The Comeback of the Middle Kingdom

The Great Silk Road, which served as an important corridor of trade and cultural exchange between Europe and Asia two millennia ago, has reappeared on the world map. Technically, this happened in June 2014 when the route was officially added to the UNESCO World Heritage Register. It includes a total of 33 historic landmarks – 22 located in China, 8 in Kazakhstan, and 3 in Kyrgyzstan.

Reviving the legendary route took unprecedented efforts, but China never doubted that the game was worth the candle. Its reinstatement should re-ignite the world’s interest, and the new version will overshadow its famous predecessor.

Chinese President Xi Jinping officially conceived the ‘Silk Road Economic Belt’ strategy and the Maritime Silk Road in the fall of 2013. The large-scale Chinese project may seem like yet another public move to exploit a hyped-up, romanticized image, but there is far more below the surface. Numerous studies and international forums have shown that a modern Silk Road is a long-term, multi-faceted global strategy, and the first phase of its implementation indicates an improved regional and global economic policy from China.

Its goals are no secret – China is starting to feel too cramped within its geographical boundaries. The mismatch between the mounting needs of 1 billion people and the country’s limited natural resources, combined with an unprecedented pace of economic growth, amount to a call to action – economic expansion.

Giampaolo Visetti, a reporter from the Italian publication La Repubblica and author of an oft-cited article about China’s ambitious plans, believes that the Silk Road Economic Belt strategy will become the country’s project of the century, seriously challenge the West, and redraw the business map of the world. “Beijing is back at the heart of the affluent part of the world bordered by the Pacific Ocean, while the US and Europe have been pushed to the impoverished outskirts of the Atlantic,” he wrote in one of his articles.

On top of the obvious external reasons for developing the Silk Road Economic Belt, there are also internal ones. In China, the western regions are acutely underdeveloped. Years of attempts to elevate ‘the far corner’ of the country to the level of the more developed eastern provinces have been unsuccessful. Development programs proved to be costly, inefficient, and largely artificial. But within the context of the Silk Road Economic Belt strategy, which will involve full-scale railway construction, western China and its significant mineral reserves looks much more accessible and attractive.

In earnest and for the long haul

China’s leadership has more than made up its mind. For instance, the construction of the Silk Road Economic Belt has become a part of the 13th Five-Year Plan (2016-2020) that is currently in development. It is also present in relevant policy documents: the most recent socio-economic development plan and government reports. More importantly, the strategy has very serious financial backing. In October 2014, the PRC signed a foundation memorandum for the Asian Infrastructure Investment Bank (AIIB) with a registered capital of $100 billion (5.2 trillion RUB), which is to begin operations before the end of the year. At the time of this writing, 57 countries have expressed the desire to become founding members, including 21 Asian states, as well as France, Finland, Italy, Germany, the UK, Australia, and Russia.

At the same time, China has established a special Silk Road Fund of up to $40 billion (2.1 trillion RUB). According to China’s President, Xi Jinping, it is made up of Chinese capital (through foreign exchange reserves and the resources of the Chinese Investment Corporation, the Export-Import Bank of China, and China Development Bank), which will be used to directly support the construction of the Silk Road Economic Belt.

In addition, Beijing is ready to help participating countries prepare 20,000 specialists in the next 5 years to work on strategy implementation, which may take up to 30 years. In the future, the plan is to create seven ‘belts’: transport, energy, trade, information, science and technology, agriculture, and tourism.

The result may indeed be the emergence of a massive free trade zone stretching from the northwestern provinces of China through Central Asia to Central and Eastern Europe. About 3 billion people currently live along the projected route. In other words, it is an immense market with immense potential.

The new incarnation of the Silk Road has no clear geographical starting or ending points. The global idea is more important: East and West are making another attempt to get closer. Beijing is keeping the doors to the new Chinese project wide open, as evidenced by the conceptual plan of action for the implementation of the project, which was adopted in early spring. “The development programs will be open and inclusive, not exclusive. They will be a chorus comprising all countries along the routes, not a solo performance by China,” confirmed President Xi Jinping at the opening ceremony of the annual Boao Forum for Asia in late March.

In November 2014, at a special meeting of China’s Central Steering Group on financial and economic issues, Xi Jinping pledged to assist countries located along the Silk Road Economic Belt in building appropriate infrastructure, including transport networks and power supply facilities. There is no lack of candidates wishing to join the Chinese initiative – 57 countries have already declared their willingness to do so. In particular, the strategy immediately received unconditional support in Central Asia, especially in Kazakhstan and Kyrgyzstan. Turkey is also interested, since it is a country whose unique location held a special place on the ancient Silk Road. If it were to once more become the focal point of revitalized relations between East and West, it would mean tangible economic benefits for the country.

The Chinese integration plan will cover many of the CIS countries, in particular the countries of the Caucasus: Armenia, Azerbaijan, and Georgia, as well as Abkhazia and South Ossetia. In December 2014, a protocol of cooperation for the joint construction of the Silk Road Economic Belt was signed between the Ministry of Commerce of China and the Ministry of Economy of the Republic of Belarus. It is also clear that Russia will not be watching from the sidelines.

