Economic impacts of

the BRI on Central

Asian economies

30/04/2024

Czech University of Life Sciences Prague

Faculty of economics and management
Regions in the international trade and economy

Members
Leonardo Pérez de Morales Monné
Swati Digal Gandhi
Digal Ashokkumar Gandhi
INDEX

Contenido
Economic impacts of the BRI on Central Asian economies .................................. 1
Introduction ............................................................................................................... 3
Objective ................................................................................................................... 3
Current state of research ............................................................................................ 3
Materials.................................................................................................................... 3
Methods .................................................................................................................... 3
Background ............................................................................................................... 4
Economic impact of BRI in Central Asian countries ..................................................... 6
Advantages ............................................................................................................ 6
Secondary advantage: National security .................................................................. 7
Secondary advantage: Liberalization and freedom gainance ..................................... 8
Risks ...................................................................................................................... 9
Analysis ................................................................................................................... 10
Discussion ............................................................................................................... 12
Conclusion .............................................................................................................. 12
References .............................................................................................................. 14

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Introduction
Since 1978, China has been changing its foreign economy and trade policies. It has
become the factory of the world and the number one trading nation. Together with
this trading opening, it has been an enormous economic development.

Most China’s economic zones are situated in the east part of the country, so they
are transferred via sea to USA, EU or Latin America. In order to reach India, Africa
and EU, they should go across countries such as Indonesia or Singapur, which are
on the US side. Also, in the north and via land, China has the Tran Siberian route
which communicates them with the EU across Russia.

The new silk road appears as a solution to Chinese trade problems. This is
because these routes go across central Asian countries, that are aligned with them
instead of across American side territories or Russi, which is larger and last longer.

Also, there are other reasons to stablish the new silk road such as national security
or energy provision.

Objective
As it was said before, China has several needs and our objective is to study Central
Asian countries role and economic impact in this initiative. Our hypothesis
consists mainly in economic and infrastructure development, as well as an
increase in energy (oil, gas and water) and natural resources such as uranium and
gold from these countries to China.

Current state of research

The current state of research is based on how this initiative from China can affect
other great players of this geopolitical game such as US or Russia. Also, several
papers about Chinese repercussions are published, whereas not many could be
found about Central Asian countries advantages and disadvantages on this deal.

Materials
Most of the information collected for this work is coming from web of science’
papers and from socioeconomic statistic web sites. We are taking information
from different fields such as history, geography and economy. And we are doing
firstly a historic review, that will be later compared with the current state of the
situation boarded.

Methods
The methodology followed by our group consists of comparing and contrasting
information taken from different papers, with the final goal of making our own
conclusions on the topic.

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We are following different structures. It is thematical when we are explaining the
current situation and theoretical when we will be explaining the future effects and
impacts.

The trends on this research topic are the impacts on great geopolitical players,
while the gaps are the impacts on central Asian countries.

Background
The economies of all Central Asia countries enjoyed GDP real growth in recent
years. The CIA estimated growth rates were in 2015 – 2017, 3.2% to 4.6% per
annum in Kyrgyzstan, 5.3% to 7.9% per annum in Uzbekistan, 6% to 7.1% in
Tajikistan and between 4.38% and 6.13% in Kazakhstan in 2017 – 2019. They all are
developing countries with a large agriculture sector and relatively limited
manufacturing, with a low position in global value chains, and outdated
connections to other regions. Central Asian countries, except for Kazakhstan, are
challenged by a large unemployed population resulting in millions of people
migrating to other countries in search of employment and income. At the same
time fundamental freedoms and rights as well as international labour standards
are poorly respected: freedom of association is severely limited, child and forced
labour exist, negligence of occupational health and safety is widespread.
According to the ITUC Global Rights Index 2024 Kazakhstan remains among the
world’s top 10 worst countries for working people, while the ITUC does not have
sufficient comparable data on the labour rights situation in the other countries.
Furthermore, China itself belongs to group 5 in the ITUC Global Rights Index where
countries are defined as having ‘no guarantee of rights. Therefore, massive
invasion of Chinese companies into Central Asia poses further risks to working
conditions, social partnership in general, including freedom of association and the
right to collective bargaining.

