by Bruce Pannier / Source Radio Free Europe

China’s massive One Belt, One Road (OBOR) project aims to connect the world like never before, using land and sea routes to form trade links across Asia and Europe and down to Africa. It’s an extremely ambitious project that will take many years to realize but already OBOR has many people excited about the economic possibilities to come.

Among the billions of people who could benefit immensely from OBOR are the roughly 65 million residents of Central Asia. But being part of OBOR is not necessarily a guarantee for a better future.

To look at OBOR in Central Asia, and some of the potential advantages and disadvantages, RFE/RL assembled a Majlis, or panel, to review the situation.

Moderating the discussion was RFE/RL Media Relations Manager Muhammad Tahir. From Exeter University in the U.K., senior lecturer and Central Asian expert David Lewis joined the discussion. From Geneva, journalist, researcher, and native of Kyrgyzstan Cholpon Orozobekova, who has written for the Jamestown Foundation and The Diplomat took part. I was just back from Washington, New York, and the CESS conference at Princeton and was raring to go, so I pitched in a few comments also.

As Lewis mentioned at the start of the Majlis, the numbers for OBOR are genuinely unprecedented -- $1 trillion of investment with routes potentially reaching some 44 countries with more than half the population of the planet. And, as Lewis pointed out, “This being the initiative of [Chinese President] Xi Jinping, it’s something that the Chinese leadership is committed to and it does involve significant funding for Central Asia in particular, and of course, governments, at least in Central Asia, are very enthusiastic about funding flowing into major infrastructure projects.”

OBOR has already started in Central Asia. Lewis recalled the oil pipeline from Kazakhstan, the natural gas pipelines from Turkmenistan, and a road network from Kyrgyzstan and Tajikistan already lead to China.

These projects and others were started, and some completed, before the autumn of 2013 when Beijing first articulated the OBOR project. As Orozobekova reminded, “In 2013, trade between China and the five Central Asian states was $50 billion already, while, for example, trade between Russia and these [Central Asian] countries was only $30 billion.”

That trend has only become stronger as Russia’s economy has weakened, limiting Russian investment potential. China, meanwhile, has continued to vigorously pursue OBOR. In February this year, the first cargo train from China arrived in Iran after passing through Kazakhstan and Turkmenistan along new railways in the latter two countries. In September, the first train from China to Afghanistan arrived after crossing through Kazakhstan and Uzbekistan.

According to the plan, the part of the route that runs through Central Asia should continue west through northern Iran into Turkey. Central Asia could benefit greatly from this new route for shipping goods to, and receiving goods from countries with access to the Persian Gulf and the Mediterranean Sea.

But already parts of Central Asia are seeing some of the negative aspects that come with these Chinese-funded projects.

“In Central Asia there are some concerns regarding the flow of migrants from China,” Lewis said. He explained: “Typically Chinese companies like to use their own people, bring in Chinese labor to get a job done. It’s often very effective but it doesn’t always give people local jobs and employ local specialists.”

That has led to problems in the oil fields of western Kazakhstan where Chinese employees work, in mining areas in Kyrgyzstan where Chinese employees work, and along various parts of the roads being constructed in Kyrgyzstan and Tajikistan where locals work alongside Chinese workers. Sometimes the problems are caused by rumors of the Chinese receiving better wages, sometimes the lack of the locals’ ability to communicate with the Chinese workers has led to fights.

Chinese farmers are also tending agricultural land in Tajikistan vacated by local farmers who left to find work in Russia. A proposal to lease farmland in Kazakhstan earlier this year sparked the largest protests seen there in some 20 years, when rumors spread that Chinese farmers would lease portions of Kazakhstan’s farmland.

Orozobekova said, “In Central Asia there are some concerns regarding the flow of migrants from China.”

Additionally, while Chinese workers are coming to Central Asia, Lewis said, “China just doesn’t offer that kind of labor migration, there’s no real option to go to China to work.” So Central Asia’s migrant laborers continue to mainly go to Russia.

