18 May 2015
Building the Silk Road Economic Belt: Problems and Priorities in Central Asia
Executive Summary
Central Asia occupies the centrepiece of China’s Silk RoadEconomic Belt (SREB) initiative. Yet, reviving the Silk Road in Central Asia will not be easy and the geopolitical challenges will be the biggest hurdle to building the SREB in the region. The idea of Central Asia as a regional grouping in political and security terms is almost non-existent and Central Asian countries remain widely divided with serious internal conflicts caused by unresolved boundary, water and energy disputes, regional rivalry, deep mistrust and differences in political, diplomatic and security policies. Also, there is an on-going big power game in Central Asia. In recent years, while better trade and investment ties with all five Central Asian countries boosted China’s economic influence in Central Asia, China is still far from being a dominant force in Central Asian affairs because of the influence of Russia and, to a lesser extent, the United States. In the near to medium term, China still cannot compete with Russia which had a significant head start in the region.
In terms of responses to China’s SREB, Central Asian countries are excited about economic opportunities that China’s SREB brings, but at the same time, wary of the geopolitical implications of China’s expanding economic influence in the region. Similarly, Russia has mixed feelings towards China’s SREB. Given Moscow-centred economic and political integration projects such as EEU and CSTO, Moscow is not likely to support the SREB project in Central Asia. In contrast, as U.S. influence wanes in Central Asia, the United States is less concerned even though the SREB is in direct competition with its New Silk Road Project and seems to be adopting an open attitude towards the SREB. Against this economic and geopolitical backdrop in Central Asia, this paper suggests that China needs to pay attention to the following aspects in building the SREB.
First, building the SREB should be a gradual and incremental process.Deeply rooted internal conflicts in Central Asia as well as the presence of big powers in the region can block China’s efforts to build the SREB. Social instability, poverty, corruption, leadership transition, and social conflicts pose high risks and uncertainty to the Chinese investment. Thus, both China’s central and local governments need to understand that being eager for quick success might lead to political backlash and a careful and incremental approach is needed. It is better to build momentum with smaller projects first and seek the opportunity to connect the “dots” at a later phase.
Second, a bilateral approach is preferred.Instead of focusing on grand-scale projects involving many countries, China should adopt a bilateral approach by engaging in economic, social, cultural and even political and security cooperation with individual Central Asian countries. In this way, policies can be customised for individual countries, taking into account country-specific interests and limitations.
Third, agricultural cooperation offers huge potential. Unlike energy investment which largely benefits the Central Asian elites, agricultural cooperation has the potential of bringing wider economic benefits to ordinary people. Given the food insecurity in Central Asia, Chinese financial investment, agricultural R&D and technology will ensure regional food supply and enhance regional stability. In addition, agricultural modernisation will help keep regional water conflicts under control.
Fourth, to finance projects under the framework of the “One Belt, One Road” initiative, China introduced two key financial instruments—the Asian Infrastructure Investment Bank (AIIB) and the 40 billion dollar Silk Road Fund. As far as funding projects in Central Asia is concerned, the Silk Road Fund is the better financial instrument.
Fifth, in the long run, China needs to integrate Central Asia into the Pan Asia Production Network. To overcome challenges to the Sino-Central Asian economic cooperation, economic restructuring of Central Asian countries and China’s western provinces is needed to build a regional supply chain to minimise direct competition.
About the Author
Zhang Hongzhou is an Associate Research Fellow with the China Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. His main research interests include China and regional resources (food, water and energy) security, agricultural and rural development, fishing policy and maritime security. He has contributed papers to peer reviewed journals such as the Pacific Review, Harvard Asia Quarterly, Copenhagen Journal of Asia Studies, the ISPI Analysis and Southeast Asia Studies, edited volumes and international conferences. He has also contributed Op-Ed articles to newspapers and magazines in the Asia-Pacific, such as the YaleGlobal Online, the Diplomat, ChinaDialogue, the Global Times, Today, Lianhe Zaobao, the Nation and others.
