CHINESE FOREIGN POLICY TOWARDS CENTRAL ASIA

CHINESE FOREIGN POLICY TOWARDS CENTRAL ASIA

Author: Marian Karagyozov
Academic affiliation: PhD-student, Institute for Balkan Studies and Centre
of Thracology, Bulgarian Academy of Sciences
Postal adress: Sofia 1000, "Moskovska" Str. №45, Bulgaria
Mobile: + 359 886 30 18 36
E-mail: [email protected]

Abstract: Central Asian states are located in a strategically important
area – between Russia, China, the Black sea and the Caspian region, India,
Pakistan and Afghanistan. These countries are very rich in terms of mineral
resources (uranium, natural gas, coals), and their agricultural potential
is also substantial.
The European countries, USA, China, Russia, Turkey, Iran, India, Pakistan
and Japan try to exert their influence in this region by using different
tools, but the most prominent actors are the EU, USA, Russia, China and
Turkey.
Concerning China`s foreign policy towards Central Asia firstly the
development of Chinese western provinces as a base for active diplomacy is
taken into account. The fast economic growth of the Xinjiang region
provides new opportunities for trade. The Xinjiang-Uyghur region became a
new transportation hub due to a massive flow of money from the central
government for infrastructure projects. For the past decade, the trade
volume between Central Asia and the Western provinces of China has risen 20-
fold.
Secondly, bilateral relations between China and all five Central Asian
states are discussed.
Thirdly, political, economical, commercial and financial ties between China
and Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan are
researched. Now People`s Republic of China is the second biggest trade
partner of Kazakhstan, Kyrgyzstan and Uzbekistan.
Some observation about Silk Road Economic Belt are also made.
Energy issues are core of the cooperation between China and Central Asian
states. Because of the insecurity of supply, coming from the Middle East
and Africa via narrow straits full of pirates and in disputed areas, China
prefers the much more secure land connection. Meanwhile, Central Asian
states look for investments for modernization of old-fashioned pipelines.
Proximity means delivery without transition countries. Chinese national
petroleum company had drawn a plan for building a Central-Asian Gas
Pipeline (CAGP) with 4-lines – A, B, C, D to the different states.
Security and military ties between china and Central Asian countries
deserve attention as well.
Chinese influence faces some problems and constraints, that is why P. R. C.
launched an active soft power policy, including expanding all around the
region the network of Confucius Institutes, which provides education and
cultural services.

Keywords: Central Asia, China, economic diplomacy, trade, pipeline-projects



Central Asia is a region located in a strategically important area –
between the Middle East, Russia, China, the Black sea and the Caspian
region, India, Pakistan and Afghanistan. The five countries, born after the
collapse of Soviet Union, have a population of 75 m people in total and a
GDP of over USD 550 billion. They are very rich in terms of mineral
resources – 15% of the world reserves of uranium, 11% of natural gas, rare
earth elements.[i] Kazakhstan, Turkmenistan and Uzbekistan have substantial
reserves of oil and gas. Kazakhstan is the richest country, while
Tajikistan and Kyrgyzstan are least prosperous. The Lack of a stable
democracy, the terror threats, the decline of the infrastructure, and the
presence of ethnic minorities are serious problems.
During the Soviet era, foreign influence in the region was seriously
restricted.
After the collapse of the unified state, different actors tried to fill the
vacuum. Among them are some Asian countries, Muslim states such as Iran,
Turkey and Saudi Arabia, EU, USA and Russia.

