China's belt and road initiative

Daily: Weekly Cutting Edge
Date: 01.08.18

China has achieved the status of being able to refute the myth that its containment is
possible. On a two-day summit on May 14 and 15, 2017, the assembly of 28 heads of
states and representatives from 110 countries of the world in Shanghai, China, was a single
major myth-busting success of the foreign policy of Chinese President Xi Jinping. One
portion of the initiative would pass through Pakistan as the China-Pakistan Economic
Corridor.

In September 2013, Jinping laid out his vision for the Silk Road Economic Belt in a speech
in Astana, Kazakhstan. In October 2014, China set up the Asian Infrastructure Investment
Bank (AIIB) with 50 billion dollars in capital, and the (new) Silk Road Fund with 40 billion
dollars. The AIIB is given the task of building infrastructure and promoting trade across the
Asian continent.

The “one belt, one road” or the OBOR initiative can be divided into two halves. The belt
part (or the “new Silk Road”) is China’s dream to revive the ancient trade routes between
China and its western neighbours in South Asia and Central Asia to Europe. The road part
is China’s vision to develop new trade routes in the seas around China, roughly along the
routes that had once been sailed by the great admiral, Zheng He, during the Ming dynasty.
The objective of the OBOR initiative – a combination of an overland belt and a maritime
road – is to connect China with Asia, Africa and Europe through infrastructure
developments including constructing highways, railways, pipeline, ports and power grids.

China joined the World Trade Organisation (WTO) in 2001 and then China did not look
back. Kevin P. Gallagher writes on page 189 of his book, The China Triangle: Latin America’
s China Boom and the Fate of the Washington Consensus, published in 2016: “China’s new
development banks have arisen from at least two motivations. [First,] China has
accumulated an enormous store of wealth and savings that it seeks to diversify by making
big investments across the world. Second, China feels slighted by the West for not being
given a greater role in the Bretton Wood institutions [such as World Bank (WB) and
International Monetary Fund (IMF)]. In 2010, the IMF passed significant reforms that would
have given China and other emerging economies a greater say. Those reforms, however,
have been stalled in the US Congress. Since China wasn’t let into existing institutions, it has
begun to create its own. These institutions now have levels of capital at their disposal that
of the Western-backed development bank. The World Bank holds just over 200 billion
dollars in capital and has just over 500 billion dollars in assets. The CDB [China
Development Bank] holds 100 billion dollars in capital, and has over 1 trillion dollars in
assets.”

Xi has pledged 124 billion dollars to the initiative. It is expected that the plan would funnel
investment of 502 billion dollars into 62 countries over the next five years. Though China
depicted its belt and road initiative as an effort to make a walloping unprecedented
investment to benefit many, the initiative is having at least nine implications.

First, China is reshaping international trade. In the past, European traders used to visit Asia
to get access to its resource- rich lands, followed by European armies occupying areas for
long-term benefits. Now, Asian countries are making roads to connect themselves to
European markets to sell their agriculture and industrial products.

Second, China is clamoring for opening international markets rather than closing them in
the name of protectionism. Contrary to protectionist efforts of US President Donald Trump,
China has tried to increase the number of stakeholders in its anti-protectionism effort by
inviting 28 leaders from various parts of the world.

Third, China is trying to neutralize the Pacific pivot to Asia introduced by the US in the
South China Sea in November 2011. Though the priority for the pivot plummeted in 2014
after the involvement of the US in Syria, the presence of any pivot in the South China Sea
loses its significance if China finds an alternative path to connect with the world
commercially through the belt and road initiative.

Fourth, China is cooperating with Russia. Contrary to the Cold-War era when China
distanced itself from the former USSR, this time China is taking Russia along. Russia, which
has already been rejected by Western Europe, has turned East. In the belt and road
initiative, Russia finds not only an alternative path to connect itself to Europe but it also
finds an unhindered access to the warm waters of the Arabian Ocean.

Fifth, China is promoting inclusiveness leaving no country of Asia out of the ambit of the
belt and road initiative. In May 2014, in Astana, Kazakhstan, Russian President Vladimir
Putin signed the founding treaty of the Eurasian Economic Union which today consists of
Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. The treaty came into force in
January 2015, and is an attractive platform for the rest of the states that once comprised
the former USSR. In December 2012, Former US Secretary of State Hillary Clinton
denounced Russia’s effort for Eurasian integration as an attempt to “re-Sovietize” the
neighbourhood and announced that the emergence of a new version of the Soviet Union
under the ruse of economic integration would be discouraged.

Sixth, China is reinforcing interdependence. Compared to the past, when countries
remained aloof from one another within their political boundaries, the belt and road initiative
has the potential of connecting about 62 countries of Asia including Central and Southeast
Asia, the Middle East, North Africa and Europe constituting about half population and more
than half the resources of the world. The governing formula is a win-win partnership which
will bring economic prosperity and peace to the countries inter-connected.

Seventh, China is yearning for economic globalization. Instead of greater political links
based on political needs, China sees solutions for the problems in the world in greater
economic links on the basis of economic needs: geo-economics is taking precedence over
geo-politics. Nevertheless, the US still questions the political intent of China for its vision of
economic globalization.

Eight, China is focusing on infrastructure development. Through offering an infrastructure
connectivity, China is offering a chance to the developing countries of Asia and Africa to
stimulate economic growth, spur development and reduce the gap of development between
themselves and the developed countries of the world.

Ninth, China is developing an international clout. Contrary to the past when China remained
self-contained, through its belt and road initiative, China is connecting three main regional
economic blocs: Association of Southeast Asian Nations, African Union and the European
Union. The clout is primarily in the economic sphere but will have a political impact.

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