The author would like to thank Mr Arthur Guschin for his help and comments on the paper.
Executive Summary
Central Asia occupies the centrepiece of China’s Silk RoadEconomic Belt (SREB) initiative. Yet, reviving the Silk Road in Central Asia will not be easy and the geopolitical challenges will be the biggest hurdle to building the SREB in the region. The idea of Central Asia as a regional grouping in political and security terms is almost non-existent and Central Asian countries remain widely divided with serious internal conflicts caused by unresolved boundary, water and energy disputes, regional rivalry, deep mistrust and differences in political, diplomatic and security policies. Also, there is an on-going big power game in Central Asia. In recent years, while better trade and investment ties with all five Central Asian countries boosted China’s economic influence in Central Asia, China is still far from being a dominant force in Central Asian affairs because of the influence of Russia and, to a lesser extent, the United States. In the near to medium term, China still cannot compete with Russia which had a significant head start in the region.
In terms of responses to China’s SREB, Central Asian countries are excited about economic opportunities that China’s SREB brings, but at the same time, wary of the geopolitical implications of China’s expanding economic influence in the region. Similarly, Russia has mixed feelings towards China’s SREB. Given Moscow-centred economic and political integration projects such as EEU and CSTO, Moscow is not likely to support the SREB project in Central Asia. In contrast, as U.S. influence wanes in Central Asia, the United States is less concerned even though the SREB is in direct competition with its New Silk Road Project and seems to be adopting an open attitude towards the SREB. Against this economic and geopolitical backdrop in Central Asia, this paper suggests that China needs to pay attention to the following aspects in building the SREB.
First, building the SREB should be a gradual and incremental process.Deeply rooted internal conflicts in Central Asia as well as the presence of big powers in the region can block China’s efforts to build the SREB. Social instability, poverty, corruption, leadership transition, and social conflicts pose high risks and uncertainty to the Chinese investment. Thus, both China’s central and local governments need to understand that being eager for quick success might lead to political backlash and a careful and incremental approach is needed. It is better to build momentum with smaller projects first and seek the opportunity to connect the “dots” at a later phase.
Second, a bilateral approach is preferred.Instead of focusing on grand-scale projects involving many countries, China should adopt a bilateral approach by engaging in economic, social, cultural and even political and security cooperation with individual Central Asian countries. In this way, policies can be customised for individual countries, taking into account country-specific interests and limitations.
Third, agricultural cooperation offers huge potential. Unlike energy investment which largely benefits the Central Asian elites, agricultural cooperation has the potential of bringing wider economic benefits to ordinary people. Given the food insecurity in Central Asia, Chinese financial investment, agricultural R&D and technology will ensure regional food supply and enhance regional stability. In addition, agricultural modernisation will help keep regional water conflicts under control.
Fourth, to finance projects under the framework of the “One Belt, One Road” initiative, China introduced two key financial instruments—the Asian Infrastructure Investment Bank (AIIB) and the 40 billion dollar Silk Road Fund. As far as funding projects in Central Asia is concerned, the Silk Road Fund is the better financial instrument.
Fifth, in the long run, China needs to integrate Central Asia into the Pan Asia Production Network. To overcome challenges to the Sino-Central Asian economic cooperation, economic restructuring of Central Asian countries and China’s western provinces is needed to build a regional supply chain to minimise direct competition.
About the Author
Zhang Hongzhou is an Associate Research Fellow with the China Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. His main research interests include China and regional resources (food, water and energy) security, agricultural and rural development, fishing policy and maritime security. He has contributed papers to peer reviewed journals such as the Pacific Review, Harvard Asia Quarterly, Copenhagen Journal of Asia Studies, the ISPI Analysis and Southeast Asia Studies, edited volumes and international conferences. He has also contributed Op-Ed articles to newspapers and magazines in the Asia-Pacific, such as the YaleGlobal Online, the Diplomat, ChinaDialogue, the Global Times, Today, Lianhe Zaobao, the Nation and others.
The author would like to thank Mr Arthur Guschin for his help and comments on the paper.
