When discussing international economic relations, experts and policymakers often focus on the first rather than on investment. Although easy to understand, good to count, and very intuitive, investment is just as important, and in some ways even more important, to understand the dynamics of the international economy. For example, foreign direct investment (FDI). Increased FDI has the outstanding ability to generate more mutual investment, and the increase in equipment, raw materials, components and manufactured goods will increase. In other words, investment is primary, and ** is secondary.
The Eurasian Development Bank studied the cumulative mutual foreign direct investment between the countries of the Eurasian region and China from 2016 to the first half of 2023. The study is based on a database of investment projects and uses a "bottom-up" approach to provide an in-depth analysis of investment relationships. The database is an important addition to the central bank's official data.
According to the assessment of the Eurasian Development Bank, China's cumulative mutual investment with 12 countries in the Eurasian region, namely Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan, has increased by 25% in the past seven years and has maintained a steady growth rate. As of the first half of 2023, the cumulative mutual investment is close to 80 billion US dollars, with most of the investment coming from China, while the investment of Eurasian countries in China is about 1 billion US dollars.
The growth of mutual investment is achieved under the Belt and Road Initiative, which is also a testament to the successful development of cooperation between China and the countries of the Eurasian region, as envisaged by the Belt and Road Initiative.
Among the countries in the Eurasian region, Kazakhstan is the largest recipient of Chinese investment, amounting to 41.9 billion US dollars, accounting for 52% of the total cumulative mutual investment between China and Eurasian countries. Despite the 10-fold difference in the size of the economies of Russia and Kazakhstan, Chinese investors invest almost twice as much in Kazakhstan as they do in Russia. However, about 90% of China's FDI in Kazakhstan comes from large-scale projects of China National Petroleum Corporation. China's mutual investment in Russia amounted to $19.7 billion, accounting for 25% of the total cumulative mutual investment between China and countries in the Eurasian region. The third largest direction of Chinese investment in Eurasian countries is Turkmenistan, with about $9.4 billion in Chinese direct investment in Turkmenistan as of the first half of 2023. Investment in oil and gas extraction, as well as pipeline transportation, accounts for about 70% of Chinese investment in Kazakhstan, Russia, and Turkmenistan, or $56.7 billion, due to the high capital intensity of projects in these areas.
In terms of manufacturing, China has invested more than US$12 billion in Eurasian countries. In this area, the main recipients of Chinese investment are Russia (56%), Kazakhstan (20%) and Uzbekistan (7%).
In recent years, China's investment in Eurasian countries has become more and more widespread. Among the projects launched in 2022-2023 are the construction of pumped storage power plants and hydroelectric power plants in Uzbekistan, the production of blood agents and vaccines, the production of mixed feed and amino acids in Belarus, the production of mineral fertilizers in Kyrgyzstan, the production of ceramic tiles in Azerbaijan, the production of equipment for oilfield services in Russia and the construction of silicon carbide plants. As of the first half of 2023, more than $500 million has been invested in these projects.
Obviously, mutual investment is of great strategic importance for both China and the countries of the Eurasian region. In recent years, new projects have been started in the manufacturing and power sectors. In the long run, increasing investment in these areas with potential for technical cooperation will reduce the share of foreign direct investment in the fields of resources and raw materials, and will further promote the rapid growth of China and the Eurasian economies.
The author, Evgeny Vinokurov, is the chief economist of the Eurasian Development Bank **Economy**).
*:Economy**.