Chinese businesses make headway in Afghanistan despite Beijing’s cautious approach to Taliban


When the Taliban retook control of Kabul a year ago following the withdrawal of US troops from Afghanistan, Yu Minghui was one of the very few Chinese businessmen who decided to stay put. Since then, Yu has had to embrace changes enforced by the country’s new rulers, deal with officials who have replaced those in the previous US-backed government, and renegotiate projects that have been in the works for years. As part of crippling sanctions imposed on the Taliban by the United States, US$9.5 billion in Afghan assets were frozen. That has led to restrictions on bank withdrawals, with Afghans allowed to withdraw no more than US$400 a week from their accounts. But Yu’s decision seems to have paid off. Four steel processing lines his factory installed last year are in operation, and local security officials visit China Town, a 10-storey building that he runs, from time to time “to listen to the needs of the Chinese merchants”. But Beijing appears to be adopting a cautious approach to relations with the Taliban and has repeatedly called on it to make more progress in combating terrorism, building an inclusive government and protecting the rights of women and children.

Like the rest of the world, Beijing has not formally recognised the Taliban government, though Chinese diplomats, including ambassador Wang Yu, frequently meet senior Taliban officials in Kabul. Representatives from state-owned companies have also visited the Taliban’s embassy in Beijing, which was opened earlier this year, to discuss investment opportunities and reconstruction plans.

“The Taliban is not just saying that they are supportive; they are actually supporting our work,” said Yu, who has been in business in Afghanistan since 2001 and also heads the China Arab Economic and Trade Promotion Committee. “There are not many foreign investors here, and these officials know who can be trusted.” That trust was demonstrated in late April when, after months of renegotiations, the Taliban government approved a joint project to develop a US$216 million industrial estate on the outskirts of Kabul. The first Sino-Afghan infrastructure project since the Taliban returned to power, it is expected to host up to 150 factories. Yu said he was betting on the future of Afghanistan, which has been plagued by war since 1978. “The country is lagging behind, and the ruined cities needed rebuilding,” he said. “That requires everything from engineers and money to skills, and I think China has the advantages.”

But Beijing appears to be adopting a cautious approach to relations with the Taliban and has repeatedly called on it to make more progress in combating terrorism, building an inclusive government and protecting the rights of women and children.

Like the rest of the world, Beijing has not formally recognised the Taliban government, though Chinese diplomats, including ambassador Wang Yu, frequently meet senior Taliban officials in Kabul. Representatives from state-owned companies have also visited the Taliban’s embassy in Beijing, which was opened earlier this year, to discuss investment opportunities and reconstruction plans.

China has advocated a multilateral approach to engaging with the Taliban, joining other neighbours of Afghanistan – Pakistan, Turkmenistan, Uzbekistan and Tajikistan – as well as the US and Russia. But Foreign Minister Wang Yi made an unannounced stopover in Kabul in March during a whirlwind four-day tour of South Asia.

Zhu Yongbiao, a professor at the Centre for Afghanistan Studies at Lanzhou University in Gansu province, said the cautious approach reflected Beijing’s concerns about political uncertainty in Afghanistan.

Some had questioned whether the Taliban would honour its commitment to sever links with terrorist organisations including the East Turkestan Islamic Movement, which Beijing has long accused of promoting separatism in the Xinjiang Uygur autonomous region, while others had expressed concerns that violence linked to sectarian and ethnic tensions in Afghanistan could spill over to Pakistan and threaten infrastructure funded and built by China under the US$62 billion China-Pakistan Economic Corridor project.

“A multilateral approach is more stable,” Zhu said. “Meanwhile, neighbours usually share common concerns such as security and terrorism, which are not the same as those of the US and Europe.”

The Taliban hopes Chinese investment can turn Afghanistan’s rich and untapped natural resources into revenue to salvage the country’s collapsing economy. According to official figures, Afghanistan has reserves of more than 2.2 billion tonnes of iron ore, 30 million tonnes of copper and 1.4 million tonnes of rare earth minerals.

But Zhu said China’s need for Afghan minerals had been exaggerated.

“Meanwhile, China has been wary of the lessons learned by the US and the Soviet Union and has been very cautious when assessing possible risks,” Zhu said, adding that could also explain why the Chinese embassy in Kabul had repeatedly warned against “blind investment” in the country.

Still, China’s economic influence in Afghanistan is steadily expanding – it is the country’s third-largest trading partner after Pakistan and Iran – and after the US’ chaotic pull-out, China has sent several rounds of humanitarian and financial assistance to Afghanistan.

China resumed the importation of Afghan pine nuts – a major source of income for farmers – in November, and Beijing said last month that 98 per cent of Afghan exports to China would be exempted from import duties from this month.

In a meeting in Kabul on Wednesday, ambassador Wang Yu told Shahabuddin Delawar, the Taliban’s minister for mining and petroleum, that exploration and extraction at the Aynak copper mine would start soon, according to the Taliban-affiliated Bakhtar News Agency.

Aynak, the biggest copper mining project in Afghanistan, was awarded to China’s state-owned China Metallurgical Group in 2007 but no progress has been made since then.

Dealing with an interlocutor such as the Taliban was never easy, said Raffaello Pantucci, a senior fellow at the S. Rajaratnam School of International Studies in Singapore.

“It is not clear how cohesive they are, nor how much they control the whole country,” he said. “As a result, China is dealing with a counterparty who is nominally in charge, but the limits of this power are hard to gauge and therefore it is hard to know how much they are able or unable to deliver, or how much they are not doing something because they do not want to. This is, I suspect, China’s biggest frustration.”

Pantucci said Beijing might be “a bit frustrated” over the slow progress the Taliban government had made, including its failure to create an inclusive government. Still, it was left with few choices and had to “adapt to dealing with the hand it has been dealt”.

There could also be growing “paranoia” in Beijing that Afghanistan might “become a place where great power conflict and clashes with India and the US come into play”, he added.