One Belt, One Road: China's New Global Strategy

“We must encourage and participate in the process of regional economic integration, speed up
the process of building up infrastructure and connectivity.” - President Xi Jinping

I. INTRODUCTION

President Xi Jinping formally publicised China’s “One Belt One Road” (OBOR) initiative while
inaugurating the Boao Forum for Asia Annual Conference at Hainan on March 28, 2015.
Simultaneously, the National Development and Reform Commission of China released the full
document at Beijing, which lays out a comprehensive plan for OBOR’s implementation in the
years ahead.1 The proposal consists of two distinct parts. One is the Silk Road Economic Belt,
stretching across Asia to the Atlantic Ocean; and the other is the 21st Century Maritime Silk
Road, linking China’s eastern sea board to the Indian Ocean and to the Persian Gulf and East
Africa.

The importance of this initiative must not be underestimated. It is the centerpiece of the
economic, political and strategic policy framework of the Fifth Generation Leadership of China
under Xi Jinping. The OBOR policy was initially meant to be a framework for greater
cooperation between Central Asia and China's western provinces in order to ensure more
balanced development within China. As China’s western provinces were lagging behind the
eastern coastal provinces the new Silk Road strategy was a way to increase trade and cooperation
from China to its western borders. The policy has however, evolved into a broader strategy for
China's engagement with the world. The new Silk Road proposes to link China to Europe with
trade and transport corridors across Central Asia and Russia. The Maritime Silk Road includes
maritime links through the Straits of Malacca to the Indian Ocean, Middle East and Africa.

1
“Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”, Beijing,
March 28,2015, Xinhua
 II. CONCEPTION & ARTICULATION OF THE INITIATIVE

The concept of "One Belt, One Road" has two characteristics: future extension of diplomatic
routes, and new aspects sought after by the Xi Jinping administration. One Belt, One Road is
seen as an abstract foreign policy by the Xi Jinping administration, but we must not overlook the
fact that this concept is being deployed atop achievements already made by the Hu Jintao
administration. China has been actively involved in regional organizations throughout the world
since the latter half of the 1990s, and has established cooperative relationships with them. One
Belt, One Road can be seen as simply a new name for the consolidation of efforts that China had
already been making in its relations with Asia, Europe, the Arab World, and Pacific Islands.

Built as a network of regional infrastructure projects, OBOR is actually much more. Through
collective and collaborative efforts, it aims to build a network of road and highspeed rail
connectivity, pipelines, ports, fibre optic cables and state of the art telecom, which will link
China to the rest of the world. On land it will replicate the original ‘silk road’; and by sea it will
connect the ports along routes traversed by Admiral Zheng He in the early 15th Century in
Southeast and South Asia and go on to West Asia and East Africa. Apart from leading to a
network of infrastructure projects, this will promote cooperation in trade and investment and
include cultural as well as people-to-people contacts. Both in scope and scale, OBOR goes well
beyond the earlier ‘routes’ or ‘roads’.

OBOR in reality is likely to be a flexible alignment and may be adjusted, curtailed or expanded
as required based on agreements and understandings with partner countries. Silk Road commerce
centuries ago was successful because traders enjoyed secure movement carrying their goods over
hundreds of kilometers. At the end of their travels there would be a secure market for trade. A
sense of order prevailed as none wished to disrupt this natural route to mutual prosperity. OBOR
provides the same opportunities and have similar characteristics, even though in these times,
these are likely to be more complex. Today, it would require free access, efficient customs
clearances, secure banking, instant money exchange facilities, comprehensive infrastructure
development, security along the routes and other amenities. Challenging as these may sound,
these are all possible to achieve with international cooperation and participation. If implemented
after careful consultation and discussion with stakeholders and developed in a spirit of
cooperation, OBOR can create a win-win situation for all. Especially as China also proposes to
fund these projects through its newly created Asia Infrastructure Investment Bank (AIIB), the
Silk Road Fund and the New Development Bank.

III. COMPONENTS, SCOPE AND COST OF THE PROJECT

Moving to the actual trajectory now, the announced geographic spread of the initiative is vast.
According to official announcements, it is calculated that the network of corridors and routes
connecting Asia, Europe and Africa will pass through more than 60 countries and regions
with a population of about 4.4 billion. 2 What is more, trade between China and Silk Road
nations is to exceed $2.5 trillion,7 and under the banner of OBOR, it will initially be funded
by the New Silk Road Fund with $40 billion, 8 in addition to receiving additional funds from
the AIIB and the BRICS New Development Bank.3

Looking at the map though, it is clear that the routes envisaged are not singular, in that they
represent networks of connections, corridors and linkages to different geographical locations.
Indeed, OBOR comprises of various arteries of overland and maritime trading routes, corridors,
highways, rail links, ports, oil and gas pipelines and other projects, connecting Asia, Europe and
Africa in one coherent web of connectivity.

