The New Silk Road (I)

Up Front Investment Location

Whereas tensions between western powers and China have significantly grown over the past few weeks and months, due to disputes over national sovereignty over islands as well as maritime rights in the South China Sea - even EU naval patrols near the Chinese coast are being discussed (german-foreign-policy.com reported [1]) - Chancellor Merkel's current visit is focusing on issues of economic cooperation. German trade with China had expanded last year, but only due to a significant increase in imports from the People's Republic of China, while German exports to China have decreased. German investments, however, have soared from 48 billion in 2013 to nearly 60 billion Euros in 2014. German firms have invested more only in the USA and a few EU countries (the United Kingdom, the Netherlands, and Luxembourg - the two latter partners are being used massively for activities in third countries). Following Chancellor Merkel's talks yesterday, the 4th Sino-German intergovernmental consultations will be held on Monday. In addition, the China-Germany Economic Advisory Committee will meet for the third time since its founding in 2014.

In the Summer Palace

According to German government circles, it is a "particular gesture of esteem" that Premier Li Keqiang received Chancellor Merkel in the Summer Palace on Sunday, rather than - as is usual - in the Great Hall of the People. During China's historic phase of weakness, the Summer Palace had been destroyed twice - in 1860 and 1901 - in humiliating punitive actions by European expeditionary forces. In China, these crimes - and the fact that they could only happen due to China's weakness - are still keen in Chinese memory.

New Markets

As confirmed by government circles, the "New Silk Road" will also be on the agenda of today's government consultations. The "New Silk Road" is the gigantic project Beijing formally introduced in a 2015 white paper entitled "One Belt, One Road." The plan to develop transport corridors from China to the West - on the one hand, overland through Central Asia to the Middle East and on to Europe, and on the other, by sea, through the South China Sea, the Indian Ocean to Africa and on to the Mediterranean via the Suez Canal, constitutes the core of the project. The project calls for vast infrastructural measures, for example the construction of roads and railways as well as the expansion of ports. Cost estimates run in the trillions. The Asian Infrastructure Investment Bank (AIIB) - which was founded in the Chinese capital at the turn of the year 2015 - 2016 - is supposed to contribute to the financing.[2] "One Belt, One Road" is deemed to open new markets for the resurgent Chinese economy. However, the project, in principle, also opens the possibility for all of the countries along the route of the new transport corridors to participate in the expected trade expansion and greater prosperity. It enables the "opening up of new markets for European goods, services and the financial sector," according to an article appearing at the beginning of the year in the periodical "Internationale Politik." Not least of all, "it could open the doors to an increasingly difficult but important Chinese market" [3] for German companies.

Great Dynamics

Therefore, the "New Silk Road" has awakened great interest in Germany's business community as well as among its policy makers. Individual projects have already been completed. For example, the German logistics company, DB Schenker, has been sending freight trains to China since 2008. In the meantime, around 400 trains are transporting around 30,000 TEU [4] of commodities per year to the People's Republic of China from Germany, which, by 2020, is expected to increase to 100,000 TEU. The 15 days needed for the shipment by train is considerably shorter than the 40 days required by ship. The main route runs from Chongqing, China to Duisburg, Germany, which has now been dubbed "Chinatown." The Chongqing - Duisburg rail line illustrates "the great economic dynamics" that have "already developed or whose potential can still be developed" along the "New Silk Road," said Germany's Foreign Minister, Frank-Walter Steinmeier May 18 during the opening of the OSCE Economic Conference, which Germany, as current OSCE Chair, had convened.[5] In fact, the Deutsche Bahn, for example, is already targeting lucrative projects in third countries along the "New Silk Road." February 2, Germany's Foreign Ministry held a conference on "One Belt, One Road" - arriving at the conclusion that the project offers "great potential for the Eurasian realm."[6] The "New Silk Road" was again the topic of discussion at the April 19, "East Forum Berlin," a top-rank business conference sponsored by the German Committee on Eastern European Economic Relations (OA), the Metro Group, and the UniCredit AG in cooperation with the Federation of German Industries (BDI) and the German Chambers of Industry and Commerce (DIHK). The "New Silk Road" was "positively evaluated by the majority," was the reaction described of the attending business representatives.[7]

Break Western Domination

Albeit, "One Belt, One Road" has potentially also far-reaching political implications. The "New Silk Road" incorporates "not only enormous economic potential for all the bordering countries," it could "also serve as an impetus for the integration of the economic realm," explained a representative of the Metro Group at this year's "East Forum Berlin."[8] The project provides opportunities not only to the more backward regions of Western China, such as the autonomous region of Xinjiang. It also permits economic penetration of countries, previously with a weaker economic development - for example in Central Asia - all under China's management. This, in turn, offers China new possibilities for strengthening its global standing, experts predict. "China's economic power and political weight are strong arguments for Beijing to no longer make its development dependent on the rules of the industrialized nations," "Internationale Politik" recently wrote. "Instead, Beijing has the ambition of becoming more involved in the formation of the structures of global governance."[9] For Beijing, "One Belt, One Road" is an instrument for reinforcing its standing - to ultimately challenge the global dominance of western powers.

In fact, the expansion of the "New Silk Road" is already challenging Berlin's hegemonic ambitions. german-foreign-policy.com will soon report.

[1] See Ostasiens Mittelmeer (I) and Ostasiens Mittelmeer (II).
[2] See Outlines of a Multipolar World.
[3] Michael Schaefer, Wei Shen, André Loesekrug-Pietri: Diplomatie mit neuen Mitteln. Internationale Politik 1/2016. S. 78-87.
[4] TEU: Twenty-foot Equivalent Unit, eine Maßeinheit im Containerverkehr.
[5] Eröffnungsrede von Außenminister Frank-Walter Steinmeier zur Wirtschaftskonferenz des deutschen OSZE-Vorsitzes "Connectivity for Commerce and Investment". 18.05.2016.
[6] Konferenz im Auswärtigen Amt zur Seidenstraßen-Initiative "OBOR". www.auswaertiges-amt.de 02.02.2016.
[7], [8] 4. east formum Berlin setzt mit Rekordbeteiligung ein deutliches Zeichen für internationale Zusammenarbeit. Berlin, 19.04.2016.
[9] Michael Schaefer, Wei Shen, André Loesekrug-Pietri: Diplomatie mit neuen Mitteln. Internationale Politik 1/2016. S. 78-87.