30.11.2023
Cooperation between Kazakhstan and China in the field of infrastructure, especially within the framework of the Belt and Road Initiative (BRI), stands out as a key factor in ensuring transport links between Central Asia and critical global markets. The partnership between the two countries in the creation and modernization of infrastructure projects is becoming an integral part of Beijing’s global strategies, the analysis of which helps to understand the goals and prospects of cooperation in the infrastructure sector.
China’s goals
The Belt and Road Initiative positions China as an active participant in establishing transport links with Europe and the Middle East through Central Asia at the global level. The official goal is to send goods westward, but there are also other, implicit motives behind this goal.
Transport infrastructure projects implemented under the BRI are aimed at achieving several key Chinese goals: creating a transit corridor for the export of goods to Europe and the Middle East, integrating the transport systems of Central Asia with Western China, and supporting the activities of Chinese companies in the region, especially in the resource extraction.
An important aspect of infrastructure construction is ensuring the supply of raw materials from the region, which gives not only an economic, but also a strategic character to the created routes.
These strategies reflect specific domestic challenges facing the Chinese leadership. This is the development of the western regions of the country, which, according to the plan of Chinese strategists, can become a center of gravity for part of the countries of Central, Western and South Asia, as well as providing a stable and controlled transport infrastructure to support the Chinese economy in the event of a confrontation with the United States on sea routes.
At the moment, China is successfully implementing its goals. Transit transportation in the north is organized using high-quality infrastructure. The next stage is planned to create alternative routes across the Caspian Sea and to the south of Central Asia. Infrastructure for transporting resources, such as the Central Asia-China gas pipeline and the Kazakhstan-China oil pipeline, has already been built by Chinese companies. The railway network allows the import of most metals and ores mined in the region from Central Asia.
China views land routes as the main option in the event of intensifying confrontation with the United States and blocking of sea routes. This is not limited only to communication with Europe, since in the event of a confrontation, the latter can support the United States. Equally, infrastructure is important to ensure the supply of raw materials from Central and possibly Western Asia. China is seeking to diversify routes, ensuring stability and independence in global trade flow.
Kazakhstan’s goals
Central Asia as a whole, and especially Kazakhstan, acts as a Eurasian continental bridge linking China with its trading partners in Europe, Russia and the Middle East.
An essential necessity for our countries is the modernization of infrastructure, especially in the case of Kazakhstan, whose enormous territorial size makes this process especially critical. China, acting as a key partner, provides not only the necessary resources, but also becomes the only real investor capable of making significant investments in the economy of Kazakhstan. These investments can become the foundation for the formation of a new economic paradigm in the country.
Cooperation in the field of transport and logistics is becoming the foundation for stimulating trade and developing regional economies in Central Asia. Considering that all states in the region are inland and do not have seaports, the development of transport routes becomes a key task for regional economic growth.
Kazakhstan views the development of transit infrastructure as a unique chance to diversify its economy and create new opportunities for development. In this context, Chinese initiatives turned out to be very relevant, especially considering the measures already being taken at that time to modernize Kazakhstan’s own transport system.
Main routes
Main transport routes:
• Northern route – to the EU through Kazakhstan and Russia (along the route Western Europe – Western China),
• The middle route – also to the EU through Kazakhstan, the Caspian Sea and the Caucasus (coincides with the first, diverges in Western Kazakhstan) and a branch to Iran,
• The southern route is through Kyrgyzstan, Uzbekistan, Turkmenistan to the Caspian Sea, then merges into the Caucasus and Iran.
The most developed transit route is the Northern route, which runs along existing railway lines. The advantages of the route include the common customs space of the EAEU, which significantly increases the speed of cargo delivery. However, the stability of the Northern route raises concerns due to possible political conflicts between Russia and the EU.
In view of this, China pays great attention to alternative routes through the Caspian Sea. With the help of Chinese capital, the railway infrastructure of the Republic of Kazakhstan and the Kazakh ports of Aktau and Kuryk are being modernized; China also supported the creation of the Baku-Tbilisi-Kars highway. So far, the active exploitation of trans-Caspian routes is hampered by the poor state of the infrastructure in the Caucasus, as well as in the Middle East by the underdeveloped railway infrastructure of Iran and its difficult geopolitical position.
Kazakhstan’s new infrastructure is the blood vessels of the economy
Over the past 5 years, an infrastructure system has been practically created anew, covering the whole of Kazakhstan and extending to various regions: Xinjiang, the Caspian Sea, Russia. Major transport hubs such as Khorgos and Dostyk, the Western China-Western Kazakhstan highway, and the ports of Aktau and Kuryk, together with the railway from the Chinese border to these ports, became key elements of this system.
Foreign investments in the transport complex of Kazakhstan over the past five years have reached 8.5 billion US dollars, of which 3.5 billion US dollars fell on the Western Europe – Western China (WE-WK) project. Despite the WE-ZK’s compliance with the goals of the Belt and Road Initiative, it was implemented before its official announcement. The Kazakh part of the project was not financed by Chinese financial institutions, but Chinese companies actively participated in the construction of infrastructure, which significantly reduced overall costs.
Thanks to the participation of Chinese companies, it was possible to significantly reduce the delivery time of goods from Central China (Shanghai) to the European Union ( Duisburg ) from 40 days in the mid-2000s to just 12 days in 2017.
An example of a complex relationship with a Chinese project is the implementation of the trilateral infrastructure project “Western Europe – Western China” with the participation of Russia, Kazakhstan and China. The total length of the highway is 8,445 km, with 2,233 km passing through Russia, 2,787 km through Kazakhstan, and 3,425 km through China.
