How Important Is The Silk Road?

The last few weeks have reminded us of the importance of the Middle East as a central hub of trade and cultural exchange. East-West trade almost exclusively all started with a little thing called the Silk Road. What is it? Why was it important? And what does the future hold? We’ll cover all this and more below. Read on!

What is the Silk Road?

Not to be confused with the banned Bitcoin marketplace of the same name, the original Silk Road has been a network of trade routes connecting the East and West for centuries.

It was established when the Han Dynasty in China officially opened trade with the West in 130 B.C. So yeah, it’s a pretty old road.

Source: NY Times

The routes ran from China in the east to Italy in the west, passing through India, Persia, Arabia and everywhere in between. This network has been a central pillar in the economic, cultural, political, and religious interactions between these regions.

The Han Empire mainly traded silk, but later paper and porcelain were also exported in exchange for precious metals, glassware, woollen articles, and other products from Europe and Egypt.

The total length of the Silk Road was about 9,000 kilometres (5,500 miles).

Is the Silk Road still important?

You bet it is. Well, sort of…

The original Silk Road route has become a popular tourist attraction, with multi-country trips tracing the Silk Road route becoming popular among both Chinese and Westerners. But it’s legacy more than lives on.

In 2013, a modern version of the Silk Road was launched by the Chinese government, it’s called the The Belt and Road Initiative (BRI). The “Road” bit is a direct reference to the Silk Road. The BRI covers the geographical area of the former Silk Road and much more besides.

Source

The BRI links countries in Europe, Asia, and Africa. This New Silk Road focuses on investment for railway, highway and port construction. It’s stated aims are the:

● Development of the Chinese Yuan as a currency of international transactions;

● Development of the infrastructures of Asian countries;

● Strengthening diplomatic relations whilst reducing dependency on the US;

● Creating new markets for Chinese products;

● Exporting surplus industrial capacity;

● Integration of commodity-rich countries more closely into the Chinese economy.

It’s essentially a new global growth engine, connecting and moving Asia, Europe and Africa closer together.

According to estimates, the entire project today affects more than 60% of the world’s population and approximately 35% of the global economy.

Trade along the new Silk Road could soon account for almost 40% of total world trade.

What does the future hold for this route?

As you may have heard, the Middle East, slap-bang in the middle of the original Silk Road and an important part of the newer BRI, has long been a hotbed for tension. This region has faced decades of conflict, largely over the vast amounts of oil that bubble under its surface.

The last 20-years have been relatively calm, following the US-led invasions of Afghanistan and Iraq. The last few years saw some turbulence with the rise and fall of the Islamic State, but it’s been largely stable. Up until the last few weeks, that is…

The US withdrawal from Afghanistan and subsequent resurgence of the Taliban as the dominant force in the country has led to many questions over the future of the county, and this East-West trade network.

Time will tell. Various East-West trading networks have pretty much stood the test of time to date and that surely bodes well for their future.

The New Silk Road most certainly has an important part to play in the future of international trade.

What’s on the trading agenda this week?

A really busy week lies ahead. Here are all of the top events to take note of.

Monday

● USD — Markit Manufacturing PMI Flash (AUG)

Tuesday

● EUR — German GDP Growth Rate YoY Final (Q2)

Wednesday

● EUR — German Ifo Business Climate (AUG)

● USD — Durable Goods Orders MoM (JUL)

Thursday

● EUR — German GfK Consumer Confidence (SEP); ECB Monetary Policy Meeting Accounts

● USD — GDP Growth Rate QoQ 2nd Est (Q2)

Friday

● USD — Core PCE Price Index YoY (JUL); PCE Price Index YoY (JUL); Michigan Consumer Sentiment Final (AUG).

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The Contentworks team

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