TCS Daily

From Xi'an to Rotterdam?

By David Murphy - April 8, 2005 12:00 AM

If you thought reviving the Silk Road was a job for the World Tourism Organisation you would be right. At least until recently. This lesser known WTO has been peddling the idea of a continuous overland link between China and Europe for more than a decade; but now the WTO's dream of a romantic itinerary for nostalgic adventurers has been overtaken by a concerted push by governments and international organizations to rebuild the overland trade routes from China to Europe. The chances of success are high for two reasons: increased stability and economic growth in central Asia and China's decision to throw its weight behind the project.

The push into central Asia is part of a profound shift in China's stance towards the nations with which it shares land borders. Decades of suspicion has been replaced by official enthusiasm: "Rebuilding the Silk Road from Xi'an to Rotterdam is a demand of both the East and West," gushed Chen Deming, deputy governor of Shaanxi province, at the Third International Silk Road Conference held in Xi'an last October.

Desert Boondoggle?

Does China really need a highway all the way to Europe? The answer is probably not. Its export engines are far away on its east and south coasts from where shipping is cheaper and more efficient than trucking. "In practice nothing will go from Shanghai to Brussels by land but all the bits in between will deal with each other. It will be an economic corridor," says Jerome Munro-Lafon, Chairman of the International Road Federation (IRF), a global industry group that promotes road transport.

China's enthusiasm for the Silk Road cloaks a desire to expand economic and infrastructure ties with central Asia, primarily Kazakhstan, Kyrgystan, Uzbekistan and Tajikistan. Beijing has two main aims. The first is to gain greater access to oil and gas and other resources in Central Asia, especially Kazakhstan. The second -- less obvious but in some ways more interesting -- is to spur growth in China's interior provinces by strengthening their access to their natural economic hinterland. The result is fast growing energy ties with central Asia and booming cross border trade all around China's land frontiers.

China's side of the putative new Silk Road is already in good shape. Beijing has built modern highways right up to its western borders, and Xinjiang alone is committed to spending Rmb200bn (US$24bn) on roads over the next 20 years. On the central Asian side, governments are poorer and less well-organized, but there is no shortage of international bodies that want to help out. Apart from the IRF, UNESCO has sought to promote the culture and common heritage of the countries through which the original silk routes passed. There's also Transport Corridor Europe Caucasus Asia (TRACECA) an EU Commission affiliated body that promotes transport links between the Caucasus, Central Asia and Europe. The endeavors of these three are paralleled or supported by a host of others including the Asian Development Bank (ADB), the United Nations Development Programme, the WTO (tourism, that is), the World Bank, and the Shanghai Cooperation Organisation (SCO). The SCO is made up of China, Russia and four central Asian countries: Kazakhstan, Kyrgystan, Uzbekistan and Tajikistan. It began life in the mid-1990s as a security organization but is taking on an increasing economic role.

Destination: Osh!

Unlike China, central Asia does desperately need land routes. Uzbekistan is, apart from Liechtenstein, the only double landlocked country in the world (i.e. a country surrounded by landlocked countries). Of course central Asia already has road networks, they are just not big or broad enough. Hoped-for changes include some new roads, road widening, surface upgrading and improvements such as standardized road signage. Much of the cost of this can be met by national governments through road tolls and fuel taxes combined with grants and low interest loans from international donors, say experts. Estimates of the total cost of connecting China and Europe via international standard highways vary from US$14bn to US$20bn, according to the IRF.

Other much needed changes require bureaucratic reform. They include speedier visa access, lower customs costs and sharply reduced waiting times at border crossings. At some central Asian crossings trucks can wait for up to three days for customs clearance, complains Atalay Coskunoglu, a former senior official with Turkey's transport ministry. Long distance truckers often can't get multiple entry visas for the countries they travel through and face the time consuming task of making a new round of applications every time they go on the road, he says.

China is also investing significantly in infrastructure in the central Asian countries. It is co-funding a road project in Kyrgyztan with the ADB that will link the city of Osh in the Fergana Valley with Kashgar in Xinjiang. A 2003 study on the feasibility of building a railway along the same route to link up with China's vast rail network at Kashgar is awaiting implementation. In addition, by sometime in 2006 a 1000-km pipeline will begin pumping oil from Atasu in central Kazakhstan to Alashankou on China's border with Kazakhstan. This pipeline, which will have an annual capacity of 10m tonnes (710m barrels) is controlled by a 50-50 joint venture of CNPC and Kuzmanaigas, the Kazakh state oil and gas company.

