Stephen King: A thousand years on,an updated Silk Road will bypass the West

Economic Outlook: In many parts of the emerging world the state and commerce are closely aligned
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The Independent Online

As this is my last column for The Independent, I'm offering my thoughts on what might be described as "the big picture". In theory, I should be in an ideal position to tell you what that is, given that I have just returned from the World Economic Forum in Davos. After all, among the attendees are those supposedly blessed with the world's finest political, financial, corporate and NGO minds. Even those not so intellectually gifted are blessed with some of the world's biggest egos.

Yet, over the last few days, there was a surprising lack of big picture thinking. Inevitably, there was a lot of talk about the euro. Many discussed the progress made already towards an eventual resolution – the bailout fund, the austerity commitments, the European Central Bank's recent actions in the money markets – but there was a strong sense that more work had to be done. Then again, no one needed to go to the top of a mountain to reach that particular conclusion.

There was growing confidence in the US economic outlook. The same, however, was true a year ago, yet the nascent recovery at that time quickly turned to seed. No one seemed willing to explain how the US was going to get to grips with its rapidly deteriorating fiscal position: it is, after all, in a worse budgetary position than Spain. Meanwhile, although the Indians and Brazilians had invested a huge amount of money buying up advertising hoardings all over Davos, there seemed to be less interest in emerging markets than in previous years. Perhaps the emerging market theme had become a casualty of the unusually early Chinese New Year: the Chinese presence was lower than usual.

As is typically the case with Davos, soundbites trumped careful analysis. One minute we were told that in the workplace "average is over", and the next warned that "above average might be over too" – apparently allowing us to reach the arithmetically challenging result that we are all now below average. There was also, predictably, a lot of discussion about income inequality, poverty and philanthropy. Not many of the bottom 99 per cent, however, were there to express a view. "If you've got it, flaunt it and then give some of it away," seemed to be the key message.

There was something missing. For all the talk about a crisis of capitalism, the focus was entirely on western, free market capitalism. The clash between the interests of nation states and the aims of global corporations received plenty of coverage, but few realised that, in many parts of the emerging world (and, cynics might say, France), the interests of state and commerce are, more often than not, extraordinarily closely aligned.

As western capitalism has ended up battered and bruised, so the state capitalism synonymous with China and other emerging nations appears to have strengthened. A Chinese firm's global commercial aims may be fully consistent with Beijing's strategic geopolitical ambitions. For many parts of the fastest-growing parts of the world, the Davos "clash" simply doesn't exist.

State capitalism is, in many ways, a throwback to the capitalism of empire. The activities of Chinese companies are not so different from those of the British East India Company (BEIC) in the 18th and 19th centuries. It may have been owned by private shareholders but the BEIC's commercial activities were supported and encouraged by UK governments. The British Empire would never have existed without the BEIC.

To be fair, China isn't in the business of taking over a third of the world's land mass. It does, however, have a strategic aim of safeguarding access to the world's scarce commodities. That means increased Chinese investment in commodity-rich parts of the world: Sinopec, the Chinese petroleum giant, was responsible for the second-biggest corporate deal in Brazil in 2010, while CNOOC, another Chinese energy behemoth, struck the single biggest deal in Argentina that year. Meanwhile, ICBC's 20 per cent stake in South Africa's Standard Bank was the biggest foreign investment in the country in the post-apartheid era.

Until recently, China's foreign investments were seen as the acts of a naive arriviste who really didn't understand the ways of the world. The Chinese, after all, were filling their boots with US Treasuries, blissfully unaware, it seemed, of the implicit currency risk (a big fall in the dollar would leave the value of China's holdings of US assets seriously reduced). Now Beijing has grander ambitions and pockets deep enough to fulfil them.

Many in the West are attracted to what might be described as advanced Schadenfreude regarding China. They can't believe its economic model will possibly survive. Either the Middle Kingdom is about to succumb to hyperinflation and all the attendant social unrest (the story in the first half of 2011) or to an economic meltdown associated with an imploding property market. Yet, despite all these gloomy prognostications, China continues to prosper. As it makes up for hundreds of years of missed economic opportunities, it will become the world's biggest economy. The West may hope China falls flat on its face, but do Western leaders really have a plan to cope should Beijing confound the cynics?

Countries elsewhere are certainly being attracted by China's magnetic pull. George Osborne talked at Davos with pride about the arrival of renminbi offshore trading in London. Germany sees China as a vital destination for its engineering products. The French are benefiting from a surge in demand for Bordeaux wines as the Chinese buy up buckets of the stuff, regardless of vintage.

The real action, however, is going on outside Europe and, indeed, bypassing the US. We are witnessing the creation of a Southern Silk Road, a return on the grandest of scales to the trade patterns of a thousand years ago. Trade back then was centred on Asia, the Middle East and East Africa. Europe, stuck in the Dark Ages, played only a bit part.

Growth in the world economy will increasingly depend on the multiplying links between Asia, the Middle East, sub-Saharan Africa and Latin America. Trade and capital flows between these geographically separate parts of the emerging world are still relatively modest. With a huge expansion of cross-border infrastructure investment, the establishment of new centres of financial excellence and the opening-up of new consumer markets, the Southern Silk Road could offer a revolution every bit as big as the opening-up of trade between the industrialised nations in the years following the end of the Second World War.

How the West copes with this remains to be seen. We are seeing a shifting centre of gravity, both politically and economically. The West can choose to grow old gracefully, accepting its diminished status in the world order. Or it can choose to resist the process, becoming ever-more isolationist. It's a fundamental choice, but one the Davos crowd didn't really want to think about: they were happy to believe that, with a few tweaks, the old order could be preserved.

On that note, it's time to say farewell: I am moving on to pastures new. Thanks for all your messages of support (and criticism!) over the years.