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 KAZAKHSTAN International Business Magazine №2, 2003
 Kazakhstan and China: The Outlook for Co-operation
Kazakhstan and China: The Outlook for Co-operation
Mr. Yao Peisheng, Chinese Ambassador to Kazakhstan, answers questions from our magazine.
What is your assessment of co-operation in trade and investment between our countries?
Trade and economic co-operation between Kazakhstan and China developed dynamically after diplomatic relations were established. Although bilateral trade was only $368m (by Chinese customs statistical data) in 1992, it surpassed $500m in 1997. In 1998 this indicator was $1bn, and $1.5bn in 2000. Last year trade between Kazakhstan and China made up almost $2bn, with $600m accounted for by Chinese exports. Therefore the annual increase over the past decade was, on average, $160m.
Among the CIS and Baltic States, and the nations of Eastern and Central Europe, Kazakhstan comes second after Russia in China’s foreign trade. Over the past decade China has placed $838.1m of gross direct investment in Kazakhstan and is currently one of the six largest donors to the country. A number of large oil and financial companies from China are operating in your country.
The following figures can be cited when evaluating the potential of our trade and economic relations. In 2002 China’s GDP surpassed $1,000bn and foreign trade stood at $620bn. These indicators were $24.4bn and $16bn respectively in Kazakhstan. The share of our bilateral trade in total foreign trade volume is 0.3% for China and 12% for Kazakhstan. Although this is a great achievement, I believe that we should not stop striving to do even better. The potential of our economies has not yet been realized in full. Today, when the world is integrating economically, there is a constant need for us to boost the level and scale of trade and economic co-operation. I believe that by 2010 our bilateral trade could reach $3bn, and the amount of Chinese investment in Kazakhstan could be $1.5bn.
Which of the Kazakh economic sectors are the most attractive for Chinese investors? Could you please list the largest investment projects under way in Kazakhstan that involve Chinese capital?
As far as I know, Chinese investors are basically interested in producing oil and gas, foodstuffs, clothing, household equipment, construction materials, paper, and assembling lorries, etcetera. The Chinese are also prepared to reconstruct and build infrastructure facilities in Kazakhstan. China has vast experience and strong technical potential in building motorways and railways, and hopes to co-operate with Kazakhstan in this respect.
The activities of Aktobemunaygaz are a striking example of economic co-operation between our countries. So far, Chinese investors have put some $700m into this project, and the production of crude by the company reached 4.37m tonnes in 2002.
Cin-Kaz is yet another successful joint project. The company produces ketchup and tomato paste which is sold throughout Kazakhstan. The Chinese share in it is over $3m.
In addition, several smaller companies operate in Kazakhstan. They produce construction materials, tobacco goods, paper, and so on.
Of course, the things that I have mentioned do not show the full picture of all that is going on just now. Still, there is no doubt that the foundations have been laid for fruitful economic co-operation, and all we need is to increase the scale and quantity of the joint projects.
What practical moves are being made to implement the Kazakhstan-China oil pipeline project?
The Chinese side are paying close attention to implementing this large-scale project, and the first step in this direction has already been made. In October 2001 the China National Petroleum Company and Kazakhstan’s Transport of Oil and Gas signed a framework agreement on constructing the Kenkiyak-Atyrau oil pipeline. Under the agreement the parties set up the Munaygaz North-Western Pipeline Company in December 2001. The 450-km North-Western oil pipeline begins near the Kenkiyak field and ends in Atyrau.
Construction of the oil pipeline was completed in December 2002. The flow rate of the first stage of the pipeline, which was launched on 28th March 2003, is 6m tonnes per year, and that of the second stage (to be commissioned in 2004) will be 10m tonnes per year.
We know that the Kazakhstani side has signed an agreement with the Hurricane Group on building a Kumkol-Kenkiyak pipeline with a total length of 730km. If its minimum flow rate is guaranteed to be 20m tonnes of oil per year, then we will be prepared to begin construction of the 1200-km Kumkol—Kazakh/Chinese border section.
