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Kazakhstan and China Contribution of Chinese companies to the development of industries in Kazakhstan

Contribution of Chinese companies to the development of industries in Kazakhstan

01.12.2023
As part of recent negotiations between the Prime Minister of the Republic of Kazakhstan Alikhan Smailov and the Deputy Premier of the State Council of the People’s Republic of China Ding Xuexiang in Astana, the head of the Kazakh government proposed expanding the List of Kazakh-Chinese projects in the field of industrialization. The Chinese side responded that it will continue to support Kazakhstan and promote its development and prosperity.

Compared to last year, when trade turnover between Kazakhstan and China was estimated at $24 billion, today this figure has increased by 24 percent. It is expected that in the near future trade turnover between the countries will reach $40 billion. The indicators are serious; exports and imports are facilitated by a good-neighborly agreement on the exchange of labor and technological resources. The presence of Chinese companies and the formation of joint projects in Kazakhstan significantly influence the intensity of the country’s industrial development.

It is important to note that this year the “One Belt, One Road” initiative put forward by Chinese President Xi Jinping in Kazakhstan turned 10 years old. Over the past decade, within the framework of the initiative, an impressive number of projects have been created in Kazakhstan alone, which are not just useful, but have radically changed the lives of our citizens and many areas that are now often associated with China and the powerful pace of its development.

Perhaps an example of the paramount importance of such cooperation is the international transport route Western Europe – Western China . The purpose of the transport corridor is to strengthen ties between Europe and Asia; it connects three states – China, Kazakhstan and Russia. The length of the highway is 8,461 kilometers, China accounts for 3,425 kilometers of this route, Kazakhstan 2,787 kilometers and Russia 2,233. The road literally became a link between the port of Lianyungang on the Yellow Sea coast, which is one of the ten largest Chinese ports, and St. Petersburg.

The construction of the highway involves the creation of 11 bridges and 31 tunnels on the territory of Kazakhstan. After all sections of the road are fully put into operation, the distance between China, Kazakhstan and Russia will be significantly reduced. Along with it, transportation time will also decrease, the speed and efficiency of logistics will increase, and the load on existing transport routes will decrease.

Almost 1,400 km of road (Kyzylorda – Turkestan – Shymkent – Taraz – Almaty – Khorgos) to technical category I with 4 lanes, the remaining sections with a length of 1,062 km will be transferred to technical category II (Russian border – Martuk – Aktobe – Karabutak – Kyzylorda).

According to leading experts in the field of transport, currently the Central Asian region is and will remain the most important transport area for connecting the regions of Western China and Western Europe. Therefore, the creation of this route, which includes high-level highways, the availability of high-quality service at the passages of freight trains and the equipment of gas stations, should provide the shortest routes for Chinese goods to the markets of Western European countries, and from their side – the supply of technological and machinery equipment to the PRC, and also raw materials.

Experts consider the most profitable, from the point of view of monetary costs and the time frame of financial return from the implementation of the project, to be the part of the territory of Kazakhstan in Almaty and Shymkent. Further direction through the territories of Russia, Belarus to Poland and further to Germany and France should reduce the delivery time of goods between Western Europe and China by approximately 3.5 times.

The route of the highway passes through Khorgos, so it is impossible not to mention the most important checkpoint for cargo across the Kazakh-Chinese border. To date, more than 30 million tons of cargo have been delivered through the Khorgos International Center for Cross-Border Cooperation ; the average turnover of the point is 135 million US dollars.

China and Kazakhstan have reached an agreement to increase the capacity and operating hours of automobile checkpoints on the border. Thus, the Nur Zholy – Khorgos checkpoint has been operating around the clock since August of this year, while the remaining automobile checkpoints have switched to a 12-hour, 7-day operating schedule. According to the Prime Minister of the Republic of Kazakhstan, this happened thanks to the digitalization and automation of processes at the ICBC.

The company has developed a strategy according to which it will set a course for the development of a trade and tourism cluster. The Khorgos General Plan provides for investment projects such as shopping centers, hotel complexes, entertainment complexes, etc. To this end, the company actively invites Kazakh investors to participate in the implementation of planned projects.

After ensuring high-quality transport links between cities and states, strategic importance is assigned to the energy industry. The relationship between China and Kazakhstan in this area can be examined using the example of the oil and gas industry. The China National Petroleum Corporation (CNPC) made a great contribution to the development of bilateral relations.

Together with Chinese partners, the activities of 7 oil and gas producing companies, two gas pipelines and two oil pipelines, an oil refinery and a steel pipe plant are regulated in Kazakhstan. Thus, CNPC is involved in almost the entire chain of the oil and gas industry: exploration and production of oil and gas, refining and marketing of petroleum products, transportation of hydrocarbons.

In addition, the development of the oil and gas industry with the assistance of a Chinese investor has created more than 30 thousand jobs. Almost all employees of subsidiaries are Kazakhs, most often the Chinese occupy senior positions. However, it must be taken into account that currently all organizations are actively working on recruiting new personnel from among the younger generation. Companies offer education and internships; at the same time, you can study a package of favorable conditions, on the basis of which cooperation with young personnel is built.

