ANALYSIS OF “THE BELT AND ROAD” DEVELOPMENT STRATEGY EFFECT IN CHINA AND KAZAKHSTAN TRADE

The Belt and Road Initiative (BRI), also known as the One Belt One Road (OBOR) or the Silk Road Economic Belt and the 21st-century Maritime Silk Road (is a development strategy adopted by the Chinese government involving infrastructure development and investments in 152 countries and international organizations in Europe, Asia, Middle East, Latin America and Africa. The President of the People's Republic of China, Xi Jinping, originally announced the strategy during official visits to Indonesia and Kazakhstan in 2013. "Belt" refers to the overland routes for road and rail transportation, called "the Silk Road Economic Belt"; whereas "road" refers to the sea routes, or the 21st Century Maritime Silk Road. Until 2016 the initiative was officially known in English as the One Belt and One Road initiative but the official name was changed as the Chinese government considered the emphasis on the word "one" as being prone to misinterpretation. Indeed, B&R is a connectivity of system and mechanism (Kuik 2016). To construct a unified large market and make full use of both international and domestic markets, through cultural exchange and integration, to enhance mutual understanding and trust of member nations, ending up in an innovative pattern with capital inflows, talent pool, and technology database.

It is evident from these developments that OBOR has put special emphasis on utilizing Kazakhstan as an important hub. For China, Kazakhstan is of immediate importance. The China-Central Asia natural gas dual pipeline of 1,840 kilometers (“Lines A and B”) was built in 2008-2010 to bring in 30 billion cubic meters of gas from Turkmenistan, Uzbekistan, and Kazakhstan. A third pipeline of larger diameter, Line C, parallel to the first two, was built in 2012-2014 and delivers an additional 25 billion cubic meters.

Chinese banks have been encouraged by Beijing to lend money to the countries that are part of the land-bridge, and Kazakhstan has become a major beneficiary of Chinese loans. Especially, Kazakhstan has been a major recipient of Chinese investment in Central Asian oil over the past two decades. In Congressional testimony in 2014, a U.S. policy adviser provided some of the specifics. China’s largest national oil company, China National Petroleum Corporation (CNPC), is the majority owner of two of Kazakhstan’s major oil companies (it owns 85.42 percent of AktobeMunaiGas and 67 percent of Petro Kazakhstan) and is involved in several oil exploration and production projects throughout the country

Kazakhstan needs foreign direct investment focused on exports and an increasing productivity to diversify and transform the economy. The country needs to embrace Chinese investments but also challenge the underlying assumption that large scale investments in infrastructure such as those at the heart of the Belt and Road initiative automatically promote economic development. The future development of Astana as a financial trade and innovation hub, built on solid institutional reform, will strengthen Kazakhstan in negotiating with China as an equal partner.

A stated goal of China’s Belt and Road initiative is to strengthen economic integration and policy coordination in the broad Eurasia region. The initiative includes a series of transportation infrastructure projects, which are proposed along two pillars.

China has further identified SREB exchange as the rationale to further develop the Sino–Kazakh free trade area in Altynkol–Huoerguosi, which the Xi administration has called its SREB land gateway to Kazakhstan. China has also called for an expansion of the Altynkol–Huoerguosi border crossing area under the SREB to facilitate cross-border trade, to update customs technology, and to expand infrastructure interconnectedness with Kazakhstan. Considering the analysis of figures of the Kazakhstan statistics, the first thing which is obvious that Kazakhstan is not priority partner for China. The share of the Peoples Republic of China in direct foreign investments into Kazakhstan's economy for all years of independence did not exceed 6 % of their total volume. The exception makes 2005, however, the lion's share of direct Chinese investments has been spent on construction of Atasu – Alashankou oil pipeline, where has been invested 800 mln. US dollars.

Therefore, you can boldly guess Think there may be some correlation between the two as far as China's commodity structure for Kazakhstan imports and exports is concerned, there have been great changes in the structure of trade commodities between the two countries as a result of one belt one road project. But from the field of China's direct investment in Kazakhstan and the commodity structure of China's export to Kazakhstan, the correlation between the two is not strong, and the industrial intra-industry trade is basically in the initial stage, and the creative effect on trade is not obvious.

