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China's Policy In Central Asia Through The Prism Of Strengthening Of Trade And Economic Relations Within The “Silk Road Economic Belt”

Monday, September 19, 2016 - 03:44

In today's accessible and sufficiently integrated world, the issues of creation of regional economic groupings are actualizing. Today, most countries of the world, regardless of their levels of socio-economic development, strive to enter into the world economic system, trying to adequately respond to external development factors of the era of globalization and modernization.


China is one of the major regional powers in CA. Solving basic economic problems, these powers have faced the need to attract the Central Asian countries to economic projects through enhanced trade and economic relations.


One of the first steps taken towards solving the various problems was the establishment of the Shanghai Cooperation Organization (in 1996, Russia, China, Kazakhstan, Kyrgyzstan and Tajikistan signed an agreement on establishment of the “Shanghai Five,” which became the SCO in 2001).


In 2005, at a meeting of prime ministers of the Shanghai Cooperation Organization, China put forwards the proposal to transform the SCO into an economic union. That is, back then there were attempts to expand China's economic presence in the region and beyond.


China's greater influence on the region's economy is quite noticeable; it is exerted within the framework of integration projects. One of the major Chinese projects is the “Silk Road Economic Belt” (SREB), which is actively promoted simultaneously with the SCO economic projects. The idea of the “Silk Road Economic Belt” first emerged in 2013. It is much later than the negotiations on establishment of the Eurasian Economic Union began. For reference, the talks regarding this significant integration union within the former Soviet Union space started in 2010.


At the end of 2015, on the basis of the proposals put forward at the Fifth Plenum of the CPC Central Committee, there was formed a project plan for China's development during the 13th Five-Year Plan. According to US experts, the main task of this period was to generally improve the quality of life: to ensure a moderately strong economic growth, to increase the share of consumption in GDP, to improve the quality of water and air. One of the key goals was set back in 2010: to double the real GDP and real incomes of the population by 2020. Now, according to the official government estimates, the average annual GDP growth should stand at 6.5 percent for the next five years for this goal to be achieved. Maintaining economic growth is the priority for these five years. The SREB project was included into the plan of the 13th Five-Year Plan of China's economy for the period 2016-2020.


The meaning of the project is to create “belts” that run in several directions. This includes scientific, technical, agricultural, tourism, informational and trade areas, as well as transport and energy. For all of these fields, plans are afoot to create free trade zones, which should include not only China and Central Asia, but also Eastern and Central Europe. The main idea of the project lies in the convergence of Europe and Asia.


Worth noting, the two major integration projects share a common goal: namely, the union of regions. It is supposed to be led by China within the SREB, and by Russia within the EEU. However, the projects have different value in terms of content and implementation.


In recent years, Beijing is increasing its economic weight in the region of Central Asia with the help of an active trade policy and the activities of transnational companies. This aspect is particularly actualized, given the fact that the activities of all major Chinese investors are controlled by the Chinese government. In turn, the government's investment policies are guided by the interests set forth by the Communist Party of China.


The main geopolitical basis of the issue is the intensification of China's trade and economic relations with the countries of the region. It is associated mainly with the beginning of the “great game” for influence in the Caspian and Central Asian regions, where China's modified foreign policy guidelines are of great importance. It is about the latent military-political rivalry, and the more than noticeable trade and economic rivalry between China and other regional and global powers.


Most experts agree that the “Silk Road Economic Belt” will give China back its former strength and the position of the “Middle Kingdom.” Of course, China needs new kinds of transportation routes, and the SREB should be seen no longer as a major integration project, but as a project of investments in construction of transport and logistics links.


China has the world's largest seaports, from where the goods produced by the Chinese industries flow out into the world. One of the major unsolved problems within China is the lack of development and the isolation of the western part of the country. Deliveries of energy resources to China and exports of goods from the country – all this depends on those who control the ocean. And the Pacific Ocean and the straits are controlled by the Americans. China wants to escape from this geo-strategic environment. Such an escape is possible only through the west: Central Asia, Iran and Russia.


The Initiative “Silk Road Economic Belt” has attracted much attention of the world community and is already being implemented in practice. An evidence of this is the creation of the Asian Infrastructure Investment Bank under the auspices of the PRC with a registered capital of $1 billion. The Central Asian countries participate in this structure and consider creation of the SCO Fund.