And there are also environmental concerns. Chinese companies do not have a good track record when it comes to ecological considerations. Lewis explained, “In Kyrgyzstan and in Tajikistan recently, new cement plants developed by China are notoriously polluting industries and can have a really negative effect on local people.” Refineries in Kyrgyzstan and Tajikistan built or operated by Chinese companies have also received complaints from local administrations and residents.

Orozobekova also pointed out for Kyrgyzstan, OBOR is a competitor project. She said many in Kyrgyzstan “are overwhelmed with the EEU, the Eurasian Economic Union.” The EEU is the Russian-led organization that also includes Armenia, Belarus, Kazakhstan, and Kyrgyzstan. Kyrgyzstan officially joined in August 2015. Orozobekova said, “When it comes to OBOR and the EEU there’s a little bit of a clash between them because currently, Kyrgyzstan and Kazakhstan joined the EEU with Russia [and] there are so many problems within this organization [EEU].”

And Orozobekova reminded that since 1998, Kyrgyzstan is also a member of the World Trade Organization, so officials in Bishkek must do some furious juggling to try to simultaneously meet the regulations of all these organizations.

And Lewis noted, “We know there’s a slowdown going on in the Chinese economy and so these very ambitious plans, which require a lot of funding, may be more difficult than was considered.”

OBOR is a thick topic, and one the Majlis will address again in the near future. Participants in this latest Majlis session explored more deeply the benefits and detriments of being one of the first sections of OBOR, including potential security problems, now and in the future.

An audio recording of the discussion can be heard at:

Gwadar, Pakistan: Pakistan's prime minister and army chief welcomed on Sunday the first large shipment of Chinese goods through the renovated port of Gwadar, part of a trade link between western China and the Arabian Sea.

The deep-water port in Pakistan's southwestern province of Baluchistan is key to the $US46 billion China Pakistan Economic Corridor (CPEC) that also encompasses roads and energy projects.

A Pakistan Navy ship berth at Gwadar port. Photo: AP

"Pakistan is located at the intersection of three engines of growth in Asia - South Asia, China and Central Asia," Pakistani Prime Minister Nawaz Sharif said at a ceremony on Sunday.

"CPEC will help in integrating these regions into an economic zone offering great opportunities for people of the region as well as investors from all over the world."

A Pakistan Navy soldier stands guard while a loaded Chinese ship prepares to depart from Gwadar port. Photo: AP

Army chief General Raheel Sharif also attended Sunday's ceremony at the port, which is expected mostly to see imports of building materials in the next year before eventually becoming a gateway for goods from western China's Xinjiang province.

The port ceremony came a day after a bomb in another part of Baluchistan killed at least 52 people at a Muslim shrine in an attack claimed by Islamic State.

Baluchistan is home to an ethnic nationalist insurgency as well as operations by sectarian militants including Lashkar-e-Jangvi, which has previously said it partners with Islamic State's Middle East-based leadership.

Pakistan has raised a dedicated security force to protect CPEC projects. The prime minister on Sunday vowed that attacks would not derail any of the work, while expressing condolences to victims of the shrine attack.

Pakistan's Prime Minister Nawaz Sharif, centre left, and Army Chief General Raheel Sharif, third from right, pray after inaugurating a new international trade route during a ceremony at Gwadar port. Photo: AP

"Our hearts are saddened and thoughts are with the innocent victims' families," he said.

"But at the same time, "I want to re-emphasise that such cowardly attacks cannot weaken our resolve to eliminate the menace of extremism and terrorism from our country in all forms." 

Reuters

China’s football strategy is about much more than just the sport itself

by Simon Chadwick

China is aligning its football investments with a strategy to secure West Asian minerals. Its ‘One Belt, One Road’ project could have major implications for the new world order of football, Simon Chadwick writes.

