Third Kazakh-China Rail Crossing Is Geo-economics, Not Development

US-China Rivalry and Digital Connectivity in the Indo-Pacific

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China is currently embarked on a number of rail development hubs with Kazakhstan, some of which make virtually no economic sense given the isolated settings. Building rail lines through remote trading posts such as the town of Tacheng only make sense in terms of geo-economic strategy linked to China’s overall policy in its northwestern Xinjiang region. The use of these remote areas for rail and logistics development seem difficult to fathom until we realize this is not about Central Asian integration and development but China’s own domestic industrial policy being played out in a regional international realm.

 

China’s ethnic policy in what is officially termed the Xinjiang Uygur Autonomous Region toward both Uyghurs and Kazakhs is the likely explanation. Beijing appears to want to transform Xinjiang’s borderlands into an import hub for industrial and agricultural goods produced in Belt and Road offshore production bases in Central Asia. This would require pulling commodities or products toward these new hubs and using them as transport centers. This is at least a material explanation for connecting the South and northern Xinjiang railways and developing other import channels linked to mainland China.

 

China maintains five border crossings with Kazakhstan; two are only accessible by road, and Tacheng is the third dual road-rail link between the two countries. The major crossings at Alashankou and Khorgos are used for long-haul Europe and Central Asia connections with mainland China, Tacheng-Bakhty and Jeminay-Maikapchagai are regional crossings with limited economic potential. While northern Kazakhstan’s Nur-Sultan, Karaganda, Pavlodar, Semey and Ust-Kamenogorsk are already connected with Xinjiang by rail at the Dostyk-Alashankou crossing, the development of new international rail connections seems more focused on developing the northern Xinjiang hubs of Tacheng, Karamay, and Altay for distribution deeper into China.

 

Northern Xinjiang is the industrial and commercial heart of Xinjiang. While southern Xinjiang is home to the more populous city of Kashgar with its mostly Uyghur population, northern Xinjiang is closer to the settler-colonial population, a forced compromise between Kazakhs and Han Chinese. A linear strip of development in the Dzungar Basin is the agricultural and industrial heartland of Xinjiang under Chinese rule and runs from Turpan to Ürümqi to Shihezi and Kuytun, with economic branches north to Karamay and south to Ili and a transport trunk directly onto the Alashankou-Dostyk crossing. Facing east, Turpan is the logistics center connecting northern Xinjiang with the rest of China.

 

Ürümqi, Turpan and Hami remain the most important administrative districts for the continued development of China’s trade and industry in Xinjiang. However, the Ili Kazakh Autonomous Prefecture is a sub-provincial level administrative jurisdiction that controls the neighboring prefectures of Altay and Tacheng, meaning all but one of the westward-facing border crossings from northern Xinjiang are under Ili’s jurisdiction. Orphaned from the main rail trunk lines, the newly opened Karamay-Tacheng branch line and the Tacheng-Bakhty rail border crossing is part of the wider and ongoing development of the northern Xinjiang railway. In an international trade context, this Tacheng-Bakhty rail connection makes zero economic sense. But in the spatially planned industrial development of Karamay, the connection is part of a development plan linked to Chinese national strategic goals. Karamay is the terminal of a major water diversion project, Project 635, bringing water from Altay via a desert canal to Karamay for future residential and industrial development. Karamay is a strategic area for China’s public administration, a Han majority prefecture wedged between Kazakh, Mongol and Hui ethnic autonomous jurisdictions. While these ethnic regions are autonomous in name only, Karamay, Hami and Ürümqi form a cluster of Han majority industrial cities that are not even nominally under ethnic autonomous public administration.