The BRI presents opportunity for trade, investment, and job creation between
China and Central Asian economies that will support increasing consumption,
infrastructure development, political associations, and sustainable development
in many parts of the world. In the next table, the main achievements of the BRI are
presented:

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 Source: List of achievements of BRI 2013–2016 (2016).

The World Bank emphasises the favourable impact of the BRI transport projects on
the exports, Foreign Direct Investment (FDI) and GDP of Central Asian countries.
Falling shipment time will make the region more competitive and its countries
more attractive for foreign investors. This generates higher FDI and exports that
should result in improved productivity and higher GDP. Recent World Bank
estimates of the impact of the BRI on some countries find that the GDP of both
Kyrgyzstan and Tajikistan could rise by 32%, while the GDP of Kazakhstan by
21.5%. Nevertheless, net gains will be significantly lower when considering the
costs of building the infrastructure.

Finally, countries of the region are of high importance for China’s security issues
and military cooperation. China had no military presence in the region earlier, but
the situation is changing: the first Chinese military base – officially a border guard
station for Tajik troops – was built using Chinese funds a few years ago in the south
of the country, not far from where Tajikistan borders with Afghanistan and China.
The governments of Tajikistan and of the PRC agreed to build seven border posts
and training centers along the Tajik-Afghan border in 2016. China has conducted
military exercises involving the armies of Central Asian countries for almost 20
years. In addition, China is today producing and exporting military equipment and
training to the countries of Central Asia as well as providing assistance in military
technology.

What are the risks for recipient countries? According to the findings of the research
on China’s overseas lending referred to above, more than two dozen countries in
the world owe more than 10% of their GDP to the Chinese government. There are
three Central Asian countries in the top 50 most indebted recipients of Chinese
direct loans – Kyrgyzstan ranks 5th with 30.5% of GDP, Tajikistan ranks 19th with
16.1%, and Uzbekistan ranks 39th with 7.5% of GDP.28

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Economic impact of BRI in Central Asian countries
Central Asian countries are developing countries with relatively close economies
due to their authoritarian regimes. Their industries are not developed and their
trade infrastructure neither. Nevertheless, they are rich in natural resources such
as oil, coal, gas, uranium, and others. Accepting the deal proposed by China may
be enormously beneficial for them, but it also means taking big risks and enforcing
the state powers while forgetting about the search for freedom.

The countries in the region need money for development and to extract value from
their vast mineral resources. Their economies, except for Kazakhstan, have been
unable to generate enough domestic finances for development and they are in
critical need of largescale investments to build up viable market-oriented
economies as well as to get involved in international trade networks.

Advantages
Tajikistan
For Tajikistan, China is also the fourth export destination. The 50,9% of Tajikistan
exports to China are precious metals and 38 % of the total is gold. However, there
is a field in which China could invest and increase the efficiency of the sector in
this country, this is the hydroelectric power plants. The country’s hydro capacity
places it among the top 10 nations in the world for hydropower potential.
Hydropower provides virtually all of the country’s electricity needs, yet only a tiny
percentage of estimated capacity is used. Projects under way to exploit this vast
unused potential include the Rogun station on the Vakhsh and Dashtijum station
on the Pianj. Plans are also being made to build networks for electricity export
outside the region.

Natural resources, including minerals, oil, natural gas, ore and non-metallic raw
materials, and other similar nonrenewable resources, are the basis of modern
industrial production. The value of mineral resources of Tajikistan that used to be
determined in a planned economy, however, does not meet the requirements of
modern markets: the prices of raw materials fluctuate greatly, and the value of
mineral resource determined today will no longer be acceptable tomorrow. In
addition, there are no unified agreed approaches to the economic assessment of
mineral resources at the stage of preliminary selection of investment projects, and
this is one of the problems of attracting strategic investors to the mining industry.