Many western observers probably still believe that Europe’s top clubs remain the most coveted football targets for China and its investors, their prospective purchase somehow symbolising the country’s sporting ambitions. And there are good reasons for such beliefs, not least the profile, presence, and power that owning a leading football club can bring.

The global discourse around China and football is becoming an increasingly well-rehearsed one, as well as one with which many of us are now familiar. But is it misplaced? Could it actually be the case that China’s football strategy is neither about the sport itself nor about Europe? Indeed, could it be that Iranian Gulf Pro League clubs Tractor Sazi and Perspolis are more important to the Chinese?

In February 2016, a freight train arrived in Tehran, having travelled directly to the Iranian capital from Beijing. Its arrival was both timely and telling; following the lifting of sanctions against Iran, the country is now opening-up to the world and establishing new trading relations. Indeed, speculation is even growing about the impact this will have on the sport and football industries in Iran.

An alignment of Chinese and Iranian sporting interests would therefore seem to be one obvious outcome of strengthening relations between the two countries. Indeed, we should probably expect sponsorships, commercial deals, and even club relationships involving the two countries.

This becomes an even likelier prospect given that Iran is a more accomplished performer at World Cups than China ever has been. The East Asian giant therefore has much to learn from its smaller West Asian partner. However, this still doesn’t account for the significance of the train, which in itself is evidence of China’s growing power across Eurasia.

The direct line from Beijing to Tehran is part of China’s ‘One Belt, One Road’ (OBOR) project, which is comprised of two parts: the Silk Road Economic Belt, and the Maritime Silk Road. Mirroring the ancient Silk Road routes, the project has been designed to foster trade in central Asia and to enable China to have a greater influence on international affairs. Among the countries that are part of the OBOR initiative are India, Qatar, Russia, as well as numerous others.

China has been seeking to utilise OBOR as means of securing raw materials and building the capacity of its manufacturing industries. At the same time, the country has also sought to break some established ties between countries in the region. Among China’s achievements include the construction of a gas pipeline that allowed Turkmenistan to break its dependence on Russia, and an oil pipeline running from Russia to China.

Aside from any speculation about Iranian football, we are already seeing how the sport and OBOR are becoming part of China’s broader strategic goals. The sale of a 13 per cent stake (worth £265 million) in English Premier League club Manchester City was in part motivated by mineral interests. City is still controlled by its majority owners from Abu Dhabi, but it is China’s broader relationship with the United Arab Emirates, an OBOR member, that is striking.

In 2014, China struck a major oil and gas deal with Abu Dhabi, the first of its kind, which broke the historic grip of Western oil companies on the Gulf nation. Quid pro quo: with the relationship established it is hardly surprising therefore that when President Xi visited Britain in late 2015, he headed straight for a visit to City (and not to United, which has long been rumoured to be his favourite football club).

This use of football for diplomatic purposes, specifically in relation to mineral trading, is hardly new and is increasingly being used. The likes of Russia’s Gazprom has proved to be highly adept at using a high profile portfolio of football sponsorships to further its interests. But with China gaining access via the OBOR project to multiple new markets allied to its growing focus on football, the mineral, energy and trade-driven diplomacy of international football is likely to intensify.

China-based broker of football club deals, Alexander Jarvis, has noted that, “Football is increasingly influenced by the minerals. I am sure it was a factor in the Chinese investment into City Football Group; venture capital firm Citic Capital, part of the consortium, has huge interests in the energy sector globally, while CEFC China Energy Company – which bought Czech football club Slavia Prague in 2015 – has close ties with local government in the country. We are seeing this type of activity across a range of countries, including Serbia, Russia, Kyrgyzstan, Kazakhstan and Uzbekistan, Iran and India.”

These are all OBOR nations, albeit sometimes with poorly-developed football. Even so, leaders of nations along the new Silk Road will be acutely aware of the political leverage that sport and football can provide, especially in their dealings with China.