CHINA
China shares common borders with three of the five Central Asian states
– Kazakhstan, Kyrgyzstan and Tajikistan.
Xinjiang is a region in Western China, that covers a sixth of China's
landmass, but contains roughly 1-2% of its population. 22 million people
live in this area – representatives of 47 ethnic groups, but the two main
of them are Uighurs (46% or almost 10 million) and the ethnic majority
group in China – Han (40%).[ii] The Uighur population has a substantial
diaspora in Uzbekistan, Kyrgyzstan, Kazakhstan (400 000 people)[iii] and
Turkey.
1/3 of the country`s oil, gas and coal recourses, as well as mineral
resources such as nickel, chrom and titanium, are concentrated in this
lands. Due to the abundance of coal, China has started USD 30 billion worth
of projects for producing gas form coals. The petrochemical refinery in
Dushanjiang has sold its production not only in China, but in all CA
states as well. Beijing has made plans to build three addition refineries.
[iv]
The region is famous for its instability, because of the tensions
between the Chinese and the Uighurs. The last bout of serious civil unrest
can be traced back to 2009, when roughly 200 people were killed during
riots in Urumqi, Xinjiang's capital. In the wake of this event, Beijing's
attention was drawn towards the troubled region once again.


DEVELOPMENT OF CHINESE WESTERN PROVINCES AS A BASE FOR ACTIVE POLICY
TOWARDS CENTRAL ASIA
In 2000, the Great Western Development and Opening Strategy was
commenced. In 2000-2009 the Central bank of China made investments worth 80
billion USD in its Western regions.[v]
Between 2000-2005 the population of Western China grew by 15 million,
or around 4%, but in Xinjiang the population grew by 9% under the impact of
state-sponsored migration.[vi] In spite of this, Beijing realized that the
policy of change of demographical balance does not yield results so the
central government continued its attempts to develop the Western regions. A
work plan entitled "The great colonization of the West" with horizon of
2050 for fostering development in the province had been laid out in May
2010.
In the spring of 2010, Zhang Chunxian, efficient economist and
reformer, became the new head of the Chinese Communist Party committee in
Xinjiang.[vii]
For China, overcoming the underdevelopment of the western provinces
means preparing a base for expanding its political and economical influence
in Central Asia.
China has started massive infrastructure investments. For the period
2011-2015 the expenses on railroad improvement were USD 19-24 billion. The
same amount of money is being spent on motorways, including building 12
highways and rehabilitation of 8 provincial routes.[viii] The whole length
of roads in the region will increase by 1/3. This is beneficial for easier
access to markets in Russia, the Middle East, and Europe and from a
military point of view – concentration of troops.
USD 4,5 billion will be invested in airports, which is 5 times more
compared to the previous period (2006-2010). The idea is to increase the
number of airports in Xinjiang from 16 to 22 by the end of this year.[ix]
All these steps made Xinjiang-Uyghur region a new transportation hub in
Central Asia.
The fast economic growth of Xinjiang region provides new opportunities
for trade. For the past decade the trade volume between CA and the Western
provinces of China has risen 20-fold.[x]
One must notice that up to now, because of the lack of free money for
major investments, the region is totally dependent on money transfers made
by the central authorities. Another serious problem for transforming the
region to a base for economical expansion in CA is the low quality and
qualification of the labor force.

BILATERAL RELATIONS
CHINA-KAZAKHSTAN
Kazakhstan has been receptive to Chinese moves to strengthen bilateral
energy relations. In 1993, Kazakhstan and China began cooperating in the
field of energy. In 2003, CNCP bought 85% of the shares of Aktobe oil-field
in Kazakhstan. In 2005, CNCP took control of the assets of
"Petrokazakhstan" company.
The first Chinese transnational pipeline is "Kazakhstan-China". In
2006, the first Kazakh oil reached the Chinese border. In 2008, started the
second phase of building the pipeline (700 km), which aims to connect via
existing pipes the oil-rich Kazakh sector of the Caspian Sea. According to
unconfirmed information, now the capacity of the pipeline is 20 million
tonnes of oil annually. In October 2012, Chinese and Kazakh experts
explored the possibilities to build a southern route to this pipeline. The
same year the Chinese development bank signed a contract with the
government in Astana (USD 1,8 billion) for the creation of this gas
pipeline.[xi]
China is also interested in the construction of a railway from
Kazakhstan via Turkmenistan to Iran.
In September 2013, a Sino-Kazakhstan Entrepreneurs committee was
established in the presence of the heads of both states and 140 Chinese and
138 Kazakh businesspeople. Astana is China`s second largest trading partner
among CIS (next to Russia), while China is Kazakhstan`s largest. The
country is the third largest market for Chinese foreign investments.[xii]


