Kazakhstan’s leverage and economic diversification amid Chinese connectivity dreams

Abstract

Since its independence, Kazakhstan has adopted a multi-vectorism approach to balance between various great powers, especially between Russia and China. Despite extensive theorisation of such foreign policy, scholarly research has rarely investigated the topic beyond diplomatic power dynamics. Based on a systematic search of China’s joint projects in Kazakhstan in the past 30 years, this paper illuminates several unexpected developmental intricacies based on Kazakhstan’s multi-vectorism, its geo-strategic location, the availability of oil-driven sovereign wealth funds, and the public pressure for more responsible industrial policies: (1) China’s ambition to connect to the West has unintentionally amplified Kazakhstan’s multi-vector bargaining power; (2) Kazakhstan’s industrial policies, supported by various financial tools backed by its oil-driven sovereign wealth funds, are integral to its multi-sector economic development and diversification of exports to include more high-value intermediate and consumer goods; and (3) shown via a case study on Kazakhstan’s agricultural development, initial state-level negotiation and sub-national implementation, coupled with a mix of Sinophobic and Sinophilic sentiments, have led to a nuanced path of economic diversification. Given the authoritarian legacy in both China and Kazakhstan, empirical research to compare industry-specific development variations would be enlightening for developing economies to design optimal paths to leverage China’s rising dream and capital.

Keywords:

• China
• Kazakhstan
• Belt and Road Initiative
• multi-vectorism
• agriculture

Introduction

Soon after the disintegration of the Soviet Union, Kazakhstan proclaimed the adoption of a ‘multi-vector’ foreign policy (Clarke 2015; Vanderhill, Joireman, and Tulepbayeva 2020) to benefit most from its large reserve of hydrocarbon resources and strategic location connecting China, Russia, Eastern Europe and the Middle East (Hanks 2009). As the country with the world’s twelfth largest petroleum reserve and sharing two long, strategic borders with Russia and China, Kazakhstan’s geographical endowments have created a huge development dilemma. While the global demand for petroleum allows Kazakhstan to trade its resources for foreign capital and technology for economic development, Kazakhstan could also become overly dependent on a resource-driven economy, and the presence of foreign companies would threaten the growth of domestic industries. The proximity to Russia and China has fuelled further concerns about state security. Undertaking a multi-vector foreign policy thus equips Kazakhstan with a hedging strategy against Russia, China and other countries. Amidst the extensive theorisation of Kazakhstan’s multi-vectorism, scholarly research rarely investigates beyond power dynamics. This paper thus takes Kazakhstan’s long-standing multi-vectorism as an entry point and extends the discussion beyond a pure diplomatic dynamic to examine Kazakhstan’s changing leverage amid China’s Belt and Road Initiative (BRI) and the resulting economic diversification.

Based on a desk-bound search of China’s joint projects in Kazakhstan of the past 30 years and a case study of the agriculture sector, this paper triangulates data from different sources and spotlights Kazakhstan’s engagement with China’s BRI projects and finance. Specifically, the combined effects of Kazakhstan’s distinctive multi-vectorism and its geo-strategic location for China’s BRI connectivity, the availability of its oil-driven sovereign wealth funds for economic diversification, and the public pressure for responsible industrial policies have resulted in three developmental intricacies: (1) China’s attempt to use BRI to connect to the West via the Eurasian landmass has increased Kazakhstan’s multi-vector leverage vis-à-vis China, affording it more bargaining power than before and resulting in more initiatives in non-connectivity-related joint projects than only those focussing on pipeline and transport connectivity infrastructure; (2) Kazakhstan’s petroleum reserve and related sovereign wealth funds have further enhanced the state’s capacity to diversify its economy and export more high-value intermediate and consumer goods; and (3) Kazakhstan’s agricultural development shows the initial outcomes of state-level negotiation and sub-national processes, coupled with both Sinophobic resistance and Sinophilic drive, have shaped a nuanced agro-development.

This paper will first explain Kazakhstan’s leverage based on its multi-vector foreign policy, the changing power structure with China, and its resource-driven sovereign wealth funds; second, based on a triangulation of secondary data and statistics, the trajectory of Kazakhstan’s multi-sector economic diversification will be discussed; third, a case study of Kazakhstan’s agriculture and food processing industry reveals how the public pressure and sub-national forces manifest and shape the outcome of the relevant Sino–Kazakh joint projects. Finally, the conclusion recaps Kazakhstan’s endeavour to balance rising external powers with conflicting domestic interests, before making suggestions on how future research should follow through on the long-term outcomes and industry-specific challenges.

Explaining Kazakhstan’s multi-vectorism and the changing power structure with China

In the past 30 years, Kazakhstan has adopted a multi-vector foreign policy to sustain its independent sovereign identity (Clarke 2015; Vanderhill, Joireman, and Tulepbayeva 2020). Specifically, Kazakhstan engages with different great powers by dividing issues into smaller parts, co-aligning the respective interests with different countries, and mitigating the risk of over-dependence on any single partner (Contessi 2015). Based on such a ‘pragmatic, non-ideological foundation’ (Hanks 2009, 259), Kazakhstan has been oscillating between balancing (against) and bandwagoning (with) great powers such as China, Russia, the United States and the European Union, to minimise loss and maximise gains, and to maintain its identity and autonomy. For example, against demands from the West, Kazakhstan refuses to implement anti-corruption and democratic reforms. It also refuses to lower the local content requirement for foreign companies to set foot in Kazakhstan (Vanderhill, Joireman, and Tulepbayeva 2019). The complexity of Kazakhstan’s approach to assert its strategic preferences is typified by its ‘hedging dynamics’ and multi-faceted ties to its two immediate great-power neighbours (Ohle, Cook, and Han 2020): Russia, which is loaded with traditional cultural and ethnic legacy, and China, which has recently emerged with rising influence in the region.

Kazakhstan’s multi-vector relation with Russia and China

With a 7000-km shared border, Kazakhstan and Russia have long-term historical ties in terms of shared ethnic, linguistic and socio-cultural origin. In addition to the presence of Russian minorities, language and media originating in Russia, there is abundant cooperation between the two countries through leadership elites, non-governmental organisations and educational associations (Laruelle, Royce, and Beyssembayev 2019). Russia has also been considered to have effected an ‘authoritarian diffusion’ in Kazakhstan (Ziegler 2016). Since the foundation of the Customs Union among Russia, Belarus and Kazakhstan in 2011, Russia’s share of Kazakhstan’s imports has remained significant, reaching as high as 35% in 2020 (ITC Trade Map n.d.). Many Russian corporations also own substantial shares of or have entered into partnerships with Kazakhstani companies in the energy, railroad infrastructure, agricultural and arms manufacturing sectors (Laruelle, Royce, and Beyssembayev 2019).

Despite the indispensability of their relations and Kazakhstan’s popular acceptance of Russia, the Kazakhstani government has tried hard to maintain its sovereign identity by rejecting a joint parliament as well as common citizenship and currency with Russia since the establishment of the Eurasian Economic Union in 2015 (Libman 2018). Kazakhstan has endeavoured to reconstitute its pre-Soviet ‘Eurasian’ identity using a narrative that recounts its Turkic Khaganate days (Shlapentokh 2016). The Kazakh government established the National Museum of the Republic of Kazakhstan in 2014, and in 2015 celebrated the 550th anniversary of the national foundation (Laruelle, Royce, and Beyssembayev 2019). Kazakhstan’s participation in the Collective Security Treaty Organization to receive military training from Russia was also balanced by its military cooperation with the North Atlantic Treaty Organization and increasing purchase of military equipment from Europe (Vanderhill, Joireman, and Tulepbayeva 2020). These high-profile, distinctly nationalistic, rhetorical gestures and emphases have well demarcated the Kazakh identity from the Russian, reinforcing Kazakhstan’s independent sovereignty as being justified, and its rulership as legitimate.

