South Asia, China, India and Silk Route

Adapted from Xinhua

Almost seven centuries after the historic southern Silk Route fell into disuse, China and South Asian countries hope to revive the ancient route into a robust economic corridor for trade and investment.

There was a time when the Chinese and South Asian traders crossed the Himalayas to exchange commodities such as silk, tea, ironware, jewelry and horses along the southern Silk Road from southwest China’s Yunnan to Myanmar, India, Pakistan and Afghanistan. The route used to be an important link for trade and cultural exchanges between China and South Asia. Unfortunately, it faded into history with the colonisation of theses countries by western powers and increasing use of maritime trade 15th century onwards.

Achieving the potential

However with the Asian juggernaut back to take its rightful place and with increasing trade and ties in the region, the ancient trade route is gradually regaining at least some of its former prominence.

There has been a realisation after all the internal and mutual conflicts inside and among these countries about the commonality of their development goals and complementary economies. China has been really successful in cashing on the opportunity. Trade between China and South Asian countries has grown robustly in recent years. Trade volume between both sides jumped to more than 80 billion U.S. dollars in 2010, up from 26 billion U.S. dollars in 2005. And there is still an overwhelming agreement that the it is far behind the region’s potential.

Yunnan Forum

This Sunday, 500 officials and business leaders from China and eight South Asian countries gathered at the 6th China-South Asia Business Forum in the city of Kunming, capital of Yunnan Province, to discuss the promotion of trade and investment in the region. The cooperative memorandum after the forum urged all involved parties to create trade and investment policies that will encourage economic globalization and regional cooperation. It also called for efforts to remove trade and investment barriers.

To help the economic corridor initiative, Yunnan announced the creation of a “bridgehead strategy” in 2009, aiming to build the province into an economic gateway for South Asia and Southeast Asia. China plans to accelerate the construction of infrastructure and logistical networks between the province and Southeast Asia, South Asia and coastal regions along the Indian Ocean.

Increasing Connectivity

New roads, railways and flight paths are already crisscrossing the region facilitating trade and investment. Yunnan has 12 civil airports with 31 international flights to 19 countries. Road networks in the region are rapidly expanding as well. Reconstruction is under way for a 312-km stretch of the Stilwell Road, which connects northeast India with Yunnan through northern Myanmar.

The reopening of the historic road, a former World War II supply route, could cut costs for transportation between India and China by 30 percent and provide a boost to Sino-Indian overland trade.

Progress is being made on the construction of a trans-Asian railway network, which will cover 114,000 km and pass through 28 countries after being completed. Construction for a 530-km section of railway that will connect Yunnan with Laos is currently under way.

Despite these efforts, infrastructure problems are still a major obstacle for the creation of a new economic corridor.

A lack of cross-border roads forces most Chinese exporters to send commodities to India and other south Asian countries via the Strait of Malacca, which adds 5,000 km of distance for Chinese exporters.

Chinese Trade Surplus

South Asian countries including India have expressed concern about China’s massive trade surplus. India is particularly worried about its expanding trade deficit with China.

China has attached great importance to trade imbalance issues and has assured to take all possible measures to improve the situation.