CHINA - TURKMENISTAN
After the signing of an agreement between Kazakhstan and China in 2003,
it became possible for Turkmenistan to deal with China.
Following a cooperation agreement signed in early 2006, in September
2007 was launched the construction of the Turkmen-China natural gas
pipeline, which envisages export of 30 bcm/y to China for 30 years.[xiii]
The price is similar to the price China recently negotiated with Russia for
Siberian gas. In total the pipeline is estimated to cost USD 7.3 billion
with the Turkmen portion costing has been funded by PetroChina, a
subsidiary to the CNPC. In 2011, China and Turkmenistan signed an agreement
which gave China the option to increase gas by 1,200 BCF (agreed to in the
2007 agreement) to 2,300 BCF annually. China is also investing directly in
the natural gas fields of Turkmenistan as seen by the 2009 USD 4.1 billion
investment and production sharing agreement in the newly found South
Yolotan field in the south-eastern province of Mary which was increased by
another USD four billion in 2011 financed by the China Development Bank.


CHINA-UZBEKISTAN
Uzbekistan is an important regional player with a market with 30
million customers . Hence the Chinese effort to build good relations with
Tashkent.
For the last six years bilateral turnover has raised 6-times and is
approximately USD 5 billion for 2013 and 2014. More than 70 representatives
delegations of Chinese companies are active in Uzbekistan, plus 500 joint
enterprises. Common projects in energy amount to more than USD 2, 8
billion.[xiv]
On 19-20th August 2013, the president of Uzbekistan Islam Karimov
made/paid a visit to Beijing. During the meetings more than 20 contracts
for USD 6 billion in the fields of energy, trade and infrastructure were
signed, and were added to agreements of previous years for USD 10-20
billion.
For China it is strategically important to build the railroad
Uzbekistan-Kyrgyzstan-China, so the Chinese put their Uzbekistani
counterparts under pressure to improve their relations with the neighboring
countries like Kyrgyzstan and Tajikistan. In 2012, China promised USD 5
billion for projects, while during the 2013 visit an offer was made for
further USD 15 billion. For more than half of this sum, Uzbekistan could
not propose real projects for investments. [xv]
Uzbekistan is less worried about the rise of Chinese influence than
other CA states, because of the lack of common borders and the relatively
small number of Chinese migrants, compared to Kyrgyzstan and Kazakhstan.

CHINA - TAJIKISTAN
In Tajikistan, Chinese companies built the tunnel of Shahristan,
located at one of most dangerous roads in the country, and also the route
Dushanbe-Pendjikent.[xvi]
On 13-14th September 2014 Xi Jinping visited Tajikistan, where both
sides agreed on a program for cooperation for the period 2015-2020 and
signed contracts for USD 3,2 billion (1/3 of Tajikistan's GDP) on the
fourth line of the CA-China pipeline. The Chinese investments in this
project only surpass all FDIs in Tajikistan since its independence.
A further USD 2, 8 billion are planned on transport and industry
projects, as well as initiatives on enhancing the Chinese image in
Tajikistan. To that aim, an exhibition centre of Chinese innovative
technologies will be opened in Dushanbe, alongside a Confucius Institute.
Official data demonstrates that in 2013 Tajikistan's foreign debt to
China amounts to USD 891 million.[xvii] 


CHINA-KYRGYZSTAN
Kyrgyzstan is also eager to have a direct rail link to China and such a
contract had been signed. The Ministry of Economic Development of
Kyrgyzstan forecasts that the annual cargo volume could be up to 15 million
tons, and up to 250,000 passengers a year. Aside from that, in order to
build the road, Kyrgyzstan would need to create up to 20,000 jobs, and the
railroad will need up to 3,000 people to operate it. The price for the
railroad, according to the Ministry`s forecast in 2014, is USD 5-6.5
billion.
The problem is that the railroads are different in Kyrgyzstan and China
(Kyrgyz railroads are under the Soviet standard of 1,520 millimeters and
Chinese railroads are under European standard of 1,435
millimeters).[xviii] 

