Azerbaijan’s importance to global trade is rooted in the country’s ties to the ancient Silk Road, which also renders it a node in the modern-day east–west corridors of the Belt and Road Initiative (BRI). A country dependent on oil and natural gas exports, Azerbaijan has leveraged BRI projects and the global push for the development of transport infrastructure to diversify its economy and raise its standing in international trade. Sino-Azerbaijani diplomatic relations are friendly, with general agreement on expanding trade, territorial sovereignty, and security issues.

Background

Similar to countries such as Kazakhstan and Iran, Azerbaijan’s relationship with China can be traced back to the cultural and economic exchanges that took place on the Silk Road in the premodern era. In particular, the location of Baku, the capital of Azerbaijan, on the Caspian Sea cemented its position as the bridge between East and West. To this day, Azerbaijani state rhetoric continues to invoke the ancient Silk Road in its calls for development and new agreements.

Not only is Azerbaijan’s physical position on the Caspian Sea integral to its modern-day role in facilitating east–west trade across Asia and Europe, but also culturally, Azerbaijani people share connections with many of their neighbours. With its history of rulers of various origin, including the Shirvanshahs, the Safavid dynasty, Imperial Russia and, later, the Soviet Union, the present territory of Azerbaijan is home to people with Turkic, Persian, and Russian ties, not to mention others who belong to ethnic minority groups such as Lezgin, Talysh, and Armenian. These ties with other states and peoples shape Azerbaijani cultural memory and are sometimes used in state rhetoric to bolster the creation of economic and infrastructure efforts (such as those with Kazakhstan)—including BRI projects.

Contemporary relations between Azerbaijan and the People’s Republic of China (PRC) began in 1991 after the dissolution of the Soviet Union, when China recognised Azerbaijan’s independence. In 1994, former president Heydar Aliyev first travelled to China, where he met with then president Jiang Zemin and premier Li Peng and discussed the Nagorno-Karabakh conflict—an ongoing territorial dispute between Azerbaijan and Armenia—as well as historical and future economic relations. Generally, the two countries have aligned their positions regarding territorial sovereignty and expanding trade, including invoking the historical memory of the Silk Road to push for increased joint opportunities for development. High-level diplomatic visits started under President Aliyev (in office from 1993 to 2003) and have continued under his son and successor, Ilham Aliyev (President of Azerbaijan since 2003).

Following the beginning of Xi Jinping’s presidency in 2013, relations between the two countries deepened, particularly starting in 2015—two years after the launch of the BRI. In April 2015, Azerbaijan became a founding member of the Asian Infrastructure Investment Bank (AIIB), which was initially conceived of as a financing body for the BRI. The two heads of state signed a memorandum of understanding (MoU) on cooperation under the BRI during President Ilham Aliyev’s official visit to China in December 2015. In March 2016, Azerbaijan became a dialogue partner in the Shanghai Cooperation Organisation—an organisation with the broad aim of fighting terrorism, separatism, and extremism—partly as a way for the country to push forward its agenda with Armenia, which includes territorial control over Nagorno-Karabakh, as well as control over the narrative of the conflict.

Although Azerbaijan as a state is relatively removed from China (literally buffered by other Central Asian states), there are instances of grassroots interaction between the Azerbaijani and Chinese sides. This includes informal interaction—such as through the presence of Chinese labourers and migrants in the country—as well as formal cultural and educational ties. The latter include the establishment of Confucius Institutes (such as at Baku State University and the Azerbaijan University of Languages), MoUs on educational cooperation between Azerbaijani and Chinese universities, the expansion of Mandarin-language classes, and the establishment of the Chinese Language and Culture Centre at the Azerbaijan University of Languages.

BRI Status

Azerbaijan signed an MoU to participate in the BRI in 2015 during President Ilham Aliyev’s visit to China. Both Chinese and Azerbaijani state language has since invoked the BRI to emphasise high-level strategic alignment, particularly in discussions about infrastructure and transport projects that are key to such trade. There is a two-step thought process here: 1) the BRI relies on infrastructure and transport projects, and 2) Azerbaijan is prioritising the development of such projects, such as the Middle Corridor, the Baku International Sea Trade Port (Ələt Port), and the Baku–Tbilisi–Kars (BTK) Railway. Generally, these projects are domestically or regionally led with minimal funding or influence from the PRC.

Middle Corridor

One of China’s stated BRI priorities is the creation of transport routes to deliver goods from China to Europe and back. These routes are often referred to as ‘economic corridors’, in contrast to their maritime counterparts. Azerbaijan—specifically, its port on the Caspian Sea—is key to many of these east–west corridors. Of significance is Azerbaijan’s role in corridors that bypass Russia and Iran, such as transport routes through Kazakhstan and Turkmenistan. One such route is the Middle Corridor—formerly called the Trans-Caspian International Transport Route, established in 2014—along which goods travel through China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Europe, and Türkiye. Currently active, the Middle Corridor has progressed largely through regional funding through public–private investments and management rather than Chinese funds. In 2022, Azerbaijan, Kazakhstan, Georgia, and Türkiye announced their intention to establish a joint venture to continue to push harmonisation efforts for transport logistics. The corridor cuts the transportation time for goods from approximately 45 to 15 days.

Baku International Sea Trade Port

As previously noted, the key node in Azerbaijan’s modern international transport network—including the Middle Corridor—is the Baku International Sea Trade Port. The historic Port of Baku was located inside the capital and eventually became constrained by the development of the surrounding city. In 2007, President Ilham Aliyev announced plans for the construction of a port 65 kilometres south of Baku, in Ələt. In 2014, the main ferry terminal was commissioned and, in 2018, the first phase of development was completed and the complex was opened. The next phases include general expansion of capacity, as well as of the surrounding free-trade zone and logistics services. Although Chinese funding was limited, support did include grants and the gifting of equipment. Additionally, there have been connections and agreements between the port and relevant Chinese stakeholders, such as an MoU signed with the Port of Qingdao in 2023. Other countries with ports on the Caspian Sea have adapted to this new port infrastructure, with landlocked neighbours such as Uzbekistan starting to take advantage of the opportunities presented by this significant increase in transport and logistics infrastructure in the region.

BTK Railway

The BTK Railway, a flagship project of the Middle Corridor, was inaugurated in 2017 at the Baku International Sea Trade Port. Currently active, the total amount of goods delivered via the BTK Railway in 2022 increased by 30 per cent from 2021, according to Azerbaijan’s national railways operator. The BTK Railway route provides overland movement of cargo and passengers from Baku, Azerbaijan, through Tbilisi, Georgia, to Kars, Türkiye. Notably, it does not include existing routes through Armenia—a fact that led to financers such as the World Bank and Asian Development Bank withdrawing their support, and the subsequent increase in Azerbaijani funding. Although Azerbaijan and Türkiye mainly financed this particular railway segment (with Azerbaijan’s State Oil Fund financing Georgia’s 178-kilometre section through loans), surrounding segments have been backed by Chinese funding.

