Economic Union of China and Kazakhstan: An analysis of the Development Prospects of the Silk Road Economic Zone

President Xi’s visit to Kazakhstan was significant as this was where he first announced the Silk Road Economic Belt in 2013.

While Kazakhstan has welcomed its participation in the Silk Road Economic Belt as a means of reducing Kazakh dependence on Russia’s troubled economy, the Kazakh government has in the meantime developed its own economic development strategy.Like his Russian counterpart, Kazakhstan’s President Nursultan Nazarbayev seeks to connect his country’s Bright Road economic policy with the Silk Road Economic Belt. Both development strategies complement each other as they focus on infrastructural development of key areas including energy, industry, and transportation. Also, Kazakhstan, which is a founding member of the AIIB, will have financing options from the AIIB for its Bright Road infrastructure projects.

For example, the road construction projects under the Bright Road development plan over the next 2 years are estimated to cost 9 billion USD.

Kazakhstan sees its geographical location as providing a strategic bridge between Europe and Asia. This strategic location offers significant opportunities for trade and investment, especially from regions of economic growth like China. Indeed, during President Xi’s 2013 state visit to Kazakhstan, President Nazarbayev expressed his hope that cooperation with China would accelerate his country’s economic growth.China has since become the largest trading partner of Kazakhstan. Their bilateral trade increased from 20.4 billion USD in 2010 to over 28 billion USD in 2013, but fell to 22.4 billion USD in 2014. China and Kazakhstan aim to increase their bilateral trade to 40 billion USD in 2015. China has also become one of the top investors in Kazakhstan. In December 2014 China and Kazakhstan signed agreements worth 14 billion USD in energy, housing and infrastructure, and in March 2015, further agreements worth 23.6 billion USD were signed in the automobile, hydropower, steel, and oil refining sectors. Indeed, Kazakhstan has become an important source of primary resources for China, including oil.

To further accelerate such investment, China has encouraged its entrepreneurs to invest in Kazakhstan, especially in industrial projects. China and Kazakhstan have also planned further joint projects at the Khorgos free trade zone, which already serves as a key source of economic growth for Kazakhstan’s Almaty region. Such economic development has implications for security, as economic development in Kazakhstan has the potential for spilling over into economic development—with possible dividends for peace—in China’s restive Xinjiang region. The parallel development of the China-Pakistan Economic Corridor has similar security implications for Xinjiang.