian countries.

Turkmenistan 

China has continuously developed its relations with Turkmenistan since 1991.  China is the first country to establish diplomatic relations with Turkmenistan, and one of the first countries to support Turkmenistan's policy of “permanent neutrality”.[xxiv] Turkmenistan is vital for China’s energy requirements and China is the largest natural gas trading partner of Turkmenistan. China has built the Central Asia-China gas pipeline, under the BRI which passes through Turkmenistan and opens up Chinese market for Turkmenistan’s gas exports. Although, there are certain challenges faced by Turkmenistan due to the Chinese engagements. First, by 2030, China seeks to import 270 billion cubic metres of natural gas, up from 53 billion in 2015.[xxv] As a result, with less than 40 billion cubic meters of gas export capacity, Turkmenistan is trying to keep up with Chinese gas demand by reducing exports to other countries.[xxvi] Second, the gas exports to China can be seen as a compensation for the millions of credit it has received from China. This is making Turkmenistan dependent on one single gas market, a situation that the country has been striving to avoid in the first place. Third, in June, 2021, the state-run Neutral Turkmenistan newspaper reported that President Gurbanguly Berdymukhamedov said Turkmenistan had paid off loans provided by China for the pipeline "on time and in full", but there is a lack of transparency on the terms and conditions of the Chinese loans and how the loans were paid off.[xxvii]

Uzbekistan 

Uzbekistan is an attractive economic partner for China as it provides diverse areas of investment like manufacturing, real estates, warehouse and logistics, trade and education. In 1992, the two countries signed the ‘Economic and Trade Agreement’, wherein they granted the Most-Favoured Nation (MFN) status to each other. In 2021, China’s share in Uzbekistan’s foreign trade turnover amounted to 17.7%.[xxviii] Natural resources, particularly gas, accounts for over 50% of Uzbek exports to China.

However, there are certain challenges in the relations between the two countries. Firstly, there is an imbalance in the types of goods which are exchanged. Uzbekistan’s export to China are mainly primary goods and China’s exports to Uzbekistan are manufactured good. This has led to the flooding of Uzbekistan’s market with ‘Made in China’ products. Secondly, increasing exports to China is creating discontent among the population of Uzbekistan as it creates shortage of gas in the domestic market especially in winters. In January, 2020, Prime Minister of Uzbekistan, Abdulla Aripov said that “by 2025, Uzbekistan will take measures to cease the export of natural gas and start its full processing in the country”.[xxix]

Conclusion 

Over the past two decades, China has become a major player in the international financial system. There are three Central Asian countries in the top 50 most indebted recipients of Chinese direct loans – Kyrgyzstan ranks 5^th with 30.5% of GDP, Tajikistan ranks 19^th with 16.1%, and Uzbekistan ranks 39^th with 7.5% of GDP.[xxx] Although the economic cooperation is increasing between China and Central Asia, the Central Asian countries are being cautious towards the Chinese engagements.[xxxi]

The rapidly growing presence of China in Central Asia is creating concerns and contributing to the increase in anti-Chinese sentiment among the population. A 2020 study conducted by Central Asia Barometer suggests that the people of Central Asia are increasingly becoming uncomfortable with Chinese presence in the region. For instance, in Kazakhstan and Kyrgyzstan, where tensions over Chinese investors have been building for some time, only 7% and 9% of populations respectively, expressed “strong support” for Chinese energy and infrastructure projects in their countries.[xxxii] In Uzbekistan, where people have somewhat enthusiastic view of China, the percentage in support of China dropped from 65% in 2019 to 48% in 2020.[xxxiii] A survey-based study showed that “COVID-19 has exacerbated the negative perceptions of China in Central Asia”.[xxxiv]

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*Gunjan Sidana is a Research Intern at Indian Council of World Affairs, New Delhi
Disclaimer: Views expressed are personal.