Current Economic Relations

Trade: China is not a major destination for Azerbaijan’s exports. Based on Azerbaijani Government statistics, China accounted for an average of 1.3 per cent of Azerbaijan’s exports between 2011 and 2022. China was Azerbaijan’s third-largest source of imports in 2022, accounting for 14.3 per cent of imports, after Russia (18.8 per cent), and Türkiye (15.8 per cent). According to Observatory of Economic Complexity statistics from 2021, the top export product from Azerbaijan to China was crude petroleum, which is in line with Azerbaijan’s history as an oil and gas producer. The top export products from China to Azerbaijan were pharmaceutical products, including vaccines, which is in line with China’s recent vaccine diplomacy efforts.

Generally, Azerbaijan exports resources: crude petroleum, petroleum gas, refined petroleum, raw cotton, and gold. Its top imports are cars, wheat, packaged medicaments, broadcasting equipment, and refined petroleum. From 2020 to 2021, its fastest growing export markets were Italy, Israel, and Germany, and its fastest growing import markets were Türkiye, China, and Russia. Economically, Azerbaijan sees China as a market primed for the diversification of its exports and services, aligned with Chinese rhetoric that highlights the BRI’s focus on increasing not only Chinese exports, but also Chinese imports.

Investment: Azerbaijan is receptive to Chinese financing for digital services and industrial development. Diplomatic signals of the importance of bilateral investment include the participation of Azerbaijan in the first China International Import Exhibition in Shanghai in 2018 and the subsequent opening of Azerbaijani wine houses in China. High-level meetings between Azerbaijani and Chinese stakeholders emphasise the opportunity for Chinese capital investment in Azerbaijan and, more generally, opportunities for joint ventures and collaboration in the private sector. Although Chinese private investment in Azerbaijan is still limited, there have been notable deals between state-backed actors—as seen in the agreements worth 821 million USD made during the second Belt and Road Forum in 2019. These deals included China National Electric Engineering Company’s investment in a tyre factory in Sumqayit’s chemical-industrial park, the building of a greenhouse complex in Kurdamir, and the creation of the Azerbaijan Trade House in Chengdu, China. Separately, Huawei Technologies has been involved in the construction of information infrastructure and information and communication technology talent programs, and China Telecom and ZTE have signed agreements to participate in Azerbaijani broadband expansion and digitisation efforts.

Aid and Other Financing: There is no official record of Chinese aid to Azerbaijan. Beyond instances of grants or investments mentioned earlier, publicly known Chinese loans include financing for the Gas Processing and Polyethylene Petrochemical Complex Project, Baku–Tbilisi–Ceyhan Pipeline construction, and a 200MW wind farm project on the Absheron Peninsula. Additionally, Azerbaijan has been a recipient of China’s Covid-19 aid. In 2020, China donated Covid-19 test kits to Azerbaijan and, a year later, Covid-19 vaccines.

Key Controversies

Generally, Azerbaijan and China enjoy friendly relations. Certain ongoing domestic and regional issues (such as Azerbaijan’s conflict with Armenia) have the potential to disrupt regional stability and, by extension, Azerbaijan’s relationship with China.

In-Depth Sources

• Jafarli, Shahin. 2020. ‘Azerbaijan–China Relations.’ Baku Research Institute. Link.
• ‘Restoration of Great Silk Road.’ President of the Republic of Azerbaijan Ilham Aliyev. Link.
• Schulz, Dante. 2022. ‘China–Azerbaijan Bilateral Relations.’ Caspian Policy Center. Link.

Cover Photo: Baku, Marco Fieber (CC), Flickr.com

Historical Background

Relations between China and Kazakhstan can be traced back to the times of the ancient Silk Road, during the Han dynasty (206 BC–220 AD). At that time, the vast territory of today’s Xinjiang, Central Asia, and beyond were known in the territories controlled by the Han dynasty as ‘Western Regions’ (西域). In the late second century BC, Zhang Qian (who died in 114 BC) was the first Chinese official envoy to open trade routes with these regions and bring back knowledge about the area to emperor Han Wudi (156BC–87BC). Over two millennia later, Zhang’s pioneering role still resonates in China to such an extent that he was recalled in Xi Jinping’s inaugural speech announcing the Belt and Road Initiative (BRI) in Astana (now Nur-Sultan, the capital of Kazakhstan) in 2013. 

The ancient Silk Road was never static. Over the centuries until the decline of Silk Road trade by the mid-fifteenth century, some routes in Central Asia acquired importance, while others died out along with the cities and trading stations on their courses. A part of the Silk Road passed through the territory of the modern Zhetysu and South Kazakhstan regions, which were inhabited by nomadic tribes. After the fragmentation of the Golden Horde in 1428, the White Horde (a proto-Kazakh state) was first divided, and then formed the Kazakh Khanate by the end of the century. With the growth of territories, long-lasting conflict with neighbouring Dzungars and Oirats, and the slow disintegration of the Kazakh Khanate in the eighteenth century, Kazakhstan first became part of the Russian empire and then of the Soviet Union. 

Looking back at the Soviet era, two incidents that occurred on the border between Kazakhstan and the People’s Republic of China (PRC) assume high historical significance. In the spring of 1962, at the beginning of the Sino–Soviet split, 60,000 Kazakhs, Uyghurs, and Soviet citizens left northern Xinjiang and illegally crossed the border into Kazakhstan at Bakhtu to flee the consequences of China’s Great Leap Forward. The so-called Yita Incident (伊塔事件) was also encouraged by promises made by Soviet leaders of better job opportunities and life conditions. The second incident took place in 1969, at the peak of the Sino–Soviet border conflicts, when Soviet and Chinese military forces clashed near Lake Zhalanashkol. In Chinese sources, it is known as the Tielieketi military incident (铁列克提事件), named after the river flowing into the Lake Zhalanashkol. Soviet sources report that two Soviet and 19 Chinese men were killed on that occasion.

After declaring independence from the Soviet Union in December 1991, Kazakhstan established diplomatic relations with the PRC in January 1992. The long-standing border dispute with China was resolved with the signing of the China–Kazakhstan border treaty in April 1994. Two years later, in 1996, the Shanghai Five grouping (later renamed Shanghai Cooperation Organisation) was created to settle territorial issues and deepen military trust in the border regions of Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and China.

In 1997, China’s increasing energy demands resulted in the China National Petroleum Corporation (CNPC) acquiring a 66.7% stake in Kazakhstan’s national oil and gas company AktobeMunaiGas and an agreement to construct an oil pipeline from western Kazakhstan to China’s Xinjiang autonomous region. In 1999, China and Kazakhstan issued a joint statement emphasising their wishes to strengthen bilateral relations and cooperation in the coming century. In 2002, both countries signed a treaty on China–Kazakhstan ‘good-neighbourly and friendly cooperation’. In 2005, the completion of the first section of the China–Kazakhstan oil pipeline and subsequent acquisition of the former Canadian–Kazakhstani joint venture PetroKazakhstan oil company by the CNPC coincided with the joint statement on the establishment of the strategic partnership between the two countries. Finally, in 2011 China and Kazakhstan announced the development of an ‘all-round comprehensive strategic partnership’, which was further upgraded to the ‘new stage of comprehensive strategic partnership’ in 2015.Marking the close relationship between Kazakhstan and China, the first President of Kazakhstan, Nursultan Nazarbayev, in office from April 1990 to March 2019, met with President Xi Jinping 19 times between 2013 and 2019, the period when their presidencies overlapped. On the occasion of his first official visit to China in September 2019, Nazarbayev’s successor, President Kassym-Jomart Tokayev, signed a bilateral agreement to develop a ‘permanent comprehensive strategic partnership’ (永久全面战略伙伴关系), securing a higher political recognition from the Chinese counterparts, but not yet at the level of a ‘strategic coordination/cooperation’ as in the Russian ‘comprehensive strategic partnership of coordination for a new era’ (新时代全面战略协作伙伴关系) or Pakistan’s ‘all-weather strategic cooperative partnership’ ( 全天候战略合作伙伴关系).

