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The “New silk roads”

Introduction

If the original Silk Road transforms and revolutionizes the economic and cultural perspective of antiquity, becoming a channel of exchange not only of goods, but also of knowledge, ideas and people, the new Silk Road has the ambition to go further, becoming the backbone of a new, immense commercial and political area in which China is destined to play a leading role.

Officially announced by President Xi Jiping in 2013, a few months after the start of his first term at the head of the People’s Republic of China, the plan “One Belt, One Road” (OBOR) – today “Belt and Road Initiative” – it is a colossal project with the potential to significantly alter global geopolitical and geo-economics balances.

 The concrete outcome of the political and economic orientations of the Chinese leader- who has in a short time accumulated enormous power at home- the New Silk Road aims to connect Asia, the Middle East, Africa, Russia and Europe with no repercussions, not only of economic nature but also of political and cultural nature, involving over 70 countries in the world through investment flows estimated between 4 and 8 trillion dollars (Devonshire-Ellis, 2017).

If the “Belt and Road Initiative” was completed, it could involve more than half of the world population, three quarters of the trade in available energy resources and about 40% of global GDP, for a trade volume that would value 2,500 billion dollars, according to the estimates.

Articulated on a land route (Belt) and a sea route (Road), to which the Polar corridor has recently been added, the project has been defined by many as a new Marshall Plan, capable of offering important economic opportunities and creating deep connections between countries.

 However, some concerns arouse due to the dynamics of interdependence/ subjection that could be generated by the substantial influence of the routes on the economy of individual states, when these became the object of Chinese infrastructure investments with evident geopolitical implications connected.

The essentially geopolitical and non-commercial nature of the project is demonstrated by the fact that its paths avoid a country like India- a historical rival of China- which would also present itself, from an economic point of view, as an inevitable and indispensable interlocutor.

Strategic interests

In recent years, China has progressively imposed itself on the world chessboard, becoming one of the major global players in the economic and financial sector, in the international security sector, and in the cyber area.

The main objective of the Beijing authorities is to guarantee a framework of internal political stability, necessary both for the survival of the regime ( to a large extent connected to dynamics of constant economic growth) and for the rebalancing of structural parameters deriving from the choices made, which on the long term could seriously damage the foundations of the economic system.

Xi Jinping, general secretary of the Chinese Communist Party (CCP), president of the People’s Republic and head of the Central Military Commission, made the “Chinese Dream”- intended as the country’s military, economic and cultural rise by mid-century – as the distinctive figure of its administration. Under his leadership, China is experiencing an important political and economic transformation: on the one hand, the country has reached great levels of prosperity, and on the other hand, the process of consolidation of power has been articulated in terms of absolute centralization of Xi’s figure, who has now acquired a personal and institutional authority superior to any other leader, comparable only to that of the President Mao.

However, some of Beijing’s most recent initiatives, such as territorial claims and actions that took part in the East and South of China – which started due to a conviction suffered in July 2016 by the Permanent Court of Arbitration in The Hague- have raised concern among neighboring states, fearful that the increasingly assertive approach of the People’s Republic in the file of international relations is a prelude to far-reaching hegemonic intentions.

Since 2015, the Renminbi has been included in the basket of monetary reserves of the International Monetary Fund (together with the dollar, euro, pound and yen), offering the Chinese government a “seal of approval” from the international community. In Africa, Beijing played a leading role for years, in fact, the flow trade reaches 300 billion dollars and guarantees 2 million jobs. China has ensured its contribution to numerous peacekeeping missions carried out in this area under the UN’s leadership. However, the evolution of foreign policy can also be seen in the initiatives aimed at protecting strategic interests beyond national borders, since the economic investments proceed simultaneously with indirect military protection. In this context, the important announcement of the DIjibouti government has granted an outpost on its territory to the Chinese military forces, by joining the “Maritime Silk Road”, in order to favor anti-piracy operations and thus protecting the trade route.

Even more relevant (and perhaps explanatory of their real intentions) was the attitude taken in the face of the Ukranian conflict: while not recognizing the annexation of Crimea to Russia, China nevertheless refrained from condemning Moscow’s actions.

 

Prosperity and political participation

The “One Belt, One Road” project is perhaps the most significant implication of China’s economic and foreign policy, the one that best outlines the Asian country’s ambition to transform itself into a hegemonic global power supported by a modern, fully developed economic system.

