A study of factors affecting China’s investments in Central Asian countries based on materials against the background of the "Belt and Road"

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A study of factors affecting China's investments in Central Asian countries based on materials against the background of the «Belt and Road»

Madiyarova D.M.

Peoples' Friendship University of Russia (Moscow, Russia)

Aibo Bazaeraili

Peoples' Friendship University of Russia (Moscow, Russia)

Aibota Sailishan

Lomonosov Moscow State University (Moscow, Russia)

Abstract

According to official statistics, by 2018, China's foreign direct investment had exceeded $143billion, accounting for 14.1% of the global total investment, becoming the world's second largest foreign investor after the United States. In 2018, China's direct investment flow to the five Central Asian countries was US $66746 million. As part of the "the Belt and Road" construction strategy, investment cooperation between China and the five Central Asian countries has opened up new development opportunities. Following the "one road" has opened a new stage of China's investment. Studying the influencing factors of China's investment in the five Central Asian countries in the context of the "the Belt and Road", deeply analyzing the current situation of China's investment in the five Central Asian countries, andfinding out the existing problems and influencing factors can not only deepen the understanding of China's investment in the five Central Asian countries, but also provide effective guidance for China's future investment in the five Central Asian countries to a certain extent, contribute to the continuous improvement of the investment environment in the five

Central Asian countries and attract better investment, Stimulate economic development. This has provided useful guidance for investment among other countries under the framework of the "the Belt and Road".

This paper analyzes the current situation of China's investment in the Central Asian countries from the aspects of scale, industrial distribution and main body, summarizes the characteristics of China's investment in the five Central Asian countries, and analyzes the problems existing in China's investment in the five Central Asian countries. Finally, I sincerely hope that the empirical analysis will provide useful information for China's investment in the five Central Asian countries and further promote the investment cooperation between China and the five Central Asian countries.

Keywords: outward direct investment, five countries in Central Asia along “Belt and Road”, influencing factors, “Belt and Road”.

1. Background and significance of research

Since the reform and opening up, China has made great progress. But the influence of various factors such as the availability of basic resources for development, the international division of labor, geographical location and other factors, the overall opening to the outside world shows that the development of coastal areas occurs relatively quickly, while the development of the northwestern regions is slow. Against this backdrop, China proposed the "One Belt, One Road" strategy. The number of countries participating in the Belt and Road Initiative reached 66 at the end of 2018, including all five countries of Central Asia. Chinese direct investment inflows to the five Central Asian countries in 2017 exceeded $2,000 million and reached $2,260.15 million. However, in 2018, due to global trade tensions initiated by the United States, China's direct investment flow to the five Central Asian countries declined again to $667.46 million. With the gradual advancement of the "One Belt, One Road" strategy, the economic and trade cooperation between China and Central Asia will gain new opportunities for development, and the five countries of Central Asia will also usher in a new stage of Chinese direct investment. In order to achieve better development, China should maintain good cooperation relations with the five countries of Central

Asia, and should deepen bilateral cooperation in many fields from the national strategic level, and constantly strengthen the national level dominance in economic investment, cooperation and trade. The economic growth of the five countries of Central Asia plays a critical role. In the background of One Belt, One Road, this article takes China's direct investment in these Central Asian countries as an object of study and analyzes the corresponding direct investment in the political environment of the five Central Asian countries, economic development, ease of doing business, human resources, and levels of informatization. through research and analysis. The environment can enrich and deepen China's understanding of Central Asia. Based on this, it draws a conclusion by analyzing the empirical results of China's investment in the five Central Asian countries. Put forward practical and theoretical suggestions on the factors affecting investment in the five Central Asian countries.

As important participating countries of the One Belt and One Road, the five countries of Central Asia are of great importance to explore the relevant issues of China's investment in the Central Asia. This paper first analyzes the current situation of China's direct investment in the Central Asian countries, including the scale of investment, the distribution of industries and the main part, and outlines the existing problems and related influencing factors. Based on the economic and geographical advantages of the five Central Asian countries, Asian countries, countermeasures and proposals are put forward. It is hoped that all parties can benefit from it.

Studying the influencing factors of China's investment in the countries of Central Asia, identifying problems and influencing factors, can not only provide an indepth understanding of the specific situation of investment has also become an effective benchmark, and to a certain extent, it can also predict the development direction of China's future investment in Central Asia. Countries, as well as contribute to the continuous improvement of the investment environment in the five countries of Central Asia, The Belt and Road Initiative, as well as inter-state investment in other contexts, can provide useful lessons for other countries.

