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April 18, 2015

Where Is China's Silk Road Going?

By Economy Watch

Beijing has announced ambitious plans to unite countries along the historic Silk Road corridor and around the world via maritime routes through a trade alliance. However, the plan has difficult social and political problems that have led many skeptics to surmise that it may fail long before it can truly get started.

The Plan

China wants to connect more than 20 countries along the ancient Silk Road in a trade arrangement. According to a report by Voice of America, the plan, dubbed “One Belt, One Road” would cost more than $140 billion to implement, and involve expanding China's economic influence around the world by creating two new major trade routes. The first would stretch overland from China to Europe along the ancient Silk Road. The other would extend over the ocean, connecting China to trading hubs in the Middle East and Africa.

Many countries along the route are pleased with the announcement. They see the route as a potential boost to their economies. However, other countries along the road are embroiled in serious political turmoil and wars that would threaten the safety of goods and personnel traversing this trade route.

Graphic Source: chinahighlights.com added by EconMatters

Chinese Non-Interference

Of course, such an ambitious plan would almost certainly require significant administration by China in order to be successful. However, China has long held to a policy of non-interference in foreign affairs, such as the dispute between the Ukraine and Russian backed separatist forces. Other examples include disputes among six countries along the South China Sea, border disputes between China and India, anti-Chinese groups in Sri Lanka, instability in Myanmar, terrorist cells in Pakistan and Afghanistan, and several others.

To be successful, critics believe the program would require China to act as a regional authority, much as America did in the days of Teddy Roosevelt's administration concerning the Americas. Worse, that the plan could have a polarizing “us versus them” affect, much like America's Marshall Plan did after World War II.

China's Own Economy a Deterrent

Several nations, like Vietnam and the Philippines, have expressed a strong aversion to joining China's plan. In part, this is due to a fear of increasing China's influence over the region, though the bigger concern appears to be with China's own uncertain economy. Many financial analysts believe China is teetering on the edge of its own recession following the contraction of its construction industry over the last several quarters. With so much influence, nations that became dependent upon the New Silk Road could find their financial futures too closely tied to China's for their comfort, at least at this time.

While the plan is far from dead, many fear it may be simply too ambitious for a 21st Century world where greater connectivity through technology has allowed for increased national independence. Nevertheless, China has shown no indication that it intends to do anything other than move forward with its plans.

Courtesy Economy Watch (Archive Here)

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