POLITICAL, ECONOMICAL, COMMERCIAL AND FINANCIAL TIES BETWEEN CHINA AND
THE CA STATES
China has recently resolved all border issues with the Central Asian
countries.
Now P.R.C. is the second biggest trade partner to Kazakhstan,
Kyrgyzstan and Uzbekistan.[xix] In 1992, when diplomatic ties had been
established, the total turnover of China with the five states is USD 460
million. 20 years later, in 2012 it's USD 46 billion.[xx]
In September 2013, Xi Jinping, during a lecture in the Nazarbaev
university in Astana, named after the president of the state, announced the
idea for creation of a 'Silk Road Economic Belt' running through the
region, a plan, which embraced 21 countries from China to Europe. According
to his statement, 5 steps should be taken.
- Green light on political and legal level for integration of regional
economies via mitigation of custom, visa and other procedures;
- Formation of common transportation infrastructure from the Pacific
ocean to the Baltic sea;
- Strengthening commercial ties and eliminating other tariff and non-
tariff barriers;
- Enforcing money flows and trade in national currency;
- Building ties between people of all states, cultural, scientific and
educational exchange, helping mutual respect and understanding,
which is a social base for the regional cooperation.
In the following years, this plan envisages for bilateral trade with
Kazakhstan to increase from USD 26 billion to USD 40 billion; with
Uzbekistan – form USD 3 to 5 billion and with Kyrgyzstan – form USD 5,6 to
9 billion.
It must be noted, that at the beginning this will not be a free trade-
zone – it is too early and too ambitious to talk about this – but should be
seen as an idea for development of the transport, infrastructure and trade.
This plan is based on the creation of 20 free economic zones.
Xi Jinping declared that China would be establishing a USD 40 billion
New Silk Road Fund. The Asian Infrastructure Investment Bank (AIIB), which
was founded by China and twenty other Asian countries in November 2014,
will be an additional source of funds. In January 2015, it was promised
that a private Energy Development Fund would be created. This fund is
planning to attract investments worth USD 20 billion as part of the
implementation of the New Silk Road concept.[xxi]
In China's favor is the poor financial situation in CA countries, which
may be considered in need of the Chinese money.These states suffer from
lack of resources for renovation of their social systems and infrastructure
but the still need to protect such an important customer.
China uses the opportunity, offered by the world financial crisis and
shortage of credits for its own credit expansion after 2009. The Central
Banks of Kyrgyzstan and Uzbekistan did not issue any official data about
the volumes of debt towards foreign partners, while according to
statistics, provided by National Bank of Kazakhstan on 30 September 2014,
the debt, owed to China from state and private companies is USD 15,75
billion.[xxii]


ENERGY ISSUES
80% of the oil imported by China came via sea and 90% of shipping is
performed by foreign shipping companies.[xxiii] This creates insecurity of
supply, coming from the Middle East and Africa. Another factor is that
routes pass by narrow straits full of pirates and in disputed areas.
That is why China prefers the much more secure land connection and
cooperation with hydrocarbon rich neighbors in Central Asia. Proximity
means delivery without transition countries. Bilateral cooperation helps
the growth in Western China. In the same time CA states look for
investments for modernization of old-fashioned pipelines, while China wants
diversification. [xxiv]
CNPC had drawn a plan for building a Central-Asian Gas Pipeline (CAGP)
with 4-lines – A, B, C, D to the different states. This is the longest
pipeline in the world (1833 km), connecting China to Turkmenistan,
Uzbekistan and Kazakhstan. In October 2012, began the construction of C-
line.[xxv] It was completed in June 2014. Expectations are for the line to
become fully operational and to reach its full capacity (55 bcm/y) in the
end of 2015. Adding the D-line means that the power of the pipeline will be
roughly 80 bcm/y to 2020. Turkmenistan supplies 65 bcm, Uzbekistan – 10 bcm
and Kazakhstan – 5 bcm.
China has plans to build new energy routes, connecting the country with
Kyrgyzstan and Tajikistan.