BRI Status

President Xi Jinping first proposed the creation of the Silk Road Economic Belt (SREB) during his visit to Nazarbayev University in Astana (now Nur-Sultan), Kazakhstan, in September 2013. In his speech, he stressed that both China and Central Asia ‘are at a crucial stage of development with unprecedented opportunities and challenges’ and proposed the ‘five connections’ (五通) along the SREB, that is policy communication, road connectivity, trade, monetary circulation, and understanding between the people. The ‘five connections’ were later outlined in the BRI roadmap Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road published in 2015.

In December 2014, the Ministry of Economic Affairs of Kazakhstan and China’s National Development and Reform Commission signed a cooperation document to jointly build the SREB. In May 2015, a joint statement was issued by China and Russia on cooperation in linking the construction of the Silk Road Economic Belt and the Eurasian Economic Union (EAEU), to which Kazakhstan has belonged since its official launch in 2015. 

The announcement of the BRI coincided with Kazakhstan’s own infrastructure programme ‘Nurly Zhol’ or ‘Bright Path’, which was officially launched in November 2014 and was initially supposed to last five years. In August 2016, the cooperation plan for the conjugation of the Nurly Zhol and the SREB between the governments of Kazakhstan and China was signed. In the same year, Kazakhstan joined the Asian Infrastructure Investment Bank with a paid-in capital of 729.3 million USD and 0.8406% of total votes.An official Memorandum of Understanding (MoU) between the Kazakh and Chinese governments on the implementation of the cooperation plan for the connectivity of the Nurly Zhol new economic policy and the construction of the Silk Road Economic Belt was finally signed in 2019 during President Tokayev’s visit to China.

Current Economic Relations

Trade: In 2019, China was Kazakhstan’s second largest trading partner—after Italy in exports and Russia in imports. The trade turnover between China and Kazakhstan amounted to 14.36 billion USD, with 7.82 billion USD of exports to China and 6.54 billion USD of imports. In comparison to 2018, the trade turnover increased by 22.8%. Kazakhstan mainly exports commodities (oil and gas, uranium, metals, agricultural and chemical products) to China and imports industrial goods (consumer goods, machinery and equipment). This trade structure leaves plenty of room for improvement—namely, a need to increase the added value of products exported in order to diversify Kazakhstan’s economy. Additionally, a single customs space within the EAEU could explain the increase in trade volume between the countries since 2015, as Chinese cargo enters Kazakhstan before going to the rest of the EAEU. It also makes it difficult to estimate the actual trade volume, especially since the Chinese and Kazakh data often do not match. The discrepancy in customs data is also driven by corruption and the existence of a whole shadow economy. Since taxes and customs revenues are the main sources for the state budget (47% in 2020), the government of Kazakhstan is actively fighting illegal cross-border trade. According to President Tokayev, in 2020 there were about 50,000 cases of inaccurate goods declarations on the border with China, resulting in a discrepancy of more than 5 billion USD with China’s mirror statistics. Digitalisation at the Chinese–Kazakhstani borders is helping to combat the shadow economy. With the creation of the Electronic Declaration Center in 2020, the discrepancy in customs statistics with China reduced from 60% in 2017 to 45% in 2020.

Investment: According to the National Bank of Kazakhstan, China has been the fourth largest investor in the Kazakh economy (after the Netherlands, United States, and Switzerland) in recent years. The biggest gross inflow of Chinese investment came in 2012 and 2013, before the announcement of the BRI. The fall of oil prices and the Crimean crisis of 2014 brought down the Russian ruble as well as the Kazakh tenge, and as a result, Chinese investment in Kazakhstan slowed down. The total amount of investment from China in the period from 2005 to 2019 was 36.2 billion USD, or about 5.2% of the total investment for the whole period. Most of these investments were directed into joint ventures in the sectors of oil and gas, mining and processing industries, and logistics and infrastructure.

Additionally, the Astana International Exchange (AIX), a part of the Astana International Financial Center (AIFC) established in 2017, was created to develop public equity and debt capital markets in Central Asia. Its AIX Belt and Road Market Segment is devoted to the provision of capital market solutions for the BRI projects with the RMB being the most important trading currency. The Shanghai Stock Exchange and the Silk Road Fund are among the shareholders of the AIX. The AIFC has signed memoranda with the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission in 2018, and established strategic partnerships with the Shanghai Stock Exchange, Silk Road Fund, China Development Bank, China Construction Bank, China CITIC Bank, and CITIC Securities. According to the AIFC Governor Kairat Kelimbetov, the BRI opened new prospects for financial cooperation between Kazakhstan and China.

Aid and loans: Since 2015, Kazakhstan has been classified by the World Bank as an upper-middle-income country, so it does not receive ‘aid’ in the narrow sense of the word and has even been a contributor in the OECD’s Development Assistance Committee (DAC) since 2013. However, Kazakhstan is actively attracting development finance from multilateral development banks, the United Kingdom, and China. For example, the construction of Nur-Sultan’s light rail transit is financed with a loan from China Development Bank. The project has now been halted after a corruption scandal.

According to the statistics provided by the National Bank of Kazakhstan, Kazakhstan’s external debt to China as of 1 October 2020 accounts for 6.4% of its total external debt (including intercompany lending). Outstanding loans to China are significant only in two sectors—banking (1.2 billion USD) and government-guaranteed debt (1.3 billion USD). Most of Kazakhstan’s debt to China is in USD, and loans issued in Chinese yuan account for about 390 million USD or 0.2% of the total external debt. 

Key Controversies in Bilateral Relations

Transboundary rivers: China and Kazakhstan share a 1782.75-kilometre-long border and 23 transboundary rivers. Two of them, Ili and Irtysh, are the largest and most contested ones in terms of water management and use. Both rivers originate in Xinjiang and are heavily used for the development of western China (in agriculture, oil extraction, and hydropower). As a result, it is anticipated that Kazakhstan may face a water deficit in its eastern regions, the concentration of harmful substances in the rivers may increase, and the natural ecological balance in the Zaisan and Balkhash lakes, where these rivers flow, might be disrupted. Negotiations on transboundary water management between Kazakhstan and China have been going on since 1999. Today, the main problem is the lack of an agreement on water distribution for transboundary rivers, although negotiations started in 2015. According to the Kazakhstani Minister of Ecology, Geology, and Natural Resources, China typically does not negotiate water allocation with its neighbouring countries and Kazakhstan is the first and only country with whom the Chinese authorities are currently engaging in this sense.

