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Bilateral trade between Xinjiang and Kazakhstan: challenges or opportunities?

Xinjiang Kazakhstan trade 2by Cobus Block.

China’s Xinjiang Uyghur Autonomous Region shares 5,600 km of border with eight countries, including a lengthy 1,700 km with Kazakhstan.  Small wonder, then, that the region has grown into a local trading hub. In 2010 the total value of trade between Xinjiang and Kazakhstan was equal to 17% of Kazakhstan’s GDP.  For Xinjiang in that year, foreign trade value to its GDP was over 30 percent.

Given the importance of cross-border trade to Xinjiang’s economic development and social stability, bilateral trade between Xinjiang and Kazakhstan deserves a closer look. This case provides an excellent example of the prospects and challenges facing trade relations between China and Central Asian countries.

Kazakhstan is a natural market for Xinjiang’s products.  Urumqi, the capital and economic hub of Xinjiang, sits over 3,000 km from China’s eastern coast.  In contrast, it lies only 1,000 km from Almaty—the largest city in Kazakhstan.  While trade to Central Asia was only one percent of China’s total exports in 2010, it made up 83 percent of exports from Xinjiang in the same year.  Kazakhstan is by far the most important destination for exports from Xinjiang accounting for 52 percent of Xinjiang’s exports in 2010.  Nonetheless, the Customs Union, established in 2010 by Belarus, Kazakhstan and Russia, challenges Sino-Central Asian trade relations.

After the fall of the Soviet Union, exports from Xinjiang to Kazakhstan grew yearly.  In the late 2000s, however, bilateral trade between Xinjiang and Kazakhstan faced many challenges related to the global economic recession, social upheaval in Xinjiang and the establishment of the Customs Union.  The traders in Almaty and Urumqi making a living by bringing goods across the border suddenly found business much more difficult as new and unfamiliar regulations were enforced.  Crossing the border had never been easy, but traders and transportation companies had learned how to comply with necessary regulations and circumnavigate others.  New officials and requirements meant re-learning the ropes.  As a result, Xinjiang’s exports to Kazakhstan only moderately recovered in 2010 before falling again in 2011.

Xinjiang Kazakhstan trade3Kazakhstan’s entry into the Customs Union may also have triggered structural changes in bilateral trade.  Chinese officials distinguish between “general trade” and “petty trade in border areas”.  General trade covers goods traded by enterprises in China with import-export rights, while border trade refers to the trade of goods in border regions through treaty-authorized ports.  In general, border trade is smaller in quantity and less subject to regulation.  It is the realm of so-called “suitcase traders”—thus named for their tendency to take goods across the border in suitcases in order to avoid paying customs duty.

From 2001 to 2008, border trade exports grew exponentially, while exports in general trade rose slowly.  By 2008, border trade exports were five times the value of general trade exports.  In the wake of the economic downturn and the establishment of the Customs Union, however, border trade exports fell by half and failed to make much of a recovery .  Meanwhle, general trade exports rose quickly , accounting  for almost a third of total exports in 2011.

The establishment of the Customs Union may end the suitcase trade across the China-Kazakhstan border and force some of Xinjiang’s exporters to switch to more regulated methods.  Some in Xinjiang’s academic and business communities see this as a positive development.  Suitcase trade usually deals in low-quality goods, which hurts China’s reputation and the prospects of more forward-looking entrepreneurs.  In other words, although the Customs Union has altered trade patterns between Xinjiang and Kazakhstan, there are still plenty of opportunities for continued bilateral trade.

Cobus Block is a Fulbright Fellow researching trade between China and Kazakhstan.  He is currently based at KIMEP University in Almaty, Kazakhstan

Email: cobusblock@yahoo.com

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

Kazakh repatriates from China: burden or asset?

 kazakhs ofnb xinjiangBy Nikolay Tyan.

The  increasing flow of people across national boundaries has become a new characteristic of  the 21st century. Transmigration should be beneficial to both sending and receiving countries; improving bilateral relationships and people-to-people diplomatic ties. However, in practice migration presents many challenges for and between states. The case of Kazakh repatriates from China demonstrates these tensions. There is great potential for this group to contribute to the development of the relations between Kazakhstan and China, yet substantial concerns over their integration remain.

Kazakhstan and China are neighbouring countries, sharing a 1700-km-long border. The issue of Kazakh repatriates in China can be traced back to 100 years ago when large numbers of Kazakhs became Chinese citizens resulting from treaties between Chinese and Russian Empires signed in 1860, 1864 and 1881. The 20th century witnessed political turmoil and civil wars in both states, as well as conflicts between the People’s Republic of China and the Soviet Union, leading to the end of cross-border flows of people in the 1960-70s. A fundamental change happened in 1991 when the Soviet Union dissolved, leading to the independent Republic of Kazakhstan. At that time around 1.5 million ethnic Kazakhs were in China. Neither governments mentioned this ethnic group in official dialogues for establishing formal relationship.

