Reflections on Afghanistan’s economic development: Is China the answer? | Melbourne Asia Review

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With the Taliban re-taking control of Afghanistan in 2021, regional ties have changed and, in some cases, deepened.  Regional negotiations have been hosted by China, Russia, India, Iran, and Uzbekistan to support the fledgling regime politically and economically.

Afghanistan has been aid-dependent for the last 20 years. Following the re-emergence of the Islamic Emirate, Afghanistan is experiencing a severe economic crisis due to foreign aid being cut off and non-governmental organisations (NGOs) ceasing operations. This has resulted in increased unemployment and poverty. China, as the world’s second largest economy after the United States, is emerging as a nation which could play a prominent role in Afghanistan’s economic development.

Bi-lateral relations

Afghanistan and China have long had friendly relations. Afghanistan was one of the earliest nations to acknowledge the People’s Republic of China in January 1950. The two nations officially established diplomatic relations in January 1955.

In 1960, China and Afghanistan signed a bilateral Friendship and Mutual Non-Aggression Treaty, laying out a Cold War-era collaboration based on economic engagement. Since then, China’s primary interests in Afghanistan have been economic. The two nations referred to the Treaty as the ‘New Silk Road’, evoking narratives of their 2,100-year-old relationship. This achievement was billed in both countries as ‘a new stage in the development of friendly relations’ and ‘another example of peaceful co-existence.’

The treaty was reaffirmed in 2006, and China became involved in fostering halted peace talks between the Afghan government and the Taliban post-2014. However, Beijing was cautious about developing large-scale economic projects in Afghanistan due to the uncertain security situation there. Following the Taliban’s takeover of Afghanistan on August 15, 2021, Chinese State-owned and private enterprises began negotiating with Afghan officials in relation to investment and China’s interests there are rapidly growing.

Natural resources

Afghanistan is rich in natural resources, including oil, natural gas, copper, gold, cobalt, iron, lithium, and unique mineral wealth of up to US$1-3 trillion. Natural resources are a vital part of the country’s wealth, capable of raising government revenue, reducing poverty and minimising foreign dependency. However, Afghanistan has very undeveloped infrastructure, which makes developing wealth from its resources difficult.

Chinese state-owned companies began investing in the Mes Aynak Copper mines and the Amu Darya Basin during the tenure of former Afghan President Hamid Karzai. With the return of the Islamic Emirate, the Mes Aynak copper mines, oil extraction in the Amu Darya Basin, the construction of a $216 million industrial park in Kabul’s new city Deh Sabz, and the influx of Chinese businessmen to Kabul, have increased investment interest in Afghanistan.

Unfortunately, Chinese companies have so far been ineffective in developing Mes Aynak copper mines and a railroad—despite the Islamic Emirate’s guarantee of security, the firm has not begun extracting. Chinese companies in Afghanistan may still be skeptical about the country’s stability, which might devolve into insecurity given decades of inconsistency. In addition, Chinese state-owned and private firms are prudent and reluctant to take financial risks.

The Islamic Emirate and China must classify and prioritise Afghanistan’s investment potential. To mitigate donor dependency, the Afghan side must choose several sectors for Chinese investment to create jobs and infrastructure, leading to economic progress.

China’s Belt and Road Initiative (BRI)

The BRI could help pave the way for Afghanistan’s economic progress by increasing intra-regional trade. As part of the BRI, access to overseas markets of major energy consumers, most notably China, would support investment in Afghanistan’s oil and gas sectors. Additionally, Afghanistan might gain by serving as both an energy supplier and an energy transit port amongst energy markets in Central Asia and South Asia. Transmission of surplus energy through Afghanistan could help fill the seasonal energy gap in Central and South Asian nations. Integration into the BRI’s electrical transmission infrastructure could stabilise the erratic nature of the Central Asian electricity supply.

