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The New Silk Road
Highlights of the New Silk Road Plan
The “One Belt and One Road” plan, otherwise known as the New Silk Road
Plan, was first announced by President Xi Jinping in September 2013. The
plan consists of a land-based belt and maritime route connecting China to
Asia, Africa and Europe (Fig 1) therefore facilitating both more traditional
north-south, and emerging south-south trade routes. In brief, the plan is
designed to develop international trade, ensure stable energy supplies,
promote Asian infrastructure development, and consolidate China’s
relationships with the 18 countries that are connected via the New Silk
Road. The countries through which the land- and sea-based routes will
pass through are mostly developing markets, connecting 4.4bn people
or 63 per cent of the global population. According to China’s Minister of
Commerce, Gao Hucheng, these countries currently generate a total of
$2.1tn or 29% of the world economy, but by developing infrastructure
across central Asia and beyond, there would appear to be significant
potential to increase this.
The Silk Road Fund
Over the course of 2014, China’s government began to accelerate the
development of the New Silk Road Plan, including securing commitment
by key countries such as Mongolia, Tajikistan, Maldives, Sri Lanka,
Pakistan and India for construction of the Silk Road Economic Belt and
21st Century Maritime Silk Road. With many of the countries along these
routes lacking the ability to invest in large scale infrastructure projects,
China launched the Asia Infrastructure Investment Bank in May 2014, and
the New Development Bank with Brazil, Russia, India and South Africa the
following month.
In November 2014, another key element in financing its ambitious
infrastructure plans was to establish a new fund, known as The Silk Road
Fund, with a start-up value of $40bn. The fund will be operated on a
commercial basis, and its core investors are Chinese state-owned entities.
It is open to co-investment from other countries at the project level.
Implications of the New Silk Road Plan
The New Silk Road inevitably echoes the original silk route, one of the first
examples of globalisation. The silk route was established more than 2,000
years ago, connecting China with Europe through central Asia, Pakistan
Currently, China’s
trade with central Asia
amounts to around
1%
of China’s total exports
in 2014, representing
an increase of
680%
over the previous
decade, and an even
greater increase than
trade with Africa
654%.