A double-edged sword: the risks to China's silk road economic belt.

Author:Wu, Friedrich
 
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China means business when it comes to the Silk Road Economic Belt and Maritime Silk Road. That was evident at the Boao Forum in March where President Xi Jinping delivered a keynote address providing the first in-depth explanation of China's vision for the Belt and Road Initiative. Envisaged as both a network of physical infrastructure such as railways, highways, oil and gas pipelines, and power grids, as well as a facilitator of greater trade and financial integration, China foresees the Belt and Road Initiative feeding the demand for infrastructure investment and fostering greater growth in Asia, Africa, and even Europe.

Of course, China would reap benefits from this bold initiative, too. The Chinese implemented a "Going Out" strategy in 1999 to complement their country's stellar inward foreign direct investment-driven economic growth. In fact, China is expected to be a net exporter of foreign direct investment in 2015, not unexpected for the world's second-largest economy holding the world's largest official foreign exchange reserves. Yet China faces some formidable domestic economic challenges, one being the uneven development between its coastal and inner regions, especially the western provinces of Xinjiang and Tibet. Indeed, the Silk Road Economic Belt would provide new impetus for China's western development strategy and create new opportunities for accelerating the economic transformation of the country.

China has already been building trade and investment linkages with the Central Asian republics since their independence in 1990. Yet doubts persist as to whether China would succeed with the overland vision of the Silk Road Economic Belt, particularly when faced with headwinds of extremism in a region characterized by latent ethnic conflict, porous borders, and shaky regimes. Bilahari Kausikan, Singapore's ambassador-at-large, claimed recently that the Chinese initiative might fail in Central Asia because "it is building on the very treacherous sands of intrinsically unstable regimes." What lessons can China learn from its experience in Central Asia thus far as it embarks on its ambitious Silk Road Economic Belt?

HOW CHINESE BUCKS GET THE BIGGEST BANG IN CENTRAL ASIA

It was China's thirst for energy that first drove it to the Central Asian republics both through investment and also trade, where China quickly became the largest trading partner for all the Central Asian republics except Uzbekistan. China imported oil and gas from the natural resource-rich countries such as Kazakhstan and Turkmenistan. Turkmenistan is China's largest foreign source of natural gas, accounting for over 52...

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