Afghanistan’s Role In China’s Foreign Policy: Geopolitical Significance And Economic Prospects

In a changing landscape of geopolitical dynamics, Afghanistan emerges as a focal point in China’s evolving foreign policy calculus. With the receding U.S. presence and a shifting security paradigm, Beijing recognizes the strategic importance of a stable Afghanistan in its long-term economic plans for the Central Asian region.

Afghanistan, as a neighbouring country to China, has fostered a close alliance with Beijing, primarily focusing on security and regional development. The Belt and Road Initiative (BRI) projects have been instrumental in strengthening the connectivity between the two nations.

The anticipation is that, with proper attention to regional security concerns, Afghanistan could become an attractive destination for foreign investment. The country could also tap into its mineral resources and develop transportation services. In return, China stands to benefit from access to these resources and the establishment of new transport routes. Both Afghanistan and China are eager to capitalize on the opportunities that a secure trade environment could bring about.

China is embarking on a path toward constructing a fully modern socialist nation. Concurrently, Afghanistan finds itself in a pivotal phase transitioning from turmoil to effective governance. The diligent, courageous, and resilient Afghan populace is presented with a historic opportunity to take genuine control of their future, emancipated from foreign interference and enduring invasion.

China expresses a willingness to cultivate amicable and neighbourly relations with Afghanistan, grounded in the Five Principles of Peaceful Coexistence. This commitment is further underscored by the principles of a Community with a Shared Future for Mankind, aligning with both Global Development Initiatives and Global Security Initiatives. China stands firmly behind Afghanistan’s pursuit of its unique modernization journey, acknowledging and respecting the nation’s distinctive conditions and independence. The commitment is for Afghanistan to shape its future and destiny autonomously.

China pledges steadfast support for Afghanistan, offering to share its governance experiences to facilitate mutual development objectives. This collaboration aims to contribute to the common development and prosperity of both nations.

 Afghanistan shares a 90 km border with China, situated at the terminus of the Wakhan Corridor in the northeastern part of the country, and plays a significant role in the Belt and Road Initiative (BRI). Afghanistan boasts some of the world’s largest untapped reserves of rare earth metals; a resource China is keen to access.

Given Afghanistan’s strategic importance, particularly in the wake of the US withdrawal from the region under NATO, China has a vested interest in the peace and stability of Afghanistan. Uniquely, Beijing maintains amicable relations with all major stakeholders in the Afghan situation. A year after the Taliban assumed control, China has become a key player in negotiations with the new regime.

During the 2022 Shanghai Cooperation Organization (SCO) and Collective Security Treaty Organization (CSTO) joint summit, President Xi Jinping emphasized the collective responsibility of member states to preserve peace and stability in Afghanistan. On this occasion, he urged the use of platforms like the SCO-Afghanistan Contact Group to facilitate a smooth transition in the country.

China’s former Foreign Minister, Wang Yi, has emphasized a non-interference policy in Afghanistan’s internal affairs. He encouraged various factions to prevent the escalation of conflict and resume intra-Afghan negotiations. Wang Yi also called on the Taliban to dissociate from terrorist forces and reintegrate into Afghanistan’s political mainstream with a sense of responsibility for the nation.

China’s approach is pragmatic, seeking cooperation with the governing authority that best protects its domestic and regional interests. In dealing with the Taliban, which now controls various territories in Afghanistan, including the crucial Badakhshan region bordering China, China has engaged in dialogue. The Taliban has expressed a desire to reassure the Chinese government that its rule would not destabilize China, welcoming Chinese investments in Afghanistan.

China’s close ties with Afghanistan’s neighbour, Pakistan, further enhance its regional engagement and potential for future trade and investment. While Afghanistan’s immediate future remains uncertain, China actively participates in the country’s reconstruction efforts, reflecting its commitment to contributing to stability and development in the region.

 

China – Afghanistan Relations

China and Afghanistan established diplomatic ties in 1955, fostering generally friendly relations over the years. Embassies in each other’s capitals signify the continued diplomatic connection.

Since 2001, China has maintained a cautious stance, refraining from deploying troops in Afghanistan but extending occasional financial and military support to the Afghan central government.

