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Lianyungang Logistics Terminal: New Trade Opportunities for Kazakhstan and China*

22.02.2017 | Comments | Economy | 300 Azhar Serikkaliyeva

Despite the creation of the Eurasian Economic Union (EEU), China remains the major trade partner of Kazakhstan. Within the “One Belt, One Road” (OBOR) Initiative, the two countries are developing infrastructure facilities for bilateral trade. Consequently, the EEU, a regional organization, initially created aiming to protect itself from an excessive economic influence of China, has changed its direction toward the interface with the Chinese initiative. OBOR’s primary goal is to create a system to facilitate Chinese outbound investment, which is necessary in order to maintain country’s economic growth as it transitions into a more mature and developed economy.

As explained by Dr. Pang Zhongyin, currently the Dean of the School of International Studies at the Sun Yat-Sen University, an ultimate impact of China is to be a “Renewed World Order”, where the real-sector trade would replace financial control over the world economy and where strength is returned to multilateral institutions such as the UN and sovereign states, just as it was supposed to be after the World War II. Dr. Pang added more contextual clarity by describing OBOR’s economic genesis as being the natural progression from interdependency to globalization and now to connectivity, which he forecasts will ultimately lead to next generational global economic governance through the creation of a worldwide free trade road map.[i]

Most of the routes from China to Europe pass through Kazakhstan’s broad territory, located strategically on the crossroads between Europe and Asia. As China is expanding its economic outreach to Europe, Kazakhstan wants to benefit beyond transit fees as it is trying to break away from oil dependence. China’s rail system has long linked to the Trans-Siberian rail system through northeastern China and Mongolia. In 1990, China added a link between its rail system and the Trans-Siberian system via Kazakhstan. China calls its uninterrupted rail link between the port city of Lianyungang and Kazakhstan the New Eurasian Land Bridge or the Second Eurasian Continental Bridge. In addition to Kazakhstan, the railways connect with other countries in Central Asia and the Middle East, including Iran. Since the completion of the rail link across the Bosporus under the Marmaray project in October 2013, the New Eurasian Land Bridge has been connecting to Europe via Central and South Asia. During the 12th meeting of Heads of Governments (Prime Ministers) of the Shanghai Cooperation Organization (SCO) member states on November 29, 2013 in Tashkent, the Prime Minister of the State Council of China, Li Keqiang, stated that Lianyungang city, located in the eastern beginning of the new Eurasian Continental Bridge, would give the member states of the SCO an access to logistics services and warehousing.[ii]

Figure 1. The first and the second Eurasian Land Bridges

Source: http://www.aapacgroup.com/

Figure 2. Eurasian Land Bridges.

Source: http://www.gokunming.com/

The Lianyungang terminal, which is located at the Jiangsu Province in East China, is Kazakhstan’s first exit to the Pacific Ocean. The Lianyungang joint terminal is aimed to increase the export and import, as well as transit potential of Kazakhstan by railways, providing the shortest way to the Asia-Pacific region and South East Asia. The project contributes to the development of trade relations in the region and creates the possibility of transit from these countries to Central Asia, the Gulf States, Russia, the Caucasus region and Europe through the territory of Kazakhstan. About 60% of Kazakhstan’s trade with East and South-East Asia countries along the OBOR is carried out through the port of Lianyungang, through the new Eurasian continental bridge. Lianyungang is a key hub for Kazakhstan’s trade with the East. Chinese “Lianyungang Port” Group and “Kazakhstan Temir Zholy EXPRESS” LLC jointly participated in the construction of the logistics cooperation project, where Kazakhstan shares 49% and China – 51%. In total, US $ 99.4 billion were invested in the project.[iii] The construction of the first joint Kazakh-Chinese terminal was laid in 21 hectares territory on May 2014. Container terminal of 200 thousand square meters, 1763 Container Parks, warehouse-unpacking containers in the area of ​​23 thousand square meters and 3.8 km access road terminal were constructed. The average daily throughput is 10.2 trains. The highest annual truck capacity is 410 thousands of standard containers. Moreover, it is expected that by 2020, the terminal will process over 550 thousands of containers per year. The Lianyungang logistics cooperation project was created to implement a comprehensive international transportation, unpacking of the container orders, warehousing and other international cargo transportation.

