BRI projects in extractive industries in Bolivia and Kazakhstan
What you'll learn from the read:
Chinese state capital (CSC), like state-owned enterprises, is a key component of the Belt and Road Initiative;
CSC, pursuing profit and strategic goals, is more accommodating to partner countries' needs than private capital;
Long-term projects driven by political ties, resource security, or industry needs see greater flexibility from CSC;
Local contexts also matter: Kazakhstan’s financial resources and industrial base boost leverage, while Bolivia’s lithium, a strategic mineral, shapes deals.
The Belt and Road Initiative (BRI), China's ambitious global development strategy, has sparked significant interest and debate regarding its impact on host countries. In a recently published article co-authored by Nicholas Jepson (University of Manchester) and myself, we examine the ways Chinese state capital (CSC) accommodates the recipient countries’ development priorities, especially in fostering structural transformation (ST) through investments in the extractive sectors of Bolivia (lithium and iron/steel) and Kazakhstan (petrochemicals). Titled Chinese State Capital as a Partner for Resource-Based Structural Transformation? The Belt and Road Initiative and Downstream Linkages in Bolivia and Kazakhstan, the article was published in a special issue on “China’s Belt and Road Initiative and dynamics of structural transformation” in the European Journal of Development Research edited by Lorena Lombardozzi (Open University), Rhys Jenkins (University of East Anglia) and Linda Calabrese (King’s College London).
We argue that state-led efforts to develop local resource-based downstream industries create a promising avenue for local ST with potential backward and forward linkages and spillover effects. Our study follows CK Lee’s argument that, given the CSC’s embeddedness within the Chinese state and society, this form of outbound capital seeks not only profit but also strategic and political goals in line with both market and state actors’ interests. Thus, the activities of state-owned enterprises (SOEs), as instances of CSC, can demonstrate more flexibility in responding to host countries’ priorities, unlike global private capital, which is beholden primarily to shareholder value. This flexibility can potentially lead to more developmental engagement from CSC, but its realization depends on the local state and society, as well as the specific forms of political-economic power behind each instance, which vary across projects, sectors, and countries.
“State-owned enterprises, as instances of CSC, can demonstrate more flexibility in responding to host countries’ priorities, unlike global private capital”
We propose a framework to understand the variability in CSC’s accommodation of local demands. This framework is based on three main axes: mix of BRI drivers, nature of investment partnership, and local context. Literature suggests the key drivers behind the BRI and CSC internationalization include strengthening political relationships, ensuring resource security, and exporting China’s surplus capital and productive capacity. The importance of these drivers varies across CSC instances and influences the degree of flexibility regarding host country interests. CSC is expected to be less accommodative when short-term overcapacity export is the main impetus compared to when political relations or resource security play larger roles and necessitate longer-term engagement.
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Additionally, CSC’s behaviour is shaped by the nature of Chinese and local actors, the structure of project deals, and the length of contract commitments. Short-term contracts provide weaker incentives for accommodation compared to long-term commitments such as a joint venture or equity stake. Finally, local context and bargaining power in host states can influence CSC actions and lead to the accommodation of local content and employment requirements. The developmental impacts resulting from CSC incorporation into local industrial policy projects vary depending on host state policies and strategic priorities, highlighting the need to distinguish CSC’s accommodation of local priorities from developmental outcomes.
CSC's deals in Bolivia and Kazakhstan
Our assessment of CSC in four sectors (Bolivian steel, Bolivian lithium, Kazakhstani oil refining, Kazakhstani polypropylene) shows CSC's relative flexibility in accommodating local demands across varied industrial strategies and priorities. This flexibility, however, has its limits, as seen in Bolivia's lithium sector. While generalizable conclusions cannot be drawn solely from these cases, considering BRI drivers (resource security, overcapacity export, political relations), investment partnership nature, and local context helps understand CSC behaviour variations.
In Bolivia, the El Mutún plant project illustrates CSC's relative accommodation of Bolivian priorities for steel production with full local ownership. However, the project favours Sinosteel by allowing significant import of inputs from China, reflecting a blend of profit-seeking and responsiveness to Bolivian concerns. Lithium, strategically important for resource security, shows mixed results. Despite equity shares and long-term involvement, Chinese commitments to Bolivian battery production remain unfulfilled.
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CSC in Kazakhstani projects shows higher responsiveness to local priorities in both the Shymkent refinery (with a long-term CSC stake) and the Atyrau polypropylene plant (a build-transfer contract). Kazakhstan's strategic importance with its BRI transport networks and oil exports, along with its stronger bargaining position and industrial base, explain CSC's accommodating behaviour. The use of CDB financing rather than Eximbank also suggests a more comprehensive approach to offshoring Chinese industrial production and integrating Kazakhstan with the Chinese economy.
Differences in CSC's deals with Bolivia and Kazakhstan highlight the importance of local contexts and capabilities. Kazakhstan's ability to self-finance and its larger industrial base give it leverage that Bolivia lacks. Sector-specific ambitions, particularly in Bolivia's pursuit of domestic lithium upgrading, also play a role.
“CSC’s effectiveness depends on strategic motivations, the nature of investment partnership, and local conditions of the host country”
The findings of the article suggest that CSC, through the BRI, can be a strategic partner in facilitating structural transformation in host countries. However, the extent of this partnership's effectiveness depends on various factors, including the strategic motivations of Chinese investments, the nature of investment partnership, and the specific local conditions of the host country. Future research is needed to refine this framework and test its applicability across different sectors and developmental objectives beyond the extractive industries. Understanding these dynamics can offer valuable insights into optimizing the role of CSC in fostering sustainable and inclusive development in BRI partner countries.
For those interested in a deeper dive into this study, the full article is available here.