China Backs New Trade Initiative
China has taken another step towards becoming a superpower following its successful Silk Road summit, which concluded this weekend in Beijing. The two-day conference, officially referred to as the “Belt and Road Forum for International Cooperation”, brought together officials representing 130 countries, many of whom agreed to work with China to reestablish a series of trade routes similar to the ancient Silk Road which first brought Chinese goods to the west. The plan is an integral part of Chinese President Xi Jinping’s attempts to bring the country closer to Europe, while elevating the economic conditions in Asia.
XI Promises Financing to Aid Asian Trade Development
In his opening speech, XI described a joint venture which would require $100 billion in financing. While much of the funding would be made available through Chinese banks with ties to the government, he also secured promises from more than 70 of the countries that attended the seminar to provide assistance with infrastructure and development, which remains critical in connecting less developed countries such as Myanmar and Sri Lanka to the rest of the world via improved roads, faster train service, and expanded internet connections. And while some countries are waiting to see how the plan develops, several key leaders have pledged support, including Russian President Vladimir Putin.
Putin Plays Nicely with Xi
Putin, who attended the summit in person, appears to be reconsidering his relationship with China as the One Belt One Road initiative heads for Moscow. Noting that the intended path of the new trade route was within reach of three quarters of Earth’s population, accounting for half of the planet’s GDP, Putin confirmed that “Eurasia is the future.” The shift in alliances comes at a particularly good time for Putin, as many European countries have decided to continue their policy of sanctions against Russia in response to Putin’s aggressive military policies, including a widely criticized campaign in Eastern Ukraine.
What Was the Silk Road?
The original Silk Road was a series of trading paths which existed from 200 BCE until the 17th Century. At its height, the Silk Road stretched from Indonesia and China in the East, to Italy in Europe, and to Somalia in Africa. The traders brought Asian fabrics and spices to Europe, and help in the adoption of Christianity and Buddhism. However, many historians also blame the increased volume of global trade in the Middle Ages for the speed with which plagues like the Black Death spread around the world. The trade route gradually fell into disuse as the various European powers developed colonies which could be used to exploit the local resources more efficiently.
Is China Competing With the EU and America?
Some political analysts have voiced concerns that the forum was part of a larger plan for China to establish a new political reality, in which trade would be the glue holding together a new set of socio-political allies, with China in charge. While Xi Jinping has denied any attempts to interfere in the foreign policies of other countries, it is clear that the new initiative is an attempt to address the increasing pressure being placed on China by the United States, thanks to U.S. alliances in the surrounding countries, such as Japan and the Philippines.
Xi Takes Control of China’s Image
One of the most important outcomes of the Belt and Road Forum is to showcase President Xi’s ability to set the public tone regarding China and its future. This is a continuation of the image he carefully crafted for the World Economic Forum in Davos, Switzerland. There, he spoke of opening China’s markets and increasing trade, addressing President Trump’s complaints that China was a currency manipulator who failed to play fairly on the global market. This attempt to change the world’s view of China seems to have been successful, as the relationship between Trump and Xi has grown closer, and there is talk that China will be taking an active role in a Pacific trade partnership abandoned by the U.S.
How Does a Re-imagined Silk Road Affect Trading?
The biggest winner if the Silk Road project is successful is the Shanghai Index, as Chinese businesses gain access to new markets throughout Europe. The rise of China’s influence will also have a negative effect on both the dollar and the American indexes such as the DOW and the S & P 500. Given the likelihood of increased trade opportunities and cheaper goods in Europe, we can also expect a positive impact on the euro.