China sets up coordinating group for modern Silk Road

[Insight]

World | Fri Apr 17, 2015 11:11am BST

China sets up coordinating group for modern Silk Road

BEIJING






(Reuters) - China has set up a senior-level coordination group to oversee Beijing's plan to create a modern Silk Road, a Communist Party news website said on Friday, as efforts gather pace on a scheme China hopes will generate $2.5 trillion (1.66 trillion pounds) in trade in a decade.
Vice Premier Zhang Gaoli will head the group, with deputies including China's top diplomat State Councillor Yang Jiechi, Vice Premier Wang Yang, and Wang Huning, head of the party's Policy Research Office and a key aide of President Xi Jinping, the CPC News website said.
It provided no other details.
Such groups are typically set up to run important policy initiatives, and the one for the new Silk Road project, termed formally by China as the "One Belt, One Road" initiative, underscores the government's commitment to the scheme.
Projects under the plan include a network of railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece, Russia and Oman, increasing China's connections to Europe and Africa.
Xi said last month that he hoped its annual trade with the countries involved in Beijing's plan to create a modern Silk Road would surpass $2.5 trillion in a decade.
(Reporting by Ben Blanchard; Editing by Nick Macfie)

http://uk.reuters.com/article/2015/04/17/uk-china-silkroad-idUKKBN0N80WW20150417

[khushal]

YIWU, China—The wholesale markets for cheap knickknacks in this trading hub a few hours from Shanghai have prospered by sending their goods across the oceans.

Arab and African traders mix with buyers from Europe to pick out gaudy plastic flowers, hairpins and bracelets, Day-Glo sticks and flashlights that are trucked to nearby ports for loading onto container ships.

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In November, however, some of the city’s wares went the other way: A freight train rumbled out of Yiwu bound for Madrid. It inaugurated the world’s longest rail link, an 8,000-mile journey along the ancient Silk Road through Central Asia. It is part of one of the most ambitious transport and infrastructure projects in history as China under President Xi Jinping chases new continental dreams.

Mr. Xi is driven by insecurity. China may be projecting an image of swaggering self-confidence by grabbing reefs and constructing artificial islands in the South China Sea, but the reality is very different. Beijing is looking westward precisely because the view out toward the Pacific is filled with peril.

China feels strangled by a chain of American military alliances that extends from South Korea and Japan through the Philippines and all the way to Australia. And even though China is rapidly building up its military strength, the U.S. Navy still rules the waves. In any conflict, American warships and submarines could choke China’s economy with a naval blockade.

Beijing also sees risk in a new regional trading order taking shape. U.S. President Barack Obama is putting fresh energy into finalizing the Trans-Pacific Partnership, a giant free-trade agreement that would link 12 countries and cover 40% of global GDP, but exclude China. The arrangement is the economic centerpiece of Mr. Obama’s “pivot” to Asia, which Beijing interprets as a Cold War-style plot to block a rising global challenger.

So Mr. Xi is swiveling toward the Eurasian land mass. His goal, as he puts it, is to “break the connectivity bottleneck.”

The improbable plan to reopen a back door to Europe through Central Asia—what China calls a “Silk Road Economic Belt”—is turning into an epic struggle against vast distances and brutal geography. The Yiwu-Madrid line snakes through Kazakhstan, Russia, Belarus, Poland, Germany and France on its way to Spain. It sets out in a subtropical climate before traversing high desert and steppe, where temperatures can plunge to minus 40 degrees in winter.

A cargo train from Yiwu, China, to Madrid before leaving home in November. ENLARGE
A cargo train from Yiwu, China, to Madrid before leaving home in November. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
Logistics are immensely complex. Because of different rail gauges along the way, the containers have to be transferred by crane three times onto new bogies at border crossings—once entering Kazakhstan, again coming into Poland and a third time arriving in Spain.

Already, there’s a freight train service between the southwestern Chinese city of Chongqing and Duisburg in Germany. From central China, Zhengzhou is paired with Hamburg. But locomotives will never replace ships: At most, they can pull a few hundred containers while the biggest container vessels can carry up to 18,000. Shipping is still far cheaper, although train is faster. The trade-off between cost and speed makes train freight worthwhile mainly for higher-value goods that China exports to Europe, like laptops, and for products it imports, such as car parts.

Plans for several additional ultralong rail routes are on the drawing boards. Some seem feasible, like a high-speed train between Beijing and Moscow. Others are purely fanciful, including a line that burrows under the Arctic and ends up in New York via Canada.

All this is just part of Mr. Xi’s grand vision: Train tracks are meant to bind China’s economy to its neighbors with ribbons of steel.

That’s why Mr. Xi has poured an initial $40 billion into a Silk Road Fund to upgrade existing rail lines, build new spurs and install energy pipelines and industrial infrastructure through countries along the way.

