Saturday,25 November, 2017
Current issue | Issue 1344, (11 - 17 May 2017)
Saturday,25 November, 2017
Issue 1344, (11 - 17 May 2017)

Ahram Weekly

The Belt and the Road

China is reviving the ancient Silk Roads that once connected East Asia to the Mediterranean in an ambitious project called the Belt and the Road, writes Sayed Moawad

A forum on “the Belt and the Road” will be held in China on 14-15 May to discuss a gamut of issues including economic and financial cooperation, eliminating trade barriers and connecting infrastructure, and the harmonisation of policies, all things that will surely affect the global economy.

This article is an overview of the ancient Silk Roads and the new Chinese initiative to give them back their vitality while also building a new “Belt and Road” on the basis of the historical Silk Roads’ spirit of peace and cooperation, openness and inclusiveness, and mutual learning and benefits for all the countries involved.

The Belt and the Road is a positive endeavour to inject new energy into global peace and development through new patterns of international cooperation and global governance. Foreign observers tend to see it as an attempt by China to translate its economic performance into political leverage, while Chinese officials consider it as an ambitious economic vision of opening up to the rest of the world and cooperation.

It is not a foreign aid programme, but a set of business projects that require the full participation of the countries involved to make a long-run commitment to these projects. The Belt and the Road will, if effectively implemented, improve international trade and spur commodity demand and bring a much-needed boost to global growth, particularly in a period of uncertainty. Most importantly, the Belt and the Road will lead to shifting China from the first goods exporter in the world to the major capital exporter.

For more than two millennia the Silk Roads linked the major civilisations of Asia, Europe and Africa through trade and cultural exchange. The history of the Silk Roads goes back to the Chinese Han Dynasty nearly 2,100 years ago when Chinese imperial envoy Zhang Qian was sent to Central Asia carrying messages of peace and friendship to open up exchange between China and the rest of Asia. The Silk Roads derived their name from the lucrative trade in silk that was carried on across their length that started from China, went through Central Asia, and extended to connect East and West.

The Silk Roads were not only a way for trade to take place, but also a tool for cultural interaction between countries. Due to the importance of the Silk Roads, the United Nations cultural organisation UNESCO has designated the Chang’an-Tianshan corridor of the Silk Roads as a World Heritage Site.

It seems logical to look at China’s the Belt and the Road initiative as an attempt to revitalise the old trade routes, but it is also crucial to consider the Belt and the Road as a way of understanding how policy-makers in China think. As a matter of fact, the Belt and the Road is a strategic driver for China’s long-term development plans, but also for the development of the other countries involved. Along the length of the Belt and the Road there will be varied business activities and related supporting services, including engineering services, construction material exports, transportation and logistics services, equipment exports and capital projects and infrastructure.

The Silk Roads historically faded as a result of a culture of openness changing to one of closure. In 1793, the then Chinese emperor Qian Long sent a haughty letter to Britain’s king George III turning down the British request to open a trade mission in China. The emperor’s letter said that “our dynasty’s majestic virtue has penetrated unto every country under Heaven, and kings of all nations have offered their tribute by land and sea. As your ambassador can see for himself, we possess all things. I see no value in other objects, strange or ingenious, and we have no use for your country’s manufactures.”

This disdainful attitude towards the rest of the world eventually resulted in a yawning technological gap between China and Europe after 1800. The Europeans were more willing to deal with the wider world and were eager to adopt inventions from it, such as paper and gunpowder from China itself, a matter that played a crucial role in Europe’s economic ascent.

The European outlook is exemplified by the 17th-century German mathematician Gottfried Leibniz’s instructions to European travellers to China “not to worry so much about getting things European to the Chinese, but rather about getting remarkable Chinese inventions to us”.