2. Review of studies of domestic and foreign literature

The Russian scholar Klimova (2015) believes that the economic indicators of market investment attractiveness in Central Asia should be a priority. He analyzed the impact of the investment environment in Central Asia in the face of policy change and predicted the investment environment in Central Asia from the periphery effect. Taganov (2016) pointed out in the analysis that ensuring the integrity of legal property rights is a necessary condition for improving the investment climate of the countries of Central Asia and will provide support to the long-term economic growth of the Central Asia. K. Vakhullin (2016) outlined the impact of the Russian currency and oil exports in terms of foreign investment and pointed out that over the ten years from 2003 to 2012. relations of economic development. F. Tsvetkov (2017), having studied the current investment state of Russia, found that the volume of foreign investments of enterprises significantly exceeds the volume of foreign direct investments, which leads to capital outflow and increases the risk of external debt. He believes that in order to solve this problem, Russia needs to develop an appropriate economic policy and investment plans, improve the system of domestic and foreign investment.

In 2012, when Qi Jianhong and Yang Li studied the factors influencing China's foreign investment, they focused on analyzing two aspects of cultural and geographic distance, and believed that both showed clear threshold effects. In 2012, Yang Dianzhong's research and analysis showed that China's investment in the Central Asian countries is mainly concentrated in manufacturing, mining, wholesale and retail trade, construction, air transportation, and finance. In 2014, Li Yue and Yang Dianzhong conducted an in-depth analysis and research on the current investment status of Chinese enterprises in Central Asian countries in terms of investment flow and stocks, investment organizations, location distribution and industrial distribution. In 2014, Wang Qiang and Li Zhicui conducted an analysis and study of the influence of tax, cost and market factors on Chinese investment enterprises in five Central Asian countries, creating a multinational business choice model. In 2015, Zhou Wuqi researched that China should further improve its investment policy, increase investment in countries along the silk road, and increase its influence. In 2015, Wang

Guoting and Ren Rongming conducted a study of factors influencing Chinese investment in Central Asia from two perspectives, economic and institutional. They believed that Chinese enterprises first attracted the potential market and cheap labor in Central Asia and then resources Access and finally, in terms of legal systems and environment, Central Asian countries are also more easily integrated in terms of accepting China's differences, which are also Central Asian factors that encourage Chinese investment in Central Asia. In 2017, Chen Huiping analyzed the obstacles faced by Chinese investment in the five countries based on facts and laws.

3. Analysis of the present situation and current problems of Chinese investment in the five countries of Central Asia

In 2008, China's direct investment in these five countries was only $1,942.05 million, and in 2014 it exceeded $100 million for the first time. In particular, the investment fund almost doubled in 2012 compared to the investment fund in 2011. This growth trend is mainly driven by the economic stimulus policies launched by various countries after the financial crisis and China's "One Belt and One Road" strategic plan. In 2015, China's direct investment in these five countries temporarily declined, began to rebound in 2016, reached a new high in 2017, and reached record highs in both 2014 and 2018. The investment fund hit a record high of $14,680.80 million, showing China's enthusiasm for investing in Central Asia. But investment funds are mainly concentrated in Kazakhstan, which at its peak accounted for about 80% of the total of the five countries. Even in 2018, it still accounted for around 50% of the five countries' total, a relatively small percentage compared to the other four.

In general, since the five Central Asian countries occupy key positions along the “One Belt and One Road”, China's direct investment in the Central Asian countries is not only large in scale, but also distributed mainly in mining, construction, manufacturing, wholesale and retail trade, finance In the mining industry, China's direct investment in these five Central Asian countries is large, widespread and deeply involved in the production chain. PetroChina, Sinopec and other companies have oil and gas exploration projects in many Central Asian countries, and related projects are also relatively expensive. Secondly, in the construction industry, Chinese enterprises through the China State Construction Engineering Corporation(CSCEC) and the China Railway Group have carried out many important engineering projects in the five countries of Central Asia. The market demand for infrastructure construction in the five countries of Central Asia is huge and the future investment prospects in this area are very optimistic. Third, in the manufacturing industry, Chinese companies, mainly Huawei and ZTE, dominate the communication equipment and communication services markets in the theses five countries and have begun to try the development and construction of 5G technology. Fourth, in the field of wholesale and retail trade, China is mainly engaged in imports and exports to Central Asian countries through the establishment of representative offices and other forms, and the main participants are private enterprises that have gone abroad from China. Fifth, in the financial sector, Industrial and Commercial Bank of China, China Development Bank and Bank of China have opened branches or offices in these countries, mainly dealing with government cooperation projects and corporate investment projects and exchange services related to China and Central Asian countries.