The massive undertaking, now a national priority, plays to some of China’s strengths. Unlike the Western Pacific, where America is likely to remain the dominant power for many years, Central Asia is up for grabs.

A power vacuum has existed in the neighborhood since the breakup of the Soviet Union in 1991 created autonomous states. The ruling elites of Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan still lean toward the Kremlin politically. Yet their economic future is with China. By and large, these countries are receptive to the Chinese way of doing business in the developing world: State-led, big on investments in energy, mining and heavy industry and with a weighty environmental impact.

In sharp contrast, the Trans-Pacific Partnership focuses on trade in services, and imposes high standards for labor and environmental practices.

Turning the clock back to the age of camels and horses is another bold gambit for a president determined to reorder China’s interactions with the world.

The long caravans of the Silk Road were killed off 400 years ago by competition from European sailing ships, as well as military and political turmoil in an unstable region. Mr. Xi faces a similar set of challenges, and there’s no guarantee of success. The journey from Yiwu to Madrid is an arduous one.

http://www.wsj.com/articles/chinas-world-on-track-or-at-sea-beijing-reopens-old-land-routes-1425371903

[khushal]

Going back in time to reawaken the silk road is unpractical. The present and the foreseeable future's trade still lies in the seas.

[Insight]

Going back in time to reawaken the silk road is unpractical. The present and the foreseeable future's trade still lies in the seas.

China new Silk Road plan also takes into account trade by sea. They are calling that part the Maritime Silk Road.

http://bdnews24.com/economy/2015/03/31/china-unveils-plans-on-building-silk-road-economic-belt-21st-century-maritime-silk-road

It is a very ambitious undertaking that involves land routes that link Asia and sea routes. Time will tell, and they have put a lot of research into this goal.

[Insight]

Khushal,

The media sources like the Wall Street Journal, Bloomberg, and the New York Times have been criticizing China's Silk Road project as unrealisitic, yet only a few years ago, the same journals (Wall Street Journal) were championing Silk Road Initiative that US proposed which was basically the same thing that emphasized land routes via Central Asia (Afghanistan.) It was said that this would forward US economic interests. Their criticism is sour grapes because US would have no role in it.

[khushal]

The maritime transit make sense and they already exist. But using land routes like it was more than 400 years ago is an old and unpractical means. It is one of the reason that the Ottomans weakened against the Europeans, the former were using land routes and latter were using sea routes and the winners were the ones who used sea routes.

[khushal]

Khushal,

The media sources like the Wall Street Journal, Bloomberg, and the New York Times have been criticizing China's Silk Road project as unrealisitic, yet only a few years ago, the same journals (Wall Street Journal) were championing Silk Road Initiative that US proposed which was basically the same thing that emphasized land routes via Central Asia (Afghanistan.) It was said that this would forward US economic interests. Their criticism is sour grapes because US would have no role in it.

But it is more practical to build land routes to the sea by the shortest means possible. So building a trasit from central asia through afghanistan or Iran to the indian ocean is practical since there is no alternative. But building a road from eastern china where most of the population lives to the middle east or europe through the himalayas is insane when sea routes are much more efficient and less costly.

[khushal]

This article is very interesting:

An Influential Voice Slams U.S. Handling of New China-Led Infrastructure Bank
ARTICLE
COMMENTS (6)
AIIB
CHINA-UK
CHINA-US
EXPERT CONTRIBUTOR
ROBERT ZOELLICK
WORLD BANK
YING MA
987 163
COMMENTARY
By Ying Ma


China’s President Xi Jinping (4th R) meets with the guests at the Asian Infrastructure Investment Bank (AIIB) launch ceremony at the Great Hall of the People in Beijing. Reuters
In the past week, the United Kingdom, France, Germany and Italy have all announced plans to join the new China-led Asian Infrastructure Investment Bank (AIIB). European participation in the new financial institution has materialized despite strong objections from the Obama administration, which sees the AIIB as China’s vehicle for creating a rival to the U.S.-led World Bank.

Is the AIIB merely a thinly veiled Chinese attack on the international financial architecture created by the United States and its allies after World War II? What does European enthusiasm for the AIIB signify for the global strategic competition shaping up between the U.S. and China?

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Robert Zoellick, former president of the World Bank and former U.S. Trade Representative and Deputy Secretary of State under George W. Bush, says there is certainly a risk that the new bank could end up being a vehicle for Chinese influence but also calls the Obama administration’s approach “mistaken both on policy and on execution.”

Zoellick notes that China aims to use the AIIB to support infrastructure financing — an important goal for emerging market economies around the world. To that end, the AIIB could serve a worthy purpose if it is developed properly in a multilateral context. The U.S. could have engaged with China on the former’s concerns over anti-corruption, transparency and governance issues but failed to take advantage of the opportunity.