The Chinese political leadership has used the leverage of nationalism, particularly after the end of the Cold War, as a tool to gain support among the population. Take, for example, the case of the Senkaku / Diaoyu islands, in the east sea. In general, any discussion on the main issues of foreign policy must be framed and read in the context of priorities and internal constraints, according to a constant intertwining – often underestimated – between hegemonic ambition and the need for economic stability.

The gradual reforms pursued since the late 1970s, which have pushed China to become the second largest economy in the world, were developed by the Beijing authorities under an “unwritten social contract” with the people, based on which the political participation has experienced limitations offset by the guarantee of economic-productive development and better living conditions.

However, the solidity of this implicit trade-off, of this “exchange” between the increase in prosperity and the reduction of political rights, has begun to show elements of fragility in recent times. Despite joining the World Trade Organization (WTO) and the many promises on the ground of reforms, Beijing’s attempts to move closer to the market economy model have slowed down: about 60% of China’s GDP is generated from state-owned enterprises (SOEs) which account for more or less half of bank credit, yet supplying only 20% of industrial production.

The great recession of 2008 then represented a decisive turning point for the People’s Republic, since it placed it in front of new important challenges: in tackling the crisis, the Chinese government decided to introduce an economic stimulus package worth 586 billion dollars (Yongding, 2008) which, although it proved effective in obtaining know-how from Western companies through their purchase, it led to an excess of production capacity in the following years.

Today this dynamic, combined with the slowdown in economic development, with the internal demographic and social imbalances, the still unfinished effort to create a middle class and a welfare state, finds an outlet and hypothetical “salvation” in the OBOR.

The "Belt and Road Initiative"

Conceived as a modern restoration of the Silk Road, the Belt and Road Initiative envisages the development of a direct road and rail network between China and Europe, through Central Asia, the Middle East and Russia, and a maritime corridor that connects the Chinese port facilities with the African coast and then, passing through the Suez Canal, with the Mediterranean.

This is the largest investment project ever carried out, with more than 70 nations involved (4.4 billion people, more than 60% of the world population) representing about a third of global GDP, and a lot of investments in terms of infrastructure estimated at $ 1 trillion.

A very ambitious initiative with an enormous economic as well as geopolitical potential, which can promote China’s international role and which reveals the real scope of its ambitions: a formal multilateralism with Beijing at the centre, based in a prominent position in bilateral approaches. A substantial syncentric vision that is articulated through the offer of cooperation, which will turn out in a win-win for the member countries in any case.

In the programmatic document “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, issued in March 2015 by the National Commission for National Development and Reforms, the Ministry of Foreign Affairs and the Ministry of Commerce of the Chinese Republic People’s Party indicated the guidelines of the project. Those guidelines indicated a coordination of the policies of the States including a system of communication and exchange of macroeconomic policies aimed at the development, i.e. the strengthening, of the infrastructures of the countries involved, with a strong exchange of investments and strengthening of financial cooperation for the purpose of monetary stability.

The perspective, stated several times, is that of a social and cultural exchange to achieve a progressive integration of the populations involved, in a given regional area.

On the one hand, therefore, economic development and mutual prosperity, on the other hand, global pacification under the aegis of infrastructure, made more and more efficient and developed. Probably also a strategy also designed to overcome the difficult phase that resulted in the “tariff crisis” with the Trump administration.

In fact, the New Silk Road represents the opportunity to create an economic area hegemonized by China, from which to potentially exclude the United States, accused of having financed the most important rivals of Beijing through the “Pivot to Asia” strategy and to have excluded China itself from the Trans-Pacific Partnership (TPP), signed in February 2016 and subsequently abandoned by Washington. This explains the insistence with which America is urging its allies to carefully consider the consequences of an unskilled adhesion to the “Belt and Road” project.

From a financial point of view, with an estimated investment of up to 8 trillion US dollars, modified several times upwards, China tries to make use of the involvement of funds and financial institutions, alongside its own resources.

Of great importance are the Asian Infrastructure Investment Bank (AIIB) and the Fund for the Silk Road, promoted by the Chinese government for the effective implementation of the “Belt and Road” projects. The AIIB has already seen the participation of numerous Countries, including Germany, Italy, France and the United Kingdom, increasingly assuming the role of counter-altar of the World Bank, the International Monetary Fund and the Asian Development Bank.

