The Diplomat: Central Asia – economic alternative for China

The Diplomat: Central Asia – economic alternative for China

World’s top largest economy China views Central Asia as an economic alternative amid uncertainty in relations with its major trading partner, USA. Such point of view has been voiced by James Grant, junior fellow at the American Foreign Policy Council, in his article, posted by The Diplomat.

USA and China have reached last week Phase One in trade deal, implying Chinese commitments to increasing “their purchases of manufactured goods, agricultural goods, energy products and services by at least $200 billion over the course of the next two years”.

US made concessions and agreed to cut down tariffs on $120 billion of Chinese goods from 15 % to 7.5 %. The expert called the agreement “an armistice in the trade war” rather than “a peace-treaty”.

It’s no wonder, then, that – even as it continues its negotiations with the U.S. – China has begun pivoting to its regional neighbors, noted expert, stressing that China losses the faith in its largest trading partner, the US.

China’s impetus to foster economic relations with other advanced markets has become more urgent. This is one of the many drivers behind China’s multi-billion Belt and Road Initiative (BRI).

Central Asia is the biggest promise for Beijing. The backbone of the BRI is the Silk Road Economic Belt, an overland network of infrastructure corridors connecting Chinese goods to European consumers via Central Asia.

Moreover, the Silk Road also plugs resource-hungry China into Eurasia’s vast raw material wealth – Turkmenistan’s natural gas, Afghanistan’s rare-earth minerals, Kazakhstan’s oil and uranium deposits.

Proving his opinion, the author mentioned that Turkmenistan and Kazakhstan cover 15% of China’s natural gas needs. For instance, last year state-owned KazTransGas signed a five-year export deal to deliver up to 10 billion cu m per year to China.

China’s official Silk Road Fund has already invested in the Astana International Exchange, and both the China Development Bank and China Construction Bank are looking to provide lending for new infrastructure projects.

“As seen from Beijing, this involvement makes good strategic sense. China is actively looking for partners to show that the BRI is a truly international project, rather than simply a geopolitical expansion plan”, underlined the author.

With bilateral ties between Beijing and Washington still far from promising, China is facing a new level of urgency to increase the breadth and depth of its alternative trade ties. The Belt and Road Initiative remains its best tool in this regard. Central Asia would benefit by serving as the physical and financial bridge for Beijing to new markets, concluded the researcher.

Meanwhile, World Bank’s April research “Common Transport Infrastructure – A Quantitative Model and Estimates from the Belt and Road Initiative” argues that Central Asia regions, the most active in terms of BRI projects, are expected to increase their GDPs by 1.46 %.

Estimates suggest that thanks to BRI, Europe and central Asia will expand their trade with Middle East and North Africa, within its own region, non-BRI-area.

However, ahead of any benefit become reality, it is estimated that US $ 50 billion worth costs have to be invested by BRI into transport infrastructure of five Central Asian countries.