A hitch-hiker’s guide to the new Silk Road

The Silk Road. The name itself is compelling, evoking long-distance trade in a luxury good and a patchwork world of different languages and religions and the extraordinary hybrids they created.

Consider the common etymology for musical instruments variably known as the guitar, the zither, and the sitar. That was the West traveling East, by the way, originating with the Greek kithera.

The “Silk Road” is a name coined in 1877, the year Crazy Horse surrendered to the U.S. government and the year the first Chinese student enrolled at the Massachussetts Institute of Technology. Moreover, it was invented by a German geologist during the height of what was known as The Great Game, the classic struggle between the British and Russian Empires over who would control Eurasia. Germany wasn’t a player in that, although at the height of that geopolitical shadow boxing fight Siemens built the first telegraph connection between London and Calcutta - passing through Russia.

Today the term is mostly used in association with the Belt and Road Initiative (BRI), China’s vision of an infrastructurally-united land mass stretching from Shanghai to Venice and Hamburg.

The BRI aspires to span an area housing more than 4.4 billion people. Building it will require more than $1 trillion in new investments, mostly in transportation and energy networks. Achieving critical mass would revolutionize the world’s map, potentially turning maritime trading nations such as Britain, Japan and the United States into peripheral players. It could also be a Trojan Horse for Europe; former NATO Secretary-General Anders Fogh Rasmussen worries that “in the long-term, China is the one external power that could pose the greatest challenge to Europe’s cohesion as an economic superpower.”

The stakes are high – and the rhetoric no less so. Chinese President Xi Jinping gave a landmark speech in May 2017 in which he emphasized that his country’s ancestors had “opened the transcontinental passage”, doing so both by land and by sea in the form of Zheng He’s 15th-century sailing adventures in the Indian Ocean. His speech hitched the faintly ominous phrase “history is our best teacher” to the universally commendable pledge to make the BRI into a “road of prosperity.”

“Infrastructure connectivity is the foundation of development through cooperation,” he said, while announcing new funding pledges worth hundreds of billions of renminbi.

The New Silk Road he has in mind is universes apart from an ill-fated project of the same name that the United States announced - via a speech in India – which amounted to some pipeline and road projects through Afghanistan that would ease the economic effects of a U.S. military retreat from the country.

Many fear growing U.S. protectionism and a more aggressive China, so paranoids have plenty to work with here!

That’s one reason why there was great scrutiny of who showed up at XI’s spring BRI bash in Beijing. Russia’s Vladimir Putin and Turkey’s Recep Erdogan did; India’s Narendra Modi and Japan’s Shinzo Abe did not. Italy’s Prime Minister Paolo Gentiloni was the only G-7 leader to attend, but he was joined by prominent Europeans such as the head of the International Monetary Fund and the Vice-President of the European Commission.

A glance at the map illuminates some of the forces at play, particularly in Europe. The BRI vision relies heavily on the Eastern Mediterranean - including China-controlled Piraeus port in Athens - and new EU member states, counts on arriving in the continent’s German heartland, and would creep up Italy’s eastern coast, thus adding a distinct East-West distinction to the existing mostly North-South cleavages in the EU.

Italy straddles the divide, as the BRI frontier doesn’t actually include Italy but moves north along the country’s eastern coast. “The critical point is Venice, which everyone knows used to be the final destination of the historic maritime Silk Road networks ultimately linking the Red River which starts in China’s Yunnan province and flows through Vietnam, to Sri Lanka, India and Persia and the African kingdom of Axum,” says Letizia Zingoni, a research affiliate at the SovereigNET centre of TUFTS/Fletcher in Boston pursuing a doctoral thesis at LUISS University in Rome, Italy.

National security claims aside, the BRI cannot be ignored by investors. Indeed, at a time when the U.S. appears cool on free trade, it may be as the Chinese argue the world’s only major economic growth driver in the coming decades.

This especially concerns players in the infrastructure sector. As Nobel laurate Michael Spence says, the sheer demographic scale of the BRI project means that the standards adopted and set for railway gauges, digital protocols and the like will have a huge influence over the way the game is played and who the winners will be – and cast a long shadow everywhere. For this reason, getting engaged early carries great promise, which may mean that the typical economic accounting case to be made for a given investment may not always be simple or even appropriate.

Also, fears of a rampant China have been overplayed in the past, as noted by Michel Korinman, professor of geopolitics at the Sorbonne in Paris. Yet the hard numbers and prices linked to the large-scale Chinese fossil fuel investments in Africa don’t really support the “Chinafrique” idea of a secret market-breaking and empire-building scheme, he says.

For Korinman, thinking about China’s rise and growing role in the world is best done while keeping in mind that “geography is not destiny” and noting that greater scale is likely to make it harder to sustain a “chameleon” strategy of engagement with other governments without any particular hegemonic or political agenda, as Beijing currently claims.

On that note, it is worth noting that Zheng He, the Renaissance-era admiral, was a Muslim and a Mongol and his adventures came only just before similar trips by Portuguese ships that had far more lasting consequences in the region, as did the Hindu kingdoms of Indonesia. National aspirations are natural, but as regards the Silk Roads China really can’t lay claim to a dominant place.

Another point is that, regardless of political colors, the actual Silk Road region desperately needs development. Studies show that China’s own experience in building road networks created hefty economic gains well into the hinterlands as whole regions gained more access to trade. On the global scale of BRI, creating such access is a precondition for countries aiming to attract some of the 100 million lower-skilled manufacturing jobs that China is expected to shed as it consolidates its status as what President Xi, citing Confucius, calls a “moderately prosperous society”.

To be sure, that also suggests the pressure on choosing routes will be enormous and delicate, no small matter given the ethnic and regional rivalries and jealousies that criss-cross Central Asia. In fact, there have been some signs of potential protests in remoter areas of the region due not to BRI projects but their absence!

“A key past-and-present lesson from Venice’s glory period is that participants in what we’re calling the silk road are given access to a wealth of opportunities,” says Zingoni.

Given the sometimes volatile politics involved, investments that can be repaid by user fees rather than governmental guarantees – a strong possibility for toll roads and electricity networks, for example - may draw special attention as they have the potential to offset claims of corruption and set new ground rules for market activity.

The BRI is an ambitious project, and as Xi himself acknowledged – literally- that Rome wasn’t built in a day. Some external factors –ranging from oil prices and the war in Syria and potentially stretching to global monetary policies – could shift some of the alliances it is built on and as such are hard to predict. Internal factors warranting observation include, from an investor’s point of view, the pace and nature of China’s assuring reciprocal access to its domestic markets, and whether governance of BRI affairs will be put on an institutional footing or handled on a bilateral basis between Beijing and more than 50 other countries.