Analytical Essay

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China’s Cement Industry Expands along Silk Road
With Special Reference to Hauxin Co Ltd.’s Investment in Tajikistan
Sharifullah Danesh
China’s Aid and Investment in Central Asia
Mr. Dirk Van Der Kley
February 28, 2016

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Introduction
Silk Road is a significant factor in the development of socio-economic relationship
between China and Central Asian countries starting from barter economy of silk evolved now
to trading in energy and infrastructure. “Since the collapse of the Soviet Union, China and its
Central Asian neighbors have developed a close relationship, initially economic but
increasingly also political and security. Energy, precious metals, and other natural resources
flow into China from the region. Investment flows the other way, as China builds pipelines,
power lines and transport networks linking Central Asia to its north-western province, the
Xinjiang Uighur Autonomous Region. Cheap consumer goods from the province have
flooded Central Asian markets”1. According to IMF data in 2013, trade between China and
Central Asia has risen from 2 billion US dollars in 2000 to 50 billion dollars in 2013. Most
recently China has been expanding its cement industry along the Silk Road.
China, world’s largest cement producer with a production capacity of 3.2 billion ton
per year is a growing industry which makes 60% of the world’s cement is expanding its
production wings along the Silk Road in Central Asian countries of Kazakhstan, Kyrgyzstan,
Uzbekistan and Tajikistan. Notably Hauxin Cement Co Ltd has plants in Kazakhstan and
Tajikistan, China's Jilong Group wants to build a 0.8Mt/yr plant in Issyk Kul, Kyrgyzstan and
according to Global Cement there will be further Chinese investment, this time by Shangfeng
Cement. It has announced financing for two new plants: in Tajikistan and Uzbekistan. Both
are set to be 1.2Mt/yr facilities. “The steady rise of the Central Asian cement sector and the
increasing international activities of Chinese cement plant manufacturers have been 'on the
cards' for years. To date, they have been trends waiting to happen, but 2015 looked to be the
year that these factors finally combined and translated into large numbers of projects. For
Central Asian countries the prospects that come with a larger and more dynamic cement
industry should enable greater independence, accelerated infrastructure development and
1 International Crisis Group, “China’s Central Asia Problem”, Asia Report No 244, page i, Published
February 13, 2013, accessed January 20, 2016, http://www.crisisgroup.org/~/media/files/asia/north-east-
asia/244-chinas-central-asia-problem.pdf

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economic growth. For the Chinese, setting up cement plants in Central Asia is a natural
expansion of its multi-billion dollar activities”2.
According to data of the Ministry of Energy and Industry (MoEI) of Tajikistan in
2013, Tajikistan’s annual requirements in cement were 3 million tons. Tajikistan used to
import some 1.7 million tons of cement per year from Pakistan. Iran and Kazakhstan also
used to provide a large part of Tajikistan’s cement imports, while domestic cement
production has considerably decreased in recent years. Tajikistan’s largest cement plant
Tojikcement (Dushanbe cement plant), which has a cement production capacity of 1.1Mt/yr,
has not been operational since the beginning of 2013 due to a lack of natural gas supplies.
Currently there are five cement plants operating in Tajikistan with a combined cement
capacity of 1.3Mt/yr3. Chinese investors found the opportunity and gap in the industry and
thereby invested by building production plants inside the country. Since 2013 the number of
production plants increased to ten.
“According to reports, Tajikistan’s Ministry of Industry and New Technologies has
announced that six new cement plants will enter operation in the next two years. This will
add to the existing ten cement plants in the country; the additional capacity will turn
Tajikistan from a cement importer to an exporter of cement. Construction has already begun
on Tajikistan-China joint venture, Tajchina, which is expected to start up in 2015 with a
capacity of 1.2 million t. The other cement plants are planned for Dangara, Bobokon,
Gafurov and Isfara districts, and Istiklol city. Currently, the country’s largest cement plant is
Huaxin Gayur Cement Co., a joint venture between a subsidiary of Huaxin Cement Co. and
Gaur Limited Liability Company”4.
2 Edwards, Peter, “China Producers and Plant builders have arrived”, Global Cement Article, published
September 30, 2015, accessed January 23, 2016, http://www.globalcement.com/news/item/4185-chinese-
producers-and-plant-builders-have-arrived
3 Ergashiva, Zrina, “Cement major Pakistan’s export to Tajikistan”, Published July 6, 2013, Accessed
Jan 31, 2016, http://news.tj/en/news/cement-major-pakistan-s-export-tajikistan
4 Guenioui, Katherine, World Cement News, “Six new cement plants for Tajikistan”, Published Jan
14, 2015, Accessed Jan 31, 2016, http://www.worldcement.com/europe-cis/14012015/Six-new-cement-plants-
for-Tajikistan-140/

