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[Analytics] New Silk Road money is paving the Old Silk Roads

A Chinese-built. traditional-style gate in Samarkand. Beijing sees trade flowing through Central Asian gateways to Western Europe. Photo: Alexander Kruglov. Sketched by the Pan Pacific Agency.

Pan Pacific Agency | COMMUICATION AGENCY FOR PACIFICA REGIONS

There never used to be much to do in Khorgos, a remote and dusty outpost on the China-Kazakh border. As recently as 2011, it was a settlement of a mere 500 souls – a sleepy village lost in endless steppe.

No longer. Today, it’s not just on the map, it boasts newly paved roads, 5-star hotels and soaring shopping malls. And in the the not-too-distant future, it could be one of Asia’s great trade and trans-shipment nodes.

This near-miraculous transformation and gasp-inducing potential is all down to Beijing’s vastly ambitious Belt and Road Initiative. Alexander Kruglov specially for the Asia Times.

Transport node

China and Kazakhstan conceived of the cross-border development of Khorgos as a transport-trade hub in 2011. Khorgos’s location made it perfectly fit for purpose. It sits on the so-called New Silk Road, an overland trade route designed to link China to European seaports via Central Asia – itself, a component of Beijing’s even mightier Belt and Road.

Eight years on, this 5.3-square-kilometer shopping zone – officially, “the Khorgos International Center of Cross-Border Cooperation” (ICBC) – has lured entrepreneurs, Chinese and Kazakh alike.

Situated 350 km northeast of Almaty, Kazakhstan’s most populous city, Khorgos is neutral territory bestriding China’s Xinjiang region and Kazakhstan. Kazakhs don’t need visas to go over to the Chinese side, and vice versa.

Shoppers from across Central Asia come to visit Khorgos’s five high-rise shopping centers, containing a whopping 2,000 shops, on the Chinese side. Some 5,000 Kazakhs per day travel vast distances on tour buses to shop at the Chinese malls.

Too good?

The goods within are not just cheap and competitive, they may be too cheap and competitive – to the point where they pose threats to local traders whose businesses are centered on Russian products.

To protect local interests, the Kazakh government allows shoppers to enter the Khorgos center only once a month each, and limits one shopper’s purchases to 25 kg of goods worth less than €500.

But the floodgates have been opened. The project has posted impressive growth numbers, and Kazakh officials are keen to point to the area’s huge potential. Trade volumes between China and Europe, via rail, are expected to rise sharply over the next decade and Kazakhstan is poised to become a key crossroads, they say.

Khorgos, touted as one of the most ambitious projects in the Belt and Road Initiative, is only one – albeit perhaps the highest-profile – symbol of the chemistry that has been brewing between the Chinese and Kazakh leaderships over the last five years.

Beijing scatters the yuan

Since Belt and Road was launched in 2013, China has sunk hundreds of billions of dollars into ports, railways and energy projects across Asia. In Central Asia, Beijing has become the largest investor, and its patronage has been embraced by local governments.

That is especially the case in Kazakhstan, where Chinese President Xi Jinping announced Belt and Road in September 2013, at the capital’s Nazarbayev University. The huge republic has benefited more from the initiative than any of its neighbors, so it’s natural that Kazakh officials are upbeat about Belt and Road.

The numbers they cite are impressive – awesome, even.

Meeting with foreign journalists in July, Deputy Foreign Minister Roman Vassilenko stressed that, since independence, Kazakhstan has upgraded 2,500 km of railroads and built about 4,000 km of paved roads – including 2,700 km of the Kazakh leg of the 7,000 km-long Western Europe-Western China Highway.

In 2010, according to Vassilenko’s statistics, not a single Chinese container was shipped via Kazakhstan to Europe. In 2017, 200,000 were; in 2018, that figure had doubled to 400,000 containers. Next year that number is expected to double yet again.

“Fifty-one economic projects worth $28 billion are being implemented jointly with [China], and not all are related to the Belt and Road Initiative,” Vassilenko declared. Indeed, Belt and Road has given a huge boost to local development projects, thanks to unprecedented investments from Beijing.

According to the Chinese Embassy in Kazakhstan, bilateral trade has almost reached $100 billion. All this makes China Kazakhstan’s second-largest trading partner – behind Russia. According to official Kazakh data, Russia accounts for almost 21% of Kazakhstan’s trade, but China is quickly catching up, taking up 18%, for the number two slot.

China’s commercial presence is visible across Kazakhstan, from the streets of the “southern capital,” Almaty, to the Caspian boom towns and beyond. In Almaty, local markets brim with Chinese goods. There are Chinese-owned shops and restaurants, and several large Chinese hotels downtown, clearly marked by neon-lit Chinese characters. The hotels mainly cater to Chinese customers.

A yuan wind blows across Central Asia

Kazakhstan is not the only Central Asian nation drinking up the BRI money; Uzbekistan is also high on Beijing’s agenda. Ever since Shavkat Mirziyoyev succeeded the late strongman Islam Karimov in 2016, Beijing has made repeated overtures to Tashkent, seeking to expand economically and win the hearts and minds of locals.

“Uzbekistan played one of the most important roles in the ancient Silk Road, as it is located in the center of the road, geographically,” said Khatamjon Ketmonov, a local politician and chairman of the Central Council of the People’s Democratic Party of Uzbekistan. “We used to be a key participant in the ancient Silk Road hundreds of years ago, and some of old cities, such as Samarkand and Bukhara, were important hubs for the merchant caravans on the road.”

That age-old tradition has resumed. According to government figures, China-Uzbek investment volume has reached $8 billion since Uzbekistan declared independence 25 years ago. Last year, China-Uzbekistan trade surged 48.4% year-on-year, reaching $6.26 billion, according to data released by Chinese Ambassador to Uzbekistan Jiang Yun.

More than 1,500 Chinese enterprises are operating in Uzbekistan. Moreover, from 2020, Chinese citizens will be able to visit Uzbekistan visa-free for seven days – a huge boost for the Uzbek tourism sector.

Chinese Premier Li Keqiang officially visited Tashkent on November 2 and met local leaders, a visit connected with the Shanghai Cooperation Organization summit held in the city.

In isolated Turkmenistan, the game is all about energy, gas and oil. China and Turkmenistan work closely on pipeline construction and long-term gas supply, following a 2007 visit to China by Turkmeni President Gurbanguly Berdimuhamedow. Now, a 188 km-long Turkmen section of pipeline has been joined to the original Kazakhstan-China pipeline project.

Culture as well as commerce

Beijing is also spreading its soft power across the region.

There are several Chinese cultural centers in the Uzbek capital, as well as Chinese grocery stores and restaurants. At Tashkent National University, Chinese is the third most popular language (behind Russian and English). The college also offers a Chinese Philology Department.

In Samarkand, an ancient Silk Road city, there is a Chinese garden, complete with elaborate stone-carved bridges and a Confucius monument. This garden was built by the local Chinese community and the Chinese embassy. The garden surrounds the foreign languages faculty of the local university; naturally, the largest department therein is Chinese.

In Bishkek, the cozy, green capital city of Kyrgyzstan, there are several large malls developed by Chinese, and a couple of major hotels. Many Chinese students attend local universities, and Chinese language skills are widely valued. On October 1, to celebrate the 70th anniversary of the Peoples Republic of China, the top local university held a Chinese festival and launched a large-scale exhibition.

But while the Chinese presence in the ‘stans, both commercial and cultural, is impossible to miss, not all is milk and honey.

In the upcoming third installment of this on-the-ground series, AT will investigate unfulfilled wish lists, unfinished projects and the rise of anti-Chinese sentiment across Central Asia.

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