Russia and China’s Digital Silk Road

The focus of this essay is on Russia‑China technology relations and the Digital Silk Road part of China’s Belt and Road Initiative (BRI) as it applies to the central Eurasian land mass, or to what some have taken to calling the Silk Road region.

As the relationship of both Russia and China with a number of other major powers—most notably the United States—has deteriorated, their own bilateral relationship at the leadership level has strength­ened. But over the past two years or so, the biggest change has been in the attitude of China, which has found itself and some of its own political policies and economic sec­tors under attack.

According to Carnegie Moscow’s Dmitri Trenin, “Russia has ‘piv­oted’ itself, as a major indepen­dent player, with China its key strategic partner. Russo‑Chinese relations rest on a formula: never against each other; not necessarily always with each other. This com­bines reassurance with freedom of maneuver.”

However, this situation is not without risks for Russia. Mos­cow‑based researcher Vasily Kashin has noted that “Russia doesn’t feel threatened itself, be­cause right now China can ill‑af­ford to alienate a neighbor that’s an important military and re­source power in its own right. Still, Russia’s government and experts have of course noticed a significant change in Chinese diplomacy and behavior, which sped up during the last several months and especially during the COVID‑19 crisis,” noting po­tential for greater risk‑taking to create problems in Russia’s rela­tions with third countries.

In mid‑2020, two U.S. analysts, Samuel Bendett and Elsa Kania, compiled an extensive and impressive looking list of publicly known technology projects and agreements between Russia and China. It may not be well‑known that we are now, in offi­cial terms, in the Year of Russian‑ Chinese Scientific, Technical, and Innovation Cooperation, and that the particular focus is on the dig­ital and aerospace spheres. We can put this together with the findings of a recent Russia‑China Dialogue report published by the Russian International Affairs Council (RIAC) that says the present pe­riod is “intended to serve as an in­centive to strengthen ties between representatives of the scientific and technical circles of the two states, exchange skilled personnel, and deepen pragmatic project‑based co­operation.” Targeted areas include “all key areas of the bilateral science, technology, and innovation dialogue: basic research, artificial intelligence, big data, new energy resources, new materials, ICT and the internet, biotechnology, aero­space, nuclear energy, agriculture, and environmental protection.”

In reality, the situation is less pos­itive than suggested by Bendett and Kania. The RIAC Russia‑China Dialogue report says that the devel­opment of science, technology, and innovation cooperation is “neg­atively affected by circumstances common to all areas of cooperation between Russia and China. At the technical level, there is a shortage of competent specialists with sufficient foreign language skills, a lack of ac­cessible information about markets and opportunities in both coun­tries, and similar issues.” Moreover, “according to Chinese experts, the investment climate in Russia is not favorable enough. In particular, the country’s foreign investment protection and dispute resolution mechanisms seem to be ineffective.” The report also finds that “Chinese partners are wary of the problems of Russian scientific and business counterparties that arise from the specifics of local business culture and government regulation. Some of the most annoying factors noted by the Chinese side are the focus on quick results instead of long‑term partner­ships, overpricing (often also a conse­quence of the short‑term focus), and the use of ‘grey’ schemes.” The report also points out that, as it says, “at the same time, the focus of interactions is often shifted to the simple purchase and sale of products or, in rare cases, to a one‑time transfer of technologies instead of conducting joint work in strategically important areas.”

The RIAC report continues: “for Russian companies, traditional con­straints include the limited access of foreign companies to a number of im­portant segments of the Chinese market, the leak or transfer of valuable intellectual property to local com­panies, difficulties for foreigners with no business experience in China in establishing business relations and complying with a set of national and regional regulations, and the hiring of personnel.” Lastly, the re­port also indicates that “the prob­lems of legal support and project management remain: many agree­ments, both at the government and corporate level, are not sufficiently thought out, which leads to many arrangements staying unfulfilled.”

As it happens, this list of prob­lems is almost identical to those I wrote about in my 2017 report enti­tled New Eurasian Age: China’s Silk Road and the EAEU in SCO Space.