The main characteristics of Chinese enterprises investing directly in the five countries of Central Asia are as follows:

* There are many types of enterprises that make direct investments in the five countries of Central Asia.

* The number of enterprises investing directly in more than two Central Asian countries is relatively high.

* Many enterprises that directly invest in the five countries of Central Asia come from Xinjiang.

China's direct investment in these five countries increased from US$1,942.05 million in 2008 to US$14.6808 billion in 2018, with an average annual growth rate of 65.59%.

Investment locations are highly concentrated. Although China's investment in these five countries is on the rise, it is mainly concentrated in Kazakhstan and is mainly invested by large state-owned enterprises.

4. Challenges in the process of China's direct investment in the five Central Asian countries

Central Asian countries are rich in mineral and energy resources and are the backbone of national economic and social development. Therefore, the government has always attached great importance to the exploitation and use of energy resources. However, with the passage of time and transformation, the Central Asian countries have gradually realized the global economic model. It is hoped that foreign investment can gradually shift the focus of investment and strengthen investment cooperation in other areas. Since China's investment in Central Asia is relatively concentrated, this makes Central Asian countries' investment in China controversial. On the one hand, they hope to receive appropriate technical and financial support from China's investment cooperation to promote their own investments. fears that an excessive influx of Chinese capital into energy and mineral resources will pose a potential threat to the country's development.

Although these five Central Asian countries belong to the same region geographically, their development is quite different, which also leads to a relatively unbalanced investment in them by China. From the 2008-2018 data of China's investment funds in these five countries, it can be seen that the region with the highest investment is Kazakhstan, and the investment funds exceed the sum of the other four countries, occupying the largest share among the five countries. Central Asian countries Absolute investment advantage. Kazakhstan has a relatively complete infrastructure, rich in oil and gas and mineral resources, occupies an absolutely dominant position in the countries of Central Asia, has a relatively developed economic development, so China's direct investment in Kazakhstan is relatively concentrated.

China is more cautious in locating foreign investment. When choosing investment regions, the main areas of investment are East Asia and Southeast Asia with the fastest economic development. Investment in Central Asia is more based on intergovernmental agreements. Private investment is not yet active.

5. Analysis on the influencing factors of China's investment in Central Asian countries under the background of the "the Belt and Road" initiative China investments Central Asian

Central Asian countries have varying degrees of access mechanisms for foreign investment and different institutional requirements for different industries, methods and forms of investment. Among them, Kyrgyzstan has no restrictions on foreign investment industries, and Turkmenistan is compared with other countries. There are relatively many industry restrictions, including manufacturing, finance, transportation, and construction.

These five countries have different preferential policies for foreign investment, which can be loosely divided into tariff reduction and exemption, product sales guarantee, customs duty exemption, multiple entry visas, and preferential corporate policies in some regions. In terms of preferential policies, Kazakhstan and Turkmenistan have relatively large preferential policies and a relatively wide range of preferential policies. Kyrgyzstan implements a national treatment policy and does not have a special preferential treatment for foreign investment.

Central Asian countries have provided more robust foreign investment protection policies, including bilateral investment protection agreements, double taxation agreements and other protection agreements China and the Central Asian countries have previously established trade and economic cooperation Kazakhstan, Kyrgyzstan, Tajikistan and other countries also have relatively comprehensive investment protection policies, while Turkmenistan and Uzbekistan have relatively few investment protection policies and relatively weak areas of protection.

The analysis of the economic development factors of various countries shows that in recent years, the world economy has faced many turbulent and uncertain factors, and the GDP of these five countries has also fluctuated greatly. Countries Trade relations between two countries for which GDP is an important benchmark The higher the GDP, the better the country's economic level and investment environment, and Chinese companies are more willing to invest in such areas. chinese investment central asia

Infrastructure is the foundation and necessary condition for national economic development. In recent years, although these five Central Asian countries have implemented a large number of infrastructure construction, the overall development level is still insufficient. These five countries have huge potential for investment in infrastructure and large investment space.

