Horgos, City on the Move
The Kazakh side of the Horgos International Center for Boundary Cooperation is experiencing a truly bizarre colonization.
That zone, straddling the Kazakh-Chinese border, was established in 2011 to allow for duty-free trade between the two nations, and is now considered a key part of the 2013-launched Silk Road Economic Belt project. On the Chinese side, there are several clusters of buildings, housing everything from multitudinous, filthy flea market stalls to spotless luxury goods stores, many of them Korean, troupes of uniformed young men and women waiting listlessly for a customer
Much has been made of the discrepancy between the facilities on the two sides of the border, and on the Kazakh side there are only two, smaller, simpler buildings. The stores inside, however, do not give a particularly left-behind impression; their contents lean much more to the luxury side.
This is, perhaps, because almost none of them are Kazakh-owned, or, indeed, Kazakhstan-related.
On the ground floor of these two buildings there is floor space for three large shops. When I was in Horgos, only two were open (the third was days away from completion). Both, according to their employees, were Chinese-owned (I found the two stores, World Star Duty Free and 吉祥中哈国际免税店，Propitious Sino-Kazakh International Duty Free Store, somehow neither Google- nor Baidu-able.) Both stocked exceedingly few products of Kazakh origin; a large percentage of the products were European, though some Japanese products were also present. The employees were also, based on my unscientific survey, all Chinese, though several statuesque young women told me that they were members of China’s Kazakh minority population.
The second (of two) floors of both buildings housed well-maintained, smaller shops. The situation there did not greatly add to the Kazakh presence on the Kazakh side. Though of the shops I visited only one of the shops there was actually owned by a Chinese person (I asked him if he thought this was odd; he pointed out that Chinese people start businesses everywhere), almost all of them were staffed by (seemingly Han) Chinese. The Russian presence was not small; several of the stores there sold primarily chocolate, primarily Russian in origin (one of them had a Russian owner, though it employed two Chinese) and the one Kazakh individual that I met owned a store selling rugs which he told me were made in Russia. An entire store was dedicated to ornate looking eggs said to be Pakistani in origin; anyone sympathetic to the SREB project would have to hope that the ICBC is not representative of the SREB in Kazakhstan as a whole: foreign products moving back and forth, and opportunities to exploit the increase in trade limited to those who can afford some large up-front investment (be it in floorspace, equipment, or bribes.) The result likely would be a diminishing of China’s (already flagging) popularity there.
The volume of customers in the ICBC was impressive, especially on the Chinese side (that is, visitors coming from Kazakhstan) — though here too one detected problems. Impressive as that volume was, he number of stores had clearly outpaced the number of visitors, and on both sides salespeople were confident enough that they were not going to get any business that they would leave their stalls for long periods of time. A surprisingly large number of stalls were simply deserted as well, some with notices posted on them informing their owners that they had not paid their rent.
One reason for this most likely is the duties being imposed by the Eurasian Customs Union; because any product that enters Kazakhstan is within that, and can move freely to Russia, Belarus, Kyrgyzstan, and Armenia a limit has been imposed on how much can be brought in per month. (I was told the limit was 30 kilogram a month, although this does not exhaust the arbitrary rules being applied — I was also informed by a woman selling silver jewelry that no more than four silver products could be brought into Kazakhstan. Sino-Russian talks on the subject of integrating the EEU with One Belt One Road are upcoming, though it is unclear whether customs rules will be among the topics discussed. In theory, the EEU’s duties will be coming down shortly regardless due to requirements imposed on Russia by the WTO which are now coming into effect ( link in Chinese), as well as to the eventual effect of Kazkahstan’s entry into that organization. However, some commentators are of the opinion that lower duties will be countermanded by new regulations designed to prevent access to the market in general; the WTO and Sino-Russion friendship will not necessarily be riding to Horgos’ rescue. The collapse of the Kazakh currency, the tenge, was also alluded to as a reason that business was, I am under the impression, simply terrible. A fur salesman informed me that visitors consistently negotiated prices too far down (there was an entire building filled with nothing but fur coats) and the general consensus was that visiting Kazakhs generally bought staple items and nothing else. (It was widely considered to be true, by the Chinese that I spoke to, that a large proportion of the goods sold on their side were fake, particularly the large number of imported Korean goods, though I can’t speak to the reputation of the place on the Kazakh side.)
