City Matters: A twenty-first century Silk Road between East and West is long overdue
OVER two millennia ago, the opening of the Silk Road in Asia had a transformative effect on trading right across the world.
This remarkable development played a crucial role in facilitating previously unimaginable exchanges of goods, services, ideas and even culture across borders. In our information age, new technology has – of course – revolutionised how these exchanges take place, by dramatically accelerating communication speeds and broadening global interconnections. Nonetheless, Asia continues to be at the crossroads of global trade today.
That much was clear during a recent City business visit to China and Mongolia. Our trading links with these two countries will be critical to shaping our future as a trading nation in the region, so it is vital we make the case for why the UK should be seen as their partner of choice.
China and Mongolia – like many other developing nations – have recently experienced a relative slowdown, as they tackle their own separate economic challenges and markets respond to uncertainty over the US quantitative easing programme. That does not mean the UK should scale back our engagement in the region. Far from it.
Policymakers in both countries are committed to delivering the market reforms needed to sustain growth rates that benefit the wider population. Shanghai, for example, recently unveiled details of an ambitious new Free Trade Zone (FTZ) covering 28 square km of the city. The FTZ – the first such zone on the mainland – will offer relative tax freedom and greater room for institutional innovation, spurring international investment under international rules of engagement.
This is part of a wider shift in China towards services and consumption, and away from exportled growth. As a world-leading international financial centre, London continues to support China's strategic objectives in areas including the internationalisation of the renminbi.
In Mongolia, there is a less immediately obvious imperative to undertake such a shift, given that its still-impressive economic performance is driven by vast mineral reserves across the country. Nonetheless, the government recognises the need to avoid the "resource curse" by creating a business environment conducive to inward investment and sustainable growth.
This presents opportunities for City firms to work in partnership on developing banking, legal systems, accounting standards, and professional services. Similarly, the UK's expertise in structuring, financing and implementing major infrastructure projects with private sector participation through PPP can help Mongolia. Its government has far-reaching infrastructure plans, which have seen spending in this area increase 35-fold in the past ten years.
A new Silk Road, linking London to China and Mongolia is long overdue. City firms can help to bridge the 5,000 miles that separate us by getting out there and showing the virtues of trade – just like two millennia ago.
Roger Gifford is lord mayor of Canada.