The main indicators of  Kazakhstan’s foreign trade with China                                                                        USD

January-November, 2016

Export

Import

Total

The average share of  total trade turnover,%

Total

The average share of  total export,%

Total

The average share of  total import,%

7 083 389,3

12,8

3820 515,6

11,7

3 262 873,6

14,5

Source: Committee on statistics (Ministry of national economy of the Republic of Kazakhstan)

From January to November 2016, import and export volume of bilateral goods between Kazakhstan and China in the amount of US $ 7.08 billion declined by 24.7%. Thus, Kazakhstan’s exports to China amounted to US $ 3.82 billion, declining by 23.9%, averaging 12.1% of its total export; Kazakhstan's imports from China amounted to US $ 3.16 billion, down by 31.2%, averaging 23.1% of its total import. By November 2016, China has become Kazakhstan’s second largest export market and the largest source of imports.[iv] Kazakhstan mainly imports clothes, electrical and mechanical equipment, construction materials, furniture, steel, etc. from China. Kazakhstan primarily exports oil and gas, non-ferrous metals, alluvial ore, grains, live leather, cotton, etc. to China. From January to November 2016, Kazakhstan’s cargo import and export reached US $ 4.8 billion, and increased by 21.7%. Among them, the export in the amount of US $ 3.32 billion increased by 33.6%; imports totaling to US $ 1.48 billion increased by 1.5%. Trade surplus amounted to US $ 1.84 billion, increasing by 78.7%.

Cargo trains have already begun running from China to Iran through the territory of Kazakhstan and Astana is hoping to modernize its own available locomotives and repair 460 miles of rails. The project’s total cost is to amount to $2.7 billion; by making the upgrade, Kazakhstan aims to capture 10% of the $600 billion trade volume between China and Europe. The government of Kazakhstan has launched several programs including the “2050 strategy” and the “100 concrete steps” that incorporate Chinese investments and goals for realignment with the OBOR Initiative. In effect, trade turnover between the two nations has surpassed $20 billion and keeps growing, turning China into Kazakhstan’s major strategic partner. Beijing has also already invested nearly $30 billion in the country’s mining, oil, transport, and agricultural sectors. These investments add to Astana’s own $9 billion stimulus plan for the nation’s modernization. Furthermore, Astana is also constructing “special economic zones” that include the Khorgos “dry port” on the Kazakh-Chinese border. On November 25, 2011, the Kazakh government decided to establish the Khorgos-East Gate logistics center near the Khorgos “special economic zone”. [v]

Kazakh President Nursultan Nazarbayev and Chinese President Xi Jinping attended the opening ceremony of the first stage of the Kazakhstan logistics terminal in the Lianyungang port on May 19, 2014. The first train carrying 720 tons of wheat from Kazakhstan arrived in the Lianyungang port on February 5, 2017. The first batch of wheat from Kazakhstan arrived in the Lianyungang port by a cargo train and was then shipped to Southeastern Asia, opening a new trade route. Transit cost of Kazakhstan’s trade with East Asia significantly reduced, saving about US $72 million per year. Thus, the distance to Japan shortened by 2500 km and by 3900 km to Singapore, comparing with the first Eurasian Continental Bridge route. Kazakhstan mainly imports vehicles and its parts, mechanical equipment, electrical appliances, plastic and rubber from East and Southeast Asia.[vi]

Chinese side made proposals on joint construction of the “Integrated Bonded Area New Area in Suwei district of Lianyungang”. The Bonded Suwei New Area is supposed to join Kazakhstani and Chinese producers. In particular, the processing and modification of copper products, food, household goods, electronics, second-hand goods and vehicles are exported from Kazakhstan to North-East Asia. The Bonded Suwei New Area will supply exporters with technical support. Therefore, construction of the “Business complex”, the “Asia-Europe trade and exhibition center”, the “trade and service street” and other projects are planned. Among them, the total area of the SCO Countries Logistics Zone terminal will cover 450 hectares, where joint “State trading complex” will be constructed. According to the “Integrated Bonded Area New Area in Suwei district of Lianyungang” plan, Special-Customs-Control-Area will be established by 2030. The Lianyungang Customs is located in harbor area of Lianyungang. Nowadays, it has set up 16 section offices, including supervision office, technological office, and customs clearance office and so on, and one functional office, one anti-smuggling branch comprised of eight offices. At present, its jurisdiction covers the whole city of Lianyungang.[vii]

China’s elite have determined Lianyungang as an ultimate bridge linking the mainland with the maritime portions of the OBOR, thus, positioning it as one of Eurasia’s most promising cities and making it a prime location for observers. Since it is also anticipated to play a bimodal (land and sea) role in linking the other regions of the extended supercontinent alongside it’s near limitless physical infrastructure development potential, Lianyungang is easily predicted to become the center of geo-economic gravity that holds the OBOR together, and likewise, one of the world’s most critical economic fulcrums in the coming decades.


Tags: China, Kazakhstan, Lianyungang, Economy

Author

  • Junior Research Fellow

    Azhar Serikkaliyeva

    Azhar Serikkaliyeva graduated from China Studies Department of the Faculty of Oriental Studies in Al-Farabi Kazakh National University in 2008.