Photographer: Qilai Shen/Bloomberg

China's Silk Road

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The name Silk Road conjures images of caravans, desert steppes and adventurers like Marco Polo navigating the ancient trading routes connecting China with Central Asia, the Middle East, Africa and Europe. China’s modern-day adaptation aims to revive those routes via a network of railways, ports, pipelines and highways. President Xi Jinping champions his pet project as a means to spur development, peace, goodwill and economic integration, as well as find markets for China's over-producing factories. Critics — both along and beyond the Silk Road routes — are wary of China's push to spread its influence further west. 

The Situation

Xi has outlined what he calls a “project of the century,” a decades-long drive to grease the wheels of trade with infrastructure projects costing tens or even hundreds of billions of dollars. In May, Xi pledged 540 billion yuan ($78 billion) in financing, including 100 billion yuan for China’s Silk Road Fund and 380 billion yuan in new lending for participating nations. More than 40 countries have so far signed formal agreements with China. Typical plans include the development of ports in Malaysia and Tanzania or highways in Pakistan and Tajikistan. Along the way, China is also encouraging its companies to invest in industrial projects such as utilities. To bankroll these ambitions, the Chinese government created the Silk Road Fund in 2014 with an initial $40 billion war-chest; it has backed a dam in Pakistan and a liquefied natural gas operation in Russia. Other funding sources include the BRICS Development Bank and China's $100 billion Asian Infrastructure Investment Bank — an alternative to the World Bank. China stands to gain not just by putting to work its underused industrial capacity and excess production of steel and other materials, but also by pushing its goal of deepening the global reach of its currency. Partner nations are weighing economic benefits against an increasingly dominant superpower's demands. For example, a deal for a rail project in Thailand fell through because local officials refused to grant China's request for commercial property rights

China Plans to Reshape World Trade

The Background

Xi first proposed reviving the Silk Road in 2013 and went on to refer to it as "One Belt, One Road" and the “Belt and Road Initiative”— a combination of an overland "belt" and a maritime "road." Although the original trading routes were established more than 2,000 years ago, the Silk Road's name — derived from the delicate fabric highly prized by the Roman elite — was coined only in the 19th century by a German geographer. In its heyday, paper, gunpowder, porcelain and spices were transported to the west; horses, woolen rugs and blankets, gold, silver and glass made the return journey. Just as monks used the routes to spread Buddhism, the modern Silk Road is not just about commerce: China floats visions of film festivals and book fairs, scholarships and jointly run schools, as well as cruise ships plying the maritime lanes via Southeast Asia and Africa. 

The Argument

China emphasizes the Silk Road's role in boosting industrialization in the developing nations sandwiched between East and West. As U.S. President Donald Trump has pulled back from international trade agreements (he withdrew his country from the Trans-Pacific Partnership), Xi has used the “Belt and Road initiative” to help position himself as the global champion of free trade. Economists agree that the initiative has the potential to stimulate Asian and global economic growth. Risks include political instability or poor governance (the Kyrgyz prime minister was forced to resign in 2016 over a contract award to a Chinese company) and long-shot developments turning into white elephants (like an international airport in southern Sri Lanka that hosts only a couple of flights a day). Certain projects — especially costly overland routes — may simply not be economically viable. Critics point to China's increasingly assertive military, particularly in Asia's waters, and speculate whether the development of ports might presage the establishment of naval bases (the so-called “string of pearls” theory). China's rejection of a tribunal ruling on its South China Sea claims has also raised questions about its regard for the international rule of law. The plan's success may in part depend on the attitudes of Russia — initially skeptical but increasingly warm  (President Vladimir Putin appeared alongside Xi at a Belt and Road conference in May) — and India, which is closely watching developments in Pakistan.  Responding to concern that China is seeking to spread its influence, Xi says the project won't resort to "outdated geopolitical maneuvering." 

The Reference Shelf


    First published Sept. 8, 2016

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