The Silk Road Project and Strategic Interests of Russia and China

Interview

The Silk Road project is often considered an example of China’s new foreign policy ambitions. Some observers are even sounding the alarm about potential consequences on Russia’s security and influence around its southern borders. We talked to Mr. Zhao Huasheng about the implications of such a project for the future of Central Asia and Russia-China relations. Zhao Huasheng, professor and director of the Center for Russia and Central Asia Studies, Fudan University, Shanghai

Interview

The Silk Road project is often considered an example of China’s new foreign policy ambitions. Some observers are even sounding the alarm about potential consequences on Russia’s security and influence around its southern borders. We talked to Mr. Zhao Huasheng about the implications of such a project for the future of Central Asia and Russia-China relations. Zhao Huasheng, professor and director of the Center for Russia and Central Asia Studies, Fudan University, Shanghai

What are China’s underlying interests for the New Silk Road Project? Is the country primarily interested in economic benefits or political influence?

The correct name of the project is the Silk Road Economic Belt. I prefer to interpret it as a part of the new layout of China’s diplomacy following the arrival of the new leadership. Obviously, this is mainly an economic project, the major economic purposes of which is to promote the economic development of China’s western provinces.Meanwhile, I also understand it as a project for developing close comprehensive relationships among states in this region (economically, politically, and with regards to humanitarian relations), and not just for some concrete economic or political benefits.

Geographically, the project is relevant to Central Asia, South Asia, West Asia and Eurasia. Surely, as China’s neighbor, Central Asia is of particular importance to the project. But this doesn’t mean that China treats Central Asia as a special region and is carrying out a special policy towards Central Asian region in terms of political principles, although the concrete forms of China’s policy in this region may differ from that in other regions.

The promotion of regional economic cooperation is part of China’s overall policy towards all regions, in particular the surrounding ones. In May 2013, during his visit to Pakistan, Chinese Prime Minister Li Keqiang alongside his Pakistani counterpart confirmed the intention of building a China-Pakistan Economic Corridor. The same month in India, Prime Minister Li alongside his Indian counterpart put forward the idea of creating a China-Bangladesh-India-Myanmar Economic Corridor. In October 2013 in Indonesia, China’s President Xi Jinping suggested the construction of a Silk Road on the Sea with ASEAN countries. Moreover, China has signed 11 free trade zone agreements with 19 countries and regions, and another 7 free trade zone agreements are in process of negotiation with 23 more countries.

So if we look at the Silk Road Economic Belt from a wider perspective, it appears that it is a normal part of China’s overall policy and not something extraordinary in Chinese diplomacy. For now, the Silk Road Economic Belt is more a concept than an action plan with concrete targets and road maps. In general, China will continue to do what it has been doing in the past years with no fundamental changes, but with more energy, creativity, flexibility in operations, and a broader perspective and a more open attitude. If any changes are present, to my knowledge, the new project has stopped sticking to the Central Asia and is being implemented more widely in South Asia, East Asia and Eurasia. In some sense, it also goes beyond the SCO in promoting regional cooperation, though the SCO remains the basic cooperation framework for China in the region.

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Years of China’s economy

Does this ambitious project represent a drawing back of Beijing’s South-Eastern policies?

I wouldn’t say that China’s South-Eastern policy is experiencing a retreat. China’s relations with some Asian counties have been damaged by territorial disputes, particularly with Japan and the Philippines. It’s not in China’s interest to see its relations with its neighbors destabilized, but in both cases the conflicts were not triggered by China. As the largest power in the region, China’s position in the region is quite strong and China is confident of it.

China maintains good relations with most of the Asian states. Both political and economic cooperation with its southeastern neighbors have been developing. Despite the intense political relations between China and Japan, the governments of China, Japan and Korea signed an investment protection agreement in May 2013, and conducted the third round of free trade zone negotiations in November 2013 in Tokyo. At the same time, the first round of negotiations of the Regional Comprehensive Economic Partnership (RCEP) was held in May 2013. China is one of the participants of it.

With advancing the Silk Road Economic Belt and other similar projects in South and West Asia, China enhances its “opening up” to the west, but it doesn’t mean a retreat from the eastern and south-eastern directions. It could make all the directions more balanced in development, and but doesn’t diminish the significance of the other vectors.

Do you believe the Silk Road Project may produce a clash of interests between Russia and China or could it become an area for cooperation?

It’s possible to be an area both of cooperation and competition for China and Russia. The outcome depends on how China and Russia will get along. China’s attitude towards Russia in Central Asia is more than clear. As a strategic partner, China is trying its best to maintain cooperative relations with Russia. This has been demonstrated by the past 20 years. Announcing the Silk Rod Economic Belt, Mr. Xi Jinping said that China is not pursuing dominance over the region and it has no plans for creating a zone of influence; he also called for cooperation with Russia. This is an unambiguous, well-intentioned message to Russia. For China there are no reasons to put forward a project against Russia at the expense of harming bilateral relations, which are highly valued in China. The major driving force behind China’s project is the natural desire for economic cooperation and not to push Russia out. For China, the desirable relationship with Russia in the region is to work together with Russia, or work in parallel in a cooperative atmosphere.

