China’s Belt and Road Strategy: Reality vs Ambition

In November last year a major geo-political milestone was announced in a low key, terse style, almost if the parties involved wanted no publicity. China reached an agreement with the East African nation of Djibouti to build a naval logistics facility, joining the US and France who already have bases in the country. There are also rumours that Russia could join them in developing a base, making this rather obscure country a hot bed of global political ambitions.

The naval base will mark the first time China has developed a military installation abroad and as such marks a decisive move away from the non-interference policy of the past to the more assertive position of the future, one which could be perhaps be described as creative involvement. This new policy is a recognition of a present day reality, China has accumulated extensive overseas assets and developed trade relations across the globe at an unprecedented rate over the last 10 years. These trappings require protection and among Beijing’s foreign policy and military elite there is growing pressure to act as a “great power” and expand its military footprint.

Officially the base is to help with China’s anti-piracy patrols in the area, but its location means it can also guard the main trade artery linking Europe with China which runs through the Suez Canal to the Straits of Malacca, plus a new route to the fast growing Pakistani port of Gwadar in which China has invested heavily.

China’s outbound investment drive has long been encouraged by the government in the form of the “going out” policy, this was updated in 2013 with the announcement of the One Belt, One Road (OBOR) or sometimes just Belt and Road initiative. The OBOR is a vague geo-political and business strategy used to describe China’s plan to develop Eurasia by improving its infrastructure and promoting economic development and integration, it describes China’s ambition for the future and arguably provides a vision of a Sino-centric continent. While much attention has been spent on the “Silk Road” or land part of the OBOR, President Xi also announced a Maritime Silk Road (MSR) which would focus on developing sea and port infrastructure around Asia and Africa, there is also arguably a military subtext to the MSR as the naval base in Djibouti demonstrates.

One Belt, One Road is the foreign policy cornerstone of President Xi’s leadership, often compared to the US Marshal Plan which helped rebuild Europe after World War 2, it aspires to develop and connect Eurasia through unprecedented infrastructure improvements,  but it is also a calculated domestic policy designed to stimulate growth in the country’s poorer western regions, such as Ningxia and Qinghai. The initative also holds ambitions of transforming more state owned enterprises into world class businesses, or at least capable of competing with their peers in China’s neighbourhood, this can be done through experience in working on OBOR projects at home and overseas.

The initiative can also be seen as a counterpoint or challenge to US or Western hegemony. So many global institutions and initiatives are Western dominated Beijing feels that creating alternatives to these are best way to develop their global power.

But in reality the OBOR initiative remains tantalisingly difficult to pin down in exact terms, the Chinese government describe it as such:

The Belt and Road Initiative aims to promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries”.

However there appears in public at least no blueprint or definitive plan nor detailed strategy, just flowery aspirations and vague promises. The vision is there, the funds are there and the institutions and companies to do the building are there, but it is not yet clear what will actually happen.

The OBOR covers a wide ill-defined area covering Central Asia, Eastern Europe, South Asia, Middle East and South East Asia – essentially the Eurasian landmass and any maritime sea routes around or to it. Within that sphere there are solid Chinese allies like Pakistan and Iran, but there are other countries such as India and Russia that value their independence and have regional power aspirations of their own. These rival powers will block Chinese influence where possible making a fully integrated continent difficult to realise.

Many other countries such as Pakistan, Afghanistan and many Central Asian nations are major security risks which could see Chinese funds placed there wasted if events go sour. In a scenario where Afghanistan or other neighbouring countries faces further conflict and Chinese companies or interests are embroiled it is not impossible that Chinese troops could be used to protect the nation’s assets, it seems far-fetched now, but overseas interventions often are until they occur.

In South East Asia tensions over islands in the South China Sea and over Taiwan could yet damage relations with its neighbours, already many countries in the region are concerned by a tide of Chinese goods flowing into their economies. This reflects a fear among many countries that trade with China is of a neo-colonial nature and their economies will suffer as they become over dependent on exporting raw commodities.

Who will pay?

In terms of financial power OBOR looks strong, the newly formed multilateral Asian Infrastructure Investment Bank has taken many of the headlines, but the much less heralded Silk Road Fund will also play a key role. However it is the China Development Bank and EXIM Bank which can provide most of the heavy lifting, already experienced in developing overseas infrastructure projects in the region and with huge balance sheets they are ideally placed to take up the challenge.

OBOR is meant to deliver complex, long term, but also economically viable infrastructure projects, but much of the proposed region and in particular Central Asia there are huge distances involved, low population density and economic underdevelopment, all of which make it extremely tough to build and maintain infrastructure such as roads and rail. Other regions such South East Asia have a better chance of seeing viable infrastructure projects take off, thanks a being a wealthier more densely populated area.

The OBOR initiative is of course already well under way, some major projects have been signed and construction has started or due to begin soon:

  • The construction of a rail line linking Kunming in Southern China to Bangkok via Laos (expected to cost around USD 6 billion) and mainly funded by China.
  • The spine of the China – Pakistan economic corridor, a planned Gwadar to Kashgar rail line is perhaps even more ambitious, providing as it does a link from the Arabian Sea to Western China, bypassing the Straits of Malacca.
  • Freight trains already run from Chongqing in Central China to Germany, Spain and Iran reducing the need for long sea journeys.

OBOR is also a sure sign that China has moved away from Deng Xiaoping’s foreign policy philosophy of “never taking the lead and keeping a low profile”. Pressure has been building in China for some time to realise a more assertive in foreign policy. By announcing such a potentially far reaching initiative China is placing itself on a new footing, one which is fraught with major pitfalls and dangers, but if it is executed correctly, could make it a true superpower.



Categories: China Goes Global, Silk Road

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  1. Weekly Bulletin: May 8 – 14, 2016 | Corint Consulting

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