Reviving the Silk Route via One Belt, One Road

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February 29, 2016 12:19 AM

The ambitious global highway starts to become a reality, even as some geopolitical hurdles remain

How India seeks and manages opportunities in terms of physical infrastructure, leveraging its founding status in AIIB and in the implementation phase of OBOR globally, via the participation of its companies, remains to be seen.How India seeks and manages opportunities in terms of physical infrastructure, leveraging its founding status in AIIB and in the implementation phase of OBOR globally, via the participation of its companies, remains to be seen.

China’s pioneering One Belt, One Road (OBOR) plan, initiated by President Xi Jinping in 2013, is now steadily gathering momentum, by way of projects ranging from airports to deepwater ports, canals to railway lines, all fortuitously spread across several geostrategic points on the map. In fact, OBOR is now starting to become a reality. While the Chinese hail OBOR—some 900 projects worth $890 billion lined up—as a vindication of Chinese prowess and lead in global connectivity and communication serving global needs, observers see more in it than just a benign Chinese benediction.

Consider why. OBOR has two components—Silk Road Economic Belt and 21st Century Maritime Silk Road. Both, naturally, in measures of national interest and global connectivity, envisage China’s footprints on the high seas, channels and ports, as well as highlands and lowlands of the continental mass—the strategy being an updated version of the ancient Silk Route, the circuitous jumble of trading routes of the past undertaken by caravans, sea-junks and dhows touching Central Asia and circumnavigating to far corners. The updated version, OBOR, envisages a more comprehensive mesh, envisaging connective infrastructure—road plus sea—designed to link, smoothen, lubricate wheels of China’s trade and exchange.

The karmic reincarnation of the former Silk Route as OBOR is backed by China’s largesse of foreign exchange reserves of $4 trillion, and its dramatic rise, showing little dent of its faltering economy and slowdown to 6.9% in 2015, lower than the anticipated 7% growth.

OBOR seeks to place China at the centre of an axis of connectivity, creating a seamless interface of physical infrastructure (ports, roads), trade (with East and West) and finance (connecting China with the rest of the world). Overland roads, highways, expressways, maritime ports and harbours are geared to ease economic connections. One of the biggest dividends, China claims, is “connecting peoples’ minds”. OBOR touches more than 60 countries and over 4 billion people, enabling an outlet for Chinese construction companies, goods and labour, and in return, offer many primary products in exchange.

OBOR is motivated by its own geographic compulsions—large parts of western and southern China constitute the land-locked interior. China’s excessive dependence on the sea route for exports and energy security (almost 80% of China’s oil from the Middle East and Africa) passes through the narrow and busy Strait of Malacca, which posits the quintessential ‘Malacca Dilemma’. Both the road and sea infrastructure are poised to help the land-locked interior and address the excessive reliance on the notorious Malacca choke-point.

The ambition of OBOR is partly captured by a professor of international relations at Seoul National University, Jae Ho Chung, who contends that OBOR footprints “55% of the world gross national product, 70% of the world’s population, and 75% of its energy reserves”, and translates as Chinese presence from the Middle East to Africa to as far as the European backyard.

Nothing showcased China’s tryst with Europe better than the world’s fastest bullet train, which is Made in China and was unveiled in late 2015. The train covers a distance of 110-km from Suzhou to Shanghai in just 20 minutes and was flagged off at the conclusion of the Fourth Summit of China and Central and Eastern European Countries (CEE, 16+1). The audience were 16 Eastern European leaders (including Albania, Bosnia and Herzegovina, Macedonia, Montenegro, and Serbia—who are not currently members of the EU), and the plus one (+1) being China. Trade between China and Central and Eastern Europe reached $52 billion in the first 10 months of 2013 and is expected to touch $120 billion in 2020—Sino-Indian trade was just over $65 billion in 2013.

Even as last year Japan beat China to build India’s first bullet train, China signed the MoU in 2013, providing 1.5 billion euros for the 374-km high-speed rail in Eastern Europe, linking Belgrade (Serbia) with Budapest (Hungary), cutting travel time to half. This line may indirectly benefit Chinese goods that arrive in Piraeus (Greece) to pass through Hungary and Western Europe. China Daily has reported Chinese eagerness for infrastructure upgrade in Baltic Sea, Adriatic Sea and Black Sea. It says, “As long as CEE countries use products and equipment made by China, the country will provide financing support.”

Many OBOR projects are operational; a few contentious ones may be under way. Recent media reports suggest China’s eagerness for the $28-billion Kra Canal Project—to build a canal in South Thailand across the Isthmus of Kra, linking South China Sea with Indian Ocean. According to analysts, if operational, the 102-km-long and 400-metre wide canal may create an alternative route to the Strait of Malacca.