Negative perception of China: Popular perception of China in Kazakhstan is largely negative due to a variety of factors, including historical memories of the Sino–Soviet split or even earlier nomadic confrontations with the Chinese empire, more recent resource nationalism, fear of a Chinese take over of the country, lack of transparency in high-level dealings with China, or simple xenophobia. In the spring of 2016, protests broke out in several cities in Kazakhstan—with different accounts pointing to the number of participants ranging from a few hundred to a few thousand—against proposed amendments to the Land Law, which was entering into force in July that year. The changes would have enabled foreigners to rent Kazakhstani agricultural land for up to 25 years (instead of 10 years as stipulated before). The protestors feared that the Chinese investors would lease and eventually take over the land. In 2019, on the eve of President Tokayev’s first official visit to China, the Kazakhstani people protested the ‘relocation’ of 55 Chinese plants in sectors such as oil and gas, ore mining and processing, machine manufacturing, energy, and food production over concerns about pollution and rising debt, as well as China’s treatment of Muslim Uyghurs and Kazakhs in Xinjiang. The idea of building these factories was first announced in 2014 under the framework of linking the Nurly Zhol to the BRI. Chinese actors were to invest about 27.6 billion USD in industrial facilities, mostly in fossil fuels and extractive industries. However, the Kazakhstani government’s lack of transparency and clear communication of the project list contributed to rumors and disinformation about the relocation of the ‘old Chinese factories’ being spread over social media in 2019, giving rise to the protests.

Xinjiang: The anti-Chinese sentiment in Kazakhstan is being further exacerbated by the detention of Muslims in Xinjiang. An estimated 1.5 million Kazakhs live in China. Since the Kazakhstani government announced its repatriation programme in 1997 to attract ethnic Kazakhs (‘oralman’) from the other countries, including China, many Kazakhs moved from Xinjiang to Kazakhstan, leaving families divided across the two countries. For this reason, the population of Kazakhstan follows China’s domestic matters very closely. 

The Kazakhstani government has to find a balance between maintaining its strategic relations with China on the one hand, and responding to its population’s worries about the fate of their relatives and fellow Kazakhs in Xinjiang on the other. In recent years, two prominent cases related to a Xinjiang whistleblower, Sayragul Sauytbay, and a human rights activist, Serikzhan Bilash, attracted extensive coverage from local and international media. Sayragul Sauytbay, an ethnic Kazakh from Xinjiang and a former member of the Chinese Communist Party, was sent to work at a political reeducation camp and later escaped, crossing the border illegally in April 2018 to join her family that had moved to Kazakhstan two years before. She was charged for using the forged documents to cross the border and was at risk of being deported back to China. After her high-profile court trial in Kazakhstan in July 2018, Sayutbay was released on a suspended sentence. After she was refused an asylum in Kazakhstan, in June 2019 she fled to Sweden, where she was granted political asylum.

Serikzhan Bilash, an ethnic Kazakh from Xinjiang, moved to Kazakhstan in 2000 and received citizenship in 2011. In 2017, Bilash founded the Atajurt Eriktileri (Volunteers of the Fatherland), a nongovernmental organisation (NGO) that assisted the relatives of ethnic Kazakhs, Kyrgyz, and Uyghurs detained in Xinjiang, published testimonies, and worked with international media and human rights groups. In March 2019, the Kazakhstani authorities detained him for inciting inter-ethnic hatred. Bilash first pleaded not guilty, but later signed a plea agreement for ‘his family and his children’. The court sentenced him to a fine and banned him from engaging in social activities. Up to that point, Bilash had repeatedly tried to register Atajurt with the authorities, but the Kazakhstani Justice Ministry refused to grant registration. In September 2019, after Bilash stepped down as NGO leader, the Justice Ministry approved all the necessary documents but the registered organisation was now headed by a man who was more agreeable with the official Kazakhstani line towards China. In 2020, two more criminal cases were initiated against Bilash. Due to mounting pressure, in September 2020, Serikhan Bilash had to leave Kazakhstan with his family first for Turkey and then the United States.

Key Sources

Websites:

• Caspiana platform at Harvard University
• Caspian Policy Center website
• Central Asian Bureau for Analytical Reporting
• Eurasianet
• Forbes Kazakhstan
• Informburo (online news portal in Russian)
• Kursiv (business news portal)
• Ratel.kz (independent online portal in Russian)
• The Astana Times
• The Bulletin (news from Central Asia & the South Caucasus) 
• The Oxus Society for Central Asian Affairs 

Books, Scholarly Articles, and Reports:

• Baldakova, Oyuna. 2019. ‘Protests Along the BRI: China’s Prestige Project Meets Growing Resistance.’ MERICS website, 10 December. Link. 
• Bitabarova, Assel G. 2018. ‘Unpacking Sino-Central Asian Engagement Along the New Silk Road: A Case Study of Kazakhstan.’ Journal of Contemporary East Asia Studies 7, no. 2: 149–73. 
• Central Asia Data-Gathering and Analysis Team Research Project. 2019. ‘BRI in Central Asia Data Review Series 20–27.’ OSCE Academy in Bishkek website. Link.
• Kassenova, Nargis. 2020. ‘Kazakhstan’s Adaptation to the Belt and Road Initiative: Tracing Changes in Domestic Governance.’ In The Belt and Road Initiative and Global Governance, edited by Maria Adele Carrai, Jean-Christophe Defraigne, and Jan Wouters. Cheltenham, UK: Edward Elgar Publishing, 182–203.
• Kembayev, Zhenis. 2020. ‘Development of China–Kazakhstan Cooperation.’ Problems of Post-Communism 67, no. 3: 204–16.
• Kenderdine, Tristan. 2018. ‘Kazakh Land, China Capital: Exporting China’s Project System to External Geographies.’ Central Asian Affairs 5, no. 4: 313–41.
• Konrad Adenauer Stiftung & Talap Center for Applied Research. 2020. Analysis of China’s Economic Strategy and Foreign Policy in Kazakhstan. Link.
• Mauk, Ben. 2021. ‘Inside Xinjiang’s Prison State.’ Pulitzer Center website, 26 February. Link.
• Pieper, Moritz. 2020. ‘The Linchpin of Eurasia: Kazakhstan and the Eurasian Economic Union Between Russia’s Defensive Regionalism and China’s New Silk Roads.’ International Politics, 2020. Link. 
• Xiaocuo, Yi. 2019. ‘A Road to Forgetting: Friendship and Memory in China’s Belt and Road Initiative.’ Made in China Journal 4, no. 1: 114–17. Link. 

Cover Photo: Kazakhstan, by Ewan McIntosh (CC).

Background

China and Tajikistan share a 477-kilometre border between Tajikistan’s Gorno Badakhshan Autonomous Oblast and China’s Xinjiang Uyghur Autonomous Region, with only one, high-altitude border crossing over the Kulma Pass. Under Soviet rule, the Soviet Socialist Tajik Republic, the borders of which were drawn in the 1920s, had limited relations with China, even though ethnic ties existed; Persian-speaking communities have been living in Xinjiang and Uyghur communities live in contemporary Tajikistan.

In those years, the border between China and Tajikistan was sealed. Only in the late 1980s did cross-border trade start to take off and gradually increase. Although diplomatic relations between the Republic of Tajikistan and the People’s Republic of China (PRC) were established on 4 January 1992, during the Tajik Civil War (1992–97), interactions were limited. Bilateral relations gradually intensified in the aftermath of the war, as investment, loans, and personal interactions picked up speed from the mid-2000s. The two countries interacted, first, under the umbrella of the Shanghai Five, and later under the Shanghai Cooperation Organisation (SCO).