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Body
Hauxin Cement Co Ltd was founded in 1907. It is one of China’s leading companies
in the cement industry with more than 100 production plants in the country and abroad with
total production capacity of 70 million ton per annum. Total capital exceeds 40 billion USD
with annual sales of 2.5 billion USD. The Company also provides cement-related technical
service, installs and maintains cement production equipment, and imports and exports cement
and other building materials.
HuaXin Cement Co., Ltd started to make investment in Tajikistan in 2011. In
September 2013, Huaxin Zhongya Investment (Wuhan) Co Ltd, the subsidiary of Huaxin
Cement Co Ltd and Gayur Limited Liability Company of Tajikistan invested in the cement
industry of Tajikistan throughout a joint venture of 75% shares devoted to Hauxin and 25%
of shares are owned by Gayur Ld. They built the first production plant worth 110 million US
dollars in Yovon district of Khalton province with the production capacity of 1 million ton
per year. The plant is coal-powered enterprise produces two types of cement – M-400 and M-
500. The plant has been running successfully for more than two years, contributing to local
employment, tax, advanced technology, etc and bringing HuaXin new development
opportunities as well.
Hauxin Co Ltd has already started building two more production plants worth 250
Million USD in Bobojon Ghafurov with production capacity of 1 million ton per annum and
another in Dangara Free Economic Zone with production capacity of 1.2 million ton per year.
The accord has been signed between the parliament of Tajikistan and Hauxin Co Ltd.
“Tajikistan will reportedly hold a 30% stake in the Bobojon Ghafurov plant and a 45% share
of the Dangara plant”5. By this the company will turn to produce oval 3.5 million ton per
year.
There are various reasons the Chinese cement industry is expanding in the region and
targeted Tajikistan as their hub. Firstly, the increasing demand of public and commercial
5 Fordham, Louise, World Cement, “Agreement for two new cement plants for Tajikistan”, Published
Feb 12, 2015, accessed Feb 3, 2016, http://www.worldcement.com/asia-pacific-rim/12022015/Tajikistan-and-
Huaxin-Cement-sign-agreement-for-two-new-cement-plants-320/

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infrastructure in Tajikistan i.e construction of the Roghun hydroelectric power plant,
construction of Khujand – Dushanbe highway including the tunnels, construction of world’s
largest flagpole, Asia’s largest library and biggest museum and construction of the Tea-
House (чайхана), construction of parks and theaters, construction of KASA 1000 electricity
project, rehabilitation of Drainage system, renovation of water pipes and construction of
canals and other national infrastructure projects plus the increasing demand in commercial
plots and apartment buildings have sharply increased the demand for cement in the country.
Tajikistan cement industry could produce and respond only half a million ton per year from
the available plants in the country out of 3.2 million ton demand. Tajikistan imported cement
in large quantities from Pakistan, Iran and China. Chinese investors found the gap as an
opportunity to invest in the country.
Secondly, the internal demand of China for cement plants has collapsed due to the
government new strategies for cement industry in order to prevent the emission of pollution
and the slowdown of Chinese housing market noticeably6. “The Chinese government is
moving to cut production. Beijing plans to consolidate the 2,500 companies and 3,650 plants
within its borders to 1,500 companies and 2,500 plants in three years, reports show. Officials
will eliminate old-fashioned, smaller-sized manufacturing equipment and limit additional
installations. China, which makes 60% of the world's cement, produced 2.47 billion tons in
2014 Chinese cement production fell by 4.9% to 2.35Bt/yr in 2015”7. Due to the reasons
(collapse in the demand and the government’s policy) Chinese investors are seeking
alternative markets and environment to maintain their businesses, Tajikistan a relatively
small, but fulfilling the current need of Chinese cement industry. Hauxin has also been
affected by the situation in China; therefore it was a good opportunity to place at least some
of their plants in neighboring countries and resume the business.
6 Perli, David, Global Cement, “Has China’s cement production peaked?”, Published January 20, 2016,
accessed February 7, 2016, http://www.globalcement.com/news/item/4533-has-china-s-cement-production-
peaked
7 Nikkei, Asia Review, “China's soft cement market could spill into rest of Asia”, Published October
17, 2015, accessed February 7, 2016, http://asia.nikkei.com/Markets/Commodities/China-s-soft-cement-market-
could-spill-into-rest-of-Asia

