China - Kazakhstan economic relations in the context of the "Оne belt, one road" initiative

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Hunan university of science and technology

School of business

China - Kazakhstan economic relations in the context of the «Оne belt, one road» initiative

Gelvig S.Yu. - PhD candidate

Hunan, China

Annotation

Nowadays, on the account of rapidly changing conditions of the world's economy, developing countries and their economic strategies are generating special interest. Regional integration is an essential step in the process of economic globalization. Currently, countries of Central Asia are creating joint projects of an impressive scale, and one of the most vivid examples is the Chinese “One Belt, One Road” initiative. Together with the Kazakhstan's “Nurly Zhol” project, this line of collective cooperation is exerting an increasingly growing influence not only on the Kazakhstan's economy, but also on the economic trends of all Central Asian countries. The author conducted an original analysis of the positioning for modern economic component in China-Kazakhstan relations, examined the nature of its influence on the development of Kazakhstan' s economy and further prospects for cooperation in this direction.

Keywords: China, Kazakhstan, “One Belt, One Road”, economy, integration.

Аннотация

Китай и Казахстан: новый уровень развития отношений в контексте инициативы «Один пояс, один путь»

Гельвиг С.Я. - кандидат PhD, Хунаньский университет науки и технологии, КНР

На сегодняшний день в виду быстроизменяющихся условий мировой экономики особый интерес представляют развивающиеся страны и их экономические стратегии. Региональная интеграция является обязательным этапом процесса экономической глобализации. В настоящее время страны Центральной Азии создают совместные проекты грандиозного масштаба, ярким примером которого может служить китайская инициатива «Один Пояс, Один Путь». Совместно с Казахстанским проектом «Нурлы Жол» это направление коллективного сотрудничества оказывает все более возрастающее влияние не только на казахстанскую экономику, но и на экономическую динамику всех стран Центральной Азии. Автором проведен оригинальный анализ позиционирования современной экономической составляющей отношений между Казахстаном и Китаем, рассмотрен характер ее влияния на развитие экономики в Казахстане и дальнейшие перспективы сотрудничества в данном направлении.

Ключевые слова: Китай, Казахстан, «Один Пояс, Один Путь», экономика, интеграция

Introduction

One of the main footstones in the process of economic globalization is regional integration. However, it should be understood that regional cooperation in Asia is fundamentally different from Europe or North America. This is particularly evident in inequality development and the lack of close links between the various sub- regions of Asia, which create considerable obstacles to the deepening of regional cooperation. The concept of the new Silk Road Economic Belt is precisely aimed at establishing links between sub-regions, such as Central Asia and Eurasia, which will facilitate mutually beneficial exchange and inestimable advantages, will allow to establish and improve supply chains, goods production and pricing throughout the Asian region. Therefore, Asian and Eurasian regional cooperation will grow to a qualitatively new level.

For Kazakhstan, partnership with China is important for a number of reasons: President Nazarbayev oft-proclaimed that the fundamental priority for Kazakhstan's foreign policy is relations with neighboring Russia and China. At the same time, if cooperation with Russia is carried out within the framework of the Eurasian Economic Union (EAEU), close collaboration with China is going in the direction of revival of the Great Silk Road. The ancient Silk Road ran through the entire territory of Kazakhstan, which occupies a key position along the way and is the main trans-shipment point linking China with Central Asia. For instance, Almaty city, located in the south of the country, has long served as an important transit port through which trade links between China and the West have been conducted. Central Asian states, including Kazakhstan and Uzbekistan, are not only playing important roles in the joint creation of the Silk Road Economic Belt, but at the same time, during the process of participation, they can gain a solid profit and get a rich return.

Kazakhstan is genuinely interested in expanding cooperation between countries throughout the Euro-Asian space for a variety of reasons. Among them, the geopolitical aspect is one of the main ones. The new economic program “Nurly Zhol - The Way to the Future”, put forward by the Ex-President of Kazakhstan Nursultan Nazarbayev in 2014, closely echoes with the concept of the Silk Road Economic Belt. These policies also include other priority strategies and objectives, such as improving of transport and logistics infrastructure, reviving the industrial infrastructure, strengthening of housing communications and etc. In this context, common points of contiguous interests remain between China and Kazakhstan.

Based on long-term relationship, strategic partnership and trade cooperation between China and Kazakhstan, construction and combining of the Chinese “One Belt One Road” initiative and Kazakhstan “Nurly Zhol” is the promising start for Kazakhstan economy development. According to the current research, the construction of this infrastructure will have a direct impact on the level of labor division between Kazakhstan and China, flows of foreign investments, development of goods production and improvement of transport infrastructure. In terms of investment, it has also played a larger role, attracting investment from China and other countries in Kazakhstan, expanding the market scope and forming a scale economy. economic integration china kazakhstan

According to A.M. Amrebaev, Candidate of Philosophy, Honorary Professor of East China Pedagogical University, from the Kazakhstan's point of view, firstly, this project opens up various opportunities to reveal the transport and logistics potential of the country; secondly, as a prospective WTO member, Kazakhstan is opening up, to a certain extent, a sufficiently large market for China's consumption, which can become the engine of growth for Kazakhstan's economy; thirdly, Kazakhstan will receive a dynamic economic corridor between East and West, which could become a source of transfer for advanced technologies and large investments in the country's economy. It is an aspiration for the transport system and logistics modernization of Kazakhstan with access to world markets and diversification of the economy, involving, along with the energy sector, the development of an effective agricultural sector, which is c apable for exporting food products to the nearest markets, and above all, to the Chinese market [1].

