China's new Silk Road plan builds on failed Go West drive

Development aims to narrow regional disparities between China's east and west, while encouraging closer ties with neighbouring countries

PUBLISHED : Monday, 02 June, 2014, 3:07am
UPDATED : Monday, 02 June, 2014, 3:08am

Two thousand years ago Xian was the heart of China's trade-driven economy.

Now a new Silk Road running through what was once the Chinese capital could become the main artery supplying the raw materials for a new era of domestically oriented growth aimed at rebalancing the world's second-biggest economy and putting it on a more sustainable footing.

But while it is one of the cornerstones of President Xi Jinping's plan to transform the economy - with some analysts saying it will be as crucial to China's future as the multitrillion-yuan urbanisation programme planned for the coming decade - specifics such as timetable and detailed roadmap remain sketchy more than half a year after it was first mooted.

Central and local economic planning policy officials who met last week in Xian highlighted the authorities' eagerness to participate in the new "Go West" drive, but revealed just how little advanced the plans are.

"The Silk Road idea is aimed at broadening the channels for China's westward development, while it may also create new opportunities for accelerating economic transformation in the country," said Zhang Junkuo, a vice-director at the State Council's Development Research Centre.

Participants said the plan would bolster China's trade and infrastructure building, as well as cultural exchanges with Central and Western Asia and Europe. The areas for cooperation included energy, minerals, agriculture, textiles, finance, medical care and tourism, officials said.

Beijing wants to quench its thirst for energy, while reducing its heavy reliance on domestic coal and imported oil, with National Energy Administration vice-director Zhang Yuqing describing energy coordination as "the centerpiece of the Silk Road economic belt plan".

But the plan is also part of Xi's strategy to forge closer diplomatic links with neighbouring countries such as Russia to counterbalance Washington's global influence.

Last month China signed a landmark US$400 billion natural gas deal with Russia after a decade of tough negotiations.

Officials also pledged to ink more deals with countries such as Kazakhstan and Uzbekistan for the supply of commodities such as oil, gas and uranium, as well as trade in goods such as fruit, grain and meat.

Tang Shengyao, vice-director of the Ministry of Agriculture's international cooperation department, said the central government wanted to establish major agricultural production bases abroad.

While 30 years of export-driven growth have turned China's eastern provinces into the world's workshop, this is the second time in two decades that Beijing has unveiled a huge policy push to develop hinterland areas.

Trillions of yuan poured into the Western Development initiative, unveiled in 1999, did help narrow the regional disparities between China's east and west but the results of the Go West drive disappointed many observers, with the region still generating barely a fifth of the mainland's gross domestic product.

A survey published by the Organisation for Economic Cooperation and Development (OECD) in March last year said that while the programme may have helped reduce regional disparities they remained more pronounced than in many OECD countries.

The extra investment has helped gross domestic product growth in western regions outpace the rest of the country - up 10.7 per cent last year compared with 9.1 per cent growth in the affluent eastern region - but observers have warned that rising social tensions may hinder fresh investment inflows.

Security concerns related to ethnic tensions have intensified significantly in Xinjiang recently, prompting the authorities to strengthen a crackdown on suspected separatists blamed for terrorist attacks.

Analysts say a shift in external demand has also raised the stakes in the latest drive to boost the economic development of central and western China.

Zhang Monan, a vice-director of the State Information Centre's World Economic Research Bureau, said the Silk Road economic belt plan was more global and its impact on China's economy would "definitely exceed that" of the old Go West strategy.

"It's hard to estimate how much investment the Silk Road plan will drive in total, because this strategy isn't just confined to within China, but instead will benefit all the countries along the route," she said.

Xian, along with many other centres in the west, is already luring more foreign investment, attracting multinationals such as Samsung and Siemens to its hi-tech development zones.

Buildings bearing international brands such as KFC, Westin and Korea's Maan Coffee sit just a short walk from the city's famous Big Wild Goose Pagoda, built in 652 during the Tang dynasty to house sutras and figurines of the Buddha brought back from India by Xuan Zang along the old Silk Road.

Several kilometres away, an annual expo that opened on May 23 attracted more foreign traders than before, from countries including Pakistan, Iran, Kenya and Russia, promoting their blankets, wooden chairs, jewellery and other goods to crowds of Chinese visitors.

Zhang Monan said the Western Development initiative was evolving into a policy of "opening to the West", reflecting a more global perspective.

She said the new plan, being designed by the National Development and Reform Commission, was expected to cover provinces and regions including Xinjiang, Tibet, Sichuan, Shaanxi, Gansu and Chongqing.