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Politics

A border boomtown in the making

Work proceeds slowly at a construction site on the Kazakh side of Khorgos on Oct. 22. (Photo by Keiichiro Asahara)

KHORGOS, China/Kazakhstan -- China may be full of half-deserted shopping malls with few shops and even fewer shoppers, but developer Bao Jun thinks this previously remote border crossing is just the place for a new center.

     "We moved to Khorgos from the east coast because we believed this could be the new Shenzhen," he said, referring to the bustling Chinese city that abuts Hong Kong.

     His optimism is shared. While there was little but rocks and sand here three years ago, the Chinese side of this duty- and visa-free zone is now on the verge of a property bubble.

     Work is underway on high-rise condominiums, hotels and other facilities. "It is a good time to buy," said the head of a local property company, promoting a 500,000 yuan ($78,700) condo.

     "When road links are completed between China and Central Asia, this could encourage a large number of people in the region to come to this city, so I am sure these units will sell well. This city will one day become one of the world's biggest commercial districts encompassing international companies," he added.

The northwest express

Some multinationals are already setting up here. The city is a key station along the New Silk Road that China is underwriting to re-establish overland trade routes to Europe. Shippers can already cut at least 10 days off the journey from Shanghai to Germany using new rail routes instead of ocean freight, according to logistics operator DP World, which is developing a dry port in Khorgos. Rail shipping rates can be five times higher than seaborne charges, but remain marginal for high-value products like smartphones.

     A newly paved expressway runs to Khorgos through the deserts and between mountains in the Tian Shan range in China's northwestern region of Xinjiang. Crossing the border, road speeds fall from around 120kph to 50kph as the Kazakh side remains bumpy, though new, heavy-duty trucks are a common sight now.

     The Kazakh side of the 19 million-sq.-meter border zone in Khorgos is much quieter than the Chinese side. Aging, dust-covered construction materials and pipes are scattered around, the construction site covered in white sand. Work is supposed to begin here by the end of this year, with funding and machinery expected to arrive from China, according to local officials.

Soft power, hard cash

Contractors are currently working on the 300km stretch from Khorgos to Almaty, Kazakhstan's commercial capital. In March, China and Kazakhstan signed $23 billion worth of agreements to strengthen cooperation in developing infrastructure, including urban facilities, bridges, rail lines and roads.

     Chinese machinery and workers have become a common sight in Kazakhstan and other parts of Central Asia. They are key props and actors in Beijing's massive effort to reassert influence out from the country's western gates.

     Chinese contractors have been at work on key routes such as the Pamir highway running through Tajikistan, as well as a road from the Chinese border to the Kyrgyz capital. Chinese-backed railway corridors are also under development across the region, including plans for a 1.5 trillion yuan Moscow-Beijing high-speed train.

     Beijing has set aside as much as $40 billion for a New Silk Road fund to bridge infrastructure gaps. Other Chinese-backed initiatives such as the Asian Infrastructure Investment Bank and the New Development Bank BRICS, organized with Russia, India, Brazil and South Africa, will provide an additional boost.

     Chinese President Xi Jinping held friendly talks with Nursultan Nazarbayev, his Kazakh counterpart, on an official visit to Kazakhstan in May to promote his "One Belt, One Road" initiative, which encompasses the New Silk Road plan. The two got along like old friends, and Nazarbayev joined Xi at the military parade held in Beijing in September to commemorate the 70th anniversary of China's victory over Japan in World War II, laughing and chatting as troops, tanks and missiles passed by.

     With Kazakhstan's economy reeling from depressed prices for its oil exports and the fall of the Russian ruble, Chinese investment in logistics networks is welcomed. Kazakhstan needs new sources of growth and will be happy to see caravans en route to Europe make their way through the country once again.

Jacopo Dettoni contributed to this report.

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