Foreign Relations / Economy / Kazakhstan / Kyrgyzstan

Op-Ed: Chinese trade games with the Central Asian neighbors

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18-07-2018, 12:01
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Why was a package of documents sent to Beijing from Xinjiang to suspend the creation of the Free Trade Zone (FTZ), which was planned to be launched this year on the Kazakh-Chinese border?

Op-Ed: Chinese trade games with the Central Asian neighbors
Image credit: stratfor.com

The FTZ was planned to open on the border with the XUAR (Xinjiang Uyghur Autonomous Region) in the East Kazakhstan region at the Bakhty checkpoint.

By the way, a zone of so-called border trade was already created there several years ago. In 2013, a "green corridor" was officially launched at the checkpoints "Bakhty" - "Pokita" for expedited trade of agricultural produce, in particular, fruits and vegetables. Bakhty was reconstructed with a separate lane for cars with priority goods.

In general, there were many reasons for opening a full-fledged FTZ with China in this village. The local infrastructure has a promising potential, in addition, the more or less established relationships between the two border areas in the sphere of business partnership is a propitious sign.

However, XUAR decided to deepen bilateral trade not with Kazakhstan, but with the Kyrgyz checkpoint Aksu. The move that bewildered many political experts.

First of all, people in Kyrgyzstan aren’t happy about deepening relations with the huge Chinese market. There have been numerous rallies and protests against the so-called Chinese expansion. The have all reasons to be afraid of such possible threats. Each year, Kyrgyzstan becomes more and more influenced by the Chinese. Beijing is now the biggest creditor, after pushing out Russia and European creditors, for the Central Asian country of a little more than five million.

In 2007, the Kyrgyz debt to China was 8.5 million US dollars, after a decade it is 1.7 billion US dollars. Various Chinese goods hit the shelves of Kyrgyz shops too fast and easy.

According to Kyrgyz 2016 statistics, imports of goods from China amounted to 1.5 billion US dollars. The Chinese have the same figures for supplies, at times more - according to their data, from China to Kyrgyzstan. Imported products are worth 5 billion US dollars. It is clear that the information on imports is greatly underestimated, and it must be understood that the lion's share of the Chinese goods simply cannot be accounted for, and the Kyrgyz side annually loses a huge part of its revenues.

With all this in mind, it becomes obvious as to what caused the rejection of building up partnership with Chinese businessmen from Kyrgyz colleagues, and simply ordinary people. While the whole country is dragging itself deeper into the debt trap arranged by the Chinese authorities, citizens of Kyrgyzstan, in particular, residents of the bordering areas, fearfully expect a greater influx of Chinese consumer goods into their markets and bazaars. After all, this means losing competition to the cheap Chinese goods and even colossal loss of jobs and income for everyone.

For the same reason, the opening of the FTZ in Aksu and for the Chinese side is unprofitable. Not only is there no inspiration from the other side, the situation in the country is quite complicated. In Kyrgyzstan, perhaps, people are accustomed to constant political unrest and instability prevailing in the state, but for the Chinese who prefer order and stability, such moods in the people's and political masses is not acceptable. Short and long-term stability are important for any business, and in the case of “Kyrgyz realities”, it is most likely not to be expected.

In this global respect, Kazakhstan, of course, looks better. There is stability in the country, both political and economic. And there are much more examples of bilateral successful cooperation between the border regions of these two countries than in the case with Bishkek.

For instance, Khorgos checkpoint is a great example! Not even Russians could build such a center of cross-border partnership.

One should understand that the transfer of the FTA to the Kyrgyz Aksu from Kazakhstan's Bakhty will negatively affect the development of the border infrastructure and, in general, the expansion of the Kazakhstan transit potential. And this is a minus for the Chinese interests, who are benefiting from the growth of Kazakhstani transit, in particular, through their territory and, therefore, losing as a result of the deterioration of the common border base.

In any case, there is not much potential at the free trade zone in the Kyrgyz Aksu, as there could be on the border with Kazakhstan -- a partner more reliable and predictable, more stable in the long-term than Kyrgyzstan.

In any case, it is more profitable to cooperate with the Kazakh side, their business partner, who has been time-tested and ready to establish a trade partnership. Whereas with Kyrgyzstan, no one can be sure this deal will see fruition.

 

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