Download One Belt One Road – China`s new Silk Road

IW-Kurzberichte 67. 2016
Thomas Puls
One Belt One Road – China’s new Silk Road
China is pressing ahead with its New Silk Road
project. It has decided on large investments in
other countries’ transportation infrastructure.
China’s aim in this is to make access to the world
markets more efficient while also promoting the
development of its economically repressed provinces.
China is pushing forward with the concept of a New
Silk Road. In Europe, we primarily associate the concept of the New Silk Road with new train connections
to China; yet this is only one aspect of a much bigger
plan. The One Belt, One Road (OBOR) project, which
was first proposed in 2013, actually involves an attempt to create a sophisticated trade area in Eurasia
– one that is intended to open new growth opportunities for China. The OBOR initiative connects two
major programmes and comprises some 900 projects
in 64 countries with an investment volume of 850
billion dollars (DVZ, 2016b, 3). Within the OBOR
framework, China has signed agreements with 30
countries so far and has provided 60 billion dollars
in multiple investment funds. The Asian Infrastructure
Investment Bank (AIIB) with its start-up capital of 100
billion dollars was also launched in the context of
OBOR.
21st Century Marine Silk Road – The
sea route from China to Europe
Foreign trade statistics show that over 90 per cent of
today’s trade with China are transported by ship. Sea
transport is relatively slow (around 30 to 35 days,
including pre-carriage and on-carriage), and yet it is
very inexpensive. A forwarder currently spends less
than 2,000 dollars for the transport of a large container (FEU) from China to Europe (DVZ, 2016c, 9).
Shipping companies are, however, currently facing
a crisis. Hanjin, a major shipping line, has already
gone bankrupt. Still, sea transport will remain the
backbone of world trade, which is why China’s OBOR
activities also include investing heavily in Asian, African and European ports. This programme aims to
connect additional regions to China’s sea route to
Western Europe, thereby facilitating the export of
Chinese products to these areas. The programme
involves investments in ports that have been used
very little up to now, such as Kenya’s Port Lamu – with
the primary objective of creating logistical access to
new markets. But there are also projects underway
that are intended to improve efficiency along transport routes. One notable example is the major investment in the Port of Piraeus, which is set to be expan-
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China‘s New Silk Road
China: Export into neighbouring countries weakening
Share of China’s export goods going to neighbouring countries in 2015, as a percentage
India
2,55%
9 other
neighbours
0,94%
France
8,58%
Russia
1,53%
4 other
neighbours
8,39%
GERMANY
CHINA
Pakistan
0,72%
Vietnam
2,91%
Netherlands
6,62%
Myanmar
0,41%
Switzerland
4,22%
Austria
4,83%
Poland
4,34%
Source: UNCTAD
ded into a logistical hub for the entire Mediterranean
region (Putten/Meijinders, 2015, 9). If successful, this
project would strongly impact the flow of transported
goods in Europe, shifting trade traffic and logistics
services from the ports in Northern Europe to those
on the Mediterranean Sea.
Silk Road Economic Belt – Creating a
Eurasian trade area
In Europe, OBOR is often perceived as a railway project. For some years now, freight trains have been
rolling from China via Russia to Duisburg. The railway
now has also established itself as an alternative means of transport to China. With a transport time of 20
to 25 days (including pre-carriage and on-carriage),
and transport costs between 4,000 and 6,000 dollars
per FEU, rail transport has positioned itself as an
inexpensive alternative to air freight in particular
(DVZ, 2016a, 7). The ability of rail transport to compete with sea transport, however, is limited by capacities. After all, it would take up to 300 trains to replace a container ship. Still, China wants to make
serious investments in land-based transport to its
neighbouring countries. This programme is known
as the Silk Road Economic Belt (SREB). As the name
reveals, it involves more than creating a faster connection to Europe. Besides building up transport
routes, the initiative is especially intended to boost
growth in China’s neighbouring countries, making
them more attractive trade partners for China. Major
projects include the recently agreed upon construction of a transport link from western China to Pakistan’s Gwadar Port and the construction of a link that
extends from China’s southwestern province of Yunnan to Calcutta via Myanmar and Bangladesh (BCIM).
These two projects aim to connect China’s more remote provinces to the world trade routes, while also
creating focal points for economic activity in the poor
neighbouring countries. Both of these large undertakings also provide a link between the two OBOR
project components.
OBOR: Why China wants to invest
OBOR represents a continuation of China’s infrastructure investment policy on an international level.
China is not shouldering the high costs out of altruism, but because the investments promise to stimulate sustainable growth in the country’s own eco-
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China‘s New Silk Road
nomy. The prosperity gains of the past 20 years are
very unevenly distributed in China. In 2014, households in the coastal regions had an annual income of
between 5,000 and 8,000 dollars (Statista, 2016). Figures were considerably worse for those in China’s
western and northern provinces, which don’t have
access to the sea. The good 350 million inhabitants
of these provinces have to survive on an average
annual household income of between 3,000 and
3,500 dollars. This is resulting in millions of itinerant
labourers moving east, which is causing considerable
social tensions.
reasons for this include poverty on the other side of
the border and the poor transport links. To strengthen the economy of the border regions sustainably,
China is dependent on setting cross-border trade into
motion. The SREB projects are primarily intended to
serve this purpose. New links to Central Asia and the
Persian Gulf will also provide better access to the
energy resources from these regions.
The Chinese government has been trying to counteract this trend and to promote western development
since the launch of the “Go West” strategy in 1999.
However, the location of the western provinces places them at a disadvantage. Since trade with Europe
and the United States is handled by ship, the goods
from western China must first reach the ports in the
eastern provinces to be loaded. This costs time and
money, resulting in a less favourable assessment of
such locations. Additionally, hinterland connections
to seaports are chronically overloaded, leading to
deadline risks. To resolve this problem, China is attempting to provide its western provinces with more
convenient access to the sea trade routes. Such efforts include the projects in Pakistan and the BCIM.
References
The planned land-based links towards the west are
also intended to address another problem of the
Chinese economy: its weak connections to the surrounding regions. Just over 9 per cent of China’s
export goods go to its 14 neighbouring countries (see
figure). In Germany, the corresponding figure is nearly 37 per cent. Even the large neighbouring countries of India and Russia only receive a combined
total of 4 per cent of China’s export goods. The biggest
export market among China’s neighbours is Vietnam,
with a share of nearly 3 per cent. Yet this partner almost exclusively transacts business with provinces
along the coast. The growth engine of regional trade
with neighbours largely fails for China – and fails
almost entirely for western China. In economic terms,
the western provinces are generally isolated. The
All in all, OBOR constitutes an internationalisation of
China’s investment policy up to now. The main objective is to generate growth for China.
Deutsche Verkehrszeitung – DVZ, 2016a, Schienesische Medizin, Nr. 61/2016
DVZ, 2016b, China drängt in neue Märkte vor, Nr.
62/2016
DVZ, 2016c, Maersk leidet unter Preisdruck, Nr.
67/2016
Statista, 2016, Einkommen pro Haushalt nach Provinzen
UNCTAD – United Nations Conference on Trade and
Development, 2016
Putten, Frans-Paul van der / Meijinders, Minke, 2015,
China, Europe and the Maritime Silk Road, Netherlands Institute of International Relations, Clingendael report