Abstract. This article is analysis the production capacity in the formation and development process between Kazakhstan and China’s cooperation. Two writers of this article analysis the fundamental of establishing cooperation on the both side of the production capacity in industrial field, then clarifying that Kazakhstan’s industrialization projects urgently need to increasing their own production capacity, meanwhile China’s production capacity has exceeded its own needs. Cooperation between Kazakhstan and China in the field of production is can be based on beneficial interests, the same interests, national interests. Furthermore, after the two countries reached an agreement of the industrial mutual assistance agreement, more than 51 companies have already running their operations in Kazakhstan. After the certain tax exemptions implemented by the Kazakhstan government, Chinese investors will easily get further developed cooperation of production capacity in this country.
The cooperation between Kazakhstan and China on production capacity is a remarkable achievement in the new stage of the strategic partnership between the two countries. Due to the sectors of cooperation with prospects for development and the model of cooperation with demonstration effects, it is a topic that is worthy of attention and research.
The establishment of cooperation between Kazakhstan and China on production capacity
Since the establishment of diplomatic relations between Kazakhstan and China in 1992, the two countries’ friendly cooperation in various sectors has been reflecting a trend of expansion. Kazakhstan and China established good-neighborly relations and friendly cooperation in 2002, a strategic partnership in 2005 and a comprehensive strategic partnership in 2011.
In September 2013, when Chinese President Xi Jinping visited Central Asian countries for the first time, he put forward the international initiative in the Republic of Kazakhstan that advocated “jointly building the ‘Silk Road Economic Belt’ with an innovative model of cooperation”, which was epoch-making and of historical and realistic geopolitical and economic significance. Therefore, the Republic of Kazakhstan immediately responded to the Chinese initiative. On November 11, President Nazarbayev proposed the new economic policy of “The Road to Brightness — The Road to the Future” in the State of the Union Address for 2014 , aiming to facilitate economic restructuring and promote economic growth. The new economic policy of the “Road to Brightness” prioritizes the development of transportation infrastructure, industrial infrastructure, energy infrastructure and public infrastructure. Therefore, Kazakhstan’s future plan of development is directly linked to the Chinese initiative and realizes the “policy coordination” of Kazakhstan and China under the Belt and Road framework so that the bilateral relations of the two countries are elevated to a new historical height and provide the basis for the policy for cooperation on production capacity. Since then, China and Kazakhstan have begun to discuss this cooperation  .
For the purpose of “policy coordination”, the top leaders of the two countries have interacted more frequently, have signed a series of cooperation agreements under the framework of the Belt and Road and have implemented them one by one.
In December 2014, Chinese Premier Li Keqiang visited the Republic of Kazakhstan. The two governments signed more than 30 cooperation agreements totaling 14 billion US dollars and the Memorandum of Understanding on Jointly Promoting the Construction of the Silk Road Economic Belt, and reached a consensus on the Kazakhstan-China agreement for a framework of cooperation with a value of 18 billion US dollars. The two countries initially identified 16 early harvest projects and 63 prospective projects, covering cement, steel, flat glass, mining, chemicals, energy, electricity and other sectors.
During the visit to China by Prime Minister Masimov of the Republic of Kazakhstan in March 2015, the two countries signed the memorandum of understanding on strengthening their cooperation on production capacity and investment, as well as cooperation agreements with a total value of 23.6 billion US dollars for steel, oil refining, hydropower, vehicles, nonferrous metals and flat glass. In December 2015, the Prime Ministers of Kazakhstan and China signed the Joint Communiqué of the Government of the Republic of Kazakhstan and the Government of the People’s Republic of China and proposed “to launch the joint plan for connecting the construction of the ‘Silk Road Economic Belt’ and the new economic policy of the ‘Road to Brightness’”.
On August 31, 2015, during the visit to China by Kazakh President Nursultan Nazarbayev, the leaders of Kazakhstan and China signed the Joint Declaration on the New Stage of a Comprehensive Strategic Partnership between the People’s Republic of China and the Republic of Kazakhstan and the intergovernmental framework agreement on strengthening cooperation on production capacity and investments. This meant that the developmental strategies of the two countries were integrated, and it was the first agreement on cooperation on production capacity signed between China and a foreign country .
In order to ensure the implementation of the agreement, China also established an inter-departmental working mechanism and set up a capacity cooperation fund. A total of 51 projects were determined and 25 agreements were signed for a total amount of 23 billion US dollars. The projects have already commenced, such as vehicle assembly, polypropylene project and light rail project of Astana, and more than ten projects in steel, smelting, cement and other sectors are about to be launched.