Presenting their concept, the Chinese leader formulated a program of action that consists of five steps:


  • - Strengthening of coordination of the CA countries in the political sphere;
  • - Intensification of construction of the single road network;
  • - Development of trade by eliminating barriers to trade, reducing trade and investment costs, improving the speed and quality of economic operations in the CA region;
  • - Increasing foreign exchange flows by means of transition to payments in national currencies;
  • - Strengthening of the role of public diplomacy, expansion of direct links between the peoples of the CA region.


The governments of the Central Asian states are interested in the implementation of these concepts. This project will solve the serious problems related to the three important aspects of national development. They are: modernization of the obsolete road and rail infrastructure; foreign direct investment; intensification of trade and economic cooperation during the difficult period that follows the sharp decline in prices for energy and other commodities on the international market. Strengthening economic and trade relations with Central Asia is a necessity step for both sides. It will enable them to fulfill their own trade and economic interests on the basis of mutually beneficial cooperation.


However, the Chinese side does not rely on creation of a particular structured formation that would give the CA countries a “sense of tranquility.” One of the main modern concepts that reflect the reality is the peaceful coexistence of neighbors. China's foreign policy adheres to a number of similar principles. Namely, they are: maintaining friendly relations with the neighbors, giving the neighbors a sense of tranquility; the principles that reflect the security and peace issues in the CA region; and the last but not the least principle for the countries of Central Asia – helping neighbors to get richer. The latter means, China's neighbors are supposed to retrieve their own benefits, just like China does.


China proposes to consider the “Silk Road Economic Belt” as a variant of an integrated formation that pursues primarily the interests of creating a unified network of railways and motorways. Such a network will ensure both mutual trade between China and Central Asia, and transit trade between the Asia-Pacific region and Europe. The most discussed project is construction of the railway “China – Kyrgyzstan – Uzbekistan.” The main railway line will have a length of 268 km. It will run along the route: “Kashi (China) – Torugart – Arpa Valley – Ferghana Ridge – Uzgen – Kara-Suu (one of the country's largest markets) – Andijan (Uzbekistan).


Considering the prospect of such cooperation between China and Central Asia, many experts note the strengthening of complementarity of the economies included in the “Silk Road Economic Belt.” The project advantageously removes the barriers that exist today in the trade and economic relations, and contributes to formation of new free trade zones. However, all this can be possible only on the basis of all parties' mutually beneficial participation in the strengthening of trade and economic relations. The basis for such promotion should be the establishment of common rules for functioning of the Silk Road. This involves development of a single tariff for the transit of goods, customs clearance, etc.


Most experts agree that the official Beijing is aiming at gradual involvement of the CA region in the contact line of China's geo-economic influence. The Chinese economic policy is aimed primarily at development and importation of mineral resources, as well as all-round promotion of exports of Chinese goods and services.


It must be said that over the twenty-odd years since the collapse of the Soviet Union, China has been using Central Asia only as a source of raw materials, which it used for manufacture and subsequent exports of finished products. This speaks about the CA region's status of the “raw materials appendage” of China. Such “cooperation” can lead: a) to a deepening of the crisis of production capacities in the CA region, which will create an imbalance and call into question the usefulness of the CA countries' participation in the SREB project; or b) to development of the CA region, on the basis of the alternative position. In general, China's presence in the Central Asian region can be seen as a guarantor of safe coexistence.


During the presentation of the book “History of Afghanistan,” Kazakh expert S. Akimbekov said: within the SCO, China supports security stabilization in Central Asia. In the region, there has formed a system of geopolitical conflicts that were affecting the situation until 2001. An even more pressing security issue is related to the 2014 withdrawal of the coalition troops from Afghanistan, and the USA's desire to “tie Afghanistan and the Central Asian region into a tight knot. According to the expert, the project “Silk Road Economic Belt” expands Afghanistan's possibilities in economic and trade terms.


On the other hand, a Kyrgyz analyst wrote: the factors that are supposed to strengthen the trade and economic relations are actually exacerbating the danger to the region. It lies not in the processes of economic cooperation with China, but in their dynamics, in their one-sided orientation. Given the huge differences in the economic and demographic potential of the collaborators, it will turn into expansion of the dominant side.


Most of the discussion regarding China's economic policy end with rather abstract conclusions about China's leadership in the Central Asian region. It is not clear: what type of leadership is in question? And will this leadership be limited to the benefits in the use of local natural resources and transport routes? Or are we talking about a more global presence of China on the cultural and ideological level? The latter option may be considered as Beijing full-scale political influence on the Central Asian region.

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