China's mega Silk Road project hits road blocks

Beijing, May 8: Sharp depreciation of yuan coupled with neighbours' suspicions are "holding back" China from the full rollout of its mega Silk Road project, prompting the country's think tanks to term the ambitious initiative as a "high risk project".

The depreciation of yuan late last year raised the cost of currency settlement for Chinese firms conducting overseas businesses, Chu Yin, an associate professor at the University of International Relations here said.

"The use of the yuan as a settlement currency overseas is a problem as the government is very cautious to take bold steps out of fear of shorting the yuan in the offshore market," Chu was quoted as saying by Hong Kong-based 'South China Morning Post'.

The depreciation almost amounting to four per cent helped Chinese exports to post better numbers but depreciated yuan denominated overseas investments. "Moves such as draining offshore yuan are a retreat of the currency's global push.

Companies are facing a complicated process in currency settlement along with its very limited use in the region [of Southeast Asia]," Chu said.

"'One Belt, One Road' (official name of Silk Road) is a high-risk project. We are bound to see some ill-conceived projects in the future, but it is more important to see how many are successful rather than how many fail," he said.

The 'One Belt, One Road' push also needed to maintain "a low profile" to counter suspicion among neighbouring countries, Chu said.

The Silk Road plan initiated by Chinese President Xi Jinping involved a maze of roads including the revival of ancient Silk Road connecting China and Europe through Central Asia, Bangladesh, China, India, Myanmar (BCIM), 21st Maritime Silk Road (MSR) and the USD 46 billion China, Pakistan Economic Corridor (CEPC) through the Pakistan occupied Kashmir (PoK).

China has set up USD 40 billion Silk Road Fund to roll out the initiative. India for its part backed only BCIM and declined to endorse the MSR over its concerns of Chinese domination in Indian Ocean and protested over CEPC as it goes through the PoK.

Chinese enterprises signed nearly 4,000 project contracts across 60 countries – with a cumulative value of USD 92.6 billion – last year. The figure is equivalent to 44 per cent of China's total overseas project contracts.

PTI