How China is building a new Silk Road

China has vast overcapacity in construction and global ambitions. The two have come together in a new push for expansion. Will it come off? Simon Wilson reports.


Now it's trains, but the idea's the same

What is One Belt, One Road?

One Belt, One Road (OBOR) is the English translation of the Chinese phrase "yi dai yi lu" referring to the two related ideas that form the backbone of China's globally oriented economic policy (or, if you prefer, the economic underpinning of its foreign policy) under President Xi Jinping. The "One Belt" part refers to Beijing's stated goal of building a "New Silk Road economic belt" that links coastal China to Europe though inland China, central Asia and the Middle East.

Obviously, the phrase is intended to echo the old "Silk Road" in fact a network of many historic trading routes that began to emerge under the Han dynasty 2,000 years ago and reached its height during the Tang dynasty (618-906). These ancient routes stretched from China's old capital, Xi'an, as far as ancient Rome, although the phrase "Silk Road" was itself not coined until the late 19th century, when it was first used by the German geographer Ferdinand von Richthofen.

And the 'One Road'?

Confusingly, the "road" is not a road at all, but a network of maritime trading routes. China's stated goal (in policy papers published between 2013 and earlier this year) is to build a "21st-century maritime Silk Road" inspired by historic sea trading routes linking coastal China via southeast Asia to the Indian ocean and beyond, to Africa and Europe. In sum, China's foreign policy is being shaped around creating a modern version of ancient trade routes, and it plans to invest its wealth and energies in helping to build infrastructure everywhere from Kazakhstan to east Africa.

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However, as Dr Tim Summers of Chatham House explained in a recent paper, neither the One Belt nor the One Road concept are about single routes, and nor are they limited to physical infrastructure: President Xi's goal is to build "networks of connectivity" encompassing trade, investment, finance and flows of tourists and students.

What's driving all this?

For some, it's about China's decision to project its economic and diplomatic power more assertively and assume a leadership role in Asia and globally. On this reading, the new Silk Road is a modern-day version of the 19th-century Great Game, in which Russia and Britain battled for control of central Asia. For others, the driver is primarily economic: it is certainly not a coincidence that the OBOR strategy has come in the wake of an investment boom that has left China with vast overcapacity in construction and a need to find new markets abroad.

There is an irony here, says Charles Clover in the Financial Times, in that Lenin's theory that imperialism is driven by capitalist surpluses is being given new support from one of the last (ostensibly) communist countries in the world.

What sort of projects are involved?

Roads and pipelines across Pakistan and Burma and port construction in countries such as Sri Lanka and Bangladesh. The freight rail link from the central-western city of Chongqing through the restive north-western province of Xinjiang strategically crucial in OBOR terms to central Asia and on to Europe. And others too numerous to mention. In all, the OBOR countries account for (depending on which of the competing interpretations of its parameters you pick) two-thirds of the world's population and a third of its GDP.

China's aim is to spend nearly $1trn of government money and lift the value of its trade with 40 countries to $2.5trn within a decade. It's the biggest act of economic diplomacy since the Marshall Plan, the US-led reconstruction of Europe after the World War II.

Is this really anything new?

There's definitely a sense in which OBOR is a rebranding and reinvigoration of diverse existing efforts, rather than a new idea. But as a piece of rebranding it is at least a simple one, with great historical resonance, which seizes ownership of a global shift in the economic centre of gravity.

In terms of substance, however, OBOR "is like a Christmas tree", Scott Kennedy of the Center for Strategic and International Studies in Washington told the FT: you can hang what you want on it. But no one has done a proper economic analysis and attracting private money will be a core challenge. Another will be relations with Russia: Moscow sees much of central Asia as its own sphere of influence.

The third challenge is even more basic: can it be done? The political and commercial risks of building infrastructure across much of the central Eurasian landmass are vast, and Chinese experience remains limited. Lack of funds is only one of the barriers to building better roads, railways and ports: there are also issues relating to local politics, governance and security. China may have the funds, but there's no guarantee its New Silk Road will prove viable.

Japan plans a road block

It's not only China that's keen to boost its economic relationswith post-Soviet central Asia, says Jack Farchy in the FT.Japan's Prime Minister Shinzo Abe was on a whirlwind tourof the region this week in an attempt to drum up businessand counter China's OBOR policy. Japanese industry wasdisheartened by Indonesia's recent decision to go with Chinafor a high-speed rail line; and the nuclear sector is "aghastat Britain's decision to build a nuclear power station withChinese technology".

Now Japan is worried about Chinesedominance in central Asia, say analysts. Despite several dealsannounced during Abe's visit the first by a Japanese leaderin nine years it seems it is right to be worried.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.