Endnotes 

[i] “Xi Jinping Chairs the Virtual Summit to Commemorate the 30th Anniversary of Diplomatic Relations Between China and Central Asian Countries”, Ministry of Foreign Affairs of the People’s Republic of China, 25/01/2022. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/202201/t20220126_10634121.html accessed on 23/02/2022 

[ii] “China promises more investment at Central Asia summit”, Eurasianet, 26/01/2022. https://eurasianet.org/china-promises-more-investment-at-central-asia-summit accessed on 19/02/2022 

[iii] “China to give $500 million in aid to Central Asian countries: Xi Jinping”, Business Standards, 26/01/2022. https://www.business-standard.com/article/international/china-to-give-500-million-in-aid-to-central-asian-countries-xi-jinping-122012600065_1.html accessed on 22/02/2022 

[iv]  “How is China’s belt and road initiative changing Central Asia”,  Roza Nurgozhayeva, New York, 9/07/2020, https://thediplomat.com/2020/07/how-is-chinas-belt-and-road-changing-central-asia/, accessed on 30/12/2021 

[v]  “China Central Asia relations: an uneasy coexistence”, Ashok Sajjanhar, New Delhi, 10/03/2021,  https://www.orfonline.org/expert-speak/china-central-asia-relations-an-uneasy-co-existence/. Accessed on 2/01/2022 

[vi] “Belt and Road Initiative in Central Asia- Desk Study, ITUC and Friedrich-Ebert-Stiftung (FES)”, https://www.ituc-csi.org/IMG/pdf/belt_and_road_initiative_in_central_asia.pdf . Accessed on 29/11/2021

[vii] “China Central Asia relations: an uneasy coexistence”, Ashok Sajjanhar, New Delhi, 10/08/2021. https://www.orfonline.org/expert-speak/china-central-asia-relations-an-uneasy-co-existence/ accessed on 3/01/2022 

[viii] “Central Asia plays a pivotal role in Belt and Road” https://news.cgtn.com/news/2022-01-24/Expert-Central-Asia-plays-a-pivotal-role-in-Belt-and-Road-175z6zTUxSo/index.html accessed on 22/02/2022 

[ix] “China Central Asia relations: an uneasy coexistence”, Ashok Sajjanhar, New Delhi,  10/03/2021 https://www.orfonline.org/expert-speak/china-central-asia-relations-an-uneasy-co-existence/ accessed on 30/1/2022 

[x] “Kazakhstan unrest: how will China’s economic interests be affected by the protests?”, Luna Sun, 7/01/22, https://www.scmp.com/economy/china-economy/article/3162581/kazakhstan-unrest-how-will-chinas-economic-interests-be accessed on 18/03/22

[xi] “Kazakhstan must look beyond the belt and road”, France, 4/05/18  https://www.iris-france.org/112196-kazakhstan-must-look-beyond-the-belt-and-road/ accessed on 18/12/21 

[xii] “Why are there anti-China protests in Central Asia” Bradley Jardine, Washington DC, 16/10/2019 https://www.washingtonpost.com/politics/2019/10/16/why-are-there-anti-china-protests-central-asia/ accessed on 19/12/21

[xiii] “China’s Silk Road and Kazakhstan’s bright path”, Nargis Kassenova, Maryland, USA, 24/07/2017 https://muse.jhu.edu/article/666561 accessed on 26/11/2021 

[xiv] “China and Kyrgyzstan bilateral trade and future outlook”, China Briefing Team, USA, 27/08/21 https://www.china-briefing.com/news/china-and-kyrgyzstan-bilateral-trade-and-future-outlook/ accessed on 25/12/21 

[xv] “Regional Connection under the Belt and Road Initiative”, London and New York, https://library.oapen.org/bitstream/id/8ad92aa6-228f-4636-9c32-1c0c68217853/9780429467172_oachapter5.pdf  accessed on 18/11/2021 

[xvi] “Kyrgyzstan cancels China logistics super hub investment al-bashy protests”, Beijing,  28/02/2020 https://www.silkroadbriefing.com/news/2020/02/28/kyrgyzstan-cancels-china-logistics-super-hub-investment-al-bashy-protests/ accessed on 17/12/21 

[xvii] “Tajikistan on Belt and Road to further prosperity”, Beijing, 14/06/2019 https://news.cgtn.com/news/2019-06-14/Tajikistan-on-Belt-and-Road-to-further-prosperity-HvKdOh1nfW/index.html accessed 29/11/21

[xviii]  “Sino-Tajikistan Relations: an unequal partnership”, Pravesh Kumar gupta, 17/08/21 https://www.vifindia.org/article/2021/august/17/sino-tajik-relations-an-unequal-partnership accessed on 15/03/22

