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What’s driving China’s One Belt, One Road initiative?

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A farmer rides a bicycle along a small alley between wheat fields in Chiping county, Shandong province, 24 March 2014. (Photo: Reuters)

In Brief

Since 2013, the ‘One Belt, One Road’ (OBOR) initiative has become the centrepiece of China’s economic diplomacy. The essence of OBOR is to promote regional and cross-continental connectivity between China and Eurasia.

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The ‘One Belt’ and ‘One Road’ refer to China’s proposed ‘Silk Road Economic Belt’ and ‘Maritime Silk Road’. Connectivity covers five major areas of interest: policy coordination, infrastructure construction (including railways and highways), unimpeded trade, financial integration and people-to-people ties. Among these, infrastructure construction is the dominant feature of the New Silk Road.

While the historical Silk Road was an upshot of bottom-up trade activities, driven mainly by nations outside China, the OBOR initiative is designed by China’s ruling elites. It represents the first major attempt by China to design and implement a cross-continental mercantile strategy and will surely have significant global and geopolitical consequences.

OBOR is a product of Chinese neomercantilist thinking. Today’s neomercantilism differs from the mercantilism of the 17th to early 20th century, when merchants were often complicit in the imperialism of the great powers in pursuit of increased political power and private wealth. Neomercantilism today is much more constrained, thanks to national and international legal frameworks, reluctance to engage in armed conflicts, as well as a greater widespread appreciation of human rights.

Chinese neomercantilism endorses global trade and its institutions while also pursuing a government-led globalisation strategy to accumulate capital and wealth for the nation. China’s strategy clearly preferences state-owned enterprises (SOEs) and is focused on establishing free trade areas — similar to the China–ASEAN Free Trade Area which came into effect in 2010 — with Central Asia and South Asia.

So what is driving China’s OBOR initiative?

Many of China’s production sectors have been facing overcapacity since 2006. The Chinese leadership hopes to solve the problem of overproduction by exploring new markets in neighbouring countries through OBOR. The OBOR initiative will provide more opportunities for the development of China’s less developed border regions. China also intends to explore new investment options that preserve and increase the value of the capital accumulated in the last few decades. OBOR has the potential to grow into a model for an alternative rule-maker of international politics and could serve as a vehicle for creating a new global economic and political order.

But there are significant risks associated with China’s OBOR strategy. China’s neomercantilism lacks sensitivity when addressing some issues in host countries, particularly regarding culture, environment and ethnicity. Beijing’s authoritarian approach may also impede effective cooperation with democratic countries

The China–Pakistan Economic Corridor (CPEC) project is a prime example of the risks and challenges facing China. CPEC is a combination of transport and energy projects and includes the development of a major deep-sea port offering direct access to the Indian Ocean and beyond. Plans for CPEC were officially formalised in April 2015. According to the agreements of both sides, total costs for the projects currently under construction amount to US$46 billion. Should all the planned projects be implemented, the combined value of the projects would be equal to all foreign direct investment in Pakistan since 1970, and would be equivalent to 17 per cent of its 2015 GDP.

The Chinese leadership sees Pakistan as one of its most longstanding and committed allies. This is why CPEC is being treated as a poster child for the OBOR initiative. Still, many uncertainties exist which could topple the project. CPEC faces domestic political opposition in Pakistan, with infighting between provinces and the central government over the allocation of investment. A more serious issue is that of security. On the Chinese side, the East Turkestan Islamic Movement (ETIM) is hindering Chinese efforts, while on the Pakistani side the Pakistani Taliban and other anti-state militant groups pose an immense threat to construction crews and could disrupt the flow of goods.

With this in mind, in the short term, China’s OBOR initiative will likely only deliver very modest results despite immense investments. It is still hard to predict whether China’s OBOR projects will be effective over the medium-to-long term as this depends on the responsiveness of both governments to challenges, as well as the external environment.

Still, OBOR marks the beginning of a new economic diplomacy for China as it shifts towards being an active driver of the regional and global economy. Whether China’s neomercantilist expansion policy will meet expectations, remains to be seen.

Junhua Zhang is a professor at Shanghai Jiao Tong University, China.

6 responses to “What’s driving China’s One Belt, One Road initiative?”

  1. As long as China’s shifts towards being ‘an active driver of the regional and global economy’ it risks being seen as ‘authoritarian’ and thus resented, if not resisted. Would it get better results with Pakistan, as well as some of its other neighbors like Myanmar, Cambodia, or Laos if it was a partner in these efforts? Admittedly an active, or even a more senior, partner but still one that engages in give and take as to what the other country wants/thinks it needs.

  2. Interesting article. One thing I could not understand is how CPEC fits into OBOR. If the “road” already provides path to Europe, which is huge market, what’s the CPEC meant to do?

    • CPEC is a project to help Pakistan build railways,ports,highways and pipeline of gasoline and gas. For China, this also opens an gate to its Northwest and close the distance to reach East Asia with abound resources. So Pakistan is strategic to OBOR.

  3. After Iran offered to be part of CPEC and improved Security in Pakistan. CPEC will be game changer. It has three routes east west central so security will never be an issue.

  4. In his truly astonishing autobiography “Derricks of Destiny”, Irish-American business tycoon Samuel G. Bayne describes a visit to mainland China in the late 19th Century.

    As part of Ireland’s 2016 commemorations, a 2016 Edition of Derricks of Destiny was published to give recognition to the “Live-Aid” support Bayne staged in 1879, when he persuaded the US Oil industry and the New York Post, to raise vital funds for famine relief in his native Ireland.

    Not known for sentimentality, Bayne’s profession was Oil and Banking both of which he mastered.

    However, his trip to China as a wealthy Oil Baron had a profound effect on him, and brought out what has often been described since, as a powerful and genuine connection between Irish culture and Chinese culture.

    It is somewhat surprising that China’s modern “Silk Road” policies have failed to identify the powerful role of cultural connections in delivering important returns on its overseas investments and policies.

    So often, the global investment interests of large economies like Chine, are perceived by other cultures as being insensitive and authoritarian.

    China has in the past turned to Hollywood in order to grapple with East-West cultural differences, but staging formulaic block-buster movie productions such as the recent “Mission Impossible” format, in a Chinese setting, has tended to have the opposite effect, both externally and internally.

    But East-West intercultural connections are capable of delivering much more than just short term profits.

    If inter-cultural projects succeeded in exploring how music, humor, and emotional experiment might re-define the perception of sensitivity and authoritarianism, the return could be measured in terms of meaningful relationships as well as meaningful profits.

    “The Boyle Royal Wedding by Anne Cestors” attempts to create an East-West experiment in “relationship investment” based on the genuine cultural connection that Samuel Bayne describes in his autobiographical account of a visit to China over a century ago.

    The Silk Road out of China might be set to meet the Linen Road out of Ireland, if the significant cultural compatibility between China and Ireland were given an opportunity to spawn a wealth of creative connections.

  5. Interactionism will prevail as OBOR directly brings back ancient trading routes where China once was seen as the uncivilized world. This sophisticated initiative will help build relations with many developing nations. That Beijing will definitely increase China’s sway in the developing world. Hopefully the Papua New Guinean government will take advantage of this initiative for the betterment its rural people as a resource based nation.

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