Development of the cooperation between Kazakhstan and China on production capacity
On September 2, 2016, the governments of Kazakhstan and China signed the Cooperation Plan for the Coordination of the Construction of the “Silk Road Economic Belt” and the New Economic Policy of the “Road to Brightness” between the Government of the Republic of Kazakhstan and the Government of the People’s Republic of China. The Plan proposed to strengthen the connectivity and cooperation regarding infrastructure in the basic transportation sector, to actively promote the traffic build-up of the China-Kazakhstan-West Asia, the China- Kazakhstan-Russia-Western Europe and the China-Kazakhstan-South Caucasus- Turkey-Europe transportation ways, to optimize transportation infrastructure from the northwest frontier to the southeast coast of China, enhance the road and railway transportation capacity of both sides, and lay a solid foundation for the construction of the new Eurasian Land Bridge Economic Corridor. Therefore, President Nazarbayev of Kazakhstan urged his government to give priority to the implementation of cooperation projects signed by Kazakhstan and China in the State of the Union address for 2017.
At the summit of the Belt and Road held in Beijing in May 2017, President Nazarbayev of Kazakhstan delivered a speech. He thought that the implementation of the Belt and Road would surely bring well-known good opportunities to countries along the Silk Road, including Central Asia, with a new developmental model. He praised the achievements of connecting the “Road to Brightness” and the “Belt and Road” and made suggestions for in-depth cooperation in the field of scientific and technological innovation in the next step. These were suggestions for the development of science and technology, educational innovations and national competitiveness proposed by our president in the State of the Union address for this year. It revealed that the President of
Kazakhstan is willing to cooperate in depth with China on technological innovations.
Nuryshev, Kazakhstan’s ambassador to China, pointed out that “Kazakhstan and China maintain close cooperation on the issue of the ‘Silk Road Economic Belt’, an important part of the Belt and Road Initiative. At present, we are working together with China on 51 projects for a total value of 26 billion US dollars in cooperation on production capacity. I believe that the successful implementation of these plans will promote not only the development of Kazakhstan, but also that of the entire region” .
Kazakhstan and China have achieved remarkable results in their cooperation on production capacity, and have made great progress in advantageous equipment such as railway and nuclear power and in their capacity for the production of steel, nonferrous metals and building materials. A total of 34 projects, such as Aktogay copper mines, with a capacity of 250,000 tons/year, the Pavlodar electrolytic aluminum plant of 250,000 tons/year, the Caspian asphalt plant with 1 million tons/year, the Menalar cement plant with 3,000 tons/day, have been completed and put into production; 43 projects are ongoing, inclusive of the first fully automated unmanned urban light railway adopting the Chinese standards in Astana, a tempered glass factory and a large- diameter spiral welded steel pipe factory with the capacity of 100,000 tons in Almaty, companies for the processing of agricultural products in the North Kazakhstan region, an oil refinery and a deep processing project in Atyrau and the Jianghuai automobile assembly plant in Kostanay.
Thus, since the strategic partnership between Kazakhstan and China entered a new stage of development, the cooperation between the two countries in production capacity has shown a trend of profound development. This means that China’s new concept of cooperation and win-win results under the new international situation has been recognized and positively responded to by Kazakhstan, and the connection of the new economic policy of the “Road to Brightness” and the Belt and Road Initiative has expanded and upgraded the cooperation of the two countries on production capacity. Therefore, President Nazarbayev of Kazakhstan once said that: “The People’s Republic of China has become one of the major economic partners of Kazakhstan in terms of the amount of foreign capital and loans and the number of joint ventures” . Zhang Hanhui, the Chinese ambassador to Kazakhstan, pointed out that: “Under the framework of the Belt and Road, China and Kazakhstan have carried out more than 50 projects of cooperation on capacity with a total amount of 27 billion US dollars. Many projects have been completed and put into use” .
The above facts indicate that Kazakhstan has achieved fruitful results in the cooperation on production capacity by connecting the “Belt and Road” and the “Road to Brightness”. This has a certain demonstration effect in Central Asia.
