China's Silk Road in the Spotlight as Xi Heads to Kazakhstan

By Shannon Tiezzi

May 08, 2015

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Kazakhstan, the first stop on China’s Silk Road Economic Belt, is of growing strategic importance to Beijing. 

Before making his way to Russia for the Victory Day celebrations, Chinese President Xi Jinping made a one-day stopover in neighboring Kazakhstan. The Central Asian state is of growing diplomatic and strategic importance to China, a fact reflected in Beijing’s attention on the region in recent years.

Kazakhstan is crucial to getting China’s Silk Road Economic Belt off the ground, which is why Xi first announced that initiative during a visit to Astana in September 2013. Since then, Kazakhstan has become a major site of Chinese investment. During Premier Li Keqiang’s visit in December 2014, China and Kazakhstan signed a framework deal that will see the two countries cooperate on infrastructure, energy, and housing deals worth over $14 billion. When Kazakh Prime Minster Karim Masimov visited China in March, the two countries signed more deals worth another $23.6 billion, this time focusing on industrial capacity in the steel, oil refining, hydropower, and automobile sectors.

Despite this, the two countries will have a hard time meeting their goal of increasing their bilateral trade volume to $40 billion this year. Last year, according to statistics from China’s Ministry of Foreign Affairs, China-Kazakhstan bilateral trade was worth only $22.4 billion, which actually represented a 21.5 percent year-on-year drop from the over $28 billion in trade in 2013.

Petroleum is Kazakhstan’s top export, but the country is seeking to improve its industrial capacity in order to wean the economy off reliance on the energy sector. China is interested in helping with this transformation as part of the Silk Road Economic Belt’s development. However, China also seeks increased access to Kazakhstan’s natural resources. An oil pipeline linking Kazakhstan and China provided China with more than 86 million barrels of oil in 2013.

Most intriguingly in geopolitical terms, Kazakhstan increasingly sees China as the answer to over-reliance on Russia, particularly given the hurdles facing the new Eurasian Economic Union. Xinhua spoke with Aidar Amrebayev, head of the Institute for World Economy and Politics under the Foundation of First President of Kazakhstan, who said that Kazakhstan can overcome the difficulties posed by Russia’s economic downturn and the ruble’s decline by taking part in the Silk Road Economic Belt.

An op-ed in the Astana Times praised the close, “mutually beneficial” relationship between China and Kazakhstan. The piece noted economic cooperation on energy as well as infrastructure projects. However, the piece also emphasized that China-Kazakhstan cooperation “is not just about trade and investment. It is about shared values, reflected in the two countries’ foreign policy.” In particular, the two countries must cooperate to fight against extremism and terrorism in the region, the piece argued. “Working together will help both countries achieve their domestic and international ambitions,” Astana Times concluded.

For China, Kazakhstan’s importance indeed extends far beyond economics. The Central Asian state is not only an important energy source and investment destination for China – cooperation with Kazakhstan has clear links to security in China’s Xinjiang province. China hopes that the Silk Road Economic Belt will boost Xinjiang’s economic fortunes, and that this growth will help quell ethnic tensions in the Uyghur Autonomous Region. Kazakhstan, which shares a lengthy border with Xinjiang, is seen as first step on Silk Road that will make economic development possible.

China has been encouraging investment in Xinjiang by touting links to Silk Road Economic Belt, including setting up a cross-border free trade zone at Horgos (also known as Khorgos), now officially described a major “land port” for the Silk Road. But making good on the Silk Road will require substantial investments in Kazakhstan as well — for example, the Kazakh side of the Horgos FTZ remains underdeveloped and poorly linked to Kazakhstan’s major cities. Still, Astana Times at least has high hopes for the project: “The importance of Khorgos to Kazakhstan should not be understated. It already acts as a strong driver of economic growth in the Almaty Oblast and Kazakhstan as a whole and will spur economic growth across the whole of Eurasia.”