The Digital Silk Road, part II-Dialing Down the Hyperbole

My last blog supplied a basic overview of China’s Digital Silk Road (DSR) initiative, part of its larger Belt and Road Initiative (BRI). This blog represents a first cut at detailing the DSR. Unfortunately, as with the BRI, it is quite challenging to do so well. Reasons include the non-existence of a public, official list of DSR projects, the misclassification of technology-related foreign direct investment (FDI) in areas such as smartphone manufacturing and semiconductor packing and testing operations as DSR-space FDI even though they have nothing to do with connectivity, and the unwillingness of participant countries to disclose the terms of their contracting deals with China.

Drawing upon the well-respected, but still limited, American Enterprise Institute (AEI) “China Global Investment Tracker” (CGIT) and excluding, mildly aggressively, technology-related FDI and contracting that does not have a clear link to connectivity, we find that total DSR COFDI appears to run USD $17 billion. Alibaba, GoerTek, and Genimous Investment are China’s top three investors in the DSR-space after 2015; the United States (US), Russia, and Vietnam are the top three destinations for non-telecommunications related Chinese DSR-space investment. If we look at telecommunications related FDI, we find BBK, Huawei, and Avic dominate with the United Kingdom (UK), India, and Italy representing the largest FDI recipients. Total DSR-space contracting sums to around $3.5 billion. Huawei and ZTE are major players in DSR contracting with the former involved in USD $2 billion in DSR projects in countries such as India, the Philippines, and Serbia. It remains open to question, however, if one can legitimately categorize India as a DSR participant given that India actually has taken steps to undermine the larger BRI. Regardless, preliminary analysis does not indicate DSR FDI and contracting is too impressive. The next blog will delve into some of the DSR’s effects.