Fears about the potential of the AIIB to counter the World Bank’s influence are also overblown. After all, a top Chinese think tank worked with the World Bank during Zoellick’s tenure to produce “China 2030,” a widely studied blueprint for economic reform. Moreover, the World Bank works regularly with outside financial actors, including Islamic and Arab funds, regional banks and private sector players. “If I had been at the World Bank, I would have tried to embrace the AIIB as a partner,” Zoellick said.

On execution, Zoellick pointed out that while pressuring its allies and partners to shun the AIIB, the administration did not offer an alternative for creating a better institution or a plan to work toward a set of common goals.

“After the Obama administration pressured allies and partners not to join, it seemed to drop the ball,” he says. Close U.S. allies such as Australia and South Korea, which refrained from joining the AIIB under U.S. pressure, actually have been “disadvantaged” by their loyalty. Most likely, these and other countries in the Asia-Pacific will switch course and join the AIIB in due time.

But perhaps U.S. policymakers can be forgiven for feeling uneasy about China’s ambitions to remake the world’s multilateral landscape. To date, China has pledged $50 billion to launch the AIIB; $40 billion for the Silk Road infrastructure fund, which seeks to revive the trade routes that once connected China to the Mediterranean; $10 billion for the New Development Bank (also known as the BRICS Bank), which is co-founded with Brazil, Russia, India and South Africa; and $41 billion for a related BRICS Bank currency contingency fund.

These pledges, totaling nearly $150 billion, exist alongside China’s open dissatisfaction with existing international financial institutions—such as the International Monetary Fund, the World Bank, the Asian Development Bank—where the U.S. and its allies wield enormous influence. Given all that, can’t the U.S. be forgiven for pushing back?

Zoellick explained that each of the proposed banks or funds is different in model, and significant work and capability still have to be done to “translate money into an effective institution.” Additionally, as China’s economic might and interests expand, it will inevitably engage with the current international system and propose new variations of it.

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That means the U.S. should not automatically reject China’s proposals, Zoellick argues. Instead, “we should press the Chinese to perform,” he said, “to institute those institutions in ways that would be supportive of international economic growth.”

As U.S. Deputy Secretary of State in 2005, Zoellick urged China to become a “responsible stakeholder” of the world and continues to believe in the value of exhorting China to do better. He has also been a consistent critic of the Obama administration’s approach to China, particularly its failure since the departure of former National Security Advisor Tom Donilon in 2013 to find a top-level official who is respected enough in Beijing to effectively manage the mix of issues at play.

Zoellick doesn’t believe Donilon’s successor, Susan Rice, knows China well, has many connections in the country or is conversant in the combination of economics and security issues. Secretary of State John Kerry, meanwhile, is highly focused on the Middle East.

“Given the significance of China for security, economic, climate, political issues, you really need to see this as an integrated whole, and I don’t see where that occurs in the [Obama] administration,” he says.

Despite those criticisms, Zoellick supports the administration’s pursuit of the Trans-Pacific Partnership, a free trade pact with Asian countries that does not include China, though he that shouldn’t be America’s “only economic venture in the region.” Specifically, he calls for the continuation of trade liberalization and integration efforts that do involve China, such as the Bilateral Investment Treaty the U.S. and China have been negotiating.

Another area where the U.S. should offer China assistance and encouragement is in its ongoing domestic economic reforms, he says. Under President Xi Jinping, the Chinese government has pledged to undertake broad-ranging market liberalization, which includes strengthening the private sector and reducing the size of China’s state-owned economy.

Zoellick understands that Chinese President Xi Jinping did not just wake up one day and discover the virtues of the free market. “His primary interest is the preservation of the Communist Party,” Zoellick says. “[Nevertheless], I think we should want to try to work with China to build the reforms, to build the private sector…to support China’s…international economic integration—while making sure that where there are differences on the security side that we don’t shrink from defending our interest and that of our allies.

Sounds like a good formula for advancing U.S. interests.

http://blogs.wsj.com/chinarealtime/2015/03/19/an-influential-voice-slams-u-s-handling-of-new-china-led-infrastructure-bank/

[Insight]

But it is more practical to build land routes to the sea by the shortest means possible. So building a trasit from central asia through afghanistan or Iran to the indian ocean is practical since there is no alternative. But building a road from eastern china where most of the population lives to the middle east or europe through the himalayas is insane when sea routes are much more efficient and less costly.

I agree with you about sea routes. I think whatever is beneficial for Afghanistan and the region will be good for peace, economy, and security.

China has got a 40 year control over Gwadar port from Pakistan. This is part of their Silk Road