The Silk Road Economic Belt and the 21st Century Maritime Silk Road. Specifically, the “Belt” links China to Central and South Asia and onward to Europe, while the “Road” links China to the nations of Southeast Asia, the Gulf countries, East and North Africa, and on to Europe. Therefore, the study aims to assess the trade impact of one belt one road project on china and khazakstan, the RCA analysis and model estimates are combined. These results are also used to investigate whether there is complementarity between infrastructure improvements and policy reforms that promote trade facilitation, market accessand further regional integration between BRI countries. Specifically, the paper provides a series of simulations on how the potential impact of OBOR could be boosted once two trade performance of countries.

The main issues addressed here are the basic impacts that happen as a result of the one belt one road project on the trade situations between China and Kazakhstan in recent years. Basically, as a result of the formulation and implementation of one belt one road; these two countries have generated a tremendous benefit related to trade. Therefore, the study primarily pays attention to the basic trade relations that are generated between China and Kazakhstan as a result of the implementation of one belt one road project.

The main project is One Belt One Road, within which a number of major infrastructure projects have already been put into operation in 5 years: the port of Lianyungang; the dry port Khorgos-Eastern Gate on the Kazakh-Chinese state border; the port of Aktau on the Caspian Sea; the new Kazakhstan-Turkmenistan-Iran railway corridor; and the international transit corridor Western Europe-Western China passing through Kazakhstan. More than 80 trade and economic cooperation zones have been established with the participation of Chinese companies along the One Belt One Road route. The 5 most attractive Kazakh sectors for Chinese investors are transportation and warehousing ($4.9 billion), mining ($2.6 billion), financial and insurance activities ($2.2 billion), construction ($2.1 billion) and manufacturing ($2.1 billion). These industries accounted for 88.9 percent ($14 billion) of the total Chinese investments in January-June 2018. The total number of Kazakh-Chinese investment projects is 51, and the total investment is estimated at more than $27 billion. In 2018-2019, eleven more projects with more than $4.4 billion investments will be launched. This study asks whether China and Kazakhstan are affected with or one belt one road project in third market of manufacturing exports. The major innovation of this study is that, unlike other researches which rely on a single approach to evaluate the impact of one belt one road on China and Kazakhstan trade relation on different regions of the world, we employed two approaches to assess the magnitude and the direction of the impacts. First, the gravity equation which involves econometric estimation of parameters is employed to evaluate the impact of china and Kazakhstan on the manufacturing export on the third market and, secondly, the FG model which is based on Spearman’s rank correlation coefficient (a non-parametric test for hypothesis) used to detect an evidence for shifting comparative advantage from China and Kazakhstan. The principal conclusions of this study are as follows.

It tends to be discovered that exchange among China and Kazakhstan. In light of the advancement of two-sided exchange among China and Kazakhstan and one belt one street venture, they confronted various difficulties and furthermore prospects of exchange between two nations. We face the primary oddity. The information of the Kazakhstan insights basically contrasts from the measurable information of China, which examination draws totally other image of the Kazakhstan-Chinese exchanging contacts. Under N. Nazarbayev's announcement, following the aftereffects of 2008, exchange volume among Kazakhstan and the Peoples Republic of China can be up to 15 bln. US dollars. Two forms of clarifying distinctive translations are conceivable: or the insights masks, attempting to give out wanted for the genuine, or something has been missed. Anyway, visiting of any Kazakhstan advertise affirms that genuine volumes of import of the Chinese merchandise won't be facilitated in any capacity with authority measurements' data.

It is useful to consider both learning and economic scale as determinants of comparative advantage brought about by international trade.  Hausmann et al.  have demonstrated that the mix of goods that a country produces may have important implications for industrial development, and show a positive link between a country’s export basket and its productivity. Anand et al. have shown that trade liberalization has had a positive impact on the complexity of Kazakhstan’s export basket. Meanwhile, Harding et al. shifted the focus of debate away from the mere fact of exporting and toward the importance of export composition for growth. It is widely believed, relatedly, that making computers is better than frying potato chips; “you become what you do” is indeed true. Upgrades the trade relation among two countries as per the researcher is to increase the export chain instinctively adopted by politicians as an economic strategy. However, there are numerous obstacles that this country face in upgrading their exports given their limited capital stock and the limited skills of their labor forces. Also, there are differing opinions regarding the proportions by which different types of products account for China’s exports. Some argue that Chinese exports are still primarily labor-intensive and resource-based, whereas others have found more skill-based and sophisticated exports. Rodrick’s research shows that China is an outlier in terms of its overall exports’ sophistication. He concluded that “China’s export bundle is that of a country with an income per capita level three times higher than that of China”. The diversification of China’s exports has been confirmed by its highlighting of the higher technology content of those exports.