In May 2015, specific policies pertaining to the "One Belt, One Road" concept were revealed. As
listed below the "six international economic corridors" would be created with an estimated total
investment of $890 billion or more for the "One Belt (Silk Road Economic Belt)", while two
routes for the Maritime Silk Road would be deployed in the center.

(1) China-Mongolia-Russia Economic Corridor Includes two economic corridors. One economic
corridor starts in Northern China, extends through Hohhot, Inner Mongolia, and reaches
2
China's Xi: Trade between China and Silk Road nations to exceed $2.5 trillion’, Sui-Lee Wee, March 29, 2015,
Bloomberg (http://www.reuters.com/article/us-china-economy-oneroad-idUSKBN0MP0J320150329)
3
Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, March 28,
2013, http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html
Mongolia and Russia. Another corridor starts in Northeast China, extends through Manzhouli,
and reaches Chita, Russia. Both rely on the Trans-Siberian Railway to connect China with
Europe. (2) New Eurasia Land Bridge (Second Eurasia Land Bridge) Economic Corridor A route
divided into three parts that connects Lianyungang, Jiangsu Province with the Port of Rotterdam
in the Netherlands.

(3) China-Central Asia-West Asia Economic Corridor Starts in the Xinjiang Uyghur
Autonomous Region, extends through the Persian Gulf, and reaches the coast of the
Mediterranean Sea and the Arabian Peninsula.

(4) China-Indochina Peninsula Economic Corridor Starts in Nanning, Guangxi Zhuang

(5) China-Pakistan Economic Corridor A 3000 km route connecting Kashgar, Xinjiang Uyghur
Autonomous Region with Gwadar Port in Pakistan. Has the role of connecting the "One Belt"
with the "One Road". An agreement between China and Pakistan to cooperate broadly in areas
such as energy, infrastructure, and industry in addition to developing Gwadar Port.

(6) BCIM Economic Corridor To be established together with Bangladesh, India, and Myanmar.
Through this economic corridor, China can promote ties with Bangladesh and India, with which
it historically did not have close ties.

(7) 21st-Century Maritime Silk Road Consists of routes from the South China Sea and the Indian
Ocean to Europe and Mrica, and routes from the South China Sea to the South Pacific. In order
to establish the Maritime Silk Road, China would concentrate its investment in 15 harbor cities
including Shanghai, Tianjin, Ningbo, and Zhoushan.

As clear from the specific measures above revealed in the middle of 2015, "One Belt, One Road"
started off as a concept and gradually turned into specific measures while the core of the concept
is still very fluid. To put it directly, China is aiming to create an economic and political sphere of
influence in the Eurasian continent through the land and maritime "One Belt, One Road"
concept. On the other hand, "One Belt, One Road" is not only a regional strategy for China but is
also a global strategy. China has only stated that "One Belt, One Road" provides a focus and
direction for cooperation, and that any nation that wishes to participate can do so without any
limits on nation or region.

IV. CURRENT STATUS INCLUDING RECENT DEVELOPMENTS

One of Beijing’s most ambitious foreign economic development initiatives aims to recreate the
legendary Silk Road. One Belt One Road (OBOR), the project wields plenty of financial muscle.
It launched in February 2014 with $40 billion, mostly drawn from Beijing’s bountiful foreign
exchange reserves.

Since then, OBOR has begun attracting other foreign investors. Singapore’s state-owned
development board has agreed to partner with China Construction Bank, committing about $22
billion to finance OBOR projects. International pension funds, insurance companies, sovereign
wealth funds and private equity funds have also thrown in on OBOR projects in search of higher
financial returns. Chinese infrastructure investment projects now span the globe.

Chinese companies have funded and built roads, bridges and tunnels across Central Asia,
increasing trade and making China the dominant economic power in the region. In 2013, trade
between China and the five Central Asian states (Kazakhstan, Kyrgyzstan, Tajikistan,
Turkmenistan and Uzbekistan) totaled $50 billion, while the five states’ trade with Russia
previously the region’s top economic player amounted to only $30 billion.