However, in 1997 the government adopted a special program of the repatriation of ethnic Kazakhs living abroad (so-called Oralman). According to the Information-Analytical Center of Social-Political Studies in Post-Soviet States, over 65 thousand ethnic Kazakhs migrated from China to Kazakhstan from 1991 to 2009 following the official invitation. They are now the second largest group from a non-Soviet country in Kazakhstan, mainly settling along the Chinese border or around Almaty – the former Kazakh capital, biggest city and major business centre. It is reasonable to assume that  Kazakh repatriates can play a positive role in facilitating mutual understanding and enhancing business ties between Kazakhstan and China.

However, there are many challenges facing Kazakh repatriates. Many were engaged in small household farming in China and lack the occupational background to contribute to business links.  They also face barriers in integrating into Kazakhstani society. Although they are fluent in Kazakh language the written script differs in Kazakstan from China. Kazakh language outside the country is based on Latin or Arabic script whereas the modern Kazakh alphabet is Cyrillic. Furthermore, Oralmans are considered by local people as “strangers” because they come from another cultural environment and usually do not speak Russian, still the language of official communication in multi-ethnic Kazakhstan.

These problems stir the debate over who the “authentic Kazakh” is. Sectors of Kazak society argue that the repatriates are descendants of those who fled from the country. Hence, they did not contribute to the socio-economic rise of Kazakhstan. On the other hand, repatriates argue that they lived in this territory for centuries before their temporary migration to other states. They also see themselves as preservers of Kazakh culture and traditions, lost to Kazakhs due to the Russian/Soviet influence.

kazakhsAnother area of tension is financial support for Oralman. Some accuse them of excessive reliance on governmental aid, causing shortages in other areas.  While enjoying the benefits from Astana, many use the door provided by Kazakh legislation to retain their Chinese citizenship as “it is easier for their business and retirement payments”, according to the Chief of the Kazakhstan’s Migration Committee.

Kazakhs repatriates could be great facilitators in China – Kazakhstan relations, but so far large numbers lack a capacity to do so. The Kazakh government should take measures towards the better integration of repatriates to Kazakh society without losing their “Chinese roots”. Astana should not underestimate the potential of the returnees.

Nikolay Tyan is a former trainee at the Ministry for Foreign Affairs of the Republic of Kazakhstan and a graduate researcher at the Organization for Security and Cooperation in Europe Academy in Bishkek (Kyrgyzstan).

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

Uncertainty of power succession in Kazakhstan and its implications for China and Russia

photo is taken from www.edu.gov.kz
photo is taken from http://www.edu.gov.kz

By Irina Malyuchenko.

The question of a presidential successor for the current incumbent President Nursultan Nazarbayev has many people inside and outside the country concerned for the future of Kazakhstan. Having reached the top leadership position before the Soviet Union collapsed, Mr. Nazarbayev remains the first and only President of the Republic of Kazakhstan since independence in December 1991.  More than two decades on, Nazarbayev is 72 years old and still in power, yet it remains unclear how and when his position can be transferred to a new political leader.

The process and outcomes of political power transfer to the “post-Nazarbayev” era will have significant impact on the international relationships and balance with the two superpowers in Central Asia – China and Russia. For Russia, Kazakhstan is an arena to exert political influence through the control of the transportation corridors, dominance in foreign trade turnover, and participation in the Collective Security Treaty Organization. For China, Kazakhstan represents an energy-supplier, product market and a partner for the security of China’s Xinjiang autonomous region. Kazakhstan is the centre of the strategic play of the great powers as it is the most developed and stable state in the region

With presidential power change in Astana, Russia will face a dilemma: whether to support the old political elite (loyal towards the Kremlin) or rely on a potentially different one. The new leadership may not be associated with the Soviet political legacy unlike the current post-Soviet ruling elite. New elites are likely to be formed from: a) the recognised opposition such as parliamentary members of the political party Ak Zhol; b) the family members of the current president and ruling families (perhaps Nazarbayev’s eldest daughter – Dariga Nazarbayeva); c) foreign opposition (such as Mukhtar Ablyazov – former Minister for Energy, Industry and Trade living in the UK, Timur Qulybaev – former Chairman of the Management Board of Samruk-Kazyna National Welfare Fund living in Austria, or Viktor Khrapunov – ex-minister for Energy and National resources, ex-mayor of Almaty living in Switzerland).

