I was writing about the New Silk Road some time ago but since then a lot has changed and whole project is much more advanced. For recap I will go over geopolitical setting.

China wants to win the battle for the world dominance and it will be an economy warfare. Their adversary – the United States – dominates over oceans and through which all trade routes are crossing. Without access to global markets Chinese economy will collapse quickly due to amounted debt and gigantic production powerhouse built through exporting.

To do this Xi Jinping resurrected old idea in new clothes. The New Silk Road and special economic zones. It is no longer just a railroad and motorway connecting China to biggest mekkas of world trade. Pipelines, energy networks and tourist centres. Goal? Make the shift from maritime trade to over-the-land giving China advantage over Americans.

Reasons behind the project

Last decades the US army build their dominance on the navy. The biggest number of aircraft carriers until now was enough to keep the whole world under control. Unfortunately for the US technology leaps in Russian and Chinese ballistic technology diminishes this advantage. HGV and KALIBR-NK are missiles that can threaten Washington’s navy. To fight those countries Washington needs to stop economic exchange. China is exposed here more than anyone. The Strait of Malacca when blocked will deal astronomic damage and chaos.

Extent

For all above reasons reactivation of the New Silk Road makes a lot of sense. This was coupled with special economic zone. Now the whole project has five railroad connections:

-first: Beijin to Rotterdam (through Kazakhstan, Russia, Belarus, Poland and Germany)

-second: Chongqing to Duisburg (through Kazakhstan, Uzbekistan, Turkmenistan, Iran, Turkey, Bulgaria, Hungary and Austria)

-third: Kunming to Teheran (through India and Pakistan)

-fourth: Kunming to Singapore (through Birma, Thailand, Malaysia)

-fifth: Beijin to Vancouver (thorugh Russia and the US).

 

There is also a planned motorway to Europe. Right now part in Kazakhstan is being built. Logistic expansion cover also new energy resources. China is looking to diversify its commodity deliveries and open Middleaster option for them. Pipelines will cover all countries rich in reserves.

The plan is very ambitious. Linking the most important countries of Asia and Europe creates the biggest goods exchange network independent from maritime trade routes.

Advantages of land transport

They are quite numerous. Transport from China to Europe by container ship takes from 4 to 6 weeks. Thanks to existent infrastructure it takes only 14 days (1000 km daily). Given that it will improve with time. Trains from Chongquing leaves for Europe on average 5 times per week already. China has very favourable trade balance. Land transport is safer. With railroads the logistic rail hubs can emerge and further push costs down.

Planned investments and free trade zones along developing routes sound promising. Those places are a magnet for investors. Government want to animate business environment to create enough jobs to incentivise moving from rural to urban surrounding. Beijin aims at 400 mln people. The fastest developing city in China is Chongquing (thanks to train connection with Europe). It has 30 mln inhabitants (twice as much as Beijin!). According to governmental statistics GDP is rising by 10% each year.

Picture above tells us that one route should go up to Canada and the US border. Interesting move especially that the whole project is designed against Washington. Let it be no surprise for you that time of dominance of Uncle Sam is slowly coming to an end. Power and military advantage is based solely on the dollar. With dollar’s importance falling in financial circles, the importance of the US itself will fall inevitably. This is why Chinese are extending their hand by planning a tunnel below the Bering Sea.

Politics

Contrary to the US strategy, China’s plan goes for trade and tourism both based on win-win rule. Both sides of the deal benefit from it. This model is welcomed with open hands around the world as one offering alternative to neo-colonial approach based on parasitism and dominance (puppet governments and debt). This is not to say that China elites could not degenerate in the future and replace position of today’s Washington.

Chinese president Xi Jinping visited Great Britain in October last year. Brits – as they have proven on many occasions – are the nation that feels from where the wind blows. Today they understand the scale and importance of the New Silk Road. For accepting yuan in to the SDR currency basket the New Silk Road is supposed to end in London instead of Rotterdam.

Excluding the United Kingdom could possibly entail rise importance of Berlin in Europe. Simply the biggest ally of the US would be dragged with Washington down. Therefore London is looking to get best of both worlds. Traditionally gives affirmation to American moves but gets to create new allies on the side.

Summary

Before all this web of connections was built, project had to tackle big hurdles. Apart from moves of hostile western oligarchy, local people challenging it, the New Silk Road goes through 21 countries. Literally an exploding concoction of ethnic, religious and military conflicts. To top it off with dissatisfied minorities and cities excluded from the project.

Great example of size of problem is bloody clash between employees and employers of one Kazakhstan company taken over by Chinese. Strike lasting for few months, increasing frustration of workers translated into a riots. Tens of people were shot dead.

In the Middle East we constantly see local wars. Terrorism, air strikes are the bread and butter for this region. Worsening any business environment.

If something can help against endless conflicts it will be: less wars, more trade. Nothing improves the relations between nations like realising and counting benefits after deal made.

 

Trader21