Kazakhstan’s diplomatic relations with China began in 1992. Sharing 1700 km of border, the two countries have established close ties in economic and security cooperations. Kazakhstan also participates in the Shanghai Cooperation Organisation (SCO), whose full list of members includes China. While the SCO is widely regarded as a regional organisation for ensuring sovereign security, particularly targeting terrorist activities (Ohle, Cook, and Han 2020), it also serves as a multilateral platform for Kazakhstan to avoid having to choose between Russia and China.

China’s recently announced BRI is an encompassing principle for the country to enlist economic cooperation with and expand influences in countries connected to the West. Being a key adjacent country, Kazakhstan has taken the opportunity to integrate BRI with such national policy as the ‘Nurly Zhol’ (Bright Path) project, the ‘2050’ strategy, and the ‘100 concrete steps’. However, the BRI has also met deep-seated Sinophobia in Kazakhstan – a fear for a possible Chinese economic and cultural domination in the country (Serikkaliyeva, Amirbek, and Batmaz 2018). While China’s interest in securing hydrocarbon supplies from Kazakhstan through inland routes over maritime transport allows Kazakhstan to counteract its over-dependence on the Russian market, Kazakhstan has also grown very cautious in limiting China’s influence by forbidding the Chinese to lease land for agricultural investment and declining requests to streamline entrance visa applications for Chinese travellers (Vanderhill, Joireman, and Tulepbayeva 2020). This multi-vector strategy is also illustrated by a clear signal that its willingness to cooperate with China is conditional: in 2018, the Kazakh government refused to deport an ethnic Kazakh woman with Chinese citizenship who had worked in a re-education camp in Xinjiang and later crossed the border illegally to join her family (Bisenov 2018; Putz 2018); and, in 2019, Kazakhstan arrested and charged a consultant for leaking information to China (Grove 2019).

Unpacking the changing Sino–Kazakh power structure: an asymmetrical frame

In 2001, China, Russia and the Central Asian states of Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan formally announced the establishment of the SCO (SCO n.d.). Many scholars regard the SCO as a manifestation of China’s rising capacity and ambition to dominate and profit from the region (Swanström 2007; Kim and Blank 2013; Song 2014; Reeves 2018), and Kazakhstan has been viewed as a weak partner of China with minimal negotiation power and limited ‘freedom of action’ (Kim and Blank 2013, 774). However, China’s recent BRI has inadvertently increased Kazakhstan’s multi-vector leverage vis-à-vis China, affording it more bargaining power than before.

A closer look at this asymmetry in power would explain why Kazakhstan can adopt a multi-vector strategy through which it engages China: As China is a strong global power, it represents a cause for concern for Kazakhstan. Kazakhstan itself, on the other hand, being a regional power at best, registers somewhat low on China’s watchlist (i.e., China’s priorities are elsewhere) (Womack 2010, 2016; Arreguín-Toft 2005; Anderson 2013). However, as much as this asymmetry might seem all unfavourable for Kazakhstan, in the case of a destructive engagement, Kazakhstan in fact has less to lose. Recognizing this (i.e., that their stakes are uneven), both sides of the table therefore acknowledge that it is in their best interest not to perturb the current relationship – with Kazakhstan showing deference and China respecting Kazakhstan’s autonomy. Since signing a boundary treaty in 1994, China and Kazakhstan have participated in the ‘Shanghai Five’ or the SCO under China’s ‘good neighbour’ policy in 1996 and 2001 (Peyrouse 2016). China has not bothered to step up its influence, and Kazakhstan has been able to diversify its pipeline orientation among Russia, China and the Caspian region to gain autonomy and concessions from various players.

Kazakhstan has benefitted from having numerous great powers to share the stakes in regional security (Vanderhill, Joireman, and Tulepbayeva 2019). Its multi-vector strategy has largely been confined to foreign policies and extends, at best, to pipeline politics (Cutler 2014). The turning point came in 2013 when China announced BRI. Geographically, Russia could also be an indispensable partner, as both Beijing and Moscow are eager to confine American power. However, China and Russia have ‘different dreams in the same bed’, as they exert their influence in Central Asia (Kim and Blank 2013). China’s recent rise in economic power has exacerbated the problematic bilateral relation. For example, Russia has suspected China of copying and reselling its military technology, and the competing statecraft could threaten its regional influence in Central Asia (Flikke 2016). Russia’s disposition against the hegemonic West and its self-identification as a great power has also resulted in ‘public cooperation and private rivalry’ with China, which prioritises cooperative pragmatism and multilateral engagement (Cooley 2018).

In 2009, China pressed the SCO to act beyond its original regional security mission (Aris 2011). In addition to directly resolving transnational security threats, China wanted to promote the economic development of Central Asia to stabilise the region. However, not only did Russia object to China’s economic initiatives such as creating an emergency ‘crisis fund’ and the SCO development bank, China’s motives were questioned by many Central Asian countries (Cooley 2009, 2018). While some scholars consider the early Sino–Russian relations more rhetorical than substantive and more fragile than expected (Swanström 2014), others argue that the two countries have become close partners as a result of the bilateral declaration signed between Vladimir Putin and Xi Jinping to link up the Eurasian Economic Union and BRI in 2015 (Li 2018; Kuteleva and Vasiliev 2020), Russia’s subsequent ‘pivot to Asia’ strategy (Lukin 2019), and a shared vision of a Eurasian future (Rolland 2019). Nonetheless, the potential rivalry between the two great powers due to China’s hunger for energy and expanding influence in Eurasia should not be overlooked (Freeman 2018; Rolland 2019). As such, both the tacit political-economic rivalries in the future and the unsuccessful attempt to turn the SCO into a development platform underscore China’s desperate search for alternative connectivity via Kazakhstan (Gabuev 2016).

To this end, China’s state elites have had to take Kazakhstan more seriously in issues relating to connectivity. In 2013, Chinese President Xi Jinping announced the BRI in Kazakhstan. In March 2015, China further characterised such a developmental proposal as a trans-regional project running through Eurasia (Xinhua 2015). China has unwittingly increased Kazakhstan’s negotiation power by according it more leverage to negotiate for more non-connectivity joint projects to diversify its economy.

Illuminating the role of Kazakhstan’s oil-driven sovereign wealth funds

Kazakhstan’s economic growth has been driven predominantly by extracting resources (Gallo 2021). However, the fluctuations in global oil prices and the devaluation of Kazakhstan’s currency (tenge) in 2015–2016 have undermined the country’s economic development. To mitigate such a ‘resource curse’, Kazakhstan has used its sovereign wealth funds as a key agency to set up various financing arrangements such as state subsidies and a credit system to shape the trajectories of strategic industrial development and foster economic diversification (Capapé et al. 2020).

There are three sovereign wealth funds in Kazakhstan: the National Fund of the Republic of Kazakhstan (NFRK), the Samruk-Kazyna (SK), and the National Investment Corporation (NIC) of the National Bank of Kazakhstan. NFRK is primarily financed by taxation income from the oil, gas and copper mining sectors, and the privatisation of state assets and land sales. Each year, the Kazakhstani government transfers funds from NFRK to the state budget to stabilise the national economy, especially because of volatile external factors (Kalyuzhnova 2011; Analytical Credit Rating Agency 2020; ILL 2012). During the financial crisis of 2007–2009, NFRK successfully stabilised Kazakhstan’s economy as a risk buffer, allocating 10 billion USD (9.5% of gross domestic product, GDP) to housing, construction, agriculture and other Small and Medium Enterprises (SMEs). The Kazakhstani economy thereby regained momentum, with 6% GDP growth driven largely by industry and net export (Kalyuzhnova 2011). In 2010, Kazakhstan announced a ‘State Program of Forced Industrial and Innovative Development’ to accelerate the economic diversification via a specialisation in manufacturing and expanding non-primary goods export (Decree of the President of the Republic of Kazakhstan 2010). The idea has been to maximise the contribution of oil revenues by transferring funds via NFRK to industries with the potential to acquire crucial production capacity in deep-processing and value-added sectors. This could structurally transform Kazakhstan’s economy from a resource-driven model into a more balanced approach.