In 2006, the Tajik Government received its first big loans from the Chinese Government and the first large projects undertaken by Chinese companies commenced. One project was the rehabilitation of an essential road connecting Tajikistan’s capital city, Dushanbe, with the northern region of the country; another two entailed the construction of power transmission lines and were undertaken by the Chinese company Tebian Electric Apparatus (TBEA). In 2007, the Chinese company Zijin Mining obtained a mining concession and acquired 75% of a goldmine in Tajikistan’s northern Sughd region.

Bilateral interactions gained momentum in the 2010s with the launch of the Belt and Road Initiative (BRI), as the Chinese Government provided more incentives to encourage Chinese state-owned enterprises (SOEs) and private actors to venture into Tajikistan. According to an interview conducted with the secretary of the Federation of Overseas Chinese in Tajikistan in September 2020, there are about 400 Chinese state and private companies active in Tajikistan today (the Tajik President mentioned a figure of 350 companies in 2019). The Chinese actors active in Tajikistan are very diverse, and it is particularly difficult to assess the number of small-scale Chinese businesses as some of their activities have resulted from networked migration, as they branched out after leaving the Chinese company that originally brought them to the country.

Many, mainly male, Chinese migrant workers reside seasonally in Tajikistan, leaving for the Chinese New Year and returning after. While Covid-19 has had a significant impact on the regular flows of people between the two countries, the Chinese and Tajik governments have attempted to safeguard the continuation of Chinese-led projects during the pandemic—for instance, by facilitating airfares for specific categories of employees of Chinese SOEs.

BRI Status

In Tajikistan, China’s BRI is more often referred to by its Russian name (Odin Poyas, Odin Put’) than in Tajik (Yak Kamarband, Yak Roh), but in daily parlance, neither concept is frequently used. According to Chinese media, Tajikistan was one of the first countries to join the BRI. Today, there are numerous bilateral agreements. In 2015, the two governments signed the ‘Memorandum of Understanding on the Preparation of the Outline of China–Tajikistan Cooperation Plan’, including newly pledged projects the media labelled BRI investments. There are also various agreements between Tajik actors and Chinese provincial administrations, in line with the decentralised character of the BRI and the fact the Chinese overseas presence is impacted by networked migration. In 2017, the two national governments forged a comprehensive strategic partnership. Tajikistan also joined the Asian Infrastructure Investment Bank as a founding member in 2015.

Current Economic Relations

Trade: Trade between China and Tajikistan is highly unbalanced. Chinese goods have come to dominate Tajik consumer markets. Most of the few commodities traded from Tajikistan to China are primary (raw) products, such as animal skins, cotton, and silk. There is little value added within Tajikistan.

China Customs statistics provide some insights into this highly unbalanced trade. The bilateral trade volume reached 1.08 billion USD in 2020, of which exports from China to Tajikistan made up 1.01 billion USD. The total trade volume was significantly lower than in 2019 (when it reached 1.67 billion USD), probably because of the Covid-19 pandemic. The border post at Kulma was closed for some time, but trade continued through third countries. In general, a significant amount of the goods imported from China enter Tajikistan through third countries, primarily Kyrgyzstan.

Investment: According to World Bank and official Tajik data, Chinese foreign direct investment (FDI) in Tajikistan was worth 262.3 million USD in 2019—that is, almost 75% of all FDI received by Tajikistan in that year. Investment is concentrated in manufacturing, transport, communication, construction, and mining. Cumulatively, between 2007 and 2019, Chinese state-owned and private companies invested 2.87 billion USD, accounting for 29% of the total FDI from 63 countries. For comparison, Russian investment (the second largest after China) was 1.63 billion USD over the same period. For large development projects such as road construction, Chinese companies often successfully compete in tenders of major international financial institutions such as the Asian Development Bank (ADB) or the Islamic Development Bank. In several cases, Chinese SOEs have taken the lead and subcontracted private Chinese companies for the work.

The mining sector is one of the most prominent sectors receiving Chinese investment. Over the past decades, Chinese companies have become dominant in this sector, reviving the exploration of old (Soviet) mines, or taking over concession rights from other foreign companies. Decisions to grant new mining concessions to Chinese companies, such as the rights granted to China’s Kashgar Xinyi Dadi Mining Investment Company to develop the Yakjilva silver deposit in the autonomous region of Gorno Badakhshan in 2019, are locally controversial, even though some of those mines (including the Yakjilva mine, as well as the Pakrut goldmine to be discussed below) were previously under foreign control.

The Pakrut goldmine in the district of Vahdat has attracted local media attention in recent years. The operating company, locally known as LLC Pakrut, obtained the licence for trial mining and exploration in 2004. The licence covered a large area that was at the time owned by Kryso, a company controlled by a well-connected businessman from New Zealand who used his connections with elites related to the Tajik presidential family to set up and maintain his business. When Kryso faced financial problems in 2008, it was saved by Chinese capital. In 2012, the company was officially renamed and formally taken over by China Nonferrous Gold Limited, the controlling shareholder of which is China Nonferrous Metals International Mining Company Limited, a subsidiary of the state-owned China Nonferrous Metals Mining (Group) Company Limited.

In 2019, an investment by China Machinery Engineering Corporation in Tajikistan’s elite-controlled and troubled aluminium plant Talco was announced, adding to China’s economic clout in Tajikistan. The plant, built under Soviet rule, has long been a domestic asset yet is also a marker of the extreme local socioeconomic inequality, providing few benefits for the population. Chinese companies have also become involved in the completion of the Roghun Dam—a key Tajik Government project (and, like the aluminium plant, locally represented as key to the success of the domestic economy), in which a large consortium of diverse foreign engineering companies have been involved for many years.

In the 2010s, Chinese companies also started to invest in Tajikistan’s agricultural sector. The first Chinese agribusiness entered Tajikistan in 2012 and is known in the country as Sinzyan Inkhai. The company involved Huangfangqu Industrial Group, a Chinese SOE from Henan Province, and a private company named Yin Yin Hai Seeds, and cooperated with a Xinjiang-based company for its irrigation system. The company was split in 2014 and today it is the state-owned farm Huangfanqu that continues to engage in plant breeding and marketing and cotton production in Tajikistan. The investment by Sinzyan Inkhai was followed by other larger agribusinesses. In 2013, Lihua Cotton set up a 70%–owned subsidiary in Tajikistan, known locally as Vodii Zarrin (Golden Valley) and in China as Jingu. In 2014, the state-owned Xinjiang Zhongtai Group set up Zhongtai Xin Silu Textile Industry Company, known in Tajikistan as Djuntai (referred to as Zhongtai below). Both agribusinesses have been referred to as Chinese in local parlance despite their official status as joint ventures. They benefited from substantial loans from the Agricultural Bank of China in recent years, as well as the China Development Bank, and their operations were connected around 2017–18, when Zhongtai became a shareholder of the Tajik subsidiary of Lihua Cotton—a fact that is hardly known in Tajikistan and beyond. These two large agribusinesses partner with high-level Tajik elites and engage in cotton production, procurement from local farmers, and processing.