Prospects for the cooperation between Kazakhstan and China on production capacity
The cooperation between Kazakhstan and China on production capacity has very broad developmental prospects because there is great complementarity between Kazakhstan’s industrial sectors and resource endowments and those of China, especially the great potential for cooperation on production capacity in infrastructure, processing and manufacturing. Kazakhstan is a large Central Asian country with the petroleum industry as the pillar and exports of energy, agriculture and animal husbandry products. It also actively promotes industrialization, informationization and economic diversification. Therefore, what Kazakhstan urgently needs is capital and technology. China has powerful capital and technology and its construction of infrastructure is basically saturated. Major products such as steel, cement, electricity and electrolytic aluminum are subject to overcapacity. Accordingly, China urgently needs a capacity transfer . This economic complementarity has laid a solid foundation for cooperation between Kazakhstan and China on production capacity.
From the perspective of policies, General Secretary Xi Jinping pointed out in the report of the 19th CPC National Congress that: “China adheres to the fundamental national policy of opening-up and pursues development with its doors open wide. China will actively promote international cooperation through the Belt and Road Initiative. In doing so, we hope to achieve policy, infrastructure, trade, financial, and people-to-people connectivity and thus build a new platform for international cooperation to create new drivers of shared development” . Therefore, it can be said that China will continue to promote the construction of the Belt and Road .
Kazakhstan believes that “the Belt and Road Initiative proposed by China can provide new developmental opportunities for Kazakhstan and even for Central Asian countries”. The Republic of Kazakhstan and China will continue to cooperate actively on the basis of common national interests. The cooperation between the two countries on production capacity will certainly not only unleash the Kazakhstan economy from the dependence on energy exports, but it will also promote the process of industrialization in Kazakhstan, improve the economic competitiveness of Kazakhstan, and be conducive to increasing employment and improving the livelihood of its people. According to the changing trend of international relations in recent years, the cooperation between Kazakhstan and China will be further developed.
In the China-Kazakhstan Production Capacity Cooperation Dialogue held in December 2014, the two sides established the principles of cooperation, namely, “Government Guidance, Enterprise Matching, Pragmatic Cooperation, Mutual Benefit and Win-Win Results”. Kazakhstan and China are working together under these principles of mutual benefit and win-win results. The concept of “win-win cooperation” has become the new principle of international relations pursued by China today and a new principle for China in developing foreign cooperative relations. The diplomatic concept of win-win cooperation is of great significance to the development of all countries in the world, to the peaceful development of mankind, and to deepening international exchanges and cooperation, thus earning wide recognition and praise from the international community. This concept and diplomatic principle is consistent with the trend of the times. Practice has proved that any international initiative and project that develops and benefits all will be accepted and recognized by the international community if it has sufficient power and sincerity to lead other countries to achieve their socio-economic development.
So far, under the framework of the Belt and Road, Kazakhstan and China have achieved fruitful cooperation in cooperation on production capacity based on the principle of “win-win cooperation”, which promotes the social and economic development of Kazakhstan. Kazakhstan and China will make more progress in that cooperation.
The leaders of Kazakhstan and China have recognized the results of the cooperation between the two sides. Kazakh President Nursultan Nazarbayev paid a state visit to China from June 7 to 8, 2018, held talks with Chinese President Xi Jinping and signed the Joint Statement between the People’s Republic of China and the Republic of Kazakhstan. In the second section, “The two sides speak highly of fruitful results achieved in the joint construction of the Belt and Road through China-Kazakhstan cooperation. Cooperation is of great significance for the development of bilateral relations. The two sides point out that it is significant to connect China’s initiative for the ‘Silk Road Economic Belt’ and Kazakhstan’s new economic policy of the ‘Road to Brightness’ and will promote cooperation and development in various fields with an open and transparent spirit” .
In the talks with Nazarbayev, Chinese Premier Li Keqiang pointed out that in recent years, China-Kazakhstan cooperation has made a series of groundbreaking achievements, particularly the positive results of the in-depth promotion of cooperation on production capacity. He expressed the hope that both sides could further strengthen their cooperation on production capacity in the construction of infrastructures, energy and resources, and expand cooperation on the trade and financing of agricultural products. Both sides should jointly facilitate trade with and communication among people, promote industrial upgrading in both countries, strengthen coordination and cooperation within the framework of the Shanghai Cooperation Organization, and benefit more countries and people in the region with more pragmatic cooperation results .
President Nazarbayev said that Kazakhstan attached great importance to the relations with China. The cooperation between the two countries in various sectors has yielded fruitful results, and the economic and trade cooperation have continuously advanced to new levels, thus becoming a model for mutual benefit and win-win results. Kazakhstan, an important partner for the construction of the Belt and Road, was willing to strengthen strategic integration with China and encourage pragmatic cooperation in sectors such as industry, investment, innovation, agriculture, energy and finance .