In terms of particular sectors and companies, there have been some recent successes. There is an agreement between Alibaba Group, Mail.ru Group, MegaFon and the Russian Direct Investment Fund to create AliExpress Russia, as well as agreements of MTS and VimpelCom with Huawei on 5G in Russia. Huawei is also undertaking various research in cooperation with Russian research entities and univer­sities. My own uni­versity (INRTU) is working with the Alibaba Cloud Venture Fund to search for prom­ising technological start‑ups.

However, the most signif­icant and widely‑touted high‑tech cooperation project between Russia and China is mired in difficulties.

However, the most significant and widely‑touted high‑tech cooperation project between Russia and China is mired in dif­ficulties. The CR929 wide‑bodied aircraft project between Russia’s United Aircraft Corporation and China’s COMAC, with a price tag of between $13 billion and $20 bil­lion, continues to face delays. One senior Russian manager in July 2020 attributed this to “difficulties in working together with Chinese partners.”

My own interactions within Russia, as well as the findings of previously‑published reports, have suggested that such “difficul­ties” are not new. The Russian side has suspected that China would not open‑up its domestic market to jointly manufactured aircraft despite Russia equally sharing development costs, while the Chinese have been annoyed by Russian “arrogance” on technology issues that they feel that their “superiority” is becoming clear.

In September 2020, Russia’s Minister of Industry and Trade re­portedly alleged that the “Chinese were bent on snooping on Russian experts and getting hold of core, proprietary technology and solu­tions while refusing to open up their domestic market,” and that there were “counter‑accusations from some COMAC employees who took to the social media and forums popular among technicians to say Russia was only interested in selling parts to China without the goodwill to swap and share vital technology.”

Finally, it is worth mentioning that over the last year or so a number of Russian scientists, gen­erally retired, have been charged with spying for China.

Russia‑China Technology Cooperation?

According to the RIAC Russia‑China Dialogue report, “experts point to the opportunities that Russia‑China cooperation will develop through the alignment of the Eurasian Economic Union (EAEU) and China’s Belt and Road Initiative and the creation of the Greater Eurasian Partnership.”

But how real are these “opportu­nities”—particularly in relation to the Digital Silk Road?

The Digital Economy section of Russia’s own official domestic National Projects documentation indicates a 2021 goal of an “in­tegrated information system for handling the common processes of the governments of EAEU member countries.” However, it makes no mention of China’s Digital Silk Road.

In 2016‑2017, the EAEU offi­cially emphasized “digital transfor­mation” as a “key factor of devel­opment” and partnered with the World Bank to “conduct a joint study to research the international experience, and develop recom­mendations to maximize the eco­nomic impact of the development of the digital space and the implementation of the Digital Agenda of the EAEU.” Not unexpectedly, it “concluded that it was important to develop a common coordinated approach to the framework of dig­ital development at the national and union levels.” The report also makes no mention of China’s Digital Silk Road ambitions.

The RIAC China‑Russia Dialogue report concluded that “scientific and technical cooperation could also contribute to the co‑develop­ment” of the EAEU and BRI, but then adds that “no significant re­sults have been achieved in this area so far.” There is no mention of the Digital Silk Road in this report and, in my view, no “significant re­sults” can be expected in the future.

As far as BRI is concerned, there have been changes in the way it is being both presented and seen.

From the beginning, various Chinese businesses, organizations, as well as regions and regional of­ficials have sought to brand as many projects as possible as BRI‑related. As well as adding credibility to proj­ects along the land Silk Road Economic Belt (SREB) part of BRI, it also often ensured that funding was available. Part of the result was much corruption and resentment within SREB countries, which forced Beijing to ensure that the BRI brand is not used by anyone who wanted to, and to begin pub­lishing official BRI‑related project lists.

The Western view of the essence of BRI has also been changing. Ac­cusations were initially levied that China was attempting to entrap various countries in debt to China on a large, organized scale. These were said to be done by promoting and lending money for essen­tially economically unsustainable projects. A thorough examination of two projects in Sri Lanka and Malaysia (even though not on the SREB part of BRI) by political scientists Lee Jones and Shahar Hameiri highlighted the extent which recipient countries have sought funding from Chinese en­tities for their own—often vain or corrupt—purposes.

