Kyrgyzstan: China solidifying economic hold on Bishkek

Kyrgyzstan: China solidifying economic hold on Bishkek
Kyrgyzstan may follow Russia’s lead in politics, but when it comes to trade and investment, Bishkek is tilting toward China. /
By Eurasianet April 5, 2024

Politically, Kyrgyzstan may be mimicking Russia, but when it comes to trade and investment, Bishkek is tilting toward China. Kyrgyzstan’s split geostrategic personality reflects changing circumstances wrought by the stalemated Russia-Ukraine war. 

Russia clearly views Kyrgyzstan as an important client state in Central Asia, evidenced by the fact that Kremlin leader Vladimir Putin’s first trip abroad last autumn, after the International Criminal Court (ICC) issued an arrest warrant for him, was to Bishkek.

Kyrgyz authorities at the same time have demonstrated an affinity for Russia’s authoritarian blueprint. On April 3, Kyrgyz President Sadyr Japarov signed a law that requires organisations receiving funding from abroad to register as foreign agents. The legislation’s wording closely adheres to a law imposed earlier by Russia; the Kremlin used its “foreign agents” law to effectively handcuff the country’s non-governmental sector. 

Critics of the Kyrgyz legislation fear it will open the way for a Russia-style crackdown on independent media and civil society activists in Kyrgyzstan. When signing the law, Japarov dismissed the notion that it could turn into an instrument of repression, saying that “as the Head of State, I guarantee there will be no persecution.”

The Kyrgyz penchant for following Moscow’s lead in politics does not extend to economics. China has supplanted Russia as Kyrgyzstan’s chief source of foreign direct investment (FDI), according to data compiled by Kyrgyzstan’s National Statistics Committee. Chinese FDI in 2023 totalled $220.8mn, or almost 28% of the country’s overall FDI total of $798.2mn. Russia’s FDI total was $147.4mn. Kazakhstan was Kyrgyzstan’s third largest foreign investor in 2023 at $67.3mn.

Manufacturing ($226.4mn) and mining ($169.2mn) were the most attractive Kyrgyz sectors in the eyes of foreign investors last year. That interest appears to be carrying over into 2024: in early April, the Chinese mining concern Huaxin signed a deal with a Kyrgyz state enterprise to develop the Kol-Jangak coal field. 

In commerce, China also eclipsed Russia in 2023 as Kyrgyzstan’s top trade partner, even though Bishkek is a member of the Moscow-dominated Eurasian Economic Union (EEU). China accounted for a near-35% share of Kyrgyzstan’s annual trade turnover total of $15.7bn in 2023. The EEU’s share was almost 28%.

Since the start of the Russia-Ukraine war, Kyrgyzstan has emerged as a key conduit for Russia for the supply of sanctions-busting goods. But there are signs that Bishkek is growing increasingly worried about the threat of secondary sanctions. Accordingly, the flow of Russia-bound illicit trade may slow in the coming months.

RFE/RL reported that Kyrgyz banks will stop processing transactions via the Russian Mir payment system as of April 5. Mir is a Russia-based alternative to Western systems managing interbank transactions. Mir’s suspension by Bishkek will make it more difficult to move money between Kyrgyzstan and Russia.

This article first appeared on Eurasianet here.