China’s ‘Silk Road’ project

China is spending around $1 trillion to rebuild the Silk Road, a massive trade network across Eurasia.

The Silk Road was the world’s oldest and most historically important overland trade route. It was the collective name given to a number of ancient trade routes linking China and Central Asia. But as travel by sea became more popular, trade along the Silk Road declined.

Now called One Belt, One Road, China’s plan to build veins of trade over land and sea into Europe and Asia may be the most significant global economic initiative in the world today, pbs.org. said in a report.

“China’s web of trade would span over 60 countries that are home to 4.4 billion people - more than half of the world’s population. Further, the initiative would interact with economies representing more than 40 percent of the world’s GDP. It’s a massive program that has the potential to affect global trade patterns. The initiative is broken into a land component, known as the Silk Road Economic Belt, and a sea component, called the Maritime Silk Road. The ‘Belt’ will consist of a number of corridors connecting China to the far reaches of Eurasia by road and rail. The ‘Road’ will involve the development of ports and shipping routes connecting Chinese harbors to Europe and the South Pacific, pbs said in a report written by Vikram Mansharamani.

The Silk Road Economic Belt will connect China with Central Asia, Russia and the Baltic countries in Europe; with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and with Southeast Asia, South Asia and the Indian Ocean.

The Maritime Silk Road, meanwhile, will link China’s coast to Europe through the South China Sea and the Indian Ocean in one route, and from China’s coast through the South China Sea to the South Pacific in the other.

So why is China spending so much for such an ambitious project?

Of course there had been a lot of speculations as to why. Mansharamani in his article said there are two main reasons: one related to China’s slowdown and economic vulnerabilities, and the other to geopolitical ambitions in the region.

But in a recent forum at the Asian Institute of Management, Professor Zhang Yuyan, who is one of China’s top economists and who is speaking on the topic “The Role of China in Global Economic Affairs,” showed how the Philippines can benefit from the “New Silk Road” project launched by Chinese President Xi Jinping in 2013.

For Zhang, the New Silk Road offers huge opportunities, not just for businessmen and investors, but even for artists and cultural workers as it would foster people-to-people exchanges.

He noted that China has already made substantial headway in strengthening economic ties with the countries covered by the Belt and Road (B&R) project. At present, more than 100 countries and global organizations are participating in various ways in China’s B&R, including railway construction and nuclear power generation. Zhang said the 21st Century Silk Road would promote policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds.

He pointed out the export of production and construction capacity is not only in the interest of China, but also in the interest of those countries whose financial resources and infrastructure are far from sufficient by pushing forward their industrialization as well as helping to stabilize the world economy.

In other words, the New Silk Road would be a two-way street where countries along its path could greatly benefit.

Enough reason for the two countries to resume dialogue and cooperation at the soonest possible time and put divisive issues on the back burner.

Zhang is also the director of the Institute of World Economic and Politics of the prestigious Chinese Academy of Social Sciences.

In 2015, bilateral trade between China and other countries along the Belt and Road reached $995.5 billion, accounting for 25.1 percent of national total. China has already expanded the scope of 50 overseas economic cooperation areas.

Last year, Chinese companies made direct investments in 29 countries along the Belt and Road, totaling $14.82 billion, increasing 18.2 percent over the previous year and accounting for 12.6 percent of the total.

Zhang admitted that while China’s current economic situation remains favorable, there are also uncertainties in the economic landscape, including currency risks, the real estate bubble, non-performing loans, public and corporate debts, and overcapacity.

Zhang pointed out China’s economy is now characterized by a shift from high growth to medium-high growth, depletion of rural surplus labor, and the peaking of employment in manufacturing as a share of total employment, resulting in economic growth more dependent on the service sector.

He said greater capital stock would lead to more asset depreciation, requiring more economic resources to make up for the depreciated assets. Their economy is likewise approaching the technology frontier, which necessitates a shift from technology import to indigenous innovation.

So while, we have to admit, China is doing this for its own good, the good news is, other countries will also benefit.

Zhang explained the Silk Road project has five major goals, namely: promote policy coordination; facilities connectivity; unimpeded trade; financial integration and people-to-people bonds. It also has four dimensions. Physically, it seeks to strengthen connectivity among countries involved via overland roads, railways, sea routes, airways, the internet and the like; financially, it involves innovation and cooperation in transforming savings into investment in the economy; institutionally, it will reduce transaction costs and provide incentives for investors in order to improve the allocation of production factors; and culturally, it will lead to better understanding among different peoples and enhancement of peaceful coexistence.

Zhang clarified that China has no hidden agenda nor a sense of guilt in embarking on the New Silk Road initiative, saying the export of production and construction capacity is not only in the interest of China but also in the interest of those countries whose financial resources and infrastructure are far from sufficient by pushing forward their industrialization as well as helping to stabilize the world economy.”

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