Good Fences, Improving Neighbors

Beijing's central Asian gambit is part of a much wider effort to repair relations with its immediate neighbors, which were mostly dreadful in the Mao era and not a lot better in the first 20 years of the reform era. Trade is rocketing on all fronts, albeit in many cases from a low base. In 2004 China's two-way trade with the nine countries with which it shares land borders rose by 46 percent to US$52bn, with both imports and exports rising at well above the rates for China's trade as a whole. The most robust growth is likely to come from Russia, Kazakhstan, India, Vietnam; the two former countries being potentially major suppliers of oil, gas and other natural resources. Russian diplomats reckon that their two-way trade with China could reach US$80bn by the end of the decade.

Physical, as well as economic, ties with surrounding countries are also growing. In addition to road and rail projects on its western front China is involved in a growing number of other cross-border infrastructure schemes. Road, rail and pipeline links are being laid with Russia, Mongolia, Afghanistan, Vietnam and Burma. Air links with India are taking off. Bureaucratic barriers, like customs entry, visas and processing of export licenses are all being streamlined in order to speed border trade.

All of this activity represents a Beijing's enthusiasm marks a change in its attitude to its frontier regions. Until fairly recently China remained wary of opening its land borders too wide, and its neighbors reciprocated with sentiments ranging from suspicion to outright hostility. China fought border wars with India (1962), the Soviet Union (1969) and Vietnam (1979), and aided insurgencies in bordering Burma and Afghanistan (not to mention nearby Thailand, Cambodia and Malaysia) from the 1950s up to the early 1990s. The bad feeling generated by these conflicts endured well into the 1990s.

A new great gamester

Until very recently China's border provinces, home to non-Han minority groups who often had ethnic and religious cousins across the frontier, were kept on a tight leash by Beijing. This was particularly true of Xinjiang in the 1990s, when China saw growing evidence of links between Islamists in Afghanistan and Central Asia and independence-minded Uighurs. Beijing now hopes to keep radical Islam at bay by expanding its influence over regional governments, most obviously through its membership of the SCO. This neatly dovetails with another goal, to mitigate the rise of US influence in Central Asia since the September 11, 2001 attacks on the US. Clothing this real-politik aim in Silk-road rhetoric is a nice bit of diplomacy.

Similarly, China's neighbors have in general embraced the opportunities presented by China's fast-growing economy. That turnaround has been aided by some deft diplomacy on Beijing's part. It has smoothed the way by repairing border disputes with former Soviet central Asia and Russia, the last of them resolved in October last year. It has also worked hard to mend ties with India and ease ASEAN concerns about the impact China's entry to the World Trade Organisation would have on their economies. And Beijing has sharply increased the number of official visits it exchanged with neighbors.

Muscular diplomacy

These neighbors increasingly see China as an opportunity rather than a threat -- although some, especially in the Russian Far East, remain queasy about opening the floodgates to migration from Chinese frontier provinces whose populations dwarf those of the nations and regions they border. Nonetheless, Russia is spending hundreds of millions of rubles on track improvement in the Far East in anticipation of the boom in border trade including an increase on the almost six million tonnes of oil shipped by rail last year.

With the growth of economic exchanges, Beijing is gaining political clout in tangible ways. In January this year, under pressure from Beijing, Nepal shut down the Dalai Lama's office in Kathmandu and has begun to forcibly return Tibetans fleeing Chinese rule, after allowing free passage for over 40 years. Beijing is also trying to curtail Tibetan influence further away. Beijing has pushed the governments of Kyrgyzstan and Kazakhstan to crack down on Uighur activists. In March last year China executed two Uighurs for the murder of a Chinese diplomat based in Bishkek, Kyrgyzstan. The two had been handed over by Kyrgyz authorities in July 2002, shortly after the incident. For them at least Beijing's new passion for the silk road did not run smooth.

David Murphy has been a journalist in China since the late 1990s. Most recently he was the Beijing correspondent of the Far Eastern Economic Review.


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