NWMontana: China: From the physical Silk Road to a digital Silk highway
The G20 in the conclusions of its 4-5 September Hangzhou Summit advocated among others inclusive economic growth and investments as its ultimate goals to be pursued globally. To achieve these goals, the G20 listed in particular connectivity enhancement, digital cooperation and innovation. China gave its One Belt, One Road Initiative as a concrete example on how it is pursuing these G20 goals.
In the late antiquity and the middle ages, Xi’an, a town located in the northwest of current China, was the starting point of the ancient Silk Road. Today Xi’an is a second-tier city. But the New Silk Road initiative has brought Xi’an back in the spotlights and promises renewed economic growth for the town, which is dreaming of a new golden age. In the early middle ages, Xi’an’s prosperity was beyond imagination.
It was one of the most dynamic, open and prosperous cities in the world and counted more inhabitants than Europe’s largest town, Constantinople. Speaking about Xi’an today, people tend to refer to it as a cultural and historic city but it is becoming also a modern city embracing financial centers and business incubators.
In the wake of the G20 Summit, the China Chamber of International Commerce (CCOIC) and the newly set up Silk Road Chamber of International Commerce (SRCIC) organized the Silk Road Business Summit and SRCIC Cooperation and Development Conference in Xi’an. Entitled ‘Joint Efforts in Building a Platform for Business Collaboration and the Belt and Road’, the two-day event gathered more than 500 participants, including chairmen of commercial chambers, federations and funds from 51 countries, international organizations such as UN Department of Economic and Social affairs, together with think tank scholars as well as business leaders.
Jean-Pierre Lehmann, emeritus professor of international political economy at IMD Business School in Switzerland and visiting professor at Hong Kong University, summarized the New Silk Road as a “ray of sunlight on a gloomy horizon”, with the potential to inject a new sense of optimism and excitement at a time when the world economy is entering a “new normal” of low growth and secular stagnation, deep lack of confidence, and trade politicization.
In his eyes, “the New Silk Road and Maritime Route is the most ambitious and exciting business and economic project of the 21st century”. And who would disagree with him, once looking at the size of such project, which engages 65 countries and over half of the world’s population across western, central and eastern Europe, the east coast of Africa, and western, central and eastern Asia, stretches from Xi’an in China to Rotterdam, across the Pacific and Indian oceans, from Indonesia into the Mediterranean to Venice – from where Marco Polo started off his expeditions.
The summit was concluded with the Xi’an Declaration. The participants state in this declaration that construction of the Belt and Road requires not only the participation and joint efforts from government sectors, but that it should address also social aspects and involve NGOs. According to the declaration the governance model of the new Silk Road should consist of , the trinity of government, civil society and business enterprises. China’s giant blueprint of the New Silk Road initiative has drawn great attention far beyond Xi’an.
Everyone sees the great potential of co-operating with the world’s second largest economy and thus tries to seize any opportunity to participate in possible projects along the Silk Belt and the Maritime Road.
China has made great effort ever since to guarantee the open nature of the initiative and welcomes any new projects and fresh ideas. Thanks to it, the initiative is no longer limited to infrastructure connectivity, but has been expanded to enhancing connectivity in energy, education, medical and other domains.
Most recently, President Xi Jinping called for a “green, healthy, intelligent and peaceful” Silk Road while addressing the Uzbek Parliament on 22 June.
Enormous opportunities have been and will be brought to the countries along the Silk Road. By the end of 2015, China has invested more than$14.8 billion in 49 countries along the route, accounting for 12.6% of China’s total overseas investments. Besides, China has contracted projects of $64.5bn in 60 countries along the route, taking up 44% of Chinese foreign contracting projects. And according to The Economist, there are 900 deals under way along the route, worth $90bn, and China alone will invest a cumulative $4 trillion in countries along the road.
President of ChinaEU Luigi Gambardella believes there is more we can do: “Why don’t we look a bit further and let’s not ignore that there is another invisible Silk Road which will benefit everyone: A Digital Silk Road.”
The Digital Silk Road has started to attract attention, with the official inauguration of the so-called e-SilkRoad, a new one-stop on-line platform that collects information on capital flows, matches businesses, and provides advisory consulting for traders and investors of the member countries. Gambardella pointed out that this initiative is in the interest of both parties as the digital transformation is underway in both China and the EU.
On the one hand, Europe is completing its Digital Single Market, whose main aim is the harmonization of national regulations by reducing barriers of business operation across the EU’s internal borders, providing EU companies scale and resources to grow, as well as making the EU an even more attractive location for global companies.
On the other hand, China is betting on initiatives such as the ‘Internet Plus’ policy and the national Big Data Strategy to boost its digital growth as a springboard to the country’s economic development. “Why not combining both in the framework of a Cyber Silk Road Treaty?” proposed Gambardella, “Chinese businesses have reacted to the digitalization of the industrial production processes swiftly and are fast in taking steps to adapt. The European manufacturing industry must be ready for this challenge as well.
Creating an alliance with China, who is interested to increase its investment levels and cooperation opportunities in Europe, can be a precious opportunity for the European industry to accelerate its digital transformation.”
As concrete projects, Gambardella suggested: The infrastructure foundation of a digital silk road: 5G and Internet of Things: China and EU should conduct joint actions both in the field of research and in technology trials. Concrete joint initiatives are also expected, such as the first ‘Full 5G Cities’, located along the Silk Road.
New e-services and applications for the Silk Road: Cross-border e-commerce along the Silk Road will facilitate SMEs located in Silk Road countries to reach the ever expanding and increasingly demanding Chinese middle class consumers. Implementing Alibaba’s e-WTP initiative along the Silk Road can be a good start.
A Silk Road Digital Fund: The fund would support and invest in SMEs and Startups along the Silk Road operating in 5G, Hi-tech, ICT who are passionate about expanding business in other markets and those who are interested in transform their traditional businesses into digital ones.
Approximation of administrative requirements and rules: negotiations should be opened to harmonize Chinese and EU rules for online purchases of digital contents, promote affordable high quality parcel delivery, harmonize IP regimes, and reduce the taxation burden in the EU and along the Silk Road.
He emphasized: “If the EU Digital Single Market initiative was widened from the EU to China, this would create a regulatory framework that can be invoked by nearly two billion end?users to protect their interests.”
Gambardella added that such negotiations should be based on thorough academic study of respective Internet regulations in China and EU, and CEOs should be involved through a stakeholders’ forum to provide their inputs on bottlenecks and problems dissuading direct investment and trade.