Kazakhstan
Kazakhstan is resource rich, and thanks to its early and vigorous adoption of liberal
market and trade reform, its oil, gas, and mineral sectors have been an investment
magnet since shortly after independence. The country’s enormous mineral
deposits make it a world leader in reserves of coal, chromite, lead, and zinc, and

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its uranium deposits are estimated to be the second largest in the world. Natural
gas reserves are substantial as well. Primarily located in the Caspian Sea region,
they are found in associated oil and gas fields, such as the giant Karachaganak and
Tengiz fields.

In the case of this country, China is the number one importer of its services and
goods. The main products are crude petroleum (30,7%), refined cooper (17,4%)
and cooper ore (15,2%). For China, Kazakhstan is also a big trading partner when it
comes to exports, specifically situated in number 26. The variety of products that
Beijing transfers to Astana is huge, going from computers and broadcasting
equipment to knit sweaters and coats.

It is worth mentioning that Kazakhstan is, together with Turkmenistan, the only two
central Asia countries with a trade surplus (they export 170,46% of what they
import). Also, data reveals this country is situated number 12 in oil reserves and
number 13 in oil production, which means its necessity of foreign investment or
infrastructure development from China are not urgently required to increase via
BRI.

Secondary advantage: National security

In its west border, China has several security issues that must manage correctly,
and BRI might be the permanent solution.

Peripheral security of China in Central Asia has two dimensions. First, the
preservation of the stability, economic well-being, political order and security of its
western most province Xinjiang-Uighur-Autonomous Region (XUAR) which shares a
long and common border with Russia, Mongolia and three Central Asian states of
Kazakhstan, Kyrgyzstan and Tajikistan. Intricately linked to this goal is the second
aim of the creation of a friendly and secure belt of states around Xinjiang region.

The Xinjiang Autonomous Region is China’s largest province in size occupying

roughly one-sixth of the country’s territory. It produces one-third of China’s cotton,
and explorations in the Tarim Basin have indicated the region to have country’s
largest oil and gas reserves (Ibid). It is an ethnically mixed region with 18 million of
population consisting Uighurs, Turks, Hans, Kazakhs and other smaller groups
(Bovingdon 2010). Uighurs and Turkic tribes constituting the overwhelmingly
majority of Xinjiang made its integration into China problematic. They were keen to
join in Central Asian mainstream, because of their historical, cultural, linguistic
and civilisational links and commonalities. Thus, there arose separatist
movements in Xinjiang. Taking serious note of the events, China for some years
after 1991 waged a large campaign to crash the three evil forces of violent
terrorists, religious extremists and separatists in Xinjiang. China believes that the
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separatists are backed by Al-Qaeda and other militants abroad such as Hizb-Ut-
Tahrir (HUT), Islamic Movement of Uzbekistan (IMU) in Central Asia and other
militant groups operating in Afghanistan and Pakistan.

The solution is based on the buffer zone that Central Asia, covering the total border
with China in the western side of about 3500 km, provides to China. It is standing
between Russian and with radical Islamic countries like Iran and Afghanistan and
provides a safe haven to China’s security concerns. Taliban that came to power in
Afghanistan in quick succession stood as the greatest threat to the region’s
security, posing serious challenges to China in its Xinjiang region. Central Asia
locating centrally between China and Afghanistan has provided a safety zone to
China in handling the crisis. The region being a mostly pro-communist provides
additional edge to Chinese security concerns. That is why China rated the region
high above everything with regard to its security priorities.

Secondary advantage: Liberalization and freedom gainance

Central Asia is a region containing some highly authoritarian governments.
Regimes in Turkmenistan and Uzbekistan are accused of having committed
serious human rights abuses. President Niyazov of Turkmenistan established a
highly eccentric and personalistic dictatorship before his sudden death in
December 2006. In Turkmenistan as well as Uzbekistan, donors have found it
difficult to work due to these political conditions, which in turn has contributed to
the neglect by the international development community.