The world will inevitably continue to focus on Wanda’s onward march through sport, Suning’s growing interests in football, and Marcello Lippi’s battle to get China to the 2018 World Cup. However, it is arguable that football’s new world order is more potently emerging in the nations through which China’s OBOR passes. Bishkek, capital of Kyrgyzstan, may not spring to mind as being a major influence on the future of football. Yet its mineral wealth and willingness to utilise sport as a means of engaging with China suggests it could be just as big an influence on China and football as La Liga and Serie A.

Source : Policy Forum 

By Christine Chou, The China Post

Yulin, China -- Many municipalities in China are facing the double struggle of curbing coal output and filling the economic void left by closed mines.

But a coal-rich city in the country's northwest is diversifying in attempt to revive its economy — turning to tourism, agriculture and alternative energy.

Located on the northern tip of Shaanxi province, Yulin has become a poster child for the country's attempts to move away from an economic reliance on mineral resources.

The city has been lauded by the national media as a consummate example of economic transformation.

Deputy Mayor Zhang Haifeng said Yulin was aiming to become "one of the most important cities along the Silk Road."

Zhang was referring to the ancient Silk Road trade route, consisting of a string of cities across Central Asia, West Asia, the Middle East and Europe. The route is enjoying a contemporary revival with backing from China's central government.

The new "Silk Road Economic Belt," along with the "Maritime Silk Road" sea route, forms the "One Belt, One Road" initiative started by the China's central government in 2013.

The ambitious plan seeks to adapt the links of the historical Silk Road, and solve the country's domestic overcapacity by improving trade connections with Eurasia.

The history of Yulin comes to the fore when one takes a walk down the streets in the city's downtown, where local snack vendors dot alleys crammed with centuries-old buildings.

A traditional bakery sells hard, dry bread that requires incredible effort to bite into. Our local guide said this durable food had been popular with merchants passing through the city had, as it could last for weeks during the long, dusty journey ahead.

Chinese Kuwait

The discovery of large-scale mineral deposits in the 1980s dramatically changed the face of Yulin.

Zhang said Yulin was known as the "Kuwait of China" given its abundance of gas and coal fields.

The deputy mayor said the city had been "a key area in Shaanxi since ancient times because of its strategic position."

He added that Yulin continued to be an "important city in the nation's 'One Belt, One Road' initiative."

During the city's 11th International Coal and Energy Expo in September, a record-breaking 101 domestic and overseas deals were made with a combined value of 119.7 billion yuan — the highest in history, according to the government.

Local officials seem confident the city will cash in on its cultural capital. With help from the new opportunities provided by central government initiatives, they hope to expand the city into an international hub for the energy and chemical industries.

Turning to Tourism

Yulin's municipal government highlighted tourism and the cultural industries as key development areas.

"We will speed up progress in building up key tourist attractions, improve services offered to foreign visitors and create a unique tourism brand for Yulin," said Zhang.

Head of the tourism bureau Cui Yuan expressed confidence that Yulin's cultural heritage would attract tourists.

As part of these tourism efforts, Yulin was planning to renovate and upgrade its airport and offer flights to more destinations, Cui said.

Biennials in country’s Muslim-majority regions coincide with cultural exchange with Qatar

by LISA MOVIUS

China is increasingly engaging with countries with mainly Muslim populations through cultural exchanges as its government champions the creation of a new, economic “Silk Road”. Two biennials opened this autumn in the country’s far-flung western regions, which are the respective homelands of China’s two largest Muslim minorities, the Turkic Uyghurs and the more assimilated Hui. Meanwhile, the 11th Shanghai Biennale, which is due to open on 11 November (until 12 March 2017), features an unprecedented number of international artists from Muslim countries, even though China’s own Muslim minorities remain marginalised.

The third Xinjiang International Art Biennale was organised by the ministry of culture of the Xinjiang Uyghur Autonomous Region in Urumqi (8-31 October). Featuring folk and popular art, which reflect official preferences, it contrasts starkly with the global contemporary approach of the first Yinchuan Biennale (until 18 December) at the new, private MoCA Yinchuan, in the capital of the Ningxia Hui Autonomous Region.

