1. FDI in Central Asia and in Uzbekistan

Since independence in 1991, FDI in Uzbekistan has been low compared to FDI in Central Asian neighbours, despite Uzbekistan being the most populous of the five Central Asian countries. In the 30 years since independence, FDI has been far lower in Uzbekistan than in oil-rich Kazakhstan and Turkmenistan. In the years 2012–14, FDI per capita was lower in Uzbekistan than in all four of Uzbekistan’s Central Asian neighbours. FDI in Uzbekistan has picked up substantially after the change in leadership in September 2016 and the 2017–18 reforms, although it remains far lower than in Kazakhstan or, on a per-capita basis, lower than in Turkmenistan.

2. Chinese Investment in Central Asia

Chinese data on investment in Central Asia is difficult to track due to the many channels (see Appendix) and differing host country experiences. The links include flagship Chinese policies such as the Belt and Road Initiative (BRI, announced by President Xi Jinping in Kazakhstan in 2013, launched in 2017) and the Digital Silk Road. There is also a lack of clarity about the definition of FDI, as opposed to development assistance grants or loans on commercial or concessional terms, and the goals and composition of Chinese outward investment have changed over time.

Initial Chinese investment in Central Asia in the late 1990s and early 2000s was by national state-owned oil companies and concentrated in Kazakhstan and Turkmenistan. China National Petroleum Corporation (CNPC) made commercial investments in Kazakhstan’s oil sector, operating the Aktobe oilfield as a joint venture with Kazmunaigas after 1997 and in 2005 purchasing PetroKazakhstan from its Canadian owner. A 988-kilometer oil pipeline built in 2004–5 linked Atasu in Central Kazakhstan to the Chinese border. Nevertheless, China has been a minor player in Kazakhstan’s oil compared to EU and US oil majors.¹³

Following a visit to Beijing in 2006 by Turkmenistan President Niyazov, China contracted to build a gas pipeline from Turkmenistan to China via Uzbekistan and Kazakhstan. The project, completed in 2009, was primarily financed by gas deliveries to China. In the only onshore production-sharing agreement that Turkmenistan’s government has signed, CNPC has operated the Bagtyyarlyk gas field since 2009. In 2009 and 2011, China Development Bank provided $4 billion in loans for Turkmenistan’s gas industry, to be repaid by gas exports to China (Liu et al. 2023: 698). In return for drilling three new wells in the Galkynysh field, CNPC negotiated in 2021 payment-in-kind of 17 billion cubic meters of gas over three years.¹⁴ Despite its gas-based wealth, Turkmenistan has been seeking Chinese development assistance from the China International Development Co-operation Agency.

On a smaller scale, in 2006–13, China was lending to the governments of Tajikistan and the Kyrgyz Republic for transportation, power generation, and electrical grid projects. Infrastructure projects have continued to be built in these countries, but no new major loan agreements have been signed since 2014. Since the early 2010s, investment shifted to smaller projects, driven by profit-seeking and often escaping from industry overcapacity in China. China’s central government and two leading policy banks—the China Development Bank and Exim Bank of China—encouraged this move towards investment and away from large, debt-funded infrastructure projects (Van Der Kley and Yau 2021).

Tajikistan began borrowing from Eximbank in 2007 to construct a 500-kW power transmission line from Dushanbe to the border with Uzbekistan. Other loans between 2007 and 2009 financed roads and a hydropower plant. In 2011, Tajikistan offered China 1,158 square kilometres of territory in the remote Pamir mountains in exchange for Beijing writing off the country’s already mounting debt (Dzamukashvili 2021). Successful China–Tajik joint ventures included a gold mine that drove a tripling of gold output between 2012 and 2019 and cement projects that turned Tajikistan from a cement importer to an exporter (Van Der Kley and Yau 2021). Since 2017, China has been Tajikistan’s largest source of foreign investment. Tajikistan officially joined the Belt and Road Initiative in 2018, after which Chinese investors launched four BRI projects in the country, amounting to $320 million; the benefits include a new road between the two largest cities, Dushanbe and Khujand, which more than halved the travel time between the cities, and new hydroelectric plants. In 2020, Tajikistan signed five new loan projects worth $459.5 million and announced plans to borrow $562 million more in 2021. As of February 2021, Tajikistan owed Eximbank an estimated $1.12 billion, and Schulz (2022) reported that Tajikistan’s overall foreign debt in early 2021 was $3.2 billion, of which half was owed to China.

The size of Tajikistan’s debt to China raised concerns that Tajikistan might have trouble repaying loans and could be falling into a debt trap. Part of the problem was poor assessment by the Chinese side of borrowers’ ability to pay off the debt. In 2019, when Tajikistan experienced difficulty repaying funds spent on the construction of the Dushanbe-2 thermal power plant, the Chinese company TBEA received the right to develop the Upper Kumarg and Duoba gold deposits in compensation for non-payment (Umarova 2022).¹⁵ In January 2021, after COVID-19 led to a drop in remittances from Tajik workers abroad, China allowed Tajikistan to suspend debt repayments; no details were given about new terms. In the 2020s, rescheduling of troubled debtors’ obligations seems to be China’s preferred response, rather than seizing collateral (Schwarz 2023; See also SCIO 2021).

