Leiden Law Blog

China’s New Silk Road Strategy: A Challenge to The Multilateral Trading System?

Posted on by Richard F. Jiang in Public Law
China’s New Silk Road Strategy: A Challenge to The Multilateral Trading System?

The concept of China’s New Silk Road originated in a speech made by Chinese President, Xi Jinping, in September 2013. The name of this strategy refers to the trade route which existed from the seventh till the tenth centuries, connecting China to Europe. In China’s New Silk Road strategy, there is one land-based route and one maritime route. The two routes are commonly referred to as “one belt, one road” in China’s official documents. China aims to increase outbound investments in infrastructure in the areas related to these two routes, which may further facilitate global trading.

How will such a big plan be implemented? According to an official from the Ministry of Commerce, China is going to negotiate free trade agreements with 65 countries which are related to the “one belt, one road”.  Until now China has signed 12 free trade agreements (Singapore, Pakistan, Chile, Peru,  Costa Rica, Iceland, Switzerland, ASAN, CEPA, and ECFA) and a further 8 are under negotiation (Japan, Korea, Australia, Sri Lanka, Norway, RCEP, ASAN and GCC).

Why is China so interested in negotiating more free trade agreements? The New Silk Road strategy, which aims to solve the problem of excess capacity, addresses many new issues such as  investment in infrastructure, internationalisation of the RMB, and energy security. When compared to the New Silk Road strategy, the current multilateral trading system is not likely to help China to achieve its objectives.

Does this mean that China has changed its focus from a multilateral trading system to a regional trading system? At least according to recent official documents, China still has quite high expectation of the multilateral trading system. For example, besides the plans for free trade agreements as mentioned above, China also emphasised the importance of applying WTO law, such as the Trade Facilitation Agreement and the Agreement on Government Procurement, to support its New Silk Road strategy.

In short, China’s New Silk Road strategy should not be considered as a rival for the multilateral trading system. In fact, one of the important objectives of this strategy is to facilitate global trade. However, due to the slow progress of the Doha round, China has to negotiate more free trade agreements in order to support its New Silk Road strategy. As pointed out by an official from the Ministry of Commerce, many issues covered by free trade agreements could have been solved at multilateral level. However as the current multilateral trading system does not offer enough support to China’s new strategy, China has to find it elsewhere.

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