Out of the 10 billion USD spent by NFRK during the 2007–2009 financial crisis, 9 billion USD was injected in 2008 into the second fund, SK, to facilitate economic diversification (International Monetary Fund 2009). By 2020, SK had managed a wide range of assets with a total value of 67.43 billion USD, ranking it first in the country and 20th in the world (Capapé et al. 2020). SK prioritises funding non-extractive industries and private equity market infrastructure including logistics, energy, food and beverage production, construction materials and paper products, as well as chemistry and petrochemistry (Kazyna Capital Management 2019).

The last and smallest fund, the NIC, was established in 2012. Owned by the National Bank of Kazakhstan (NBK), the fund manages and enhances the long-term returns of Kazakhstan’s sovereign assets and foreign exchange reserves of NBK, pension funds and other assets determined by the legislation of the Republic of Kazakhstan (International Forum of Sovereign Wealth Funds 2021; National Investment Corporation of National Bank of Kazakhstan n.d.). With the state’s aspirations to become one of the world’s top 30 developed nations (Nazarbayev 2012), and having specific monetary support for economic diversification, Kazakhstan’s industrial stakeholders have been empowered to negotiate for co-investment and partnership with Chinese capital and companies in both connectivity- and non-connectivity-related projects (Samruk-Kazyna 2019).

Taking stock of Chinese projects in Kazakhstan

Kazakhstan’s resource-dependent economy has widely been considered the result of China’s long-standing policy of resource extraction (Minbaeva and Muratbekova-Touron 2011; Chazan 2010; Peyrouse 2007). Some scholars further argue that China’s past infrastructure projects have facilitated corruptive practices among Kazakhstan’s state elites and inevitably fuelled Sinophobic sentiments (Laruelle and Peyrouse 2012; Rastogi and Arvis 2014). There is widespread speculation on undesirable consequences for Kazakhstan to participate in China’s connectivity infrastructure in the region (Griffiths 2019; Hillman 2018; World Bank 2019; Burkhanov and Chen 2016). Peyrouse also recounts that in Kazakhstan, trading with China has been unfavourable, akin to interacting with ‘a distant but recurrent enemy’ (2016, 14). Despite these sceptical views, BRI’s impact on agriculture, trade, climate and corruption in Central Asia is still uncertain (Laruelle 2018; Bitabarova 2018). Drawing on a meticulous effort to track down the Sino–Kazakh joint projects in the past 30 years, the following section shows that the development tracjectories of different industrial sectors vary.

Changing nature of Sino–Kazakh joint projects

Information about China’s projects in Kazakhstan had been extremely limited until September 2019, when Kazakhstan’s Ministry of Industry and Infrastructure Development (MIID) disclosed 27 projects under its auspices (Kazakhstan’s MIID 2019). A full list of 55 projects was soon available, comprising the 27 on the MIID’s list, seven that belonged to the Ministry of Agriculture, 20 under the Ministry of Energy and one under the Astana International Financial Centre (Simonov 2019; Medeubayeva 2019). Kazakh Invest, a national export and investment agency, later announced a similar list of 54 Sino–Kazakh joint projects (Kazakh Invest 2019). Earlier, a Norwegian research team had collected information on 261 Chinese projects in Central Asia, of which 102 took place in Kazakhstan (CADGAT 2019). Based on this information, as well as subsequent follow-through search, 166 Chinese projects in Kazakhstan are listed in Table 1; some of them are completed, whereas others are under construction, planned or terminated.

Table 1. Sino–Kazakhstan joint projects planned and completed between 1997 and 2022.

