INTRODUCTION China’s ambition of facilitating the rate of growth

INTRODUCTION

The flagship Belt
and Road Initiative (BRI) is   China’s ambition of facilitating the rate of
growth and development in the low and middle-income countries. The President of
China, HE. Xi Jinping introduced the initiative in 2013 of constructing modern
silk roads that covers about half of the world. BRI popularly called One Belt
One Road (OBOR) is a partnership and a win-win collaboration between China and
partner countries to foster a parallel development and to drive nations towards
peace and friendship through mutual understanding of all-round exchanges. This
initiative relies on Connectivity and Cooperation to focus on trade and Investment,
policy coordination, infrastructure, financial integration and building
international relations. Since the birthing of this initiative, OBOR has become
the major topic for discussion at many gatherings. Some group of people were
optimistic about the goodies that could come along with the project. On another
side, some group of individuals were skeptical about the project as they
believe that, the OBOR is over-ambitious and might be faced with many barriers including
Geopolitical, Geo-economic and managerial barriers.

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 Thus, this term paper sets to review China’s
One Belt One Road project in terms of China and the stakeholder countries.

 

 

 

 

 

 

HISTORY OF BELT AND ROAD INITIATIVE

Exalted as
being “The Project of the Century”, China’s One Belt One Road (OBOR) is
arguably the most ambitious infrastructure, Trade and diplomatic program that would
set a new form of Globalization. OBOR is an open initiative for all countries
that want to contribute to global connectivity. However, what then is China’s
One Belt One Road Project?

One Belt One
Road is China’s ambition of constructing and or reconstructing ancient Silk
roads spanning Asia, Europe and North Africa. There are two aspect of the
project called the Belt and the Road. The Belt is a physical Road from China through
Asia to Europe. The Belt passes through Central Asia, Russia and finally to Europe
(the Baltic).

The maritime Silk
Road is a shipping lane from China to Europe and African continent and other
Asia countries. The maritime road connects the major East Asia economic cities
at one side and the major European economic cities as well as countries with
huge potential for economic development. This maritime Silk Road passes through
the Indian Ocean and the Mediterranean Sea to Venice- a city in Italy on the
European continent. History held it as elaborated in The Travel China Guide
that, “the Silk Road was originally opened by the Han Dynasty. The Silk Road originated
from Xian (formerly Chang’an) through Gansu, Tianshui, Lanzhou, Hexi and
Dunhuang all inside China. The Eastern and Western countries were linked to
China through the Guanzhou Port. Guangzhou was the starting point of the
maritime Silk Road and extended through the Indian Ocean and through the
Persian Gulf and the Mediterranean into the West. This road linked China to
Roman Empire. Between 2nd century BC and 14th century AD,
Silk was a major trade commodity between China and the Europe and the silk was
transported through this route. A German geographer Ferdinand Von Richthofen
named this route the “Silk Road” in 1877. Important and beneficial cultures of
China, Persia, Arabia Greek and Rome were exchanged on this route. There were
many famous travelers who used the Silk Road and many soldiers had given up
their lives to protect the road. These have made the silk trade route “the Silk
Road” an important and historic one for international trade.  

In 2013, during
his state visits to Kazakhstan and Indonesia, the President HE Xi Jinping unveiled
the One Belt One Road initiative as part of envisioning the creation of a
maritime shipping lane and an on shore economic corridor to link Asian markets
to other parts of the world. The initiative was seen as integrated and mutually
beneficial to all parties. This was followed by the release of an action plan two
years down the lane by the National Development and Reform Commission and the
Ministry of Foreign and Ministry of Commerce. The action plan was titled “The
Vision and Actions on Jointly Building Silk Road Economic Belt and 21st
Century Maritime Silk Road.” 

Stated in the
official paper, the objective is targeted at “promoting an orderly and free
flow of economic factors, highly efficient allocation of resources and deep
integration of markets. Encouraging the countries along the belt and Road to
achieve economic policy coordination and carry out broader and more in-depth
regional cooperation of higher standards. Jointly creating an open, inclusive
and balanced regional economic cooperation architecture that benefits all”. The
Belt and Road initiative is a way for win-win
collaboration that encourages common development and prosperity and a road
towards
peace and friendship by enhancing mutual understanding and trust and
strengthening all-round exchanges. The project seeks to improve the current infrastructure
deficits as well as connecting the East to the West for trade and investments. Thus,
the Road will connect China to major European cities through Central Asia and
the Belt connecting China’s ports those in Africa and Europe.  