Aid and Other Finance: Loans from Chinese policy banks to Tajikistan have declined over the past years and the last major loan was pledged in 2014. Nevertheless, grants and aid, including projects such as the rebuilding of Tajikistan’s parliament building, are ongoing.

The presence and importance of China and Chinese actors in Tajikistan have gradually evolved since the 2000s. The first significant loans from the Chinese Government through the Export–Import Bank of China (China Eximbank) totalled 603 million USD and were obtained in 2006. As mentioned above, these were provided for infrastructure rehabilitation and the construction of power transmission lines in different parts of the country.

China Eximbank has since remained Tajikistan’s most important creditor, providing large loans to the Tajik state budget. Of all foreign governments, the Chinese provided the most aid to Tajikistan in 2020: 21 million USD—that is, 37.5% of all aid received (directly transferred) in that year. The most recent grant under China Aid was for the construction, contracted to a Chinese company, of a new building for Tajikistan’s national parliament—a project that started in 2020. Through China Aid, the Chinese Government is also supporting the capital city’s public transport network (for instance, by providing buses, which could be seen on the streets of Dushanbe in 2012 and 2021). Since the outbreak of the Covid-19 pandemic, the Chinese Government’s ‘health diplomacy’ has become part of its engagement with Tajikistan through the provision of medical supplies and vaccines.

In 2020, finance for public investment projects provided by the Chinese Government ranked fourth (after the ADB, World Bank, and the European Bank for Reconstruction and Development), and was worth almost 480 million USD (around 14% of the total). In 2021, debt owed to China (mainly to China Eximbank) totalled 1.2 billion USD— about 37%p.14 of the country’s total public external debt. Significantly, whereas Chinese loans remain substantial, China’s share of Tajikistan’s overall debt has decreased over the past few years (from 53.6% in 2016 to 35.6% in 2020).

In addition to loans from China Eximbank, there are additional bilateral agreements between local and other Chinese banks. The Tajik Amonatbank and Agroinvestbank each received loans, from the Chinese Development Bank and the Agricultural Bank of China (ABC), respectively. Agroinvestbank went bankrupt in 2020 and reportedly still owes a substantial debt to the ABC (at the time of writing, Agroinvestbank is in the process of liquidation and rebranding).

Key Controversies in Bilateral Relations

As China’s role in and interactions with Tajikistan have evolved, concerns have emerged around issues of sovereignty, corruption, debt, labour, and the environment.

Military Presence and the Islamic Threat Narrative: An article in The Washington Post in 2019 about the establishment of a Chinese military base in Tajikistan’s eastern Gorno Badakhshan region received significant attention internationally. Neither China nor Tajikistan acknowledged the existence of the base or the presence of Chinese troops in Tajikistan, and public and media discussion of the issue was silenced in Tajikistan. However, international media has continued to track the development of the base.

In October 2021, the construction of another Chinese-funded base, also in the Badakhshan region, close to Tajikistan’s border with Afghanistan, was approved by the Tajik Parliament. While media reported that the base would be manned by Tajik troops, China’s increasing military presence and involvement in defence showcase the Chinese Government’s concerns about stability in Afghanistan and the situation in Xinjiang.

Despite the geographical proximity with Xinjiang and even though the situation of Uyghurs in Tajikistan has increasingly gained international attention, the mass internment of Uyghurs and other Muslim minorities in China’s northwest does not receive any attention in Tajikistan’s state-controlled media. In 2020, a group of lawyers urged the International Criminal Court to investigate the alleged forced repatriation of Uyghurs from Tajikistan to China.

Strikingly, alongside the silence over the situation in Xinjiang, the Islamic threat narrative—mainly concerning the potential radicalisation of Tajik individuals—plays an important role in Tajikistan’s national politics. In 2015, the Tajik Government banned the Islamic Renaissance Party (the only meaningful opposition party). Mosque attendance and expressions of religion in the public realm (such as wearing beards in educational and state institutions) are discouraged and sometimes even forbidden. The probability of radicalisation among Tajik individuals as well the potential implications of the conflict in Afghanistan are instrumentalised by the Tajik Government to gain international support (from the United States and European donors as well as China and Russia) and suppress opposition parties. The threat narrative also plays a role in bilateral relations between China and Tajikistan, as it does in the two countries’ engagement in the SCO, legitimising bilateral defence interactions. China and Tajikistan have undertaken a few joint military drills in recent years and the Chinese Government has provided arms to Tajikistan. As such, the Chinese Government has been active in strengthening Tajikistan’s defence system, in various ways.

Sovereignty: The physical presence of the Chinese military raises concern in Tajikistan and adds to existing anxieties about sovereignty. Chinese companies have become active in Tajikistan’s core industries, producing and trading commodities considered to be strategically important, as mentioned above, including cotton, aluminium, and minerals. Territorial sovereignty is at the core of debates about the growing power of Chinese actors in Tajikistan. These discussions are grounded in the idea that the Tajik Government is selling out land and resources, and were heightened when it ceded 1,000 square kilometres of land along the border to China in 2012. Some external observers and segments of Tajik society associated the move with debt, also considering that the ceded land is rich in mineral deposits, but there is no evidence to back this assumption. This land transfer ended a border dispute between China and Tajikistan that dated back to the late nineteenth century—a time when modern-day Tajikistan and the PRC did not yet exist. The border shift boosted fears that the Tajik Government would cede more land to China in the future—a concern that was augmented by the fact that the ratification of the territorial change happened at the same time as the first large land acquisition by a Chinese company (mentioned earlier). International media triggered anxiety as journalists stated that this acquisition involved thousands of Chinese farmers, which would settle in Tajikistan. However, these statements have proven incorrect. The few large Chinese agribusinesses in Tajikistan mainly lease land from large local landowners. More importantly, most of their staff is local. Fears of further shifts have continued in Tajik media in recent years, partially triggered by statements regarding the border lands in Chinese media.

Social Control: Chinese companies have developed a strong presence in Tajikistan’s telecommunications market. Huawei has become the main player and has supplied all the technology for Dushanbe’s ‘Safe City’ project, providing, among other technology, traffic cameras. The project reportedly involved an investment of around 18 million USD—a sum that is to be paid back with money obtained through traffic penalties.

Debt and Investment: Debt has increasingly been an issue of concern, and discussions of ‘debt traps’ and ‘debt swaps’ often feature in international as well as local circles. The growing imbalance in trade and investment and the significant amount of loans and aid concern Tajik civil society. Questions are often raised about how Tajikistan will repay its outstanding debt, and what the Chinese Government will demand in return.

As mentioned above, in 2019, more than 40% of Tajikistan’s public debt was owed to China. The Tajik state (despite being ruled by a wealthy regime) lacks the capital to rehabilitate various sectors of the economy and has depended on injections of foreign capital since the country’s independence in 1991. The reliance on foreign capital has become structural.

Discussions of debt are often grounded in controversies related to mining concessions. In 2018, Tajik media reported that the government would transfer rights to explore and develop gold deposits at the Upper Kumarg and Eastern Duoba mines to the Chinese company TBEA. Rights to the mines were granted in return for TBEA’s help in obtaining finance from Chinese banks for the construction of the 400 MW Dushanbe 2 thermal power plant (according to a Chinese source dated 2012, this was agreed on at the start of the project, and included three mines). It appears the China Eximbank loan for the power plant was connected to the expected proceeds of the goldmines, which would be used to repay the loan.

