What Next for The New Silk Road? 10 Years On

It was 10 years ago that I published “The New Silk Road”, exploring China’s growing commercial ties with the Middle East. Today, China and the Middle East have become inseparable commercial partners and China's Belt & Road Initiative a reality. How fast events have moved in just a decade.

I recall my conversations with some inspiring Chinese and Arab entrepreneurs in the early 2000s. It was these conversations that pushed me to dig deeper into the subject. And I soon discovered a pattern of activity across the region, all pointing to the emergence of a modern Silk Road built on a solid foundation of powerful market forces.

But what do those early lessons say about the next ten years?

1. Turbocharged Infrastructure

China’s ability to build infrastructure captured the Middle East’s attention in the 2000s. I recall at the time an Egyptian business man explaining how crowds had formed outside the Chinese Embassy just to watch a Chinese construction team work day and night to expand the embassy building.

Today, most Silk Road countries are building infrastructure at an accelerated pace. And while it’s popular to attribute this to China’s Belt & Road Initiative (BRI), our extensive geospatial analytics shows that the BRI only accounts for a small share of the region’s infrastructure projects underway.

We are witnessing transformative growth in the infrastructure space; the challenge will be broadening and financing the region's ambitions.

2. The Rise of Silk Road Multinationals

Few multinationals chased cross-regional business opportunities 10 years ago: the Asian headquarters focused on Asia; the Middle East headquarters focused on the Middle East; and, it was rare for the two regions to speak with other, let alone identify common opportunities.

But that’s all changing. Global banks are now racing to capture capital flows between Asia and the Middle East. Global industrial firms are following their Chinese clients into the Middle East. Today, picking up a phone in Hong Kong to chat with a colleague in Dubai is commonplace.

This type of joined-up thinking is critical as the Silk Road’s share of the global economy continues to grow. But it’s not easy to break down geographic barriers in a corporate structure. For every firm that builds a true cross-regional strategy, there are five that fail to get traction.

3. The US-China Dispute is a Game Changer

China is the Silk Road’s commercial giant and the Middle East’s largest trading partner. Ten years ago, it was hard to imagine how the rest of the region would compete with China’s costs and scale. But costs are rising and the US-China trade dispute is a game changer.

Global buyers are already looking at options to source from factories in Southeast Asia and South Asia. Chinese manufacturers are similarly looking to invest in those regions. A growing share of these products will end up in Middle East and other Silk Road markets.

Sure, China will remain the region’s largest exporter. But the global supply chain is changing and the region’s trade networks will start to grow in complexity.

4. The New Silk Road Has Complexities

It’s hard to overlook the risks of political stability. Ten years ago, I focused my initial work on Syria. The Chinese media wrote of Syria as a key commercial hub for the region. The Adra Free Zone outside Damascus was a hub of activity shipping construction materials into Iraq and Lebanon.

Today, my many Syrian friends are scattered around the world living in Sudan, Turkey, and Italy, to name just a few places. It is heart breaking to watch. To their credit, many have found new ways to reinvent their business opportunities, tapping into today’s digitally connected world.

Syria is both a tragic and extreme example. And yet, the world has entered a period of political uncertainty. The speed at which events changed in the Middle East is a reminder that the rise of a New Silk Road isn’t a straight-line trajectory. There will be many bumps on the road ahead.

5. A Digital Silk Road: The Next 10 Years

I’ve met countless entrepreneurs and traders over the region in the past 10 years. Not just in the Middle East, but across Asia and Africa. Their drive, passion, and creativity are an inspiration, especially given the challenges of running businesses in the region.

The single most important lesson I took away from writing 'The New Silk Road' was how important individuals are to creation of a new Silk Road. They are more often driving change, whereas governments are simply introducing policy to capture their drive.

My view hasn’t changed. If anything, I am more convinced. A global digital revolution has empowered those same entrepreneurs and traders. And China has led the way, from Alipay to Huawei. It is this digital Silk Road that will shape the next 10 years.