Construction of Chinas Silk Road faces Risk of Failure Owing to Economic Turbulence

Published By : 23 Sep 2015 | Published By : QYRESEARCH

The Silk Road Initiative is considered to be the most significant project for Chinese President Xi Jinping. The idea of One Belt One Road has been promoted at every diplomatic forum and at every state visit. Hoping to expand its political and economic influence in Eurasia, Beijing wished to develop a series of infrastructure networks centered on China.

However, the time is long gone when the country could afford and manage to make investments that were economically unprofitable based solely on political motives. More than US$ 900 billion was initially intended by Beijing to be spent on infrastructure expansion in the Eurasia region. The money, however, is currently needed to steady its nervous financial markets and its stagnating economy. In August, the currency reserves of China decreased severely.

Several infrastructure projects have been brought to a complete standstill owing to the financial difficulties in the country. The Power of Siberia gas pipeline, for instance, is presently in the danger of failing. This pipeline was at the core of an agreement signed by China and Russia last May. Apart from this, the release of funds meant for the Altai gas pipeline construction that will connect China and western Siberia has also been delayed without further notice. 

The One Belt One Road project, at a very basic level, represents a step backwards in terms of economy. The problem here is that instead of concentrating on tackling domestic demand, Beijing is contemplating on new export markets in regions such as Pakistan that are currently quite unstable. The overcapacity of enterprises owned by the Chinese State are not tackled but are just exported to other regions. The leadership in this way ends up adversely impacting its own ability to get over the structure emergency that faces the growth model in China

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