Guest post from Calipe Chong, founder of VipoAsia and author of VipoAsia’s blog

The Ancient Silk Road - Wikicommons

China adopted West Development Strategy since January 2000 to beef up the economic development in the western region to close the gap with the prosperous eastern region at the coast line. In the last 10 years, the central government had financed more than 3.5 trillion yuan ($512.4 billion) to support development of the western region which consists of 12 western provinces, autonomous regions and municipalities with a combined population of about 370 million. They include Sichuan, Yunnan, Gansu and Shaanxi provinces. This year alone, China planned to invest 468.9 billion yuan ($69 billion) for projects in this region.

President Hu Jintao announced on May 21 at the central work conference that Xinjiang Uygur Autonomous Region would receive 2 trillion yuan ($295 billion) in next 5 years for fixed asset investment to double up its GDP to national average by 2015. The purpose is to improve Xinjiang’s infrastructure, self-development capacity, ethnic unity and social stability. Premier Wen Jiabao also proposed a series of preferential policies to boost Xinjiang, among which was the resource tax reform launched on June 1. The government is trying hard to reduce regional income disparities which have escalated into a big social problem. It hopes to harmonize the strife tension between ethnic Uyghur and Han Chinese.

The vast natural resources on minerals, oil and gas would also provide the return on this vast investment. Central state-owned companies and large private corporations are becoming a powerful engine for the rapid economic growth in Xinjiang.

Kashgar, an ancient Silk Road trading post located in western Xinjiang, has been singled out as an economic development zone meant to increase trade with nearby Central Asian nations. It is to be modeled after the special economic zone (SEZ) of Shenzhen with preferential policies in addition to becoming a comprehensive reform experimental zone. The 50 square kilometer SEZ is planned to boost the city’s economy and population to one million but also drive the economies of the surrounding cities and countries.

To further enhance the connectivity of Xinjiang, the government had begun constructing the second high speed railway line linking it with the inland cities and Beijing. This would make the journey from Urumqi, provincial capital of Xinjinag, to Beijing an awesome 12 hours compared with the current 40.

China has developed her high speed train to a remarkable speed of 350 Km per hour. And she now has the longest high speed train network in the world. She is experimenting train with speed of 500 Km per hour which will be delivered in less than 5 years time. The engineers and scientists are researching train with speed up to 1,000 km per hour. They hope the super high speed train would be operational in 10~15 years time. If that happens, it will revolutionize the whole transport industry and a major threat to short distance flight. The whole supply chain will have to be remodeled.

With the success of her high speed train, she now embarks on a very aggressive ambition to develop transcontinental high speed rail lines spanning across 17 countries. She is planning to develop 3 major rail lines as follows:

(a) Southern route – Kunming in southwest China with Singapore passing through Myanmar, Vietnam, Cambodia, Thailand and Malaysia

(b) Western route – Urumchi in northwest China with Germany passing through Kazakhstan, Uzbekistan, Turkmenistan, Pakistan, Iran and Turkey

(c) Northern route – Heilongjiang in northeast China with South-Eastern Europe through Russia

The whole network links 28 states with 81,000 km railroads. This massive network connecting China with Central Asia and Eastern Europe looks so much like the ancient Silk Road. I call it the Metallic Silk Route. It is mind-boggling and breathtaking for China to visualize such almost impossible feat. China has meticulously setting her plan to rekindle the ancient trading with Central Asia, Eastern Europe, Russia and South Asia.

She plans to build it with her own money in exchange for resources from the respective states. This would help her to tap opportunities and resources from the resource-rich Central Asia and less dependent from her current overseas suppliers. It will probably bring tremendous trade opportunities and wealth to the under-developed Central Asia which has been deprived from the global economy for centuries. Many states may find it hard to resist the China offer. Without the high speed railway, it is difficult for them to sell their resources to finance the nation building and welfare development.

The direct access to Middle East and Eastern Europe without using the sea lanes would mean that China can depend less on the narrow, congested and pirates infested Malacca Straits and controversial India Ocean and South China Sea. Any hiccups at these sea lanes could bring China economy to her knees. Chinese does not like someone holding his throat. The massive man power and resources to build and maintain the Great Wall to deter the invasion from the West is a good example of what China would do to keep her safe.

We need to understand the impact of ancient Silk Road to the countries involved to conceptualize what the Metallic Silk Route would bring to the region. The ancient Silk Road was an important path for cultural, commercial and technological exchange between traders, merchants, pilgrims, missionaries, soldiers, nomads and urban dwellers from China, India, Tibet, Persia, Arab and Rome for almost 3,000 years. The eastern road was made safe from bandits by the Han Dynasty in early 200 BC. Han Wudi managed to foster a safe passage with the various kingdoms in the region.

The road which was reputed as 6,400 Km long enabled trade in silk, slaves, spice, perfumes, medicines, jewels, artifacts, glassware, etc. More importantly it allows the spread of knowledge, ideas, teachings, culture, food, music, language and religion. All the countries not only gain wealth from the immense trading but also intellectual development from the diverse countries. Many inventions and thoughts were developed. It had flourished the civilizations at both ends of the continent. Buddhism was brought to China from India while Islam was brought to Central Asia from Arab. There are many Chinese Muslims living in western China right till now.

The Turks who came into power after the fall of Mongol Empire had literally cut off the Silk Road around 1400 AD. It had deprived the West from access to beloved silk and spice from the East. This had compelled Portugal and Spain to find an alternate sea route to the East. The success of the maritime explorers brought Europe to Asia and had helped it to become colonial powers for centuries. Without the quest to the East to acquire the commodities, the global development would not be what it is today.

In ancient time, the Romans would pay gold for the silk from China. And now China is buying resources from Central Asia with her huge foreign reserves. The Metallic Silk Route allows her vital oil and gas import from Middle East and Russia to flow in through an alternate route. This is a very critical strategy to sustain her huge consumption of energy. And she is also less vulnerable on the negotiation table with the less friendly countries.

China attempts to revitalize trading with her western neighbors is sensational and formidable in this new century. She cannot do it alone. Besides the contiguous states along the railway lines, she also needs the investment and involvement from the well developed nations to succeed. This spells great opportunities for companies willing to venture in this new frontier. This will be a new chapter in global trading.

In twenty years time, the whole Asia will revive her glory, might and global dominance once again after a millennium gap. The impact would be far greater than the ancient Silk Road era. The wind of power and influence never stop circulating around the globe.

* This entry has been published with the permission of the author, Calipe Chong of Vipo Asia.  Please visit VipoAsia to access his blog directly and read more of his insight on Asia and the world.

Van Eck bets on Vietnam’s growth with new ETF – Reuters

The Market Vectors Vietnam ETF (VNM) will be the first U.S.-listed ETF exclusively dedicated to Vietnam, mirroring the performance of the Market Vectors Vietnam index .MVVN, which tracks companies that generate at least 50 percent of their revenues in the country, Van Eck said in a statement.

“Vietnam is one of the world’s most populous nations, and its well-educated, young population — nearly half of the country’s 90 million residents are under the age of 25 — provides strong underpinnings for local economic growth,” Van Eck said in the statement.

Click here to access the full article from Reuters by Walter Brandimarte

* Vietnam Flag, courtesy of CIA World Factbook