Friday, 27 January 2017

CHINA: -''One Belt, One Road''- Yiwu to London

China's New Silk Road just got a glitzy new route: a freight train service from the Zheijang province in eastern China all the way to London. China railway Corp, announced on Monday the departure of the first train from Yiwu, a city of 1 million near Shanghai. It is an impressive logistical feat, connecting 7,500 miles of rails to reach Europe's largest capitals in 16 days.

More importantly, the Yiwu-London line lays bare the geopolitical ambitions underpinning China's ''One Belt, One Road'' policy that aims to re-create the ancient ''Silk Road'' trade route that connected China with Central Asia, the Middle East, and Europe. This ''New Silk Road'' could take on even more importance if the US-China trade relationship goes south, as early and hawkish postures by the President Donald Trump and his team have indicated. 

''One Belt, One Road'' is not just about railroads: confusingly, the ''belt'' refers to overland connections including roads and pipelines across Central Asia, while the ''road'' refers to a Maritime Silk Road, re-creating the old Indian Ocean trading routes that brought Chinese silks to Roman markets.

China Railway already runs freight train services to other European cities, from Hamburg to Milan, to Madrid, though rail is not the most efficient shipping method for huge cargoes: The Yiwu-London train can carry only 200 containers, a small sum when compared with the 20,000 a huge cargo ship can haul. But it can be cost-effective for certain goods.

Britain, one of the largest economies in the world, importing $663 billion in 2014 alone, is an attractive prize for China's export-based economy. In recent years, China has increased investment in British industry and energy and has received--at least until recently--the red carpet treatment by British leaders eager to gain access to the world's second-biggest economy. Faced with the possible loss of trading privileges with European Union after Brexit, the UK will be only more eager to deepen trading with Beijing.

China's goal behind the ''Belt and Road Initiative'' is to make easier to trade with 65 countries that represent 60 percent of the world's population. China, suffering from overcapacity in plenty of key sectors from steel to cement, is looking for new markets to keep its economy growing at health clip.

China's rail links to Europe destinations are indeed unprecedented, and countries along the lines will benefit from better connectivity. China can then follow the trend, building up economic corridors like ''One Belt, One Road'' along the rails lines, and thereby secure wider influence in the region. In an ideal scenario China's ''New Silk Road'' could become the biggest economic stimulus program since the Marshall Plan, with which the US helped Germany get back on its feet after World War II.

The project could become even more important for China, which still relies on exports despite years of trying to re-balance its economy more toward domestic consumption, due to looming tensions with the United States. Trump has been vocal critic of free trade deals and has surrounded himself with China-bashing economists and trade advisors who blame Beijing for what ails the US economy. 

That worries leaders in China: The US trade relationship totaled $659 billion in 2015, according to the US trade representative. If that takes a hit from higher tariffs, currency wars, or the like , the New Silk Road to Europe may be a Chinese escape hatch.

By Jennifer Birich
Political Commentator.


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