 

THE SILK ROADS TODAY: China today is committed to instilling a new vitality into the ancient Silk Roads, and on 7 September 2013 in a speech delivered at Nazarbayev University in Kazakhstan Chinese President Xi Jinping called for reviving the ancient Silk Roads by establishing the Silk Route Economic Belt (SREB).

On the margins of the ASEAN-China Summit in October 2013, the Chinese premier also spoke about the new Maritime Silk Roads (MSR). To bring these initiatives together, on 28 March 2015 the Chinese National Development and Reform Commission, the Ministry of Foreign Affairs and the Ministry of Commerce announced actions to build the Silk Roads Economic Belt and the 21st-Century Maritime Silk Roads. The two initiatives were combined in one overarching title as “One Belt, One Road”, or “the Belt and the Road”.

The Belt and the Road has become the centrepiece of China’s economic diplomacy. The initiative will take place on land and at sea. On land, it aims to build a new Eurasian land bridge establishing China-Mongolia-Russia, China-Central Asia-West Asia, and China-Indochina Peninsula economic corridors to act as international transport routes, utilising the core cities along the Belt and the Road as industrial parks and cooperation platforms.

At sea, the initiative seeks to build a smooth, efficient and safe transport road to connect major sea ports along the Belt and the Road. In addition to this, economic corridors between China-Pakistan on the one hand and Bangladesh-China-India-Myanmar on the other are closely related and will see closer cooperation.

From the opening up and the reforms that have taken place in China from 1978 to the present day, one of the salient features has been to help others to realise their own development. In this regard, China has repeated that it does not want to see the development of China alone, but also the development of the rest of the world. This conviction has appeared on many occasions in the speeches of the Chinese leadership. On one occasion, the architect of reform, Deng Xiaoping, stated that “closed-door development is not workable and is doomed to fail. Without opening up or interaction with the world, it is impossible to keep up with the advanced nations. To develop the nation and lift people out of poverty, we have no other option but to open up.”

On another occasion, Chinese President Xi Jinping described the “Chinese dream”, saying that “to realise the Chinese dream we must adhere to peaceful development. We will unswervingly follow the road of peaceful development, pursue mutually beneficial development, and the win-win strategy of opening up. We are not just committed to China’s own development; we are equally serious about fulfilling our responsibilities and making contributions to the rest of the world. Our development will not only benefit the Chinese people, but also the people of the rest of the world,” he said.

The question is why the call to revive the ancient Silk Roads came to world attention only four years ago? The answer emerges from the profound and complicated changes taking place in the world arena that encompass, inter alia, the slow recovery of the global economy, uneven global economic development, multilateral trading system rules that are undergoing major adjustments, and the emerging impacts of the international financial crisis.

Furthermore, the initiative of the Belt and the Road seeks to embrace the trends towards a multipolar world, economic globalisation, and cultural diversity. The Belt and the Road aims to uphold the global free-trade regime, the free-flow of economic factors, and the deeper integration of markets in order to achieve economic policy coordination and create open, inclusive and balanced regional economic cooperation that benefits all the countries and peoples concerned.

Xi Jinping in his speech at Nazarbayev University set out certain principles to enhance and deepen economic cooperation between countries on the Belt and the Road in order to establish regional cooperation gradually. These principles included, first, cementing communications such that all the countries concerned engage in comprehensive communications around economic development strategies. They should also conduct consultations on preparing and planning regional cooperation and take due legal measures towards achieving regional economic integration.

Second, they should cement connectivity and establish cross-border transportation networks in order to secure economic development for countries and exchanges between peoples. Third, they should facilitate the flow of trade, particularly since the potential trade and investment capabilities of countries on the Belt and the Road are huge and the population of countries and the volume of markets of the countries on the Belt and the Road are also very large. In this regard, all concerned parties should work together to encourage trade and investment, to take due measures to eliminate trade barriers, and to accelerate the process of regional cooperation in order to attain mutual benefits.

