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Energy and Economic Relations between China and Central Asia

The gradually increasing economic role of China in Central Asia since 1991 is not surprising considering the geographic proximity of the two regions and China's dynamic economy, coupled with an economic policy focused on the encouragement of trade. Energy resources are key to this growing relationship as the geographic region comprising the former Soviet Central Asian Republics increasingly becomes a strategic global energy supplier.1 There are a number of outside economic and political players interested in the Sino-Central Asian border and vying for interest in this region. In addition to Russia, with its historically strong ties to the region, Turkey, Iran and Saudi Arabia, and increasingly the United States, have sought to become significant actors in Central Asia's economic and political development.2 This guide, however, will focus on ways in which continued Chinese economic growth and expansion of transportation links in Central Asia are influencing the economic development of Central Asian countries.

The energy resources of Central Asia are expected to play a pivotal part in the Chinese economy due to geographic proximity and shared borders.3 The Caspian Sea and its continental shelf are the third largest area in the world of developable energy reserves.4 Kazakhstan, in particular, has oil reserves of between 9 to 40 billion barrels5 and forecasted oil production of 100 million tons in 2010. By 2015 Kazakhstan's output of natural gas will be 50 billion cubic meters while its domestic consumption will not exceed 16 billion cubic meters. Turkmenistan, on the other hand, has reserves of 12-21 trillion cubic meters10 of natural gas. To expand the market for these energy resources,6 the Central Asian states need capital for technological and infrastructure upgrades, and China, holding over two trillion foreign exchange reserves in addition to having the technological expertise,7 is potentially a significant source of Foreign direct investment (FDI).

The Influence of Chinese Economic Growth on Central Asian Countries

A Guide to Selected Resources

Table of Contents

Profile: Central Asian Countries
Profile: China
Print Resources
Catalog Searches

 The Caucasus and Central Asia, 2009

Caption: above:
Map of the Caucasus and Central Asia.
Created: Washington, D.C.
US Central Intelligence Agency, 2009.
From the Map Collections of the Geography and Map Division of the Library of Congress

Gradually, China is moving into the Central Asian energy development market. Kazakhstan is already China's largest trading partner in the region, with official bilateral trade in 2007 totaling over $13.9 billion in U.S. dollars.8 China has allowed Kazakhstan to trade on its ocean port of Lianyungang maintaining the latter's independence from Russian controlled transport passages. Moreover, the opening of the Almaty-Urumqi rail lines shows their relationship is more than just commercial trade.

Other Central Asian nations are also seeing increased trade with China. In 2006, China signed a bilateral contract with Turkmenistan, agreeing to buy 30 billion cubic meters of natural gas exports a year between 2009 and 2039.9 In addition, Uzbekistan signed an agreement to build a gas pipeline of 530 kilometers with the capacity of 30 billion cubic meters between the two countries10; and the China National Petroleum Company (CNPC) signed a $600 million agreement with Uzbekistan's state owned company, Uzbekneftegaz, for some 23 smaller oil fields in the Bukhara area.11 Bilateral trade between China and Tajikistan was $158 million in 2005.12 Tajikistan was also the largest recipient of China's $900 million of privileged export loans to members of the Shanghai Cooperation Organization? (SCO).

China's interest in hydropower generation is also growing. The country has established partnerships with Tajikistan and Kyrgyzstan for constructing power lines, and has become a member of a water and energy resources consortium set up by Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.13

The rapid economic growth of China has increased energy demand considerably, making Central Asian energy security very attractive and strategically important for China's growing energy needs. The Shanghai Five was a group (comprised of Kazakhstan, Kyrgyzstan, Tajikistan, China and Russia) established in 1996 through the signing of the "Treaty on Deepening Military Trust" for the border regions around Shanghai.14 The Shanghai Five group was later renamed the "Shanghai Cooperation Organization" (SCO) when Uzbekistan joined the group in 2001.15 While the foremost focus of the SCO is terrorism, separatism and extremism, the primary policy interest of China relating to the region involves avoiding regional instability,16 securing access to energy resources,17 and expending economic cooperation.18 China's membership in the SCO increases Chinese influence in the region, allowing it to advance shared policy interests though an intergovernmental organization. Notably, China at the Yekaterinburg SCO summit, expressed willingness to provide a loan to members amounting to $10 billion in US dollars in order to bolster their stressed economies in the face of the global financial recession.19

  1.Bruce Pannier, "Central Asia: SCO Leaders Focus On Energy, Security, Cooperation" (August 2007)., Viewed on December 30, 2010.

  2. Mark Burles, "Chinese Policy Toward Russia and the Central Asian Republics," 1999. p. ix, Viewed on December 30, 2010

  3. James Fishelson. "From the Silk Road to Chevron: The Geopolitics of Oil Pipelines in Central Asia" (December 12, 2007) Viewed on December 30, 2010.

  4. Mahmoud Ghafouri. "The Caspian Sea Rivalry and Cooperation" Middle East Policy (Summer 2008), p. 81.

  5. Energy Information Administration. "Country Analysis Briefs" (February 2008). p.1. [PDF format: 257 KB / 10 pp.] Viewed on December 30, 2010.

  6. Pan Guang, "China and Energy Security in Central Asia." Journal of Social and Political Studies CA&CC Press Publishing House (No. 6 (48), 2007).
Full text available by subscription only. Summary available from the publisher at

  7. Lita Epstein. "China's foreign exchange reserves top $2 trillion for first time," Daily Finance. (July 2009) Viewed on July 16, 2015.

  8. Hou Xiaoying. "China-Kazakhstan cooperation continues" (July, 2008) Viewed on December 31, 2010.

  9. Asian News. "Turkmenistan: gas pipeline to China is ready" (20 August, 2009). Viewed on December 31, 2010.

  10. Kozlova, Marina. "Natural Gas: Uzbekistan Tilts to China." BusinessWeek. May 29, 2007. Viewed on August 29, 2011.

  11. Martha Brill Olcott, "Is China A Reliable Stakeholder in Central Asia?" (August, 2006). Testimony before the U.S.-China Economic and Security Review Commission. Viewed on December 31, 2010.

  12. RIANOVOSTI, "China, Tajikistan sign friendship economic pacts" (January, 2007) Viewed on December 31, 2010.

  13. Valentin Bogatyrev, "Tough Politics: On Water Management in Central Asia," Institute for Public Policy, Bishkek, Kyrgyzstan (November, 2006)

  14. The Global Security. Shanghai Cooperation Organization (SCO). Viewed on December 31, 2010.

  15. Prajakti Kalra and Siddharth S. Saxena. "Shanghai Cooperation Organization and Prospects of Development in the Eurasia Region. The European Stability Initiative." , p. 2. [PDF format: 47 KB / 4 pp.] Viewed on December 31, 2010.

  16. Ariel Cohen. "The Dragon Looks West: China and the Shanghai Cooperation Organization". (September 7, 2006). Heritage Foundation. Viewed on December 31, 2010.

  17. Hsiu-Ling Wu; Chien-Hsun Chen. "The Prospect for Regional Economic Integration between China and the Five Central Asian Countries," Europe Asia Studies (November 2004), p. 1070.

  18. Pan Guang, Alyson J.K. Bailes, Pál Dunay, Mikhail Troitskiy. "Chinese perspective on the Shanghai Cooperation Organization" (May 2007), p. 50. SIPRI Policy Paper #17 [PDF format: 705 KB / 66 pp.] Viewed on December 31, 2010.

  19. Window of China. "China provide 10-billion-dollar loan to SCO members" (June 2006). Viewed on December 31, 2010.

Last updated: 11/17/2015
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