The Silk Road was one of the most important economic trade routes of antiquity. The road spanned from modern day Turkey to the Pacific side of China. Successfully connecting various markets along the route. Not only did the road create immense wealth but indirectly lead to cultural exchange. In effect, Europeans were exposed to new spices. That created new pallets for various people, leading to the development of foods such as spaghetti & lasagna. The information passed through the silk road was also valuable. Technological advancements such as paper making, printing, gunpowder, and the compass gained traction across the world. Effectively leading to other advancements in society. However, despite all the positive effects the Silk Road had it would eventually decline due to political turmoil in the heart of the trade route. That lead to less security for traders, translating into a risky investment. Making it fall out of favor as a venture.
Fast forward to the 21st century. From relative obscurity & poverty, China has developed into an economic powerhouse. Climbing up the GVC (global value chain) and effectively becoming one of the world’s leaders in logistics. This only seems like the start. General Secretary Xi Jinping has announced a plan that has the potential to propel China into economic dominance. The project is called ‘The Silk Road Economic Belt’.
Silk Road 2.0
The new Silk Road project aims to unify large markets through a connected infrastructure. Creating one diversified market which trades products, talent, information, and culture. Sound familiar? It should because this is exactly what the old Silk Road did. However, a key difference is the route of the road. Instead of going through the Middle East it will go through central Asia. Rightly so, since the Middle East is experiencing a period of extreme instability. From central Asia the road is supposed to expand into eastern Europe. That would be a clear gateway into western European markets.
Now looking at the project through an optimistic lens this seem like a great opportunity to; develop Central Asian countries, reignite the stagnating economy of Eastern Europe, and take China deeper into a market Economy. Central Asian countries would gain the opportunity to develop their infrastructure, as well as become deeply integrated into the global economy. The idea China has is that new communities will sprout up on the road because of the economic benefits.
The same applies to Eastern European nations but to a lesser degree. How Eastern Europe would mainly benefit is as the direct gateway to Western European markets. An attractive venture for people trying to make money via Western Europe.Hypothetically, that should increase investment in the region which would stimulate the local economy. Allowing for growth. Thus reversing the stagnation.
China would be able to capitalize on this road by allowing their products to flow through the route. Increasing their market dominance as a producer. Additionally, products from Western Europe would come through as well. Allowing for consumption by the Chinese population. Specifically the middle class. Bam! Market economy.
The project aims to generate profit but in the process it enfranchises the disenfranchised. That’s always advantageous. Being able to make money while producing something by helping those in need is beneficial for all parties.
Despite all it’s potential, it’d be naive to ignore the hurdles for this project.. Big projects need big money. The ambitious project is estimated to cost $5-8 trillion. In order for this to work a tremendous amount of cooperation & efficient execution. Only time will tell if this project gains traction.
While nations build walls, China plans to build roads. Times of economic growth (current growth is at 3.9% IMF) are the best times to plan for future. After all you want to fix the leaky roof while it’s sunny out.
Sources: IMF https://www.imf.org/en/Publications/WEO/Issues/2018/01/11/world-economic-outlook-update-january-2018
http://www.ejinsight.com/20160412-getting-lost-one-belt-one-road/
Sermo Civilis 