China urges Central Asia to use $10bn infrastructure fund

By bne IntelliNews December 6, 2012

bne -

With no takers thus far, China has called on the governments of four Central Asian republics to start using a $10bn package of loans announced in June to fund infrastructure and industrial projects.

The credit package from China's state banks was opened in the summer and offered for investments in the Central Asian member states of the Shanghai Cooperation Organization (SCO). Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan are included in the regional security club alongside their two giant neighbours: China and Russia.

"We intend to invest this money in infrastructure, energy and production projects, in order to facilitate development of the real economy," Chinese Premier Wen Jiabao told an SCO summit in Bishkek on December 5, Reuters reports. Wen added that China would "welcome" applications from the four countries to the state-owned Eximbank and Development Bank of China.

Chinese state banks are ready to invest into projects, including the planned railway connecting China to Uzbekistan via Kyrgyzstan, he noted. The railway, from Kashagar in western China to the Uzbek town of Andijan, is expected to cost around $2bn to build. Kyrgyz and Chinese officials are already in talks over the planned route, and a decision on the project may be made by the end of this year.

Energy hungry China has increased investment into Central Asia in recent years, as it seeks access to the region's hydrocarbon and mineral resources. For their part, the Central Asian states are happy to have a serious competitor to Russia for its exports.

In a bid to increase its influence, Beijing has provided billions of dollars worth of soft loans funding infrastructure projects across the region. Both state owned and private Chinese companies have made numerous acquisitions especially in the natural resources sectors.

The unveiling of the infrastructure fund in Central Asia was matched with a similar offer in Central Europe, as Beijing seeks to make inroads into European markets. The east-end of the EU is clearly seen as a bridgehead into the wider EU, but progress has been slow, with European governments wary of Chinese quality and intent.

However, the developing nations of Central Asia have proved far more receptive, and China is pushing to cement its role in the region's economy. In September, Wen announced Beijing is mulling a China-Central Asia economic cooperation fund, and an agricultural cooperation fund. China is also considering building several trade zones and agricultural demonstration centers in neighboring countries, the premier claimed.

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