Key stops on China's new Silk Road

On Sunday, Beijing will host a two-day summit on the Belt and Road Initiative, an ambitious project that incorporates an overland network of highways and railroads as well as a maritime route. In the second instalment of a series that looks at the mega project spanning China, Central Asia, South-east Asia, South Asia, Africa, the Middle East and Europe, The Straits Times explores Fujian, a designated core area for the 21st Century Maritime Silk Road, and Horgos, the special economic development zone on China's border with Kazakhstan.

Horgos hub on China-Kazakhstan border: Not smooth as silk yet

Under the shadows of the snow- capped Tianshan mountains, Chinese and Kazakhs cross over into each other's territory with just a flash of their passports in Horgos, a 5.3 sq km special economic zone straddling China and Kazakhstan.

Conceived in 2006 and operational in 2011, the zone came under the One Belt, One Road initiative after the latter was proposed in 2013.

The zone is meant to be a key node for rail and vehicular trade between China and Eurasia going on to Europe; and a catalyst for a larger 70 sq km area to house high-tech industry, financial services and biomedical firms. But five years on, Horgos, or Khorgos, is still a long way from these lofty goals.

Rather than high-volume, high- margin trade powered by rail cars or prime movers, most of Horgos' daily 12,000 visitors are there to cash in on tax exemptions or discounts. Chinese visitors especially would cart as many cartons of canned food, chocolates or soft drinks as they can out of the Chinese side of the zone to save on consumption tax of 13 to 17 per cent.

One Chinese visitor, a 31-year-old who wanted to be known as Mr Zhang, said he makes 20 yuan (S$4) per trip and he sells his food purchases to a nearby minimart. "A trip can take 30 minutes, or more than an hour if the Customs queues are long," he said. "It's a tax-free zone, but there's still passport control."

 

For now, the difference between the Kazakh and Chinese sides of Horgos could not be more stark.

 

Two double-storey duty-free centres on the Kazakh side are dwarfed by the tall buildings on China's side, where the din of machines is a constant. Down the road, the finishing touches are

 

being put on a border crossing that can handle 10 times the road traffic of the existing one when it is completed later this year.

Unlike deep-pocketed China, which has poured 11.7 billion yuan into building mega malls, commercial towers and even a cultural centre on its side of the zone, Kazakhstan, a country of 18 million people, has struggled to fund infrastructure projects, especially after a plunge in oil prices in 2014 hit its natural resource-reliant economy.

While Kazakhstan's President Nursultan Nazarbayev has thrown his weight behind the project, analysts said things may be slow to get moving, given the long shadow cast by the region's top dog, Russia.

Kazakhstan and Russia, along with Armenia, Belarus and Kyrgyzstan, are already part of a Customs union. Fear that Chinese goods will flood into the union through Horgos means only €1,500 (S$2,300) worth of duty-free goods can be brought into Kazakhstan each day per visitor. China imposes a cap of 8,000 yuan per person a day.

Dr Farkhod Tolipov, director of Knowledge Caravan, an institute which studies geopolitics in Central Asia, said: "The opening and unlocking of Central Asia appears to be a more complicated and protracted process than expected, in which the 'Modern Silk Road' needs to balance multiple national interests."

For Horgos to fulfil its promise, the Chinese need to change their mindsets, said experts.

Beijing has deployed moves from a familiar playbook to try and spur economic growth: capital and infrastructure investment, and preferential policies to try to make Horgos a more attractive offshore yuan settlement centre than even Shenzhen or Shanghai.

But it needs to look at how it can help Central Asian countries build up their infrastructure, said Professor Yang Yiyong, director of the Macroeconomics Institute at the National Development and Reform Commission, China's economic planning authority. "We should be taking a leaf from Singapore's book, setting up cooperation offices in each of the five Central Asian countries," he said at a Belt and Road forum.

Dr Tolipov said China should help Eurasia attract third-party investment. "By using the Silk Road Economic Belt idea, these states can advertise their own territories, resources, economic potential, reliability, perspectives and even history to draw outside investors."

Fujian gears up  to boost trade links with S-E Asia

Call it the frozen seafood express delivery.

Previously, seafood imports from South-east Asia, such as ribbon fish, squid and pomfret, would be stuck for days at Mawei Port in Fuzhou before being cleared by Customs and sent to different corners of China.

Now, one day may be all it takes for the seafood to go from port to dining table, with the setting up of a 24-hour inspection station inside a wholesale market near the port in 2013 speeding up Customs clearance by leaps and bounds.

READ MORE HERE  

Quanzhou remains key to maritime Silk Road 

Any talk of the revival of the ancient maritime Silk Road will not be complete without a mention of Quanzhou city.

As one of the key starting points of the sea route, through which China exported its ceramics, silk and tea, Quanzhou was said to be the largest port in the east from the 10th century to 14th century.

Also known as Zaiton among Arab traders in the old days, based on citong, the Chinese name for the coral trees that used to line the streets, the city has many remnants of Muslim, Christian, Hindu, Buddhist and Taoist religious sites from that period. The local government has applied for 16 such sites to be added to the Unesco's list of World Heritage Sites next year.

READ MORE HERE  

READ PART 1 HERE: CHINA MAKES TRACKS ON MODERN SILK ROAD

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A version of this article appeared in the print edition of The Straits Times on May 12, 2017, with the headline 'Not smooth as silk yet in border hub'. Print Edition | Subscribe