Labour and Personal Interactions: Labour is a core issue in relations between China and Tajikistan, particularly because Tajikistan is one of the most remittance-dependent economies in the world. In 2013, remittances equalled almost 50% of the country’s gross domestic product (GDP). The reliance on outbound labour migration results in a fragile and dependent economy and is often raised as an issue in response to the import of Chinese labour. In this context, allocations of farmland to Chinese companies (which are most often joint ventures with local elites) become particularly controversial because a large part of the Tajik labour force engages in outbound labour migration due to the lack of decently paid local jobs. Indeed, particularly in earlier years, debates about Chinese companies and labour concerned the expectation that Chinese companies would bring in their own labour force and employ few locals. However, the Tajik Government justifies Chinese investment with the claim it creates badly needed employment in the domestic economy—a claim supported by research on the ground revealing that Chinese companies increasingly and to a large extent employ Tajik workers. Localisation of the labour force, as well as development in the vocational training of local labourers, points to an evolution in the Chinese approach. Significantly, little attention is given to individual Chinese labour migrants in Tajikistan, with local as well as international media primarily addressing concerns about local workers and labour conditions.

The Tajik Government sets quotas for foreign labour immigration each year, per country, but exceptions can be made for projects deemed strategic or essential for the economy. In addition, there are expectations that companies, once established, will gradually replace their foreign labour force with locals (to around 80%). Observations of the increase in male Chinese labourers in Tajikistan have also resulted in debates about Chinese–Tajik marriages and personal interactions and are often associated with a growth in sex work.

Environmental Issues: Public discourse on Chinese industrial activity and land-use practices in Tajikistan holds that Chinese companies have had significant negative impacts on soil and air quality. According to some lawyers as well as officials from the Tajik state’s environmental protection agency, the industrial activities of Chinese actors have a positive impact of increasing awareness about environmental concerns within local society. Allegations of water or air pollution often lack evidence. The low capacity of the Tajik state—for instance, its environmental protection agency—makes it difficult to assess the impacts of Chinese companies on the environment.

Key Sources

Bitabarova, Assel. 2016. ‘Contested Views of Contested Territories: How Tajik Society Views the Tajik Chinese Border Settlement.’ Eurasia Border Review 6(1): 63–81.

Chorshanbiyev, Payrav. 2020. ‘Тоҷикистон содиротро кам ва воридоти молу маҳсулотро афзуд [Tajikistan Reduced Exports and Increased Imports of Goods].’ Asia Plus,17 April. Link.

Chorshanbiyev, Payrav. 2021. ‘Зиёда аз сеяки кумаки башардӯстонаро Тоҷикистон аз Чин гирифт [Most Humanitarian Aid to Tajikistan was from China].’ Asia Plus,18 January. Link.

Hofman, Irna. 2016. ‘Politics or Profits along the “Silk Road”: What Drives Chinese Farms in Tajikistan and Helps Them Thrive?’ Eurasian Geography and Economics 57(3): 457–81.

Kassenova, Nargis. 2009. ‘China as an Emerging Donor in Tajikistan and Kyrgyzstan.’ IFRI Russei/Nei.Visions (36). Link. Van der Kley, Dirk. 2020. ‘Chinese Companies’ Localization in Kyrgyzstan and Tajikistan.’ Problems of Post-Communism 67(3): 241–50.

Cover Photo: Tajikistan. Credit: (CC) Kalpak Travel.

Historical Background

Although Uzbekistan under Soviet rule did not have any formal diplomatic relationship with the People’s Republic of China (PRC), the authorities in Tashkent established diplomatic ties with the PRC on 2 January 1992. They were the first government in Central Asia to do so in the wake of the collapse of the Soviet Union. Throughout the 1990s and 2000s, while there were regular high-level visits by delegations from the two countries, bilateral relations remained limited mainly to small-scale exchanges of goods. Uzbekistan and China do not share a common border, so the cost of transit, lack of infrastructure, and trade barriers limited economic relations. On top of that, former President of Uzbekistan Islam Karimov (in power from 1991 to 2016) managed to maintain regional and global powers, including China, at a certain distance both economically and politically. 

However, in recent years strategic partnership agreements within the framework of the Belt and Road Initiative (BRI)—in particular, the Joint Declaration on Further Developing and Deepening the Strategic Partnership of 2013 and the Comprehensive Strategic Partnership of 2016—have given fresh impetus to expanding bilateral relations. While historical linkages related to the old Silk Road are often presented as a bedrock for political and economic relations between the two countries, it is Uzbekistan’s energy and mineral resources, strategic location, and the market for Chinese goods that draws Chinese interest today.

BRI Status

Uzbekistan was relatively late in developing significant economic ties with China in Central Asia. However, thanks to its strategically important location along the overland route to Middle Eastern and South Asian markets and abundant natural resources, the country is becoming one of the key pillars of China’s Silk Road Economic Belt (SREB)—that is, the section of BRI in Central Asia. Under the rubric of the BRI, energy and industrial projects have expanded, as have infrastructure and communication networks in Uzbekistan, thus enhancing the country’s participation in the new, China-centred Eurasian economic and geopolitical order. Yet, the impact of closer economic and political ties with China remains to be seen.

Current Economic Relations

The economic liberalisation of Uzbekistan under President Shavkat Mirziyoyev, who took power in 2016 after the death Islam Karimov, has boosted trade relations with China. Mirziyoyev’s new ‘open doors’ policy is now encouraging external investment on an unprecedented scale. Beijing, in turn, has capitalised on the economic reforms in Uzbekistan, which have improved the investment climate and now provide better protection of the legal rights and interests of foreign businesses. This surge of Chinese investment has been openly welcomed by the new Uzbek leadership. As a result, in less than a decade, China has turned into Uzbekistan’s largest trading partner, source of imports, and destination of export goods. 

Bilateral Trade: As Uzbekistan’s top trading partner, China now accounts for almost 20% of the country’s foreign trade. Since 2016, China has eclipsed Russia to become the largest exporter of goods and technologies to Uzbekistan. China replaced Russia as the top destination for Uzbek products even earlier, in 2013. Uzbekistan’s overall trade turnover with China amounted to 6.26 billion USD in 2018, a nearly 50% increase compared to the previous year. In 2019, the trade turnover between the two countries reached 7.6 billion USD. The price advantage of Chinese finished goods—including consumer products, machinery, processed foodstuffs, textiles, shoes, electronic goods, pharmaceutical products, and automobile parts—well suits local consumers with low purchasing power. In exchange, Uzbekistan exports mainly raw materials to China. 

Investment: China has also become the largest single investor in Uzbekistan, with the energy, industrial, and infrastructure sectors receiving the lion’s share of investment. As of November 2019, Chinese investment in Uzbekistan exceeded 9 billion USD. In May 2017, President Shavkat Mirziyoyev returned from his first official visit to China with around 100 deals worth 20 billion USD. This new investment package is expected to significantly expand Chinese economic presence in Uzbekistan, particularly in the joint production of synthetic fuel (3.7 billion USD), oil industry (2.6 billion USD), power-generation plants (679 million USD), and railroad infrastructure development agreements (520 million USD). No update has been released on the extent to which these funds are being used so far. Backed by primarily Chinese funding, Uzbekistan is also building a 1.7-billion-USD international business and financial hub in Tashkent. In 2020, over 1,650 Chinese-invested enterprises employing more than 20,000 people were active in Uzbekistan, with almost one-third of them established in 2019 alone. 

