China in Central Asia and the South Caucasus: economy and strategy

China's engagement with Central Asia and the South Caucasus is evolving, redefining its traditional role and signaling a more diversified approach to regional partnerships. As Beijing expands its influence in these geopolitically significant areas, the question arises: Is China merely an economic partner, or is it reshaping the power dynamics in regions traditionally influenced by Russia?

Historically, China's focus in Central Asia has been predominantly economic, with investments in energy and infrastructure taking center stage. For decades, Beijing's approach revolved around extracting raw materials, particularly oil and gas, and creating the infrastructure—such as roads and pipelines—necessary to transport these resources to Chinese markets. However, this narrative began shifting in 2015. China started diversifying its investments to include the industrial sector, aiming to contribute to the region's industrialization and add value to its products. By 2018, the shift was even more pronounced, with green energy projects, such as wind and solar power, becoming a focal point. This alignment with regional developmental goals has strengthened China's position as a key economic partner, moving beyond resource extraction to support renewable energy and industrial growth.

In the South Caucasus, Beijing’s footprint has been more subdued historically. But recent years have seen a surge in activity, particularly in Azerbaijan and Georgia. For example, China is now a significant player in Azerbaijan's renewable energy sector, highlighted by a Memorandum of Understanding between Azerbaijan's Ministry of Energy and the China Gezhouba Group Overseas Investment. This partnership underscores China's dual role as both a supplier of materials and a developer of renewable energy projects. Beyond energy, China's influence extends to the electric vehicle market , with increasing exports to the region and agreements like Azerbaijan's collaboration with BYD to produce electric buses. Together, these developments showcase Beijing's growing role in both Central Asia and the South Caucasus, particularly in green energy and technology sectors.

Strategic focus: Kazakhstan, Uzbekistan, and Azerbaijan

Among the countries in these regions, Kazakhstan, Uzbekistan, and Azerbaijan stand out as particularly significant for China's strategic ambitions. Kazakhstan's importance lies in its geography and resources. As a land-based bridge between China and the EU, it facilitates trade routes critical to the Belt and Road Initiative. Additionally, Kazakhstan's rich reserves of energy and rare-earth materials make it a vital partner in China's quest for resource security. Uzbekistan, with its large population and evolving investment climate, offers China a growing consumer market and opportunities for economic cooperation. Azerbaijan, located at the heart of the Middle Corridor, is pivotal for China’s trade connectivity with Europe. Its active pursuit of renewable energy aligns well with China's investment priorities, making it an essential partner.

Collectively, these countries not only provide economic opportunities for Beijing but also contribute to regional cooperation in green energy and transportation infrastructure. By engaging in such initiatives, China reduces the need for direct investments while enhancing its trade routes and logistical capabilities. This collaborative dynamic strengthens China's long-term presence in Eurasia, bolstering its economic ties and connectivity with Europe.

A complementary role with Russia

China’s growing influence in these regions inevitably raises questions about its impact on Russia, which has long considered Central Asia and the South Caucasus its sphere of influence. Contrary to expectations of tension, China’s activities appear to complement Russia’s regional role rather than conflict with it. An implicit division of responsibilities has emerged: China acts as the financier, while Russia maintains its role as the security provider. Beijing’s investments, particularly in infrastructure and energy, serve to limit Western influence—a goal shared by Moscow. By avoiding a direct security presence, such as establishing military bases, China signals respect for Russia’s traditional dominance in the region.

This tacit understanding has allowed China to expand its economic activities without triggering significant friction with Moscow. Moreover, China's investments indirectly support Russia's broader strategy of reducing Western influence while benefiting from Beijing’s economic contributions. In this context, China's role is less a threat to Russian primacy and more a complementary force that aligns with shared objectives.

Azerbaijan: A strategic partner for China

Azerbaijan has emerged as one of China's most significant partners in the South Caucasus . The establishment of a strategic partnership in 2024 has paved the way for deeper cooperation in trade, energy, and infrastructure. Bilateral trade reached $3.1 billion in 2023, with both nations committed to fostering further growth. Renewable energy has become a key area of collaboration, exemplified by a 2023 agreement to develop projects with a capacity of 2 GW.

Azerbaijan’s role in the Middle Corridor enhances its strategic importance for China's Belt and Road Initiative. Joint efforts to improve this trade route aim to create more efficient connections between China and Europe, benefiting both economies. Furthermore, green energy projects remain a high priority, with China's Vice Premier Ding Xuexiang highlighting the global green agenda during his visit to Azerbaijan for the COP29 summit.

These developments reflect a deepening partnership that aligns with China’s strategic goals while supporting Azerbaijan's ambitions for sustainable and dynamic growth.

Taiwan: A persistent challenge for China

While China’s engagement in Central Asia and the South Caucasus is largely seen as a success, its approach to Taiwan remains a source of tension and strategic uncertainty. Beijing continues to prioritize peaceful integration, leveraging economic ties and soft power to foster interdependence. However, the potential return of a Trump administration could escalate U.S.-China tensions , particularly over Taiwan. Beijing is likely to respond by enhancing its military capabilities as a deterrent, while maintaining a focus on achieving greater self-sufficiency in strategic sectors.

Over the next five years, China’s efforts to integrate Taiwan will likely remain at the forefront of its foreign policy. The dual approach of economic outreach and military preparedness reflects Beijing’s commitment to preventing Taiwanese independence while avoiding open conflict. Yet, the Taiwan issue continues to be a significant point of contention in U.S.-China relations, with the potential for escalation remaining ever-present.

A balancing act with global implications

China's growing role in Central Asia and the South Caucasus demonstrates its ability to adapt and align its investments with regional priorities. By diversifying its engagement to include green energy and industrialization, Beijing has positioned itself as a vital economic partner in these regions. At the same time, its cautious approach to regional security ensures a complementary relationship with Russia, reducing the risk of conflict over influence.

While China’s activities in Central Asia and the South Caucasus strengthen its global standing, the unresolved Taiwan issue highlights the complexity of Beijing’s foreign policy challenges. Balancing economic engagement with strategic imperatives will remain central to China’s approach in the coming years, shaping its relationships with neighboring regions and major global powers alike.

(If you possess specialized knowledge and wish to contribute, please reach out to us at opinions@news.az).

News.Az