Afghanistan’s effective contribution will be dependent not just on improved infrastructure, but also on addressing the unique difficulties of low agricultural production and lack of industrialisation. To take advantage of BRI-facilitated connectivity, the government needs to pursue structural economic modification, with a special emphasis on domestic agriculture and industries. This would not only stimulate economic growth but also lessen Afghanistan’s reliance on imports and improve the country’s trade balance. Afghanistan must try to enter the global agricultural value chain by extending its goods and facilitating high-value cash crops such as saffron to significant markets in the Middle East and South Asia. This will equip the government to raise revenue through high-value-added exports. Additionally, BRI can help stabilise Afghanistan and enable sustainable development. It also has consequences for regional security because it seeks to address and improve the flaws of the conventional development aid model.

Afghanistan must also attempt to enhance relations with neighboring countries to solve issues in regard to cross-border trade and transit. The BRI has several problems, not the least of which is the scarcity of bilateral and multilateral agreements that facilitate international trade. To attract foreign investors, Afghanistan must liberalise and harmonise rules governing foreign investment with international norms.

Afghanistan has the potential to play a significant role in transit and trade, but its under-developed road and rail networks are holding it back. Possibly, China has not prioritised infrastructure in Afghanistan because no land corridor of the BRI crosses through Afghanistan: both the China-Pakistan Economic Corridor and the China-Central Asia-West Economic Corridor bypass it. The former Afghan government, due to its weak governance, failed to convince China to integrate Afghanistan into either corridor. Chinese enterprises have also stated that the ability to carry out BRI-announced projects in Afghanistan has been due in large part to the unstable security and political situation. It is critical that the Afghan government urges China to implement BRI projects relating to Afghanistan and also encourages other countries to develop other regional initiatives.

Afghanistan may play a significant role in regional integration due to its unique strategic location. Afghan officials have promised the Chinese government and other regional states that they will facilitate the implementation of the New Silk Road and other projects and investments. The Taliban’s contacts with Chinese officials before the fall of Ashraf Ghani’s government, as well as the Chinese Foreign Minister Wang Yi’s visit to Kabul, highlight the two sides’ tight ties.

Afghan foreign policy

Afghan foreign policy is centered on the economy to attract overseas investment. Acting Foreign Minister Amir Khan Muttaqi stated at a meeting on Afghanistan in China that the country has pursued a balanced and economic-oriented approach. Likewise, Mullah Abdul Ghani Baradar, deputy Prime Minister and head of the economic commission, said during a meeting of the economic commission in Kabul that economic growth is their top priority and that they are trying to eradicate poverty and unemployment.

Afghanistan must try for the best possible relations with the US and China. This will require a nuanced approach to many issues, including relations with Pakistan where regime change is altering its relationship with the US. The closeness of Afghanistan to China does not mean that the United States must be abandoned; rather, it means that Afghanistan can benefit from US support, which will help the Emirate acquire global recognition. Instability is a major concern for all Afghanistan’s neighbors, so Afghanistan should not isolate itself from the rest of the world and accept conditions for inclusion in the international community.


If the Islamic Emirate aspires to center foreign policy on economic principles, it should aim to emulate China’s open-door policy in the 20th century and pave the way for capital inflow, such as in the UAE, so that investors can operate in a safe environment. Afghanistan’s regional connectivity can allow South Asian states to make use of Afghanistan’s geographic location to realise their historical aim of linking with Central Asia.

Undoubtedly, the US’ continued sanctions against Afghanistan will push Emirate authorities to shift toward China and boost economic and trade ties, as well as encourage Chinese state-owned and private firms to invest in Afghanistan. Given China’s proximity to Afghanistan and its status as the world’s second-largest economy, the Islamic Emirate needs to seize opportunities in the region by maintaining a balance in its foreign relations. China’s involvement should not be the start of a new regional rivalry, but rather a gateway to a prosperous and economically developed Afghanistan. Ultimately, if China invests, Afghanistan’s economic status might improve in the medium term, which is crucial to overall regional stability.


Imran Zakeria is a researcher at the Regional Studies Center, Academy of Sciences of Afghanistan. He can be reached at

Image: Mes Aynak copper mine, 2011. Credit: Jerome Starkey/Flickr. This image has been cropped.


Afghanistan China economic development regional security regional stability USA