China and Kazakhstan are significantly affected by the project called one belt one road on a positive manner. In the early years of the study period, particularly after the year 2015, the overall impact of China was crowding out Kazakhstan labour intensive manufacturing export. China on the other hand, has been complementing the Kazakhstan exports of labour intensive manufacture to the third market during the same period. However, the overall impact of China and Kazakhstan seems to be that of complementarily during the later years of the study period. This is subject to two different interpretations. First, it could be because during the early years, Kazakhstan has been importing consumer goods which do not have production enhancing effect in the manufacturing process from China while competing in the third market with china, but has been importing capital goods or skills which augment. The complementarily effect during the later years in the study period would imply Kazakhstan has been importing production augmenting capital goods or skills and technology from China. Secondly, the AGOA act of May2000couldbe another possibility. This is particularly true as AGOA provides a special rule for textile and apparel which applies to duty- free and quota-free access to SSA’s textile products made from USA fabrics, yarns and threads following what has been called triple transformation rule (Nouve and Staatz, 2003). Obviously, duty-free access of SSA’s export to USA would mean the duty-free import by USA off-sets high initial production cost in Kazakhstan which enabled Kazakhstan to compete with China on USA market. This is reflected by the fact that year specific dummies are positive and significant for the later years in the econometric estimation of the gravity equation.

Utilizing the FG hypothesis of modern improvement, we found a proof for moving relative favorable position from China and Kazakhstan. Notwithstanding, this ought to be translated with alert. Since Spearman's rank connection coefficient depends on uncovered similar favorable position, it is workable for a nation to increase (free) relative preferred standpoint during the time spent de (industrialization) in supreme terms. By and by, exact confirmations (see for instance, Rogerson, 2000) demonstrate that especially South Asia has increased similar preferred standpoint and has experienced significant auxiliary change in assembling. It is additionally conceivable to contend that the wellspring of the near preferred standpoint could be nations or areas other than China and Kazakhstan.

The economic and trade participation among Kazakhstan and China has been creating sound and consistently in these years. Notwithstanding, the collaboration fields should be extended, the Chinese government ought to support all the more vast and medium-sized undertakings to put resources into those fields, which are offered need to create in Kazakhstan's national program, for example, transportation, correspondence, nuclear vitality, apparatus, and so on. In addition, Kazakhstan needs to upgrade its modern structure so as to take care of the issue of fare broadening. Generally, the reciprocal exchange among China and Kazakhstan is moving towards a positive pattern and further fortifying two-sided participation will help advance the improvement of the "One Belt and One Road" and increment financial effectiveness.

To fully capitalize on OBOR, Kazakhstan must take advantage of new sources of economic growth and efficiency. It currently ranks as constrained in terms of digitization while Russia and China have made significant gains over the last decade. New reforms and applied best practices can narrow the gap between Kazakhstan and its partners on OBOR in terms of economic performance, transparency, and access to government services. OBOR provides Kazakhstan with the opportunity to emerge once more as a key region connecting global trade. When Zhang Qian, a Chinese imperial official of the Han Dynasty, and founder of the ancient silk road, first embarked on the route West, he was met by Central Asia’s people with desirable goods and tradable silver. For over 1500 years, this trade artery grew until Vasco da Gama discovered the shipping route to the Orient around Africa. Modern market and geopolitical trends promise to revive the ancient arteries. This is Kazakhstan’s greatest growth opportunity since independence. Its national companies are the biggest stakeholders, and must ensure that they are ready to support the enormous transit volumes in the years to come. They must understand the importance of the New Silk Road, and award it the attention it deserves. This means major changes need to be made soon.