When China’s president Xi Jinping laid out his plans to establish a “New Silk Road” across Central Asia in 2013, he was doing more than invoking China’s distant past. Instead, he was sketching out a new direction for Chinese trade and investment, one that aims not only to improve China’s links with Europe, but also to facilitate China’s macroeconomic priorities and its integration in the global economy.
However, such a bold, long-term plan will face challenges, and those challenges will be commercial, economic and political.
First of all, although a focus on expanding trade along the proposed routes into Europe might seem like a “win-win” for all those involved, from the perspective of business, the benefits are not as clear cut. A senior source from the Asian freight industry thinks the direct benefits of better rail links between China and Europe would “probably not be much” because “you’re looking at a difference of 14 days into Europe as opposed to four to six weeks by sea. So it really depends what sort of commodity you’re moving, what value it has and how time sensitive it is.”
This restrained skepticism is reflected in wider market-based views of the New Silk Road. “Although obviously we are interested in specific investments across the region, the ‘New Silk Road’ is the sort of strategic policy initiative that generates little in the way of obvious and direct tangible benefits,” says Jonathan Silver, Banking and Finance Partner at the law firm Norton Rose Fulbright in Hong Kong. “So while business would generally welcome the potential benefits, most would only take a direct interest in the concrete results, as they arise.”
“It certainly makes for a nice announcement and it has a nice name,” says Daniel Tobin, lecturer at the China Institute, School of Oriental and African studies, University of London. “[But] when you’ve been looking at these things for a while, you tend to get quite skeptical about the way things are packaged. The policy is consistent in one sense, but the big problem always seems to happen with implementation.”
Moving beyond trade and implementation, it is also clear that some of the hoped for macroeconomic benefits will be difficult to realize. For example, Li Haitao, Professor of Finance at Cheung Kong Graduate School of Business expresses particular skepticism that the New Silk Road will help output China’s industrial overcapacity overseas.
“Just think about a country that is big enough, that has huge demand for infrastructure building, could be India right? But do you think India would open its doors and let China in to build all the bridges and roads?” he says. “They want to do it themselves.”
Setting aside the mundane matter of threading the whole idea together with actual steel, concrete and trade agreements, there is also the question of politics, or at least, the question of political perception.
From the outset, the New Silk Road initiative has been less about specific trade routes, than it has been a kind of political symbolism, and a statement of intent to other countries. He Liping, a professor at the School of Economics and Business Administration at Beijing Normal University, suggests that “it is a reflection that China’s leaders want to make friends with many countries around the world, particularly those that are geographically close to China.”
But the political challenge is that if these three basic routes that comprise the spine of the New Silk Road become so important to China’s national interests, it naturally will be at odds with some major global powers. “Russia will definitely have concerns with China’s expansion through Central Asia,” says Song Gao, Managing Partner at PRC Macro Advisors in Beijing. “For the maritime route, China will have to secure the trading route through the Indian Ocean, that will at least be perceived as a threatening move [by India].”
Indeed, so threatening that India is developing its own strategic vision for the Indian Ocean region—so far called ‘Project Mausam’—as a direct response to China’s New Silk Road.
Unfortunately, time can also herald unwelcome changes. China prefers stable, long-term relations with other countries, but some of the New Silk Road countries are democracies, at times leading to dramatic changes in governments.
President Maithripala Sirisena’s new government in Sri Lanka has promised to review a Chinese-backed port project in Colombo that was launched by Xi Jinping in September last year, and which is already under construction. Ranil Wickremesinghe, the country’s new prime minister, had previously said the project would be stopped if his party came to power. He later told the press in February that the administration still hadn’t decided whether to proceed with the project.
Meanwhile, in Greece, Syriza, the party that has just gained power, has just suspended the sale of the port of Piraeus to China Ocean Shipping Company (COSCO), who were planning to transform it into an important European hub on the New Silk Road.
Chinese leaders are, of course, aware of these negative perceptions, and so far opposition to the initiative remains quite fragmented. But just like the ancient Silk Road that ran across vast deserts and drastically different cultures, one shouldn’t expect the new one to be hazard-free.(Forbes)