Marketplace Middle East - Blog
The New Silk Route
Beijing, November 8, 2007

My inbound overnight flight from Kuala Lumpur had me landing into Beijing at 0630. From one economy growing at a very respectable 5.5 percent to another growing at 11.5 percent, I could feel the energy of that expansion once you go through the airport exits.

In a jet-lagged haze you are subject to a rush of western style marketing by Citigroup, Starbucks and not to be outdone by China Mobile with the long arm of basketball giant/product endorser Yao Ming offering easy telephone connections. The other advertisement that catches my eye is CNPL, the China Post company which handles everything from simple post to giant container shipments into and outside this vast market of more than a billion people. CNPL is one player on what I like to call “The New Silk Route”.

The Silk Route conjures up romantic images of the past and historic trade links from the Levant countries to China. In 2007, we are witnessing a new era in trade and investment between the Middle East and China, the Gulf and Southeast Asia, China and Central Asia. While the languages and religions in many cases serve as barriers, they share a common DNA for business.

This was abundantly clear at the 11th annual Business Week CEO Forum in Beijing that I chaired. Fifteen percent of the 600 delegates attending were from the Middle East. They were led by some pretty sizable hitters such as Prince Turki Al-Faisal of Saudi Arabia, David Jackson of Istithmar, Sheikh Mohammed Al Khalifa of the Economic Development Board of Bahrain, Robert Johnson of Dubai Aerospace and Yousuf Alireza of Xenel Industries. (Read and watch the interview with Victor Chu, CEO of Chinese investment firm First Eastern Investment Group.)

Prince Turki provided an eloquent historical brief of the Silk Route which was vibrant from Baghdad to Beijing through World War II. The route was dormant for 60 years thereafter, but has come back to life looking like a superhighway.

Trade between the Middle East and China has surged ten-fold in the past five years and now tops $50 billion dollars. Foreign Direct Investment (FDI) is going in many different directions. Bahraini banks have opened up operations in China. Saudi Arabia is establishing refineries. Chinese factories are scattered throughout the Middle East. We visited one in Jordan for our CNN special from Beijing, a sprawling operation by Haier the white goods manufacturer.

But the Silk Route will likely cover much more territory in the 21st Century. In my view it is a giant arc which starts in North Africa loops through the GCC, into South and Central Asia, up to China and bends down into Southeast Asia. The recent investment by a Gulf consortium into a Malaysian special economic zone two months ago underscores my point. And don’t overlook the countries in between. Chinese Premier Wen Jiabao was in Turkmenistan this week vowing closer ties. This is energy diplomacy at its finest under the banner of East-East trade.

There a couple of subtle but important sub-plots in this re-construction effort. With a third of the world’s population on this Silk Route, it will be an important driver of global economic growth in the next quarter century. A second, and I believe very important, theme is the economic tide rising as a result of China and India lifting the boat of prosperity for different countries on the old Silk Route overlooked in the Soviet era. Premier Wen visited Uzbekistan as well this week, preceded by a deal signed before between China and Kazakhstan for a pipeline to deliver energy.

The final observation on this journey is the power of eager youth. After seeing their parents struggling for opportunity, they are eager to learn, eager to travel West and very likely benefit from the re-creation of something that is just beginning to re-appear on the world map, the Silk Route.
Excellent article, JOhn!

Beeing involved in Gulf Business and highly interested in global politics and economy I will continue reading and recommending your work.

Best, still from Berlin,

John Defterios’ blog accompanies the weekly business program, Marketplace Middle East (MME) that is dedicated to the latest financial news from the Middle East. As MME anchor, John Defterios talks to the people in the know, finding out their opinions on the big business moves in the region, he provides his views via this weekly blog. We hope you will join the discussion around the issues raised.
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