MINISTRY OF EDUCATION AND SCIENCE OF

THE REPUBLIC OF KAZAKHSTAN

SULEYMAN DEMIREL UNIVERSITY

FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES

Altynbekova Shynar

THESIS WORK

Specialty 5B020200 – «International Relations»

Kaskelen 2015

MINISTRY OF EDUCATION AND SCIENCE OF THE REPUBLIC OF KAZAKHSTAN

SULEYMAN DEMIREL UNIVERSITY

FACULTY OF ECONOMICS AND ADMINISTRATIVE SCIENCES

«Approved»

Head __________________ Department

_______________________ _______________________

THESIS WORK

Theme: «In the fist of heavenly Empire: Why China’s Investments poses a big threat to Kazakhstan »

Specialty 5B020200 – «International Relations»

Submitted by: Altynbekova A.

Scientific supervisor: Dr., prof. Zhanabel Zh.

Monitoring of Implementation__________

Kaskelen 2014

CONTENT

INTRODUCTION

1. SHAPING OF CHINESE STRATEGIC IMPERATIVES TOWARDS CENTRAL ASIA (1949-2013)…………………………………………...

2. CHINESE ECONOMIC PRESENCE IN KAZAKHSTAN

1. Brief Review of bilateral trade…………………………………………..

2. Under the drive of heavy Chinese Investments………………………….

3. THREATS AND OPPORTUNITIES OF SINO-KAZAKH COOPERATION

3.1 Kazakhstan’s response to Chinese advance: SCO and ECU compared…………………….

3.2 New level of cooperation between RK and PRC………………………

CONCLUSION…………………………………………………………...

REFERENCES………………………………………………………….....

Introduction

After the collapse of the Soviet Union in 1991 five new independent states emerged on the territory of Central Asia, namely Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. Five of them had been a part of one state and its dissolution was as surprising for them as for the whole world. Russia’s territory size quickly decreased many times and former superpower bogged down in economic problems. Meantime the emergence of new states in Central Asia captured the attention of the rising power on their eastern borders. China having freed from the burden of having big neighbor started establishing diplomatic contacts with its western neighbors. The vacuum resulted in a collapse of the Soviet Union in Central Asia created some threats for China as well as a lot of opportunities. Weak countries of the region were not able to defend themselves against rising threats such as spread of terrorism and religious extremism which also posed risk to the security of China. However the relative weakness of Central Asian states on the other hand was a positive factor for Beijing. The pressure exerted by the Soviet Union disappeared. The vast market for Chinese products emerged in the region. After detailed analysis of the situation People’s Republic decided that its role was to fill the vacuum. With the help of the work of research institutes Chinese government started developing its approach towards Central Asia which later turned into complex strategy. The most preferred cooperation for China was with Kazakhstan, as it was the biggest and richest country of the region with open economy and stability.

More than twenty years passed from then. In two decades it grew up and became the second largest economy in the world after the United States and the third military power after USA and Russian Federation. PRC is without any doubts a regional power and is continuing gaining strength. Nowadays China is actively engaged in Kazakhstan and is increasing its influence.China is one of the biggest economic partners of Kazakhstan and the biggest investor. Chinese companies’ presence in energy sector of Kazakhstan tangible. PRC helps to build infrastructure and renew old roads. Confucius institutes are teaching Chinese language to local young people and promote Chinese culture. All of these are the ways to ensure China’s national security, access to vital energy resources and build a corridor connecting China with Europe. Chinese interests in Kazakhstan are rising and its strategy becomes more active with every year.

Therefore a reasonable question arises about the real intentions of China in Kazakhstan. Despite Beijing’s assurances of China’s peaceful environment strategy, policy of non-intervention in internal affairs and respecting sovereignty of its neighboring countries strengthening of PRC raises concerns of those in rule of relatively weak Central Asian states, especially Kazakhstan. Can Chinese soft-power one day turn into offensive and aggressive power? Nowadays no one can say it for sure. History proves Central Asia has always been in the sphere of strategic interests of China. No doubt, in the era of globalization and institutionalization the situation should be interpreted much differently. But we should not rule out the possibility that such scenario may take place especially considering the hard fact that Russia is gradually losing its influence in the region to China and the United States is slightly decreasing its presence in Central Asia after the withdrawal of troops from Afghanistan.

