Building Silk Roads for the 21st century

Author: Pradumna B. Rana, RSIS

China’s emergence as the ‘factory of the world’, based on its focus on exporting labour-intensive manufactures, is well-known. Less well-known is the role that infrastructure played in this strategy.

From 1992 to 2011 China spent 8.5 per cent of GDP on infrastructure, much more than the developing country average of 2–4 per cent, according to a 2013 McKinsey Global Institute report. And, from 1992 to 2007, China spent US$120 billion on building 35,000 kilometres of highways.

View of an elevated highway among mountains at sunrise in Chongqing, China, 19 July 2014. From 1992 to 2011 China spent 8.5 per cent of GDP on infrastructure. (Photo: AAP).

China’s push for infrastructure development within its borders picked up pace with its Western Development or ‘Go West’ policy, implemented in 2000. Under this policy, the government sought to address the growing economic disparity between the prosperous coastal region and the inner western region by building infrastructure towards the hinterland, and by attracting investments to the west.

Last year, China devised a ‘New Silk Roads’ policy to enhance connectivity with neighbouring countries. This policy has two components: a ‘Silk Road Economic Belt’ for land connectivity initially with Central Asia and a ‘21st century Maritime Silk Road’ to connect China with ASEAN and, ultimately, with the coastal cities of South Asia as well.

China’s actions have led to the revival of the Northern Silk Road. Cities in inner provinces such as Kunming, Chongqing, Chengdu, Xi’an and Xining have emerged as major metropolitan cities with urban infrastructure projects paralleling those in coastal areas. China has built an east–west railway line to connect far-flung cities like Urumqi and Kashgar to Xi’an and the coastal cities. This railway line has been extended to Moscow, using Central Asia as an economic corridor, and then on to Duisburg (in Germany) to become the China–Europe railway line. East–west pipelines such as the Kazakhstan–China and Central Asia–China pipelines have also been built.

In conjunction with India, which is actively implementing its ‘Look East’ policy, China is building the BCIM Economic Corridor to connect the Yunnan province of China with Myanmar, Bangladesh and India. This is an important segment of the less well-known Southern Silk Road.

In June this year, the Chinese Ambassador to New Delhi, Wei Wei, proposed the establishment of a ‘Trans-Himalaya Economic Growth Region (THEGR)’ to promote the interconnection and joint prosperity of China and India and neighbouring countries. As with many such proposals from China, details are not known as yet. Nonetheless, the proposal is welcome as it addresses an important missing link in connectivity in the region.

It is expected that establishing new economic corridors between India and China through Nepal would be one component of the recent Chinese proposal. Another would be establishing India–China connectivity through the Nathu La pass in Sikkim. Recently the Global Times said that the extension of the Beijing–Lhasa railway to Shigaste, a Chinese city close to the Nepal border, would open next month. It also mentioned that the railway line would be extended by 2020 to two separate points, one on the border of Nepal (Kerung) and the other on the border with India and Bhutan.

In a recent study prepared for the Asian Development Bank (ADB), a colleague and I have proposed four multimodal Trans-Himalayan Economic Corridors (THECs) beginning in New Delhi and Kolkota, passing through Kathmandu and Tibet, with two turning east to Southeast Asia and another two turning west to Pakistan, Afghanistan and Central Asia. We have also proposed that the BCIM project be expanded to cover all of the South Asia Sub-regional Economic Cooperation countries, including Nepal and Bhutan.

China’s THEGR proposal should focus on the four of these economic corridors. Complemented by the three economic corridors in the Greater Mekong Sub-region and the six in Central Asia, these THECs would lead to a seamless Asian economy extending all the way from Central Asia to South Asia and East Asia, lifting growth for all.

Distances between major Indian cities and the rapidly growing inner cities of China would be reduced by more than half if land routes via Nepal can be used instead of the traditional sea route via Hong Kong. While sea freight is the most cost effective way of moving goods for bulky items, other, less bulky items, such as parts and components in supply chain trade whose significance is growing rapidly, could be more cost effectively transported by road or air.

Just as it did in the Greater Mekong sub-region and in Central Asia, the Asian Development Bank should promote the idea of the four THECs as a facilitator, financier, honest broker and technical advisor. The THECs will have to be put together like pieces of a jigsaw puzzle. Possible new sources of financing include the newly-established BRICS bank and the soon-to-be-established Asian Infrastructure Investment Fund. Border trade and cooperation between neighbouring districts/provinces of India, Nepal and China should also be promoted since issues tend to be less tense at the sub-national level than at the country level.

Pradumna B Rana is Associate Professor at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

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