In September 2013, when Xi Jin Ping in his speech at Nazarbayev University in Astana, for the first time mentioned the idea of creating an economic belt of the silk road. Recalling the history of the ancient silk road, he also spoke about the need to improve cross-border transport infrastructure, China's readiness to participate in the creation of transport networks connecting East, West and South Asia, which would create favorable conditions for the economic development of the region. The Chinese President also spoke about the need to simplify trade and investment rules to eliminate trade barriers and improve the speed and quality of economic operations in the region. The aim is to create a trade corridor for direct supplies of goods from the East to the West on preferential terms. This economic corridor should connect the Asia-Pacific region in the East with the developed European countries in the West.
Keywords: China, Kazakhstan, investments, silk road, economic relations
Introduction
China at the present period is the country with the most advanced economy in the world. It is worth noting that in recent years, China has overtaken such economic giants as Japan and the United States, which indicates the steady and constant development of this country. Having a huge potential, which is expressed primarily in the number of the population (labor force), the presence of some natural resources and the desire not only to work, but also to earn money, China has confidently established itself as an economic leader. Since 1978, the Chinese authorities have entered the path of openness and moved to reforms that opened the country to foreign investment. Thus, China's GDP began to grow. However, being smart and perspicacious politicians, the Chinese authorities understand that the country will fall into complete dependence if it becomes an «economic recipient», and therefore, for the implementation of its investment programs, China begins to establish economic relations with the States of Central Asia, since the 80-ies of the twentieth century, to become a powerful investor in this region. One of the main branches of China's economic investments is not accidental that the Countries of Central Asia. Experts state that it was extremely important for China to firmly settle in this region for a number of reasons. The first one is that the region has a significant geographical position, which allows China to enter the European market bypassing Russia, thus China is trying not to put «all the eggs in one basket».
In addition, it’s highly undesirable for China to have a US presence in this region, therefore, the PRC needed to establish friendly and partnership relations with the countries of Central Asia before the US begins to do so. In this matter, China certainly had advantages. As a reliable economically of the USSR, China begins to play an important economic role, since the 80-ies of the twentieth century. Thus, China had much more room for «maneuver» in this region than the United States. Moreover, China has successfully played on the desire of peripheral countries to become economically independent from the center. This allowed China to start its economic influence before the collapse of the USSR.
Another reason why China pays close attention to Central Asia is that this region is rich in minerals, and China, having a strong production base, is in dire need of resources.
And at last, Central Asian countries consist of ethnic groups. They are inhabited by representatives of nationalities who are small peoples of China. The collapse of the Soviet Union and the independence of these nationalities made Chinese politicians think and raised fears that, inspired by the example, the small peoples can start movements for independence, and these movements will be financed from abroad. Thus, China was in dire need of active participation in the region to control such «trends».
By the early 1990s, China had set several key priorities for policies towards Central Asian countries. For example, Preservation of balance and inviolability of the policy of the Central Asian countries. Such measures are primarily aimed at ensuring reliable cooperation between China and the countries of Central Asia. Naturally, it is better to cooperate with a partner in which you are confident. With all this, it was important for China not to «anger» such «giants» as Russia and the US. In its policy, China skillfully bypasses acute angles in dealing with complex issues and situations. Despite productive cooperation, China has faced a number of challenges. Central Asian countries are of strategic interest to many countries, such as the United States, Europe, Russia, Arab countries, Turkey, Japan, Iran, South Korea. In this regard, China has to compete with these rather strong countries and occupy its niche. Another problem is the negative image of China in the 1990s, when importers supplied counterfeit and low-quality products. This factor is negative when choosing an investment partner by the Central Asian countries. Another problem is that Chinese enterprises, especially private enterprises, are inferior in terms of investment, technology and highly skilled professionals compared to us and Western companies. In connection with these problems, Chinese investments differ in that they have a low level of technology, many short-term and few long-term joint projects, Chinese investors are little-known medium-sized enterprises, very few brand companies.
The main current tasks of investments into Kazakhstan’s Economy.
