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The impact of the Covid-19 pandemic on Kazakh-Chinese relations

Below is a brief presentation by Yuri Poyta, Head of the Asia-Pacific Section of the CIACR, during a Georgian-Kazakh roundtable organized by the Georgian Strategic Analysis Center (GSAC). The topic of the speech was the impact of the pandemic on Kazakh-Chinese relations, which may be relevant for Ukrainian-Chinese relations.

It is very difficult to predict the further development of the situation, as no one knows how the pandemic will develop further, how strong the second wave will be. Plus, there are both pandemic-related factors (falling oil prices, world economic recession) and those that are not directly related, but occur against the background of deteriorating socio-economic situation in countries (protests in the US, Europe, Hong Kong). These factors add uncertainty and unpredictability to the development of political and economic processes.

The consequences of the coronavirus for the bilateral relations between Kazakhstan and China can be analyzed in the following dimensions: economic and political, as well as the scale of the impact tactical (short-term - 2020-2021) and strategic.

In economics there are global consequences of the pandemic, which has caused a slowdown in economic processes, both in China and around the world. Due to the fact that production in China has slowed down, respectively, the demand for some products that China receives from Kazakhstan is also declining, plus we see lower prices for many commodities (the basis of Kazakhstan's exports - mineral, oil and gas and fuel and energy products, some metallurgy products), which is already reducing trade.

As for joint ventures - currently there are Chinese investors in Kazakhstan (most actively represented in the oil industry), there is a project to implement in Kazakhstan 55 Sino-Kazakh enterprises in various fields (according to the cooperation plan for the state program of Kazakhstan "Nurly Zhol" and "Silk Road Economic Belt"), in different areas: food, metallurgy, processing, etc. And the pandemic will affect their work, including regarding product sales, labor migration from China, supplies of necessary equipment, logistics, etc. As for the One Belt, One Road initiative, some projects will, of course, be slowed down or paused, but most likely, globally, China will not abandon it.

That is, in bilateral economic relations - there is a general decline in trade, but structurally, in the near future there will be no large-scale changes.

Political consequences:

Globally, there will be an intensification of the Sino-American confrontation, in the trade sphere, information, technology, and this is gradually moving into the legal plane, US sanctions against China will be imposed and intensified.

What are the risks here?

First, the intensification of protest activity - Against the background of the pandemic, accusations of China as an alleged source of a deadly virus, there is likely to be an increase in Chinese phobia, including Kazakhstan. In 2019, we observed a series, albeit small in number of participants, of regularly recurring anti-Chinese protests, which have the hidden potential to form a common anti-government narrative. Therefore, the intensification of cooperation with China can be interpreted by part of the population as a threat to national security, expansion, an attempt to seize land, etc. And the information component of the anti-Chinese narrative can be significantly strengthened, including on the part of Russia in order to weaken China's influence in Kazakhstan.

Second, the geopolitical choice. China and the United States will try to win over as many allies as possible. China's problem is that there are virtually no allies who are really ready to side with it in the confrontation with China. Therefore, Beijing will definitely try to gain the support of other countries, using both "soft power" (humanitarian aid) and acting harshly. We see a very clear example in Australia, when Canberra's statements about the need for an international investigation into the coronavirus outbreak led to very harsh rhetoric from official Beijing, and secondly, an increase in tariffs on agricultural products from Australia by 80,5%, which is a powerful blow to the Australian economy.

These factors entail certain geopolitical risks for Kazakhstan, which cooperates quite effectively with both the West (US and EU) and Russia and China. Therefore, there may be a situation when Kazakhstan will try to pull to its side, thus narrowing the possibility for foreign policy maneuver.

The third is the sanctions package. At the moment, a two-party consensus has been formed in the US Congress, and new documents have been developed and published (here и here) in relation to China, and it is most likely that the process of sanctions pressure will increase slowly but surely. Areas that will be hit: IT (both China's access to Western technology and China's access to other markets), manufacturing (there is a tendency to withdraw Western production sites from China, and the recession of the US and EU economies may be a trigger job creation in the United States and Europe). There are obstacles to this process, but this scenario cannot be ruled out.

Also, it is possible that the Chinese may be under sanctions energy and infrastructurewhich are a key asset of China. U.S. think tanks are now working to find China's vulnerabilities, and a plan to gradually impose sanctions on key areas in China. Introduction is also not excluded secondary sanctions, already on those companies that work with Chinese companies (for example, CNPC). And here, from my point of view, there is a risk of getting Kazakh companies under secondary sanctions.

The full video of the discussion can be watched there.