China’s Trillion Dollar Gamble: The New Silk Road

by James Corbett
TheInternationalForecaster.com
March 5, 2016

Two weeks ago a train carrying 32 containers of cargo arrived in Tehran. Although you probably didn’t hear about it, this rail shipment changed the face of global geopolitics.

Well, OK, not that particular train itself. But what it represents. You see, this was the first-ever shipment of cargo between Wuyi, China, and Tehran, Iran, and it only took 14 days to travel the 6,462 miles between the two cities. Compare that to the traditional method of shipment between China and Iran. Those containers would generally be loaded onto ships in Shanghai and would travel to the Iranian port of Bandar Abbas. Total journey time: 44 days. They just shaved a month off the trip.

Again, the significance of this is not the connection between China and Iran, per se. It is that this new rail line represents only one part of a much, much, much more ambitious project: China’s “One Belt, One Road” plan to build a vast transportation infrastructure connecting the “middle kingdom” to destinations all throughout Central and South Asia, Eurasia, and even Europe. The plan is as ambitious as it is comprehensive; consisting of a “Silk Road Economic Belt” and a “21st-Century Maritime Silk Road,” the aim is to link China to 65 countries with a combined population of 4.4 billion people—more than half the population of the planet.

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In an official news release from the Ministry of Foreign Affairs outlining the project, the Chinese government explains:

“More than two millennia ago the diligent and courageous people of Eurasia explored and opened up several routes of trade and cultural exchanges that linked the major civilizations of Asia, Europe and Africa, collectively called the Silk Road by later generations. For thousands of years, the Silk Road Spirit – ‘peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit’ – has been passed from generation to generation, promoted the progress of human civilization, and contributed greatly to the prosperity and development of the countries along the Silk Road. Symbolizing communication and cooperation between the East and the West, the Silk Road Spirit is a historic and cultural heritage shared by all countries around the world.”

The new silk road, then, is intended to be the 21st-century equivalent of this millennia-old idea. But it is about so much more than mere transportation infrastructure.

The government document outlining this vision references a number of projects that China plans to undertake with its partner countries throughout the region: promoting cross-border energy infrastructure connectivity and oil and gas pipeline security; sharing government data and statistics on issues of mutual concern; harmonizing regulations; fostering cross-border cooperation in law enforcement; jointly investing in next generation technologies in materials science, biotech, IT, and other emerging industries; spearheading joint R&D efforts in production and marketing systems; increasing cooperation of financial institutions and even attempting to integrate financial systems; expanding the scale and scope of existing regional organizations like APEC, the SCO and ASEAN; establishing international fora and exhibitions to promote cross-border trade and cultural exchange; and on and on and on.

If the plan is sounding more like a nascent attempt at forming a regional government than a mere attempt to build a few new rail lines, that’s because it is. Or, more precisely, it is China’s attempt to convert some of its growing economic clout into geopolitical clout.

No one can accuse the Chinese government of holding back in this quest, either. The China Development Bank has so far pledged to commit $890 billion to over 900 projects in 60 different countries to help make this vision come true. Just to get a sense of what that number means, that is nearly seven times the size of the Marshall Plan (even adjusted for inflation).

In true Chinese style, the project amounts to a series of quid pro quo understandings with China’s neighbors; you scratch the dragon’s back, it will scratch yours.

China spends over $1.1 billion (in export credits) building a railway link from Khartoum to Port Sudan. Sudan restores key economic infrastructure and China improves its access to Sudanese oil.

China then pours $46 billion into energy infrastructure projects in Pakistan. In return, it gets access to Pakistan’s port of Gwadar, a convenient point for shipping Chinese goods out to the world and bringing African resources in to China . . . through Port Sudan.

Much of the infrastructure investment is this way. Taken singly, the projects may seem random or haphazard. Taken together, they are a brilliant way of playing win-win politics with China’s neighbors and trading partners. China gets to increase markets and stabilize shaky trading partners and the recipients of China’s largesse get a multi-billion dollar shot in the arm that comes without the usual burden of IMF debt conditions.

So we have a happy and prosperous China recognizing that its long-term interest lies in spreading some of that wealth around to help prop up its neighbors. Rather than seeing other countries as competitors in a cutthroat dog-eat-dog world, China is treating its One Road, One Belt collaborators as partners whose rising tide will help lift the Chinese dragon boat. What could possibly go wrong?

Three things.

Firstly, the Chinese miracle is not looking so miraculous anymore. With global trade falling off the cliff, unsustainable ponzi debt schemes taking over from manufacturing as drivers of domestic growth, and more currency devaluation in the cards this year, there is no guarantee that China will be able to continue doling out this kind of cash in maintaining its growing trade empire, let alone expanding it. $890 billion is an impressive-sounding pledge, but actually delivering on those promises will be infinitely more impressive.

Secondly, the US (or, more accurately, the financial oligarchs who largely inhabit the US at this stage of history) might decide that the phony rivalry with China is no longer in their best interests and simply put a stop to it . . . militarily or otherwise.

And thirdly, China is not alone in its quest for dominance in Central Asia, Eurasia, and the Caucasus. For all of their overlapping interests, Russia and China’s designs on the region are more rivalrous than cooperative, and Russia’s own Eurasian Economic Union is a stark example of how Moscow’s idea of development in Central Asia is going to come into conflict with Beijing’s sooner or later.

With all of these pressures, it remains to be seen if the “One Belt, One Road” dream will ever become reality or will end up merely a series of empty promises. But one thing’s for sure: a cargo train just rolled into Tehran from China, and the world is slowly re-orienting toward Beijing.

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