China’s New Silk Road Project

Lately, China launched an action plan for its Silk Road concept. This project is potentially involving an area that covers 55 percent of world GDP, 70 percent of global population, and 75 percent of known energy resources. In regard to this project, China’s financial commitments seem huge and its implementation is anticipated to span a very long time period of 35 years. The map on the right shows the scale and scope of the project. The solid line and dotted indicate the land route and maritime respectively. In addition, China’s logic on the project is mainly based on geopolitics and on the export of its excessive infrastructure-building capacities. In short, China is seeking to supplement the existing international order rather than to revise it.

What’s Driving China to Make the New Silk Road?

This question can be answered from the two perspectives. Firstly, in terms of geopolitics, China wants to take the leadership enough to stand against the United States. Recently, Chinese president Xi Jinping signed trade deals with neighboring countries including Russia. They includes an agreement to coordinate the Silk Road economic belt initiative with Russia’s Eurasian Union project. Interestingly, in the recent, the United States also made the Trans-Pacific Partnership agreement with eleven Pacific Rim countries, which account for 40 percent of global GDP when including the United States’ GDP.

The other driver comes from the economic necessity. Since financial crisis in 2008, China has supported the world economic growth with the United States. However, over the last couple of years, it is obvious that China has struggled to maintain its economic growth. In this regard, China is trying to carry out two economic development alternatives. One of them is focusing on turning investment-leading economy into consumption-leading over the next couple of years. The other is related to oversupply of capacity which resulted from excessively-overlapped investments approved by the government. To address this problem, China seems to have decided to make a chance of utilizing its massive infrastructure-building capacities.

Impacts on the World Economy

Most of all, the OBOR project has the potential to rearrange the existing pattern of international trade. In specific, China would secure trade route via the Eurasian continent as the project makes progress. This implies that China can export goods to EU countries in more cost and time-efficient way, and also import energy resource from Russia and some Middle East countries. Furthermore, China may revitalize its production facilities in Central Asia and Eastern Europe countries by connecting them to the overland trade route. To sum up, China is trying to shift from “Made in China” to “Made for China”.

In the meantime, the success of the project is probably likely to bring about brand-new economic union in the Eurasian continent. At least, two counties, which are China and Russia, really want to rebalance the world economy away from the United States. In this regard, the United States is trying to expand its economic influence into Pacific Rim countries. In addition, the birth of new economic union between countries ranging along the overland trade route may in turn lead to the new key currency for the international trade. This means that the bigger the new economic union gets, the weaker the US dollar’s power may get. Currently, China continues to try to make the Chinese Yuan a settlement currency.

Prospects and Challenges on the Project

China’s new Silk Road plan seems to be without a parallel in the history of the world. However, many doubts are being cast over the possibility that the project will be completed successfully. The main argument is about if China is able to get through the project. Over the last couple of years, we could learn the news of the Chinese economy’s instability and downside potential. In fact, this massive project requires astronomical amounts of money, cutting-edge engineering technology, and advanced project management technique. As of now, there is no decisive evidence to prove that the project will run smoothly.

Nevertheless, we need to pay attention to the Asian Infrastructure Investment Bank established earlier this year. The AIIB is an international financial institution that aims to support the building of infrastructure in the Asia-Pacific region, which was proposed as an initiative by the Chinese government. The surprising thing is that EU’s major countries – including the United Kingdom, France, and Germany – joined this bank as founding members. Basically, they do not have any reason to invest in this bank when considering its operational function. This European diplomatic turnaround may be, in a sense, a prelude to the new international economic order.


In summary, China just started the unprecedented massive economic project of building the new Silk Road across the Eurasia continent. At a moment, there is no guarantee that the project will be completed successfully. However, it is obvious that China’s new Silk Road has the potential to substantially change the existing pattern of international trade. In the meantime, China certainly needs to implement the project to overcome the current economic downturn, and many countries lying along the trade route also want to rebalance the global economy. In this light, we need to take an interest in the AIIB’s upcoming activities relating to the project.

Youngsu Kim
MBA Candidate 2016