China's Silk Road

Ancient Routes Carry a Nation's Influence West

By

David Tweed

| Updated Sep 8, 2016 1:05 AM UTC

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, goodwill and economic integration, as well as finding 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. 

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THE SITUATION

Xi has outlined a decades-long drive to grease the wheels of trade with infrastructure projects costing tens (or perhaps even hundreds) of billions of dollars. Typical plans include the development of ports in Malaysia and Tanzania or highways in Pakistan and Tajikistan. The vision goes beyond better connections; China is also encouraging its companies to invest in industrial projects such as utilities. To bankroll these ambitions, the government created the $40 billion Silk Road Fund in 2014; already, it's 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 (AIIB) — an alternative to the World Bank that the U.S. and Japan initially pilloried for lacking the same standards of governance. Xi says more than 30 countries have signed formal agreements with China and 20-plus are cooperating on plans such as railways and nuclear power. China stands to gain not just by putting to work its underused industrial capacity and excess production of materials like steel, but also by promoting greater use of its currency. Partner nations are weighing economic benefits against an increasingly dominant superpower's demands. A deal for a rail project in Thailand collapsed because local officials were unwilling to grant China's request for property rights .

Source: Bloomberg

THE BACKGROUND

Xi first raised the idea of a modern Silk Road in 2013 and went on to refer to it as "One Belt, One Road," combining his plans for an overland "belt" and 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 19^th 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. Economists say the initiative has the potential to stimulate Asian and global economic growth. Risks include stoking graft in a region beset by corruption (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 the world's emptiest international airport in Sri Lanka). Certain projects — particularly costly overland routes — may simply not be economically viable. Critics point to China's increasingly assertive military, particularly in Asia's waters, and question 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. Part of the plan's success may depend on the attitudes of Russia (initially skeptical but increasingly warm) and India, which is closely watching developments in Pakistan. There's also the question of how long China will be prepared to forge ahead with costly overseas investment when growth at home is slowing.