Urumqi and Yinchuan are stops on China’s ancient Silk Road, the overland trade route that led to the mostly Muslim countries to China’s west. Their biennials coincide with an increase in China’s cultural engagement with neighbouring countries and the Middle East. For example, Doha’s Museum of Islamic Art is currently showing Treasures of China (until 7 January), including terracotta warriors from Xi’an—the start of the Silk Road—as part of the official Qatar-China Year.

The cultural exchange with Qatar is part of China’s massive One Belt, One Road Initiative, championed by president Xi Jinping as a way to counteract slowing domestic growth. The Chinese government aims to develop new markets to China’s west and south.

Official cultural exchanges under One Belt, One Road’s auspices now abound, such as a thematic section of the 18th China Shanghai International Arts Festival (until November 15), featuring projects from Qatar and Egypt. Unofficially, such events may encourage institutions in coastal China to show more work by contemporary artists from Muslim-majority countries. However, there are no indicators that state scrutiny of unofficial shows will relax. Other Gallery Shanghai’s March 2011 group exhibition The Third Eye, which featured works by nine Iranian artists, was closed after the Iranian consulate complained to the Chinese authorities about its content.

Religious and political taboos

In the past two decades artists from across Asia, the Middle East and North Africa have rarely been shown in Beijing, Shanghai and Guangzhou, partly because politics and religion, major themes in contemporary art from these regions, are major taboos in China. Meanwhile, negative stereotypes of the Hui, Uyghurs and foreign Muslims remain common among Han Chinese. “It is impossible to attract publicity and visitors without famous artists’ works in a show. Chinese art museums are still early in their evolution, and well-known Islamic artists are very few,” says MoCA Yinchuan director Liu Wenjin. “I will not use Islamic identity to promote artists­—their background is incidental to whether their art can move the audience.” She blames Chinese audiences’ hesitancy towards art from the Islamic world on sensationalist media reports.

While Chinese institutions and collectors are often uninterested in, or wary of, contemporary art from countries with mainly Muslim populations, the Shanghai Biennale will feature work by artists including Beiruit-based, Iraqi-American Rheim Alkadhi and Indonesia’s Agan Harahap. The show, which is organised by Raqs Media Collective, founded by three New Delhi-based artists, stresses “south-south co-operation”.

By Tony Boyd / Source Financial Review

One way of explaining the amazing surge in commodity prices in the wake of Donald Trump becoming US President-Elect is that there is going to be an infrastructure investment surge on both sides of the Pacific.

The idea is that Trump's commitment to rebuilding America's infrastructure will coincide with an increase in China's policy of investing in infrastructure from China to the Middle East.

Ironically, this confluence of commodity-friendly investment, which would benefit Australia's terms of trade, would be triggered by Trump's isolationist and protectionist trade policies.

"A more domestically-focused US will probably make more room for China to expand its geopolitical and economic interests through initiatives like "One-Belt-One-Road", according to Steven Sun, head of China Equity Strategy at HSBC.

One-Belt-One-Road is a regional infrastructure investment plan involving the investment of billions of dollars in infrastructure in 60 countries.

Other economists agree that a logical Chinese response to the imposition of tariffs on Chinese exports to the US would be to turn inward and step up its stimulatory domestic policies.

"The trade tensions will also put more pressure on domestic macro policy, introducing an easing bias on the fiscal policy," according to economist Haibin Zhu at JPMorgan in Hong Kong.

Commodity prices were on a roll before the Trump wildcard was thrown down this week. That surge in the price of base metals as well as iron ore and coal was attributed to China's fiscal stimulus over the past nine months and its decision to wind back the production of coal.

Following Trump's election, key commodities took off. Copper, which is a bellwether of global industrial production, rose 3.4 per cent on the London Metals Exchange, taking its gains over the past two weeks to 17 per cent.