However, China’s project may be seen as a challenge in Russia. It’s not because the project contains anti-Russian intentions, but mainly because of Russia’s psychological feeling toward the Central Asian region, which used to be a part of Soviet Union and which is regarded by Russia as its zone of influence.

Located between China and Russia, Central Asia is a region unavoidable for China and Russia to meet. China’s northwest provinces, primarily Xinjiang, are an important part of Central Asia in geographical terms and in traditional understanding. It takes about 5 hours to fly from Urumqi, the capital of Xinjiang, to Shanghai, but in a little more than one hour one can fly from Urumqi to Almaty. China neighbors three of the five Central Asian states and shares more than three thousand kilometers of borders with Central Asia. Due to this geography, the coexistence of China and Russia in this region is more than natural. As a matter of fact, the economic relations of Xinjiang and Central Asia was very close all the time in past hundreds years, except of a short period of 1960-1980s, when China and Soviet Union almost closed mutual border.

This geography will never change. China and Russia should develop their relationship from a strategic and long-term perspective. A cooperative relationship is the best format to serve the interests of both; exclusive competition will bring no gains and only strategic losses for both countries. For both China and Russia, the basic interest in the region is to have a friendly neighbor, stable region and a close economic partner. China and Russia should join efforts in helping make the region stable, safe and prosperous. This is in both China and Russia’s basic interests.

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Shanghai financial district

Russia is concerned about China’s economic integration plan in Central Asia, worrying that it could become a challenge to the Eurasian Union project. China does not oppose the Eurasian Union project, which is based on historic linkages of Russia and the former Soviet republics. And it’s impossible for China to replace it with its own. In my understanding, the Silk Road Economic Belt, as in its current form,is not an integration project. However, it doesn’t mean China refuses the idea of economic integration Regional economic integration is the natural trend all over the world. It reduces trading costs, and facilitates trade and economic cooperation. This process is driven by economic logic. It’s rational for China to think about it in Central Asia and beyond with the aim of enhancing trade and economic cooperation. China holds negotiations on free trade zone with both developed and developing countriesin Europe and Asia, such as Iceland and Switzerland, Pakistan and Sri Lanka. China did not choose for particular political purpose. Economic integration does not mean the fall of Central Asian states into China’s control or creation of China’s zone of influence. No single country has fallen into China’s control by deepening of economic relationship with China. China’s project is not an alternative to Eurasian Union for Central Asian states as well. It is a popular practice for states to participate in different regional economic projects at the same time. The same will happen in Central Asia. Some countries in this region may be the participants of all three regional projects by China, Russia and US. Success or failure of the Eurasian Union is not related to China’s Silk Road project, but depend on the relations of Russia its neighbouring states. I think, with deepening of bilateral economic relations, even China and Russia will become involved in economic regional processes with each other sometime in the future. If China and Russia can reach an understanding, it would open up the range and opportunities for cooperation. If they fail, they have to work on their own ideas separately.

Finally, I believe, that it is in China and Russia’s fundamental interests to make Central Asia an area of cooperation.

What are the differences in the approaches of Central Asian states to Russia and China? What factors will influence their political decision-making?

All the Central Asian states practice a multi-vector foreign policy; all of them are trying to maintain a relatively balanced relationship with the great powers. However, every individual Central Asian state has its own priorities and peculiarities. As great powers, China and Russia are perceived differently in Central Asia due to different historical, political, economic, social and cultural relations. It’s a complicated question that deserves specific study.

How will Central Asian states react to the implementation of such a policy? Is Chinese investment welcome in the region?

I think politically the Central Asian states will respond positively to the Silk Road Economic Belt because there is no reason to be against a cooperation initiative. Economically, the extent of participation and support of Central Asian states for the project will depend on how the individual projects are economically beneficial to them. China’s investment, as well as investment from other states, is welcome.

Now the economic relations between China and the Central Asian states are so deep that China is becoming one of the most important trading partners, investors and financial sponsors of the region. China’s contribution to the economy of the region is significant. China benefits from this cooperation as well. Among all areas of cooperation, the significance of energy for the Chinese economy stands out, in particular gas imports. In 2012 China’s gas imports totaled 42,5 billion cubic meters, with about 20 billion cubic meters coming from Central Asia. It’s expected that gas imports from Central Asia will significantly increase in near future. As far oil is concerned, oil imported from Kazakhstan has stabilized at about 4% of China’s overall oil imports in recent years. In 2012, China imported 271 million tons of oil, among it 10 million tons provided by Kazakhstan. For Kazakhstan, this accounts for about 16% of its oil exports.

As trading partners, China as a large economy is more significant for Central Asian states than Central Asian states for China. The turnover of China-Central Asia trade constitutes a little more than one percentage point of China’s foreign trade. Kazakhstan and Kyrgyzstan are the top two trading partners for China in the region. In 2012 China-Kazakhstan trade volume reached ﹩25,7 billion, China-Kyrgyzstan --﹩5,1billion; they made up 0.66% and 0.13%, respectively, of China’s total foreign trade volume of ﹩3866,7 billion.

It should be expected that the economic ties between China and Central Asia will continue to develop, and China, with its huge investment possibilities, will have an even more important role to play in the region’s economic development.