The Silk Road is myth, reality and vision at the same time: Once a trade route for silk, this network of trade routes from China to the rest of the world is awakening from a long sleep. The Chinese government wants to revive the “new” Silk Road.
In fact, the Silk Road is not a single road, but a whole network of old trade links that reach from the Middle Kingdom to Europe. Opened in 115 B.C., it was initially mainly used for trading silk. In the 15th century it lost its importance. However, the new old Silk Road has been experiencing a renaissance for a good five years now. In 2014 it was declared a World Heritage Site. Just in time for the appointment, the Chinese government published a map of a new Silk Road which will be revived. The overland route, which follows the old Silk Road, is only one of six corridors.
From China to the Ruhr Area
The roads will connect three continents by land and sea: Asia, Africa and Europe. The overland route begins like the historic Silk Road in the city of Xi’an and leads to the Ruhr area. The new Silk Road runs from Duisburg to Venice. There the circle closes with the sea route. A total of almost 30 cities are located along the new country route.
China hopes that the revival will lead to an expansion of trade relations between the countries. Chinese policy is promoting the strengthening of the integrated countries by improving infrastructure, expanding the trade network and monetary cooperation as well as diplomatic relations.
Importance for German companies
China is Germany’s most important trading partner. According to calculations by the Federal Statistical Office, goods worth a total of 199.3 billion euros were traded between Germany and China last year (exports and imports). As a result, the People’s Republic is now at the top of the list of German trading partners for the third time in a row.The new Silk Road could open up a new land route for imports and exports between China and the European countries.
The Bundesverband Deutsche Seidenstraße Initiative (BVDSI/translated Federal Association of the German Silk Road Initiative) is committed to safeguarding the economic interests of German companies along the Silk Road. Hans von Helldorf, the association’s spokesman, sees a duty above all for politicians: “If Germany wants to remain a leading export nation, politicians must ensure that the right conditions are in place”.
The expert considers the importance of the Silk Road for the German middle class to be extremely high. Cooperation and projects with companies along the Silk Road could create effective potential. Otherwise, Germany could lose touch and only be a spectator when it comes to innovations, warns von Helldorf. “If Germany wants to remain a leading exporting nation, the politicians must ensure the appropriate conditions.”
Improved access to raw materials
Probably the biggest advantage for purchasing is the shortening of supply chains and transport routes. The goods would take 20-40 days to travel by sea, 16 days by rail from Chongqing to Duisburg and around 11 days via the Silk Road from China to the gates of the EU. In 2016, around 1,700 freight trains rolled on the new route between Europe and China. In May 2017 alone, almost 120 trains ran from Duisburg to China.
Especially for bulky goods, the Silk Road is a good alternative to sea transport and air freight. Another advantage: faster transport routes can also reduce transport costs. In addition, German companies have new opportunities along the route. In countries such as Uzbekistan, Kazakhstan and Turkmenistan, for example, the infrastructure will be improved and the industry restructured.
But even if transport times are getting shorter, hardly any European manufacturer can avoid a warehouse in Europe. Compared to competitors from South Korea, who are supplied from China within a week, European companies still have a competitive disadvantage in terms of delivery times.
The project One Belt, One Road also connects the Middle Kingdom to the Indian Ocean via Pakistan. This shortens the journey here as well. First and foremost, this will benefit the access of raw materials from Pakistan.
But also German companies from the logistics, energy, medical and automotive sectors can maintain their innovative strength through the Silk Road, according to the expert von Helldorf. Kazakhstan is particularly interesting for the energy sector, because the country has one of the most constant wind and solar productions in the world.
Beware debt trap! But the Chinese government’s megaproject is also often criticized. The reason: the high debt burden for the countries involved. Although countries will be financially supported with the new roads and the expansion of infrastructure, appearances are deceptive.
China’s apparent generosity could become a debt trap for countries. Even if the Chinese state finances the construction, Beijing insists that the buildings have to be built by Chinese companies using Chinese materials and Chinese workers. This will not help the economy in the economically weaker countries to regain momentum. In addition, the states are becoming financially dependent on China. If they are unable to repay the loans, it is conceivable that the buildings will be returned to Chinese hands.
The emerging countries would then not have won anything. The economic benefits for other countries are therefore still unclear. An example of this risk is in the middle of Montenegro. The Moracica bridge is supposed to reach a height of almost 200 meters and cross a river valley. The inauguration date is scheduled for 2019. But so far there are only five pillars in the rocky landscape. It is uncertain whether trucks and vans will ever roll over the bridge with goods. It will lead to Serbia through sparsely populated mountain regions. But it is unclear whether Serbia will connect to the bridge beyond its own borders.
Conclusion
It is questionable to what extent European manufacturers will benefit from the new Silk Road if politicians do not create the appropriate framework conditions in the appropriate time. The megaproject, which will cost almost a trillion dollars, will otherwise be particularly profitable for Chinese companies. This will give them economies of scale and an edge over Western manufacturers.
And Europe? Reactions from Brussels have so far been rather cautious, and are becoming increasingly nervous. After all, a working group will work out a strategy on Central Asia by the end of 2019. Whether the potential can then be fully exploited remains to be seen.
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