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China’s Silk Road to riches, for many…

Zafar Bangash

China is reviving the old Silk Road idea that will integrate Central Asia, Russia and Europe in the west and, Pakistan, India, Bangladesh, Malaysia and Indonesia in the east into its rapidly growing economy.

There is a tectonic shift taking place in global politics. The self-appointed sole superpower, the US, is licking its wounds from repeated blows in Iraq, Afghanistan and a host of other places. Even meddling in Ukraine has not turned out to be an easy ride despite the US and its European allies imposing sanctions on Russia for its “insolence” in refusing to accept Western demands. This short-sighted US policy has pushed Moscow toward much closer cooperation with Beijing. The Chinese can hardly believe their good fortune.

There are many factors that must be in place to enable a country to project power on the global stage. Economic strength is one of the most important together with military might but the latter is dependent on the former. Without financial resources, a country’s armed forces cannot be sustained. This is what has happened to the US. It is already a has-been superpower.

It is, however, in the economic sphere that China has made major strides and has surpassed the US in Gross Domestic Product (GDP), according to the International Monetary Fund (IMF) report of December 5, 2014. The US plan to confine China in the Pacific through its newly crafted policy commonly referred to as the “Asia Pivot,” is misplaced. To advance this policy, Washington has tried to rope in Japan into an anti-China alliance. China looks upon this development with bemused bewilderment. Beijing is not looking to the Pacific for power projection whether in the economic, political or military fields.

The dispute between China and Japan over a few small islands in the Pacific that the US corporate media magnified into a major crisis has been deftly handled by both sides. In the first week of November, Beijing and Tokyo released what was referred to as a “Principled Agreement on Handling and Improving Bilateral Relations.” The agreement was hammered out in meetings between Japan’s National Security Advisor Shotaro Yachi and Chinese State Councillor Yang Jiechi. Under the terms of the agreement, both sides would “establish crisis management mechanisms to avoid contingencies [meaning eruption of hostilities]” and to employ “dialogue and consultation.” In other words, resort to force or to the threat of use of force would not be an option in dealing with each other.

Chinese policy is geared toward ensuring stability within its own borders and strengthening ties with its Central and South Asian neighbours. This can be seen from recent policy pronouncements. China has announced a $40 billion Silk Road project that would tie in the Eurasian landmass to Beijing’s interests. Concurrently, Beijing has also called for establishing a Maritime Silk Road Route through Southeast Asia and on to South Asia and the Muslim East. To prove it is serious about these projects, China established the Asian Infrastructure Investment Bank (AIIB) in October 2014.

If the tens of billions earmarked for the various Silk Road projects are impressive, even more staggering are figures Chinese President Xi Jinping announced at the Asia Pacific Economic Cooperation (APEC) forum in Beijing in November. He said over the next decade, Chinese foreign investment would total more than $1 trillion. What he said next would be music to the ears of the several billion people residing in Asia. At least 60% of this investment will be in Asian countries.

With its fantastic growth rate (even if it has slowed somewhat to around 7% recently), China is in need of vast energy and other resources. “China will import over $10 trillion worth of goods and the number of outbound Chinese tourists will also exceed 500 million,” over the next five years, according to President Xi who has adopted a far more robust policy posture compared to his predecessors. Chinese energy imports will receive a further boost with the fall in the price of oil from around $100/barrel in June to about $55 at present and still sliding. The 45% drop in oil prices will be a bonanza for energy starved China.

While the US has tried to prop up India as a rival to China — as it did in the 1970s when Washington used Chinese rivalry with the Soviet Union to undermine its principal rival — the Chinese take a long term view of relations and international affairs. India is an adversary but China is not going to waste its energies in that bogland. Instead, when Xi visited India in September, he pledged to spend $20 billion on Indian infrastructure. Delhi had hoped for $80 billion. Indian Prime Minister Narendra Modi is keen to project his business-friendly image and wants to improve the country’s creaky infrastructure that hinders movement of goods and acts as a drag on economic progress.

China has also signalled that it would like to help Afghanistan. During his visit to Beijing from October 28 to October 31, the new Afghan President Ashraf Ghani secured a pledge of $300 million from his Chinese hosts. China also indicated that it would like to help with Afghanistan’s stability through the Istanbul Ministerial Process. There are huge pickings to be made in Afghanistan given its estimated $4 trillion in untapped mineral riches. Previous Chinese investments had suffered a setback because of attacks, for instance, at the Aynak mine in Logar province where China invested $4.4 billion. Ghani’s other wish is that together with Pakistan, China might be able to help bring the Taliban to the negotiating table. Past American efforts at facilitating indirect talks with the Taliban collapsed because of US duplicity. The Taliban appear in no mood to talk to Ghani because they know the Afghan Army cannot withstand their power especially if the Americans and their numerous allies could not defeat the Taliban after trying for more than 13 years.