Source: Center for International Development and Conflict Management

Kyrgyzstan has a more liberal political climate, but has become increasingly
unstable since the so-called ‘Tulip revolution’ in March 2005, which failed to
generate a stable and legitimate government. Tajikistan experienced civil war from
1992 to 1997. It has had a relatively authoritarian government since, with some
commitment to development and acceptance among the population.

Kazakhstan – the wealthiest country of the group – is governed by a more

enlightened authoritarian regime; but state capture is still a serious issue.

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On a positive note, high educational levels relative to per-capita GDP mean that
the conditions for building more capable and modern public administrations are
better than in many developing countries; but especially in the more authoritarian
political regimes, this process is nonetheless a difficult one.

Risks
The main risk that these countries are facing when allowing China to build this
massive trade bridge is debt. China will invest huge amounts of capital in this
project, and central Asia countries will be forced to give it back.

Of special interest is the case of Kyrgyzstan, which actual debt is

Kazakhstan is well placed to invest in BRI projects while ensuring its debt
sustainability and continuing to strengthen its fiscal institutions. Total public debt
had risen recently but only to around 20 percent of GDP in 2019, half of which is
external. Total spending, including capital expenditure, is being reduced as part of
fiscal consolidation. Public investment management framework is being
strengthened.

Tajikistan with 10,27 % and Kyrgyzstan with 22,91 % (as percentage of GDP) of debt
have also very low rates, which allow them to increase it and receive more foreign
investment.

When it comes to debt specifically to China, Kyrgyzstan ranks 5th with 30.5% of
GDP, Tajikistan ranks 19th with 16.1%, and Uzbekistan ranks 39th with 7.5% of
GDP, according to ITUS and FES Belt and Road Initiative in Central Asia desk study.

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Analysis
Considering all countries in the world, including the ones involved in this study
work towards their own interests, it is crucial to analyze the impact of the BRI on
central Asian economies basing on each side interests.

Economic impact on central Asian countries after doing BRI.

What Central Asian countries need for growing their economies is the following:

- Economic openness to foreign trade regions

- Increase private companies trade
- Export of natural resources
- Increase in jobs and employment
- Investment in infrastructure
- Diversifying the economy
- Good governance

What China is expecting to gain from this project is the following:

- Central Asia infrastructure upgrade

- Increase trade rates with central Asia countries
- Increase land connectivity with central Asia countries
- Connect China and EU via land
- Increase its power over Central Asia countries
- Upgrade national security

So, the question is whether the needs of one side and the aspirations of the other
are compatible or not. This correlation matrix between needs and aspirations
represents how much will BRI impact on Central Asian economies. It was
considered that without the BRI project the needs of Central Asian countries
would be covered with a total value of 21, which means that BRI will have a
positive impact if the average of total values is above that number.

(1) Very negative impact

(2) Negative impact

(3) Same impact as no BRI

(4) Positive impact

(5) Very positive impact

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 Chinese Infrastructur Increas Land China Increas Nationa
interests e upgrade e trade connectivit -EU e power l
Central rates y Security
Asia needs
Economic 3 4 4 4 3 3
openness
Private 3 2 3 3 2 3
companies
Natural 4 5 4 4 3 3
resources
export
Employment 4 4 3 3 3 3
Investment 5 4 4 5 3 3
in
infrastructur
e
Diversify 4 4 4 4 4 3
economy
Good 3 3 3 4 1 2
governance
TOTAL 26 26 25 27 19 20
correlation
(out of 35)
Average = 23,83

The results show that BRI will impact slightly positively on these economies. Most
aspects will remain the same, as 3 (Same impact as no BRI) is the mode with an
appearance of 19 times, while 4 (Positive impact) appeared 16 times. It is worth
mentioning that only one very negative impact was obtained, this was for the case
of the increase of chinese power over the region, that will result in very low
governance indictors for central Asia.