A participant at the recent LME Week event in London said the bullish mood towards copper was far greater than in previous years. The metal is now trading at a 15-month high despite evidence this week that Chinese imports in October were the lowest since February 2015.

Coking coal prices rose 4 per cent on Wednesday night to a five-year high of $US295 a tonne.

The other commodity sprinting ahead this week is iron ore. It rose 3.9 per cent after Trump's election victory and has now gained 21 per cent in two weeks.

That helps explain the significant increase in the share prices of irone ore stocks, including Rio Tinto, BHP Billiton and Fortescue Metals Group.

There is a common theme evident with these stocks. When analysts plug in the spot prices for iron ore into their models for these companies there is a material upside risk to their earnings forecasts.

Investors have been reluctant to rely on the high spot prices because of caution about what might happen in China. But the optimists have pointed out that China's President, Xi Jinping, has many incentives to continue his stimulatory policies to maintain growth in the Chinese economy ahead of his reappointment by the Chinese Communist Party early next year.

Xi has as much incentive as every Western leader to ensure that the social harmony, which has been a feature of the country's extraordinary growth over the past decade, is maintained. He does not want a populist, extremist upheaval upsetting his plans to appoint a range of chosen colleagues to important party positions next year.

Trump's election holds out the prospect of the world's largest economy competing with China for the mantle as global infrastructure investment leader.

It is telling that the equity futures markets in the US were down substantially when Trump rose to give his victory speech. The sentiment changed and the futures prices reversed dramatically from negative to positive as soon as Trump mentioned infrastructure.

As with most things that Trump has said, his victory speech was light on detail. But the message was clear that America is going to need a lot of concrete and steel.

"We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals," Trump said. "We are going to rebuild our infrastructure, which will become ... second to none and we will put millions of our people to work as we rebuild it."

One of Trump's campaign pledges was to work with lawmakers to introduce legislation to "spur $1 trillion in infrastructure investment" over the course of a decade, according to FTI Consulting.

Trump claims the infrastructure bill would be "revenue neutral" and leverage "public-private partnerships, and private investments through tax incentives"

This law is meant to go through in his first 100 days.

By Tony Boyd / Source Financial Review

MINSK, 10 November (BelTA) – Belarusian Economy Minister Vladimir Zinovsky invited Latvian businesses to become residents of the Chinese-Belarusian industrial park Great Stone as he met with a Latvian delegation led by Economy Minister Arvils Aseradens on 10 November, BelTA has learned. “Belarus is a good investment platform. We are building an industrial park in cooperation with China, and we invite all European companies, not only those of Belarus and China, to join the project. We would like to see Latvian companies in the park. Its residents are given good preferences,” Vladimir Zinovsky noted. He stressed that businesses can enjoy preferences not only in the industrial park Great Stone, but also in a number of free economic zones in Belarus. Vladimir Zinovsky said that the trade between Belarus and Latvia has declined recently. However, the minister expressed confidence that the countries have not yet exhausted their potential and will manage to improve the situation. “We are ready for open and constructive work.

Now it is important to catch up and switch to new forms of cooperation and projects with good economic returns,” the minister emphasized. He noted that Belarus seeks to develop fruitful and effective relations with Latvia and to strengthen the mutually beneficial economic cooperation. In this context, Vladimir Zinovsky said with satisfaction that Belarus' cargoes traditionally account for a considerable share of the total volume of Latvia's rail transportation. Belarus' and Latvia's participation in the large-scale Chinese projects Silk Road Economic Belt and 21st-century Maritime Silk Road will enhance the countries' appeal and intensify their cooperation in logistics.

Arvils Aseradens said that the relations between Belarus and Latvia are fruitful. He said that Latvia is eager to develop close economic cooperation. “There is great potential with respect to the Belarusian economy. I think we can expect the mutual trade to double,” he noted. Besides, the minister said that Latvia would like to cooperate with Belarus within China's One Belt, One Road project. Arvils Aseradens emphasized the importance of the Days of Latvia which are currently underway in Belarus. “It is very good that Belarusians will have a chance to learn about the life in their neighboring country,” Arvils Aseradens said.