Fourth, they should enhance monetary circulation through the settlement of accounts using national currencies. Using national currencies in the settlement of current and capital accounts will reduce the cost of circulation, increase capabilities to deal with financial risks, and raise the international competitiveness of regional economies. Fifth, they should boost the ties between peoples as these usually play a role in establishing commercial relations between countries. In order to accomplish cooperation in the above fields, it is necessary to obtain the support of the peoples of the countries concerned, boosting mutual understanding and traditional friendships to create a solid popular and societal base to complete regional cooperation.

China intends to lead the entire process of implementing the Belt and the Road initiative. It will set out the framework of the cooperation mechanisms. The world trading system is currently witnessing economic integration on the international level along with an upswing in trends on the regional level. In this environment, China will rely on existing bilateral and multilateral mechanisms of cooperation in order to push forward the completion of the Belt and the Road initiative to promote regional cooperation and development.

It will exert all possible efforts to strengthen the comprehensive development of bilateral relations through multi-level and multi-channel negotiations and consultations. To push bilateral cooperation ahead, plans, memorandums of understanding, joint working mechanisms and roadmaps are required for the advancement of the Belt and the Road initiative.

There is no doubt that the Belt and the Road will create an advantage for firms located in the countries involved, as well as for international firms, through facilitating trade flows within the connected areas through infrastructure that may enable shortening of lead times and transportation costs between areas of production and consumption. Most importantly, the movement of goods by rail will be more cost-effective compared with air transportation, and this will benefit firms that rely on materials from international markets.    

The Belt and the Road initiative is expected to have implications for a wide range of activities in nearly 65 countries in Asia, Europe and Africa, with populations approximating four billion and producing $21 trillion in GDP. China has set out both a national and a regional strategy to achieve the Belt and Road initiative including, inter alia, extending China’s circle of influence in both global economic and political affairs, exporting excess capacities in certain sectors such as steel, construction, manufacturing and transportation, finding new investment opportunities for China’s surplus of foreign reserves, developing new horizons that work as engines for growth such as boosting trade activities and investing in infrastructure, expanding the internationalisation of the Chinese currency, and securing resource supplies.

 

BENEFITS: Though the Belt and the Road is beneficial to all the countries involved, here I will refer especially to the positive effects for China and Egypt.

For China, some estimates indicate that it has signed contracts worth nearly $925 billion along the Belt and the Road, where a gamut of cross-border infrastructure projects is already underway. These include a highway in Pakistan and a port in Vietnam, and there are others to come. Trade and investment between China and various countries along the Belt and the Road exceeded $1 trillion in 2015, equal to a quarter of China’s total value of trade. It is worth noting that exports by China to countries along the Belt and the Road are more than its exports to its two top trading partners, the US and the EU. This situation makes China safer should protectionist measures be taken.

As for Egypt, the Belt and the Road will provide a unique opportunity in which it will become a significant bond linking Chinese and Egyptian economic cooperation. On the one hand, after the New Suez Canal came into being in 2015 the government has been placing great importance on upgrading the country’s ports, establishing infrastructure projects and constructing industrial parks that are the main potential activities that will be created along the length of the Belt and the Road.

On the other hand, China-Egypt economic and trade cooperation can take place close to one of the country’s largest ports, Ain Sokhna, which is both a meeting point and a junction of the Belt and the Road, with the Suez Canal Area Development project acting as a gateway to China-Egypt cooperation. China and Egypt have concluded an agreement that the local currency of both countries can be used in dealings between them, something that should significantly facilitate commercial relations.

In conclusion, the Belt and the Road is a form of win-win cooperation, an interaction depending on mutual respect and trust, and a connection between civilisations. It is currently the largest single project in the world, and it will help at least four billion people in the countries involved. Most importantly, it will cement people-to-people bonds through fostering a friendly and harmonious cultural environment and positive public opinion.


The writer is an expert on international trade in charge of anti-dumping policy at the Ministry of Trade and Industry. He writes in a personal capacity.

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