The New Silk Road: China and its plan to lead world trade


The New Silk Road is presented as an opportunity for development and trade around the world. However, the lack of transparency on the part of China could dampen the wishes of its government.

Throughout these first stages of the year, and immersed in a scenario of exceptional uncertainty, China focused the eyes of the main leaders on the planet when communicating to the world its growth prospects for the coming years, as well as the figures it left in the Asian country in the past 2020. And, while the economies on the planet were debating between a contraction similar or greater than that which occurred in the last crisis of 2008, China, for its part, announced that the country, having been the world epicenter of the pandemic, it intended to close the year with growth of up to 2.3%.

With regard to this situation, we have to say that this growth of the Chinese economy is quite surprising. Precisely due to the fact that we are facing the country in which the phenomenon was unleashed that today is causing the main economies on the planet to show contractions never seen before in their historical series.

However, the better performance of the Chinese economy, due to characteristics that have allowed it to better overcome the effects of this pandemic, has placed the Asian dragon at the head of the world in terms of economic growth and recovery.

Among these phenomena that have made the Asian economy more resilient in times of crisis, international trade and China's strong commitment to expanding its participation in this profitable phenomenon stand out. Proof of this is the leading role of exports in gross domestic product (GDP), which have gone from representing 4.31% of GDP in 1960 to 19% in recent years, according to World Bank data. An evolution similar to that experienced by imports, which allows us to conclude that the degree of openness of the Chinese economy to the world has been growing, generating on the way very promising agreements such as the New Silk Road (BRI, for its acronym in English), or the recent RCEP.

More trade agreements, and more ambitious

Despite the fact that China's relations with the world have not been so good in recent years, and even having generated tensions like those it had with the United States, China has not stopped feeding a project that, as shown by the growth of the Asian giant In recent years, it has contributed extensively to the growth of the Asian economy. A project based on that greater participation in international trade, and that begins to materialize through treaties such as the one reached with other Asian countries under the name “RCEP”.

Although we are talking about a regional treaty, we are facing an agreement that integrates 15 countries, with an aggregate population of 2,200 million people. An agreement that, combining the different levels of gross domestic product (GDP), represents an aggregate of 22.14 trillion dollars. In short, and worth the redundancy, an agreement that would monopolize 28% of world trade, being able to absorb a higher share in the coming years. At the same time, in the same way, we speak of a combined GDP that would account for 30% of world GDP. As we can see, we are talking about the largest trade agreement in history.

However, apart from this agreement, China has not wanted to neglect the rest of the world, so it has launched another series of agreements that could expand this participation even more. In this sense, already in 2014, Xi Jinping proposed the creation of a new trade route that would connect China with the rest of the economic powers of the planet; including also emerging economies such as Latin America and Africa, where China is increasing its participation.

He called this new route "the New Silk Road." An agreement for which two combined routes would be established, one for land and the other maritime infrastructure, with the aim of improving Chinese connections both on the Asian continent and abroad, giving China more economic and political influence worldwide.

New Silk Road. Map

According to the World Bank, this New Silk Road could boost world trade by up to 9.7%, as well as reduce the transport time of goods by up to 12%. That is why, since its inception, the total volume of trade between the countries involved in the New Silk Road has reached 6,000 billion dollars, according to official data provided by the Chinese government. Since its birth, 130 countries have participated in some way in this agreement, which represents about 42% of global GDP, as well as 78% of the world's population.In short, another great deal that brings China closer and closer to its desired goal.

The New Silk Road: A Deal for Development or to Control the World?

Since its inception in 2014, as many leaders have praised the creation of this new route as there are those who have criticized it. The World Bank, where appropriate, considers that this agreement could help lift 7.2 million people worldwide out of extreme poverty, as well as 32 million out of moderate poverty; very similar to the statements made by the UN or the IMF. For its part, the trade war with the United States exemplifies the opinion of many other leaders who consider this route a mechanism to expand China's dominance on the planet, while consolidating its role as the dominant economy in international markets.

Be that as it may, the truth is that the new agreement, which tries to replicate the historic Silk Road that has benefited countries so much in the past, is a firm project that hopes to see the light of day in the coming years. China's investment in infrastructure throughout the planet is increasing, having already allocated a huge amount of capital to many neighboring economies that it intends to reactivate and promote with this route. And it is that, taking into account the projects that this route contemplates, also taking into account the infrastructures (maritime and land), we are talking about an investment that is expected to exceed 500,000 million dollars. A capital used in the construction of roads, ports, railways, logistics platforms and other infrastructures in more than 60 countries.

However, despite the intentions that the Chinese president claims are to connect the five continents through improvements in telecommunications, transportation, as well as all kinds of infrastructures, the truth is that these investments made by the Chinese economy in other economies are beginning to worry many leaders on the planet. Well, after what happened with Sri Lanka, or the signs that are observed in other similar economies, a situation is not as pleasant as the one that China claims to show.

In this sense, we are talking about a debt that ends up committing the interested countries to China, generating a dangerous dependence that could compromise impartiality, and justice and equity in multilateral decisions.

Well, in the same way that we speak of a notable improvement in land and maritime infrastructures, the large volumes of expenditure required by this trade route require the indebtedness of many economies. A debt that ends up in the hands of China, generating this dependency relationship that many countries fear. For this reason, there are many leaders who, despite praising the proposal, have entrusted reforms to China that guarantee transparency in the agreements. What happened in other economies, where China's control over the foreign debt has been able to compromise the interests of the planet itself in favor of China, generates a kind of skepticism in some economic leaders who do not quite see the good intentions of Xi Jinping.

However, and given what has happened on the planet with the pandemic, the continued talk of cooperation and multilateralism, as well as international trade, is a good sign. Tensions arose on the planet, and this globalization, which has brought so much economic benefit to countries, was beginning to be threatened. However, if they do not control all the details that the leaders require to join the project, as well as review the investments that are needed to put this agreement into operation, which today is presented as an opportunity, tomorrow could sow the beginning of a battle campal for the dominance of global trade.

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