Locals refer to a section of road in northern Tajikistan as the “Chinese road.” Not because it is directly related to China, but rather because China constructed it, funded it, designed it, employed people, and, in a practical sense, still owns a portion of it. Most of the employees left for home. The debt persisted.
One of the most significant financial experiments of the last ten years is centered on this dynamic, which is manifesting in different ways throughout Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan. When President Xi Jinping unveiled China’s Belt and Road Initiative in a 2013 speech at Nazarbayev University in Astana, it was presented as an act of charity: connectivity for economies long constrained by geography and Soviet-era bottlenecks, infrastructure for areas in need. That framing was never totally incorrect. However, it was also never fully finished.
China had contributed more than $1.3 trillion in infrastructure loans worldwide by the time the initiative gained traction, with a sizable concentration in Central Asia. In many respects, the original logic of the Belt and Road was based on the five former Soviet republics, which were resource-rich, landlocked, and strategically situated between China, Russia, and the larger Eurasian market. They serve as the actual entry point for China’s land routes that extend westward into Europe. Building those routes resulted in increased reliance, sometimes on purpose and other times as a result of the real workings of Chinese infrastructure financing.
Here, the mechanics are important. The funds rarely move freely within the host economy when China’s Export-Import Bank lends money to a Central Asian government for a rail or road project. Labor is frequently imported directly from China, contracts are typically awarded to Chinese companies, and equipment is shipped from Chinese factories. In other words, before a single local worker receives a paycheck, a loan to Tajikistan may flow almost entirely back into the Chinese system. Infrastructure is constructed. The debt becomes due. The economic multiplier that was meant to support the entire arrangement frequently doesn’t show up on the scale that was anticipated.
The best example is Tajikistan. Approximately $1.1 billion, or half of its total debt, is owed to Chinese organizations, mainly the Exim Bank. Similar unrest exists in Kyrgyzstan, where Chinese creditors own about 40% of its sovereign debt. In a renegotiation, neither nation has clear leverage. There are no substitutes that even remotely match the scope of what China provides. No Central Asian state has yet been compelled to relinquish strategic assets in the same manner that Sri Lanka gave up operational control of Hambantota Port in 2017; however, the Chinese government disputes this framing with some justification. Several economists have referred to this position as a debt trap. However, one analyst cautiously stated that the political and financial ramifications of that degree of debt dependency are “still to be predicted.”
Kazakhstan is on a different level. a more expansive economy, greater diversity, and a growing readiness to resist unfavorable terms. Since its founding, the English common law-based Astana International Financial Center, which was specifically created to draw in non-Chinese capital, has contributed more than $20 billion to Kazakhstan’s economy. This June, more than 8,000 people from 97 countries attended an international investment forum in Tashkent, the capital of Uzbekistan, which resulted in agreements worth about $30.5 billion. It is clear that both cities are sending the same message: Central Asia wants its own financial architecture, not just Beijing’s.
The Trans-Caspian route, which transports goods from China through Kazakhstan, across the Caspian Sea to Azerbaijan, and then through Georgia into Europe, is a more ambitious project than another rail line funded by China. In recent years, the volume of freight on that corridor has increased by approximately five times, and transit times have decreased from approximately one month to nearly two weeks. By 2030, the World Bank wants those volumes to have tripled. The fact that Gulf institutions, Western investors, Islamic finance networks, and Asian development banks are all being courted at the same time to fund the upgrades is noteworthy. China is still by far the biggest single investor in the area. However, it is no longer the sole topic of discussion in the space.
It’s actually unclear if that alters the underlying debt calculation. China’s structural advantages have not diminished, including its scale, speed, and appetite for projects that Western lenders frequently refuse to take on. Additionally, the issue is not ideological for governments attempting to develop ports on the Caspian and move cargo more quickly. It’s useful. However, it seems that Central Asia has determined that the terms of infrastructure finance for the upcoming decade should differ from those of the previous one, as evidenced by the forums in Tashkent and Baku being filled with new types of investors.
For a very long time, the road in Tajikistan will remain known as the Chinese road. That won’t alter. The next road’s name and who is in charge of it could change.