[xix] “Tajikistan’s Catch-2022: foreign investment and sovereignty risk”, Bob Rehorst and Wouter Kuijl, Washington DC, 24/03/21 https://thediplomat.com/2021/03/tajikistans-catch-22-foreign-investment-and-sovereignty-risks/ accessed on 15/1/2022 

[xx]“Living in Debt: To Whom and How Much Does Tajikistan Owe?”, Central Asian Bureau for Analytical Reporting, 17/02/21, https://cabar.asia/en/living-in-debt-to-whom-and-how-much-does-tajikistan-owe , accessed on 9/03/22

[xxi] “Beijing’s imperialism casts a shadow from South China Sea to the Pamirs”, Ayjaz Wani, 12/08/20, https://www.orfonline.org/expert-speak/beijing-imperialism-casts-shadow-south-china-sea-pamirs/ , accessed on 18/02/22

[xxii] Ibid

[xxiii] “After Ladakh, Nepal & Bhutan, China Now Claims Territory In Tajikistan”, Eurasian Times Desk, 8/08/20, https://eurasiantimes.com/after-ladakh-nepal-bhutan-china-now-claims-territory-in-tajikistan/ , accessed on 14/01/22

[xxiv] Xi Jinping Exchanges Messages of Congratulations with Turkmen President Gurbanguly Berdymukhamedov on the 30th Anniversary of the Establishment of China-Turkmenistan Diplomatic Relations, Embassy of the People’s Republic of China in the Republic of Liberia, 06/01/22, http://lr.china-embassy.org/eng/zgyw/202201/t20220106_10479390.htm#:~:text=China%20is%20the%20first%20country,gas%20trading%20partner%20of%20Turkmenistan, accessed on 14/01/22

[xxv] “Regional Connection under the Belt and Road Initiative The Prospects for Economic and Financial Cooperation”, Roman Vakulchuk and Indra Overland, 2019, https://library.oapen.org/bitstream/id/8ad92aa6-228f-4636-9c32-1c0c68217853/9780429467172_oachapter5.pdf accessed on 4/02/22

[xxvi] “Many faces of China’s Belt and road initiative” raffaello Pantucci, Univerisity of California, 1/01/2021 https://online.ucpress.edu/currenthistory/article/120/822/28/114549/The-Many-Faces-of-China-s-Belt-and-Road Initiative accessed on 21/12/2021 

[xxvii] “Tipping the scales: China's predatory loans force countries into debt bondage”, Caravanserai and AFP , 7/12/21, https://central.asia-news.com/en_GB/articles/cnmi_ca/features/2021/07/12/feature-01 accessed on 7/01/22

[xxviii] “China and Uzbekistan: Investments, Projects, and Areas of Cooperation”, Nargiza Umarova, Uzbekistan 14/02/22,  https://cabar.asia/en/china-and-uzbekistan-investments-projects-and-areas-of-cooperation

[xxix] “Uzbekistan plans to cease export of natural gas by 2025”, Uzbekistan, 18/01/2020 https://kun.uz/en/news/2020/01/18/uzbekistan-plans-to-cease-export-of-natural-gas-by-2025 accessed on 26/12/2021 

[xxx] “China’s overseas’ lending”, National Bureau of Economic Research, July, 2019, https://www.nber.org/papers/w26050, accessed on 7/1/22 

[xxxi] “Central Asia and South Asia: opportunities and Challenges”, K. Warikoo, India Quarterly, New Delhi,  March, 2016, https://www.jstor.org/stable/48505479 accessed on 22/3/22

[xxxii] “South Korea is becoming a real alternative to Russia and China in Central Asia”, Russia, 23/01/21 https://vestnikkavkaza.net/analysis/South-Korea-is-becoming-a-real-alternative-to-Russia-and-China-in-Central-Asia.html accessed on 30/11/21 

[xxxiii] Ibid

[xxxiv] “Anti-Chinese Sentiment, the BRI, and COVID-19: Kazakhstani Perceptions of China in Central Asia”, Springer link, 2019. https://link.springer.com/chapter/10.1007/978-981-16-7586-7_5 accessed on 18/02/2022