China and Afghanistan have taken a major step toward closer relations in recent weeks.

At the beginning of June, Afghan President Hamid Karzai traveled to Beijing to attend a summit meeting of the Shanghai Cooperation Organization. At that time the organization's members agreed to upgrade Afghanistan to observer status, on a par with Iran, India, and Pakistan. This means that henceforth Afghanistan will be automatically included in the annual summit, giving Kabul an opportunity to develop closer ties with member states?most particularly China.

Karzai also met with Chinese President Hu Jintao during his visit. During their talks, the two concluded a strategic partnership and agreed to continue strengthening bilateral ties.

In the wake of this diplomatic activity, some Japanese observers have voiced fears that China is positioning itself to become a major player in Afghan affairs after the withdrawal (by the end of 2014) of US combat troops and others participating in the International Security Assistance Force. Are such concerns justified?

As the July 8 Tokyo Conference on Afghanistan has just been held, now is an excellent time to consider the state of the China-Afghanistan relationship and its significance for Japan, which likewise seeks closer ties with Afghanistan. Here I offer a brief survey and assessment of relations between Afghanistan and the People's Republic of China, together with a few words on how Japan should proceed henceforth.

A Half-Century of Off-and-On Relations

The People's Republic of China and Afghanistan first established diplomatic ties in 1955, before the PRC was recognized by the United Nations. Premier Zhou Enlai visited Afghanistan in 1957, and the two nations concluded a trade agreement. Over the next few years Beijing and Kabul built a foundation for friendship, with a mutual nonaggression treaty in 1960 and a boundary treaty in 1963.

The next turning point in the relationship came in 1979, with the Soviet invasion of Afghanistan. China refused to recognize the government of Babrak Karmal, installed under Soviet intervention. Although the Chinese embassy remained open under an acting charge d'affaires, diplomatic relations between Beijing and Kabul were all but suspended.

In 1989, Soviet forces withdrew from Afghanistan. When mujahideen guerilla factions installed a new government in 1992, there were signs that the two countries were prepared to normalize relations. But civil war quickly intervened. As armed conflict erupted in Afghanistan, Beijing recalled its embassy staff (primarily out of safety concerns), and diplomatic ties between the two countries were broken off entirely.

A Decade of Stable Ties

Resumption of official relations had to await the establishment of the Afghan Interim Authority following the US-led operation that toppled the Taliban regime in response to the terrorist attacks of September 11, 2001. Appointed head of the new interim government in December 2001, Karzai wasted no time visiting Beijing in January 2002. He quickly secured a pledge from President Zhang Zemin and Premier Zhu Rongji for 30 million yuan (equivalent to about $3.6 million at the time) in emergency supplies, as well as financial aid totaling $1 million. [1] China also announced $1.5 million in grant assistance to Afghanistan over five years, beginning in 2002. (Initially, half of that amount was to consist of loans, but Beijing subsequently decided to provide the entire package in the form of grants.)

Since then, China has announced and delivered one aid package after another to Afghanistan. In 2004, it wrote off 9.6 million pounds in Afghan government debt. It also announced grant assistance of $15 million in 2005, further grants totaling 160 million yuan (about $20 million at the time) in 2006 and 2007, and another 50 million yen (then about $6 million) in grant aid in 2008.

In addition to providing government aid to Afghanistan, China has also emerged as an important economic partner. In the 2010-11 fiscal year, the volume of trade between the two countries totaled $373 million. By the end of April 2010, China had invested a total of $123 million in a variety of projects, including mining, communications, and road construction.

In 2007, the state-owned China Metallurgical Group Corporation won a contract to mine one of the world's largest copper deposits, located in Aynak, just south of Kabul. In 2011 another state-run enterprise, CNPC (China National Petroleum Corporation), won rights to drill for oil and natural gas in three fields in the northeastern provinces of Faryab and Sari Pul.

China-Afghanistan Relations in Global Context

Combined with these signs of growing economic interdependence, recent moves to strengthen political and security ties between China and Afghanistan—as mentioned in the first part of this article—have raised concerns among some that Afghanistan may be falling under under China's sway. As things stand now, however, China's role in Afghan affairs is by no means prominent compared with that of other countries.

In trade, for example, China is only the sixth-largest market for Afghan exports, following Pakistan, India, Turkey, Iran, and Russia, according to Afghanistan Statistical Yearbook 2010 . As a source of imports, China looms larger, occupying the number two spot, after Uzbekistan. But Japan is not far behind, at number four (following Pakistan). According to Japanese Ministry of Finance figures, Japanese exports to Afghanistan in 2011 totaled approximately 9 billion yen (about $110 million), although Japanese imports from that country amounted to a mere 40 million yen.

Moreover, China's promised and actual aid to Afghanistan, while worthy of note, is by no means remarkable when compared with that of other donors. The United States is far and away the top donor of foreign aid to Afghanistan, having provided a full $9.3 billion in official development assistance from 2005 to 2009, according to the OECD's DAC statistics. Other major Western benefactors are Britain, Canada, and Germany, each of which provides somewhere between $200 million and $300 million annually.

But the Japanese government has also played a key role, supplying approximately $4 billion in ODA to Afghanistan since 2001. In 2009, Tokyo announced a five-year aid package totaling approximately $5 billion, divided between assistance for upgrading Afghanistan's police forces, support for social rehabilitation of ex-Taliban soldiers, and economic and social development projects. About $2.5 billion of that has already been spent.

Challenge for Japan

As the foregoing suggests, China's role in Afghanistan today is a distinctly secondary one compared with that played by the United States, Europe, and Japan.

It is worth noting that Japan's official relationship with Afghanistan is of considerably longer duration than that of the PRC, extending back to the bilateral friendship treaty signed in 1930, before World War II. More recently, the Japanese government—which just hosted the Tokyo Conference on Afghanistan in July—has played a proactive and prominent role in Afghanistan's reconstruction. As a player in Afghan affairs, Tokyo has no reason to worry about being eclipsed by Beijing.

Unfortunately, the same cannot be said on the business front. While Japan holds a clear lead when it comes to government aid, Chinese companies have been far more active in pursuing direct investment, particularly in the area of mineral and energy resources.

Of courses, the reluctance of Japanese companies to commit to a country that has yet to achieve political stability is shared by their counterparts in Europe and North America. But the economic and social development of Afghanistan henceforth depends very much on whether businesses are willing to pick up where government aid leaves off. This was doubtless what Afghan President Karzai had in mind when he told Foreign Ministry adviser Sadako Ogata, during her visit to Afghanistan in late June, that Afghanistan needs investment by Japanese business if it is to take advantage of the economic opportunities presented by Tokyo's largesse. Surely his plea embodies the hopes and expectations of Afghanistan as a whole.

[1] These and other statistics regarding Chinese aid, trade, and investment vis-à-vis Afghanistan were supplied by the Embassy of China in Afghanistan. See http://af2.mofcom.gov.cn/.