Closer home, the $46-billion China-Pakistan Economic Corridor (CPEC) from Gwadar (Balochistan) to Kashgar (Xinjiang) will enable China reach Arabian Sea, while China’s oil pipeline from Kyaukphyu in Myanmar to Yunnan has already started operations in 2014.

In Africa, among other investments, China is spearheading the development of the deepwater port of Kribi in Cameroon, and a railway connecting Nairobi with the port city of Mombasa in Kenya. China also concluded the successful first phase of the $475-million, 17-km-long light railway project in Addis Ababa, Ethiopia, besides railway projects in Nigeria and Angola.

OBOR has been years in the making before it hit the ground running. The phenomenal 11,000-km railway line from Chongqing (Southwest China) cutting through the country’s heartland—Xi’an to Lanzhou to Xinjiang to neighbouring Kazakhstan over the Alataw Pass—is operational since 2011. The line proceeds through Russia, Belarus and Poland into the port of Duisburg in Germany’s Ruhr Industrial area—which President Xi Jinping visited in 2014.
This train, called Yu-Xin-Ou (Chongqing-Xinjiang-Europe), takes 16 days for the journey, lesser than that taken by the sea route through the Strait of Malacca, but the freight costs are exorbitant. Chongqing has announced the delineation of a free trade port town in the Liangjiang area (in Chongqing). New railway container lines are on the cards in other parts of China—Harbin (northern Heilongjiang) will be linked with Hamburg, and Zhengzhou (central Henan) with Madrid.

The maritime component of OBOR has sought to upgrade ports, harbours—the so-called ‘strings of pearls’ Hambantota (Sri Lanka) and Sittwe (Myanmar). Maritime scientific research, disaster warning systems and environmental concerns seeking cross-border collaboration are also on the cards.

Boosting OBOR is the new financial institution, the Asian Infrastructure Investment Bank (AIIB), headquartered in Beijing. AIIB has been set up with an initial capital of $50 billion, with 57 countries signing up as founding members. China has contributed $29 billion to the $100 billion capital pool, followed by India which has contributed $8.4 billion. A Silk Road Fund (state-owned investment fund) was established in 2014.

The OBOR challenge

The challenge lies in implementation over disparate socio-political terrains, often with ‘non-traditional’ threats such as insurgencies and drug trade. China’s ASEAN backyard is simmering with disputes over South China Sea and East China Sea. Despite China’s burgeoning trade with ASEAN (bilateral trade is expected to reach $500 billion), ASEAN stands divided over increasing Chinese stridency in neighbouring seas. Central Asia, a huge stakeholder in the strategy, is marked by a dominant Russian presence, with potentially unstable states such as Belarus which could prove to be the hurdles in the smooth running of the economic corridors.

Some projects have already run into rough weather—Kra Canal has acrimoniously divided the Thai public, and is ruffling Singapore’s feathers (the canal will diminish Singapore’s maritime standing which contributes 7% to its GDP). In Indonesia, the Jakarta-Bandung Railway shows teething troubles, with newspapers churning out paeans about safety issues. As for the CPEC, given the security environment and opposition to Chinese workers in Pakistan, a 12,000-strong security force stands guard over Chinese workers. According to the American Enterprise Institute (AEI), a quarter of investments/projects undertaken by the Chinese from 2005 to 2014 worth $246 billion have stalled due to various reasons.

OBOR may inadvertently drive rivalry in Asia. The China-led AIIB challenges existing financial institutions such as the Word Bank and the IMF, and also Japan’s Asian Development Bank (ADB) which has chosen to keep away from AIIB. ‘Re-balancing’ China may yet take other hues.

Implications for India

It can be an opportunity, as some say, or a danger, as others do. Like it or not, India is part of the OBOR boat under the auspices of the 2,800-km-long BCIM (Bangladesh, China, India, Myanmar) economic corridor initiated in 1999.
Under BCIM, the K2K purports to link Kolkata with Kunming, crossing Benapole, Dhaka and Sylhet, to re-enter Silchar and then Imphal, hitting the Tamu-Kalewa friendship road in Myanmar and onwards to Kunming. This promises to benefit the vast marginalised north-east and east India—a region with a host of problems. Making a virtue out of the reality of Chinese prowess could be the Indian takeaway. How India seeks and manages opportunities in terms of physical infrastructure, leveraging its founding status in AIIB and in the implementation phase of OBOR globally, via participation of its companies, remains to be seen.

The author is a Singapore-based Sinologist and adjunct fellow at the Institute of Chinese Studies, New Delhi. She is the author of Finding India in China

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