China’s ‘One Belt, One Road’ initiative (2024)

Geoff Wade, ForeignAffairs, Defence and Security

Key Issue
The ‘One Belt, One Road’ (OBOR) initiative is a Chinese economic and strategic agenda by which the two ends of Eurasia, as well as Africa and Oceania, are being more closely tied along two routes–one overland and one maritime. Supporters suggest that the initiative permits new infrastructure and economic aid to be provided to needy economies. Critics claim that it facilitates Chinese economic and strategic domination of the countries along these routes. OBOR provides a global context for China’s growing economic links with Australia.

The ‘One Belt, One Road’ (OBOR) initiative is a foreign policy and economic strategy of the People’s Republic of China. The term derives from the overland ‘Silk Road Economic Belt’ and the ‘21st-Century Maritime Silk Road’, concepts introduced by PRC President Xi Jinping in 2013. These are the two major axes along which China proposes to economically link Europe to China through countries across Eurasia and the Indian Ocean. The OBOR initiative also links to Africa and Oceania. In March 2015, the PRC issued an action plan for realising this initiative. While the OBOR initiative is being coordinated by China’s National Development and Reform Commission,it also heavily involves the ministries of Foreign Affairs and Commerce.

The initiative envisagesthe building of six major economic cooperation corridors and several keymaritime pivot points across Eurasia:

On land, the plan is to build a new Eurasian land bridge and develop the economic corridors of: China-Mongolia-Russia; China-Central Asia-West Asia; the China-Indochina peninsula; China-Pakistan; and Bangladesh-China-India-Myanmar ... On the seas, the initiative will focus on jointly building smooth, secure and efficient transport routes connecting major sea ports along the belt and road.

Formally, OBOR emphasises five key areas ofcooperation:

coordinating development policies
forging infrastructure and facilities networks
strengthening investment and trade relations
enhancing financial cooperation and
deepening social and cultural exchanges.

But it is infrastructure such as railways, roads, ports, energy systems and telecommunications networks which is receiving mostattention.

The overland ‘Belt’ involves the creation of aneconomic and trade corridor extending from China’s west through Central Asia, andfinally to Europe. The first step is to further link Central Asianstates to the Chinese economy, while the longer-distance initiativesinclude railwayconnections between China and Europe. The ‘Belt’ initiative calls for theintegration of the Eurasian land mass into a cohesive economic area.

For the maritime ‘Road’, China’s development ofports and hubs across the Indo-Pacific is a key aspect of the initiative.Purchase and construction of port facilities and associated economic zones in Australia,Malaysia,Indonesia, Bangladesh,SriLanka, Myanmar,Pakistan,Kenya,Tanzania,Omanand Djiboutiare intended to provide China with maritime access and economic benefit acrossthe Indian Ocean. These will connect to Piraeus, Greece’s major port, which hasbeen bought by Chineseshipping group COSCO and which will allow direct access to the markets ofEurope.

Foremost among the key projects which have beenpromoted as focal parts of the OBOR initiative are the China-PakistanEconomic Corridor which provides China’s western provinces with access tothe Indian Ocean through the Pakistani port of Gwadar, and the BangladeshChina India Myanmar Corridor, which will give Yunnan Province access to theBay of Bengal.

Funding for the initiative is a key issue. China’spolicy banks are providing massivefunds for Chinese enterprises to operate along these axes, while furtherfunding will be provided through the Asian Infrastructure Investment Bank (AIIB),funded by countries globally. The AIIB was created precisely to serviceprojects under OBOR. The projects funded by the firstloans issued by AIIB were in Indonesia, Bangladesh, Pakistan andTajikistan, all countries which China is trying to include within its OBORinitiative.

Hong Kong is also being tapped. In his policyaddress in January 2016, the Chief Executive of the Hong Kong SpecialAdministrative Region, CY Leung, underlined that Hong Kong would play an activefinancial role in OBOR and would facilitate educational exchanges between HongKong and ‘OBOR countries’. A ‘HongKong Belt and Road Summit’ was also convened in May 2016 to allow ZhangDejiang, Chairman of the Standing Committee of the National People’s Congress,to outline ‘Hong Kong's Four Unique Advantages’ as a hub for OBOR projects. Thenin July 2016, the Hong Kong Monetary Authority launched the InfrastructureFinancing Facilitation Office, a new entity to facilitate fundraising forprojects related to the OBOR initiative. The Hong Kong Trade Development Councilhas also arranged visitsto Thailand for Chinese investors to promote OBOR investment.

Singapore is also essential to promoting offshoreeconomic activities by Chinese entities. The China Construction Bank signed anMOU with International Enterprise Singapore in April 2016, providing S$30 billionin financial support to Singaporean and Chinese companies jointly investing in OBORprojects. A new centre in Singapore to provide project financing and relatedservices to projects is also being planned.

While China claims that OBOR will ‘include 65countries, 4.4 billion people and about 40 percent of global GDP’, the currentrealities are much more pedestrian. China has reportedly established 75overseas economic and trade cooperation zones in 35 countries as part ofthe OBOR initiative. OBOR, however, remains inchoate and still strives forexternal endorsem*nt and support.

China’s other OBOR interests

It is clear that China has broader uses for theincreased influence it hopes to enjoy through the OBOR initiative.

The Bank of China has clearlynoted that OBOR is intended to make the Renminbi the main trading andinvestment currency in the countries involved. The expansionof Chinese banks into new OBORmarkets to serve the globalisation of the Chinese economy is also beingpromoted. OBOR is further intended to facilitate online retailing and thecollection and use of bigdata across OBOR countries. China has also been stressing the role of OverseasChinese in promoting OBOR projects.

