Modern Silk Route: Way to China’s next Economic Boom
Modern Silk route is one of the most visionary projects undergoing in the current world. China in a process to revive the route is investing trillions of dollars. President Xi Jinping talked about creating a network of road, rails & shipping port around the world to export Chinese goods in all the markets of the world. And this is a huge and most ambitious step of China. With the modern Silk route, China aims to get another economic boom. While a part of the world shows concern about Chinese taking a unilateral lead in the world market and monopolizing it in near future. Let’s understand what this Silk Road 2.0 is bringing new to this world by starting from its history.
Maritime Silk Route
The Maritime Silk Road or Maritime Silk Route refers to the maritime section of the historic Silk Road that connected China, Southeast Asia, the Indian subcontinent, the Arabian peninsula, Somalia, Egypt and Europe. It emerged as a channel of trade and exchange between these regions. The route is best known for an important role in connecting the East & West by linking their diverse culture & economy. Also, the route was influential in the early spread of Hinduism and Buddhism to the east. Maritime Silk Road proliferated between the 2nd century BCE and 15th century CE. Interestingly, China associated Silk Route with itself but the Maritime Silk Road was primarily established and operated by Austronesian sailors in Southeast Asia, Tamil merchants in India, Greco-Roman merchants in East Africa, India, Ceylon and Indochina, and by Persian and Arab traders in the Arabian Sea and beyond. Let’s look into the timeline of the route.
Before the 10th century, the route was used by Southeast Asian traders, although Tamil and Persian traders also sailed them. By the 7th century CE, Arab dhow traders ventured into the routes, leading to the earliest spread of Islam into Southeast Asian polities. By the 16th century, the Age of Exploration had begun. The new demand for spices from Southeast Asia and textiles from India and China by the European market led to another economic boom in the Maritime Silk Road. The silk trade continued to flourish until it was disrupted by the collapse of the Safavid Empire in the 1720s.
Idea of reviving Silk Route
China has claimed itself the discoverer of Silk Route over time and used the history of Silk Route to establish strong trade & diplomatic relationships with many countries. Also, the route facilitated easy trading to China since carrying goods to markets was much easier for them. Now again after almost three centuries, China seems very serious about reviving this route. Xi Jinping, President of China, first announced the strategy during official visits to Indonesia and Kazakhstan in 2013. It was known as the One Belt One Road (OBOR), short for the Silk Road Economic Belt and the 21st-century Maritime Silk Road until 2016 when the Chinese government considered the emphasis on the word “one” was prone to misinterpretation. The Chinese government projects the revival as “a bid to enhance regional connectivity and embrace a brighter future”. Some critical observers see it as a push for Chinese dominance in global affairs with a China-centered trading network.
There is an infrastructure gap around the world to facilitates easy trade between countries, many of the countries with huge potential of importing goods are not well connected to the world market. A report from the World Pensions Council (WPC) estimates that Asia, excluding China, requires up to US$900 billion of infrastructure investments per year over the next decade which is 50% above current infrastructure spending rates. China has well identified this space in the world market and pushing hard to invest in the infrastructure. It has identified the new route in which many new countries have also been included. The route has been strategically designed which includes 65% of the world’s population and 40% of the global gross domestic product as of 2017. China in very diplomatic way states the objectives as : “to construct a unified large market and make full use of both international and domestic markets, through cultural exchange and integration, to enhance mutual understanding and trust of member nations, ending up in an innovative pattern with capital inflows, talent pool, and technology database.”
Benefits to China
China has pledged for the new Silk Route which will cost more than $5 trillion. Why China is investing such a huge amount outside its country? Is it just for the rest of the world to facilitate trade in the region? The actual aim of China is to improve trade and connections between China and Europe, Asia and the Middle East. China is opening up the way for its factories to export goods in all the markets of the world. With this, it aims to become the manufacturing hub of the world. Also, China is known to build infrastructure. It is making deals with the participating nations to build infrastructure for them along with investment. So it is creating job opportunities for its company, engineers and labor outside its boundary. No doubt China’s plan to revive Silk Route will also benefit other South Asian countries since the route will also facilitate trade for them. China even sees this as an opportunity. Since most of the route’s infrastructure is being built by the Chinese company, China will charge high taxes from the countries using the route. This is not only limited to taxation, but China can also use this route to monopolize the market by banning competitors on the route.
China has been putting effort to internationalize its currency Chinese Yuan(RMB) for a long time. With the new trade route, this also seems feasible as China is planning to trade in Yuan with the partner countries. In some belt and road countries, it is already happening. For example, in the past three years, Malaysia’s RMB use grew by 551%, Russia’s by 56% and Thailand’s by 50%. Also, China plans to boost its investment in B&R Countries along the route. “The positive developments over the past few months reinforced our view that China could double its B&R investment to $1.2 trillion-$1.3 trillion by 2027,” Xing says.
Impact on World & Participating Nations
While China is aiming to boost its economy with the Silk Route in the near future, other parts of the world especially the West seems worried about the future. The recent trade war between America and China is even deepening as China is progressing fast on the Silk Route’s infrastructure development. The countries along the new Silk Route are potential partners to China for trade in the future. This way China can reduce its dependency on the USA and even the possibility of doing so is terrifying the Americans. The volume of increasing Chinese Yuan in world trading is a clear indication of the progress made by China. If this happened in the near future the American will lose control from World Market to some extent and Chinese influence will grow even more. Other Western countries see the approach of China to monopolize the world market in their favor as they will be controlling the route in the future.
Participating Nations seem happy with China as it is the initial stage. They all are happy as foreign investment is increasing in the infrastructure directly and leading the way to development. But is they actually getting benefitted? The answer to this question depends on bias towards China. In some way, China is definitely leading them to infrastructural development. But the cost of it is very high. Hambantota port costs so much to Sri Lanka that it has to lease the port to China for 99 years. Similarily Gadawar port in Pakistan which comes under China Pakistan Economic Corridor (CPEC) is leading to a similar situation. The ground reality is, Chinese projects are creating very fewer opportunities for locals. In some regions of Pakistan, as Chinese skilled labor flooded in the country, the local labors got low-quality work and even many of them got unemployed. Even though the above two examples are not from the Silk Route but the situation seems similar there. An expert in Chinese matter quotes “When you trade with China you end up in dept”, which seems quite true.