No.	Project title	Sector*	Cost (million USD)	Start year	Status**	No.	Project title	Sector*	Cost (million USD)	Start year	Status**
1	CNPC–AktobeMunaiGaz	O&G	4000	1997	C	2	Tsinkaz food processing company	Agr	n.a	1998	C
3	China Telecom–Kazakhtelecom joint network	Telecm	n.a.	1998	C	4	Kazakhstan–China oil pipeline	O&G	359	2002	C
5	Soya, wheat and livestock^a	Agr	n.a.	2003	C	6	Atasu–Alashankou/Kazakh–China oil pipeline	O&G	800	2004	C
7	Kaznurtel Limited Liability Company	Telecm	n.a.	2004	C	8	International Petroleum Exploration/Production^b	O&G	n.a.	2004	C
9	Investment in PetroKazakhstan, Inc.	O&G	4180	2005	C	10	Moinak hydropower station	Rew	360	2006	C
11	Kenkiyak–Kumkol oil pipeline	O&G	850	2006	C	12	JSC KaraZhanBasMunaiGaz	O&G	930	2007	C
13	Confucius Institute in Almaty	Cltr	n.a	2007	C	14	Irkol underground leaching mine to produce uranium production	Mtlg	n.a	2008	U
15	Western Europe–Western China Highway^c	Infsrctr	n.a	2008	C	16	East Europe–East China highway	Infsrctr	6600	2009	C
17	Kazakhstan–China gas pipeline	O&G	7500	2009	C	18	Loan to Development Bank of Kazakhstan	Fn	5000	2009	C
19	Confucius Institute in Almaty	Cltr	n.a	2009	C	20	Kazakhstan–China oil pumping stations	O&G	135.4	2010	C
21	Beineu–Bozoi–Kyzylorda–Shymkent gas pipeline	O&G	4000	2010	C	22	Upgrade Atyrau oil refinery foraromatic hydrocarbons	Pchm	884	2010	C
23	Upgrade of Atyrau oil refinery for deep oil refining	Pchm	1100	2011	C	24	Modernisation of Shymkent oil refinery	Pchm	1856	2011	C
25	Confucius Institute in Aktobe	Cltr	n.a	2011	C	26	Shalkar–Beineu railway	Infsrctr	1203	2012	C
27	Arkalyk–Shubarkol railway^d	Infsrctr	261	2012	C	28	Confucius Institute in Karaganda	Cltr	n.a	2012	C
29	Kazakhstani terminal in Lianyungang seaport^e	Infsrctr	99.3	2013	C	30	Beineu–Bozoi–Kyzylorda–Shymkent gas pipeline	O&G	700	2013	C
31	Kashagan oilfield in the Caspian Sea	O&G	5000	2013	C	32	Aktau bitumen plant^f	Bldg	145	2013	C
33	Aktogay copper mine^g	Mtl	3200	2013	U	34	Modernisation of Aktau port	Infsrctr	121	2014	C
35	Khorgos Dry Port	Infsrctr	239	2014	C	36	Modernisation of the Shymkent refinery^h	Pchm	1800	2014	C
37	Loan to the Development Bank of Kazakhstan	Fn	500	2014	C	38	Glass manufacturing plant	Bldg	200	2015	C
39	Processing of oil crops	Agr	23	2015	C	40	Kazakhstan Infrastructure Fund	Fn	600	2015	C
41	Modernisation of polypropylene production	PChm	12	2015	C	42	Manufacture of cars	Mchg	22	2015	C
43	Kuryk port in Mangistau	Infsrctr	280	2015	C	44	Astana railway system	Infsrctr	1887	2015	C
45	Almaty 1–Shu railway	Infsrctr	110	2015	C	46	Production of powder polypropylene	Pchm	12	2015	C
47	Construction of steel pipes manufacturing plant	Mtlg	100	2016	U	48	Integrated alloys plant	Mtlg	50	2016	C
49	China–Kazakh Production Capacity cooperation Fund	Fn	2000	2016	C	50	Metallurgical plant	Mtlg	50	2016	C
51	Recycling of PET waste for staple fibre production	Pchm	20	2016	C	52	Processing of ferrous metals	Mtlg	50	2016	C
53	Cement plant	Bldg	177	2016	C	54	Deep processing of grain	Agr	110	2016	C
55	Cultivation/deep processing of flax and other crops	Agr	117.6	2016	C	56	China International Forum/Cross-Border education	Cltr	n.a	2016	C
57	Production of rapeseed oil	Agr	19	2016	C	58	Production of powdered milk from camel’s milk	Agr	23	2016	C
59	Fuel assemblies plant	Pchm	172	2016	C	60	Drip irrigation equipment plant	Agr	0.03	2016	C
61	Drip irrigation	Agr	1.8	2016	C	62	Astana city transport system^i	Infsrctr	1900	2016	T
63	Processing of camel and horse milk	Agr	22	2016	C	64	Hydropower plants	Rew	50	2017	U
65	Centre–South road: Karaganda–Balkhash section	Infsrctr	852	2017	U	66	Centre–West road	Infsrctr	1111	2017	U
67	Polypropylene production	Pchm	2600	2017	n.a.	68	Reconstruction of the Taldykorgan–Kalbatau–Ust–Kamenogorsk highway	Infsrctr	796	2017	C
69	Reconstruction of the Merke–Burybaytal roadway	Infsrctr	253	2017	C	70	Solar power station in Gulshat	Rew	69	2017	U
71	Reconstruction of two power units in Aksu	Enrgy	600	2017	U	72	Turgun II hydropower station	Rew	23.3	2017	C
73	A mining, chemical and metallurgical complex	Mtlg	1500	2017	U	74	Silicon manufacturing plant	Mtlg	107	2017	n.a.
75	Production of explosives	Chm	20	2017	n.a.	76	Olefin production facility for KazAzot	Chm	2350	2017	n.a.
77	Production of potash fertiliser	Chm	1700	2017	n.a.	78	Fresh-frozen fish and fish products	Agr	0.5	2017	C
79	Tomatoes growing and tomato paste production	Agr	32.6	2017	C	80	Processing of soybeans	Agr	28	2017	C
81	Sheep farming, meat processing, leather/fur factory	Agr	26.7	2017	n.a.	82	Deep processing of agricultural products	Agr	500	2017	n.a.
83	PET waste processing and staple fibre production	Pchm	20	2017	C	84	Mining, processing and steel production plant	Mtlg	900	2017	C
85	Reconstruction of electrolysis plant	Chm	500	2017	U	86	Poultry farm construction	Agr	20	2017	C
87	Processing of antler and meat products	Agr	1.7	2017	C	88	Poultry farm construction	Agr	132.4	2017	C
89	Production of semi-finished meat products	Agr	3.5	2017	C	90	PetroKazakhstan Oil Products LLP Oil Refinery	Pchm	2100	2017	C
91	Production of polypropylene	Pchm	2630	2017	U	92	Wind power plant in Shelek corridor	Rew	103	2018	U
93	Meat processing plant	Agr	26	2018	U	94	Khorgos–Eastern Gate technology park	Infsrctr	205	2018	U
95	Wind power plant	Rew	47	2018	p	96	FEZ Chemical Park in Taraz ^j	IndstrP	99.7	2018	U
97	Processing and sale of rapeseed and sunflower seeds	Agr	3.5	2018	n.a.	98	Slaughterhouse	Agr	25.3	2018	C
99	Education for 200 Kazakhstan students in China	Cltr	n.a.	2018	C	100	11th Educational Exchange “China–ASEAN” in Guizhou	Cltr	n.a	2018	C
101	Anodic copper production	Mtlg	1300	2018	n.a.	102	Phosphorus trichloride and glyphosate production in Taraz	Chm	200.3	2018	n.a.
103	Methanol and ammonia production in Khimpark Taraz	Chm	1.5	2018	n.a.	104	Solar power plant	Rew	107	2018	C
105	Heat supply system for the energy projection	Enrgy	154	2018	U	106	‘Zhangiz Solar’ solar power plant	Rew	27	2018	C
107	Acquisition of Astana International Exchange	Fn	13	2018	C	108	Reconstruction of Astana–Almaty roadway	Infsrctr	727	2018	U
109	Wind power plant in the Shelek corridor	Rew	149	2018	C	110	Kerbulak hydroelectric station on the Ili River	Rew	152	2018	C
111	Production of oil and gas equipment	O&G	100	2018	C	112	Coal processing complex	Pchm	2500	2018	n.a.
113	Small hydropower stations on the Shelek River	Rew	117	2018	C	114	Liquefied natural gas production in Taraz	O&G	40	2018	n.a.
115	Elevators and lift equipment production	Mchg	7	2018	C	116	Development of a multi-car assembly cluster	Mchg	1100	2018	C
117	Sodium carbonate plant	Chm	275	2018	U	118	Desalination plant	Chm	60	2019	P
119	Production of potassium sulphate in Khimpark Taraz	Chm	268	2018	n.a.	120	Production of emulsion explosives, and expanded amonium nitrate industrial explosives production plant	Chm	25	2019	U
121	Wind power plant in Zhanatas	Rew	150	2019	U	122	Manufacture of ceramics products	Bldg	39	2019	U
123	Wind power plant in Tobyl Solar Park	Rew	50	2019	P	124	Solar power plant	Rew	42	2019	P
125	Oil extraction plant	O&G	70	2019	P	126	Solar cells production	Rew	70	2019	P
127	Mobile drilling rigs production	Mchg	13	2019	P	128	Mineral fertilisers production	Chm	446.5	2019	n.a.
129	Cement production plant	Bldg	117	2019	n.a.	130	Production of tractor	Mchg	10	2019	C
131	Complex alloys plant	Mtlg	260	2020	P	132	Wind power plant	Rew	100	2020	P
133	Wind power plant	Rew	50	2020	P	134	Natural stone products	Bldg	25	2020	P
135	Distribution of gas turbine power plants	Enrgy	354	2020	P	136	Ammonia-carbamide production	Chm	600	2020	P
137	Coal chemical complex	Chm	2600	2020	P	138	Mass Rapid Transit in Almaty	Infsrctr	1071	2020	P
139	Methanol and ammonia production in Atyrau	Chm	1600	2020	U	140	Gas pipeline production	O&G	50	2020	P
141	Cable products production	Mchg	18	2020	P	142	Processing of hazardous oily waste	Pchm	97	2020	P
143	Agricultural crops processing plant	Agr	250	2020	P	144	Production of electrolytic manganese	Mtlg	45	2020	P
145	Mining–Chemical–Metallurgical Complex in Pavlodar and Zhambyl region	Mtlg	2300	2020	P	146	Development of tungsten ore deposit in Boguty	Mtl	260	2020	P
147	Aluminum smelter plant	Mtlg	1465	2021	P	148	Reconstruct two power units at Aksu Power Plant	Enrgy	540	2021	P
149	Development of Koksay copper deposit	Mtl	1500	2021	P	150	Heating and power plant in Taldykurgan	Enrgy	540	2021	P
151	Biochemical cluster for deep wheat processing	Agr	2500	2021	P	152	Potassium mineral fertilisers production	Chm	3000	2021	P
153	Mineral fertilisers production	Chm	600	2022	P	154	Koksai copper deposit	Mtl	1083	P	P
155	Metallurgical plant	Mtlg	94.8	P	P	156	Hydropower station in Turgun	Rew	250	p	p
157	Development of cross-border e-commerce centre	Fn	42	n.a.	n.a.	158	Manufacture of oil and gas equipment	O&G	8	n.a	n.a.
159	Phosphorus trichloride and glyphosate production	PChm	199	n.a	n.a.	160	Small hydro power plants	Rew	117	n.a	n.a.
161	Tomato processing plant	Agr	26	n.a	n.a.	162	Production of yarn from cotton	Agr	37	n.a	n.a.
163	Emulsion explosives production	Chm	20	n.a	n.a.	164	Spindle production	Mchg	220	P	P
165	Construction, mining and metallurgical complex in Akmola	Mtlg	n.a.	P	P	166	Geological exploration and oilfield development	O&G	4800	P	P

* Fuels- and connectivity-related joint projects: culture (Cltr), transport infrastructure (Infsrctr), oil and gas (O&G), telecommunications (Telecm).