Division of Labor and Cooperation between China and Kazakhstan

On the theoretical background, economic diplomacy is the basis of China- Kazakhstan economic development, including the establishment of international alliances. Implement such policies and measures, which are most likely to strengthen the national economy and provide employment opportunities for people in both countries. It can be predicted that China's policy towards Kazakhstan is aimed at further increase in activity due to the fact that Kazakhstan has joined several economic alliances, including the Eurasian Economic Union. The Eurasian Economic Union, which includes Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia, has formed a large market with a population of more than 170 million, which will create investment opportunities for enterprises and enable them to benefit from this large market. Kazakhstan and Chinese industrialists clearly realize that by increasing their activities in Kyrgyzstan, they can gain access to the common market of the Eurasian Economic Union.

The implementation of the “Bright Road” plan not only effectively promotes economic growth, but also creates a large number of jobs. Since the implementation of the plan, only highway construction and reconstruction projects have created more than 100.000 jobs. Kazakhstan is the largest economy among the five Central Asian countries and has the closest trade with China. Under the new situation of building the Silk Road Economic Belt, the two sides will carry out more in-depth cooperation. On this basis, it expounds the basic theory and division of labor between China and Kazakhstan. On the whole, the trade complementarity between China and Kazakhstan is relatively strong. There are five categories of industries complementary in ten categories, including two resource intensive industries, one labor-intensive industry and two capital technology intensive industries. There are three complementary industries between China and Kazakhstan, including two labor-intensive industries and one capital technology intensive industry. Kazakhstan has two complementary industries with China's advantages, both of which are resource intensive industries. The two countries are highly complementary in raw materials and miscellaneous parts, which belong to resource intensive industries and labor-intensive industries. It can be seen that the two countries are highly balancing in these two industries. Because the labor cost is lower than in Kazakhstan, China has an advantage in labor-intensive industries. This is mainly due to the long-term oversupply of China's labor market, resulting in a decline in wages. In labor intensive industries, low-cost leads to product price advantage, which makes these industries more competitive. After the reform and opening up, because of the rapid development of labor-intensive industries brought by the demographic dividend, the export of labor-intensive industries is the main driving force of China's economic growth. The competitiveness of Kazakhstan's resource intensive industries is significantly better than that in China, mainly due to diffe r- ences in natural resources and conditions. Kazakhstan has a large number of oil and gas resources, with oil reserves ranking in the top ten [2] in the world.

Kazakhstan government also takes the development of mineral resources as the main task of long-term strategy, and the oil and gas industry is the central pillar of the industry. Although China is also rich in natural resources, due to its large population and low level of natural resources per capita, it cannot fully rely on resource exploitation for economic growth. At present, agriculture and animal husbandry are still the main industries in Kazakhstan. Kazakhstan has a relatively small population and sufficient arable land. Agricultural products not only meet the domestic demand, but also can be exported to bring i n foreign exchange. The annual export of grain is about 5 million tons. Leather products have become the main export industry of Kazakhstan in economic and trade cooperation [2].

Based on the theory of division of labor, Kazakhstan has advantages in resource intensive industries, while China has advantages in capital technology intensive industries and labor-intensive industries. The main reasons for this species diversity are the difference in natural resource endowment, labor cost and technological development level. The industrial complementarity of both sides is greater than competition, which is very beneficial to the development of industrial cooperation. In addition, the continuous growth and complementarity of joint industries have provided favorable conditions for broadening the field of industrial cooperation and developing deep-seated industrial collaboration in the future.

Main Highlights of Economic and Trade Relations between Kazakhstan and China

Being the main component of foreign economic relations, foreign trade is a very important factor in economic development of China-Kazakhstan relations. The economic and trade cooperation between China and Kazakhstan has a long history and solid foundation. The bilateral trade volume of the two countries fluctuates slightly in different years, and the trade structure changes with the total amount of import and export. At present, China has become Kazakhstan's second largest trading partner, and the economic and trade cooperation between the two countries is developing well as a whole. Within this area, in 2011 the trade volume between China and Kazakhstan reached 20 billion US dollars (only 8.3 billion US dollars in 2006), which is much larger than that between Kazakhstan and Russia. The bilateral trade volume increased from 432 million US dollars in 1992 to 10.5 billion US dollars in 2017 [3], showing the dynamic growth of bilateral trade volume and further strengthening China's foothold in Central Asia. In terms of economic relations, more improvements can be expected.