The Kyrgyz Republic borrowed from Exim Bank between 2009 and 2015 for infrastructure projects; the last was the North South Alternative Road. Other Chinese investment in the Kyrgyz Republic has been more controversial.¹⁶ In 2019, protests against a Chinese mining project led to the suspension of the operation. In February 2020, a $280 million Chinese project to develop infrastructure, buildings, and other facilities in a free-trade zone near the Chinese border was abandoned after large-scale protests.¹⁷

The most comprehensive attempt to estimate FDI stocks in Central Asia is by the research department of the Eurasian Development Bank (EDB 2025).¹⁸ The EDB reports that the largest stocks of Chinese FDI in Central Asia in the first half of 2024 were in Kazakhstan ($10.4 billion), Turkmenistan ($9.5 billion), and Uzbekistan ($4.3 billion), and comments that the fastest increase since 2016 was Uzbekistan—from $0.3 billion in 2016 and only exceeding one billion in 2021.

Aggregate Chinese data are scattered with differing definitions of foreign investment. Table 3 reports the estimates of Chinese outward FDI in 2008–22 from the China National Bureau of Statistics Yearbook. The numbers look small compared to the figures in Table 1, suggesting that Chinese statisticians are employing a standard, but narrow, view of FDI. Actual Chinese-funded construction projects in the Kyrgyz Republic and Tajikistan over the last decade surely cost more than half a million or 220,000 dollars and must be accounted for under aid or some other form of transfer. Similarly, most of the Chinese investment in Turkmenistan, which has been mainly repaid in kind (gas), is not included in Table 3. All of which contributes to the difficulty of unravelling the more complex financial flows to the two larger economies, Kazakhstan and Uzbekistan.

For all its shortcomings, Table 3 suggests the overwhelming role of Kazakhstan as the main destination for Chinese FDI. Kazakhstan plays a key geographical role in China’s BRI, which was first announced in Astana, although Kazakhstan has financed most of its BRI-related infrastructure projects through its own budget. Indeed, the total $130 million in Chinese FDI in Kazakhstan between 2008 and 2022 reported in Table 3 is minuscule compared to the total FDI in Kazakhstan reported in Table 1.

Chinese expansion into Central Asia’s technology market occurred long before the implementation of the Digital Silk Road in 2017. Data from the Australian Strategic Policy Institute’s International Cyber Policy Centre reports 46 cases of Chinese technology companies’ expansion in Central Asia between 2001 and 2020.¹⁹ Currently, China is implementing Safe City IT projects in several Central Asian countries, which reflects Chinese technical leadership in face recognition systems and other monitoring services.

Despite the uneven data quality of the various sources, the overall picture of Chinese FDI in Central Asia is that it has not been large. The large initial FDI inflows into Central Asia in the 1990s, mainly in resources and especially into Kazakhstan, occurred before China became a large foreign investor. The surge in Chinese investment in the Kyrgyz Republic and Tajikistan was only loosely coordinated, and when projects failed, it appears to have been due to poor project evaluation rather than a strategy of creating debt dependence. Some failures, including the 2017 Kyrgyz power station and several Kyrgyz mining joint ventures and the Astana Light Rail project in 2019, support this interpretation and explain why China sought to improve oversight of international lending (described in the Appendix).²⁰ Greater financial care over FDI is consistent with more FDI for Uzbekistan since the reforms of President Mirziyoyev.

3. Chinese Investment in Uzbekistan

Table 3 suggests that Uzbekistan has been second in Central Asia as a recipient of Chinese FDI. The Uzbek numbers are dominated by a 2011 spike, as in Uzbekistan’s aggregate FDI data (Table 1), and a second, bigger spike in the most recent years, 2021 and 2022. Again, with the caveat that the absolute numbers look small ($8.91 million in 2021 and 2022 combined), Uzbekistan appears to be the major Central Asian destination for Chinese FDI after President Mirziyoyev’s reforms.

Chinese interest in investing in Uzbekistan dates from an agreement between China National Oil Development Corporation (CNODC) and Uzbekneftegaz to explore five blocks.²¹ CNODC invested $260.2 million in the geological exploration that was completed in 2011. In 2013, CNODC and Uzbekneftegaz formed the New Silk Road Oil and Gas joint venture to exploit the Karakul block (Bukhara province), although implementation was delayed until 2017. China’s largest loan to Uzbekistan—valued at $1.2 billion and signed in 2017—was from the China Development Bank to Uzbekneftegaz for the Oltin Yo’l gas-to-liquid processing plant (Van Der Kley and Yau 2021). In May 2024, the New Silk Road JV’s website (https://nsrog.uz/) listed the partners as Uzbekneftgas, CNPC, China National Logging Corporation, and LUK oil.