Russia – the chance of a millennium

It is no secret that Moscow’s participation in the Beijing-initiated project was never a foregone conclusion. Its architects originally envisioned the Silk Road Economic Belt to run along a southern route that would bypass Russia entirely. To some extent, the inclusion of Russia in the northern corridor’s trajectory was facilitated by the return of Crimea, the western gate of the historic Silk Road that opened maritime trade routes to Byzantium and Europe.

In turn, Russia also had grounds for concern in regards to China’s initiatives, which could be seen as possible competition for its own Eurasian economic integration projects implemented as part of the Eurasian Economic Union (EEU) and the Shanghai Cooperation Organization (SCO). After several meetings in recent months, China managed to convince its Russian partners that there was no conflict of interest. “The implementation of the concept does not duplicate or compete with cooperation mechanisms like the Shanghai Cooperation Organization or the EEU. On the contrary, its implementation will add new content and give additional impetus,” confirms Li Hui, China’s Ambassador to Russia.

As a result, First Deputy Prime Minister Igor Shuvalov announced in March at the Asian Economic Forum that Russia had decided to join the Silk Road Economic Belt strategy. In April, Russia officially became a founding member of the AIIB.

It should be a win-win situation for both countries. On the one hand, participation in the strategy opens up previously unseen opportunities for Russia, but only if the country participates in the project – which draws upon China’s increasing economic potential – wisely, strategically, and on favorable terms. On the other hand, the leadership in Beijing understands that the project they initiated is still incomplete, if not impossible, without Russia’s participation and cooperation. The northern corridor of the new Silk Road extends from Western China through Kazakhstan to Orenburg, Russia, and then – as envisioned by China – to St. Petersburg and the Baltic Sea, as well as through Belarus and via Warsaw to Western Europe.

It is no accident that the first joint project of the Silk Road Economic Belt strategy may be the joint construction of a high-speed railway (HSR) between Moscow and Kazan with an option to extend it to Beijing. Not so long ago, it was added to the list of top priorities for one of China’s leading railway companies, China CNR Corporation. Today the company is involved in negotiations for the construction of the HSR, which will connect 28 Silk Road Economic Belt countries.

Significantly, Russia’s participation in the Chinese project will not be limited to a transit role. On the contrary, it will become a full partner in the northern part of the Eurasian corridor. “Russia is an essential party to the Silk Road Economic Belt strategy, which can integrate many Sino-Russian projects, in particular the program of joint development of the border regions of the two countries,” confirms Jin Sheng, a representative of the Department of Foreign Economic Relations in China’s Ministry of Foreign Affairs.

From the perspective of brand new and indispensable economic cooperation with the regions of the Russian Federation, Beijing has a lot to offer Moscow. Last summer, at the first China-Russia Expo in Harbin, Chinese experts offered to use the concept of the Silk Road Economic Belt to promote the development of Siberia and the Far East with the help of local railways. In turn, Wang Qinghai, a deputy of the National People’s Congress, suggested that the implementation of the Silk Road Economic Belt should include Bolshoy Ussuriysky Island, which has been divided between the two countries since 2008 in accordance with recent agreements on border demarcation. According to Qinghai, the government should focus on the future of this strategically important piece of land.

The modern Silk Road is a long-term, multi-faceted global strategy. Its goals are no secret – China is starting to feel too cramped within its geographical boundaries. The mismatch between the mounting needs of 1 billion people and the country’s limited natural resources, combined with an unprecedented pace of economic growth, amount to a call to action – economic expansion

Some fundamentally new Russian-Chinese projects are also being proposed. For instance, as part of the Silk Road Economic Belt strategy, Shaanxi Province in northern China announced its intent to establish a free trade zone that would focus on Russia, and the corresponding application should be submitted to the State Council before the end of the year. It will operate under simplified customs clearance and return of import and export tax rules for goods from Russia and China, and carry out direct payments in national currencies. A Russian-Chinese technological cluster will become the centerpiece of the new FTA, with the first phase of the construction project already started.

The strategy of the Silk Road Economic Belt will include Chinese cooperation in the oil and gas sector with Russia and the Central Asian countries, which will help the former to strengthen its national energy security, and the latter to deepen their diversification of their energy resources.

For its part, the initiative is supported by many Russian regions. For instance, the authorities of Yugra have offered to synchronize infrastructure development in the Polar Urals and the Arctic region with Chinese plans. “It is in our interest that our route should become a new northern branch of the Silk Road, a part of the global ‘Arctic-Asia’ corridor,” said Natalia Komarova, acting governor of the Khanty-Mansiysk Autonomous Okrug, at the SCO Forum in March.

Finally, there is enormous potential should the Russian Northern Sea Route be included in the ‘Maritime Silk Road of the 21st century.’

Whatever the case, Beijing is busy studying the reactions of all their possible partners and analyzing more than 300 project proposals within the context of the Silk Road Economic Belt – in essence, a philosophy of rapprochement and cooperation between the two major pillars of modern civilization, Europe and Asia. China is serious about taking advantage of this historic opportunity on a global scale, and is in no hurry to wrap up its final plan as it moves toward regaining its historical position as the ‘Middle Kingdom’ of the modern world.