China’s Belt and Road Initiative (BRI) is a multifaceted economic, diplomatic and geopolitical undertaking that has morphed through various iterations, from the “New Silk Road” to “ One Belt One Road”.
US$1.3 trillion Chinese-led investment program creating a web of infrastructure, including roads, railways, telecommunications, energy pipelines, and ports. This would serve to enhance economic interconnectivity and facilitate development across Eurasia, East Africa and more than 60 partner countries. With $900bn of planned investments ranging from ports in Pakistan and Sri Lanka to high-speed railways in east Africa to gas pipelines crossing central Asia, China’s One Belt, One Road project (OBOR) is arguably the largest overseas investment drive ever launched by a single country. So far, little outside China has been completed. For example, the Khorgos “dry port” on the Kazakh-Chinese border is intended to be a hub for goods passing from China into central Asia and Europe. China plans to invest $600m in the project, building a vast complex of wholesale markets, train lines and cargo cranes. While the Chinese side of the border is surrounded by newly built tower blocks, the Kazakh side consists of a few semi-abandoned buildings. Talks with Thailand over high-speed rail have also stalled.
Macroeconomic Impact:
There is no sign that Beijing is backing down on its plans. A wave of anti-globalisation sentiment sweeping the developed world, typified by the election of US President Donald Trump, has even provided an opportunity to present OBOR as the leading vehicle for increasing global trade, with Mr Xi linking the two in a January speech at Davos. “Belt and Road is now seen as part of the China solution for the whole world, not just the developing world”. “The question is what is the cost of stepping up to play that role. If they step up to the mark, it is not cheap.”
Foremost among the key projects which have been promoted as focal parts of the OBOR initiative are the China-Pakistan Economic Corridor which provides China’s western provinces with access to the Indian Ocean through the Pakistani port of Gwadar, and the Bangladesh China India Myanmar Corridor, which will give Yunnan Province access to the Bay of Bengal.
The Bank of China has clearly noted that OBOR is intended to make the Renminbi the main trading and investment currency in the countries involved. The expansion of Chinese banks into new OBOR markets to serve the globalisation of the Chinese economy is also being promoted. OBOR is further intended to facilitate online retailing and the collection and use of big data across OBOR countries. China has also been stressing the role of Overseas Chinese in promoting OBOR projects.
The expansion of China-controlled telecommunications networks is an important aspect of OBOR. CITIC Telecom CPC recently acquired Linx Telecommunications, which services Russia, Kazakhstan and the ‘Stan’ region, the Baltic Sea and Eastern Europe. This will provide China with telecommunications services across much of its targeted ‘Belt’ region.
Mining and energy projects are also central to this endeavour, with China widely purchasing mines as well as generation and transmission projects across OBOR states. Chinese companies now own almost a quarter of Kazakhstan’s oil production, while over $15 billion of oil, gas and uranium deals have recently been signed with Uzbekistan.
And in this year’s white paper on its satellite navigation and location service, China says that it plans to launch another 30 Beidou satellite navigation system satellites over the next five years, with the first 18 satellites being launched before 2018 to cover OBOR countries. It an essential element of Beijing’s attempt to deepen economic reform within China and stimulate development in China’s western regions.”
In the economic realm, despite its near-altruistic goals as stated by many Chinese sources, the One Belt, One Road initiative is, as one non-Chinese observer states, “a tool for promoting national economic development by boosting exports, enhancing access to natural resources, and providing support to important domestic industries.” In this regard, there is little doubt that some, perhaps many, Chinese see the One Belt, One Road initiative as a way of relieving overcapacity in certain Chinese capital goods and construction-oriented industrial sectors. This could become an increasingly important component of China’s adjustment to lower economic growth rates over the long term.
Regarding the challenges and problems confronting the One Belt, One Road initiative, as suggested above, relatively few Chinese sources address this issue. While some non- authoritative sources stress the apparent complementarity between the needs of the other developing states that comprise the One Belt, One Road region and China’s huge financial resources and extensive experience in undertaking infrastructure projects, none seriously examine what would be required to complete such an endeavour in a profitable and genuinely beneficial manner. Many of the nations in the One Belt, One Road region are exceedingly poor, with limited experience in undertaking huge infrastructure projects, and considerable levels of corruption. Moreover, as some non-authoritative Chinese observers suggest, a major increase in the activities of Chinese enterprises across the One Belt, One Road area could generate damaging political and cultural “blowback” that could harm China’s image or increase instability and heighten geopolitical tensions. And of course, economic failures in One Belt, One Road areas could adversely affect China’s own development efforts.
Potential Consequences / Conclusion:
OBOR is still in its initial stage; several projects are in their planning phase, which makes it is hard to say if all infrastructure projects will be accomplished. Hence, the expected outcomes from the initiative are related to the prospects and consequences. As stated in the Visions and Actions Plan (2015) the Chinese government has promoted the enhanced relations and communication between countries connected to the initiative. The expected outcomes can as well be linked to better infrastructure, economic growth and improved cultural exchanges over borders (National Development and Reform Commission et al., 2015).
4.4 billion people will be affected by the initiative if it works out as planned. One reason behind OBOR was to stimulate the domestic economy and enhance export opportunities, however, an expected outcome is the further entry of services, technologies and knowledge from Western countries.
The Chinese government has in recent decade established reforms and policies in order to improve the position of the RMB on the global financial market (Nabar & Tovar, 2017). According to Nabar and Tovar (2017) the internationalisation of the currency takes time, however, the use of RMB in international trade will help to increase its role in financial and monetary systems worldwide. As discussed by Cheng (2016) and Du (2016) the New Silk Roads will encourage the use of RMB on the global market, which can be a step towards the internationalisation of the currency. Reforms and policies connected to the internationalisation of RMB will as well support and encourage sustainable growth within the country.
According to the Visions and Actions Plan (2015) OBOR shows respect and trust to countries along the roads. Hence, enhanced knowledge sharing between and across countries along the roads can be a result of increased trust and respect connected to the initiative. Continuously, the Visions and Actions Plan stresses the importance of countries’ endeavour towards the common goals of the initiative. The initiative has huge potentials, and as long as the affected countries contribute to the shared goals the expected outcomes are.