In 2017, amid escalating tensions between Pakistan and Afghanistan, China initiated peacekeeping efforts, leading to the formation of the China-Afghanistan-Pakistan trilateral cooperation. The inaugural trilateral dialogue took place later that year.

By their fourth dialogue in June 2020, the three nations affirmed their commitment to expanding regional peace and stability. Emphasizing cooperation under the Belt and Road Initiative, they also expressed a united front against the challenges posed by the COVID-19 pandemic and terrorism.

It’s noteworthy that Afghanistan’s representation in these dialogues has been led by the Minister of Foreign Affairs of the Islamic Republic of Afghanistan. The nation is presently governed by a coalition government. However, with the Taliban assuming effective power and on the brink of forming a government, the future trajectory of these diplomatic talks remains uncertain. The dynamics of engagement will likely be shaped by the evolving political landscape in Afghanistan under the new administration of the Taliban, referring to themselves as the Islamic Emirate of Afghanistan.

 

China’s Interest 

From China’s perspective, Afghanistan holds a strategically advantageous geographic position that could serve as a potential shortcut for importing oil and gas from the Middle East, in collaboration with neighbouring Pakistan. This strategic interest propels China’s eagerness to broaden cooperation under the Belt and Road Initiative (BRI) and establish trade and transport routes involving Afghanistan.

Despite the considerable potential, previous BRI ventures in Afghanistan encountered substantial security risks. This challenging environment resulted in setbacks, with some projects, including a copper mining contract with the Chinese state-owned company MCC, failing to materialize.

Notwithstanding these obstacles, certain infrastructure initiatives have commenced, notably a $5 million road construction project aiming to link Kabul with China through the Wakhan Corridor.

It’s evident that the expansion of BRI projects in Afghanistan, and consequently the enhancement of bilateral trade relations, faces significant challenges as long as the internal situation remains unstable. Recognizing this, China is likely to persist in leveraging its considerable influence in the region to advocate for peace and stability. The success of future endeavours hinges on effectively addressing the security concerns that have impeded progress in the past, allowing for the realization of the economic potential inherent in Afghanistan’s strategic position within the broader framework of the Belt and Road Initiative.

 

Trade Relations

Afghanistan relies significantly on its neighbouring countries for trade, and China stands out as one of its major trading partners. In 2020, China ascended to become the second-largest export destination for Afghan goods, following Pakistan. It also claimed the top spot as the source of imported goods for Afghanistan, preceded only by the United Arab Emirates (UAE), Pakistan, and India. Over the past five years, China’s share in Afghanistan’s total imports and exports has consistently expanded, reflecting a notable trend. Particularly noteworthy is the annual growth rate in the value of Afghanistan’s exports to China, which reached an impressive 105 per cent between 2016 and 2020, according to the International Trade Centre (ICT).

The trajectory of Afghanistan’s exports to China has seen consistent growth over the last 25 years, averaging a yearly rate of 4.84 per cent. In 2021, the total value reached US$49.53 million, up from US$16.6 million in 1995. Notable among the exported products are edible fruits and nuts (US$44.8 million), wool and animal hair yarn (US$2.08 million), and pearls, precious stones, metals, and coins (US$895,880).

Conversely, in 2021, China exported goods worth US$474.45 million to Afghanistan, according to the United Nations COMTRADE database. The primary exported products include electrical and electronic equipment (US$85.13 million), rubbers (US$81.94 million), machinery, nuclear reactors, and boilers (US$47.16 million), vehicles other than railway (US$39.71 million), and manmade staple fibres (US$28.04 million). This reciprocal trade relationship underscores the economic ties between Afghanistan and China, with both countries contributing significantly to each other’s trade activities.

 

Initiatives and Agreements

As of the latest information, China and Afghanistan have not entered into any formal Free Trade Agreements (FTAs) or Double Taxation Avoidance Agreements (DTAs). Despite the absence of such comprehensive agreements, the two countries have established the China-Afghanistan Joint Committee on Economics and Trade (JCET). This committee convened in 2010, 2015, and 2017, providing a platform for discussions and cooperation on economic and trade matters.

