The world is experiencing another shake up with still unclear consequences, Russian political analyst Andrey Grozin thinks. The conflict between Russia and the west is growing, far from perfect are relations between China and the US, plus there are noticeable are centrifugal events within Europe. At the same time many countries have vested interests in Central Asia.

How will the conflicts affect key players in the region? This was the subject of our conversation with Andrey Grozin — the head of department of Central Asia and Kazakhstan of Institute of CIS countries. It turned out to be a long one, but we did not cut anything out — just divided the interview into several parts. Today we offer the readers of our portal KazakhSTAN 2.0 kz.expert — the first part about China’s effect on Central-Asia.

You don’t change horses mid-stream

— Andrey Valentinovich, news that Chinese authorities decided to change the constitution of the country, getting rid of the norm limiting number of terms for the chairman of PRC, was widely discussed in the world. Experts disagree in estimating the consequences of this step: Some say it is essential for continuation of reforms started by Xi, others warn — country is headed towards dictatorship. What do you think?

— The decision of CC of PRC to change constitution of China getting rid of the norm limiting the number of terms for the chairman of PRC, was made not from some personal aspirations of Xi Jinping to bolster his power. This likely played a secondary role. Primary reason was geopolitics. The world is transforming, dynamic of global processes producing conflicts or leading to them, is increasing. Thus, now there is a situation, when you can’t «change horses». And Xi Jinping is an authoritative figure, having large support among Chinese population, including thanks to active fight against corruption.

I have been to Shanghai this january and during the week sometimes watched the TV. On every channel at the end of the news segment there always was a small unmasking report on yet another corrupt official who is sitting in the cell and repenting. The fight against corruption gets a very lively response and support among the public. That might be why it took neutrally the news about taking off the limit of terms of governing for chairmen.

This can be confirmed from the uncensored Hong Kong press. There, position of CPC is critiqued, but it is obvious that overall the decision was taken lightly. Looks like the wound received by Chinese public as part of cultural revolution and Mao’s rule healed. Our view that comparison can be made between current reform of Xi and China’s Maoist past, is completely false. China of Mao’s times and current one are two different things.

For example, economic growth, rise in the number of rich and fed people has seriously disrupted previous traditionalist Chinese views on the world, life and values. Yes, the dominating impact of the party remains unchanged, but Chinese communism today is a very different movement. Communist party of China is more of a government institution of managing domestic policy and foreign policy processes. Thus, it is more of an institution of government administration, rather than political institution.

Also, decisions of the past convention and plenary session of CPC clearly evidence — Chinese elite is consolidated, compared to elites of Central Asian countries, and it is aimed at Chinese foreign policy being even more offensive and oriented at solving multiple domestic goals and problem through the outside world and neighbors who owe so much they will never get square.

Loan dependency

— Debts of Central Asian countries to China continue to rise. And Kyrgyzstan and Tajikistan have a debt to Chinese bank that approaches 50% of all foreign debt. More often now, you hear of such a definition of China’s expansion: Colonialism with a Chinese flavor. Do you agree with this?

— New model really is being created in the relationship between China and its partners today. Interestingly, this model was being tested in Africa. Its results, especially in equatorial Africa, as experts say are controversial. The same goes for partnership with certain countries via Asia-Pacific region, with Myanmar for example, or mountainous Tibet principalities.

It is important to realize though that Chinese foreign policy is changing and moving away from testament of Deng Xiaoping. Officially this isn’t announced, contribution of Xiaoping to development of modern China is still present in the constitution, but now there is also parts about special role of Xi Jinping and his concepts.

—What does it presuppose?

—It is two main ideas of incremental development of China  — the dream of rebirth of the might of Chinese nation — for domestic consumption, and for the foreign — the One Belt One Road initiative, which consists of two blocs — Economic belt of the silk road and maritime silk road of XXI century. It is important to understand that all foreign policy concepts that I named are applicable things for securing of stable and incremental growth of economy and society within China. Thus, the main formula for today’s administatin of China is undoubtedly domestic development. And China is very traditional in that aspect — it sees itself at the center of the world, around which everything else is created, including all transport, logistical and geopolitical.

China isn’t unique in that, since USA, Russia and any other large state, that plays or tries to play a role on global arena, sees itself as almost the center of universe. As Russian president recently said, why do we need the world if there is no Russia in it? The same could be said by Americans with their atlantic liberal center and moreover China. Thus, what China is doing is a pretty traditional strategy of expanding of one’s living space through economic influence and submission.