Chinese investments in Kazakhstan are mainly in the energy sector, where the volume of proven oil reserves according to BP is 39.6 billion barrels or 6.5 billion tons, which is 3.2 % of the total world reserves, as well as there is a accumulation of minerals in large quantities. The main sectors of direct investment are: oil exploration and production, gas station networks, telecommunications, processing of agricultural products, leather processing, catering services, trade etc.
The main investment projects are: Aktobemunaygaz, Karazhanbasmunaigaz, the oil company «Petro Kazakhstan», oil exploration in the Eastern margins of the Central part of the Caspian basin, Pavlodar Aluminum Plant, the railway, the development of a uranium mine, Moynak Hydroelectric Power Station, the Kazakh-Chinese oil pipeline, the Kazakh-Chinese gas pipeline, the international center of boundary cooperation «Khorgos» on the Kazakh-Chinese border.
Due to the different level of development of the Central Asian countries, different ways of investing. Thus, Chinese investments in Kazakhstan are mainly direct investments.
Bilateral economic relations are equally positive and have been intensifying for many years. The main factor behind the continuous improvements in trade relations is China’s unmatched willingness and ability to invest. Figures in this regard are impressive: at the beginning of 2011, for example, Beijing committed to loan $1.7 billion to the Kazakh national welfare fund, $5 billion to the local petrochemical industry, and to buy Kazakh uranium for an estimated $8 billion. Increased Chinese influence welcomed in Astana because it provides an opportunity to diversify the country’s economy. For many years, trade relations remained limited to gas and oil exports from Kazakhstan to China, however trade is now slowly starting to diversify, with positive consequences for the economic interconnection of the two countries, especially in the border regions.
Kazakh and Chinese officials have excellent reasons for being happy also about the two countries’ trade relations, which have reached a volume of $20 billion in 2011 (up from just $8.3 billion in 2006), much larger than trade between Kazakhstan and Russia. The initial goal set by Kazakh and Chinese officials was to reach a trade volume of $15 billion by 2015, however this goal has been surpassed four years early as the value of bilateral trade is already $5 billion above the planned level. Besides direct trade, Kazakhstan is also important for China as a transit country: among the issues recently discussed was also the improvement of railway connection between China and Kazakhstan and, from there, to Russia and Western Europe.
Conclusion
Political and economic cooperation between China and Kazakhstan is, overall, an example of success. The two countries still cooperate mostly in the energy sphere, but both seem committed to encouraging Kazakhstan’s economic diversification. However, Chinese investments may not be enough: a strong political will from the Kazakh side is required to successfully promote diversification, even though this may deprive the leadership of opportunities for kleptocracy. In addition, cooperation in the aspect of security with China has economic dimensions, which may even prove to be more important than pure military cooperation: Kazakhstan might in fact be the best ally in Beijing’s effort to reduce social unrest in East Turkestan by providing more economic prosperity to that region. In this regard, the promotion of trade in border areas is particularly important. Cooperation, however, has its drawbacks. Depending too much on China may be dangerous for Kazakhstan, if Beijing experiences serious economic downturns. Moreover, the two countries might be close to reaching the limits of their cooperation: Kazakh officials’ wariness of China’s power, and the local population’s fear of Chinese demographic expansion, may prove to be insurmountable obstacles to cooperation efforts. In any case, Kazakhstan’s problems are unlikely to be solved exclusively by closer ties with China. Diversification, not just in the economic sphere, but also in the choice of political partners, will remain Kazakhstan’s priority for the time being.
References:
- «Kazakhstan — China: from cross-border trade to strategic partnership», K. L. Syroezhkin
- http://tengrinews.kz/ http://articlekz.com/article/8023
- http://www.nauchforum.ru/node/2076
- Annual statistical Bulletin on China's foreign direct investment
- Qin Fangming. “Regional economic cooperation of the Central Asian countries and China from the investment point of view”. Journal «Research and development».
- The World Bank (2008). Country Brief, 2007. The World Bank, Kazakhstan Overview, March 2008.
- UNESCAP (2017). Kazakhstan Briefing Notes for the Launch in Astana, April 2017, United Nations Economic and Social Commission for Asia and the Pacific, 2017.