The energy sector is a priority in the cooperation between China and Uzbekistan. A joint investment fund with an authorised capital of 1 billion USD between Uzbekistan’s Ministry of Investment and Foreign Trade and China’s state-owned enterprise CITIC to implement high-tech projects in the petrochemical and hydrocarbon industries was created in 2019. In late 2020, the Uzbekistan-China Intergovernmental Cooperation Committee was finalising the list of projects to receive financial support from that fund. The sale of raw materials, such as natural gas, uranium, copper, and mineral fertilisers, is the most lucrative area in cooperation with China, and it accounts for over 50% of Uzbek exports. The most significant of these commodities is natural gas. One of the largest deals landed by the Uzbek leadership was 1.2-billion-USD financing for a project for the production of synthetic liquid fuel at Shurtan, Uzbekistan’s largest gas refinery complex. In 2011, the Uzbek authorities signed a bilateral agreement to supply 10 billion cubic metres of gas annually to China via the Line C of the Central Asia–China Gas Pipeline for 25 years.

For Uzbekistan, like the rest of Central Asia, Chinese loans for rail and road infrastructure are crucial. Transport infrastructure in the country is both inadequate and outdated, and only Beijing currently has the willingness and financial resources to invest in large infrastructure projects. Western governments refrain from investing in large-scale projects and prioritise local community engagement, while Russia has inadequate funds to promote expensive initiatives in Uzbekistan. Besides, China is willing to engage in the most technologically challenging projects. For instance, China has recently completed the construction of the Angren–Pap railway, the longest of its kind in Central Asia and a new link in the transportation corridor connecting China to Kyrgyzstan and Uzbekistan. The 455-million-USD Kamchiq tunnel (19.2 kilometres long) in Uzbekistan was built by the Chinese in just 900 days to link the capital city Tashkent to the resource-rich Fergana valley.

Aid: China has used foreign aid as a regular diplomatic tool in its bilateral relationship with Uzbekistan since its independence. While no official statistics are available, official announcements and news reports show that China committed grants or interest-free loans to Uzbekistan in at least the following years: 1996, 2001, 2005, 2006, 2008, and 2009. According to a Chinese media report, by 2017 there were over 40 projects in Uzbekistan that were funded by Chinese grants in sectors such as education, health care, customs, culture, agriculture, water and electricity supply, and security. Lately, China has started to cooperate with Uzbekistan on the poverty reduction front, as the two countries signed a joint Uzbek-Chinese intergovernmental research project in October 2020.

Key Controversies in Bilateral Relations

Energy: Line C of the Central Asia–China Gas Pipeline was launched in 2015 when the country itself was experiencing a shortage of energy for domestic consumption. Natural gas for local consumers is heavily subsidised by the Uzbek government and is no longer a source of national revenue. This explains the authorities’ willingness to export gas for higher prices to China, even at the expense of local consumption. However, increased export of natural gas to China has caused discontent among Uzbek citizens, as it causes scarcity of gas for domestic use, especially during cold winter months. 

Limited contribution to local economies: Uzbek authorities often emphasise that BRI infrastructure projects, along with transforming the country into a strategically important transit territory, will boost the domestic economy—raising living standards, expanding local business and production, and offering new employment opportunities for the local people. The fact that some flagship BRI projects have not materialised and, even where they have, these promises have remained largely on paper, has raised concerns among the public. For instance, a Nurken village nearby Khorgos dry port was supposed to expand into a city of 100,000 but it is still inhabited by less than 2,000 people and has underdeveloped infrastructure. In addition, as in other Central Asian countries, the fact that most of the materials, technology, equipment, and services necessary for the implementation of the projects financed by the Chinese were procured from China has also caused domestic tensions.

Emerging cyber-security risks: Investments in telecommunications have also become a prominent area of bilateral cooperation. In April 2019, two Chinese companies—Huawei and CITIC Guoan Information Industry—announced in a meeting with the Uzbekistani president Mirziyoyev that they would invest up to one billion USD to enhance the digital infrastructure of the country. In August 2019, during president Mirziyoyev’s visit to China, Huawei signed two Memorandums of Agreement with Uzbekistan’s Ministry for Development of Information Technologies for the implementation of ‘safe’ city projects throughout Uzbekistan, which involve surveillance and video monitoring technology that supposedly can enhance the capabilities of law enforcement, and for the application of modern ICT technologies in emergency medical services. At the same time, Uzbekistan reportedly secured a 150-million USD loan from China for upgrading the country’s existing cellular network to 4G country-wide and 5G in select regions by 2023 using Huawei equipment. Almost all contracts to install and operate advanced communication technologies are currently won by Chinese companies, aligning the country’s national policies on connectivity and cybersecurity standards to those of China. According to Liu Jiaxing, Head of Huawei in Uzbekistan, security provided by such surveillance systems will help promote foreign investment in the country. The fact that Chinese-made surveillance systems are being installed now in Uzbekistan, however, is causing concerns among Uzbekistani citizens.

Sovereign debt concern: Evidence suggests that the foreign debt has surged after Uzbekistan participated in a number of large BRI projects. External debt doubled between 2013 and 2019, reaching 21.7 billion USD in 2019, partly due to the inflow of Chinese loans. As of January 2021, Uzbekistan owes China Development Bank (CDB) and Export–Import Bank of China (China Eximbank) 2 billion USD each, out of its 21.1 billion USD of outstanding public external debt. As such, China is the largest bilateral creditor of Uzbekistan’s. Rapidly rising foreign debt to a single creditor—China has already become one of the major concerns for all Central Asian countries, including Uzbekistan.

Key Sources

English-language Local Media:

Local media outlets in English include KUN.UZ and Uzbekistan Daily. Regional news can be found on the Central Asian Bureau for Analytical Reporting and on Eurasianet.

Books, Reports, and Scholarly Articles:

• Central Asia Data-Gathering and Analysis Team Research Project. 2019. ‘BRI in Central Asia Data Review Series 20–27.’ OSCE Academy in Bishkek website. Link.
• Dadabaev, Timur. 2018. ‘The Chinese Economic Pivot in Central Asia and Its Implications for the Post-Karimov Re-emergence of Uzbekistan.’ Asian Survey 58, no. 4: 747–69.
• Laruelle, Marlene. 2018. China’s BRI and Its Impact in Central Asia. Washington D.C.: Central Asia Program, The George Washington University. Link.
• Limanov, Oleg. 2020. ‘Uzbekistan–China Relations During the Covid-19 Pandemic.’ Cabar.asia, 1 June. Link. Sim, Li-Chen and Farkhod Aminjonov. 2020. ‘Central Asia in BRI: Policy-taker or Policy-shaper?’ In Regions in the Belt and Road Initiative, edited by Jonathan Fulton. New York: Routledge.

Cover Photo: iltelegrafo (CC).