It is, however, American blunders in Ukraine that have propelled Russia toward China. When America propelled the neo-Nazi coup in Ukraine overthrowing an elected president, the Russians moved to annex Crimea fearing loss of their naval base in the Black Sea. President Vladimir Putin could not remain a silent spectator in the face of American aggression. The West led by the US imposed sanctions on Russia. Moscow immediately moved closer to Beijing and not only opened the gas tap but also agreed to supply China sophisticated military technology, including the formidable S-400 air defense system. As the late French President Charles De Gaulle had noted, the Americans are capable of doing the most stupid things imaginable and even those that are not imaginable. Whether pushing Russia toward closer cooperation with China was an imaginable stupid act or not is now a moot point. It has become a reality and will pose a strategic challenge to the US.

China is building rail, pipeline and telecommunication networks across the former Soviet republics as well as Russia. These will terminate at the Mediterranean Sea and greatly facilitate Chinese trade with Europe. With its rapid economic growth — China tripled its GDP in the last 30 years, a feat unparalleled in history — Beijing is anxious to create as many economic zones and as quickly as possible. The Eurasian landmass offers great opportunities. But this will not all be one-way traffic. Admittedly China is keen to sell goods; it is equally anxious to import goods as President Xi announced at the APEC summit. He outlined a Chinese target of $10 trillion for imports as well as foreign investment totalling $1 trillion over the next 10 years. Such fantastic sums would transform the entire region and integrate it into the Chinese economy.

To get a glimpse into China's strategy, let us consider this. Chinese companies have already signed $30 billion in contracts with Kazakhstan; another $15 billion in contracts have been signed with Uzbekistan while Turkmenistan and Tajikistan have respectively gotten $8 billion and one billion dollars in loans.

It is, however, China’s plans for a bullet train idea that will transform the region and beyond radically. If the steam engine transformed the 20th century, the bullet train will do the same for the 21st century. True, it will not be built in a day or even a year but the very thought of it makes European businessmen salivate with excitement. The 13,000-kilometre bullet train will link Yiwu in China to Madrid in Spain traversing Kazakhstan, Russia, Belarus, Poland, Germany, and France before arriving in Spain. It will cut travel time between China and Europe from the current 21 days to a mere two days.

The idea has so excited German businessmen that Germany is seriously considering a new economic partnership with Russia and China. The Europeans are tiring of America’s meddlesome ways, with Germany and France leading the pack. The Silk Road idea has also attracted others, notably Iran and Turkey that together with the Central Asian republics are already actively promoting their own connections to it. When the Trans-Siberian Railway is linked to it, this will lead to a new ballgame not only in the region but also globally. The rail links are scheduled for completion by 2025.

China is using its financial muscle in other ways as well. It is establishing several banks in partnership with others to facilitate the realization of these fantastic projects. Last June, BRICS (Brazil, Russia, India, China and South Africa) agreed to set up the BRICS Development Bank. Its initial capital of $50 billion will be provided primarily by China and India and will rival the Asian Development Bank (ADB) that was established under World Bank supervision in 1966 to keep Asian countries under Western control. BRICS is already viewed as more than an economic club. Russian President Vladimir Putin is keen to give it some political teeth as well. Taking a dig at the US-influenced ADB, China and India announced that the BRICS bank will make loans on the basis of “justice, equity, and transparency” clearly hinting that this has not been the case with the ADB.

The BRICS bank will be supplemented by the Asian Infrastructure Investment Bank (AIIB) that 21 Asian countries approved at the APEC summit. This was proposed only one year ago by Xi. Only four countries — the US, Japan, Australia and South Korea — opposed it. Sore losers!

China’s breathtaking proposals are based on sound thinking. The regions that Beijing wants to integrate into its economic zone have vast populations (China and India alone account for 2.5 billion people), they occupy a huge landmass and have enormous resources, primarily hydrocarbons. And China is willing to invest heavily in all of them to realize its dreams. The 21st century is clearly shaping up to be the Chinese century and it will arrive with bullet train speed.

As old Uncle Sam limps toward oblivion, the Chinese dragon is roaring to go.

Article from

Crescent International Vol. 43, No. 11

Rabi' al-Awwal 10, 14362015-01-01

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