Investments in the PRC: Structure, Trends, Status*

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In bilateral cooperation in the investment sphere, Kazakhstan is not limited to the role of a recipient of Chinese investments, but also acts as an investor in the PRC economy. As of July 1, 2021, the amount of Kazakhstan’s accumulated investments in China was $4,324 million1. This value corresponds to a third of the amount of accumulated investments of the PRC in Kazakhstan (12,918 million dollars). Throughout most of the history of bilateral economic cooperation, Kazakhstan’s investments in China have tended to grow, although not always evenly, which is reflected, in particular, in the dynamics of the gross amount of direct Kazakh investments in China (Figure 1).

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Figure 1: Dynamics of gross direct investment from Kazakhstan to China and its share in total FDI from Kazakhstan abroad[1].

As far as this indicator is concerned, it can be noted that it has demonstrated growth even during the last few years, which have been difficult for Kazakhstan’s economy, and this growth has outpaced the growth rate of Kazakhstan’s direct investments as a whole, which was reflected in a significant increase in China’s share of gross investments from Kazakhstan abroad. At the end of 2020, this indicator reached a historical maximum of almost 4%, despite the crisis phenomena in that year, which indicates a steady growth in the interest of Kazakhstani businesses in the Chinese market.

Despite the positive dynamics, the absolute amounts of Kazakhstan’s investments in the PRC remain small even by the standards of Kazakhstan, and are even less significant on the scale of China. Comparison of Chinese statistics with Kazakhstan’s indicators gives the value of the specific weight of investments accumulated in PRC from Kazakhstan of all types in 0.07% of the total amount of foreign investments, concentrated in China (Table 1.).

 

Table 1. Kazakhstan’s role in accumulated foreign investment in the PRC at the end of 2020. [2]

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Despite the low role of Kazakhstani investments in the Chinese economy, consideration of trends in their movement has a certain value in the context of the study of international economic cooperation of Kazakhstan and the shifts occurring in it. The most complete picture of these trends can be obtained by analyzing the index of accumulated Kazakhstan investments in China, reflected in the statistics of the international investment position (maintained by the National Bank of Kazakhstan).

In this case there is a situation similar to the dynamics of the flow of direct investments from Kazakhstan to China – the amount of accumulated Kazakh investments of all types in China is growing, and even more pronounced and intensive – both in absolute and relative terms (Figure 2).

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Figure 2: Dynamics of the amount of accumulated investments of all types from Kazakhstan to China and their share in the total amount of Kazakhstan’s investments accumulated abroad[3].

 

According to the results of 2020, despite the strongest crisis that occurred that year, the amount of accumulated Kazakhstan investments in China reached the next historical maximum of US$ 4,720 million, as well as the share of investments accumulated in China in their total amount, which amounted to 2.9%. Thus, in recent years there has been a steady growth in the investment presence of Kazakhstan in China, and the Chinese direction is gradually increasing its importance among the main geographical areas of Kazakhstan’s capital investment. According to the results of the first half of 2021, China is on the 12th place among all jurisdictions of the world (including offshore areas) by the amount of accumulated Kazakhstan investments, while on the same date of 2013 this place was the fifteenth.

At the same time, it is typical that the growth occurs in all main types of investments – direct, portfolio, other and reserve assets (Fig.3).

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Figure 3. Amounts of accumulated Kazakhstan investments in the PRC by main types in 2013 and 2021, million USD. U.S. DOLLARS[4].

 

As can be seen from the presented diagram, the growth of the amount of accumulated Kazakh investments in the PRC occurred unevenly by their individual types. We can note the outstripping growth of port-file investments and emergence of the previously absent type – reserve assets, while the largest type – other investments – grew insignificantly. More detailed indicators of growth of the amount of accumulated investments from Kazakhstan to the PRC are shown in Table 2.

Table 2. Absolute and relative indices of growth of amount of main kinds of investments accumulated in PRC from Kazakhstan in period of 1.07.2013-1.07.2021[5].

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In general, the following main conclusions can be drawn regarding the trends of Kazakhstan’s investments in the PRC:

– Kazakhstan has been increasing investments in PRC throughout most of the history of bilateral economic relations, although the Chinese direction remains insufficiently significant to date;

– the growth of Kazakhstan’s investments in PRC is observed for all types of investments, and their main type in terms of accumulated amount is other (or other), in which various debt instruments are represented;

– for the last eight years the amount of accumulated investments from Kazakhstan to PRC has doubled, demonstrating a higher growth rate than in general, which has led to an increase in the share of China in the total amount of accumulated Kazakhstani investments abroad to a maximum of 2.9%.

 

                                                                                         Vyacheslav Dodonov, Chief Researcher at KazISS under the President of the Republic of Kazakhstan      

* From the speech at the International Conference “30th Anniversary of diplomatic relations of the Republic of Kazakhstan and the People’s Republic of China – from formation to strategic partnership”, held on December 25, 2021 in the Research Institute of International and Regional Cooperation of Kazakh-German University, with the support of the Consulate General of the PRC in Almaty.

[1] Calculated using data from the following source: Gross outflow of direct investments abroad from Kazakhstani direct investors by type of economic activity of residents/countries // External Sector Statistics. National Bank of Kazakhstan. URL: https://nationalbank.kz/ru/news/pryamye-investicii-po-napravleniyu-vlozheniya (date of application: 28.11.2021).

[2] Sources: The time-series data of International Investment Position of China //  Data and Statistics. State Administration of Foreign Exchange. URL:  http://www.safe.gov.cn/en/2018/0928/1459.html (date of application: 30.11.2021); International investment position // Statistics of the external sector. National Bank of Kazakhstan. URL: https://nationalbank.kz/ru/news/mezhdunarodnaya-investicionnaya-poziciya (date of application: 28.11.2021).

[3] Calculated from the following source: International Investment Position // External Sector Statistics. National Bank of Kazakhstan. URL: https://nationalbank.kz/ru/news/mezhdunarodnaya-investicionnaya-poziciya (date of application: 28.11.2021).

[4] Calculated from the following source: International Investment Position // External Sector Statistics. National Bank of Kazakhstan. URL: https://nationalbank.kz/ru/news/mezhdunarodnaya-investicionnaya-poziciya (date of application: 28.11.2021).

[5] Calculated from the following source: International Investment Position // External Sector Statistics. National Bank of Kazakhstan. URL: https://nationalbank.kz/ru/news/mezhdunarodnaya-investicionnaya-poziciya (date of application: 28.11.2021).

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