Source Belarus News

The ultimate purpose of the Belt and Road Initiative is deep economic integration through the development of global value chains. Importantly, the initiative is supposed to abide by market rules. Either geopolitical considerations were never taken into account or everything in the Vision and Actions document was carefully checked and revised to make it read like a business plan.

even in the milder forms of expanding Chinese soft power. Issued in March 2015 with the clunky title “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road,” the paper offers a vision of greater economic integration between mutually complementary economies. Such integration is meant to promote the “orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets.”

Global Value Chains

Patterns of international specialization and division of labor are particularly relevant in the age of global value chains. Today, very few products are manufactured in a single country. A country’s manufacturing imports are more likely to be intermediate goods—that is, commodities, components, or semifinished products that a country uses to make its own products. These could be final products or new segments in a global network of producers and suppliers. Global value chains can become so complex that imports can also contain returned value added that originated in the importing country. In China, nearly 7 percent of the total value of imported intermediate goods reflects value added that originated in China. For electronic goods, Chinese intermediate imports contain over 12 percent of returned Chinese domestic value added.

The Belt and Road Initiative is the first example of “transnational” industrial policy. “Formerly, all industrial policy was national,” he said. He has a point, as even the European Union, when it created an ambitious transnational framework of rules and institutions, tended to abandon industrial policy on the grounds that such a policy could not be reproduced at a transnational level.

The image of the original Silk Road is particularly misleading in this context, as indicated by the inclusion of the small code words “belt” and “road” in the names of the project’s two components. The land element is called a belt to pinpoint that its ultimate goal is the creation of a densely integrated economic corridor rather than a transportation network linking two points. The maritime road is meant to adapt sea transportation to new patterns of global trade.

Transportation and communications networks are no doubt a precondition for the development of global value chains. But the crucial element is the set of industrial policy decisions by which countries strive to move into new chains or segments in an already-occupied value chain. To avoid the middle-income trap—a situation in which a country becomes stuck with its previous growth model after attaining a certain level of income—and speed up the process of moving into higher-value segments, China wants its industrial policy to be sufficiently coordinated with those of countries that occupy other segments and chains. In return, China can offer cheap financing and its experience of an economic model that has proved very successful in boosting industrialization and urbanization on an unprecedentedly fast timescale.

Take the case of the steel industry. Hit by falling steel prices, the performance of China’s steel industry has been sharply decreasing. The industry generated a sales revenue of 7.2 trillion yuan ($1.1 trillion) in 2015, down 13.9 percent on the previous year, and a total profit of 97.2 billion yuan ($14.3 billion), down 60 percent. Chinese policymakers are aware that some of the industry will have to move abroad, and they have started looking at Central Asia, with its lower production costs, as a possible destination. As governments and the private sector in the region invest in energy development, transportation infrastructure, and residential construction, the demand for steel products in Central Asia is expected to boom in coming years, but Chinese producers have to compete with Russian, Turkish, and Ukrainian steel enterprises that benefit from easier trade regimes. These competitors would lose that advantage if Chinese companies established steel production units in Central Asian countries, which are rich in mineral resources and have low labor costs. In the integrated framework of the Silk Road Economic Belt, new transportation infrastructure could both boost demand for steel and prepare the ground for China to import steel from Central Asia as it moves into higher-value products and value-chain segments.

Chinese companies have built 46 cooperation zones [industrialization zones] in countries along the routes, while China's Ministry of Education has inked over 60 deals with those countries, according to Zhao.

In 2015, nearly half of the international students in China came from countries along the routes, Zhao added. Nearly 400,000 foreign students from 202 countries and regions came to study in China in 2015, data showed.

Meanwhile, China was building more railways, highways and ports along the routes while sealing more MOUs with its neighbors and partners.

SOURCES - Carnegie Endowment, China National Development and Reform Commission, China Daily, EY