The 21st
Century project comes along with five thematic goals: Policy, Infrastructure
development, Trade, Finance and People. For a successful implementation of the
project, the policies of member countries must be coordinated. The countries
would adopt their own economic development strategies and policies but then, a “multy-level
inter-governmental macro policy exchange mechanism” would be established to
support each country. There would be improvement in infrastructure of the
countries. There would be construction of ports, increase in number of voyages,
improvement in the aviation system, improvement in energy infrastructure,
communication networks, Science and Technology as well as exchange of personnel.
There would be improvement in custom services in the countries and a joint
enforcement of trade liberalization policies. “A single-window system will be
established in border ports” (Fung Business Intelligence Center, 2015). The
fourth goal is Financial Cooperation. There would be a joint effort in
strengthening the member counties currencies, the establishment of new Bond
market and currency swap deals, equity and private funds, Asian Infrastructure
Investment Bank and the Silk Road Fund. Finally, there would be exchange of
technical knowledge and experts in the key areas thus creating people-to-people
bonds for the successful implementation of the project.  The diagram below show the geographic coverage
of the ambitious One Belt One Road Project.

 

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COUNTRIES INVOLVED BY
GEO/CONTINENTAL LEVELS

OBOR is said
to create a harmonious co-existence among the partner countries. Currently,
there are over sixty-five (65) countries identified along the OBOR project and
according to the World Bank Classification of Countries, the list of these
countries are tabulated below.

Region

Country

East
Asia

China,
Mongolia

Southeast
Asia

Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,
Thailand, Timor-Leste, Vietnam

Central
Asia

Kazakhstan,
Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan

Middle
East
and North Africa

Bahrain,
Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi
Arabia, Palestine, Syria, United Arab Emirates, Yemen

South
Asia

Afghanistan,
Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka

Europe

Albania,
Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina,
Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Latvia,
Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia,
Slovakia, Slovenia, Turkey, Ukraine

Source: The
Belt and Road Initiative: 65 Countries and Beyond.

 

The
sixty-five (65) countries covers 38.5% of land surface area, 62,3% of the world
population, 30% of World’s GDP and 24% of the world’s household consumption
(World bank Database). So far, this project covers about one half of the world.

Furthermore,
HE President Xi Jinping had noted that the project is an open, win-win project.
This means that the project is a platform for all countries and institutions to
join and share in its cost and benefits. The project is to bring greater
opportunities for development of the countries and so long as other countries and
international organizations are willing to contribute to bringing the world
together on an equal level, these parties are welcomed. According to Helen C,
& Winnie H 2016, forty-eight (48) nations have shown interest in the
project. These forty-eight countries have shown different forms of interest
including Transport infrastructure cooperation, Bilateral Cooperation and Asian
Infrastructure Investment Bank (AIIB). These countries are likely to join the
existing sixty-five and become actual participant in the OBOR project.

 

FUNDING AND PROGRESS

This project is overwhelmingly glamorous in people’s mind but with
a spot of doubt as it is too expensive to achieve. The BRI was estimated to
cost over $1trillion. The skepticism here is whether China is going to fund
these projects all alone, or the member countries would share in the costs, and
if the latter were true, at what point in time would the countries make commitment
to the overall cost.

As the project is very huge, the Asian Infrastructure Investment
Bank (AIIB) was established and headquartered in Beijing. AIIB was founded by fifty-seven
(57) member countries. The AIIB was established with a $100billion funding from
the member countries. Another funding called the Silk Road Fund was also
established with about $40 billion investment. The third funding sources is the
New Development Bank. Members of BRICS countries would fund this bank. An
estimate of $100 billion was expected to be made to fund the New Development
Bank. Thus by summing these three already established funding sources, am
amount of $240billion is ready to kick-start the ambitious project. This leads
to an investment gap of over $760billion fund to raise. So far, China and the
Chinese banks are the largest contributors to the funds. The question of
whether China and Chinese private sector would finance the deficit or the
member countries needs to contribute to the project. Obviously, there should be
a limit to the amount China should finance. This is because, prior to the
launching of the BRI, China’s foreign reserves were around $4 trillion and the
banking sector of the China’s economy was booming. As of June 2017, China’s
growth has slowed down and the balance sheets of the Chinese banks were “saddled
with doubtful loans” (Alicia G Herrero, 2017) and China’s foreign reserves
reduced by $1 trillion due to huge capital outflow. This suggest that China should
set a limit to which it’s foreign reserve should not fall in order to maintain
the confidence level in the country. Partners to the BRI would have to
contribute to the success of the project but it is uncertain as to the time
their financial commitment will upsurge.   

