Mains 2016 : Silk Road revival plan- One Belt One Road


silk_route


Historical background of Silk Road:


1. The Silk Road was a network of trade routes, formally established during the Han Dynasty. The road originated from Chang’an (now Xian) in the east and ended in the Mediterranean in the west, linking China with the Roman Empire.
2. As China’s silk was the major trade product, German geographer Ferdinand von Richthofen coined it the Silk Road in 1877.
3. It was not just one road but rather a series of major trade routes that helped build trade and cultural ties between China, India, Persia, Arabia, Greece, Rome and Mediterranean countries.
4. It reached its height during the Tang Dynasty, but declined in the Yuan dynasty, established by the Mongol Empire, as political powers along the route became more fragmented.
5. The Silk Road ceased to be a shipping route for silk around 1453 with the rise of the Ottoman Empire, whose rulers opposed the West.


Objective of reviving this route:


1. In just 30 years, China has developed from a poor inward-looking agricultural country to a global manufacturing powerhouse. Its model of investing and producing at home and exporting to developed markets has elevated it to the world’s second-largest economy after the USA.
2. Now faced with a slowing economy at home, China’s leadership is looking for new channels to sustain its appetite for growth at a time when developing neighbors are experiencing rapidly rising demand.
3. Moreover, there is no equitable development in China. Coastal areas are developed but interior regions are poorly developed. As a result social tension arises. This also leads to frustration against the government and demand for democracy there. To curb this, China needs to develop inland regions, mostly western part of China.
4. China’s export driven economy requires new market as due to global slowdown, demand in developed market is falling.
5. The other objective is to secure a lane for raw materials and counter the influence of US. Also, China wants to secure Strait of Malacca as piracy is a problem in this region. Almost 80 per cent of China’s trade pass from this region.
6. It wants to get access in Bay of Bengal region to encircle India.


One Belt One Road:


It has two components;
1. Silk Road Economic Belt: It is the land-based component.
2. Maritime Silk Road: It is the ocean based component.


Conceptual Framework:


The Belt and Road Initiative aims to connect Asia, Europe and Africa along five routes. The Silk Road Economic Belt focuses on:
1) Linking China to Europe through Central Asia and Russia;
2) Connecting China with the Middle East through Central Asia;
3) Bringing together China and Southeast Asia, South Asia and the Indian Ocean.
The 21st Century Maritime Silk Road, meanwhile, focusses on using Chinese coastal ports to:
4) Link China with Europe through the South China Sea and Indian Ocean; and
5) Connect China with the South Pacific Ocean through the South China Sea.


Closely related networks:


1. The China Pakistan Economic Corridor (CPEC) and the Bangladesh-China-India-Myanmar (BCIM) Economic Corridor are officially classified as “closely related to the Belt and Road Initiative”.
2. The CPEC in particular is often regarded as the link between China’s maritime and overland Silk Road, with the port of Gwadar forming the crux of the CPEC project.


Funding for the project:


1. One Belt, One Road’s vast scale has elevated it to a high-profile status given China’s financial resources. But even China’s deep pockets have limits, with the country’s total debt to GDP at 250%.
2. Three financial institutions have been set up to support its development, which have met some resistance in the West given they provide alternatives to the World Bank, IMF and ADB.
3. Silk Road Infrastructure Fund: Launched in February 2014, the China-led US$40bn Silk Road Infrastructure Fund invests in One Belt, One Road infrastructure projects. The fund is capitalised mainly by China’s forex reserves and is intended to be managed like China’s sovereign wealth fund.
4. Asian Infra Investment Bank: Founded in October 2014, the AIIB aspires to be a global development bank with 21 Asian member countries (China, India, Thailand, Malaysia, Singapore, the Philippines, Pakistan, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Laos, Myanmar, Mongolia, Nepal, Oman, Qatar, Sri Lanka, Uzbekistan and Vietnam), with registered capital of US$100bn.
5. New Development Bank: The NDB is a BRICS multilateral development bank established on 15 July 2014, by Brazil, Russia, India, China and South Africa. The bank was seeded with US$50bn initial capital, with the intention to increase capital to US$100bn. The bank will be headquartered in Shanghai. Each country will have one vote and no country will have veto power.


Strategic Implications:


This initiative could shift the center of geo-economic power towards Eurasia instead of Asia-Pacific region which is dominated by US and its allies undermining their “Asia Pivot” strategy seen by Beijing as part of a “China-containment” policy.


Implications for India:


Positive:

1. China is also willing to link the ‘Belt and Road’ initiatives with India’s ‘Spice Route’ and ‘Mausam’ projects.
a. The ‘Mausam’ project envisages the re-establishment of India’s ancient maritime routes with its traditional trade partners along the Indian Ocean.
b. The ‘Spice Route of India’, visualises the India-centered linkup of historic sea routes in Asia, Europe and Africa.
2. The participation in the Silk Road project and increased Chinese investment in infrastructure projects in India will ease the massive trade deficit.
3. India could also get access to various routes and thus, trade would increase.


Negative:

1. China’s influence on Indian neighbours like Bangladesh, Nepal, Myanmar and Bhutan will increase.
2. It will augment the Chinese intention of encircling India through string of pearls. Moreover, China would get direct access to Arabian Sea through Pakistan which mainly passes through Pakistan occupied Kashmir.
3. Thus, this route will provide easy logistic to Chinese and Pakistan army in case of war.


Recent Initiative:


1. China is digging deep into its cultural roots to anchor a seamless revival of the ancient Silk Road, in tune with a growing domestic focus on tapping the achievements of its past.
2. Analysts say that by leveraging culture, the Chinese wish to send a message to the world that the One Belt One Road (OBOR) connectivity project, is an extension of China’s peaceful engagement of Asia and Europe that ran for over a millennia along the Silk Road super-highway.


Conclusion:


Given the foregoing analysis, India will need to take a hard look at the pros and cons of supporting such a proposal. The dilemma for India is that a number of SAARC countries have already approved the Chinese proposal. Can India afford to be an outlier?
Can India together with Japan and ASEAN offer a countervailing regional initiative in which Japan, South Korea, Indonesia, Vietnam and other ASEAN countries could be partners? Speed with which China is selling the concept, India has to act fast otherwise it will be drawn into the MSR on Chinese terms.
Best course for India is to follow two pronged strategy – deepen its economic linkages and draw China into major infrastructural investments; second, hedge on MSR, in any case it will be a long drawn process, invest in immediate neighborhood exactly in those capacities which China is planning and leverage these to draw out neighbors such as Bangladesh, Myanmar and Sri Lanka among others to India. MSR is a serious Chinese proposal; India cannot take a diffident stand but needs to pro-actively shape the discourse.



 


Comments

6 responses to “Mains 2016 : Silk Road revival plan- One Belt One Road”

  1. Thanks nk.

  2. well explained 🙂

  3. Thanks Sachin.

  4. SACHIN KHADE Avatar
    SACHIN KHADE

    Nicely explained?????????

  5. Good one ILP 🙂

  6. ILP- KUNA3885 (thevagabond85) Avatar
    ILP- KUNA3885 (thevagabond85)

    At the stroke of midnight …. Aspirants find a new compilation… Thanks

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