 

Northern Xinjiang’s Kazakh Connection

 

Of northern Xinjiang’s eight extant and historical border crossings, all but one are in ethnic Kazakh-governed public-administration units. The main rail and road crossing to Kazakhstan and onward to Europe, Russia and Turkey is Dostyk-Alashankou, in the Mongol Autonomous Prefecture, but the administrative governance at this border crossing is directly under the Xinjiang Production and Construction Corps, which is controlled firmly by Beijing. The Ili Kazakh Autonomous Prefecture directly or indirectly controls the other seven border crossings with Kazakhstan, one of which, at Dulat, is closed. The Irtysh inland waterway has been closed since the 20th century, and the crossing to Mongolia from Altay is seasonal and local only. Two border crossings between Mongolia and northern Xinjiang also fall in ethnic Kazakh areas, a seasonal mountain crossing only for locals yet manned by a Chinese outpost with two helipad ports, and the Lao-Myao border crossing, an iron ore artery between Mongolia and mainland China via the Barköl Kazakh Autonomous County. The international political trade power is, however, manifested in the government of the Ili Kazakh Autonomous Region through which trade and industrial integration with Kazakhstan is managed.

 

The new Tacheng-Bakhty crossing is not a conventional trade hub. The older Dostyk-Alashankou and Altynkol-Khorgos border hubs were designed to service both inter-continental rail between China and Europe and more national-level trade between China and Kazakhstan, Uzbekistan and Kyrgyzstan. But the Tacheng border crossing is a local facility, connecting northern Xinjiang with northern Kazakhstan. The Tacheng transport loop connects to Bakhty on the Kazakhstan side, which is already serviced by a road, the A356, which eventually connects to Omsk in Russia. Harsh conditions make it difficult to maintain year-round rail or road services, and both freight and passenger border crossings often close with little notice. Most cross-border trade from far northern Xinjiang is either small-scale local transit or strategic iron ore and coal imports. Mongolian border crossings are similarly difficult due to frequently changing conditions and the lack of significant trade volume.

 

The northern Xinjiang loop connecting the settlements of the Altay range in the northern Dzungar Basin with the industrial heartland in the southern Dzungar Basin is a strategic economic development priority for Beijing. The Karamay-Tacheng route was announced in 2014 at a cost of US$840 billion,1 and it was opened in May 2019.2 A 2014 State Council Information Office document lays out the directive for a Central Asian Economic Corridor,3 originally contained in a 2012-2030 development strategy.4 Tacheng has been designated a pilot border zone since 2015.5 The Tacheng border crossing is billed as a hub of the Central Asian Economic Corridor, which mainland Chinese businesses are being incentivized to explore. Chinese state media, though, bills the Tacheng-Bakhty dry-port trade center as targeting locals and small consumer goods.6

 

Tacheng itself faces the Northeast Kazakhstan industrial cities of Semey and Pavlodar. But northern Kazakhstan’s industrial production is small, and the border crossing does not link to the far northern Xinjiang industrial cluster centered on Beitun and Altay cities, which might have some justification in terms of economic integration. Rather, this third rail connection is vectored to a natural transport and industrial hub in Karamay, a strategic city embedded in Tacheng prefecture and surrounded by the ethnic autonomous prefectures of Ili, Bortala, Bayingolin and the Chanji Hui. Developing Karamay is thus a greater geo-economic priority. A fourth rail crossing is planned to link Mongolia to Kazakhstan directly by connecting Maikapchagai with the Burenkhaikhan crossing into Mongolia, traversing far northern Xinjiang with trunks to Altay and Fuyun. The Maikapchagai road crossing’s future upgrade to a rail connection is odd, though, given there is no rail line on the Kazakh side. Similarly, the border connection with Mongolia in east Altay connects only to impossible terrain with one small road. Four rail connections between Xinjiang and Kazakhstan — Khorgos, Dostyk, Tacheng and Maikapchagai — is economic folly. For captured Chinese taxpayers to accept this inefficiency is a cost of Communist economic planning, and no protest is likely, but neither the multilateral development banks nor the Republic of Kazakhstan should be funding this.

 

Regional Transport Development as a Geoeconomic Strategy

 

Xinjiang is built around Han industrial cities, a Kazakh north and a Uyghur south, making developing international road and rail connections with Kazakhstan through Ili Kazakh Autonomous Prefecture jurisdictions a natural fit. As the world struggles to penetrate China’s ethnic public policy in Xinjiang toward both Uyghurs and Kazakhs, there remains an unexplored dimension as to why China is clearing the way in the first place. Transforming the Xinjiang border into an import hub for industrial and agricultural goods produced in Belt and Road Initiative offshore production bases is the geoeconomic rationale for connecting the southern and northern Xinjiang railways, as well as expanding the cross-border trade capacity with Kazakhstan.