Kazakhstan and China are implementing a joint venture project to establish 51 enterprises worth 28 billion roads under the One Belt One Road project. The Kazakh side attaches great importance to this project.
In the future, Kazakhstan has adopted a tax-free document for enterprises invested by Chinese investors. The Majilis of the Republic of Kazakhstan approved the document submitted by the Government at its plenary session on December 5, 2018. This document is called “Agreement on tax exemption of certain incomes of the China- Kazakhstan Fund for Production Capacity Cooperation, which makes direct investments in Kazakhstan.” “Manufacturing enterprises with Chinese capital will be exempt from taxes,” the statement said. These include petrochemistry, fertilizer production, metallurgy and other activities. This is a great concession made by Kazakhstan to
Chinese investors, which has never been in any other country.
This policy of Kazakhstan should significantly develop cooperation between the two countries in the field of production capacity. But the sudden outbreak of the pandemic in Wuhan has destabilized China’s economy, Kazakhstan’s economy and even the world economy. Thus, the implementation of China’s “One Belt One Road” project, the development of cooperation between the two countries in the field of production capacity has faced serious challenges. Therefore, in the post-post-post-international situation, we believe that it is necessary to take into account the possible difficulties in the development of cooperation between Kazakhstan and China in the field of production capacity.
- Address of the President of the Republic of Kazakhstan N.Nazarbayev to the nation. Akorda, January 17, 2014. URL: https://www.akorda.kz/ en/addresses/addresses_of_president/address-of-the-president-of-the- republic-of-kazakhstan-nnazarbayev-to-the-nation-january-17-2014-3 (Access date: 01.09.2020)
- Wang Zhi-min. Spillover Effects of Sino-Kazakhstan Cooperation of Production Capacity under the Background of “Belt and Road Initiatives” - Northeast Asia Forum №1,2017. URL: http://jtp.cnki.net/Bilingual/ detail/html/dbyl201701005?view=2 (Access date: 01.09.2020)
- Joint Declaration on New Stage of Comprehensive Strategic Partnership Between the People’s Republic of China and the Republic of Kazakhstan – Ministry of Foreign Affairs of the People’s Respublic of China – Beijing, 30.08.2015. URL: https://www.fmprc.gov.cn/mfa_eng/ wjdt_665385/2649_665393/t1293114.shtml (Access date: 01.09.2020)
- The President of Kazakhstan Nursultan Nazarbayev’s Address to the Nation of Kazakhstan. Akorda, January 31, 2017. URL:http://www. akorda.kz/kz/addresses/addresses_of_president/memleket-basshysy- nnazarbaevtyn-kazakstan-halkyna-zholdauy-2017-zhylgy-31-kantar (Access date: 01.09.2020)
- Some measures to revitalize Central Asia //Ortalyk Aziany zhandandyru bastamalary //Aikyn gazeti. 16.05.2015. (Access date: 01.09.2020)
- Nuryshev Sh. “Nurly zhol” and “Belt and Road” actively docking will create a model for cooperation [Guang Ming Da Dao yu Yi Dai Yi Lu jiji duijie jiang dazao hezuo dianfan]. National Business Daily, 12.05.2017. URL: http://finance.sina.com.cn/roll/2017-05-12/docifyfecvz1021606. shtml. (Access date: 01.09.2020)
- Some measures to revitalize Central Asia // Ortalyk Aziany zhandandyru bastamalary //Aikyn gazeti. 16.05.2015.
- Li Keqiang meets with President Nazarbayev of Kazakhstan. - Embassy of the People’s Republic of China in the Republic of Kazakhstan. URL:http://kz.chineseembassy.org/chn/zhgx/t1568148.htm (Access date: 01.09.2020) URL:https://baike.baidu.com/item/%E4%BA%A7% E8%83%BD%E5%90%88%E4%BD% 9C/17012573
- WANG Zhi-min. Spillover Effects of Sino-Kazakhstan Cooperation of Production Capacity under the Background of “Belt and Road Initiatives”, Northeast Asia Forum, №1,2017.
- Xi Jinping. Delivered at the 19th National Congress of the Communist Party of China (18.10 .2017). People’s publishing house. 2017 .
- China is a source of new possibilities. //Qitay-Zhana mumkindikter kozi// Қытай–URKISTAN gazeti, 03.09.2015.; An initiative that will allow to introduce Central Asia in a new way// Ortalyk Aziany Zhana nurpatty tanistiruga mumkindik beretin bactama//Aikyn gazeti.16.05.2017.