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Discussion
Alam Iqbal et. Al concluded on their article Impact of Belt and Road Initiative on
Asian Economies, “The results based on multiple models indicate a significant
impact of BRI on the economic growth of Asian Economies. Other macroeconomic
variables, such as imports, political stability, and corruption, also have a
significant impact on the economic growth of the Asian economies.” Our
conclusion on this topic has the same result, although it doesn’t support the
benefits of the BRI as strongly as they do.

Impact of Belt and Road Initiative on Asian Economies

Conclusion
Belt and Road Initiative is beneficial both for China and for Central Asia countries,
but also has strong threats that must be handled.

From Chinese point of view, is of imperative necessity to open and find new trade
routes due to the maritime one are controlled by USA and the Tran Siberian one is
too long. Nevertheless, even with these circumstances, China has succeeded on
being the factory of the world.

The most important factor in this story is Chinese future economic model. If this
country continues being a massive goods exporter, will definitely require great
amounts of energy. On the other hand, as China is developing vastly, getting its
people out of poverty and building great infrastructure and increasing life quality,
they will maybe be obliged to change their economic model to one that respect
more the modern requisites such as human rights and environmental respect such
as services or finance. If this is the case in the upcoming years, their energy

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demands will not be as high as they are nowadays, and the BRI will not be giving
the monetary earnings back.

Firstly, Central Asian countries, have plenty of natural resources, mainly coal, gas
oil and uranium, all of them energy sources. Apart from corridor infrastructure, this
is what Chinese government is interested on. Likewise, these countries are
desiring for new technologies investment to extract and sell all that wealth located
under their lands.

None of the five Central Asian countries are facing big debt problems, so they
would be very interesting for them to accept more external monetary and
technological help to exploit their natural resources. However, they must be
careful not to suffer from high-risk debts.

When it comes to social impact, it is well known that Central Asian countries have
very low governance indicators. This is a big problem because BRI could mean the
definite impulse for developing in these countries. If its governments will keep all
the wealth, these societies will find a lot of obstacles to find the development
path. Firstly, because the authoritarian powers will gain even more, and secondly
because their natural wealth will be gone. Also, China is an authoritarian regime
that will most likely not focus on social impacts and on bringing the gains to the
Central Asian countries people.

Finally, in terms of security, China will win a lot. Consolidating economic relations
with its bordering countries means that military threats coming from that area will
be certainly repressed. Islamic extremism threatening from Afghanistan will be
also controlled due to the corridor that will connect Beijing with this country.

In conclusion, BRI will be very beneficial to China depending on if it changes or not

its economic model in the next few years. Bri is also a big opportunity for Central
Asian economies development, but it is still problematic the question about how
will this development impact current people and their life quality.

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References
https://www.iza.org/publications/dp/5151/international-trade-and-its-effects-on-
economic-growth-in-china

https://docs.iza.org/dp5151.pdf

https://semspub.epa.gov/work/HQ/175234.pdf

https://www.files.ethz.ch/isn/35520/2007-05%20Central%20Asia.pdf

https://documents1.worldbank.org/curated/en/471731593499938164/pdf/South-
Caucasus-and-Central-Asia-The-Belt-and-Road-Initiative-Kazakhstan-Country-
Case-Study.pdf

The new great game in Central Asia post 2014: The US “New Silk Road” strategy
and Sino-Russian rivalry

The Importance of the New Silk Road in the Hungarian Automotive Supply Chain

Central Asia and Post-2014 Afghanistan: A New Turn in Russia’s Military Policy in
Central Asia

The Rise of China in Central Asia: The New Silk Road Diplomacy. Ramakrushna
Pradhan

Central Asia: the New Silk Road Initiative’s questionable economic rationality.
Sebastien Peyrouse & Gaël Raballand

The new ‘‘Silk Road Economic Belt’’ as a threat to the sustainable management of
Central Asia’s transboundary water resources. Ken W. F. Howard, Karina K. Howard

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