View Full Version : China's Silk Road ambitions delayed by financial crisis

21-07-09, 05:31
China's Silk Road ambitions delayed by financial crisis
China's ambition to restore the old Silk Road as a trade route fit for the modern era of globalisation has been halted by the financial crisis and unrest in the western region of Xinjiang.


By Richard Spencer in Horgos
Published: 3:51PM BST 19 Jul 2009

From far-flung trading outposts to bazaars in millennia-old Central Asian cities, Chinese shopkeepers are heading home, leaving behind their unsold goods.

Towns are filling instead with unemployed former migrant workers, whose jobs on building sites in Russia have disappeared. The financial crisis is largely the cause. But traders in China's Central Asian borderlands, which lie in Xinjiang, also blame the violent clashes between the province's Muslim Uighur population and local Han Chinese.

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"It became unstable and the Chinese stopped coming," said Janar Janabul, a trader in Horgos, on China's border with Kazakhstan.

"Things were great three years ago. But beginning from last year things got worse and worse, and now I'm losing money. If things go on like this, I'm not sure I can survive."

The revival of the Silk Road, the ancient trading route which brought Chinese textiles, paper and porcelain to Europe via cities like Samarkand and Bukhara, was a natural result of Central Asia's former Soviet republics becoming independent states and opening up to the world from 1991 onwards.

China also hoped to expand its influence westwards and secure some of the oil and natural gas reserves that lie along the Silk Road.

An upgraded road linking Shanghai with Central Asia, crossing mountains and deserts to reach Horgos in the far west of the country, was completed in 2004. Gas and oil pipelines were constructed, and a new railway is not far behind.

Official say that President Hu Jintao drew a circle around Horgos and said this would be his Shenzhen – the special economic zone next to Hong Kong created by Deng Xiaoping, the former paramount leader, as a hot spot for growth and investment.

By 2006, trade through Horgos had more than doubled in four years, and the rise in 2007 and early 2008 was faster still.

But since the onset of the global credit crunch and the outbreak of violence in Xinjiang, there has been a swift reversal.

The signs still say "Horgos – Shenzhen of the West", but straddling the border itself is an empty palace of steel and glass. Beijing has been unable to find any major investors for this new economic zone.

To the south-west, Kyrgyzstan, which borders China, Kazakhstan and other Central Asian states, faces a similar situation. Shopkeepers would travel hundreds of miles to stock up at the giant bazaar at Osh, a Silk Road city hosting the largest wholesale market in Central Asia.

Local suppliers imported goods from Dubai, while the Chinese brought theirs from home. It was a textbook case of globalisation delivering growth in a traditional trading centre.

Today, however, Osh is enduring a downward spiral of falling trade, lost jobs and ethnic tensions.

President Kurmanbek Bakiyev of Kyrgyzstan has tried to protect local businesses by doubling the licence fees for their Chinese competitors. His counterpart in neighbouring Uzbekistan, President Islam Karimov, closed his border with Kyrgyzstan to stop the flow of imports. "Business is not good," said Nurmanbet Yasun, an Uighur from Xinjiang who sells socks in an otherwise empty lane in the Chinese section of the market.

"Last year I made a profit of £4,500. This year I'll be lucky to make half that. Most of the Chinese have left because of the higher licences and fewer buyers."

The economic travails bring fears of political turmoil, with unemployed young men easy prey for radical Islamist groups active in the region.

Pakistan and Afghanistan are not far away. Uzbek identity cards were found on the bodies of some Taliban fighters killed in the Swat valley in Pakistan's North West Frontier Province.

That fact may drive Central Asian nations further into the arms of Russia and China, according to Adil Kaukenov, a Kazakh political scientist. Their governments have increasingly turned to Russia for security and China for financial support.

"A crisis is just a crisis, but in the long term we need China," he said. "After all, we can't afford to buy Italian shoes – we have to buy Chinese ones."