China and Central Asia: Bright Prospects for Economic Cooperation
Bilateral energy cooperation has been the highlight. Since its official operation in 2006, the China-Kazakhstan oil pipeline, with a total length of over 1,200 km, has delivered over 50 million tons of crude oil to China. A 10,000-km-long China-Central Asia natural gas pipeline, starting from the border between Turkmenistan and Uzbekistan in the west, across central Uzbekistan and southern Kazakhstan, since its inception in 2009, has transferred over 50 billion cubic meters of gas to China. Turkmenistan is thus the largest gas supplier to China – accounting for 51 percent of China’s gas imports.
“China’s energy cooperation with Central Asian countries is strategically important,” Xing Guangcheng, director of the Research Center for Chinese Borderland History and Geography, under CASS, said. He added that the China-Central Asia gas pipeline benefits several countries, not only China as the importer, but also Kazakhstan and Uzbekistan where the pipeline crosses. Both countries gain income from fees for allowing the pipeline to transverse their land.
During Xi Jinping’s visit to Turkmenistan, the two sides reached agreement on speeding up construction of Line C of the China-Central Asia gas pipeline, while initiating construction as soon as possible to ensure Line D could be completed by 2016. It is predicted that by 2020, yearly natural gas exports to China from Turkmenistan will surpass 65 billion cubic meters.
In its mid-term development strategy plan, the SCO in 2012 proposed to strengthen member countries’ cooperation in finance, energy and interconnectivity, setting up financing guarantee mechanisms and tapping member states’ transit shipment capacities.
China is now actively advancing cooperation with Central Asian countries on railways, highways, aviation, telecommunications, power grids and energy pipelines, to improve interconnectivity. Meanwhile, China is also expanding cooperation with Central Asian countries in such fields as logistics, people’s mobility, cash flow, and information flow. At the 2012 SCO summit, China committed to providing US $10 billion in loans to Central Asian countries, to be used for infrastructure construction like railways, highways, optical cables, as well as oil and natural gas pipelines. Meanwhile, many Chinese companies have become contractors for infrastructure projects such as highways, telecommunications and power facilities in Central Asian countries.
In ancient times, the main means of transport on the Silk Road were camels and horses. Nowadays, highways, railways, oil and gas pipelines, as well as air routes, form a diversified multidimensional modern Silk Road, Wu Hongwei, director of the Central Asian Studies Section, under CASS Institute of Russian, East European and Central Asian Studies, observed.
Bilateral cooperation in the financial sector is greatly anticipated by Central Asian countries. China’s overall investment in Kazakhstan is over US $20 billion, and credit financing in various forms also exceeds US $30 billion. In 2012, China provided a total of RMB 560 million to Central Asian countries as non-reimbursable assistance.
Chen Yurong, director of the Central Asian Studies Section under the China Institute of International Studies, indicates that China and Central Asian countries should implement currency swaps and local currency settlements in current accounts and capital accounts as soon as possible. This will avoid exchange-rate risks and lower circulation costs by reducing intermediate links. Removal of financial barriers will greatly facilitate trade and investment. On September 26, 2013, a forum in Xi’an focused on accelerating the establishment of a special SCO development bank to spur new vitality and a long-term driving force toward pragmatic regional cooperation.
A Promising Future
The dream of revitalizing the Silk Road has never dimmed for the countries along it.
In November 2007, the sixth ministerial meeting of the Central Asian Regional Economic Cooperation held in Duschanbe, Tajikistan, passed a US $18 billion strategic plan. The plan aims to build up a modern Silk Road of importance similar to its ancient role, turning Central Asia into a trade hub connecting Europe and Asia by improving its transport network of highways, railways, air transport and sea freight.