 

Ethnic Kazakhs in Xinjiang are co-opted into this as part of the economic development drive, both through the Ili prefectural and Xinjiang government structures as well as through the natural connection with counterparts in Kazakhstan. Developing a third rail crossing in Tacheng makes little sense for facilitating mainland China exports or north Xinjiang exports. However, as a primarily import-driven zone for bringing in commodities, semi-finished and finished industrial products from Kazakhstan and China’s other industrial bases in Central Asia, the investment is more sound. South Xinjiang import channels are more focused on strategic Indian Ocean imports through Pakistan and the geoeconomic hedging of different routes to Iran, Afghanistan, and the Fergana Valley, which includes parts of eastern Uzbekistan, southern Kyrgyzstan and northern Tajikistan. The northern Xinjiang import hub strategy seems directly focused on importing products made in China’s factories in Kazakhstan, the Kyrgyz Republic, Uzbekistan and Tajikistan as a form of investment co-ordination under Beijing’s international capacity co-operation policy.

 

The rail and road spending to link these small northern Xinjiang cities with the Ürümqi-Turpan industrial-center mainline logistics route to mainland China then makes geo-economic sense. While the new rail crossing does not appear economic, the Asian Development Bank funded US$150 million of a US$300 million technical assistance project for Tacheng road upgrades and border crossing improvement.7 China’s annual railway budget is around US$124 billion.8 Much of this was taken up by high-speed rail in the 2010s, but Xinjiang is a key investment priority for conventional rail. For China’s investment-driven economic growth model, built on infrastructure, industrial and housing construction, everything appears to be a nail looking for a hammer. For Tacheng, it is hard to ignore the domestic-industry functions of developing the northern Xinjiang rail network. This economic development is entirely within established state spatial-planning paradigms and funding mechanisms that China has used to develop its domestic industrial economy.

 

However, is it in the interest of the multilateral development banks to upgrade China’s geo-economic strategic capabilities? Should Kazakhstan institutions organize the domestic logistics industry to accommodate this rail connection when the existing rail connections can so easily be targeted with geo-economic blockages? For bilateral economic growth and integration as a political legitimacy strategy, both China and Kazakhstan might be better off integrating across Xinjiang, Kazakhstan, the Kyrgyz Republic, Uzbekistan and Tajikistan. If economic development were at the heart of this, Chinese investment should be going into developing rail linkages between Kazakhstan and Southern Central Asian consumer centers in the Fergana Valley. But the clearer reality is that this is Chinese domestic industrial policy being played out in a regional international realm.

 

While central spatial planning may appear to be a competent geo-economic strategy, the disjointed realities at the subnational level show how difficult co-ordinating a Eurasian regional industrial policy is. The trade carrot for Kazakhstan has always been ocean access via the busy Lianyungang port in Jiangsu between Beijing and Shanghai. This has been chosen by Beijing as a key strategic port for foreign throughput, offering the Kazakh government, and by extension Middle Corridor partner economies, access to the ocean. In this context also, the third rail crossing at Tacheng makes no sense for Kazakhstan. China’s trade and industrial policy is to develop northern Xinjiang as an import hub for more China-invested industrial projects produced in Kazakhstan. The expanded transport network then has clear benefits for the northern Xinjiang economy. But for Kazakhstan, a third rail connection that at best only serves China’s Xinjiang development policy and at worst is simply geo-economically strategic for China is of little practical use.

 

Economic Development as a Legitimacy Narrative Is Waning

 

The Belt and Road Initiative, of course, was never about infrastructure. Any infrastructure development attached to it has mostly occurred within China, to prepare provinces such as Xinjiang to become import hubs or to plan for other geo-economic transitions. Actual Belt and Road investment in Central Asia has been in factories and industrial plants to develop an offshore production network for China. Transforming the China model from an export-oriented paradigm to an import-oriented capital archipelago model is simpler in a province like Xinjiang, which throughout the reform and opening period had been little more than an afterthought or a source of labor for mainland development. Now that Xinjiang is an import hub for land-based geo-economic and strategic trade, the dynamics of its political, economic, industrial and transport governance change. The ongoing ethnic policy against Uyghurs and Kazakhs is a manifestation of this change in industrial policy, not a policy goal in itself.