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Finally, the projects are derived on the basis of China’s foreign policy and peaceful
coexistence principles. The relation hints back to China’s north-western region of Xinjiang
and domestic ethnic and security tensions there. Since the region is bordered with Central
Asian countries, the security and stability in Central Asia matter a lot to China not only for
the safety and protection of its own investments in the region but also because of the almost
inevitable spillover effects that insecurity and instability might have within China’s north-
western region of Xinjiang. Around two hundred thousand Uighurs live in Central Asia, but
that is not the problem. The problem could spill over indirectly from Afghanistan to Central
Asia, as the Islamic movement of Uighurs (Turkistan Islamic Party) is hosted by terrorist
groups in the border between Pakistan and Afghanistan. Not only TIP, but also other terrorist
groups from Central Asian countries. They are all potential threat to China throughout
Central Asian countries bordered with Xinjiang.
According to China’s economic development policy (non-physical intervention
policy) to eradicate extremism and fight against terrorism in the region in order to prevent the
spill over to China, Government of China supports the regions throughout economic growth.
“Security is often seen from the prism of development: underdevelopment generates
insecurity and instability and is a root cause of conflict, or in other words, investing in
development offers the best guarantee for promoting security”8. In short high unemployment
and consistent poverty can generate terrorism and provoke extremism or create other social
syndromes in any region. Therefore Chinese foreign policy aims to prevent them by investing
in the region and creating employment, growing economy of both China and Central Asia as
means of “win-win” policy. The investments in Tajikistan are also convinced by the policy.
According to statistics, Tajikistan has attracted 2.659 billion U.S. dollars by the end of June
in 2014. China has become Tajikistan’s second largest investor with an investment amount of
467 million U.S. dollars9.
8 Mariani, Bernardo, “China’s role and interests in Central Asia”, Published October, 2013, accessed
February 7, 2016, http://www.saferworld.org.uk/downloads/pubdocs/chinas-role-and-interests-in-central-
asia.pdf.
9 Huifang, Mao, Hubei, “HuaXin Cement Co., Ltd expands investment in Tajikistan”, published
September 15, 2014, http://en.hubei.gov.cn/news/newslist/201409/t20140915_526341.shtml

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Moreover, the projects are derived into the region due to some additional causes,
which one cannot neglect them. The availability and easy access to the resources for the
production of the cement, inexpensive labor and production costs are among factors
convinced the business owners to invest in the country. Tajikistan being a landlocked was
another advantage for investors for long-term production plans to improve the capacity and
further re-export its access production to neighboring countries and use Tajikistan as re-
export hub in the region. Eventually it was also due the efforts made by Ministry of Industry
and New Technology of Tajikistan and the leadership of Hauxin Co Ltd, that they proved a
good corporate governance to take the initiative in the country.
Conclusion
Since the collapse USSR and independence of Central Asian countries in 1990s China
has endeavored to strengthen its relations with the five Central Asian states of Kazakhstan,
Turkmenistan, Uzbekistan, Kyrgyzstan, and Tajikistan. China’s increased engagement in the
region presents many opportunities. Chinese trade improved from 2 billion to 50 billion with
these countries and China became the most prominent economic actor and one of the main
sources of investment in the region. Today; a considerable network of roads, railways, air
flights, communication, and oil and gas pipelines connects China to Central Asia. 10
Tajikistan at the back doorstep of Central Asia to connect China with Afghanistan
with south and Southeast Asian countries became a hub for Chinese investment of Hauxin Co
Ltd. The company could be turned to regional cement provider by taking the advantage of
Tajikistan as landlocked country connecting CA to Afghanistan. The investment turned the
country from importing to an exporting country in the cement Industry. Iranian cement and
Pakistan cement products already stopped exporting their cement to Tajikistan. Never the
less, Tajikistan became an exporter to Afghanistan.
Hauxin Co Ltd could substitute Pakistani cement in Afghanistan especially in
Northern and Northern-east provinces of Afghanistan. The prices of one ton Pakistani
10 Mariani, Bernardo, “China’s role and interests in Central Asia”, page 1-3, Published October, 2013, accessed
February 7, 2016, http://www.saferworld.org.uk/downloads/pubdocs/chinas-role-and-interests-in-central-
asia.pdf.