The Silk Road Fund, established in November 2014 with an endowment of USD 50 billion, is the main funding channel for works not necessarily strictly related to logistics. The role that the Fund wants to assume, in fact, seems to be oriented towards the work of facilitation and coordination between China and the countries to which the investment is directed, in order to encourage participation and integration in the dynamics of the Silk Road.

Reactions to the Chinese plan

Beijing has shown a steadfast attitude in the field of infrastructure design, even before the formal announcement of “Belt and Road”. An example of this is the construction of the oil pipeline which, starting from the border between Uzbekistan and Turkmenistan, reaches the middle of the People’s Republic, in Jingbian.

It is possible to mention also the plan to build a railway network between Khorgos (China) and the Caspian Sea port of Aktau (Kazakhstan), announced by the presidents of the two countries in 2015, or the so-called “China-Pakistan Economic Corridor” (CPEC), which would offer the Silk Road a new outlet to the sea avoiding the Strait of Malacca, an area at high risk of piracy.

As for the reactions to the Chinese project, it must be said that Russia initially disapproved of the Beijing initiative, seeing it as a threat to its own interests in the Asian region. Recently, however, Moscow’s position seems different from the initial approach.

With the joint declaration on “Cooperation and coordination in the development of the EU and the economic belt of the Silk Road”, signed in May 2015, and with the investment by a Chinese consortium of 375 million dollars for the construction of a high-speed railway line between Moscow and Kazan, Putin and Xi Jinping seem, in fact, to want to offer signs of relaxation with a view to greater commercial collaboration.

European countries have taken an attitude of caution (also due to the tensions associated with 5G technology), but the recent signing of the “Memorandum of Understanding” with Italy seems to have provided new substance and thrust to the Chinese project.

 Italy is for now the only country in the G7 that has negotiated a preliminary agreement with Beijing (the government of Rome later specified that it is not binding), although other states (this is the case of France) have signed commercial agreements or have established close relations with Beijing (Germany).

In this context, the European Commission’s strategy, presented in March 2019 and aimed at the cohesion of member countries, aims to establish the principle of reciprocity in public procurement, as well as to establish criteria of maximum caution and safety on the subject of telecommunications.

On positions particularly hostile to the “Belt and Road” are India and the United States. Washington, in particular, believes that the loans granted for infrastructure plans are destined to undermine the economies of the countries that receive them, putting them into debt beyond the level of sustainability, to the point of the loss of substantial sovereignty.

The clash has also moved within the United Nations Security Council, heightening the concerns of the Trump administration, at the same time as China proposed – in March 2019 – to use the “Belt and Road” as a tool for reconstruction and development of Afghanistan and the whole Central Asian region. However, the opposition did not make it possible to take a decision to that effect.

It should also be noted that economic and social concerns are joined by those relating to national security, linked to the issue of 5G, a technology so innovative that it can revolutionize world connectivity, and of which China – through Huawei – could be the first global supplier.

Future scenarios

“Belt and Road” is a plan of historical significance, the largest geopolitical project ever conceived. Embodiment of the thinking of Xi Jinping, if Beijing succeeded in realizing it, it would take a first big step in revolutionizing the world order and, at least, in establishing a new duopoly with the United States in terms of power, to the detriment of other global players, first of all Europe and India.

Although with different nuances over the years, more and more countries have changed their approach towards an initiative that is too large to hide the real hegemonic ambitions but, at the same time, too important not to be taken into consideration in a period of economic and social crisis.

However, the risks of failure of the Chinese project are many. To the problems related to the political scenarios of many Asian countries, characterized by bad administration and a high rate of corruption, needs to be added the great macroeconomic risks associated with financing and the development of the necessary infrastructure.

According to the “Center for Global Development”, a Washington-based think tank, in the case of some countries involved (Pakistan, Montenegro, Maldives, Mongolia) the debt / GDP ratio will increase to the point of forcing them to implement strategies to balance the participation in the project.

Suffice it to say that the construction of the Kunming-Singapore railway in Laos (estimated cost of USD 6 billion), will amount to almost 35% of the country’s GDP in 2017. A further risk originates from the general concern linked to the lack of confidence in real goals of the Asian giant. What seems certain is the fact that if what comes to light only follows the premises, East and West will not only significantly increase their commercial ties, but will also make an agreement that cannot fail to generate profound changes in the geopolitical and cultural equilibrium in the world.