The reality is that China is not essentially engaged in debt‑trap lending.

The reality is that China is not essentially en­gaged in debt‑trap lending.

Essentially, BRI remains what it always has essen­tially been: a PR idea that sparked the imagination of others who then worked for var­ious reasons to more exactly define it and give it real form—and with some success!

Russian pride means that it does not want to be seen as a SREB country, and certainly not as a “bridge” between China and Europe. Moreover, it only wants the SREB to succeed if it is in partner­ship with its own EAEU.

The idea of Eurasia or Greater Eurasia as an en­tity beats in the heart of a considerable number of Russian thinkers and leaders.

The idea of Eurasia or Greater Eurasia as an entity beats in the heart of a considerable number of Russian thinkers and leaders.  

Yaroslav Lissovolik, writing for the Valdai Discussion Club in September 2020, said that “this year Russia celebrates the one hundredth anniversary of Eurasianism, a school of thought that emphasized the uniqueness of Eurasia as a continent charac­terized among other features by extreme distances of its inland regions from coastal lines and trade routes.” He wrote that “from today’s vantage point Eurasia’s geography of unique continental expanses and the prevalence of landlocked countries rather than being a hin­drance to develop­ment may harbor tremendous eco­nomic potential related to connec­tivity projects.” He then went on to detail how he thought Eurasia can be brought to fruition as some sort of unique entity.

In his pre‑recorded video ad­dress to the seventy‑fifth session of the UN General Assembly in September 2020, Vladimir Putin extolled “Russia’s initiative to form a Greater Eurasian Partner­ship involving all Asian and Euro­pean countries without exception” as contributing to solving some of the world’s problems. Here it should be noted that the inclusion of “all Asian and European coun­tries” is really the broader Putin PR version of the Eurasia to which Lissovolik refers.

The reality is somewhat different to what Lissovolik and Putin would like to see. Andrey Kortunov of RIAC says that, “sadly, the Eurasian continent continues to be disjointed or, rather, split into a host of large and small fragments. This applies to Eurasian secu­rity, the Eurasian political space, the Eurasian economy, and science and cul­ture. Right now, the concept of ‘Eurasian iden­tity’ does not even exist, and the nu­merous attempts to construct one have not brought anything par­ticularly promising.” Kortunov continues: “Even though the idea of the ‘Greater Eurasian Partner­ship’ was first put forward about five years ago, we are still in the very beginning of a lengthy his­torical project. At the moment, we can only talk about some very preliminary pencil sketches of the very complex Eurasian structure of the future. These sketches contain more questions about the future of our continent than they do answers.”

Russia has seen a role for the Shanghai Cooperation Organization (SCO) to contribute to the security and political— but not economic—aspects of its Eurasian vision. Prior to BRI, China had wanted the SCO to be more greatly involved in economic issues but Russia had resisted this—pre­ferring to try to develop the EAEU as the main Eurasian supranational economic organization working as a “partner” with China.

China’s confidence in BRI eventually reduced its in­terest in the SCO as a ve­hicle for economic issues, and the admission of India and Pakistan to the SCO greatly increased its diversity of thinking and interests.

China’s confidence in BRI eventu­ally reduced its interest in the SCO as a vehicle for economic issues, and the admission of India and Pa­kistan to the SCO greatly increased its diversity of thinking and inter­ests. The SCO is now little more than a leader’s discussion club.

In summary, not much has re­ally changed since I wrote my re­port entitled, New Eurasian Age: China’s Silk Road and the EAEU in SCO Space in 2017. Therein I stated that “the SREB, the EAEU, and the SCO are very different things in any institutional or organization sense” and that “the EAEU and the SCO are each close to the peak of their influence and relevance.” I concluded that “significant cooperation between the EAEU, BRI and the SCO—or even between any two of these—is highly unlikely” and that “the idea of Greater Eurasia is a fantasy.”