At the end of September last year, entrepreneurs from China and Kazakhstan held a meeting to discuss trade between the two countries. Wu Bangguo, chairman of the Standing Committee of the National People's Congress, took this opportunity to talk about future cooperation opportunities in energy, mineral resources, highway and railway construction, metallurgy, telecommunications and other fields. At present, in terms of economy and trade, China is one of the major foreign trade partners of Kazakhstan. Its share in Kazakhstan's commodity turnover was 15.7% ($11.7bn) in 2018 [4]. Chinese statistics say that the trade turnover between the two countries over the past year amounted to $18 billion, a comparable increase of 37.4 percent. It is quite possible to reach an even greater annual increase. It is especially worth noting that last year China imported wheat, sunflower seeds and other agricultural products from Kazakhstan, which exceeded 500,000 tones, a comparable increase of 20 percent, which was a new and significant event in bilateral trade [4].

Currently, Kazakhstan is China's first trading partner in Central Asia and the second among Commonwealth of Independent States (CIS) countries. China is the second trade partner of Kazakhstan in the world. The main export commodities of Kazakhstan to China are mineral products, metal and chemical products, and the import commodities from China to Kazakhstan are textiles, machinery, equipment, metals, minerals, ceramics and glass products and consumer goods. However, in the past 10 years, due to the enhancement of global green awareness and development of all kinds of new energy, China's depen d- ence on primary energy products has declined, and the bilateral import and e x- port products have changed from labor-intensive to technology intensive and capital intensive, which is significantly reflected in the construction of infrastructure. The large-scale construction of infrastructure has also indirectly driven the development of domestic catering industry, cleaning industry, small commodity retail industry and other tertiary industries in Kazakhstan.

Fig. 1. Kazakhstan Trade with Russia and China (Imports), 2001-2018.Source: International Monetary Fund, 2019.

Historically, Kazakhstan's trade and transportation systems have been oriented towards Russia and former Soviet republics. The railroad network has eleven connecting points with Russia, two with Uzbekistan and one with Kyrgyzstan and China [5]. Same may be said for the trade and energy system.

Fig. 2. Kazakhstan Trade with Russia and China (Exports), 2001-2018. Source: International Monetary Fund, 2019.

From Fig. 1 and Fig. 2 we can see that China become an increasingly important trade partner for Kazakhstan over the last two decades, overtaking Russia as the Central Asian country's primary export destination and seeing steady growth as an importer. Independence brought the opportunity to diversify the country's economy via access to new markets. Transportation infrastructure construction is one of the main projects, which aims to establish multi - dimensional, network connected, multi-modal transport channels along the new economic “belt”.

Conclusion

In terms of the transportation construction and technology facilities, the two sides reached a high degree of agreement. In order to promote the effective connection between China and Kazakhstan in terms of transportation and logi s- tics infrastructure, it is necessary to jointly promote the construction of "Eurasia Land Bridge" multimodal transport corridor (a transcontinental railroad and rail land bridge, currently comprises the Trans-Siberian Railway, which runs through Russia, China and Kazakhstan), jointly build the "Western Europe - Western China" International Corridor, promote the construction of modern multi-functional transport and logistics center, increase the docking cooperation of port construction, highlight the port effect, so as to form roads, railways and airlines. It is very important to strengthen the economic and trade links among regions, improve the optimal allocation and economic efficiency of various economic factors, develop related industries and more job opportunities and economic construction and open up new markets in Kazakhstan.

The cooperation in the construction of transport infrastructure between Kazakhstan and China can not only contribute to the creation of transport corridors between Kazakhstan, China and other countries, but also play an important role in the further optimization for the building level of tran sport infrastructure in the Western Region and the Southeast coastal areas of China, which is conducive to further improving the transport capacity of countries in the region and contributing to the economy, will lay a good foundation for the future development.

References

1. Amrebaev A. M. The economic belt of the Great Silk Road: from idea to reality // Kazakhstan in Global Processes journal. 2014. №3. P. 30-39.

2. About Kazakhstan, The Ministry of Foreign Affairs Republic of Kazakhstan: official site.

3. Galdini F., Satke R. Between East and West: Kazakhstan's development along China's New Silk Road // OSCE Academy Journal. 2015. №3. P. 6-12.

4. Bangguo W. Chairman of the Standing Committee of the National People's Congress Speech

5. International Crisis Group (ICG). Kazakhstan: Waiting for Change / International Crisis Group (ICG) // Asia report. 2013. №250. P. 34.

6. Nazarbayev N. Address of the President of the Republic of Kazakhstan, Leader of the Nation // “Strategy Kazakhstan -2050”: new political course of the establishment state: official site.

7. Xi J. Carry forward the five principles of peaceful coexistence and build a win- win world of cooperation // Speech at the 60th anniversary of commemorative meeting on the five principles of peaceful coexistence : People's daily. 2014. P. 2

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