Why is China building a New Silk Road?

2000 years ago, merchants and caravans began moving between east and west along the Silk Road, trading goods, philosophy and technology.  The very name Silk Road conjures images of caravans, desert steppes and adventurers like Marco Polo navigating the ancient trading routes connecting China with Central Asia, the Middle East, Africa and Europe.  

Now a modern Silk Road, rekindling trade and achieving common prosperity, is in the making. Yes, Mighty China is reviving the historic Silk Road trade route that runs between its own borders and Europe.  China’s modern-day adaptation aims to revive those historical routes via a network of railways, ports, pipelines and highways. President Xi Jinping champions his pet project as a means to spur development, goodwill and economic integration, as well as find markets for China's over-producing factories. Critics — both along and beyond the Silk Road routes — are wary of China's push to spread its influence further west. 

What is OBOR? 
The Silk Road Economic Belt and the 21st-century Maritime Silk Road, also known as The Belt and Road (abbreviated B&R), One Belt, One Road (abbreviated OBOR) or the Belt and Road Initiative is a development strategy and framework, proposed by Chinese paramount leader Xi Jinping that focuses on connectivity and cooperation among countries primarily between the People's Republic of China and the rest of Eurasia, which consists of two main components, the land-based "Silk Road Economic Belt" (SREB) and oceangoing "Maritime Silk Road" (MSR). The strategy underlines China's push to take a bigger role in global affairs, and its need for priority capacity cooperation in areas such as steel manufacturin

The Belt and Road Initiative, proposed by Chinese president Xi Jinping, has gained traction in the last three years, scholars and officials said. A new Silk Road is being formed, and the main structure has roughly taken shape, through better links between cities along the routes, trade zones, international economic corridors and improved ports,

In June 2016, the Renmin university of China published a report on the progress of the initiative, chronicling successes in transportation, pipelines and telecommunication infrastructure, trade expansions, financial and cultural cooperation.

More than 2000 train services operated between China and Europe

Notably among the successes, more than 2,000 train services operate each year between China and European countries, shipping laptops, dinnerware and oil-drilling equipment to Europe and bringing back food, wine and baby formula.

"Most countries along the Belt and Road are developing countries eager for better economic performance. By supporting the initiative, we are seeing better economic vitality and regional economic integration," said Fang Aiqing, vice commerce minister of China.

How many trade corridors planned?

Announced in 2013 by President Xi Jinping, the idea is that two new trade corridors – one overland, the other by sea – will connect the country with its neighbors in the west: Central Asia, the Middle East and Europe.

Why is China building the New Silk Road?

There are strong commercial and geopolitical forces at play here. 

China's Industrial Overcapacity: China’s vast industrial overcapacity – mainly in steel manufacturing and heavy equipment – for which the new trade route would serve as an outlet. As China’s domestic market slows down, opening new trade markets could go a long way towards keeping the national economy buoyant.

Hoping to lift the value of cross-border trade to $2.5 trillion within a decade, President Xi Jinping has channeled nearly $1 trillion of government money into the project. He’s also encouraging state-owned enterprises and financial institutions to invest in infrastructure and construction abroad.

“It is not an economic project, it is a geopolitical project — and it is very strategic,” Nadège Rolland, an analyst at the National Bureau for Asian Research, told foreignpolicy.com. He's not alone in suspecting China of a tactical repositioning in the global economy; it's clear that relationships with the ASEAN region, Central Asia and European countries stand to improve significantly if China directs more of its capital into developing infrastructure overseas.

Moreover, by striking up economic and cultural partnerships with other countries, China cements its status as a dominant player in world affairs.

China's OBOR - Will it reshape Global trade?
Will China's OBOR breathe vitality into the Global economy? 

Global economy is still plagued by problems of weak growth, weak demand with financial fluctuations lurking round each corner. The Belt and Road initiative targets growth and rebalancing global economy, said Fang.

Over 30 countries have signed inter-governmental agreements on the initiative with China. From January to August this year, trade along the road exceeded 600 billion U.S. dollars, about 26 percent of China's trade total. Direct investment by Chinese companies was over 10 billion U.S. dollars, commerce ministry statistics show.

Contracts were worth over 70 billion U.S. dollars, up 28.3 percent year on year. Projects such as a highway in Pakistan, high-speed railway in Turkey and rail link between Hungary and Serbia, are well under way.

China has built 56 economic or trade zones overseas, and created more than 163,000 jobs in Belt and Road countries and regions.

Thai-Chinese Rayong Industrial Zone in east Thailand is one of the most successful zones. Covering 12 square kilometers, it hosts 80 companies and provides jobs to more than 20,000 workers. "We call it the industrial China town," said Wu Guangyun, vice manager of the industrial park.

"The new Silk Road is by no means a private path for China. Rather, it is a grand avenue that accommodates the prosperity of many nations," said Fang.

The initiative also encompasses cultural, educational, tourism and archaeological exchanges.  "We have the chance to explore ancient tombs in the south of Uzbekistan. I look for more such academic cooperation," said Feng Jian, director of relics protection in Xi'an, a key city along the ancient Silk Road.

China's Modern Silk road

Ancient Wisdom Revisited?  

He Lifeng is another ministerial official who shares conviction in the bright future of the new Silk Road. "History can be silent but it never disappears, and it is time to recall past experiences to shape the future," said He, deputy head of the National Development and Reform Commission, China's top economic planning body. "Global economic recovery in the past few years has been hard and circuitous. International trade and investment are slow, and globalization has met immense challenges," he said.

"Faced with the challenges, we need to draw wisdom and beliefs from our ancestors and take action to break the stalemate and make a difference," he said.

The ancient silk road turned post houses and small oases into great cities, and brought about exchange among the world's greatest civilizations.

"We need to remember that when the ancient road was in its prime, China was a strong and open nation. Through the new Belt and Road initiative, China aims for further opening-up and common prosperity.

CHINA'S OBOR - India's interests?

CHINA'S OBOR -  India’s interests
Ever since China launched OBOR, most Indian analysts have regarded it more as a threat than an opportunity. Only a minority, consisting almost entirely of economists, have seen it as an opportunity to modernize India’s infrastructure and pave the way for rapid industrialization and employment growth. What it turns out to be will depend entirely upon what India wants it to be.

The incontrovertible fact today is that China has the finance capital, the technology and above all the overwhelming need , in its own national interest, to accelerate the development of these countries to an extent that could not have been imagined even half a decade ago. It is also an incontrovertible fact that the tunnel, road and rail links that it intends to build will pierce the natural ramparts of South Asia, the Himalayas, and end India’s geographical hegemony over the rest of south Asia.


If India chooses to stay out of OBOR it will only increase its isolation within South Asia, and hasten the end of its regional hegemony. But what will be even less excusable is that it will pass up a once-in-history opportunity to harness China’s economic muscle to India’s development. The way to avoid this is to join OBOR, invite Chinese investment in Indian infrastructure, and use the connectivity this creates to increase trade and investment with other south Asian countries and, of course, with China.