—Through loans?

—Among other things. China gives out low interest loans with conditions for attracting of Chinese labor force, technologies and business. As a result countries, implementing projects using Chinese loans, receive infrastructure with varying degrees of control and a lot of debt. These are two things left over to borrowers. And it should be understood that China isn’t a kind uncle who gives out stacks of dollars and yuan out of his sack. They realize their national interests through loans.

—But countries of Central Asia happily take these loans. Why?

—This was very well explained by Kyrgyzstan’s minister of finance; because you can borrow the whole sum necessary for a project with a reasonable interest. Or as one Tajik official said about a year and a half ago, the Chinese are offering loans basically on conditions of grants, so why wouldn’t we take it? I.e. we will still have roads and buildings.

However, he didn’t mention that there will still be debts left. And they aren’t small. Recently, a study came out on the size of debts of various countries to China. In it eight countries are mentioned, including European Montenegro all of them in a risk zone, due to very high percentage rates of foreign debt, specifically to China.

Chinese loans are also good in that there is no visible political component, i.e. China, unlike US and Russia for now doesn’t correlate loans with any political burdens. And the word «for now» is the key.

The Chinese are building their relationships with highest elites, who they keep materially interested. Because, all Chinese loans for Central Asia, essentially enriched only a small number of people. Yes, they resulted in construction of roads, bridges, tunnels, modernized energy infrastructure, but they didn’t create significant and sustainable jobs.

Debts will have to be returned

—In which Central Asian countries in your opinion Chinese influence is largest.

—Chinese assumed dominating positions in a slew of economic and financial parameters in three out of five Central Asian republics already — in Tajiksitan, Kyrgyzstan and Turkmenistan. And Turkmenistan, due to its shot-sighted foreign policy ended up in a situation where the only large buyer of its main export resource — natural gas is China. At the same time it accumulated huge loans from China for outfitting of Galkynish — gigantic natural gas deposit, i.e. it ended up in a vulnerable position, which already seriously affects its economy. And it will get worse further on. One shouldn’t hope that China will go for forgiving the loans. Unlike Russia it has never done so. At least, I don’t remember such situation, where China forgave a debt to anyone, due to politics. It is its principle.

If anyone in Bishkek or Dushanbe thinks that Beijing like Moscow will empathize with their dire situation and forgive the loans, they are mistaken. They will have to return the loans or agree to some other non-financial means of paying them off — with land, property, resources, deposits.

—And which Central Asian country, let’s say, doesn’t want to wide open the doors to funds from China?

—Uzbekistan. It has the smallest debt to the Chinese bank compared to other countries of the region. But after the death of Islam Karimov, China of course is trying to galvanize its cooperation with Tashkent in various spheres.

Overall, an interesting situation is forming in the region. Earlier as we know the main recipient of Chinese investments was Astana (though it remains the absolute leader in the volume of Chinese loans and direct investments). But now there is a sense that the wind from China its changing its direction. And if Shavkat Mirziyoev will be able to implement at least half of announced economic reforms, then likely, Uzbekistan will be even more attractive for China in certain aspects than Kazakhstan.

Because why does China need CA? On one hand, it is natural resources — on the other territory of transit in the widest sense of that word, third, it’s a geopolitical foreground before western China and its well-known problems.

For example, Uzbek market is at least twice as large as Kazakhstan’s. Yes, the structure of income is lower among Uzbekistan’s population, but China is now fighting for any even seemingly small and non-lucrative markets, such as Myanmar and Kyrgyzstan. Thus, 32 mil. of Uzbek citizens, who according to forecast of UN may turn into 50 mil. by 2050 — is a very interesting prize, worth fighting for. Plus, of course its resources gas, cotton and uranium. It’s additional opportunities for Chinese economy.

—But what about statements of some experts that China is trying to re-orient to its domestic market?

—Yes, Chinese economy is rebuilding, but it is very slow-paced and its resource demands will be preserved at least due to tis huge size, Chinese economy is also reorienting to alternative sources of energy, but whatever they say about solar batteries or shale gas, these resources aren’t enough for gigantic scope and volumes that are present in China. Thus, its interest in Central Asian resources remains.  

To be continued.