** Non-fuels- and non-connectivity-related joint projects: agriculture and food processing (Agr), building materials (Bldg), chemistry (Chm), energy (Enrgy), finance (Fn), industrial park (IndstrP), manufacturing (Mnftr), mechanical engineering (Mchg), metal mining (Mtl), metallurgy (Mtlg), petrochemistry (Pchm), and renewable energy (Rew). **Status: completed (C), under construction (U), planned (P), terminated (T), and information not available (n.a.).

Source: Project information compiled from the following reference unless otherwise specified with superscripts: Kazakh Invest (n.d.); CADGAT (2019); Medeubayeva (2019); Kazakshtsan’s MIID (2019); Mining Technology (2018); Peyrouse (2008); ^aGrain.org (2008); ^bChen and Zhang (2017); ^cWang (2019); ^dADAL PROFI Website (n.d.); ^eCang (2017); ^fAstanaBuild (2015); ^gMining Technology (2018); ^hThe Astana Times (2018); ⁱKoskina (2019).

Before 2013, the majority of China’s involvement in Kazakhstan was related to oil and gas extraction, pipeline construction, metal mining, transport infrastructure and a few cultural projects. In 1997, China and Kazakhstan initiated the first state-level negotiation over oil cooperation (Ho 2017). China National Petroleum Corporation (CNPC) acquired 66.7% shares of JSC AktobeMunaiGaz at 325 million USD and agreed to increase its investment from 585 million USD in five years to 4 billion USD in 20 years (CADGAT 2019). In 2002, 2004 and 2006, CNPC coopoerated with several Kazakh companies to build the first Kazakhstan–China oil pipeline, and acquired 49–50% of the shares in each phase (CADGAT 2019). The first stage of the 962-km pipeline began operation in 2006 (Xinhua 2006).

Since then, China has invested in or partnered with various Kazakh companies, primarily in resource extraction and connectivity infrastructure. Between 1997 and 2012, 20 out of 28 Chinese projects in Kazakhstan have been fuel- and connectivity-related. They include 10 oil and gas mining and pipeline construction projects, three telecommunications projects, three transport infrastructure projects and four Confucius Institutes involving at least 30.82 billion USD (cost information is not available for some projects; see Table 1). The remaining eight projects include the reconstruction of the Moinak hydropower station, a food-processing company in Tsinkaz (Peyrouse 2008), a farm in Alakol (Grain.org 2008), three oil refining petrochemical projects, a leaching mine for uranium production and a loan to the Development Bank of Kazakhstan.

China’s focus on resource extraction has resulted in Kazakhstan’s over-dependence on exporting resources. Kazakhstan’s total export value to China has increased from 0.67 billion USD in 2000 to 16.48 billion USD in 2012, over half of which was fuel (see Table 2 and Figure 2). China’s investment in the oil sector, however, has not enhanced Kazakhstan’s oil extraction and refinery technology. Kazakhstan’s oil quality is not suitable for direct consumption and its oil exported to China has to be further processed through different petrochemical procedures. As such, Kazakhstan has to export crude oil to and import processed petrochemical products from China. In 2013, when China announced the BRI, Kazakhstan began to negotiate to acquire China’s processing technologies to diversify its economy (Yau 2020a).

Table 2. Kazakhstan’s trade with China and the world, 2000–2019 (billions USD).

	Trade turnover with China			Trade turnover with the world (China’s share)
Year	Total	Export	Import	Total	Export	Import
2000	0.82	0.67	0.15	13.67 (6.03%)	8.68 (7.75%)	4.99 (3.03%)
2001	0.82	0.65	0.17	14.77 (5.54%)	8.49 (7.62%)	6.28 (2.74%)
2002	1.33	1.02	0.31	16.22 (8.21%)	9.64 (10.56%)	6.58 (4.76%)
2003	2.18	1.65	0.52	21.32 (10.21%)	12.92 (12.80%)	8.40 (6.23%)
2004	2.73	1.97	0.76	32.58 (8.30%)	20.08 (9.80%)	12.77 (5.94%)
2005	3.67	2.42	1.25	45.18 (8.13%)	27.85 (8.70%)	17.33 (7.22%)
2006	5.52	3.59	1.92	61.91 (8.91%)	38.24 (9.39%)	23.66 (8.14%)
2007	9.14	5.64	3.51	80.43 (11.37%)	47.75 (11.80%)	32.69 (10.73%)
2008	12.24	7.68	4.57	108.99 (11.23%)	71.17 (10.79%)	37.82 (12.07%)
2009	9.46	5.89	3.57	71.60 (13.21%)	43.20 (13.63%)	28.41 (12.56%)
2010	14.09	10.12	3.96	81.27 (17.33%)	57.24 (17.68%)	24.02 (16.50%)
2011	21.31	16.29	5.02	126.12 (16.9%)	88.11 (18.49)	38.01 (13.21%)
2012	23.98	16.48	7.50	136.82 (17.53%)	92.28 (17.86%)	44.54 (16.83%)
2013	22.74	14.37	8.36	133.50 (17.03%)	84.70 (16.97%)	48.80 (17.14%)
2014	17.16	9.80	7.36	120.75 (14.21%)	79.46 (12.33%)	41.30 (17.82%)
2015	10.57	5.48	5.09	76.52 (13.81%)	45.95 (11.93%)	30.57 (16.64%)
2016	7.88	4.21	3.67	61.95 (12.72%)	36.78 (11.46%)	25.17 (14.56%)
2017	10.49	5.80	4.69	78.10 (13.43%)	48.50 (11.95%)	29.60 (15.86%)
2018	11.69	6.31	5.38	94.77 (12.34%)	61.11 (10.32%)	33.66 (16.00%)
2019	14.39	7.82	6.57	96.08 (14.98%	57.72 (13.55%)	38.36 (17.12%)

Source: World Integrated Trade Solution data, World Bank, https://wits.worldbankorg/CountryProfile/en/Country/KAZ/

The composition of Sino–Kazakhstan joint projects and the bilateral trade structure have changed since 2013. Among all the projects listed in Table 1 that have started construction or been planned since 2013, 113 out of the 138 Chinese projects in Kazakhstan have been non-fuel and non-connectivity related. They include projects in agriculture and food processing, building materials, chemistry and petrochemistry, energy and renewable energy, finance, industrial parks, manufacturing, mechanical engineering, and metal mining and metallurgy. The total spent/committed investment amounts to 53,832 million USD, which is 72% of all the joint projects (cost information is not available for four projects). Out of these 113 projects, 44 are reported as completed, 17 have begun construction, 31 are still under planning and one has been terminated (status information is not available for the remaining 20 projects). Although some projects may have been postponed or never realised, a quick comparison between the list of agreed projects before and after the announcement of the BRI illuminates Kazakhstan’s increasing bargaining power.

As regards bilateral trade, Kazakhstan’s export of raw materials to China increased from 0.15 billion USD (22.89%) in 2000 to 11.27 billion USD (68.37%) in 2012 (Figures 1 and 2). Specifically, fuel export increased from 0.11 billion USD (15.78%) to 9.1 billion USD (55.2%), and maintained a peak at 8.92 billion USD (62.04%) in 2013 before gradually subsiding (Figure 3). Consequently, the bilateral trade has become more balanced (Table 2). Despite the drastic change in the structure of Kazakhstan’s export to China, its import structure from China has remained relatively stable, with capital goods always constituting the majority of the imports except in 2008. All imports, whether capital, consumer, or intermediate goods, from China to Kazakhstan dropped after that announcement, until 2016, when imports picked up momentum again (Figures 4 and 5).