In your opinion, what are the prospects for developing contacts between our countries for transit transport?
China and Kazakhstan enjoy excellent opportunities for developing transit shipments. Over the ten or more years that we have maintained diplomatic relations, both parties have put a lot of effort into developing contacts of this type. China and Kazakhstan signed an interstate agreement on co-operation in the area of road and rail transport; the authorities concerned are currently working in this direction.
For instance, in 1995 the first container shipment was made from Lianyungang to Kazakhstani territory through the Druzhba frontier crossing. In 2001 the total amount of goods handled by The Druzhba-Alashankou rail terminal alone exceeded 5m tonnes. The Chinese side assigned considerable funds to a large-scale reconstruction of this facility. Our goal is to increase its handling capacity to 13m tonnes in five years and to 20m tonnes by 2013. The Khorgoz and Bakhty frontier posts in the Xinjiang Uygur Autonomous Region of China also play an important role in developing transit transport relations between the two countries.
I would like to stress that realizing the great potential in the field of transit shipments between Kazakhstan and China could represent a real breakthrough in our economic co-operation.
What research and cultural programmes is China implementing to strengthen the relations between our countries?
As to cultural co-operation, the number of contacts in this sphere is growing every year. In 2001 the Ministries of Culture in our two countries approved a series of measures to expand mutual cultural exchanges. Under this plan, Kazakhstani Culture Days were held in Beijing and Shanghai in 2001, whilst Chinese Culture Days were organized in Almaty and Astana. It is crucial to note that the success of measures like these really does foster cultural co-operation between states. In 2002 a meeting of the Ministers of Culture of the Shanghai Co-operation Organisation was held in Beijing. Its participants reached a full understanding on comprehensive cultural co-operation between their countries. Cultural festivals and a whole host of presentations and exhibitions will be held within the SOC. Incidentally, there is a chance that a cultural festival of the SOC countries may be held in Kazakhstan this year.
As you may know, on 30th December 1994 an agreement was signed between the Governments of China and Kazakhstan on scientific and technical co-operation. Within this agreement, the first constituent session of the Chinese-Kazakh working commission for scientific and technical co-operation took place in Almaty in May 2001. The parties agreed that they would continue to co-operate in priority areas such as farming and stock-breeding, production and processing of hydrocarbons, chemistry, mathematics, physics, information science and computer technology, seismology and geology, biotechnology and transport and communications. In addition, the commission considered and passed the project list within the bilateral co-operation programme. This included nine projects from the Chinese side and ten from our Kazakh counterparts. For the time being, we have held joint specialized programmes in the field of seismology, meteorology, environmental protection and health care.
What are the main outcomes from the June visit by China’s Chairman Hu Jingtao?
This was the first official visit to Kazakhstan by Hu Jingtao in his capacity as Chairman of the People’s Republic of China. Two important developments should be emphasized when reporting its outcome.
Firstly, the basis for mutual political trust has been elevated to a new level. On this occasion a Memorandum was signed on exchanging ratification instruments under the Treaty of Friendship, Neighbourliness and Cooperation between China and Kazakhstan. Sino-Kazakh co-operation will be broadened by this, not only in politics but also in other fields.
Secondly, a new goal has been set for business partnership. Both parties expressed a wish for bilateral trade turnover to be increased to $5 bln, with $10 bln as a longer-term prospect.
In addition, during their recent meeting the heads of our states signed two crucial documents on co-operation in the oil and gas sector, one being a Memorandum on joint study and phased construction for an oil pipeline from Kazakhstan to China. Bilateral relations in the transport and communications sector also received attention, and goals have been set for the next five years. In conclusion, this top-level meeting was another milestone in the history of Sino-Kazakh relations.

Table of contents
Railways Need Investments  Yerlan Atamkulov, Nigmatzhan Isingarin 
ASTEL is Number One!  Vladimir Breusov 
Kazakhstan in the System of Eurasian Transport Corridors  Kubat Rakhimov, Alexander Sobyanin, Alexander Maly 
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