Chinese post-2016 investments in Uzbekistan are diversified. The Jinsheng Group invested in a textile factory in Uzbekistan that became operational in 2017; with an annual output of 22,000 metric tons of cotton yarn, 95% of which are exported, and half are sold to China. In 2017, Xin Zhong Yuan Ceramics opened a $150 million ceramics production line in Uzbekistan, attracted by cheap raw materials, low energy costs, and a large local market. In 2019–21, the largest investments in Uzbekistan were $150 million by Anhui Conch, $150 million by Huaxin Cement, and $200 million by Hengyuan Cement, all in construction of cement plant (Umarova 2022). This list, similar in many respects to the American Enterprise Institute China Global Investment Tracker (Table 4), contains loans as well as FDI, but even so, the anecdotal evidence suggests that Table 3 underestimates Chinese FDI in Uzbekistan.

The Eurasian Development Bank (EDB 2025) reports that electricity generation has played a large role in major recent project launches in Uzbekistan. In 2022, China’s sovereign Silk Road Fund acquired a 49% stake worth $345 million in a gas turbine plant in Uzbekistan from ACWA Power (Saudi Arabia). China Southern Power Grid International began construction in 2023 of pumped storage power plants in Uzbekistan with expected commissioning in 2030 and planned total investment of $1.6 billion. China Poly Group and China Electric plan to invest $350 million in a solar power plant in Uzbekistan. The largest new Chinese manufacturing project in Uzbekistan in 2023–4 was a plant in Syrdarya to produce EXEED cars, with an estimated FDI of $390 million.

Table 5 reports data on Chinese loans and FDI to Uzbekistan from the Statistics Agency of the Republic of Uzbekistan. In terms of definitions, these should be comparable to the total loans and FDI in Uzbekistan in Table 2. The totals show an increase from under $300 million in 2016–18 to $1.5–1.8 billion in 2019–22, and more than doubling in 2023 to almost $4 billion. This is the strongest evidence in support of an increase in Chinese FDI in response to Uzbekistan’s policy changes since 2017. The increases are driven primarily by investment in manufacturing, with smaller increases in primary products (agriculture and mining) and infrastructure, sectors where FDI is not only smaller but also more volatile.

4. Conclusions

Foreign investment in Central Asia since 1991 was initially concentrated in Kazakhstan and, to a lesser extent, in Turkmenistan, driven by the exploitation of oil and gas. Uzbekistan received limited foreign investment, apart from a spike in 2010–11 that was probably associated with the creation of the Navoi special economic zone. The situation has changed after the death of President Karimov and the reforms introduced by President Mirziyoyev between 2017 and 2020. Improved conditions for foreign investors in Uzbekistan has coincided with increased attention by China to financial returns on foreign investment been led by China. Negative concerns about the Chinese economic presence in Uzbekistan are less pronounced than in the Kyrgyz Republic, and worries about debt-dependency are far less plausible in Uzbekistan than in Tajikistan.

Despite the substantial increase in Chinese investment in Uzbekistan in recent years and the commitment of the two governments to foster increased investment flows, the prospects of an investment boom may be exaggerated. Bilateral FDI flows have not been a large share of either Chinese outward FDI or Uzbek inward FDI. Moreover, with slower growth during and after COVID, the Chinese economy appears to have less funds available for foreign investment. Although Central Asia is a key part of the Silk Road Economic Belt and BRI, Uzbekistan seems unlikely to be a major beneficiary of large-scale infrastructure funding.²²

APPENDIX: Chinese Lending and Aid Institutions and Instruments

Between 2017 and 2021, China introduced substantial reforms to its foreign lending practices, in part because the China Development Bank and the Export-Import Bank of China (Eximbank) had operated since their establishment in 1994 without a specific regulatory framework.²³ Improved reporting and a mandate for CDB and Eximbank to establish risk management systems suggested that basic controls had not been in place. Part of the problem appeared to have been a lack of consistent data on the country’s loan portfolio, even within the Chinese government, which hampered external debt management. However, the bureaucratic complexity and infighting appear to have remained, with over 20 departments and agencies at the central level in the management and implementation of China’s international development co-operation. In addition, many central-level agencies delegate aid implementation to provincial subsidiaries (Schwarz 2023: 27).

The range of institutions and variety of instruments make it difficult to track Chinese foreign investment. Moreover, the distinction between loans and FDI may be non-transparent. Most recent capital flows from China to Uzbekistan come from the China Development Bank or Eximbank, which makes them look like loans; however, if the funds are used by a state-owned enterprise to acquire land, property, or other productive assets, then they are essentially FDI.²⁴ Table 3 may be a guide to relative magnitudes across Central Asia over time, but the numbers cannot be accepted with any confidence. Anecdotal lists of approved or disbursed investments are unsatisfactory insofar as many projects are likely to be omitted, as in Table 4. Nevertheless, I argue in the paper that the skimpy data can corroborate a plausible account of Chinese investment in Central Asia and specifically in Uzbekistan.

Acknowledgements

An earlier version of the paper was presented in the Westminster Development Studies Symposium 2024 at the University of Westminster, London, 7 May 2024. I am grateful to Azizakhon Mukhammedova of WIUT for excellent research assistance.

Competing Interests

The author has no competing interests to declare.