Figure 1. Kazakhstan’s exports to China: total value by category, 2000–2019.

Source: World Integrated Trade Solution data, World Bank, available at: https://wits.worldbank.org/CountryProfile/en/Country/KAZ/Year/2019/TradeFlow/EXPIMP/Partner/CHN/Product/all-groups (accessed 16 June 2021).

Figure 2. Kazakhstan’s exports to China: shares by category, 2000–2019.

Source: World Integrated Trade Solution data, World Bank, available at: https://wits.worldbank.org/CountryProfile/en/Country/KAZ/Year/2019/TradeFlow/EXPIMP/Partner/CHN/Product/all-groups (accessed 16 June 2021).

Figure 3. Kazakhstan’s fuel exports to China: total value and shares, 2000–2019.

Source: World Integrated Trade Solution data, World Bank, available at: https://wits.worldbank.org/CountryProfile/en/Country/KAZ/Year/2019/TradeFlow/EXPIMP/Partner/CHN/Product/all-groups (accessed 16 June 2021).

Figure 4. Kazakhstan’s imports from China: total value by category, 2000–2019.

Source: World Integrated Trade Solution data, World Bank, available at: https://wits.worldbank.org/CountryProfile/en/Country/KAZ/Year/2019/TradeFlow/EXPIMP/Partner/CHN/Product/all-groups (accessed 16 June 2021).

Figure 5. Kazakhstan’s imports from China: shares by category, 2000–2018.

Source: World Integrated Trade Solution data, World Bank, available at: https://wits.worldbank.org/CountryProfile/en/Country/KAZ/Year/2019/TradeFlow/EXPIMP/Partner/CHN/Product/all-groups (accessed 16 June 2021).

Kazakhstan’s growing leverage

China’s strategic goals to cooperate with the Central Asian countries on border security issues can be traced back to the first ‘Treaty on Deepening Military Trust in Border Regions’ signed in 1996, the ‘Treaty on Reduction of Military Forces in Border Regions’ in 1997, and the SCO in 2001 (Wu and Chen 2004). Despite the later consent to deepen bilateral collaboration with Kazakhstan in trade and industrial investment and the establishment of the China–Kazakhstan Cooperation Committee in 2004, Kazakhstan has not been successful in diversifying China’s involvement away from resource extraction and infrastructure (Wu and Chen 2004; Peyrouse 2008). The year 2013, when China put forward its BRI, was a turning point, as Kazakhstan is an immediate neighbour and a gateway that connects to the West, so China has had to take Kazakhstan seriously and give Kazakhstan increased leverage during negotiations so as to secure more more desirable joint projects along with other must-have items on its wish list. Seeing a limited realisation of foreign investment to diversify Kazakhstan’s economy (Visser and Spoor 2011), the Astana government has taken China’s expansionist drive as ‘the last hope to diversify and jump-start the economy’ (Kassenova 2017, 114).

In 2014, then Kazakh President Nursultan Nazarbayev budgeted 9 million USD for a comprehensive infrastructure development plan, ‘Nurly Zhol’, which he publicly tied to the BRI (Yau 2020b). Sino–Kazakh working groups have since been established to match the initiatives from both countries (Pieper 2021). In 2016, the Ministry of Investment and Development of Kazakhstan negotiated with the National Development and Reform Commission of China for the Kazakhstan–China Program of Industrial Cooperation, which sought to move 55 industrial projects from China to Kazakhstan with a combined capital investment of 26 billion USD from Chinese and Kazakhstani partners (Jochec and Kyzy 2018). Kazakhstan has proactively pitched its development plan to China (Tian 2018; Maitra 2017; Shtraks 2016), and this is possible because (1) China’s BRI aspiration has given more leverage to Kazakhstan’s multi-vectorism strategy; and (2) Kazakhstan’s sovereign wealth funds have made Kazakhstan relatively self-sufficient by allowing the resource-generated wealth to trickle down its multi-sector development. Many of Kazakhstan’s state-prioritised projects have been supported by its sovereign funds in conjunction with multilateral development banks (Zogg 2019). As such, China’s loan to Kazakhstan has never exceeded 10% of the country’s total debt since 2014, and Chinese capital in terms of state loan and commercial investment has always been kept below 10% (see Table 3).

Table 3. Kazakhstan’s debt to and foreign direct investment (FDI) from China, 2014–2020.

Year	Debt to China (billion USD)	Total external debt	Debt to China/total external debt (% )	FDI from China (USD billion)	Total FDI	FDI from China/total FDI (%)	Gross domestic product (GDP)	Debt to and FDI from China/GDP (%)
2014	16.0	157	10.20	1.80	23.9	7.53	221.416	8.04
2015	13.2	153	8.63	0.83	15.2	5.46	184.388	7.61
2016	12.6	163	7.73	0.98	20.9	4.69	137.278	9.89
2017	12.8	167	7.66	1.08	20.8	5.19	166.806	8.32
2018	11.6	158	7.34	1.67	24.3	6.87	179.340	7.40
2019	10.4	157	6.62	1.70	24.3	7.00	181.666	6.67
2020	10.0	163	6.13	0.95	17.1	5.56	164.792	6.64

Source: Author’s compilation from figures retrieved from the Balance of Payments and External Debt, National Bank of Kazakhstan (2015–2021).

Kazakhstan’s desire for industrial technologies also fit well into ‘Made in China 2025’ announced in 2015, which is aimed at displacing China’s industrial overcapacities overseas and re-orientating its manufacturing-led and infrastructure-led economy to high-end yet environmentally friendly development (Cyrill 2018). Although governments do in principle agree on such joint initiatives, the materialisation of specific projects has been met with practical challenges such as financial concerns regarding funding feasibility and public scepticism about unchecked Chinese influence, environmental degradation and undesirable low-tech transfers (Tian 2018; Jochec and Kyzy 2018). Chinese officials are therefore ‘grateful’ when a host country pitches projects that align with the BRI’s broadly defined connectivity goals (Shtraks 2016). Despite the uncertainty regarding the outcome of such joint projects, Kazakhstan has been able to negotiate for projects that give its bid for economic diversification a better chance of success. The following case study of Kazakhstan’s agricultural development exemplifies the initial outcome of the state-level negotiation and sub-national process, through which Sinophobic resistance mixed with Sinophilic drive has shaped a nuanced development of Kazakhstan’s agricultural sector.

Making sense of the sub-national agricultural and food-processing sector

After its independence from the former Soviet Union, the Kazakh government adopted a liberal approach in its agricultural sector, which included rice and cotton fields in the south, wheat in the north, and oil in the east. The initial increase in agricultural output was soon followed by a prolonged decline in output because of diminishing agricultural and livestock enterprises, from more than 6500 in 1990 to less than 500 in 2000. The overall output between 1996 and 2000 was half of what the 1987–1991 period produced (Petrick and Pomfret 2016). Between 2003 and 2005, then Kazakh President Nazarbayev put forward the State Agriculture and Food Programme. The idea was to use the income generated from the extractive industry to invest in the farming and agricultural processing industry, enhance productivity, increase export and diversify the economy. The state budget in the agricultural sector therefore increased by almost four times, from 26 billion tenge in 2001 to 81 billion tenge in 2005, which in turn accounted for 2.5% and 6.5%, respectively, of the total state budget (Petrick and Pomfret 2016).