Digital Silk Road Concept

China has several programs to promote its technology de­velopment and influence. Made in China 2025 aimed at making China an international leader in manufac­turing various types of advanced technology. Internet Plus aims to promote the use of cloud com­puting, big data, and the Internet of Things (IoT) in order to ad­vance other sectors of the economy. China Standards 2035 will aim at promoting Chinese technology standards to the world in areas such as telecommunications, AI, IoT, blockchain, and the use of these in such things as “smart cities” and telemedicine.

BRI’s initial focus was very much on transport infra­structure and trade networks, but tech­nology has become more prominent with increased emphasis on the Digital Silk Road.

The concept of a Digital Silk Road was contained in a Chinese white paper released in 2015, which built on work done at Fudan University. It initially did not garner much attention because at the time the major focus of BRI projects and discussion related to major infra­structure projects. Moreover, as with the wider BRI idea, the Digital Silk Road is best understood as an “umbrella branding effort and nar­rative.” It is, in other words, a way for China to promote its global vi­sion and standards across a range of technology areas.

A March 2015 article in China’s official state press Xinhua News Agency defined Digital Silk Road as “five connectivities and three com­munities”: connectivity in infra­structure, trade, finance, ‘people’s hearts’ and policy; and the com­munity of interest, destiny, and re­sponsibility. It thus remains a rather abstract idea in many ways, and has even been described as a “mindset.”

In practical terms, infrastructure essentially means cross‑border optical cables and telecommu­nications, and Beidou satellite navigation; trade means supply chains and e‑commerce; people’s heart’s means media and on‑line education; and policy means digital governance.

Xi Jinping is a more ideological leader than his recent prede­cessors and has increasingly sought to ensure that private businesses and its leaders are working in the interest of the Communist Party of China (CPC). In September new instructions were given by the CPC Central Committee that reinforced this ten­dency. Business was reassured that it could continue to exist and prosper if it aligned its overall goals with those of the CPC to achieve “socialism with Chinese characteristics.” This is inev­itably going to flow through to a con­tinued tightening of what it is permis­sible for Chinese entities to do under the official BRI umbrella—including the Digital Silk Road.

As with the wider‑BRI, Chinese entities attempt to curry political favor and receive funding by claiming numerous technolo­gies as part Digital Silk Road. While large state‑backed Chinese finan­cial organizations such as the China Development Bank and the In­dustrial and Commercial Bank of China have played major roles in the wider BRI because of the huge funding requirements, the Digital Silk Road requires a dif­ferent approach because much Chinese technology ability and capacity is held by its private tech‑giants such as Baidu, Alibaba, Tencent, and Huawei.

The more influence China and its tech‑giants have on setting such international technical stan­dards, the greater will be interna­tional compatibility with domestic Chinese systems and the greater the extent of Chinese economic power, as well as social and political influ­ence in the world. It is the interests of both China and its technology companies that these companies seek to build influence in such or­ganizations as the International Telecommunications Union, which leads in setting standards for 5G. In addition to telecommunication product producers such as Huawei and ZTE, Chinese state‑backed mobile carriers such as China Mobile, China Telecom, and China Union can only benefit from such influence.

the Digital Silk Road broadly reflects China’s efforts to expand its tech­nology sphere of influence across BRI participating countries by going from a standards‑taker to a standard‑maker.

In essence, the Digital Silk Road broadly reflects China’s efforts to expand its technology sphere of influence across BRI participating countries by going from a stan­dards‑taker to a standard‑maker.

Despite the general desire to ad­vance the interests of China, its technology companies are not easy to manage in any centralized coordinated manner to achieve such government aims. As noted by Harvard Business School’s Meg Rithmire, “the Chinese govern­ment’s heavier hand in the economy in recent years does not mean that its intentions always translate into reality.” Big‑tech companies such as Alibaba and Tencent compete fiercely within China, and it should not be expected that they will easily cooperate in achieving govern­ment aims when working outside of China.