For each of these countries, it should be noted that since Turkmenistan does not have sufficient information on the policy to attract foreign investment and does not have relevant data on the business environment, statistics on the ease of doing business are not kept.

Kazakhstan's own economic level is relatively good, various foreign investment policies are relatively comprehensive, and it has a good business environment, ranking first among the five countries of Central Asia. The investment environment in Kyrgyzstan is also relatively good, with an upward trend especially since 2016. The Ease of Doing Business scores of Uzbekistan and Tajikistan fluctuate a lot and rank relatively low

From 2008 to 2018, the population of each country in the status of the five countries of Central Asia showed an upward trend, and it is increasing year by year, which indicates that the level of human resources in the five countries of Central Asia has great potential for development. In 2018, the population of Uzbekistan was 19.776 million, indicating that Uzbekistan has the richest labor force and a relatively high level of human resources. The second place is occupied by Kazakhstan with a population of 10.968 million people in 2018, which is 8.808 million less than the population of Uzbekistan, which also shows that the population of Uzbekistan has an absolute advantage. The least densely populated country in Central Asia is Turkmenistan with a population of just 3.51 million in 2018, while Uzbekistan has more than five times the population, indicating relatively low levels of human resources in Turkmenistan.

Corruption is a cancer of economic development, so in terms of the ability to control corruption, it can be indicative of the importance that a country attaches to economic development, as well as a means of providing a good competitive environment for the market. The country's ability to control corruption is also undeniable, as it affects its ability to attract foreign businessmen. Corruption is rampant in these five countries and the pursuit of power rents is commonplace.

6. Suggestions on Promoting Chinese Direct Investment in Five Central Asian Countries along the Belt and Road

From the problems of China's direct investment in these five countries, it can be seen that the investment areas and locations are relatively concentrated. Therefore, in order to further promote China's direct investment in these countries, the structure of direct investment should be optimized and relations with Central Asia should be comprehensively improved. The strategic cooperation of the five countries in various fields. Since most of the five Central Asian countries are relatively backward countries, on the one hand, the Chinese government needs to strengthen the promotion and support of fiscal policy, and at the same time, it also needs the active cooperation of the governments of the five Central Asian countries.

The "Investment Agreement" signed between China and the five Central Asian countries stipulates that China and the five Central Asian countries can formulate investment incentives according to domestic needs, thus creating a favorable environment for investment and trade. between two parties. However, there is still huge room for improvement in direct investment cooperation between China and Central Asian countries. Both sides can learn from common international practice to gradually weaken market access for investment and constantly improve investment measures to eliminate obstacles in investment liberalization.

China and these countries have proposed to implement free trade zones, the approval and investment management procedures are still relatively onerous, and there are some differences in the foreign investment system. For example, the application of national treatment is not exhaustive and contains exceptions. For foreign investment, a step-by-step management approach based on the principle of compliance with the appropriate regime can be implemented, and more effective policy management can be implemented in various areas.

Conclusion

This paper analyzes the current situation and existing problems of China's direct investment in five Central Asian countries including Kazakhstan, as well as the factors that affect the process of China's direct investment in these five countries, and puts forward relevant countermeasures to promote China's direct investment in these five countries and suggestions. The main conclusions include: (1) Direct investment in the five Central Asian countries is small. In order to promote the construction of the "Belt and Road", China needs to further increase its direct investment in these five countries and broaden the channels for investment and cooperation between the two sides. (2) The structure of direct investment is resource-based, and the risk is relatively high. China's direct investment in these five countries is mainly concentrated in primary industries such as oil, iron ore, and coal. If world commodity prices fluctuate abnormally, this will have a greater impact on investment security. (3) Conditions for direct investment are not very good. The political environment in Central Asia is unstable, government corruption is severe, and overseas direct investment is significantly influenced by the political environment, which increases the risk of foreign direct investment, and the political and legal environment leaves much to be desired. Secondly, the construction of infrastructure in Central Asia is a big drawback, which directly leads to a lack of investment attractiveness, which affects the economic development of Central Asia. China's direct investment in these five countries is mainly concentrated in primary industries such as oil, iron ore, and coal. Finally, the social financing and operating costs of these five countries are generally high, and the ease of doing business is insufficient, which also makes it difficult for foreign investors to enter the local market.

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