Why China is building a new Silk Road

 China is pouring money into countries in Central Asia and Eastern Europe, aiming to rebuild the old Silk Road trade route. But is the plan all about economic development, or something more sinister? Matt Bevan reports.

Last week, the first ever freight train from China arrived in Afghanistan. It's a major milestone in a project China has been pouring billions and billions of dollars into: rebuilding the ancient trade links between east and west.

Beijing has an agenda to increase its clout economically and politically.

LAURIE PEARCEY, UNSW

Straddling the border of China and Kazakhstan, there is a small town called Khorgos. Or Korgas. Or Chorgos. Or Gorgas. It's so obscure that there's no correct way of spelling or pronouncing it.

The town has existed in some capacity for 300 years. For most of that time it was just a few houses and a mosque, but in the last 10 years it's exploded into a city nearly the size of Darwin.

China is investing a huge amount of money in a trade route through its western provinces, through Central Asia and into Europe. They're rebuilding the ancient Silk Road—right through Khorgos.

Wade Shepard, a contributor for Forbes.com and author of a book called The Ghost Cities of China, says the rise of Khorgos is one of the most astonishing things going on right now in Asia.

'Kazakhstan and China have this idea that this town in the middle of nowhere could also be the centre of the world,' he says.

'Just seeing that kind of development from nothing to something in such a short amount of time tells you that the New Silk Road thing is for real now.'

Khorgos isn't the only place on the route where new cities are being built—it's happening as far away as Poland.

A large amount of the investment is coming from the Asian Infrastructure Investment Bank, a Chinese-led financial institution that Australia is a member of. But why does huge investment in Central Asia benefit China?

 

Creating economic growth for the western provinces of China

Most of China's economic growth is happening in cities along the east coast. Beijing has wanted to spread that growth across the rest of the country for decades. The One Belt, One Road Initiative, which includes the plan for developing the New Silk Road, is the outcome of their planning.

'The One Belt, One Road Initiative is designed to enable China's hinterland provinces to benefit from export earnings and investment links with the rest of the world,' says Laurie Pearcey from the University of New South Wales.

Beijing wants other countries to buy Chinese goods, but the countries to their west don't have a lot of capital to spend, so China wants to stimulate their growth too.

'If these countries are going to trade with China then there needs to be a commensurate lift in their standard of living, so they're investing billions of dollars in infrastructure and education in these countries,' says Pearcey.

'Beijing has an agenda to increase its clout economically and politically.'

Read more: The geopolitics of Obama's Asia pivot

Of course using economic diplomacy isn't a new idea. European powers have been doing it for centuries, and America has employed it a lot since the end of the Second World War.

In fact, then US secretary of state Hillary Clinton made her own Silk Road-related promise in 2011.

'The United States was going to try and put Afghanistan at the centre of this emergent Silk Road network,' says Shepard.

'The Asian Development Bank built a 75km railway in Afghanistan but that was about it. The US doesn't have nearly the amount of money China has—or the political will—to build this kind of network.'

Local response to Chinese investment

In Australia there has been controversy about Chinese investment in agriculture and infrastructure, but in Central Asia, the locals are excited about Beijing's money.

'The local population is very receptive,' says Shepard. 'They want the investment, they want the money. These investments are made with local partners across the board.'

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But even if locals welcome Chinese investment, the idea of transporting valuable goods overland through Central Asia comes with some security concerns.

'We're dealing with countries that have been volatile, but equally China has growing faith in its own geopolitical links with these economies,' says Pearcey.

Implications of the South China Sea dispute

China's dream would be to load a train in Shanghai and send it all the way to Berlin, but that may never be as economical as sending it via the sea.

Pearcey says the concept isn't just about a return on investment, but also ensuring that China will always have a source of resources.

'One of the key areas of anxiety that surrounds the South China Sea issue is trade security. The South China Sea accounts for something like two thirds of global trade,' he says.

China imports AU$2.1 trillion in goods every year. It needs oil. It needs metal. It needs food. And if its maritime trade links are ever interrupted, it needs a backup plan.

 

Matt Bevan 

Source ABC

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