Silk Road: China’s project could transform Eurasia

Photo: Thomas Depenbusch
Photo: Thomas Depenbusch

By Raffaello Pantucci and Sarah Lain

First published in the EU Observer, October 2015

Almost two years have passed since Chinese President Xi Jinping first gave a name to the strategy that China had been undertaking in Central Asia for over a decade. The announcement of the Silk Road Economic Belt in Astana in September 2013 was rapidly followed by the declaration of a number of other trade and economic corridors emanating out from China, which largely copied the Central Asian model.

At home in China there has been a flurry of activity to try to unpack at a regional and national level the roadmap of the leader’s vision, manifested in conferences, regional strategy documents, and various declarations.
Outside China there has been less clarity, with most in Europe (who have heard the message that they are the other end of this road) questioning what the Chinese vision looks like in practice.

In Georgia last week, China started its push out to explain its vision to the world at the Tbilisi Silk Road Forum. This represented the first event on the Silk Road Economic Belt co-sponsored by China’s government held outside China, placing Georgia on the map as an important partner in the project.

The clearest message from the Tbilisi conference is the importance of cooperation and greater connectivity. The Chinese vision is founded on developing a network of trade and economic corridors originating in China.

In a region where connectivity is a huge challenge, this approach suits not only regional development but also China – China has a surfeit of capacity and liquidity to fund such infrastructure so necessary to increasing trade and commerce. At the same time, this is not an entirely new concept – the Asian Development Bank (ADB) has long had its Central Asia Regional Economic Cooperation (CAREC) programme and the European Investment Bank has funded numerous projects, particularly in energy connectivity.

There is a clear demand for these various institutions and regional approaches to find ways of greater integration and cooperation. Regional conferences like the Forum are one way to try to advance it. But regional connectivity does not necessarily equate to regional prosperity in itself. Increased connectivity means an increase in trade by sea, air, road and rail, but transiting goods does not always mean immediate benefits to local communities. If these regional connectivity plans are going to truly benefit those along the way, then more work needs to be done to identify ways in which transit countries can benefit more than simply passing on goods and commodities to their neighbours.

This touches on one of the key under-developed, or at least under-communicated, aspects of the Chinese vision. How will this benefit locals? One way is to establish special economic zones, which focus on attracting investors to set up businesses that maintain expertise, trade and manufacturing in-country. It is an approach China has championed to some success at home. But, these require specific infrastructure, market liberalization, incentives and assurances in business security to ensure investor trust.

Furthermore, connectivity is not solely a question of economics. For some of the countries along the Silk Road Economic Belt, there are fundamental political and geographical problems between states whereby establishing direct transport links is problematic. For example, anyone who has travelled between the capital cities of the Central Asian states will know that finding direct and regular flights is problematic, instead having to route through Turkey or Dubai. In other situations, regional dynamics between great powers impairs direct trade connections, for example between Pakistan and India.

At a more fundamental level, however, the biggest problem around connectivity is the lack of harmonised trade tariffs, technical standards and customs procedures. One delegate at the Tbilisi Silk Road Forum said 40 percent of transport time across Eurasia is spent at border crossings, adding costs to both transport operators and consumers.

Associations like the Eurasian Economic Union offer a slightly more streamlined economic space, but this covers a limited part of the wide piece of territory covered under the Silk Road Economic Belt. Moreover, non-members immediately incur a separate and higher tariff compared to members, thus making any harmonization impossible.

A huge amount of work needs to go into focusing on where and how to establish common standards, streamline trade and economics barriers, address non-tariff barriers and improve customs practices across the entire region. Greater digitalisation of customer paperwork, for example, is required, although this would mean alterations in much national legislation.

China’s re-emergence as a Eurasian land power is going to transform the entire landmass. The Silk Road Economic Belt is the first public and holistic expression of this. However, rather than being a purely China-dictated vision, it is clear that the intention is for countries like Georgia to engage with China on cooperatively shaping the vision and tackling the issues. China is consciously reaching out for this, as demonstrated by the Tbilisi Silk Road Forum.

Now is the time for Western European countries to follow Georgia’s example to understand the benefits it can reap in further cooperation on the Silk Road.

Raffaello Pantucci and Sarah Lain served as rapporteurs at the Tbilisi Silk Road Forum, October 2015

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