Making inroads: China's New Silk Road initiative.

Author:Guluzian, Christine R.
Position:Report
 
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China's New Silk Road initiative is a multistate commercial project as grandiose as it is ambitious. Comprised of an overland economic "belt" and a maritime transit component, it envisages the development of a trade network traversing numerous countries and continents. Major investments in infrastructure are to establish new commercial hubs along the route, linking regions together via railroads, ports, energy transit systems, and technology. A relatively novel concept introduced by China's President Xi Jinping in 2013, several projects related to the New Silk Road initiative--also called "One Belt, One Road" (OROR, or B&R)--are being planned, are under construction, or have been recently completed. The New Silk Road is a fluid concept in its formative stages: it encompasses a variety of projects and is all-inclusive in terms of countries welcomed to participate. For these reasons, it has been labeled an abstract or visionary project. However, those in the region can attest that the New Silk Road is a reality, backed by Chinese hard currency. Thus, while Washington continues to deliberate on an overarching policy toward Asia, Beijing is making inroads--literally and figuratively-across the region and beyond.

An Ancient Trade Network Modernized

The New Silk Road is a modern-day revival of the ancient Silk Road initiated under the Western Han dynasty. The original network opened up various regions to trade by land and by sea, until advancements in maritime transport ultimately rendered land routes economically uncompetitive.

The Silk Road route traversed lands called xi yu, or "western regions." These lay to the west of the Yumen Pass and include today's Xinjiang region as well as Central Asia, both considered strategically significant from at least the 3rd century BC. In its broadest sense, xi yu encompassed areas further to the west and as far reaching as the Indian subcontinent, Europe, the Middle East, and Africa.

As is the case with most revivals, China's New Silk Road takes certain notions from the original while adapting to the present-day circumstances. Most notably, the New Silk Road initiative places emphasis on "hard" infrastructure projects (i.e., construction of roads, railways, and energy pipelines) as well as "soft" (or "smart-iron") projects such as e-commerce platforms. Trucks, trains, and pipelines carrying cargo and crude are thus to replace caravans of camels laden with silk and amber.

Another modern aspect of the New Silk Road initiative is the institutionalization of its funding mechanism. Namely, Beijing established a purpose-built $40 billion Silk Road Fund in December 2014 to support investments as part of the New Silk Road, pooling together resources from the State Administration of Foreign Exchange, the China Investment Corporation, the Export-Import Bank of China, and the China Development Bank. Beijing has also initiated a multinational funding; body: the $100 billion China-initiated Asian Infrastructure Investment Bank (AIIB)--boasting 57 members including Germany, the United Kingdom, France, and Russia, but not the United States--is a development bank allocating funds for infrastructure construction projects as part of the New Silk Road. However, even China's state coffers are insufficient to meet the over $1 trillion cost associated with the New Silk Road. To bridge the gap, international and regional development banks (such as the European Bank for Reconstruction and Development, the Asian Development Bank, and the World Bank), host governments, and private-sector actors are also providing financing.

Assessing "Win-Win"

China is marketing its New Silk Road initiative as a "win-win" (shuang ying) scenario for all partners involved. For Beijing, benefits come in the form of a boost to the domestic economy by offsetting industrial overcapacity and opening up new markets abroad for China's new consumer-driven growth model. This is of particular importance as China adjusts to a "new normal" of single-digit growth following decades of double-digit growth. The project will also deliver greater energy security for China by providing alternate hydrocarbon transport routes aside from those it traditionally depends upon, such as the Strait of Malacca and the South China Sea. Additionally, a core aim of the New Silk Road initiative is to close the investment gap between the east and west of China in an attempt to equalize regional disparities in economic development. Economic growth is also seen as a remedy to counteract ethnic separatism in certain regions, namely Xinjiang province. All of these factors allude to a strong domestic imperative behind the New Silk Road initiative. At a time when China is undergoing a massive reform program, the New Silk Road initiative is therefore heralded as a vital component of China's evolving economic and foreign policy. In fact, it is a project mainly under the purview of the National Development and Reform Commission (NDRC).

For host governments, the New Silk Road initiative is projected to foster development in otherwise economically marginalized regions or countries. For instance, Pakistan's president has lauded the China-Pakistan Economic Corridor component of the New Silk Road as a "monument of the century" (Iftikhar 2016) benefiting billions of people in the region through the construction of new roads, an 1,800-kilometer railway line, oil pipelines, and a multibillion dollar port at Gwadar. The New Silk Road also brands itself as an all-inclusive project, thereby benefiting emerging economies as well as established ones: a remote village on the outskirts of Kyrgyzstan could stand to gain economically as much as a European Union member-state. Germany and Poland are building key New Silk Road-related dry ports and corresponding industrial zones, for instance (Shepard 2016). Thus, on the one hand, for host governments, the New Silk Road represents an opportunity for job creation, infrastructural and economic development, and becoming a part of the global supply chain. On the other hand, the local content aspect of New Silk Road projects are wanting: Chinese companies generally prefer rising a Chinese workforce as opposed to local laborers, which may offset local job growth creation in host countries. Environmental and safety standards are also of sizable concern for host governments, as is the...

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