One of three oil refineries in Kazakhstan is the Shymkent Oil Refinery “PetroKazakhstan”. The enterprise’s capacity is 6 million tons per year, supplying the domestic market with 30–40 percent of products. At the same time, no goods are exported, only heating oil, which is considered surplus. The annual production volume of aviation fuel is 350–400 thousand tons; the plant provides the country with only 6–7 percent of it.

The quality of Kazakhstani oil products has reached Euro-4 and Euro-5 environmental standards. The plant guarantees safety and full compliance with environmental standards; in recent years, emissions have been significantly reduced, but many citizens continue to complain about air pollution.

Today the plant requires young personnel. The average age of employees is close to retirement, many will soon retire, and there are very few interested young workers. In any case, the working conditions are acceptable for anyone – the average salary is around 570 thousand tenge, in addition to this, they are ready to train future specialists and send them for internships in China.

In 2018, the Chinese company China National Chemical Engineering Co became the EPC contractor of the Integrated Gas Chemical Complex in Atyrau. For the development of the entire cycle of work, 2 billion US dollars were raised from the China Development Bank. At the beginning of 2023, Kazakhstan Petrochemical Industries LLP (KPI Inc.) , the company that is the operator of the project for the construction of the first integrated gas chemical complex in the Atyrau region, was able to pay off the debt.

The goals of the project include the construction of the first gas chemical complex, the creation of a petrochemical cluster in the Republic of Kazakhstan, the production of export-oriented products with high added value, and the production of polymers for the diversification of industrial sectors.

Since the actual launch of the plant (October 30, 2022), 176,814 tons of polypropylene have been produced. By the end of 2023, the company set a goal to produce more than 254 tons of product, but statistics already show that by the beginning of December, 57 percent of the plan had been fulfilled. In November, 21 thousand of the planned 52 thousand tons were produced.

At the same time, the design capacity of the enterprise is 500 thousand tons of granulated polypropylene per year. When the plant reaches this figure, the demand of the Kazakh market will be fully satisfied. The production is recognized as unique for the country; all raw materials (propane) are delivered from the Tengiz field.

In June of this year, it was reported that KazMunayGas, whose daughter is KPI, will reduce more than 400 thousand tons of carbon dioxide emissions by 2031 from the activities of all subsidiaries in the Atyrau region. KazMunayGas is also reducing flaring of raw gas, introducing reuse of water resources and carrying out land reclamation. The company has committed to achieving zero routine flaring by 2030.

Among the energy projects that benefit from China’s investments and smart technologies are renewable energy sources operating in Kazakhstan. For example, wind power plants built by the Chinese State Power Investment Corporation (SPIC) . Such wind turbines have been installed in Akmola and Zhambyl regions.

Currently, wind energy in Zhanatas (Zhambyl region) is produced by 40 wind turbines with a total capacity of 100 MW. Each of them produces 2.5 MW. This year, the corporation announced the commissioning of the second stage of wind turbines in Zhanatas by the end of this year. The power of each new wind turbine will be 4.8 MW, and 21 more will be added to the existing number. Then the total capacity of the wind farm will be doubled.

US$150 million was invested in the green energy project. The wind turbines of the Zhanatas wind farm are the largest and most modern in the entire republic.

SPIC Corporation strives to develop not only wind power plants in Kazakhstan, but also other types of renewable energy sources. In May of this year, the head of the corporation announced plans to build a thermal station with a capacity of up to 200 Gcal in the south of Kazakhstan.

Thanks to Chinese integration, Kazakhstan definitely has a chance for promising development of renewable energy sources, since the country periodically records the strongest wind gusts for the region for wind farms or the optimal number of sunny days per year for installing solar stations. It is China that is competent in cooperation on the development of green energy, since at present the PRC has already become a world leader in the field of renewable energy sources.

According to Wood Mackenzie , China has planned investment of US$455 billion through 2025, up 60 percent from the previous decade. Strong system integration and low costs position China to lead wind and solar energy over the next decade.

Taking into account the dynamic changes in the geopolitical situation on the mainland, consolidation and a joint desire to achieve economic development results are more significant than ever. Kazakhstan, like other countries, is feeling the effects of the challenges facing the global economy, including trade barriers, disruptions in production chains and financial instability.

In this regard, Kazakhstan is ready to develop and implement practical mechanisms for strengthening economic cooperation that can in the future minimize the impact of any global threats. The head of the Government of the Republic of Kazakhstan, Alikhan Smailov, spoke about this in Shanghai during the opening ceremony of the 6th China International Import Exhibition.

Looking at the successful experience of bilateral partnerships, the government of Kazakhstan has invited Chinese transport companies to use cross-border transport infrastructure and participate in the implementation of new projects.

China Studies Center, Astana

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