The Eurasian Development Bank (EDB) reports that China is now the largest foreign investor in Central Asia, surpassing Russia after a decade of growing investments in oil, gas, mining, and transportation infrastructure.
According to EDB, China took the top spot from Russia by pouring money into Kazakhstan, Uzbekistan, and Turkmenistan, which together received about 90 percent of China’s investments since 2015. The crown jewel of these investments is a $9.4 billion oil field in Turkmenistan, managed by the state-run China National Petroleum Corporation (CNPC).
Uzbekistan saw a 500-percent surge in Chinese investment over the last five years, as the Chinese both covet Uzbekistan’s rich mineral deposits, and see profit in helping the Uzbeks diversify their economy into manufacturing and renewable energy. The geography of Central Asia favors wind and solar projects that can feed electricity into the adjacent rural areas of China.
The Foreign Policy Research Institute (FPRI) theorized in May that Russia decisively lost its grip on Central Asia due to the Ukraine war, which drained both Russian investment capital and the military strength it formerly provided to the Central Asian republics. There is some evidence that Central Asia no longer sees Russia as the guarantor of regional security, and may have actually begun to see the Russians as a threat.
China, meanwhile, saw the region as more important than ever due to its oil and minerals, the burgeoning economies of Kazakhstan and Uzbekistan, and the flow of trade through Central Asia to Europe. Heavy investments through the crucial years of regional growth gave Beijing an unassailable position as provider – and ultimately controller – of transportation and communications infrastructure.
“Chinese firms now anchor much of Central Asia’s telecommunications backbone, fiber-optic networks, smart-city platforms, AI-enabled surveillance systems, and e-governance infrastructure,” FPRI observed.
“This shift is not merely commercial since it reshapes standards-setting power, data governance frameworks, cybersecurity dependencies, and long-term training ecosystems. Over time, these technological dependencies create path dependence that is far more difficult to unwind than shifts in trade volume or diplomatic alignment,” the report added.
Chinese trade with Central Asia has tripled over the past ten years, with Kazakhstan accounting for almost half of the current $106.3 billion trade volume. China is now the number one trading partner for all five of the largest Central Asian economies – although there is some dispute about just how strong China’s grip on the region is, since Chinese agencies claim much higher trade figures than any of the individual Central Asian republics do.
FPRI noted that China even found a way to cash in on Russia’s decline, as Central Asia has become “a hub for Russian sanctions evasion,” with China as the “central player.” Kazakhstan has a huge land border with Russia, while Kyrgyzstan is fabulously corrupt, making both countries ideal links in the sanctions evasion trading chain between China and Russia.
Central Asia also offers China a convenient escape route from Western sanctions such as the Uyghur Forced Labor Prevention Act (UFLPA). Moving factories to Central Asia is a quick way to get them off the Western sanctions radar screen.
The chief executive of Hong Kong’s China-controlled puppet government, John Lee Ka-chiu, paid a trading visit to Kazakhstan on Monday – and the results were considered a disappointment, with a much lower volume of trade deals signed than Hong Kong was expecting.
In fact, Kazakh officials were talking about $100 billion in trade deals ahead of Lee’s visit, but Hong Kong announced a mere $1.65 billion worth of signed agreements, and Kazakhstan would not even estimate a dollar value for the trade deals signed.
These developments could indicate that Kazakhstan is growing nervous about becoming too dependent upon China and wants to keep its options open with Russia and other economic suitors, including Europe and the United States. Also, Lee and the vast entourage he brought to Kazakhstan spoke of Hong Kong as a ‘bridge” between Central Asia and China, but Kazakhstan may not feel that it needs any such middleman to access Chinese markets and investment.
The National Interest in May saw some lingering suspicion about Chinese influence in the Central Asian republics, but frankly the money offered by China’s trillion-dollar Belt and Road Initiative (BRI) early in the previous decade was just too good to pass up.
All of the biggest Central Asian republics received infrastructure money from BRI and Kazakhstan was the symbolic birthplace of the entire program, as Chinese President Xi Jinping formally unveiled BRI in the Kazakh capital of Astana in 2013. The World Bank has attributed up to 32 percent GDP growth in the smaller Central Asian nations to BRI investments.
While most of Central Asia’s governments are cheerleaders for BRI, not all of their citizens are quite so enamored of China’s influence.
The National Interest noted BRI “has bred resentment in Central Asia,” because most of the best jobs it creates go to imported Chinese workers, and Chinese investors wind up with majority ownership stakes in vital national infrastructure – sometimes with zero ownership, and zero profit, for the locals.
Meanwhile, the people of Central Asia are growing nervous that their governments are drowning in debt to Chinese banks. China has already seized territory in Central Asia from states that could not pay those debts, and may do so again. That danger probably seems more immediate to the people living on the land Beijing might take than political elites living in comfortable capital cities.
“Politically, Chinese involvement in the country is also controversial due to its activities in the neighboring Xinjiang Province, where ethnically Turkic Uyghur Muslims face extreme persecution. Anti-China rallies across the region, highlighting this issue, have been aplenty,” the article noted.
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