In August 2014, there was a significant development with the signing of Exchange Notes between China and Afghanistan, granting zero-tariff treatment to certain Afghan goods exported to China. This move aimed to facilitate trade and economic relations between the two nations. Since 2015, 97 per cent of goods originating from Afghanistan have been eligible for zero tariffs when exported to China. Notably, China renewed this commitment on December 1, 2022, extending zero-tariff treatment to 98 per cent of tax items from Afghanistan. This reflects a continuing effort to enhance trade facilitation.

It’s worth noting that, despite the favourable terms for Afghan exports to China, Afghanistan imposes relatively high tariff rates on imports of raw materials. The dynamics of trade agreements and tariffs can significantly impact the economic relationship between countries, and the developments mentioned highlight ongoing efforts to foster cooperation and reduce trade barriers between China and Afghanistan.

 

Belt And Road Initiative

As the United States withdraws its strategic presence from Afghanistan, China perceives a combination of risks and opportunities. Afghanistan holds strategic importance for China due to its location at the crossroads of South Asia, Central Asia, and West Asia. This geographic positioning is particularly relevant to China’s Belt and Road Initiative (BRI) projects, making Afghanistan a potentially crucial node in the expansive infrastructure network.

Despite the inherent risks associated with the uncertain political situation in Afghanistan, China sees significant opportunities. Once stability is restored, and necessary infrastructure is developed, Afghanistan has the potential to evolve into a vital regional trade hub. This aligns with China’s broader vision for enhancing connectivity and economic cooperation through the BRI, which seeks to create an extensive network of trade routes and infrastructure projects across Asia, Europe, and Africa.

 

The Silk Route Trades

The new administration in Afghanistan has engaged in discussions with China regarding the reopening of historical Silk Road trade routes, with a particular focus on the Wakhan Corridor. This corridor is an Afghan valley route that acts as a geographical division between China and Tajikistan, creating a link between China and Afghanistan through a 98 km-wide strip of land.

The Islamic Emirate of Afghanistan (IEA) has expressed its readiness for the opening of the Wakhan Corridor, seeking cooperation from China to facilitate the project. The goal is to enhance trade between the two nations and establish a reliable route for the transit of goods.

The Wakhan Corridor project is envisioned as a substantial investment that could contribute to Afghanistan’s reconstruction and transition from a conflict-ridden state to a nation capable of producing goods and maintaining peace. While Chinese construction firms possess the necessary capabilities, the development of the Wakhan Corridor route is expected to incur significant costs, potentially reaching tens of billions of dollars. Additional funding would likely be required to address security concerns, ensure vital transportation infrastructure, and provide logistical services for the successful realization of the project.

 

The Afghanistan CPEC

China is exploring the extension of the China-Pakistan Economic Corridor (CPEC), a key Belt and Road Initiative (BRI) project, to Afghanistan. Launched in 2013, the CPEC focuses on critical infrastructure development. Chinese leaders are reportedly negotiating deals with Kabul authorities to invest in Afghanistan’s infrastructure under the BRI. Previously cautious due to U.S. influence, Kabul is now considering extending the $62 billion CPEC into Afghanistan, potentially bringing significant economic benefits and aligning with China’s regional connectivity goals. The success of this extension depends on factors like regional security and political stability.

 

China Kyrgyzstan Uzbekistan Corridor

In August 2022, Uzbekistan proposed the creation of a new transportation route called the “China-Kyrgyzstan-Uzbekistan-Afghanistan” corridor, aimed at fostering regional connectivity.

The heads of the railways in Kyrgyzstan and Afghanistan, along with the acting chairman of the board of Uzbekistan, discussed this proposal. The conference also included the Afghan Railways Director General, the Kyrgyz Railway Firm Director General, and representatives from the Chinese Wakhan Corridor logistics company.

The key focus of the discussion was the need to establish favourable conditions for freight transportation and ensure competitive rates for the new corridor. Uzbekistan emphasized the importance of creating an environment that encourages efficient and cost-effective freight movement.

The potential development of such a transportation corridor is seen as a positive step toward the reconstruction of Afghanistan. It could play a crucial role in helping the country transition from a state of perpetual conflict to one focused on production and peace.

 

Pine Nut Air Transport Corridor

The trade of pine nuts between China and Afghanistan reflects Beijing’s increasing interest in the region along its western border. Established in 2018, the “pine nut air transport corridor” is an air freight route designed to support Afghanistan’s pine nut industry, generating revenue of $15 million for locals within the initial four months.