According to (Yeroen, V. & Joshua, Y., 2017), the BRI would
take about thirty years to complete. Thus by 2050 when China is celebrating its
Centenary, the BRI would be an important milestone of China and for the rest of
the world especially the beneficiary countries. 
However, the BRI remains a blueprint, “long on rhetoric and short on
Implementation, with little signs of a step change” (Helen, C., & et 2015). Series
of meetings were held with the most recent one held in May 2017 and was
attended by twenty-nine (29) Heads of States. This was an inaugural meeting to
promote the BRI for International recognition and co-operation. Akin to the
European Railway, system the Belt and Road Initiative is said to ease movement
of finished goods.  

 

SOME OPINIONS ON BELT
AND ROAD INITIATIVE.

China’s initiative is seen as having the capacity to change
Economic and Political landscape of Asia and Europe. There have been varied feelings
and opinions about the Belt and Road Initiative since the project covers almost
half of the world and different countries are affected at different levels.

The initiative could be seen as a platform for Economic and Commercial
cooperation between China and some countries. For example, the UK places
economic and commerce first in the initiative. Although the Belt does not
extend to the UK, the country is planning to respond proactively by obtaining a
share in the Asia Infrastructure Investment Bank (AIIB) as well as exploring
opportunities for its companies in the infrastructure development business and
for its financial sector. One critical opportunity envisaged was Cooperation
with Chinese companies in those markets along the Belt and Road so that the UK
can build on her already existing works in those countries. This response from
the UK re-emphasize the flexibility and openness of the initiative for any
country to join as stated by the President of China HE. Xi Jinping.

On another breadth, the Belt and Road Initiative could be seen as
a Connectivity platform and a new avenue of exchange of policies regarding
transport and infrastructure investments. There are differences in trade and investment
policies implemented by China and the other parts of the world. Therefore, the
initiative could be seen as a vehicle to iron out these disparities in policies
and bring cooperation for the mutual benefit for both Chinese Companies in
outside market and foreign companies (and prospective companies) to gain access
to the Chinese markets. For example, trade policies and standards of European
Union for companies that want to enter the European market differ from
Companies that want to enter the Chinese markets. Therefore, the Belt and Road
Initiative could serve the platform to bridge the gap between these two
markets.   

Again, many have seen another potential benefit of BRI to the
world at large. The opinion raised was the enhancement of China’s diplomacy
towards the rest of the world. The Belt and Road initiative would increase the
goodwill of other nations toward China. Key example could be the enhancement of
US-China cooperation and Investments. The BRI may serve another diplomatic
bridge between the two giants to combat the causes and effects of climate
change and global warming in a joint effort. In recent times, climate change
and global warming are major concerns to all nations. As one can recall, 2016
G20 summit has seen the two nations ratified the UN Paris Agreement on climate
change and pledge to combat the canker. The two giants have promised to reduce
industrial emissions significantly by 2030. Again, the two giants have also
promised to avoid the use of certain contents in air conditioning units and
fridges that contributes to global warming. Thus, the BRI would present a
platform for the two giants to chart the course of these overlapping
international considerations that leads to a significant improvement is
environmental protection.

As countries are affected on different levels, I turned to explore
another level of impact on some other countries. Today China is known not only
as a nation with the largest population but also as the largest economy and as
net creditor nation ready to overtake from America. Therefore, the BRI has
greater implications to the US. On one side, varieties of concerns raised in
relation to the economic viability and the implications for American interest.
Key among these views are BRI-a mercantile endeavor; a pursuit of
“reestablishing Eurasia as the largest Economic market (Chance
A, 2014) and a foundation for China’s dominance and control
of the world. These feelings largely stems from the fear of future transparency
in implementation of the project. For example, during the bidding process for
projects which strategic significance spans over a long term, it is feared that
China may not allow for independence in the award of contracts or may exercise undue
influence on the partners.  