Although implementation has begun, the Russian section of the project has never been fully built, raising questions about possible reasons, such as bureaucratic obstacles and lack of funding. Perhaps the deeper reason is competition with other projects, such as the Trans-Siberian Railway and the BAM, which Russia is seeking to revive.
To solve this problem, Kazakhstan and China directed the flow of cargo towards the Caspian Sea, choosing the port of Aktau as the end point of the highway. The modernization of the port of Aktau and the construction of a ferry crossing in the port of Kuryk are being implemented by Chinese companies, confirming the redistribution of cargo flow in the direction of the Caspian Sea. It is expected that cargo turnover in Kazakh ports will increase, especially through the port of Kuryk, thanks to the new Azerbaijan-Georgia-Turkey railway route. The Caucasus route may become a priority for transit traffic.
Increase in transportation volumes
In the context of growing traffic volumes and large-scale construction of transport routes, it is important to pay attention to the key component of infrastructure programs – economic feasibility. Land freight transport between China and Europe has shown impressive growth: from 139 trains heading towards Europe in 2013, by 2023 this number has increased to more than 10,000.
This significant increase in cargo traffic is primarily due to improved infrastructure and streamlined customs procedures. A significant contribution was made by the commissioning of the Khorgos railway junction and the simplification of procedures between Kazakhstan, Russia and China, which sharply reduced the average cargo transit time from 37 days in 2006 to 14 days in 2017.
Another important reason for this growth is the subsidization of continental transport by Chinese regional authorities. Transportation by land remains more expensive compared to sea transportation. The high cost is associated with the low carrying capacity of standard trains (82 tons versus 3–3.4 thousand tons for Panamax class container ships) and the problem of filling the cars when returning from Europe – less than half of the cars are loaded. This leads to high costs that are difficult to compensate even for subsidies.
Despite the fact that continental shipping is still more expensive than sea shipping, it is competitive in terms of safety and speed of delivery. Therefore, they are actively used in the transport of fragile and valuable goods, such as cars shipped from the EU to China.
Chinese logistics companies
In the Kazakh transportation market, Chinese companies can be classified into two main types: those specializing in logistics in Central Asia and large logistics companies not associated with the region.
The first type is represented mainly by medium-sized companies focused on delivering goods to Russia, the countries of Central Asia and the Caucasus. Their transport volumes are generally small compared to the overall volume of the Chinese market. They serve local customers and are the main users of the new infrastructure, which provides optimal delivery routes for goods.
The second type are large logistics companies from the coastal regions of China that do not attach much importance to continental transport. Their interest in using Kazakhstan as a transit route is primarily due to the commercial desire to occupy the newly emerging transportation market as a potential investment in the future. The second motivation is the direction of the Chinese government, through the China Transport and Communications Association, of the attention of these companies to new transport routes. For them, the infrastructure being created represents an opportunity to expand their business and open new markets, so issues of return on investment are not always so critical for them.
It is also worth highlighting another type of transportation related to the provision of Chinese projects in Kazakhstan and adjacent regions. China is actively implementing investment projects, launching production and developing deposits that require supplies of materials and goods from China. For example, the plant of the Chinese company Changang in Northern Iran, in the city of Sabeh , 100 kilometers from Tehran, needs the supply of automotive components through trans-Caspian transportation.
The main difficulties faced by Chinese companies in the field of logistics are the lack of developed infrastructure and customs barriers. The underdevelopment of the infrastructure is manifested not so much in the lack of sufficient capacity, but in the overly complex organization of procedures. State-owned companies, which often manage Caspian ports, do not have experience in effective logistics management, which makes Chinese businesses the preferred option for cooperation. Customs barriers, recognized as an important issue in the Belt and Road project, are a top priority for the Chinese government.
Prospects
IN report World Common Transport Infrastructure Bank . A Quantitative Model and Estimates from the Belt and Road Initiative” notes that the implementation of infrastructure projects under the Belt and Road Initiative will lead to an increase in the GDP of the BRI participating countries by 3.4%, and the world economy will receive an additional 2.9%. The World Bank’s calculations foreshadow the prospects for increased exports from Central Asian countries to China, Europe and the Middle East, highlighting the significant opportunities opening up for the region through participation in Belt and Road projects.
Particularly important are the calculations of potential infrastructure investments in BRI participating countries presented in the report. The authors used data on similar projects implemented by Chinese companies and obtained amounts that reflect the ratio of economies and country sizes. The largest investments are expected in China itself, as well as in Kazakhstan, which ranks fifth in terms of potential infrastructure investment, estimated at $21.3 billion.
However, the amount of investment required, according to World Bank calculations, is weakly related to assessments of the quality of existing infrastructure and is closely related to the size of countries. Despite this, Kazakhstan’s infrastructure, ranked among the top 5 countries with high investment potential, demonstrates higher quality, based on the Logistics Performance Index (LPI), which evaluates infrastructure performance. Thus, Kazakhstan appears more attractive for Chinese logistics investment compared to potential competitors such as Pakistan, Mongolia and Myanmar.
The investment capacity of Kazakhstan’s infrastructure, expected with the participation of Chinese companies, is estimated at $21 billion, which exceeds current foreign investment by two and a half times. This makes the infrastructure of Kazakhstan a promising area for the development of investment cooperation between Kazakhstan and China, and creates new growth points in this sector.
Cooperation between Kazakhstan and China in the field of infrastructure, especially in the context of BRI, occupies a central position in the formation of a new reality in transcontinental transport flows. The projects created by these countries not only help strengthen transit routes and generate economic activity, but also highlight strategic and mutually beneficial infrastructure partnerships. Kazakhstan, which is at the epicenter of global transit corridors, and China, which plays a key role in their creation, continue to shape a new picture of global trade and economic relations through the development of infrastructure projects in Central Asia.
China Studies Centre, Astana
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