One would not get the impression that business was less than ideal from the city beyond the ICBC, however. In fact, one would get the impression that it was booming: the city is absolutely full of the skeletons of buildings, many of which are, according to the banners draped on them, to be hotels — though the hotel that I stayed at, one of very few that was licensed to admit foreigners, seemed far from capacity.
It is true, of course, that more is going on in Horgos than the markets in the ICBC. That zone is intended to streamline cross-border trade in general, including on a less-modest scale (logistics companies may be the only things in the city that outnumber cranes) and there are industrial parks being built as well. Furthermore, the entire thing is still in its very early stages — when I arrived in Horgos they were still in the process of installing the trees that would line the road. Given time, certainly the ICBC will exert more pull than it does not. But the way that the city is being built — seemingly by fiat, as the demand clearly does not yet exist to draw in these businesses — is somewhat concerning, for what it says about the willingness of the government to rely on market forces and to move away from potentially wasteful infrastructure spending. (Pledges to do so do not see to apply where OBOR is concerned, as evidenced by this recent Washington Post article.) There are said to be 15,000 permanent residents in Horgos at the moment, with plans to accommodate 100,000 in the near future and eventually 200,000. Whether the decision is made to slow down construction if population growth does not keep pace is an open question (and in fact that decision will likely be made fairly distant from Horgos, perhaps Suzhou Industrial Park, which has been assigned to shepherd Horgos into prosperity.)
Also concerning is the makeup of the workforce in the ICBC. It’s widely accepted (and frequently stated by the government itself) that one of the primary goals of the SREB is to produce a wealthier, and therefore more harmonious, Xinjiang. Any benefits to the Uyghur community in Horgos, however, would have to be trickle down, the result of consumption by an ever-larger community of Han Chinese, many not even from Xinjiang themselves. The Uyghur presence in the north of Xinjiang actually is much lower than in the south, and so an overwhelming Uyghur presence would not be expected, but the lack of Uyghur salespeople and entrepreneurs was striking.
Though I did meet some Han Chinese from Xinjiang in the ICBC, the primary Uyghur presence there was working in the restaurants in clusters on the Chinese side. If I encountered a single Uyghur individual who owned a shop or worked as a salesperson, I am unaware of it. A very high proportion of the entrepreneurs that I did encounter had relocated from further east, and I actually met several young women who had responded to a notice online and relocated from Sichuan and Guangdong for the explicit purpose of working in a clothing shop. While I did not attempt to survey the logistics companies that are similarly benefiting from the SREB policies, I am skeptical that there would be a large Uyghur presence there, at least among their owners; Uyghur entrepreneurs are generally pushed into the informal economy by their inability, for various reasons, to secure loans from Chinese banks (1), certainly affecting their ability to acquire start-up money for such a complex undertaking, and cultural (and dietary) differences with Han Chinese tend to limit the number of Uyghurs in Han-owned businesses.
Aside from traditional Uyghur handicrafts (the presence of which I heard discussed, but cannot substantiate) little of what was sold was made in Xinjiang, either. The fur coats, from various provinces in the north of China. Various smaller goods from Guangdong. A very large number of clean, well-lighted and professionally staffed South Korean (or “South Korean”) stores supplied goods supposedly imported through Shandong. About 70 percent of the goods exported through Xinjiang were made elsewhere and I saw little evidence in Horgos that current policies are in the process of changing that. To put it simply, what I saw of the ICBC gave me no confidence that, a few restauranteurs aside, the Uyghur population would directly benefit from the program at Horgos. Almost no Uyghurs were being employed and almost no products sold had been produced in Xinjiang.
And, though Horgos is in its early stages, it is hard, in my opinion, to see how China’s much-vaunted shift to the service economy and to private investment (of which Horgos is a part) could benefit a community cut off from capital and unlikely to find employment in privately-owned Han companies — much as it is hard to imagine how the average Kazakh can benefit from, at least, the happenings within the ICBC. Only time will tell whether benefits do begin to trickle down in any meaningful way, and whether there will be a meaningful effect on the SREB’s progress if they do not.
1 As observed by Thomas Cliff in his article“Lucrative Chaos: Inter-ethnic Conflict as a Product of Economic ‘Normalization’ In Southern Xinjiang.”
