Halyk Finance has published a report that concludes the series of publications on the topic of economic cooperation between Kazakhstan and China. Previous materials from Halyk Research included an assessment of key macroeconomic indicators of China and the directions of Kazakh-Chinese cooperation.
In this report, we focused on the experience and challenges of joint infrastructure projects being implemented by the republic in collaboration with the PRC. The Halyk Research team analyzed the level of Chinese investors' presence in Kazakhstan, the extent of national holdings' participation in investment projects, and the priority sectors for investments in accordance with the Roadmap for cooperation between the PRC and the Republic of Kazakhstan. The report also includes information on the necessary steps from the Kazakh side that, in our opinion, could facilitate the attraction of Chinese investments into the republic.
Summary
Chinese investments play a crucial role in the development of key sectors of Kazakhstan's economy, such as mining, energy, and logistics. The two countries are increasingly interacting with each other, as evidenced by the growth of joint ventures and the expansion of investment offerings for Chinese partners. Kazakhstan is actively promoting projects in priority sectors such as mining and metallurgy, chemical and petrochemical industries, as well as energy. Chinese companies are actively involved in modernizing infrastructure and creating transport hubs, which strengthen Kazakhstan's position as a transit center in Eurasia. However, investors face several challenges, including bureaucratic hurdles, personnel barriers, infrastructure limitations, and obstacles to free trade, as well as insufficient incentives in the field of geological exploration. Addressing these issues requires strategic planning, attention to the quality and availability of production factors, and enhancing the role of institutions responsible for the investment environment. Thus, Kazakhstan, as a landlocked country, is not fully leveraging the benefits of its geographical position as a land bridge in Eurasia and its proximity to the world’s second-largest economy.
1. Chinese Joint Ventures in Kazakhstan:
Approximately 5,000 companies with Chinese participation are registered in Kazakhstan. In recent years, the number of such enterprises has significantly increased, reflecting China's strategic interest in Kazakhstan's resource and industrial sectors. Chinese companies primarily focus on mining, energy, and manufacturing industries. Chinese firms, including CNPC and Sinopec, are actively developing joint projects in the oil and gas sector, accounting for about 24% of total oil production in Kazakhstan. Important assets for Chinese investors have included mature fields (e.g., Zhanazhol, fields in Mangistau and Kyzylorda regions), where the implementation of enhanced oil recovery technologies has extended their operational lifespan.
Key examples: – JSC “CNPC-Aktobemunaigas” and JSC “Mangistaumunaygaz” – major players in oil and gas extraction; – Buzachi Operating LTD – successful development of the North Buzachi field; – Petro Kazakhstan and Aktau Bitumen Plant – investments in oil refining; – logistics terminal in Lianyungang – a transport hub connecting Kazakhstan and China.
2. Chinese Joint Project Programs of 2015
Under the joint project program with China signed in 2015, Kazakhstan and China agreed on the implementation of 52 projects worth $21.1 billion in sectors such as metallurgy, oil refining, chemical industry, machinery, power engineering, and agriculture. From 2015 to 2022, 25 projects worth $7.4 billion were successfully completed, 9 projects ($2.3 billion) are in the implementation phase, and 18 are under consideration.
Among the major completed projects are: – production of polypropylene (jointly with Kazakhstan Petrochemical Industries and CNCEC) worth $2.6 billion; – reconstruction of the Shymkent oil refinery costing $2.1 billion.
3. Government Development Plans
The development plans of the Government of Kazakhstan and national holdings such as “Baiterek” and “Samruk-Kazyna” are aimed at attracting Chinese investors and selecting promising projects in priority sectors. The main strategy is to create conditions for co-financing, including joint participation of private and public funds, making projects more attractive to foreign partners. The National Managing Holding “Baiterek” actively collaborates with Chinese financial institutions such as the China Development Bank and China International Capital Corporation to finance projects in Kazakhstan. As of July 2024, the national pool contains 707 projects, of which 139 involve foreign participation, including Chinese investments. Among the total foreign projects, China ranks second with 30 projects worth 2.5 trillion tenge (approximately $5.2 billion), second only to Russia, with which 32 projects worth 6.1 trillion tenge ($12.5 billion) are being implemented.
One of the important directions is the development of an ecosystem for equity financing and the securitization of loan portfolios, which attracts Chinese investments and supports promising projects. The holding also emphasizes infrastructure projects that expand Kazakhstan's export potential, providing Chinese companies access to new markets and strengthening trade ties.
4. Main Recommendations
To strengthen mutually beneficial cooperation, Kazakhstan can adopt successful practices from China aimed at improving the state planning system, business climate, and stimulating economic growth.
– State planning: China's example shows that five-year plans help effectively direct economic development. Kazakhstan can leverage this approach to better coordinate national and regional priorities.
- Improving the business climate: China actively enhances conditions for doing business, including support for small and medium enterprises. Kazakhstan is advised to continue and deepen reforms to increase its investment attractiveness.
– Optimizing the role of the state: China's experience in reducing ineffective state intervention, gradually abandoning price regulation, and enhancing subsidy efficiency can help Kazakhstan sustain steady economic growth.
– Financing through the banking sector: China actively supports small and medium enterprises through its banking system, which can serve as a beneficial practice for Kazakhstan.
– Investments in infrastructure and R&D: China has achieved significant success through large infrastructure projects and investments in R&D. Kazakhstan should also focus on developing infrastructure and increasing spending on scientific research to stimulate innovation and competitiveness.
5. Roadmap for Economic Cooperation
Taking into account the information presented in the three reports, we have prepared a Roadmap that we believe will serve as a basis for strengthening economic ties between Kazakhstan and China. The main directions of this Roadmap include:
– Creating an effective mechanism to facilitate investment cooperation: to attract Chinese investors, it is proposed to implement a “Single Window” mechanism based on JSC “Kazakh Invest”, which will simplify interaction with government agencies through a digital platform. It is also suggested to introduce a “green corridor” for strategic projects, ensuring expedited receipt of permits and comprehensive support, including attracting foreign specialists and applying international standards.
– Priority areas for Chinese investments in Kazakhstan: Kazakhstan recognizes as priorities Chinese investments related to the production of high value-added products, deepening the processing of raw materials, integration into existing or newly created clusters, and enhancing the competitiveness of the service sector in the following areas:
1. Oil Extraction and Refining:
– enhancing the attractiveness of exploration and development of new fields, joint geological studies, and creating joint ventures;
– ensuring oil production at existing enterprises with Chinese participation, achieving break-even in stages;
– increasing oil transportation via the Kazakhstan–China pipeline;
– expanding the Shymkent oil refinery's capacity to 12 million tons per year;