Finally, it is viewed that China is probably using infrastructure
as a “diplomatic tool” to gain power in the Eastern World. China is using its
capital market power and economic capacity to improve infrastructure in
neighboring countries to promote goodwill towards itself and to gain access
easily to markets to drive its export-oriented goal.

 

GENERAL PROSPECTS AND
OPPORTUNITIES FOR CHINA

The advantages or benefits accruing to the country from the
Belt-Road Initiative could be connected to the China’s long-term goals. These
include Expansion of Trade and Investment to foreign countries.  This is largely the prime focus of direction
of the initiative. By connecting countries together, China would be better
placed to import raw materials and export its manufactured goods thus boosting the
economy. China would also boost its foreign direct investments as it invests in
infrastructure in other countries and hence yielding greater inflows in the end.
 China recorded over nineteen percent
growth in foreign trade over the past 10 years while foreign investments also
grew up by forty- six percent (Ngai, J., Sneader K. & Zecha C,
2016).

Another equally likely prospect of the initiative is the benefits
associated with integration with other countries. The belt connecting China to
other part of Asian countries would increase China’s position due to
international or boarder trade. Under this initiative, China is more than
likely to enter in Free Trade Agreements with other countries. This would cause
import tariffs to decrease in the future. Another impact on the country is the
establishment or designation of Free Trade Zones. The Belt and Road initiative
would open the boarders of China to the rest of the world and coupled with
reduced import tariffs, China would be may establish more free trade zones in
addition to Fujin Free Trade zones, Guandong Free trade zone and others. The Belt
and Road Initiative comes along with China’s International Diplomacy with the
rest of the world.

 

POSSIBLE CHALLENGES AND
OR SET BACKS

The Belt and Road initiative would be the 21st Century
project. However, in spite of numerous benefits accruing from its implementation,
there are still some risks and challenges associate.

Some people describe
the initiative as the attempt by China to shift partner countries attention of
development from the Western world and America to China and the East through a
mutuality in trade investment as well as international relations. This largely
stems from the rate of growth and development of China and many were of the view
that China may become the world’s developed country. Also the fear and skepticism about China’s intention. People think that
China may use its financial strength and economic endowments to exert
unparalleled influence on member countries possess a critical challenge to the
successful implementation of the initiative.  Even though the President explained that the
initiative is a Win-Win one, there are still doubt in minds of many and this
has caused some countries to sit on the fence to observe how things work out. For
many people, there is a bit of doubt as whether the initiative is political or business
focused as China is on the verge of becoming the next world power.

Another challenge discovered in literature is the concern about transparency
and standards. Transparency of activities and compliance with international trade
rules set the basis of cooperation (World Street
Journal 2017). The general level of uncertainty
about the operations and lending standards of the funding bank- AIIB seems
unclear to some countries. Some commentators were of the view that lending
initiatives of China loosely preserve the environment or labor rights in countries
receiving those funds (Chance A, 2016).  On another level, some commentators fear that
China might use those economic powers to influence unduly the liberal norms in
those countries.  

 

OPINION AND
RECOMMENDATIONS

Since the major concern raised in literature is about transparency
of activities and international trade standards, I would recommend that China
should work to address these issues first using its international diplomacy
initiatives. This means that, the country should practice an open door policy
and communicate further to explain in details the intentions of the Belt and
Road initiative and about its commitment to existing international
trade norms and practices.

In addition, the other countries must remain open-minded about the
initiative. These countries should not view the initiative as China’s intention
of geopolitical competition but rather as a means of improving infrastructure
deficits in the beneficiary countries. In this regard, the stakeholder countries
should engage collaborate when there are overlapping interest rather than
compete during the implementation of the initiative. China should set up
dialogue mechanisms that would pay attention to addressing stakeholder’s
concerns.

Again during the implementation of the project, the China and
interested stake holding countries should lead the setting up of mechanisms that
would harmonize all stakeholders’ capacity to exploit areas of overlapping
interests in partner countries.

 

 

 

CONCLUSION.

The Belt and Road initiative is certainly the 21st
century project which when implemented would improve the infrastructure deficit
in the East, facilitate the trade and investment among member countries, promote
China’s image to the rest of the world and finally boosting the economy of
China.

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I'm Dominick!

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