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Cement in northern east provinces of Afghanistan is above 100 USD (depending on different
types), while Hauxin Co Ltd signed a contract with Shamal Sharq (Afghani Trading
company) to export the cement, which is of same quality as Pakistani cement at the rate of
65$ per ton. Currently the export is on low level and the market need for northern east
provinces is around 2 million ton per year, therefore Hauxin is looking for more traders to
import the cements on high level of amount to the region.
On the other hand, the cement from Tajikistan could further be exported to
Uzbekistan by two routes, one directly from Tajikistan to Uzbekistan through Regar by 12
hours of road and the other from Shirkhanbandar (border between Afghanistan and
Tajikistan) to Hairatanbandar (border between Afghanistan and Uzbekistan) and then to
Termiz and so on. The idea is, Afghanistan has planned to build railroad between these two
borders (from Shir-Khanbandar to Hairatan Bandar) and in Hairatan there is already a
railroad build between Afghanistan and Uzbekistan, this would be shortest and cheapest way
to export the Hauxin cement through transit to Uzbekistan. By implementing such exporting
strategies Hauxin would be able to capture market share of Pakistani and Irani cement in the
region and maximize its profit.

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Bibliography
Edwards, Peter,“China Producers and Plant builders have arrived”, Global Cement Article, published
September 30, 2015, accessed January 23,2016,
http://www.globalcement.com/news/item/4185-chinese-producers-and-plant-builders-have-
arrived
Ergashiva, Zrina, “Cement major Pakistan’s export to Tajikistan”, Published July 6, 2013, Accessed
Jan 31, 2016, http://news.tj/en/news/cement-major-pakistan-s-export-tajikistan
Fordham, Louise, World Cement, “Agreement for two new cement plants for Tajikistan”, Published
Feb 12, 2015, accessed Feb 3, 2016, http://www.worldcement.com/asia-pacific-
rim/12022015/Tajikistan-and-Huaxin-Cement-sign-agreement-for-two-new-cement-plants-
320/
Guenioui, Katherine, World Cement News,“Six new cement plants for Tajikistan”, Published Jan 14,
2015, Accessed Jan 31,2016, http://www.worldcement.com/europe-cis/14012015/Six-new-
cement-plants-for-Tajikistan-140/
Huifang, Mao, Hubei, “HuaXin Cement Co., Ltd expands investment in Tajikistan”, published
September 15, 2014, http://en.hubei.gov.cn/news/newslist/201409/t20140915_526341.shtml
International Crisis Group, “China’s Central Asia Problem”, Asia Report No 244, page i, Published
February 13, 2013, accessed January 20, 2016,
http://www.crisisgroup.org/~/media/files/asia/north-east-asia/244-chinas-central-asia-
problem.pdf
Mariani, Bernardo, “China’s role and interests in CentralAsia”, Published October,2013, accessed
February 7, 2016, http://www.saferworld.org.uk/downloads/pubdocs/chinas-role-and-
interests-in-central-asia.pdf.
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accessed February 7,2016, http://www.saferworld.org.uk/downloads/pubdocs/chinas-role-
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Nikkei, Asia Review, “China's soft cement market could spill into rest of Asia”, Published October
17, 2015, accessed February 7,2016, http://asia.nikkei.com/Markets/Commodities/China-s-
soft-cement-market-could-spill-into-rest-of-Asia
Perli, David, Global Cement, “Has China’s cement production peaked?”,Published January 20, 2016,
accessed February 7,2016, http://www.globalcement.com/news/item/4533-has-china-s-
cement-production-peaked