The Silk Road of the Future And Its Siblings- Part 1

توسطAli Karim 6 ماهپیش

The legacy of Silk Road bears a rich history of centuries of culture, trade, mutual agreements and literature. It was the way to different civilizations through difficult roads of rough paths, yet in a way so beautiful it can arouse senses of every man.

Zhang Qian, a diplomat of Han Dynasty, in 138 B.C went on a mission to the western part of China, Yuezhi province- the border of China and the Parthian Empire of Persia- to persuade them to form an alliance with Han dynasty. Although, the mission failed, however Zhang Qian discovered something that changed the history of commerce and trade and formed a route from China to Roman Empire.

He noticed a stronger, much larger breed of (Persian) horses, which were not available back home. In his reports to officials his observations made Han dynasty become eager to trade their special and one of a kind silk for those horses in order to strengthen their army. Of course, at that time Persia was already trading with India and western part of China from 5th century B.C.

The routes of Silk Road – as seen below- started from Changan city (Modern Xian) in the northern center of China. It then went along the Big Wall and after it finished diverged into three separate road in the western regions of China (Turfan, Dunhuang and Khotan) then Dunhuang and Khotan met each other in Kashgar near the border. It then passed Pamirs Mountains and came to Persia and passed Samarkand, Balkh, Merv and Nishapur, Rayy, Ecbatana, Tabriz on its way. Then it diverged into two parts, one went to north eastern part of Roman Empire (near Black Sea) and the other went to different parts of Roman Empire. The other road from Turfan went from above Caspian Sea to Black sea and Roman Empire.

The Ancient Silk Road Map

The Ancient Silk Road Map

 

The title of “Silk Road” was coined in 1877 by the German geographer, Ferdinand von Richtofen. The Silk Road routes remained one of the main trade routes of the world, specially before the maritime trade, until 1453 A.D when the Ottoman Empire boycotted trade with China and closed them.

After the traders left these ancient routes, new visitors began to spread among these wild paths, the historians, the geographer, the archeologists and many curious tourists who wondered about the mysterious lands, which once made the world become united and unique. Many wars, disputes, stories of sharing of culture, language and literature happened there. People of different countries came together there to meet each other halfway and to share their lives, their culture, their collective conscious and their goods.

Modern China and Silk Road 2.0

The World Bank data shows the gradual decline in GDP growth of China since 2007 which has fell from 14.7 to 6.689 in 2016. The element, alone signals that years ahead will be less profitable and more troubling for Chinese government.

 

The years of burning coal in China that brought the highest surge in GDP, has had its negative outcomes, too. According to Reuters, “China is under pressure this year to meet politically important 2017 air quality targets. It aimed to cut 2012 levels of PM2.5 by more than a quarter in the Beijing-Tianjin-Hebei region and bring average concentrations down to 60 micrograms per cubic meter in the Chinese capital in 2017. But PM2.5 averages rose in the first seven months of the year as a result of near record-high smog in January and February, which China blamed on “unfavorable weather conditions”.

On October, Forbes predicted that forced regulations regarding the air pollution and the program of “Quality, rather than Quantity, will make the Chinese government shut down tens of thousands of factories.

All these facts along with several other factors indicate that China may struggle as one of the world’s leading economies in the future. One important factor should not be overlooked here, is that china has a population of 1.409 billion. This is what makes it the world’s second leading economy after US of America, and its GDP per capita is USD 8,123 as opposed to USD 57,638 of USA.

 

According to above statistics, China may be forced to look for their lost GDP and shut down factories somewhere else in the world.

 

The Modern Silk Road, The savior of the Economy or the leader of the politics?

A simple look to the newest version of the ancient Silk Road which has been initiated since the past 4 years can arouse several interpretations from political to economic, strategic to environmental and world connectivity. But something is certain amongst all these interpretations, and that is the fact that China may want to dominate Eurasia.

It seems that economic and political strategies behind the OBOR are totally integrated and can’t be separated from one another.

According to Economist, In 2014, Wang Yi, the foreign minister, said the initiative was Mr Xi’s most important foreign policy. Its ultimate aim is to make Eurasia (dominated by China) an economic and trading area to rival the transatlantic one (dominated by America).

The modern Silk Road Map

The modern Silk Road Map

Another Economic reason to begin the project according to Economist, is that right now many of China’s foreign exchange reserves are in the low profit banks of America, so by getting them out of there and injecting them into the subject project they can get a much higher profit share. Also another economic reason according to CNN, is that “China is looking to use OBOR as a way to ship its own domestic overproduction offshore.”

