The New Silk Route: Opportunities and Risks

The gigantic project of the New Silk Route, promoted by China, aims at redefining the system of economic and political relationships at a global level A strategy that has many pros and cons. But above all, what stand will Italy take?

by Renato Uggeri

The memorandum of understanding with Beijing which Prime Minister Giuseppe Conte recently signed formalized Italy’s participation in the Belt and Road Initiative (BRI), the great Chinese infrastructural plan which involves Asia, Africa and Europe. The project aims at reinforcing the infrastructural, commercial and investment ties between China and other 65 countries which altogether account for more than 30% of the global GNP, 62% of the population and 75% of known energy reserves.

Two economic corridors through a series of infrastructures and nodes
The Belt and Road Initiative foresees the creation of two corridors, maritime and overland, with the aim of turning China into the pivot of a complex network of connections. To create this network, which will pass through a series of infrastructures and nodes, 100 billion Euro have already been budgeted. From the very beginning, China distinguished firmly between the Silk Road Economic Belt or Silk Route, the overland side of the project which connects China with Central and Southern Asia and goes on towards Europe, and the Maritime Silk Road, its maritime counterpart which connects China to the nations of South-East Asia, the Gulf countries, North Africa and Europe. The picture is completed by six more economic corridors. In greater detail, the Silk Route is configured as a series of “overland bridges”, be they roads or railways, interconnected and meant to play the role of trade routes and meeting points between the countries concerned, from Russia to Myanmar, in turn members of the Asian Infrastructure Investment Bank which provides financial support and economic resources. Among the most important “bridges” there are the China-Pakistan Economic Corridor (Cpec) and the New Eurasian Land Bridge (Nelb) which will connect China and Germany going through Russia and Kazakhstan. The New Silk Route is remindful, starting from its name, of the times when trade went on in the great Eurasian spaces, the age of caravans which crossed Syria, Iran and Central Asia allowing trade to take place between the Mediterranean basin and China.

Is Italy a bridgehead for Chinese interests in Europe?
For Italy, the New Silk Route is particularly interesting since the land and sea routes end up meeting in our peninsula and namely in Venice, thereby recalling Marco Polo and his numerous trips to China.
The initiative was however seriously criticized by the United States due to fears that it might turn into a sort of Trojan horse to enable Beijing’s interests to prevail n Europe. The European Union was also irritated and has already asked member states not to embark on such initiatives on their own. But in Europe other countries such as Hungary, Poland, Greece and Portugal already signed the memorandum of understanding with Beijing.
The most critical observers think that Italy might serve as a bridgehead for China’s significant landing in Europe. However, considering that the Chinese market is the one with the fastest-growing demand in the world, it could prove to be an opportunity to exports goods made in Italy.
About twenty agreements complement the emorandum, with a value of about 20 billion Euro. Some are trade agreements, some are strategic, such as the Italian Deposits and Loans Fund, which envisages the issue of Panda bonds (bonds aiming at collecting capital from Chinese institutional investors with the purpose of financing Italian companies present in the Asian country). A curiosity: there was talk about playing an official Italian football match in China, as part of a long-term agreement like the one signed with Saudi Arabia for the Super Cup.

Which are the pros and cons?
An example used against the agreement was the case of the Piraeus harbour in Greece, where the Chinese company COSCO purchased 67%.
While it is true that traffic in this Mediterranean harbour is increasing considerably the political price to pay for this result could be high.
Another example could be the tunnel which during the next decade will connect Helsinki in Finland with Tallinn in Estonia, and which will be largely built using Chinese funds destined to infrastructures included int he Silk Route. The submarine tunnel, the longest in the world, will connect the two countries and will bring Scandinavia closer to the heart of Europe.
It is just as true that many developing nations are getting ready to reap the benefits of Chinese investments. Many have a strong need for new and better quality infrastructures, considering the growing pressure felt by existing infrastructures due to the increase in population, economic development and urbanization. Meanwhile, Europe is reconsidering its policy regarding China by proposing “10 actions” to member States, with the aim of starting off a discussion to improve the European approach.
Demands especially concern reciprocity in access to markets and investments, and a greater awareness as to risks for national security caused by foreign investments in strategic activities, technologies and infrastructures.

Controlling the best part of infrastructures
The New Silk Route is evidence of the new expansive phase of the Chinese economy and, from a logistic standpoint, it has a precise aim: connecting Europe and Asia while controlling the bet part of infrastructures. Directly, with workmen working on building sites, employees managing offices, ship owners and railwaymen carrying tons of goods. Indirectly, investing through financing and loans the huge reserves of liquidity built up during the past few decades spent manufacturing consumer goods for the whole world (besides, roughly 70% of steel, which is used to build railway tracks and bridges, comes from China).