China’s green investments are driving Central Asia energy shift

China’s investments in Central Asia have traditionally been characterised by inflow of cash into large projects focused on resource extraction and physical infrastructure such as pipelines, roads or attempts to establish railway connectivity.

Lately, however, China is pushing to focus more on green energy and related investments. Though the region is generally seen as rich in green energy resources, Beijing is focusing on Kazakhstan and especially Uzbekistan.

Despite being rich in traditional energy resources, these two countries have faced acute difficulties in winter because of the inadequate spread of infrastructure across their vast territories. Kazakhstan and Uzbekistan are now trying to create conditions for a major shift in their economies by turning to greener energy resources, in particular solar and wind power.

The growing cooperation between China and Central Asia on green energy fits into Beijing’s own agenda of making more sustainable investments which take heed of environmental issues, creating a “greener” version of the Belt and Road Initiative.

China’s shifting preferences in Central Asia also indicate the initiative’s adaptability in the face of local demands and political factors. For instance, Chinese companies in Kazakhstan helped develop eight wind and solar power projects from 2018 to 2022. Those were mostly a result of state-to-state cooperation in green energy. In contrast, in Uzbekistan, China invests through tenders and auctions.

In a recent manifestation of the engagement on green energy between China and Central Asia, greater collaboration and Chinese support for Uzbekistan’s green development were discussed during Uzbek President Shavkat Mirziyoyev’s visit to China in January.

At the time, Uzbekistan’s presidential office highlighted a fivefold increase in Chinese investments in the country’s economy. Mirziyoyev said at an international investment forum earlier this month that the country was working on 28 energy sector projects with a goal of creating more than 20 gigawatts of renewable energy capacity by 2030.

Tangible progress is evident in the ongoing development of photovoltaic power stations by China Gezhouba Group in the Bukhara and Kashkadarya regions of Uzbekistan, each with a capacity of 500 megawatts. Some of these projects have already commenced operations.

Mirziyoyev also explored the possibility of establishing a branch of the Export-Import Bank of China in Tashkent. In addition, the regional government of Samarkand has bought 100 electric buses from Chinese firm Yutong, with projected costs of about US$62 million.

For Uzbekistan, these agreements are not only about investment in green energy but also reducing the dependence on fossil fuel-based technologies. During his visit to China, Mirziyoyev toured vehicle manufacturer BYD’s headquarters in Shenzhen.

The collaboration between BYD and UzAuto, a state-owned Uzbek car manufacturer, has been progressing since an initial investment agreement with Uzbekistan’s Ministry of Investment, Industry and Trade in October 2023. These cars are expected to be exported to Central Asian markets and Russia.

Central Asia has gained strategic importance for China amid geopolitical shifts such as the

Red Sea crisis. The disruption in maritime trade routes has prompted China to seek alternative trade corridors. China’s push for green energy engagement also fits in with the strengthening of its presence in Central Asia, a move evident through its expanding trade with the region.

However, Central Asian nations are unlikely and somewhat unable to fully transition away from fossil fuels because of the nature of their economies. Uzbekistan, for instance, still heavily relies on fossil fuels for power generation.

Additionally, while Chinese investment shows promise, Central Asian states have experienced challenges with previous projects, indicating a need for diverse partnerships and Western expertise in their renewable energy transition. Given that, Uzbekistan and Kazakhstan are working on attracting investment from Gulf countries, the European Union and the United States to avoid becoming dependent on Chinese investment.