Of course, many of the world’s economists actually are skeptic about the feasibility of “one belt, one road”. The definite amount of the money that needs to be injected into the project is not yet estimated, however many believe that trillions of dollars are to be funded in order for it to be completed by 2040s. This is one of the reasons that president Jinping invited all the world to BARF on May. He is hoping to provide these trillions of USD by attracting investment from different sources. The answer to the Question, “Will he be able to finance “one belt, one road” from the respected sources or not”, will remain very uncertain and needs time to be answered.

On the political side, although it has been mentioned that there are no political intentions behind this project but many believe that in fact the main plan is to dominate the area also as stated above.

According to CNN, “It has been compared to the Marshall Plan -- the huge redevelopment initiative undertaken by the US to rebuild Western Europe in the wake of World War II, after which it emerged as a global superpower -- though Chinese state media has vociferously rejected this analogy.”

It is not the first time that china is trying to expand and strengthen its influence on Africa or Asia, and the power plant in Botswana, Africa or the Railway projects of Laos (in SE Asia) are the clear examples. Although both of above mentioned planning went to ruins when the power plant encountered many technical problems and finally the authorities tried to sell the whole project and the long delaying with lots of fiscal deficit aroused controversies around the latter.

 

Looking into these projects’ financial status which of course were not made public and clear, it is obvious that China will benefit a lot more than the local governments. For instance, in Laos Laos project, according to Nikkei Asian Review, after a long controversy over the financing and ownership of the project the came to an agreement that Lao-China Railway Company, a joint venture set up between the two governments to build and operate the railway. However, only %30 of the joint company belonged to Laotian Government and the rest was China’s. Moreover, due to the shortage of liquidity on Laos side, they had to borrow $465 million (the whole financial commitment of Laos was $715 Million) from the Export-Import Bank of China at 2.3% interest with a five-year grace period and 35-year maturity. Therefore in reality, even %65 of the %30 share belonged to China, which would make a total of % 89.5 of all.

Out of these examples, it can be stated that China has a habit of going in less developed countries and propose a gigantic project which cannot be funded by the local Government, then they would step up as the main contractor and would loan the amount of other party’s to them from their own banks, which would finally bring them the main profit.

Moreover, these loans of one government to another, regardless of the countries involved, would bring the loaner a political leverage.

To summarize, the main points about the OBOR project are as below:

  1. The main focus of OBOR is on infrastructure which is a very important and sensitive issue in less developed countries because mostly governments in these countries can’t provide it due to low liquidity, bad credit with foreign banks, corruption, less experience and not having the production line of needed facilities. Now if we look at the list of countries involved specially in central Asia, Africa, middle east and some countries in Europe like Greece, there is a very good chance we find the exact situation.

  2. Sea Ports are strategic gateways of a country and getting into these gateways and controlling them provides a very good opportunity to benefit from both economic and political aspects.

  3. Infrastructure of roads, railways and ports are expensive and developing countries need a resource to fund them. Now a fair contract with a win-win position for both parties would be ideal. However, taking Laos railways project into account, owning least 89 percent of the whole project may not be fair since the land of a country is the base of such benefit. Although, no one can ignore the fact that infrastructure - roads, railways and ports- is one of the main supporters of economic growth of a country, but it is both the quality of the work done and the contract terms and conditions which at all times must favor the origin country’s rights (the country whose land is being developed) that determine the fairness of the project.

  4. It is of great importance that no limitations are put on the origin country’s method and place of which they are going to procure the money and materials needed to accomplish their own half. Monopoly of Chinese banks or companies in the OBOR would not at all be fair. That is why some analysts are worried that this would be a new method of imperialism and neocolonialism. Because Money and Materials can bring dependency to a country and dependency, especially in these types of contracts can result in imbalance in the relationship of the two parties.

  5. However, if all the contracts which are to be closed in OBOR, will be fair and benefit both parties at the same time, then the modern Silk Road would make 1. The Eurasia rapidly move forward in the globalization of trade. 2. It can make the countries involved, close business agreements which will even benefit more. 3. It will be the initiative to increase GDP of developing countries and to have a faster pace towards the economic growth. 4. Trade simplification and mutual cooperation agreements in commerce and trade can make the countries interact peacefully which will result in less tensions in the world. 5. It would bring about the equal and just distribution of wealth in the world. 6. It would make less developed countries, to think about using their own wealth in their own advantage by investing on their country’s potential and population instead of wasting it by selling them cheap to developed countries. And so many other advantages. On the other hand, if the OBOR will not be fair in the developing and even in developed ones, then it would bring much more tensions, wars and inequality to the world.


 

In the second part we will discuss China's attendance in Gwadar port of Pakistan and Iran-India investment on Chabahar

دسته بندی ها ::
  economic analysis, Logistics
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