CHINA HAS NOW signed $40 billion-worth of deals with Kazakhstan in the course of barely four months. The latest tranche ($23.6 billion) was agreed during last week’s visit by Kazakhstan Prime Minister Karim Massimov, reciprocating his counterpart Li Keqiang’s trip to Astana in December. On that occasion, $18 billion in joint ventures was inked.
The two men also met at the World Economic Forum in Davos in Switzerland in January. Despite being a member of the Russia-led Eurasian Economic Union, Kazakhstan is intent on deepening its strategic relations with China, if nothing else as a counterbalance to Russia, the region’s longstanding power, and to the West, which has become more of a presence in Central Asia since the collapse of the Soviet Union.
For its part, Beijing will welcome the security of a trade-tied neighbour on its at times troubled far western marches as much as it does Kazakhstan’s exports of oil, natural gas and uranium. The Central Asian country also offers a prospective market for China’s growing defense industry while being a key leg of the new Silk Road westward overland trade corridor Beijing wants to develop, and which was so prominently touted at the annual Boao conference just concluded.
Kazakhstan is already the largest recipient of Chinese foreign direct investment among the post-Soviet Central Asia republics. Loans-for-oil-deals between the two countries date back to 2009. Beijing will use the investment funds it makes available via the Silk Road Fund, the Shanghai Cooperation Organization, and its proposed Asian Infrastructure Investment Bank to cement that position.
Kazakhstan has its own ‘Bright Road’ project to boost economic development through infrastructure projects. The spillover from Russia’s sanctions-slowed economy has made that need more urgent. The European Bank for Reconstruction and Development downgraded its forecast for Kazakhstan’s GDP growth this year to 1.5% from the 5.1% it forecast as recently as last September. 2014’s estimated GDP growth was 4.3% down from 6% in 2013.
One-fifth of Kazakhstan’s $84 billion–year of exports now goes to China, twice the share that goes to Russia. The relative positions reverse on the import account: Russia being the source of 36% of Kazakhstan’s $44 billion a year of imports; China of 18%. That gap looks set to narrow. A regular goods rail service between Lianyungang and Almaty, Kazakhstan’s largest city, started last month with the first westbound load carrying Chinese cars, electronics and household goods.
Beijing has the trade and investment clout to exploit Russia’s moment of vulnerability and so expand its influence and market power across the region at Moscow — and the West’s — expense.