Silk Road Monthly: February 2025
International Trade and Investment Paramount in Regional Affairs
Kyrgyzstan Introduces Sovereign Bond
China is Kyrgyzstan’s largest creditor, amounting to over 35% of the small Central Asian country’s foreign debt, primarily through investments from China’s Ex-Im Bank. In efforts to diversify its financial partnerships and lessen its debt to China, Kyrgyzstan is issuing ten-year sovereign bonds in Hong Kong to raise $1.7 billion. The specific bond yield remains undisclosed, but analysts expect the rate to be set relatively high. The influx of cash could create risks and spur inflation, leaving potential investors wary.
Chinese EVs Surge in Central Asia
Followed by the rapid development of the Chinese EV market, Central Asia is now seeing a surge in Chinese EV imports. Central Asian governments are providing tax breaks for consumers and setting up localized production, as was seen with BYD’s new factory in Uzbekistan this past June. For the very first time, Uzbekistan saw the import of hybrids and EVs overtake traditional gasoline vehicles in 2024, marking a relatively surprising development in the Central Asian automobile space.
Since independence, Central Asia has prioritized importing second-hand vehicles from the U.S. or Europe, which serve as a quick and cheap way to transport its citizens. However, these second-hand vehicles often did not meet the fuel economy, exhaust emissions and safety standards of the countries they were exported from, as they ended up being significant contributors to Central Asia’s air quality struggles.
Despite the recent influx of EVs, these vehicles remain largely unaffordable to most Central Asians. The cost of repairs, maintenance and electricity for EVs is much cheaper than that of second-hand cars, but the upfront cost of a new Chinese EV in Central Asia poses a barrier for most drivers. However, government-imposed tax breaks and subsidies can help that. With more EVs coming into the region, and projects such as a new EV production plant in Bishkek, the construction of EV charging stations throughout Uzbekistan, and the BYD production facility in Jizzaq, Central Asia is seeing more than just a rise in Chinese EV imports, but an invested commitment to cleaner and more technologically advanced vehicles for the future.
Direct Rail Shipment Launched From China to Afghanistan via Central Asia
On Feb. 10, a Chinese freight train departed Chongqing’s Tuanjiecun station for Hairatan, Afghanistan. This marked the first direct rail route between Chongqing and Afghanistan. The train passed through the Khorgos checkpoint on the Kazakh-Xinjiang border and then headed through Kazakhstan and Uzbekistan before reaching Afghanistan. The route takes approximately 12-15 days, and saves around 20% of the time and cost compared to road transportation. The shipment was primarily transporting telecommunications equipment from Chinese tech company, ZTE, which was sent to support the development of Afghanistan’s telecommunication infrastructure.
Chinese Investing in Kazakh Metallurgy Production
On Feb. 17, China's East Hope Group (EHG), announced plans to invest over $12 billion in Kazakhstan's non-ferrous metals sector. The project involves constructing a large industrial park focusing on deep metal processing and manufacturing finished goods for export to the European Union, Central Asia, and China. The project is expected to create up to 10,000 jobs. EHG has established a subsidiary in Kazakhstan and completed preliminary studies of potential sites across several regions. The company plans to commence detailed site assessments soon. Kazakh Invest, represented by Chairman Yerzhan Yelekeyev, has pledged comprehensive government support for the project, emphasizing its significance for Kazakhstan's industrial sector.
Kazakhstan Seeks Funding for Almaty Metro Expansion
On Feb. 18, Almaty Mayor Yerbolat Dossayev held talks with Wang Chunying, President of China’s Exim Bank, to secure funding for the expansion of Almaty's metro system. The project, estimated at approximately $1 billion, aims to enhance the city's public transportation infrastructure. The proposed metro expansion includes extending the existing line to the Barlyk market and constructing a new line connecting the subway to the airport. This development is expected to alleviate traffic congestion and improve urban mobility in Almaty.
Chinese Company Launches Digital Substation in Uzbekistan
On Feb. 21, Shanghai Electric commissioned Uzbekistan's first digital substation, Zafarabad 220kV Digital Substation in Jizzakh. Occupying approximately 75,000 square meters, the substation aims to enhance the power supply in the Jizzakh Region and surrounding areas. With a capacity of 400 megawatts, it is expected to double the electricity supply to households and businesses, addressing heating issues previously caused by shortages of natural gas and electricity.
The substation is equipped with two 250 MW autotransformers, reducing network voltage from 220 kV to 110 kV for efficient load distribution. Its fully automated control system and advanced monitoring capabilities enhance operational efficiency and safety by quickly identifying faults and adjusting network loads to prevent power disruptions. Initiated in 2021, the project was financed by the Asian Development Bank, with Shanghai Electric winning the turnkey construction contract through a tender process.
Longest Bridge in Central Asia Coming to Tajikistan
On Feb. 22, Tajikistan's Ministry of Transport signed an agreement with China's Zhejiang Communications Construction Group Co. Ltd to construct Central Asia's longest road bridge. The bridge, spanning 920 meters over the Surkhob River in the Nurobod District, will extend to a total length of 1,500 meters when including access roads. The project, valued at approximately 427.5 million yuan (around $60 million), is scheduled for completion within four years.
This initiative is part of the third phase of the Obigarm–Nurobod highway construction, aiming to enhance Tajikistan's transportation infrastructure and bolster its role as a regional transit hub. The feasibility study involved collaboration between local engineers and South Korean experts.
Zhejiang Communications Construction Group Co. Ltd, a state-owned Chinese corporation, specializes in designing and building transportation infrastructure, including ports, highways, and bridges. The company operates in 139 countries and has been involved in major projects such as the 36-kilometer Hangzhou Bay Bridge, the world's longest transoceanic bridge.
Kazakhstan Selects Site for Nuclear Power Station
On Feb. 25, the Kazakh government officially designated the Zhambyl district in the Almaty region as the site for the country's first nuclear power plant (NPP). This decision follows a nationwide referendum held on October 6, where 71.12% of voters supported the construction of the NPP, with a voter turnout of 63.66%.
Four companies have been shortlisted as potential technology suppliers for the NPP's construction: China's CNNC, South Korea's ICHNP, Russia's Rosatom, and France's EDF. The project aims to address Kazakhstan's growing energy needs and reduce reliance on coal-fired power plants, which currently account for approximately 70% of the country's electricity production.
China Engaging in Trans-Afghan Projects
On Feb. 24, Kazakhstan Temir Zholy (KTZ) and China Communications Construction Company (CCCC) held discussions in Beijing to explore collaboration on the Trans-Afghan Transport Corridor. This initiative aims to enhance connectivity between Central and South Asia by developing key railway routes, including Termez–Mazar-i-Sharif–Kabul–Peshawar and Herat–Kandahar–Spin Boldak. Kazakhstan has committed to supplying essential materials for these projects, such as crossties and clamps.
Additionally, Afghan Acting Minister of Public Works Mohammad Esa Sani met with Chinese Ambassador to Afghanistan Zhao Xing to discuss the Wakhan Corridor and Trans-Afghan Railway projects. The Wakhan Corridor, situated in northeastern Afghanistan, serves as a direct link between Afghanistan and China's Xinjiang region. It is an extremely mountainous region and very difficult terrain to construct infrastructure projects. Roads are being built, but it remains a slow process.