China pushes 21st century Silk Road, bets on Modi to sign up

June 19, 2015

(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

China’s Guangdong province, the first to be opened up after the Cultural Revolution, has long pushed for aggressive engagement with the rest of the world.

The centre of China’s three-decade manufacturing boom, Guangdong, sits on the South China Sea, barely an hour from Hong Kong port. It is also the starting point of China’s Maritime Silk Road, a grand plan to recreate the ancient trading route linking Asia to Europe in which it wants India to sign up.

Projects under the plan include a network of railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece, Russia and Oman, increasing China’s connections to Europe and Africa.

About 50 countries have shown interest in the ambitious project that China says is a decisive, bold move to revive global expansion and wants fast-growing India to be a part of this giant initiative.

China is betting on Indian Prime Minister Narendra Modi to set aside the political distrust between the Asian giants and let President Xi Jinping’s “One Belt, One Road” flourish. For Beijing, Modi remains the best hope to change the dynamics of India-China relations mired in a territorial dispute, over which they fought a brief war in 1962.

India hasn’t endorsed the plan yet, even though most of its neighbours are likely to clamber aboard seeing in it an opportunity to tie their economies closer to China’s and even among themselves. For the strategic establishment in New Delhi, this is another grand plan to encircle India, build ties with the smaller neighbours and undermine New Delhi in its own backyard. Pakistan’s key involvement in the trade initiative where Xi has pledged $46 billion on an economic corridor are a further dampener.

Can India really stand in the way of Xi’s plan to deepen ties with Asian countries along the Silk Road commerce and migration routes of the Middle Ages? Who is going to argue against China’s attempts to bolster connectivity between countries?

The “One Belt, One Road” initiative has various threads. The Silk Road Economic Belt focuses on linking China, Central Asia, Russia and the Baltic states; linking China to the Gulf and Mediterranean through Central Asia and West Asia; and connecting China with Southeast Asia, South Asia and the Indian Ocean. The 21st century Maritime Silk Road will stretch from China to Europe through the South China Sea and the Indian Ocean on one route, and from China to the South Pacific in the other.

Pressure for thrusting out further into Asia’s growth engines is coming from provinces such as Guangdong as China’s policy makers contend with slowing growth at home. China’s provinces have been instrumental in the past in shaping Beijing’s political positions as happened in  2012 when trade with Japan — which was of the order of $214 billion — fell as a dispute over long contested islands flared, egged on by nationalists on both sides. At the urging of provincial political and business heavyweights, the Beijing leadership eventually moved to normalise ties so trade didn’t suffer.

India and China’s territorial disputes won’t be resolved any time soon. Why hold greater economic engagement ransom to political problems, Chinese officials argue. In Modi’s plans for India, they see much that can be done. Like Xi, Modi too has a dream, which is to turn it into a manufacturing powerhouse. China wants to be part of the Make-in-India programme, and says if there is anything holding up its push inside the country, it is India itself, especially the security agencies who view Chinese investment in some sectors such as telecoms as a long-term threat.

Like the vast number of Indians who voted for him, the Chinese with an interest in India hope that Modi would somehow magically transform things. But if he doesn’t and India remains an outlier, Beijing is not going to be stopped from its biggest trade push. It’s a push that one study suggested could produce benefits on the scale of China’s joining the World Trade Organization in 2001, integrating itself into the global economy.

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