China’s new Silk Road could be the biggest Asian economic project in history.
As a part of Chinese President Xi Jinping’s effort to continue China’s 30 year economic acceleration forward, a new and improved Silk Road (a modern day rendition of the ancient trade route), known as One Belt, One Road, is in the works.
Here’s everything you need to know about how it will look and what its impact will be.
The new Silk Road is trade initiative that will consist of two main parts
China’s new Silk Road is dual faceted. With the goal of encouraging multinational economic development – especially in the Eurasian region – President Xi’s One Belt initiative will create both the land based Silk Road Economic Belt (SREB), and the seagoing Maritime Silk Road (MSR).
The land route
The SREB is meant to foster economic activity amongst countries in Asia, Europe, and The Middle East, by improving infrastructure, trade relations, and economic partnership. With the main land route stretching from Xi’an, China to Rotterdam, Netherlands, the plan is aimed to connect 65 percent of the world’s population.
The sea route
Much like the SREB, the MSR will also foster economic partnership between China and surrounding countries – though at a much wider scope.
The MSR is aiming to include countries in Africa, the South China Sea, Oceania, and the Indian Ocean, and will stretch from Shanghai to Venice, Italy.
The controversial AIIB will be helping fund the new Silk Road
The new Silk Road projects will be funded using money from the $50 billion Asian Infrastructure Investment bank in addition to a China funded $40 billion Silk Road investment fund. Additionally, the Bank of China plans on investing $100 billion in the next three years.
As we’ve discussed previously, the AIIB is a multinational investment bank upstart created by China which has caused quite a stir – mainly in the United States where skeptics fear that the new bank could challenge US hegemony.
The scope of the projects will be enormous
According to Foreign Affairs, China’s leaders have calculated that the project will reach 4.4 billion people in 65 different nations, in addition to adding over $2.5 trillion in additional trade.
Already, even in its preliminary stages, some are calling the initiative the biggest economic proposal that the region has ever seen.
The project will bolster China’s push towards hegemony
A project of this scope will allow China to solidify its position as a world economic power in a number of different ways.
One major benefit would be increasing the strength and ubiquity of China’s main currency, the Renminbi.
Though the currency has already grown quite popular in the region, an economic partnership like Silk Road, which would use the Renminbi as its main currency, would effectively elevate the currency to the level of the dollar or Euro.
Additionally, if successful, the new Silk Road will place China at the center of a large swath of economic activity around the world, and in turn place them in a more crucial foreign policy role than the country typically occupies.
A deal of this proportion could also bring with it some tough economic and political obstacles – none the least of which include a tumultuous Middle East.
The misappropriation or mismanagement (i.e. failed infrastructure development projects) of Chinese-provided funds by Silk Road’s economic partners could also result in increased Chinese debt if debtors struggle to pay back loans.
Other obstacles include balancing Chinese aspirations with those of other global actors in the region – for example India, Russia, and the US.