Annually, between 3,000 and 5,000 tons of pine nuts are transported to China under this corridor, bringing tangible benefits to both nations and becoming a crucial link for bilateral cooperation. Despite challenges posed by poor transportation infrastructure and years of war in Afghanistan, the corridor has the potential to create jobs for over 100,000 locals. Afghanistan’s annual pine nut output is approximately 20,000 tons, with an export value of around $800 million. Due to a lack of processing capabilities, China has emerged as the primary destination for refining the product, replacing Pakistan in value-added processes and generating revenue for these services.

 

Oil Extraction Deal

On January 5, 2022, the Taliban-led administration in Afghanistan signed a significant deal with a Chinese company, Xinjiang Central Asia Petroleum and Gas Co (CAPEIC), to extract oil from the Amu Darya basin and establish an oil reserve in Sar-e Pul province in the northern part of the country. The agreement, inked by Afghanistan’s acting minister of mines and petroleum, Sheikh Shahabuddin Delawar, and a CAPEIC representative, marks the first major energy extraction deal with a foreign company since the Taliban assumed control in 2021.

Under the terms of the agreement, the Chinese company will invest up to $150 million annually, with plans to increase the investment to $540 million within three years. Afghanistan is estimated to possess natural resources exceeding $1 trillion, including copper, rare earths, and natural gas. However, due to the prolonged instability in the country, a significant portion of these resources remains untapped.

Simultaneously, another Chinese state-owned enterprise is engaged in discussions with the Taliban-led government regarding mining activities at the Mes Aynak copper mine near Kabul. This would follow up on a $3 billion, 30-year contract signed in 2008 during the previous administration. These developments signal China’s continued interest in Afghanistan’s natural resources and the potential for increased economic cooperation between the two nations under the new Taliban-led government.

 

Shanghai Cooperation Organization

Afghanistan began engaging with the Shanghai Cooperation Organization (SCO) in 2005 by signing a protocol that established the SCO-Afghanistan contact group. Despite becoming an observer in the SCO in 2012, Afghanistan has been striving for full membership since 2015, a status that has not yet been approved. While Pakistan and India gained full membership in July 2017, Afghanistan remains an observer in the organization.

Geographically situated within the SCO region and having close historical and economic ties with most SCO states, Afghanistan’s engagement is vital. The Afghan Civil War played a significant role in the formation of the SCO, and both parties share common interests in regional security, combating terrorism, and extremism, and addressing opium cultivation.

At the 2022 SCO foreign ministers’ gathering in Uzbekistan, Wang Yi, the former Chinese Foreign Minister, held discussions with his Taliban counterpart, Amir Khan Muttaqi. On this occasion, Wang announced that China would not impose tariffs on 98 per cent of goods imported from Afghanistan, aiming to boost bilateral trade ties.

Given the importance of the security situation in the region, the SCO could play a pivotal role in fostering cooperation and joint development between China and Afghanistan. China seeks to provide new opportunities to Afghanistan through the SCO, emphasizing the need for the Taliban regime to honour security commitments and ensure the safety of the Afghan people, diplomats, and Chinese citizens.

Within the SCO framework, China has proposed practical cooperation in various fields with member and observer states. If Afghanistan introduces cooperation projects in these areas, it could receive financial, technical, and personnel support from other member states, including China. This represents a valuable opportunity for Afghanistan, which urgently needs post-war reconstruction and faces isolation from Western countries.

 

Conclusion

As the U.S. presence diminishes and the security situation evolves in Afghanistan, the country has gained increased importance in Beijing’s foreign policy considerations. A stable Afghanistan aligns with China’s long-term economic plans in the Central Asian region. Therefore, China is politically motivated to advocate for peace and stability in Afghanistan. Despite facing challenges, including project interruptions, the abundant minerals and hydrocarbons in Afghanistan continue to attract Chinese investors and companies.

Simultaneously, as Kabul actively seeks foreign assistance to bolster its weak economy, Beijing’s substantial economic influence positions it as a preferred partner for collaboration. China’s economic clout makes it an attractive and influential player in Afghanistan’s efforts to attract foreign investment and support for its economic development. This underscores the multifaceted importance of Afghanistan to China, involving both geopolitical and economic considerations.