Almost all of these scenarios of power succession challenge Russian and Chinese standing in the region as the Kazakh ruling elite is directly involved in oil and gas deals with both states.

The change in the ruling elite will weaken Russian influence and create a power vacuum in the country, creating new room for China’s interests in Kazakhstan and opening new inroads for China in oil and gas sectors of the Kazakh economy. These circumstances will allow China to continue its domestic economic and energy reforms as well as

photo taken from www.azh.kz
photo taken from http://www.azh.kz

consolidating its “great power” image in Central Asia. Over the next five to ten years China will use this favorable political climate for its economic benefit, but in the long term Beijing will aim at strengthening its political and ideational influence in Kazakhstan.

Kazakhstan went through a peaceful transition of power in the beginning of the 1990s. There is no guarantee, however, that the same will happen after the change of the current president. Facing this dilemma, Chinese strategy is likely to maintain the security of its frontiers with Kazakhstan and do everything in its power to avert instability in Central Asia. Stable Kazakhstan is a guarantee of security for Chinese interests in oil and gas pipelines going through Kazakh territory. Kazakhstan’s uranium deposits and transport routes provide security for the whole of China. It is time to observe closely any adjustment of China’s foreign policy to Kazakhstan’s power transition in the near future.

Irina Malyuchenko is a graduate researcher at the Organization for Security and Cooperation in Europe Academy in Bishkek (Kyrgyzstan). Her research interests include Kazakhstan’s diplomatic relations, energy security and Central Asian and international relations.

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors

Taiwanese dITplomacy (sic) in Kazakhstan

by Elzbieta Maria Pron.

Kazakhstan is thirsty for technical innovations, being the fastest-growing Central Asian state with a GDP increase of 7.5% in 2011. Neither of its main trading partners – Russia and China – have the capability to dominate the IT market (although the Chinese brand Lenovo is making a good run for it). Therefore Taiwanese IT companies have plenty of room to enter Kazakhstan. The Computex Taipei 2012 International Fair received good publicity in the brand press and the opportunity for Taiwanese IT producers to interact with worldwide IT producers without leaving Asia has made the sector an important factor for Taiwanese image-building in Central Asia.

Taiwanese dITpomacy in Kazakhstan is a relatively new phenomenon, initiated by the opening of the Taiwan External Trade Development Council (TAITRA) Office in Almaty in 2004. Despite TAITRA Almaty being modest in its size and team, the Office is located strategically in the finest place – the biggest Kazakh city and its former capital, only a 3-hour-drive from the Kyrgyz capital. This is also the only office in Central Asia co-sponsored by the Taiwanese government – the closest Taipei Economic and Cultural Office (a quasi-embassy of Taiwan) has its premises in Moscow.

TAITRA Almaty has focused on two missions over the past few years. The first was facilitating trade contacts between Taiwanese and Kazakh traders with the IT industry being at the core of these negotiations. TAITRA supported Kazakh IT distributors with logistical aid in the organization of their visits to main Taiwanese IT trade shows. It also provided Kazakhs with leading innovative technology companies with office facilities available for periods of up to two years at the Taiwan Trade Centre in order to be able to further business contacts with Taiwanese producers.

The second mission of TAITRA Almaty has been to fill the commercial gaps in the Kazakh domestic market with Taiwanese products and to establish the trade brands of Taiwanese goods. TAITRA attempts to show that Taiwan is not only the home of Acer, Asus and Gigabyte, but also a manufacturer of components and final products for other globally-recognized brands from Europe and the US. As the Head of TAITRA Almaty says, ‘Why do they [Kazakhs distributors – aut.] have to travel all that way to Germany or the US, if they can have it from us?!’

This ‘IT diplomacy’ has already paid off. The IT brand press forms a public medium in which the notion of Taiwan as an entity separate from the mainland of China is most prominent. Neither the Kazakh academic community nor public opinion distinguishes between Taiwanese and Chinese nationals, a difference commonly (although not diplomatically) recognised in most Western states. Taiwan has been presented as rich and successful economy that is worth looking at in contrast to China, which is still seen as a producer of cheap and bad quality goods. Despite the fact that TAITRA Almaty distances itself from any form of political agenda, it has contributed immensely to Taiwanese image-building in Kazakhstan. Given the Kazakh appetite for technical novelties, their soft spot for luxury products and the value attached to branded goods, the IT future of the little island of Taiwan seems to have set sail on a rising tide.

Elzbieta Maria Pron is PhD candidate at the School of Contemporary Chinese Studies, University of Nottingham.

Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.

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