 

However, while Beijing’s central spatial planning and geo-economic policy may appear to be grand strategy, the disjointed realities at the sub-national level demonstrate how difficult co-ordinating a Eurasian offshore industrial policy will be. For Central Asian economies wishing to export goods to Xinjiang and mainland China, does China’s export of its regional subnational spatial planning model benefit the host economy? Where a dynamic international trade and industry strategy is needed, on the Kazakhstan borderlands, Beijing appears to have little in the geo-economic policy toolbox aside from the “engineering as economic policy” model. Overlaid on this is that different regions of China currently have different macro regional spatial planning policies. These different regions have very different local governance structures and state-market institutional relationships, as do the Central Asian and Eurasian economies they are policy-incentivized to interact with.

 

China’s Communist Party appears to be pinning its foreign economic strategy on developing new forms of legitimacy. In trying to offer an alternative to the loose Bretton Woods system of globalization, Beijing clearly seeks a multipolar alternative, a legitimation narrative, and a challenge to the liberal international order. China policymakers have tried hard to develop a foreign economic policy distinguishable from the late-stage Soviet Union and the easy critiques of imperial overstretch. Yet the evidence from the Kazakhstan-China border shows more white elephant than geo-economic dragon, more economic policy misstep than grand strategy.

 

The Tacheng-Bakhty rail opening is geo- economically strategic, but it is a manifestation of a weak geopolitical strategy. It is easy to draw nice lines on the map, but this does not necessarily convert to cost and time savings for container transport or the consumer. In geo-economics, though, is anyone really thinking about cost-effectiveness? In northern Xinjiang, China’s economic development as a political-legitimacy argument is dead. While there are already two rail links to Kazakhstan, one of them heavily underutilized, there is no economic rationale for a third crossing. This is no longer economic development. For China’s planned economy model to absorb such loss-making endeavors is a choice Beijing can make, but neither Central Asian states nor multilateral development banks should be funding China’s loss-making geostrategic infrastructure.


Notes

1 “Karamay-Tacheng Railway Opens,” Railway Gazette, June 6, 2019, www.railwaygazette.com/asia/karamay-tacheng-railway-opens/48653.article

2 “New Railway under Construction in Xinjiang,” Embassy of the People’s Republic of China in the United States of America, April 12, 2014, www.china-embassy.org/eng/zt/Xinjiang/t1149236.htm

3 “Xinjiang’s Investment in Infrastructure Exceeds 800 billion [yuan] to Build New Silk Road Economic Belt Transportation System” (新疆投资基建超8000亿 建设新丝绸之路经济带 交通体系), State Council Information Office, June 27, 2014, www.scio.gov.cn/ztk/dtzt/2014/31055/31066/Document/1373906/1373906_1.htm

4 Zhang Xiaolong, “‘Central Asia Trade Corridor’ Ushers in Major Development Opportunities” (“中亚商贸走廊” 迎来重大发展 机遇), China Trade News, Jan. 6, 2021, www.chinatradenews.com.cn/content/202101/06/c125193.html

5 Relevant Persons in Charge of Ministry of Commerce and National Development and Reform Commission Interviewed by Central Media on “Opinions of the State Council on Several Policies and Measures to Support the Development and Opening up of Key Border Regions” (两部门有关负责人就《国务院关于支持沿边重点地区开发开放若干政策措施的意见》), China Central Government Portal, Jan. 12, 2016, www.gov.cn/zhengce/2016-01/12/content _5032274.htm

6 “In Pics: Border Trade Center of Bakti Port in Tacheng, NW China’s Xinjiang,” Xinhua, Sept. 5, 2019, www.xinhuanet.com/english/2019-09/05/c_138368324.htm

7 “Xinjiang Tacheng Border Cities and Counties Development Project-Procurement Plan,” Asian Development Bank, Aug. 26, 2021, www.adb.org/sites/default/files/project-documents/46063/ 46063-002-pp-en.pdf

8 “China Plans to Spend 800 bln Yuan on Railway in 2020,” Xinhua, Dec. 30, 2019, www.xinhuanet.com/english/2019-12/30/c _138666820.htm

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