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China’s Challenges in Central Asia

China's Challenges in Central Asia

Just when things are hotting up again with its neighbors in the East and South China Seas, Beijing faces new challenges from its western neighbors in Central Asia.  A report released on February 27 entitled “China’s Central Asia Problem” issued by the International Crisis Group (ICG), a Brussels-based non-governmental organization tasked with reducing deadly conflict, examines the growing pains and threats China is facing in Central Asia.  After the fall of the Soviet Union, China moved into the neighborhood in search of coal, oil, gas, precious metals and other natural resources.  On the positive side, China’s thirst for these resources has resulted in the development of infrastructure (pipelines, power lines and transport networks) for the region.  The downside has included a flood of cheap consumer goods into markets driving out local vendors, a careless destruction of the environment, and an increase in poor working conditions within Chinese-run plants. Despite the negative effects of increased development, Beijing announced in June 2012 a $10 billion economic development fund to be disbursed as loans to member states of the Shanghai Cooperation Organization (SCO), a regional forum on security and economic cooperation, which includes Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.  Continued investment by China in Central Asian resources has led some to label the Chinese as the new economic imperialists, and of using Central Asia as a “resource pit.”

However, the ICG’s biggest concern, according to the report, is the fragility of government in Central Asia, which could seriously undermine China’s economic interests and internal political stability, particularly in its western province of Xinjiang. with a substantial population which is both Turkic and Muslim.  China’s analysts are likewise concerned about the failure of many of the central governments in Central Asia due to rampant corruption, lack of competence, and the links the political establishment has with organized crime, especially within the two weakest states, Kyrgyzstan and Tajikistan. They fear the withdrawal of North Atlantic Treaty Organization (NATO) troops from Afghanistan in 2014 could be disorderly and lead to serious regional unrest and the weakening of central governments.  Their biggest fear is the return of Chinese separatists who have trained in Afghanistan and Pakistan, and an attempt to foment another “Arab Spring” in the unstable province of Xinjiang, which has seen a protracted struggle for greater autonomy and even independence.

The report concludes that since China has ruled out any sort of military intervention in Central Asia, Beijing will need to step up its diplomatic efforts and increase its economic engagement in the region in order to protect its economic interests. But increased economic engagement has its risks — given the fragility and corrupt nature of the governments in Central Asia and their ties to organized crime, assets could easily be stripped from private investors and returned to state ownership or to a newly empowered elite.  Political violence is another worry, for Beijing has made it clear it will not unilaterally safeguard key infrastructure beyond its borders – leaving its pipelines, refineries, bridges and tunnels vulnerable to sabotage by extremists. Beyond these political risks to its investments, there are financial concerns surrounding Beijing’s investments.  Given China’s knack for politically-motivated investment, China could face substantial financial losses on its investments in the region, much as it is now facing at home as state-owned banks struggle with non-performing loans.

In an earlier version of this “Great Game,” China was successful.  Between 1600 to 1800, the Qing empire of China was able to expand into Central Eurasia through astute diplomacy, economic investment, and a series of military campaigns. By defeating the Zhungar Mongols, the ruling Manchus were able to bring all of modern Xinjiang and Mongolia under their control, and gain dominant influence in Tibet.  The challenges China faces today in expanding its influence in Central Asia are just as great — and more pressing given its thirst for resources.  Only a thoughtful combination of reasoned diplomacy and smart investment from Beijing will be able to bring stability to its interests in the region.



Gary Sands

Gary Sands is a Senior Analyst at Wikistrat, a crowdsourced consultancy, and a Director at Highway West Capital Advisors, a venture capital, project finance and political risk advisory. He has contributed a number of op-eds for Forbes, U.S. News and World Report, Newsweek, Washington Times, The Diplomat, The National Interest, International Policy Digest, Asia Times, EurasiaNet, Eurasia Review, Indo-Pacific Review, the South China Morning Post, and the Global Times. He was previously employed in lending and advisory roles at Shell Capital, ABB Structured Finance, and the U.S. Overseas Private Investment Corporation. He earned his Masters of Business Administration in International Business from the George Washington University in Washington, D.C. and a Bachelor of Science in Finance at the University of Connecticut in Storrs, Connecticut. He spent six years in Shanghai from 2006-2012, four years in Rio de Janeiro, and is currently based in Ho Chi Minh City, Vietnam. Twitter@ForeignDevil666