The relevance of this thesis work is therefore in its newness and originality. In last twenty years not so many scientists analyzed the scale of Chinese presence in the Kazakhstan. In contrast there are dozens of research centers in China which study Central Asia. The Chinese factor is a relatively new topic and started gaining interest in academic sphere only recently. This factor has increased rapidly and still without clear analysis it is very difficult to understand how China is successful in penetrating the region. In author’s opinion, this is due to the fact that culturally it is Russia and the West who dominate in Central Asia. But China is actively involved in those areas where it needs to be involved, particularly trade, energy sector and infrastructure. In cultural dimension China has just started gaining momentum. Confucius institutes as the engines of Chinese cultural influence attract more students and higher education in China becomes more appealing to locals due to its quality and availability. While China as well as other geopolitical actors has a lot of leverages to use when dealing with Kazakhstan in turn have to rely on skillful diplomacy so not to become mere parts of games between great powers. In order to fully understand what are the plans of China for Kazakhstan rigorous research needs to be conducted.

In general, Chines factor in Central Asia it was thoroughly analyzed by several experts. One of them is Ablat Khojaev from Uzbekistan. He wrote a book on Chinese factor in Central Asia basing on sources of Chinese analysts which beyond question added value to his work. Another scholar is Zhao Huasheng from China. His contribution is mainly presented by the book he wrote together with another two experts called “Central Asia: Views from Washington, Moscow and Beijing”, and many other articles. It also was analyzed by considerable number of specialists from Kazakhstan. Their views are primarily expressed in articles of different journals like “Central Asia and The Caucasus”.. Among the western experts in-depth research was made by two co-authors Rafaello Pantucci and Alexandros Petersen who write a number of articles on China’s strategy in Central Asia in modern era. Some findings and opinions of respective experts and many other authors are cited in this thesis work.

The main purposes of this thesis work is to describe the interests of China in the region, to analyze the economic presence of China in Kazakhstan, to examine Chinese investments, which can be considered as the main tool of expansion, and to try to show the future perspectives of Sino*Kazakh cooperation. To achieve this aims the following objectives needs to be fulfilled:

• To analyze the shaping of Chinese strategy in Central Asia over time starting from the emergence of People’s Republic of China in 1949;

• To analyze the bileteral trade between two states;

• To analyze the Chinese investments on implementation of Chinese strategy in energy sector of Kazakhstan;

• To compare SCO to ECU, to explain their influences and roles.

During the research the methods of theoretical and practical analysis and ascent from the abstract to the specific has been used by the author.

Practical significance of the thesis work lies in the fact that its findings and recommendations may be used by other specialists in their researches as a literature and in general can help to understand reading audience the current situation in Kazakhstan.

The thesis work describes the shaping of Chinese economic presence and advance in Kazakhstan starting from 1991 till today. Exception is the first chapter where a brief analysis of history takes place starting from the emergence of People’s Republic in 1949.

In the thesis work the following structure has been used: introduction, three chapters, conclusion and list of references. The main body is divided into three parts. The first chapter explains the history of the problem, in our case how the strategy of China towards Central Asia was formed in a process of time from 1949 till today.

The second chapter describes the bilateral Trade and Chinese FDI’s. The first paragraph analyses both import and export dimensions between Kazakhstan and China, gives information about the value of trade since 1995, including detailed groups of goods . The second paragraph addresses the investment policy of China, and the cooperation on energy sector, the main sector of Chinese interests .

The third Chapter describes the competition of danger of Chinese rising role of our economy and its opportunities for the future development . The firat pargraf compares SCO and ECU, analyses it aims and possible implications on Economy of Kazakhstan. While the second paragraph describes the new level of cooperation between China and Kazakhstan, allocation of recent 14 bln $ investment is explained.

The literature used in the research is extensive and includes scientific articles of analysts from Central Asian states, mainly Kazakhstan and Uzbekistan, analysts from Caucasus and Turkey, Russian and western as well as Chinese analysts. The emphasis has been put on the diversity of sources. Analyzing thoughts of scholars from different nations including those discussed in this thesis work ensures greater objectivity.