SECURITY AND MILITARY TIES BETWEEN CHINA AND CA STATES
China is worried about drug trade,[xxvi] religious extremism and terror
threats after the withdrawal of allies from Afghanistan. That is why:
Beijing currently supports local governments in the war against
terrorism;
China has agreements with Kyrgyzstan and Tajikistan for bilateral
military support and training;
Concerning the situation in and around Afghanistan, in August 2014,
Beijing appointed a new special envoy for Afghanistan – a new post in
China. P. R. C. considers sending military aid to the neighbors of
Afghanistan, primarily to Tajikistan.[xxvii]

CHINESE INFLUENCE FACES SOME PROBLEMS AND CONSTRAINTS
On the other hand, the CA states export to China mainly (over 90%)
resources and China exports goods, which makes very difficult
reinvigoration of the local industrial base. One instructive example - in
Kazakhstan`s export structure energy accounted for 37% and metals for 43%;
and in the import structure - textiles and footwear made up 38% and
machinery and plastics 20%.[xxviii]
Secondly, regional economies are under high dependence from China. It
is worth nothing that credits, given by Chinese state banks, include
conditions for Chinese companies to participate in the financing of these
credits projects.
Although Chinese companies are the main stakeholders in CA states' oil
and gas sectors, companies from the region do not have licenses for
drilling or shares in Chinese oil and gas fields.
The migration of Chinese citizens to CA states worries all CA states.
It is a great problem mainly in Tajikistan and Kyrgyzstan, where labour
competition is very serious.
Next, the problem with sharing waters of transborder rivers is on the
agenda. In 1999, in Xinjiang, China constructed channels, which bypass
waters for the needs of Chinese petroleum industry in Karamae and other CA
states suffer from lack of fresh water.[xxix]
Chinese companies have a bad fame for not being ecologically
responsible in the exploitation of mineral resources abroad.
According to many opinion polls, there is no great level of trust in
China among the CA public. The Chinese call this "warm politics, cold
public" problem: China can have good elite relations, but public opinion
remains wary, if not hostile. The Chinese answer is simple – active soft
power policy. In 2009, the Chinese Central television opened a Russian-
language channel for broadcasting to the CIS countries. [xxx] China also
expands all around CA the network of Confucius Institutes, which provides
education and cultural services.
China has plans to educate 1500 experts on Central Asian affairs in
next five years.[xxxi]
In conclusion - the aforementioned competition for influence in this
important region between all major players will continue in the foreseeable
future, but now China is placed as one of most substantial players.

