National Development

When outlining the plan for the SREB at the SCO summit in Bishkek in 2013, XI presented a five-point proposal for jointly constructing the SREB and strengthening relations between China, Central Asia and Europe:

1 Strengthen policy communication, which may help “switch on a green light”

for joint economic cooperation

2 Focus on road connections, with the idea to establish a great transport corridor from the Pacific to the Baltic Sea, and from Central Asia to the Indian Ocean, then gradually build a network of transport connections between eastern, western and southern Asia

3 Improve trade facilitation, with a focus on eliminating trade barriers and taking steps to reduce trade and investment expenses

4 Intensify monetary cooperation, with special attention to currency settlements that could decrease transaction costs and lessen financial risk while increasing economic competitiveness

5 Strengthen people-to-people relations (Nidhi, 2014, p. 92)

The project certainly appears to be designed with trade and economic objectives paramount, and the special leading group to oversee the implementation of OBOR was placed under the National Development and Reform Commission, China’s top economic planner (Swaine, 2015).

2.2 National Development

China is currently the world’s second-largest economy in nominal terms behind the United States, and it has overtaken the US in terms of GDP based on purchasing power parity (IMF, 2016). It has also overtaken the US to become the largest trading nation (The World Factbook, 2016). There is no doubt that China has made enormous advances. Between 1978 and 2014, it increased its per capita GDP almost 49-fold (World Economic Forum, 2016). However, China still lags far behind much of the world in GDP per capita terms, ranking 113^th globally with US$14,100 compared to the US’ 19^th position with US$55,800 (The World Factbook, 2016). It is the job of China’s leaders to be concerned about the prosperity of the Chinese population and recognize that it is necessary to look outward for increased sources of prosperity and security. With a population of over 1.3 billion people, almost 20 percent of the global total, but just 7.9 percent of the world’s farmland and severely limited energy and industrial resources (Information Office of the State Council, 2011), China is heavily

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dependent on the world outside its borders in order to sustain itself and if it is to have any hope of increasing its prosperity. This is especially the case as significantly lower growth rates are expected in the coming years.

Since reform and opening, the Chinese Communist Party’s (CCP) legitimacy has rested on its ability to provide record-breaking economic growth. OBOR serves as a demonstration that the government is taking far-reaching action to ensure the

continued rise of the nation.

Much of the debate outside China to do with the new Silk Road plan is heavy with suspicions as to China’s real intentions (see below). While there are very reasonable causes for concern associated with the project, it is important to remember that such a development strategy can also be seen less as a matter of choice and more one of necessity foisted on China by the stage of development at which it finds itself.

As China attempts to push through a process of switching its economy from export-driven to domestic consumption-export-driven, government literature on OBOR makes no secret of the fact that the initiative is intended to create space and time for the transition to take place. China has tried to increase domestic consumption, but it is a process that takes time. Income levels and social safety networks first need to improve. OBOR is a recognition that investment is the way to boost growth both domestically and internationally. China is not well placed to sign typical growth-promoting free trade agreements with its neighbors, as many are not at a high enough level of development. It needs to stimulate regional economies by constructing infrastructure that over time will provide opportunities for trade and further

investment. Economic growth and interconnectedness along the new Silk Road could also help boost peace and stability.

China faces a huge crisis of overcapacity in steel production, iron, cement, aluminum, glass, coal, shipbuilding, solar panels and more, andChinese analysts have held up OBOR as a significant solution to the problem. This is seen especially to be the case when combined with the country’s phenomenal capacity for providing infrastructure – an enormous industry that is operating at far below capacity as China has

overproduced on so many of its own infrastructure needs (Dibb and Lee, 2014).

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There is a huge disparity of wealth in China, and income is strongly divided across geographical lines, with the central and western provinces fairing poorly compared to the richer regions of the east (Ferdinand, 2016). In 2013, per capita income in western areas such as Gansu, Qinghai and Xinjiang was just over a third of that in eastern areas such as Guangdong and Fujian, and only a quarter of that in Shanghai and Beijing (ibid.). The SREB is a huge part of China’s plans to reform and improve the economy of the inland areas.

The central government has been somewhat successful in opening up China’s west through the Shanghai Cooperation Organization, but the pace of change has remained slow. The most westerly province, Xinjiang, was a major part of the ancient Silk Road and the central government intends to revive this status. The geography of the region, which is landlocked, mainly made up of desert and surrounded by mountains, has made it difficult to develop using methods that have been successful elsewhere in China. However, Xinjiang certainly has a great deal of potential from the viewpoint of the central authorities. It marks the way to Central Asia as well as South Asia and the Middle East via Pakistan. In the past, the region made enormous contributions to China through it being a conduit on the Silk Road, which brought so much in terms of ideas, technologies and trade to China. Through the SREB, the central authorities intend to make this the case again.

China’s demand for energy and raw materials has far outstripped its domestic production capacity in recent decades. The country has had to source an increasing amount of what it needs from overseas, drastically increasing the country’s exposure to economic and political forces beyond its own control. This has made China increasingly vulnerable to international supply disruptions. Xinjiang contains and borders areas with enormous reserves of coal, natural gas and oil (Chang, 2014).

However, Xinjiang poses concerns for the mandarins in Beijing as the region has a long history of discord between the indigenous Uyghur population and Han Chinese immigrants and China’s authorities that has intensified since 2008 (Clarke, 2015).

According to internal government statistics, there were 248 instances of “violence and terror” in the province in 2013, with the majority of these cases pitting the now-minority Uyghurs against the ever-encroaching state (Leibold, 2014). The SREB program to build rail and road infrastructure to connect the region with China’s

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dynamic eastern areas is part of an ongoing plan to tie the region more closely to the rest of the country. Beijing firmly believes that the political and ethnic tensions in Xinjiang can be lessened by economic development that can be brought through investment. Rolland (2015) argues that this strategy is also being applied to China’s close neighbors through the SREB in the belief that it will enhance political stability in those areas.

Jiang Zemin decided in 1999 that Xinjiang needed to be more closely connected to the rest of the country (Clarke, 2015). China’s “Go West” strategy, launched shortly before the country’s entry into the World Trade Organization in 2001, was set up to combat the issues in the western provinces, and has shown some successes: total GDP for the western regions reportedly grew from 1.66 trillion yuan in 2000, to 3.33 trillion in 2005 (Xinhua, 2006). However, many raise questions over who such investments really reward as there is seen to be little benefit for the indigenous Uyghur population (Chang, 2014).

Investments are continuing apace in Xinjiang, with plans to spend 160 billion yuan on infrastructure construction, 80 billion on industrial projects and 66.5 billion on social causes in the province in 2016 alone (China Daily, 2016). A high-speed rail link was also recently opened between Urumqi in Xinjiang and Lanzhou in Gansu province (China International Travel Service, 2016).

Given the amount of promotion that has gone into the new Silk Road initiative, how omnipresent that promotion has been throughout China and that it is so very strongly associated with Xi Jinping personally, it is apparent that China is very confident in its ability to make it work, or else such a potential loss of face and public confidence would never be risked. However, a wide variety of very challenging obstacles lie in its path. From the tough terrain of mountainous Central Asia, to terrorism, to a lack of support for increasing China’s strength from numerous big players, a testing road certainly lies ahead.