China’s Western Neighbours, and the Future of Eurasian Overland Trade

A feature of international trade over the last half century has been the flourishing of global value chains.  Despite the name GVCs were rarely global but regional, centred on East Asia, Europe, and North America.  The final goods would be shipped by sea to their final market.

During the 2010s, overland links between the Asian and European regional value chains were created, initially in response to demand from German carmakers sending components to their factories in China and from electronics companies sending Apple, HP, and Acer products from China to Europe.

The Eurasian Landbridge

Regular services began in 2011 between Chongqing and Duisburg and between Chengdu and Łódź.  By 2016 the former was daily, and services between many other EU-China city pairs had been created. 

China’s flagship foreign policy, the Silk Road Economic Belt, was announced in 2013 in Astana, capital of Kazakhstan, and became part of the Belt and Road Initiative that was launched in May 2017.  Rail connections west through Kazakhstan were the key part of the overland “Belt”.

The number of containers on the main line through Kazakhstan increased to 46,000 in 2015 and 333,000 in 2019.  As maritime shipping services were disrupted by COVID19 and more customers were willing to pay for faster more reliable service, the number of containers grew to 547,000 in 2020 and 692,500 in 2021.

A bigger shock was the Russian invasion of Ukraine.  As Russian Railways were added to the list of western sanctions and freight forwarders were concerned about insurance being invalidated by “Act of War” clauses, China-EU rail services collapsed.

China had been slowly trialling alternative routes to Europe via Iran or across the Caspian, the latter with EU support.  China reacted quickly to closure of the Russian route sending a freight train in early March via Kazakhstan across the Caspian to Baku and then by rail to Istanbul and boat to Trieste. Other multi-modal routes cross the Black Sea to ports in Romania and Bulgaria.  The Landbridge is important to China.

The Road to Samarkand via Kazakhstan

President Xi’s first post-COVID trip abroad was to the Shanghai Cooperation Organization (SCO) summit in Samarkand on 15-16 September 2022.  The eyes of the world were on the summit and especially President Putin’s bilateral meetings with leaders of China, India, Iran, Turkey, Pakistan, and others.  In his search for support of the war in Ukraine, Putin came away empty-handed.  China continued to not criticise rather than offer positive support.

The global media paid less attention to President Xi’s state visit to Kazakhstan en route to Samarkand.  Xi spoke warmly of Sino-Kazakh relations:

Our countries have become the forefront of cooperation in a number of areas. We were among the first to settle border issues, turning the 1,780-kilometer-long common border into a bond of friendship between our peoples. We were among the first to have developed international cooperation in the field of industrialization, setting an example of cooperation within the "One Belt, One Road" program. We have elevated bilateral relations to the level of eternal comprehensive strategic partnership, which has no parallel in Chinese diplomacy, having achieved its breakthrough development.

Even more striking was Xi’s support for Kazakhstan’s territorial integrity:

No matter how the international situation changes, we will continue our strong support to Kazakhstan in protecting its independence, sovereignty and territorial integrity, as well as firm support to the reforms you are carrying out to ensure stability and development, and strongly oppose to the interference of any forces in the internal affairs of your country.

Kazakhstan shares many features with Ukraine.  Its 7,644 km border with Russia is indefensible, and several million Russian speakers live on the Kazakh side of the border.  When Kazakhstan and Ukraine decommissioned their nuclear weapons, they signed similar treaties confirming their territorial integrity.  Little wonder that President Tokayev is worried about Russia’s invasion of Ukraine.

China sympathizes because relations with Central Asia have long involved condemnation of “splittism”, i.e. discouraging any support for Xinjiang or other potential seceders.  The Central Asian countries agreed to mute support for the Uighurs in return for good economic and political relations with China.  National borders were sacrosanct.

In Samarkand, China also emphasized stability.  Trade and investment in Central Asia have been mutually beneficial, as has the rail connection to Europe.

One of the main practical measures to be agreed in Samarkand was funding for a rail link between Kashi (Kashgar), the most westerly point on China’s rail network, and Andijan in Uzbekistan, with connections to Tashkent and a shorter route to Tehran or the Caspian.  The link mainly runs through the Kyrgyz Republic which had baulked at the route and the cost, but in Samarkand China agreed to a financing formula by which the three countries involved would each pay one third.

Russia, China, and Central Asia

Central Asian relations with Russia and China are a game of shadows.  The SCO was intended to be a forum for regional cooperation, against the background of an implicit arrangement whereby Russia maintained political hegemony in Central Asia while China increased its economic footprint.  Since 2000, China’s economic presence has overtaken that of Russia in many respects.  Rail, road and pipeline connections between Central Asia and China that were non-existent in 1990 are now well established.

China will seek to extend its economic presence in Central Asia and the overland rail link to Europe and the Middle East.  For the near future that link must go through Kazakhstan, although the Kashi-Andijan line will provide a future alternative.  China has also laid down a political redline in guaranteeing the territorial integrity of Kazakhstan.  China may not be stepping up to oppose Russia’s war in Ukraine, but President XI has underlined Russia’s diminished influence in Central Asia.

Richard Pomfret, Emeritus Professor of Economics, the University of Adelaide.

The views expressed here are the authors, and may not necessarily represent the views of the Institute for International Trade.

Photo by Jake Weirick on Unsplash