April 17, 2015
China recently unveiled an action plan for its controversial One Belt, One Road initiative to link its economy with the rest of Asia, Africa, the Middle East and Europe. Known as the ‘new silk roads’, it combines new infrastructure networks of roads, railway lines, ports to strengthen trade, investment, and people-to-people cooperation.
The initiative will have a profound impact on other countries in Asia and Africa. There are potentially negative environmental consequences, as new huge infrastructure projects plough through areas such as the rugged yet fragile Karakoram mountains. Deep social transformations seem certain too as stronger infrastructure comes to isolated regions, for instance the restive areas of northern Myanmar.
China has estimates the total benefit stream for participating investors and firms could be as high as US$ 21 trillion.
The three main routes approximiate to historic trade routes linking China with the West, and have been dubbed the New Silk Road, South Silk Road, and the 21st Century Maritime Silk Road.
The timing of the initiative is critical. China’s current development strategy envisages an infusion of economic growth, reaching deep into its still-underdeveloped interior. The trajectory follows on an internationally-orientated plan to export finished products, while importing much-needed raw materials from Africa and the Middle East.
Despite criticism that the initiative is China’s grand strategy for global domination, the catchphrase among China’s planners suggests it is essentially an outward-looking plan that aims to fulfill domestic economic needs first: planners call it youwaizhinei, or ‘to bring the outside in’. President Xi Jinping is betting his political future, and the continued legitimacy of the Chinese Communist Party, on this initiative. The hope is it can bring help restructure China’s growth model and deliver successful reforms.
Scrutiny should therefore focus on assessments of the efficiency of the various interlocking projects — these include a proposed railway running through Laos, which will cost more than the small, landlocked country’s annual GDP, and seven large-scale distribution ports circling Africa’s coastline.
A key question is whether Xi can deliver real benefits from the initiative in time to stave off China’s economic slowdown, given that construction of the One Belt, One Road system will take more than a decade.
Some analysts have suggested the cheap financing and aid packages attached to the plan are part of a political strategy for China to placate its neighbours — many of whom are riled by territorial disagreements in the South China Seas — with trade incentives and cash.
However, Yun Sun, resident fellow and China foreign policy expert at the Stimson Center in Washington DC, thinks there is more to the initiative than external strategic and political calculations. “The plan is primarily an economic campaign designed to serve China’s economic restructuring and export needs. It will benefit the region, as well as China,” she says.
A useful comparison can be drawn with the US Marshall Plan for Europe, which acted as the keystone to economic recovery after World War 2, and the cornerstone of global institutions such as the Bretton Woods system.
While there is no guarantee the One Belt, One Road initiative will deliver the local and global economic benefits that China hopes for, it is worth remembering that unlike the Marshall Plan, China has no economic restructuring model to offer the rest of the world, and its status as a soft power has not necessarily improved.
China’s public relations crisis
Despite the initial fanfare, the One Belt, One Road initiative will be no easy sell. China’s record in regard to economic development in mainland Southeast Asia is patchy.
Vietnam has stringently followed China’s export-led growth model but is stoking up economic problems, unless it considers a different strategy. Even in poor countries like Laos, consumers prefer Thai or even Vietnamese products to Chinese exports, and scant evidence exists to demonstrate the image of “made in China” goods is improving.
The record of Chinese firms abroad in regard to environmental protection and labour practices is abysmal in countries such as Laos, Myanmar, and Cambodia, with no evidenced improvement in corporate social responsibility practices.
Tied to this, Xi Jinping’s anti-corruption crackdown may expose widespread graft in many of China’s overseas infrastructure development projects. Moreover, Xi is pledging to break-up the monopolies of many of China’s powerful state firms – construction and energy firms are already in his sights. Thus, it is unclear who will build the One Belt, One Road projects.
Liu Jinxin, regional logistics expert and chief architect of the Bangladesh-China-India-Myanmar Corridor (a westward leg of the South Silk Road), says that the greatest challenge facing the One Belt, One Road strategy is in China’s public relations strategy.
“Too many have misunderstood China’s intentions, and factions, particularly within democratic countries, and will misinterpret the benefit flows that this plan will deliver,” he says.
Liu also cites the need for harmonising legal structures between partners in sectors related to trade, commerce, and logistics. “China will learn the most from this process, specifically through interaction with countries in Europe where the rule of law is strong.
His point is illustrated by Thailand’s refusal to pass a regional cross-border transportation agreement, sponsored by the Asian Development Bank and ratified by China and other mainland Southeast Asian states. Ratification of this agreement would require the break-up of many entrenched factions within Thailand’s customs and inspection agencies and the military.
The plan, though short on details, sets out its broad priorities as:
﹡Rail connections from China to European ports, via economic corridors across Mongolia-Russia and Central Asia.
﹡Construction of oil and natural-gas pipelines, regional power grids and transmission lines.
﹡Investment in fibre-optic networks, information technology, new energy and bio-technology.
﹡The Mekong River region, which China has previously identified for economic cooperation, is to become an international transport corridor connecting Yunnan province with Southeast Asia. The China Pakistan Economic Corridor also gets a mention, though so does almost every other regional economic plan of recent years is also mentioned.