What Are the Opportunities for Chinese Companies' Overseas Business in Central Asia?

Industrials Author: Ruoxin Zhang Editor: Lena Peng May 03, 2023 09:16 AM (GMT+8)

As the Belt and Road initiative extends deeper, trade between China and Central Asia has become increasingly frequent in recent years. Chinese technology, products, standards, and services are continuously penetrating into the Central Asian market, injecting new vitality into the local economic development.


On April 18th, the first China-Central Asia Meeting of the Ministers of Economy and Trade was held. Minister of Commerce Wang Wentao chaired the meeting and delivered a speech, and the economic and trade ministers of the five Central Asian countries spoke respectively. Ling Ji, Vice Minister of Commerce and Deputy Chief Negotiator for International Trade, as well as ambassadors and commercial counselors from the five countries participating in China, attended the meeting. In May of this year, the first China plus Central Asian countries (C+C5) heads of state summit will be held in Xi'an, aiming to "discuss the grand plan of developing China-Central Asia relations" to build a community of shared destiny between China and Central Asia and tap into cooperation potential.

This summit is also expected to deepen intergovernmental cooperation, accelerate the landing of more landmark projects, and will impose higher requirements on infrastructure construction such as railways, highways, and ports. China's cooperation and investment with Central Asian countries in the fields of energy, energy, chemical industry, metallurgy, and other fields are expected to accelerate, further expanding the demand for overseas professional engineering.

In January 1992, China established diplomatic relations with the five Central Asian countries of Uzbekistan, Kazakhstan, Tajikistan, Kyrgyzstan, and Turkmenistan, becoming one of the first countries to recognize and establish diplomatic relations with the five Central Asian countries after their independence. Since then, economic and trade exchanges between China and Central Asian countries have continued to grow, making China the most important trading partner and source of investment in the Central Asian region.

In 2022, President Xi Jinping reached an important consensus with the leaders of Central Asian countries on establishing the "China-Central Asia Five Countries" mechanism. Under the strategic guidance of top-level diplomacy, China's pragmatic cooperation with Central Asian countries has also made significant progress. In 2022, the total trade volume between China and the five Central Asian countries exceeded USD 70 billion, reaching a historical high, with an average annual growth rate of more than 15%. By the end of 2022, China's direct investment in the five Central Asian countries was nearly USD 15 billion, and a number of cooperation projects have been jointly implemented in fields such as oil and gas exploration and mining, processing and manufacturing, interconnection and digital technology.

Central Asia, located in the center of the Eurasian continent, is one of the most potentially developing regions in the world. The total GDP of the five Central Asian countries exceeds USD 300 billion and is expected to maintain high-speed growth. According to the World Bank's "Global Economic Outlook" report, the annual economic growth in the Central Asian region is expected to remain at 3.9% in 2023. Currently, Central Asia has a population of over 75 million, and its population has increased by an average of one million annually over the past decade. Meanwhile, Central Asia is one of the youngest regions in the world with an average age of 27.6. Against the background of the divergent development of globalization and regional economic and trade cooperation, Central Asia is expected to become a new regional trading center in Eurasia.


As Saudi Arabia and Iran reconcile their diplomatic relations, trade between China and the Middle East is expected to deepen, with Central Asia playing a crucial role in connecting the two regions. China urgently needs to establish close connections with Middle Eastern countries through the rail networks of the five Central Asian countries. Currently, these countries are modernizing their transportation infrastructure and researching new large-scale transnational railway projects to connect European, Middle Eastern, and Asian markets. Over the past few years, many Chinese construction companies have leveraged their international influence, project experience, and technological advantages to expand their businesses in Central Asia.

China's cooperation with the five Central Asian countries in the field of economic foreign trade is highly complementary. Trade in energy, minerals, raw materials, electromechanical equipment, and chemical products have been stable for a long time. At the same time, both sides are committed to optimizing the trade structure, and the trading volume of services and agricultural products has been gradually increasing year by year. Over the past 30 years since diplomatic relations were established, China's trade volume with the five Central Asian countries has grown more than 100 times, and many fruits and dried fruits from Central Asia have become hot-selling products on domestic e-commerce platforms.

Moreover, in recent years, the number of internet users in the five Central Asian countries has grown rapidly, and e-commerce has developed quickly, with a focus on logistics platform construction. This has led to an increasing number of Chinese cross-border e-commerce platforms that are optimistic about this market's considerable potential. Since 2021, Alibaba International Station has cooperated with Central Asian countries such as Kazakhstan and Uzbekistan to help local small and medium-sized enterprises digitize their operations and establish online outlets for global trade. However, there is still significant room for exploring opportunities in e-commerce platforms and independent site construction, overseas warehouse and courier service networks, and supply chain management, as the five Central Asian countries have yet to form the scale effect brought by large e-commerce platforms.

China also has resource and market complementarity advantages in oil and gas cooperation with the five Central Asian countries. The region is rich in oil and gas resources and is an important production and export base for oil and gas globally. According to the 2022 BP Statistical Review of World Energy, the remaining proven oil reserves in Central Asia are about 4.1 billion tons, accounting for 1.8% of the world's total, while the remaining proven natural gas reserves are about 16.7 trillion cubic meters, representing nearly 9% of the world's total. Central Asia plays a vital role in China's energy security by ensuring its oil and gas imports. Chinese companies have participated in the entire industry chain, including oil and gas exploration, development, pipeline construction, petrochemicals, and petroleum sales, helping Central Asian countries establish a complete oil and gas industrial system.


Apart from traditional areas such as logistics infrastructure and energy, there is still enormous room for exploration in China's cooperation with Central Asia in the future. Since the outbreak of the epidemic, China has conducted in-depth cooperation with Central Asian countries on epidemic prevention and control, and the potential for the construction of a "Healthy Silk Road" is enormous. Against the backdrop of significant progress in the new energy sector, responding to climate change, and accelerating global energy transformation, China has also taken the lead in developing new energy worldwide. This area will become a new growth point for economic cooperation between China and Central Asian countries, allowing China's advanced clean energy technology and equipment to play a constructive role in the energy transformation processes of Central Asian countries.

The digital economy has also become an essential priority for China's cooperation with Central Asian countries. In recent years, Central Asian countries have generally regarded the digital economy as a new direction for building modern economic systems and promoting high-quality economic development and have issued strategies for digital economic development while actively engaging in international cooperation to jointly build the "Digital Silk Road." Companies such as Huawei and ZTE have become participants and important telecom equipment suppliers for the digital economies of Central Asian countries such as Uzbekistan and Kazakhstan.

From past economic and trade exchanges to today's industrial cooperation and investment, China's cooperation with the five Central Asian countries has entered a new phase. Under the new summit mechanism, China and the Central Asian countries are expected to further enhance political mutual trust, jointly address regional security challenges, and create new growth points for economic and trade cooperation.