The expansion of China-controlledtelecommunications networks is an important aspect of OBOR. CITIC Telecom CPC recentlyacquired Linx Telecommunications, which services Russia,Kazakhstan and the ‘Stan’ region, the Baltic Sea and Eastern Europe. This willprovide China with telecommunications services across much of its targeted‘Belt’ region. Visits by journalists from OBOR countries to China,and publishing arrangements with newspapers abroad areintended to promote China’s views over a broader sphere.

Mining and energy projects are also central to thisendeavour, with China widely purchasing mines as well as generation andtransmission projects across OBOR states. Chinese companies now own almost aquarter of Kazakhstan’soil production, while over $15billion of oil,gas and uranium deals have recently been signed with Uzbekistan.

Reactions

Reactions to the OBOR proposal have variedglobally. Ethnic Chinese business figures in Southeast Asia and their politicalrepresentatives have generally been enthusiastic about the business possibilities.Malaysia has been active in accepting and promoting the idea, with a 162-member Malaysian delegationheading to Beijing in July 2015 to participate in an OBOR dialogue.

Pakistanand SriLanka have also been particularlywelcoming of Chinese capital and infrastructure projects, as have thevarious CentralAsian states. Vietnam, meanwhile, has expressedgrave doubts about the initiative. With few exceptions,India has been stridentlysuspicious of the overall OBOR initiative and has repeatedly expressed itsconcerns about China’s growingeconomic and strategic power being pursued through OBOR. Russia needs fundingassistance for developing its resources and appears to see OBOR as an avenuefor this.

Western reactions have been mixed. Business peopleare generallypositive, while strategists have been less sanguine. In Europe, China has talkedup OBOR’s possible integration with the EU’s €315 billioninvestment plan (the Juncker plan). China is simultaneously pushing for an EU-ChinaFTA that would make it easier for PRC companies to invest in Europeanmarkets. Central and Eastern Europe are a major focus for OBOR programs, withthe CzechRepublic, Serbia and Poland receiving major financial inputs.

Australia and OBOR

Within Australia, enterprises,banksand lawfirms are promoting the OBOR initiative as an economic opportunity for thecountry and, with Chinese endorsem*nt, an Australia-China OBOR Initiative hasbeen established to promote Chinese engagement in the Australian economy. Chinais also utilising the concept to promote its growing economic engagement with northernAustralia. Another avenue for encouraging Australia’s further engagementwith OBOR is China’s funding and support of various related local academic conferencesand seminars.

Criticisms

Not all reactions to OBOR have been enthusiastic. FormerWorld Trade Organization chief, Supachai Panitchpakdi, hasstated that the OBOR initiative and, specifically, its projects along theMekong River, all serve China’s own interests.

On the economic front, China has been criticisedfor using its massive financial assets to dominate smaller economies throughlong-term control of infrastructure,naturalresources and associated land assets, and through offering less thandesirable creditterms for infrastructure loans. Further, the ‘productioncapacity cooperation’ which China lauds as an integral aspect of OBOR, ofteninvolves the simple transferof Chinese-owned production capacity to countries where production is cheaperand markets are closer. Such processes can also result in China exerting some controlover local markets, labour and export policies.

Despite the claimed economic nature of the OBORagenda, critics see the initiative as being simultaneously a strategic program.China clearly portrays OBOR as both being premised on and further validating China’sclaims to the islands of the South China Sea, while on the other side ofthe Indian Ocean, Djibouti is providing China with both a trade port as well asits firstoverseas military base. It has been repeatedly noted in China that OBOR isalso intended as a regionalsecurity mechanism, and the future role of the People’s Liberation Army in protectingChina’s OBOR facilities abroad has been widely discussed. The two ‘economiccorridors’ now being developed provide China with direct access to theIndian Ocean.

Broader concerns relate to the longer-term aims of China, withthe possibility that the OBOR agenda is aimed at creating a Eurasia-wide,China-led bloc to counter the US. At the June 2016 Shangri-la Dialogue inSingapore, ProfessorXiang Lanxin, director of the Centre of One Belt and One Road Studies atthe China National Institutefor SCO International Exchange and Judicial Cooperation, spoke of OBOR asbeing an avenue to a ‘post-Westphalian world’. As such, some see thisinitiative as a profound challenge to the current global political and economicstatus quo.

Conclusion

China’s wielding of this economic statecraftstrategy derives from several collocations. On the political front, since late2012, President Xi has been promoting the ‘Chinesedream’ (中国梦), involving the ‘great revival of the Chinese nation’. Such revivalrequires a restored global position and identity for China. Earlier iterationsof OBOR involved the catch-phrases ‘common development’ and ‘win-wincooperation’ to characterise the relations between China’s development and thatof its neighbours. China also promoted a ‘China-ASEANcommunity of shared destiny’ (中国-东盟命运共同体). But these smaller initiatives have burgeoned into theEurasia-wide OBOR, bringing into play the PRC’s massive capital reserves—bothstate and private—achieved through 40 years of rapid economic growth, andoffering an outlet for the vast excessproduction capacities which exist today in China.

Regardless of the credence which one assigns to thevarious interpretations of the OBOR initiative, progress thus far makes itclear that as Australia becomes increasingly tied economically with China,there is a need to maintain a close watch on the progress of the OBORinitiative globally. It also suggests that Australia needs to adopt a moreeconomically and strategically prudent attitude in determining how theAustralia-China economic relationship is to further develop.