Such state-led policy was in place because the agrarian sector that emerged through de-collectivisation in the post-communist era was in desperate need of capital investment, management skills and stable employment (Lerman, Csaki, and Feder 2004; Petrick, Wandel, and Karsten 2013). The ultimate goal was to ensure national food security and enhance agricultural and processed food export (Wandel 2010). However, despite the Kazakh government’s claimed effort to reform its agriculture, the World Bank regarded its State Agro Food Program as only moderately successful because of a lack of institutional and financing support (Csaki and Kray 2005; Dudwick, Fock, and Sedik 2007). The second wave of state-led effort was directed to establish the KazAgro holding company in 2006 and consolidate institutional and policy support to boost agricultural productivity. Between 2008 and 2009, Kazakhstan’s state budget in the agricultural sector increased to 139 billion tenge, 45% of which was allocated to KazAgro. Around the same time, KazAgro Innovation was established to focus on agricultural research and technology development.

China was not active in agriculture or food processing projects until the BRI was announced in 2013. In the same year, Nazarbayev also announced ‘Agribusiness 2020’ to modernise the large-scale agriculture industry projects. Such national programmes included 15 master plans to enhance the legal framework, regulation and subsidies for regional specialisation of specific agricultural sub-sectors. One of the master plans was to construct 20 industrial and 2000 small-scale dairy farms between 2014 and 2020 to reduce the import of milk in the long term. The Kazakh Ministry of Regional Development also established the Social Entrepreneurship Corporation to attract investors to participate in projects of high socio-economic importance (Alibekova 2013; Kazakhstan’s Prime Minister Web Page 2013).

In November 2014, President Nazarbayev announced the Nurly Zhol to link up with BRI (President of the Republic of Kazakhstan 2014). The following year, Nazarbayev put forward a 100-step programme to materialise various institutional arrangements in the government apparatus, legal system, and industrial, economic and social sectors. A few of these 100 steps focussed on agriculture-related developments (Kazakhstan Institute for Strategic Studies, n.d.) For example, the 35th and 36th steps concerned the agricultural land code. The 55th step aimed to attract at least 10 transnational corporations into the processing industry to enhance agricultural export. The 60th and 61st steps were to attract strategic investors in the milk, dairy, meat processing and development sectors (Table 4). Although the development outcome of these projects is still unclear and Kazakhstan’s agricultural exports are arguably still far below their potential, the fact that ‘Agribusiness 2020’ was announced in the same year as China’s BRI suggests a desire on Kazakhstan’s part to appeal for Chinese cooperation.

Table 4. Five of the 100 steps to reform put forward by former President Narbarzabev in 2015.

35. Introduction of agricultural land into the market turnover for the purpose of its efficient use. Introduction of amendments into the land code and other legislative acts. 36. Simplification of the procedure for changing the intended use of a land plot. Regular monitoring of the use of agricultural lands. Transfer of unused lands into the government fund for further privatization. 55. Attracting at least 10 transnational corporations into the processing sector to create export goods and ensure Kazakhstan’s entry into the world markets. Informing the international business of the new opportunities at international economic forum. 60. Attraction of strategic investors to develop milk and dairy products. The main goal is to ensure exports of nearly half of the output products to the markets of the Commonwealth of Independent States (CIS) member countries within three years. 61. Attraction of strategic investors for the development of meat production and processing. The main goal is to develop the resource base and the export of processed products.

Source: Kazakhstan Institute for Strategic Studies (n.d.).

Along with the 100-step reform, the Kazakh government began to strengthen cooperations with China for projects beyond resource extraction and transport infrastructure. Consequently, 54 joint projects were initiated with an estimated 23.17 billion USD of investment in the mining and metallurgy, chemistry and petrochemistry, engineering and renewable energy, transport, construction materials, and agriculture and agro-industrial sectors (Kazakh Invest n.d.a). Another source reported a similar scale of cooperation, with 55 projects involving a total of 27.6 billion USD (Simonov 2019). In 2015, Total Imepx–May Toyshın Ltd. was among the first companies to incorporate and process oil crops for the Chinese market. The project was reportedly valued at 23 million USD (CADGAT 2019). In 2016, Gulmira Isaeva, the Vice Minister of Agriculture, explained that Kazakhstan wanted Chinese investment in its agricultural sector, eg in tomato processing plants, oil seed processing, beef, lamb and horsemeat production, and chicken processing facilities: ‘In Kazakhstan we have no tradition to eat legs and heads of birds; in China it’s a delicacy …. We can export to China all products which we can grow in Kazakhstan’ (Farchy 2016). The following section explains the role of sub-national resistance in shaping this state-led development trajectory.

Sub-national forces shaping China’s joint agricultural projects in Kazakhstan

The 35th and 36th steps of the National 100-step reform were targeted at facilitating the legislative amendment of Kazakhstan’s Land Code and promoting effective privatisation of agricultural land. To attract foreign investment, the Kazakh government extended the lease of farmland to foreigners through joint ventures from 10 to 25 years in 2016. Going back to the year 2003, a Chinese company rented 7000 ha of land in Alakol county to grow soybeans and wheat and breed livestock for the domestic market and for export. As a result, 3000 Chinese farmers from Yili, Xinjiang, were deployed, and a joint Sino–Kazakh firm was set up to oversee the project (Grain 2008). The 2016 land reform, therefore, has spurred sub-national fears of a Chinese influx and subsequent harmful use of the soil. In April of the same year, a massive protest took place in Atyrau. It soon spread to neighbouring Aktau, Kyzylorda and Zhanaozen in the South, Aktobe in the North and Semey in the East; the local protesters had developed deep-seated anti-Chinese sentiments. Twenty years after China and Kazakhstan had signed the boundary treaty, the fear that China would take over the soil continued to haunt the local community (Bayer 2016; Bitabarova 2018).

Such local resistance has shaped the development of Sino–Kazakh agriculture projects from pure crop growing to deep food processing. Specifically, the widespread public protest has made Kazakhstan’s Deputy Agriculture Minister Isayeva vow to forbid Chinese investors to own Kazakh land. Instead, the government sought engagement with China’s agro-industrial capacity cooperation (Kenderdine 2017) and facilitated multiple joint partnerships with Chinese companies in the food processing industry (Farchy 2016). This not only prevents Chinese from taking control of Kazakhstan’s agricultural land, but also allows the Kazakh companies to acquire the Chinese food-processing technologies. In 2016 alone, there were seven agriculture-related joint projects, five of which focussed on the food processing industry to produce rapeseed oil, camel and horse milk and powdered milk, and to deep-process grain, flax and other crops; and two involved drip irrigation. By 2018, 22 agriculture projects were recorded to process poultry, antlers, sheep, fish, leather, fur, soybean, tomato, rapeseed and sunflower seed, involving about 1117 million USD. Out of these 22 projects, 18 were completed and one was under construction (no information was available about the remaining three). There were four more recently proposed agricultural projects, including a biochemical cluster for deep wheat processing that was estimated to cost about 2500 million USD (see detailed project information in Table 1).

One typical illustration of the sub-national negotiation in Kazakhstan is the rapeseed oil facility established in 2016 (project no. 57 in Table 1). Despite China’s desire to expand its agricultural development from north-west China to eastern Kazakhstan, and the joint establishment of the Sino–Kazakhstan Modern Agricultural Industry Innovation Demonstration Park in Almaty in 2015 to develop drought-resistant crops (Zakir 2018; Xinhua 2018), the public protest in 2016 has prevented Chinese enterprises from becoming directly involved in crop production. Instead, the Taiyinsha Mai LLP, an oil-seed processing plant in the Tayynshinsky district of northern Kazakhstan, has negotiated with China’s Xi’an AiJu Cereals and Oil Industry Group (AiJu) to jointly operate a rapeseed processing plant in the locality. On the one hand, such a food processing project does not require massive control of agricultural land; on the other hand, it facilitates technology transfer from China. With the state policy to promote oilseed production and export the processed oil to China, Russia and Uzbekistan, as well as different financing and infrastructure support from the Ministry of Agriculture and the Samruk Kazyna investment fund (Kazakh Invest n.d.b), Taiyinsha Mai has been able to acquire equipment and machineries, enjoy taxation holidays and process priority crops with state subsidies. With this development support, the Kazakh partner gained the upper hand in bargaining with the Chinese partner: in addition to getting access to AiJu’s retail rapeseed oil market in Xi’an, Chinese agro-experts could only arrive at the Kazakh plant in phases, allowing ample time for indigenous actors to learn and grow (Rspadm n.d.).

