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China’s New Maritime Silk Road: Implications and Opportunities for Southeast Asia

By Institute of South East Asian Studies

21 April 2015

EXECUTIVE SUMMARY • In 2013, Chinese President Xi Jinping unveiled plans for two massive trade and infrastructure networks connecting East Asia with Europe: the New Silk Road and the 21st Century Maritime Silk Road (“one belt one road”). The plans aim to reinvigorate the ancient Silk Roads with a modern network of high-speed rail, motorways, pipelines and ports stretching across the region. • The idea of the New Silk Road and the New Maritime Silk Road was raised because China’s domestic economy is experiencing structural changes that reflect a “new normal” of slower but better quality growth. • More importantly, it signals a shift in China’s strategic thinking and foreign policy towards prioritizing the relationship with neighbouring countries. Hence, it has many implications for Southeast Asian countries. • China’s extension of the New Silk Road diplomacy is driven by both economic and political considerations. It is eager to participate in the construction of ports and other related facilities in Southeast Asia and hopes that outward infrastructure investment will help boost production capacity in its iron, steel, aluminum and cement industries for export purposes. • China sees a huge potential in upgrading infrastructure in Southeast Asian countries and is hence supportive of Chinese companies’ participation in such projects. The competition among Chinese provinces for much of this business is likely to launch a new round of investment projects. Some of China’s local governments have 15-00925 01 Trends_2015-3.indd 7 4/6/15 11:20 AM been lobbying and organizing activities for preferential policies and financial support from the central government since the Maritime Silk Road initiatives were announced. • Beijing’s new Maritime Silk Road initiative poses an attractive vision of countries working together in pursuit of mutually beneficial cooperation. This initiative appears all the more seductive when it fits with the Master Plan on ASEAN Connectivity and President Jokowi’s vision of maritime power. Nevertheless, there are a number of challenges that China will have to deal with. • Indonesia is the largest country in Southeast Asia and shares many common interests and visions with China in the context of the New Maritime Silk Road initiative. The two countries can strengthen cooperation on transport infrastructure construction as well as on security. • ASEAN countries badly need more infrastructure investment and perceive that multilateral and private sector organizations are not acting fast enough to meet their needs. However, while China has tried to reassure its neighbours that its rapid rise is accompanied by peaceful intentions, there is no guarantee that this will be the case in the long term. There exists a deep-rooted fear among Southeast Asian countries that China has plans that go beyond building roads, laying railways, upgrading ports and boosting trade.

The full report please see here.