-----------------------
[i]Adam Balcer, Dimitar Bechev, Turkey as a mid-sized power in the post-
Soviet region: implications for the EU", ECFR, DemosEUROPA, Warsaw,
(November 2013), р. 3-4
[ii] Иветта Фролова, Экономическая политика КНР в Синьцзян-Уйгурском
автономном районе в контексте интересов стран Централньой Азии", сп.
Проблемы националной стратегии", №4 (2014), РИСИ, p. 72-3
[iii] David Kerr, "Central Asian and Russian Perspectives on China`s
strategic emergence", International Affairs, Vol. 86, Issue 1, January
2010, p. 141
[iv] Иветта Фролова, op. cit., p. 72-3
[v] Михаил Карпов, К вопросу о динамике социально-экономического развития
северо-западных районов КНР в контексте международного сотрудничества в
Центральной азии" in Регион Центральньой Азии: состояние, проблемы и
преспективы российско-китайского взаимодействия", сборник докладов,
Российский институт стратегических исследований, М., 2013 г., p. 14
[vi] David Kerr, op. cit., 138
[vii] Иветта Фролова, Экономическая политика КНР в Синьцзян-Уйгурском
автономном районе в контексте интересов стран Централньой Азии", op. cit.,
p. 66
[viii] Ibid, p. 69
[ix] Ibid, p. 70
[x] Михаил Карпов, op. cit., p. 16
[xi] Ли Син, Ван Ченсин, Китайската енергийна стратегия в Централна Азия",
Геополитика", Year 11, Vol. 1 (2014), p. 120
[xii] "A friendly neighborhood", China Pictorial, Vol. 785 (November 2013),
p. 63
[xiii] Saltanat Berdikeeva, Turkmenistan's Energy Policy: Risks and
Opportunities", Insight Turkey, Vol. 9, №3 (2007), р. 124, 128
[xiv] Узбекистан и Китай обсудили сотрудничество в сфере энергетики",
14.08.2014, Kommersant.uz,
http://news.mail.ru/economics/19193202/?frommail=1, last access 09.03.2015
[xv] Виталий Волков, Чью нишу заполнит Китай в Узбекистане?", 29.08.2014,
Deutche Wellle,
stable URL: http://dw.de/p/1D2vD, last access 21.10.2014
[xvi] Ирина Звягелская, Центральная Азия: вненеполитическое измерение", in
Внешнеполитический процесс в странах Востока, edited by Д. В. Стрелцова,
(М., МГИМО, Аспект Пресс, 2011), р. 218
[xvii] Галим Фасхутдинов, ࠀࠐ࠼࠾ࡖࡘ࡚ࢠࢮॾ঎৖৘৲ਜਝੇੈ 샐 莙莙熙墙堾>Китай предложил
Таджикистану новые условия сотрудничества", 15.09.2014 г.,
http://dw.de/p/1DCLS, last access 12.03.2015.
[xviii] Bakyt Ibraimov, "Kyrgyzstan eager to direct rail link to China",
07.02.2015, New Silk Road Reporters
[xix] Дин Сяосин, Евразийския союз и ШОС" in Регион Центральньой Азии:
...", p. 19
[xx] Иветта Фролова, Экономическая политика КНР в Синьцзян-Уйгурском
автономном районе в контексте интересов стран Централньой Азии", op. cit.,
p. 77
[xxi] Marcin Kaczmarski, "The New Silk Road: a versatile instrument in
China's policy", 10.02.2015, Centre for Eastern Studies,
http://www.osw.waw.pl/en/publikacje/osw-commentary/2015-02-10/new-silk-road-
a-versatile-instrument-chinas-policy, last access 12.03.2015
[xxii] Александр Габуев, "Приручить дракона", 19.02.2015, Россия в
глобальной политике, http://www.globalaffairs.ru/number/Priruchit-drakona-
17316, last access 12.03.2015
[xxiii] Ли Син, Ван Ченсин, op. cit., p. 120
[xxiv] Иветта Фролова, Усиление значения Центральной Азии в энергетической
стратегии КНР" in Регион Центральньой Азии: ...", p. 31; Е Тяньлэ, Роль
Центральной Азии в энергетической стратегии Китая" в Центральньая Азии:
проблемы и преспективы", op. cit., p. 148-150
[xxv] Ли Син, Ван Ченсин, op. cit., p. 125
[xxvi] In Afghanistan nearly 90% of world opium production is concentrated;
since 2001 drugs productions rise 40 times; in 2013 only more than 300
clashes between customs officers and smugglers are registered on Tajikistan-
Afghanistan 1350 km-long border.
[xxvii] Александр Князев, Безответная ШОС", 11.09.2014,
http://www.caspiania.org/2014/09/11/bezotvetnaya-shos/, last access
21.10.2014 г.
[xxviii] David Kerr, op. cit., p. 139
[xxix] For more in depth analyses consult Аждар Куртов, Центральная Азия:
водные артерии как новые узли противоречий", Центральньая Азии: проблемы и
преспективы", op. cit., p. 155-230
[xxx] David Kerr, op. cit., p. 136-137
[xxxi] Ирина Звягелская, op. cit., p. 229