China’s exports to Central Asia are booming
Smart diplomacy and business acumen pay off
Central Asia is becoming one of Eurasia’s main trade and transit hubs, with Kazakhstan in the forefront.
Sino-Central Asian trade turnover stood atUS$89.4 billion at the end of 2023, a 27% increase over the 2022 level of US$70.2 billion, according to China’s Customs Agency. Of that total, US$61.4 billion represented Chinese exports to the region.Trade between China and Kazakhstan alone clocked in at a whopping US$41 billion – or 46% of China’s total trade turnover with all of Central Asia. That represents a 32% increase over its 2022 turnover at year’s end.
In January and February of this year, China’s exports to all the countries in the arc from Türkiye to Kazakhstan increased 31% compared with the first two months of 2022. China’s trade with Azerbaijan jumped 83% over the same period – nearly double the percentage increase in trade with any other country in the region.
China’s total trade with the Global South, which includes Central Asia, made up for sharp declines in trade in developed countries, including with the United States, the European Union and Japan, as David Goldman recently showed in Asia Times.
What explains the massive rise in Chinese exports to Central Asia and the Caucasus? This story deserves some attention considering, as Goldman said, “global supply chains and their financing” are shifting.
Diplomacy and trade
For well over two decades now, Azerbaijan, Kazakhstan, and Kyrgyzstan and, more recently Turkmenistan and Uzbekistan, have engaged in smart bilateral and multilateral diplomacy, which includes promoting trade across Eurasia. To increase regional trade turnover, these states often work in concert to leverage their collective strength; when necessary, they go it alone but generally manage to avoid stepping on one nother’s toes.
Aiding this effort is the practice of Central Asian heads of state to regularly visit one another in person. For example, Kazakhstan’s President Kassym-Jomart Tokayev and Uzbekistan’s President Shavkat Mirziyoyev have met in person twelve times since 2018. Just two weeks ago, President Tokayev met with Azerbaijan’s President Ilham Aliyev in Baku to fortify already extensive trade and transport agreements.
Central Asian presidents travel to Beijing on a regular basis. Present Xi Jinping has personally visited Astana, Tashkent, Bishkek, Ashgabat and Dushanbe multiple times to promote trade and investment initiatives. In January 2024, Uzbekistan’s President Shavkat Mirziyoyev visited Xi in Beijing.
Thus, Eurasian economic convergence continues apace even in the face of devastating wars in Eastern Europe and the Middle East and the usual suspects grousing about debt traps, non-market-generated trade imbalances and other complaints that are intended to discourage trade but often backfire.
The countries of Central Asia, the Caucasus and China recognize that, to secure markets for their exports (and imports), they must build and maintain open, well-functioning transit corridors across Eurasia. This is so because Central Asia is land-locked, and China is vulnerable to maritime blockades. In this sense, their interests align.
Other factors driving china exports
Central Asian leaders are on board with BRICS and its ever-expanding membership, China’s Belt and Road Initiative, the United States’ C5+1 (resurrected from the dead last year) and B5+1 (just launched), the Eurasian Economic Union and many other similar structures, which they see as promoting trade.
In addition, the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, the Eurasian Development Bank, the China Development Bank, and various Middle Eastern states, among others, for years have been pouring money into Central Asia for infrastructure, logistics and transport corridors. At times, conflicting agendas come into play, of course, but that hasn’t stopped the drive for Eurasian connectivity and integration.
It goes without saying that initiatives such as the Trans-Caspian International Transport Route, the International North-South Transport Corridor, the China-Kyrgyz-Uzbekistan Railway, and the Uzbekistan–Afghanistan–Pakistan Railway are all welcome, albeit the latter two still requiring much work.
On the investment side, Kazakhstan alone is expecting at least $150 billion in foreign direct investment by 2029, a prospect commercial enterprises welcome and which is backed up by the billions of dollars that have been spent on infrastructure development since the 1990s.
Trade and business activity go hand-and-hand. For example, in Uzbekistan, according to Interfax, China opened 854 new businesses in 2023, 210% more than in 2022. Russian, Turkish and South Korean businesses are also very active whereas EU and US investments in the SME sector are lagging. The banking sector’s willingness to provide credit is also a factor in the region’s flourishing trade.
So is the existence of more than dozens of special economic or export processing zones in Central Asia and the Caucasus. While not all are up and running, some are and those are having a positive impact on trade For example, Kazakh Railroads recently concluded a memorandum of understanding with the Chinese company Xi’an Free Trade Port Construction and Operation Co, LTD, to facilitate cross-border trade. And in November 2023, the Xinjiang Pilot Free Trade Zone (FTZ), the first in China’s northwestern border region, officially opened; such projects contribute to the flow of goods.
Likewise, after years of work, notwithstanding challenges, cross-border trade has benefited from efforts to improve regulatory measures, digitalization, tariff harmonization, border procedures and interoperability. USAID has been prominent in this arena.
Finally, China’s trade with Central Asia benefits from the general drive to institutionalize an “all-weather payment mechanism” – a currency system that functions without third party interference. For example, in 2022, Kazakhstan and China signed a Memorandum on Mutual Settlements in yuan, as reported by the Astana Times. Other initiatives are in the works.
Smart diplomacy, the on-going process of Eurasian integration, the need for dependable non-maritime transport routes, strong regional economic growth and demand for Chinese goods, continued capital investments, the need to avoid northern corridors across Eurasia and the personal leadership of presidents across the region – all contribute to the striking rise in China’s exports to Central Asia and the Caucasus.
Because these factors are rooted in the national self-interest of the states involved, barring any massive jolts to world geo-economics, this trend can be expected to continue into the foreseeable future.