Digital Silk Road Technologies

Finally, it worth reflecting on whether the “road” word in the term “digital silk road” has any similar meaning to the “road” or “belt” terms in the One Belt, One Road terminology used before it be­came the Belt and Road Initiative. This, I should add, is not merely linguistic tinkering, for it points to something more substantial.

This is only likely to be the case if technology competition be­tween the U.S. and China results in non‑Indian Eurasia having separate 5G telecommunications standards to that of much of the remainder of the world, because 5G is a basis for much of what is proposed in the new digitally‑orientated world. But even if this is ultimately the case, it will not happen quickly.

5G networks are expensive to deploy, especially in less popu­lated areas—as in much of central Eurasia—because the radio wave signals travel a comparatively short distance compared to earlier gener­ations of telecommunications. This means that many more cell boxes need to be deployed in an area in order to connect to the network.

5G is now being rolled out in many areas of China, but even there some questions are being asked about its present use­fulness because of the absence of other technologies such as autono­mous vehicles to take advantage of it. For example, a former Chinese finance minister recently warned of over‑investment in 5G: “We are getting ahead of ourselves. The 5G technology isn’t ready, but tens of billions have already been invested, raising costs for users and debt for public institutions.”

In addition to a clear and well‑de­fined task, AI systems need large accurate databases from which to search for patterns and thus make decisions and recommendations. One set of data on any issue and in any one country is likely to be of little use in another situation. Nev­ertheless, some countries seem to fear that apps such as TikTok can be used to collect user data in their country and consequently be used to facilitate unwanted influence of their citizens.

Outside of China, verbal‑hype about the Digital Silk Road is likely to run ahead of reality for quite a few years. For example, according to the Reconstruc­tion and Develop­ment of Agency of Armenia (AD­KARS) Chinese entities will fi­nance the construc­tion of a “Smart Science City” in Armenia costing about $10‑15 bil­lion over 15 years beginning in 2021. ADKARS says that “after signing, we must create a group that will consider what joint projects are interesting to develop, in what areas, and in parallel with the construction of the city, these projects will be carried out.” However, it expects “the main directions are ar­tificial intelligence, medical neural networks, the production of new ma­terials, new drugs, machine learning, the Internet of smart things (a completely new direction in science and technology) and much more.”

It is difficult to know how seri­ously to take this agreement, but it would be very surprising if it came to much given the huge amount of money compared to the size of the Armenian population and the fact that it is basically a project looking for a reason to exist rather than a reason existing for a project.

China has been working on a Central Bank Digital Currency in the form of a e‑Renminbi. Unlike crypto­currencies such as Bitcoin, it will be controlled by a state and not decen­tralized. Such a digital yuan, with the help of China’s tech‑giants and big state‑owned banks, could replace the U.S. dollar in international transactions along the SREB that occur with Chinese entities. This could be con­sidered a Digital Silk Road project, but is certainly not dependent on it.

Little Significant Change

Little has significantly changed over the last three years in terms of Russia‑China technology relations, the EAEU, the SCO or the idea of “Eurasia.”

China will work hard on main­taining a good general bilateral re­lationship with Russia, but has little interest in these multilateral formats and ideas favored by Russia. Russia will continue to try to figure out what it can do to hold its position in cen­tral Eurasia and—unrealistically— engage in EAEU and Greater Eurasia dreams about how it can enhance it.

BRI (including the land SREB part) has been exposed as a nice PR stunt that has consumed large amounts of money and brought China little eco­nomic benefit. The Digital Silk Road has emerged as the most discussed part of BRI, in no small part due to the increasing technology competi­tion and antagonism between China and America, as well as some other Western countries.

5G and AI are very impressive tech­nologies, and they offer the potential for significant changes in ways that societies operate and are managed; thus, they are the two technologies of most significance for the Digital Silk Road. However, the ways in which this will occur will ultimately depend on human decisionmakers. There is an element of mystery to both technologies that causes some fear. The reality is that neither is the over‑powering technology that some imagine. How this will come to affect the Silk Road region in strategic terms thus remains an open question.