Local-level entrepreneurial drive to diversify exports

In addition to negotiating for technology transfer, local business stakeholders also worried about tightening trade policies, which would restrict Kazakhstan’s export to China (Bitabarova 2018). Such restriction would reduce the incentive for local actors to explore new business opportunities. The trade volume between the two countries reached its peak in 2012. The export value then dropped by 32% between 2013 and 2014 and a further 44% between 2014 and 2015 (Table 2). While falling oil prices could explain the shrinking value, the structural shift as described in the previous section also played a part. This warrants a more nuanced reading of the changing relations between a Kazakhstan that acquired more leverage and a China that continued to promote its BRI.

Kazakhstan’s export of raw materials to China increased from a 22.89% share to 70.43% of the total export between 2000 and 2013, and then dropped to 31.67% in 2018 before increasing to 33.64% in 2019. Over the same period, the share of the export of intermediate goods, including products such as stone and glass, metals, wood and plastic, decreased from 68.06% to 27.43% before rebounding to 61.39% in 2017 but dropping back to 45.51% in 2019 (Figure 2). Kazakhstan’s export of consumer goods to China had always taken up a minimal share of less than 10%, until 2018 when it recorded a significant jump to 17% of total export and continued to increase to 20.75% in 2019 (Figure 2). Kazakhstan’s export to China has gradually shifted from primarily resource-dominant to a more balanced distribution comprising intermediate goods, raw materials and consumer goods. For example, as seven new Chinese agriculture and food processing joint projects in Kazakhstan materialised, the share of the export of animal products, food products and vegetables increased by more than threefold, from 67.8 million to 235.5 million between 2013 and 2018 (World Integrated Trade Solution data, n.d.). This breakthrough was a result of combined efforts in pushing for economic diversification.

Specifically, the state-led negotiations on industrial and investment cooperation between the two governments were facilitated through the Kazakh–Chinese Coordination Committee. On the other hand, numerous bottom-up sub-national initiatives also managed to shape the outcome of Kazakhstan’s engagements with the BRI. For example, the Chinese government had considered the China–Europe freight service one of its signature BRI projects, connecting Chinese cities with Central Asian and European cities. Various local Chinese governments, therefore, rushed to provide subsidies for even non-viable freight routes as a gesture of goodwill towards the central policy. As a result, freight operators receiving political subsidies operated frequent freight trains despite the trade imbalance and inefficient use of empty return trains to China. To make extra earnings, various Chinese railway companies soon established respective trading offices in en-route cities. For example, they hired several Chinese-speaking Kazakh representatives in Almaty to explore possible trade opportunities and arrange exports using their empty return trains to China. Their entrepreneurial drive for personal gain has unintentionally expanded the market for Kazakhstan’s agricultural, food-processing and certification sectors (Tjia 2020).

Such sub-national efforts were backed by state-level negotiation. Both governments have agreed, in the ‘Chinese–Kazakh 2020 Long-term Plan for Economic Cooperation’, that they would endeavour to optimise the bilateral trade structure by increasing the proportion of high-value-added and high-tech products (Xinhua 2014). This has led China to expand border crossing facilities, upgrade customs technology and improve infrastructure connectivity (Reeves 2018). The ensuing first batch of wheat was exported from Kazakhstan to Jiangsu in China in August 2018. Since then, chilled beef, live donkeys and barley were exported to China in August, November and December, respectively, of 2019. These exports involved enormous sub-national efforts not only in sourcing the suppliers but also in identifying suitable food testing laboratories and getting sanitary certificates for various agricultural products such as rapeseed, hay, barley, wheat, sweet corn, wheat flour, flaxseed and dairy products. In 2019, a few lists of Kazakhstan enterprises were announced as registered suppliers of soybean, sweet corn, barley and wheat goods for China (General Administration of Customs of China 2019). With a clear set of state-led priorities and well-received sub-national concerns about local economic development, Kazakhstan, as a recipient/engaging country, is able to cope with China’s strong desire to pursue its connectivity projects.

Conclusion

Kazakhstan’s pitch on China’s BRI projects illuminates the possibilities for developing countries to cope with China’s recent development agenda. Despite being a weak neighbour, Kazakhstan has adopted a multi-vector strategy to reduce its reliance on China. Seeing China use BRI to connect to the West via Central Asia, the Kazakhstani government has shaped its ‘Bright Path’ national development plan in a way that allows it to bargain for Chinese participation in non-connectivity joint projects. An initial mapping of the Sino–Kazakh joint projects suggests that China’s aspiration has unintentionally given Kazakhstan extra leverage, allowing it to punch above its weight in the regional economy. However, whether these planned joint projects could eventually be rolled out as promised to benefit the local community will rely on specific industrial policies and related state agents to act with integrity on behalf of public interest, as well as their capacity to follow through on the loose ends to complete the projects. This is especially challenging in Kazakhstan, where authoritarian legacy has given the state elites more power to collude and privatise public gains. The lack of transparency in many state programmes has also made any scrutiny of the industrial projects and inspection of their implementation and outcome difficult. There have been no official reports on the projects, and the outbreak of COVID-19 has made any field trips and interviews almost impossible. As such, one must rely on multiple secondary sources and triangulate their information. This sub-national case study of the evolving agriculture and food processing industry in Kazakhstan has therefore aimed to shed light on the micro-dynamics that stemmed from public resilience and has become critical in shaping state-level narratives during negotiations, steering the country’s development towards a promising trajectory. Further fieldwork and case studies should be carried out to compare the outcomes of different sectors such as the automobile, hydropower and petrochemical industries to provide a more comprehensive explanation of Kazakhstan’s multi-sector economic diversification and to determine the critical success factors.

China’s rise and subsequent increasing investment in developing countries often involve multiple development goals. Instead of speculating about the underlying agenda, it may be pragmatically more beneficial for the engaging states, especially the weak partners, to prepare for the inflow of resources and make the most of the situation. One illuminating lesson learned from the case of Kazakhstan is that state-level negotiation could kick off the engagement, and subsequent sub-national resilience and entrepreneurial drive can then interact and further shape the outcome of such cooperations. Whether this will eventually lead to a sustainable agricultural/food processing development and economic diversification in Kazakhstan, by reconciling the interests of large investors and local stakeholders to a large-scale foreign agro-industrial complex (UNCTAD 2009) and enhancing small farmers’ access to capital and technology and generating employment in the rural sectors, is worth following up as China’s BRI continues to evolve in Kazakhstan.

Acknowledgements

The work described in this paper was supported by the Early Career Research Scheme funded by the Research Grants Council of the Hong Kong Special Administrative Region, China (Project no. CityU 21606520) and the CityU Strategic Research Grant (Project No. 7005324). The author also thanks Huang Wenjie for her research assistance on this paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

Linda Yin-nor Tjia

Linda Yin-Nor Tjia is Assistant Professor at the Department of Asian and International Studies, City University of Hong Kong. Her research interests include China’s domestic and overseas railway, logistics, infrastructural and industrial projects, as well as the related impact on the engaging countries. She received numerous regional and international research grants to investigate China’s involvements in Kazakhstan, the high-speed rail development in China and Japan, and the agri-product development in Mongolia and Kazakhstan. Her articles appear in China Journal, Asian Survey, Journal of Transport History and Journal of Social Entrepreneurship. She is also the author of a monograph explaining Railway Reform in China: A Train of Property Rights Rearrangements and numerous book chapters published by Routledge and Edward Elgar.