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ShareIn ancient times, caravans laden with silk, perfumes, spices and precious stones traversed on one of the world's arterial trade routes: the Silk Road, which linked China, through Persia, to the Mediterranean. At its best, the Silk Road stretched over 7,000 km, and from all accounts it was the trade along this route, conducted by thousands of merchants, that accounted for the rise of Chinese, Indian, Persian and Roman civilisations. Today, the simultaneous rise of China and the Arab world is inspiring a recharting of a New Silk Road, with profound implications for the West and the rest of the world, says RBS economist Ben Simpfendorfer.
A fluent speaker of Chinese and Arabic, the author of The New Silk Road: How a Rising Arab World is Turning Away from the West and Rediscovering China tells DNAVenkatesan Vembu of the significance of this emerging strategic relationship. Excerpts from an interview:
What are the economic and political forces shaping the emergence of the New Silk Road linking China and the Arab world?
There is a historical gravity to these commercial relations. Unlike the Brics thesis (which groups four disparate economies: Brazil, Russia, India and China), these are economies that have strong historical commercial relations, and a strong historical memory of those relations.
Second, this is a part of the world that's growing robustly. And they are to some extent natural partners insofar as oil goes one way (from the Arab world to China) and consumer goods go the other way.
Third, and this is crucial, is that given the events of the past 10 years, the shape of global trade has shifted for two reasons. One is that there's been a growth of export factories in this part of the world; and second, because of global security worries --whether it's September 11 or the Iraq war -- it's increasingly difficult for traders in emerging countries to obtain visas to developed countries. The flow of people between developing countries is growing much faster than between developing and developed countries. In other words, the East-East flow of people is faster than the East-West flow. China has become the principal sourcing destination for importers all over the world.
Likewise, there are Chinatowns all over the world. So what's special about the China-Arab links?
True, the rapid growth of China's export to the Middle East is not exceptional. But there are some things that make it different. One, there's an Islamic connection insofar as most of the traders are Muslim and they've reconnected with the Muslim population in China. The Muslim population in China serves two purposes: they work as translators, and because of their presence, there are mosques and halal restaurants across China. If you go to the Canton Trade Fair in Guangzhou in October, there's a separate kitchen serving halal food for Muslim participants. That wouldn't have been the case if there weren't already a large Muslim population in China.
You make the point that Arab-China trade growth has been facilitated not by governments but by individuals. Why is that significant?
Consider exports from China to the US and exports from China to the Middle East. When it comes to exports to the US, it's big companies like Wal-Mart that are responsible for that; they will just have a few purchasing agents in China. It's not a very intimate relationship.Whereas exports from China to the Middle East are driven by thousands of individual traders. It is more organic -- and stronger.
When trade and commercial relationship are strengthened sufficiently, will it lead to a strategic relationship between China and the Arab world?
I think we will. There's a temptation to say the strategic relationship is already there, simply because of the oil link. But I'd disagree with that. I think it's in its infancy: while there are individual traders on both sides who get it, at the government level there are still some obstacles -- mainly cultural obstacles. I don't think China and Saudi Arabia are natural partners: they both still see the US as their Number 1 partner. They can recognise the logic for closer cooperation between them, but there's just not a lot of momentum.
You say this is part of an ongoing global rebalancing, and that a new centre of gravity is emerging. What does that mean?
The East's share of the global economyand by East I mean everything from North Asia to North Africa -- has risen from round about 20 to almost 30 percentage points in the last few decades. Visibly there is a change. It's also evident in increasing trade within the region -- or intra-regional trade as a share of total trade; one in every two goods shipped from this region stays in this region.
Increasingly also the flow of ideas within the region is strong. In particular, Arab countries are looking to China as a growth model. They know China's growth model was built on reforms proposed by the IMF but they feel that China has practical experience whereas the IMF has only theoretical experience. So they'd rather go to Beijing to learn their craft rather than to Washington.
Does this New Silk Road connection upset any other country's interest? Does the West need to worry about this emerging relationship? Is it a zero-sum game?
I don't think it's a zero sum game, but I do think the rules of the global economic and political system will change. And the West will have to adapt to the new reality. It's only a zero-sum game if you believe or hope that the status quo will remain unchanged.
