Along the Silk Road

DUNHUANG, China – Over the last week and half, I had been tracing portions of the old Silk Road through the cities of Xian, Urumqi, Turpan and Dunhuang. This is a city in China’s northwestern Gansu Province, on the edge of the Gobi Desert. It was once a frontier garrison on the Silk Road.

The Silk Road was an important access route between East and West used by traders to take goods across the Asian continent to the Middle East and beyond to Europe. Now China is reviving its importance by investing billions into infrastructure along this route.

Indeed, there is now a train service carrying Chinese manufactured goods from areas in the East Coast near Shanghai to Europe. The journey takes two weeks and is said to be cheaper and faster than the usual sea route.

Politics, business and culture also intersect at this Silk Road junction. Dr. Mimi Garner Gates, founding chairwoman of the New York-based Dunhuang Foundation and stepmother of US billionaire Bill Gates thinks an appreciation of the ancient art and heritage of Dunhuang along the Silk Road may ease America’s fears of the “China threat.” It also builds confidence among Chinese in being global players.

I am currently traveling with a group of Filipino businessmen and journalists invited by Carlos Chan to see one of his 14 Oishi factories across China in Xinjiang province. We also took a side trip to visit the cave temples, the Mo Gao Grotto, near this city that features wall paintings and art from the 4th to 14th centuries. There are some 735 caves and 492 filled with art.

Dr. Gates, a scholar in Chinese art from Yale University told The South China Morning Post that “from a scholar’s point of view, I don’t think there is a site quite like Dunhuang… We often talk about globalization as a 20th or 21st century phenomenon. But in fact China, as early as the Han dynasty, was communicating and trading as far as the Mediterranean world through the Silk Road. Dunhuang embodies just that.”

The artistic director of the Gansu Opera House observed “Dunhuang was an intersection along the Silk Road for cultural and trading exchange between the East and the West, thus the culture and art cultivated here is extensive and profound, and rich and colorful as well.”

The Silk Road has become important for China again. In late 2013, President Xi Jinping, floated the idea of creating the contemporary equivalent of the ancient Silk Road trade route. He apparently wants to weave more closely together a good part of Asia, Europe, Africa and the Middle East through new infrastructure and free trade zones.

The vision is also known as the Belt and Road Initiative, namely the Silk Road Economic Belt and the 21st Century Maritime Silk Road. The first big project is a major hydropower dam in Pakistan being funded by the $40 billion Silk Road Fund.

The Karot Hydropower Project is being built by a subsidiary of China Three Gorges Corp. and will begin construction by the end of this year. It is just one of 51 agreements worth a total of $46 billion recently signed by China and Pakistan.

The plan under the Belt and Road Initiative is to create a 1,860-mile economic belt and trade corridor linking China’s Xinjiang Uygur autonomous region to Gwadar Port on the Arabian Sea. The projects include an upgrade of the port, as well as a new airport, roads, rail links and resource pipelines.

China Daily reports that China has been advocating a network of free trade and bonded zones, and massive cross-border financial reform, potentially across three continents. The idea is to build a “belt of prosperity” and “an area of common economic interest” that in part leveraged the shared cultural and historical narrative of the Silk Road.

“It includes a road that will connect to Europe through Central Asia and Russia, a road that connects (China) with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and a route through Southeast Asia, South Asia and the Indian Ocean.

“The road will head southwards. It will include two routes, one from coastal ports in China to the Indian Ocean through the South China Sea that eventually goes to Europe, and another from coastal ports in China to the South Pacific Ocean through the South China Sea.”

Is China going to pay for all that? The new China-initiated Asian Infrastructure Investment Bank is likely to finance some of the costs as well as the $40 billion Silk Road Fund. Private investors have also created the Green Silk Road Fund with 30 billion yuan.

China would likely provide some countries along the road with low-interest, long-term loans, similar to what they gave in Africa for large infrastructure projects. But China may also be looking for investment partners.

There are those who see China’s Silk Road initiatives as a push for more diplomatic clout by increasing its trade and economic footprint. China probably wants itself to be seen as a power that brings something to the table for potential allies as it tries to recast the world economic and political order.

Foreign Affairs sees the “New Silk Road strategy,” as China’s attempt to improve its soft power. This plan to resurrect the trade route connecting China to Europe via Central Asia in the seventh to tenth centuries, Foreign Affairs observes “aspires to deepen linkages between China and its neighbors via trade, investment, energy, infrastructure, and internationalization of China’s currency, the renminbi.”

It could also be a way of mitigating the diplomatic and economic snub by America and it’s allies after China, the most consequential trade and manufacturing nation on the region, was not invited to the TPP.

In any case, Foreign Affairs sees “the Silk Road strategy is a far better fit for Beijing than the TPP. With the TPP, the United States emphasizes high standards in market liberalization and openness. China’s Silk Road strategy has no ‘standards,’ except for a vague idea of mutual interest and mutual respect.

“The TPP seeks to reduce the roles of governments in market operations and to restrict the importance of state-owned enterprises (SOEs) in the economies of its members. The Silk Road plan, in contrast, relies on top-level government coordination, and would enhance the power of large SOEs and governments.

“The TPP focuses on services, intellectual property rights, and domestic regulations. The Silk Road strategy aims to facilitate large-scale infrastructure construction, energy sale and transport, and relocation of manufacturing industries.”

The line in the sand has effectively been drawn in a way that would seem to divide APEC between China and the US. Unfortunately for us, we are not in either side. We could potentially lose benefits that could be gained by being a member of the AIIB by delaying our decision to join. TPP will never have us, regardless of what some of our officials say, because we will find it difficult to comply with the TPP standards for trade and investments. Among others, the TPP requires dropping economic restrictions on foreign investment ownership rights in our Constitution. Participating in AIIB and the Silk Road initiatives require no such preconditions.

Unfortunately, our officials are too mired in domestic politics to appreciate the fast growing changes in geopolitics that affect our economy. As a result we are losing out as we isolate ourselves more and more with our insular thinking on trade, investments and alliances.

P-Noy is said to be reluctant to join AIIB because of the past corruption scandal involving the past administration over the ZTE broadband and North Rail projects. But the current power in Beijing is doing his own daang matuwid campaign with more visibly impressive results. It may now be possible to deal with China without fear of being tainted by corruption.

Locals told me that President Xi Jinping’s anti corruption drive has caused Macau casinos as well as a lot of high class restaurants and luxury goods stores to lose a lot of business. Within China lavish banquets hosted by officials or business people seeking state clearances have been banned, as is the acceptance of gifts.

I suppose ties between us and China will remain cool until the maritime boundary dispute is addressed. But that shouldn’t mean we can’t do business in the meantime. We have been trading with Chinese traders even before Magellan. And using the new Silk Road as well as concessional infra loans through AIIB offer good opportunities for our economy. I imagine our neighbors will soon participate and we should at least give it a good look.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco.