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China revives The Silk Road

China adopted West Development Strategy since January 2000 to beef up the economic development in the western region to close the gap with the prosperous eastern region at the coast line. In the last 10 years, the central government had financed more than 3.5 trillion yuan ($512.4 billion) to support development of the western region which consists of 12 western provinces, autonomous regions and municipalities with a combined population of about 370 million. They include Sichuan, Yunnan, Gansu and Shaanxi provinces. This year alone, China planned to invest 468.9 billion yuan ($69 billion) for projects in this region.

President Hu Jintao announced on May 21 at the central work conference that Xinjiang Uygur Autonomous Region would receive 2 trillion yuan ($295 billion) in next 5 years for fixed asset investment to double up its GDP to national average by 2015. The purpose is to improve Xinjiang’s infrastructure, self-development capacity, ethnic unity and social stability. Premier Wen Jiabao also proposed a series of preferential policies to boost Xinjiang, among which was the resource tax reform launched on June 1. The government is trying hard to reduce regional income disparities which have escalated into a big social problem. It hopes to harmonize the strife tension between ethnic Uyghur and Han Chinese.

The vast natural resources on minerals, oil and gas would also provide the return on this vast investment. Central state-owned companies and large private corporations are becoming a powerful engine for the rapid economic growth in Xinjiang.

Kashgar, an ancient Silk Road trading post located in western Xinjiang, has been singled out as an economic development zone meant to increase trade with nearby Central Asian nations. It is to be modeled after the special economic zone (SEZ) of Shenzhen with preferential policies in addition to becoming a comprehensive reform experimental zone. The 50 square kilometer SEZ is planned to boost the city's economy and population to one million but also drive the economies of the surrounding cities and countries.

To further enhance the connectivity of Xinjiang, the government had begun constructing the second high speed railway line linking it with the inland cities and Beijing. This would make the journey from Urumqi, provincial capital of Xinjinag, to Beijing an awesome 12 hours compared with the current 40.

China has developed her high speed train to a remarkable speed of 350 Km per hour. And she now has the longest high speed train network in the world. She is experimenting train with speed of 500 Km per hour which will be delivered in less than 5 years time. The engineers and scientists are researching train with speed up to 1,000 km per hour. They hope the super high speed train would be operational in 10~15 years time. If that happens, it will revolutionize the whole transport industry and a major threat to short distance flight. The whole supply chain will have to be remodeled.

With the success of her high speed train, she now embarks on a very aggressive ambition to develop transcontinental high speed rail lines spanning across 17 countries. She is planning to develop 3 major rail lines as follows:

(a) Southern route - Kunming in southwest China with Singapore passing through Myanmar, Vietnam, Cambodia, Thailand and Malaysia

(b) Western route - Urumchi in northwest China with Germany passing through Kazakhstan, Uzbekistan, Turkmenistan, Pakistan, Iran and Turkey

The whole network links 28 states with 81,000 km railroads. This massive network connecting China with Central Asia and Eastern Europe looks so much like the ancient Silk Road. I call it the Metallic Silk Route. It is mind-boggling and breathtaking for China to visualize such almost impossible feat. China has meticulously setting her plan to rekindle the ancient trading with Central Asia, Eastern Europe, Russia and South Asia.

She plans to build it with her own money in exchange for resources from the respective states. This would help her to tap opportunities and resources from the resource-rich Central Asia and less dependent from her current overseas suppliers. It will probably bring tremendous trade opportunities and wealth to the under-developed Central Asia which has been deprived from the global economy for centuries. Many states may find it hard to resist the China offer. Without the high speed railway, it is difficult for them to sell their resources to finance the nation building and welfare development.

The direct access to Middle East and Eastern Europe without using the sea lanes would mean that China can depend less on the narrow, congested and pirates infested Malacca Straits and controversial India Ocean and South China Sea. Any hiccups at these sea lanes could bring China economy to her knees. Chinese does not like someone holding his throat. The massive man power and resources to build and maintain the Great Wall to deter the invasion from the West is a good example of what China would do to keep her safe.

We need to understand the impact of ancient Silk Road to the countries involved to conceptualize what the Metallic Silk Route would bring to the region. The ancient Silk Road was an important path for cultural, commercial and technological exchange between traders, merchants, pilgrims, missionaries, soldiers, nomads and urban dwellers from China, India, Tibet, Persia, Arab and Rome for almost 3,000 years. The eastern road was made safe from bandits by the Han Dynasty in early 200 BC. Han Wudi managed to foster a safe passage with the various kingdoms in the region.

The road which was reputed as 6,400 Km long enabled trade in silk, slaves, spice, perfumes, medicines, jewels, artifacts, glassware, etc. More importantly it allows the spread of knowledge, ideas, teachings, culture, food, music, language and religion. All the countries not only gain wealth from the immense trading but also intellectual development from the diverse countries. Many inventions and thoughts were developed. It had flourished the civilizations at both ends of the continent. Buddhism was brought to China from India while Islam was brought to Central Asia from Arab. There are many Chinese Muslims living in western China right till now.

The Turks who came into power after the fall of Mongol Empire had literally cut off the Silk Road around 1400 AD. It had deprived the West from access to beloved silk and spice from the East. This had compelled Portugal and Spain to find an alternate sea route to the East. The success of the maritime explorers brought Europe to Asia and had helped it to become colonial powers for centuries. Without the quest to the East to acquire the commodities, the global development would not be what it is today.

In ancient time, the Romans would pay gold for the silk from China. And now China is buying resources from Central Asia with her huge foreign reserves. The Metallic Silk Route allows her vital oil and gas import from Middle East and Russia to flow in through an alternate route. This is a very critical strategy to sustain her huge consumption of energy. And she is also less vulnerable on the negotiation table with the less friendly countries.

China attempts to revitalize trading with her western neighbors is sensational and formidable in this new century. She cannot do it alone. Besides the contiguous states along the railway lines, she also needs the investment and involvement from the well developed nations to succeed. This spells great opportunities for companies willing to venture in this new frontier. This will be a new chapter in global trading.

In twenty years time, the whole Asia will revive her glory, might and global dominance once again after a millennium gap. The impact would be far greater than the ancient Silk Road era. The wind of power and influence never stop circulating around the globe.

Sep 5 2010

Different facets of China

China Daily reported on July 31 that China had just overtaken Japan as the world second largest economy. Yet her per-capita income grows modestly to US$3,800 which is miserably small compared to US ($46,730) and Japan ($33,280). It is interesting to see a communist state which was a less developed country just thirty years ago has achieved the formidable status in such short time.

Her economic performance has baffled many economists, academics and politicians inside and outside China. Standard economic theories do not explain China model adequately. Many economists have predicted that her property bubble is going to burst with humongous damage the world has never seen. Yet she is still able to hang on to the property growth. Not so long ago there was still wide media coverage on the infamous poor quality in food, products and services. But now, some well developed countries are setting up tariffs to block some Chinese imports to protect their own industries.

Conflicting theories and hypothesis have been published to depict the China model on her success and failure. All seems to be true. Why is it so? I like to use the analogy of seven blind men touching different parts of an elephant and each claiming they know what an elephant is like. Yes China is so huge and diversified that you cannot find another country similar to her state of affairs.

The fundamental of her administration is a socialist system managing a capitalistic economy. She does not adopt all the western economic practices. The practices and theories are selected and customized to her needs. Even the communism which Mao Zedong preached was different from Russia.

Her exploded economic development with the high rise buildings, higher standard of living and the expensive cars on the road have led us to believe the capitalism is at work. The Chinese are very capitalistic indeed but not the administration which is a unique socialism that China has evolved it into. You do not find the local financial institutions behaving like their peers on the Wall Street across the ocean. Also when the state owned corporation chiefs want to overly compensate themselves, you will find a directive from the central government to curb the remuneration and bonus for these chiefs. The chiefs have to quietly adhere to the directive. President Obama has to fight acrimoniously in the Capitol Hill and with the media to push his course. Thus using the western yardstick to comment China is stepping on the wrong foot.

You cannot use Japan property bubble burst or even the recent Dubai case to explain China property phenomenon. You can use it if China is only Shanghai. Though the property price in some major cities is outrageously high beyond one imagine, China has so many other cities to lessen the impact. There are four forces in play and each trying to control the property development. Firstly the central government wants to curb the price increase so as to allow the low income group to own a home. The local governments rely on the sale of land for their revenue; while the property developers want to manipulate the market for their profit. And lastly the home buyers want to speculate to make hefty profit too by borrowing from a pool of relatives and friends. The collaboration between local governments and property developers against the central government will put up a spectacular show of who is mightier. The home buyers will determine the tip of the balance. That is, if more home buyers believe the price will keep escalating and flock to the sales office, the central government will introduce more drastic legislation to cool the market. The Chinese government needs to find alternate investment vehicles for her rich citizen in order to alleviate the heat on property speculation.

The major coastal cities are well developed with the standard of living comparable to developed countries. The western and some central regions are less developed and offer the same kind of opportunities and environment the coastal cities have provided two decades ago. Thus there is still ample growth opportunity for China. Many companies have moved inland to avoid the higher operating cost at the coastal cities. China has a combination of high tech industries and low cost manufacturing base. It is too early to foretell that many manufacturing companies will leave China for cheaper place elsewhere. Many companies had indeed left for India and Vietnam but also some of them had quietly returned to China too as there is no other place like China that could offer cost competitive environment plus a huge growing market. And also the competent and hard working workers at comparative low cost are another strategic leverage China has.

As for the Chinese, they are too large to be generalized. With 1.3 billion people, you can always find both extremes from the malevolence to most humble people on the street. There are many “Forrest Gump” everywhere complementary the unscrupulous people preying on the innocents. Many younger Chinese have adopted the western beliefs and way of living. But when it comes to distress and problems, they usually refer to the ancient wisdom for the solution. This is probably why some of the westerners are caught off guard with the Chinese reactions. There are no lack of heroes and generous donors during disasters. It is one of very few countries where the soldiers carry spades and rescue kits in the disasters instead of riffles to deter looters. On the other hand, one has to be very prudent with strangers on the street. Many foreigners have been cheated by them. Henceforth the good and bad experiences that the foreigners have encountered are just various aspects of life in China.

Looking at the hindsight, is not this situation similar in almost every countries? There are always the good, bad and ugly in every race and society. The Chinese is just like everybody staying next door and colleagues you either love or hate in the office.

Similarly, regions and ancient philosophies are also intertwined that they are far from the originals. Buddhism, Confucianism and Taoism are three most widely accepted religion and practices in China for thousands of years. You can find Taoist deities in the Buddhist temple and vice versa. Zen is often practiced by Buddhist and Taoist. Current Confucian teaching had been mixed with Taoist thoughts which in turned were borrowed from some ancient philosophies and suppositions. Most Chinese live by the principles and practices from these three teachings. Even the Muslim and Chinese Christians observed some of the Chinese rites. Foreigners are not familiar with these Confucianism, Taoism and some ancient teachings and thus they easily misunderstand the Chinese and the culture.

China has a facet in every angle. One has to be discreet when writing about the course of events in China or anticipating her moves. There are many self-opposing conditions, practices and thoughts which the western world is not familiar with. The Chinese has mastered the art of balancing the “Yin” and “Yan” and survival skills from thousands of years in war and conflict.

Welcome to China!

Aug 14 2010

China revives The Silk Road

Different facets of China

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