China has also redrawn Central Asia’s energy economics. Chinese companies now own close to
a quarter of Kazakhstan’s oil production and account for well over half of Turkmenistan’s gas
exports. Recently they signed $15 billion in gas and uranium deals with Uzbekistan. China is
also going global with its expertise in high-speed rail (HSR) construction. With more than twelve
thousand miles of track laid, China has more HSR than the rest of the world combined. Now
Beijing plans to build HSR networks connecting China with all of Southeast Asia.
To penetrate the struggling but affluent European market (China’s largest trading partner), China
is financing the upgrade of the Greek port of Piraeus and a $3 billion bullet train from Belgrade
to Budapest. Another network of rails, roads and pipelines, starting in the Chinese central city of
Xian, will stretch westward as far as Belgium. Beijing has already started building an eight-
thousand-mile cargo rail route between the Chinese city of Yiwu and Madrid. China is also in the
lead for building a proposed HSR in California. Equally important, are the other financial
institutions, either Chinese-based or initiated by China.

China also plans to build a $46 billion economic corridor—pipeline, rail, roads, bridges and
more through Pakistan. The goal is to establish a trade route connecting Gwadar, a port on the
Arabian Sea, to northwest China. This enormous project is driven in part by Beijing’s desire to
build additional routes for its energy imports from the Middle East—to lessen its dependence on
sea routes.

Tehran has been most receptive to Chinese infrastructure projects, hoping it will help make Iran
a key trading hub between Europe and China. Earlier this year, the first freight train from eastern
China—traveling through Kazakhstan and Turkmenistan—completed the journey in just fourteen
days, compared to forty-five days by sea. Sino-Iranian trade increased from $4 billion in 2003 to
$52 billion in 2014, and Tehran hopes to boost that figure to $600 billion over the next decade.
Naturally, the global infusion of Chinese capital has fostered some geopolitical tension as well.
Moscow, for one, is far from pleased about losing preeminence in Central Asia, a region it had
dominated for two centuries. China has built an oil pipeline from Kazakhstan and a gas pipeline
that has allowed Turkmenistan to break its dependence on Russia.

Last week Moreover, China invited Latin American and Caribbean countries to join its "One
Belt, One Road" initiative on Monday, as part of an agreement to deepen economic and political
cooperation in a region where U.S.influence is historically strong.

V. CHALLENGES FACED IN IMPELMENTATION

For all its potential, and perhaps due to its grandiose scope and size, it is evident that are many
structural challenges remaining to confront the OBOR initiative and to derail its process of
implementation. Indeed, the initiative’s geographical spread and thematic scope is such that it is
not difficult to understand that the risks and the unknowns involved in this process would be
many and varied. Economic and regulatory risks Even a basic risk analysis could indicate that
the most obvious challenge that OBOR faces is the rich tapestry of countries it is anticipated to
cover. For a project that aspires to link up Asia, Europe and Africa, and overcome physical and
other barriers that have existed for decades, and in certain cases, centuries, the objective of doing
so remains an extremely challenging undertaking. Beijing’s strong commitment to push the
project forward as actively as possible might be there, but what lies underneath the grand
announcements is a reality of countries with competing economic interests, or at least divergent
visions of how they would like the initiative to materialise within their borders, and often
beyond. At this stage, the aforementioned flexible approach employed by China has the potential
to accommodate a great deal of such differences, but as time goes by and the initiative takes a
more concrete form, this will become an increasingly laborious and arduous affair.

Such an endeavour is certainly made more challenging when one considers the kaleidoscopic
organisational and regulatory frameworks that exist in all countries, whether already
participating or expected to do so. Such policy, legal and bureaucratic mismatches between
China, Europe and all intervening transit countries range from their respective rules on credit and
payment, quality control, and insurance, to the various national legislations on labour,
environment, and human rights.

What is more, especially concerning the ‘Belt’ component of OBOR, the absorptive capacity of
certain countries is often dependent on issues of corruption, patronage and rent-seeking, which
could further complicate both the designing and the implementation of OBOR projects, and that
will most certainly jeopardize the much-needed transparency around the initiative. If not
complemented by meticulous planning, due diligence and sustained diplomatic efforts, such a
diversified field could prove to be an impeding, if not prohibitive, factor for many actors and
companies to participate in the project. Beijing is certainly mindful of the sensitivity in dealing
with all this complexity, and it has variously proclaimed its willingness to promote the project in
an inclusive, consultative manner, aimed at gradually working over these differences.
Nonetheless, such differences remain one of the most vexing challenges for the initiative’s future
success.
Geopolitical concerns Perhaps more crucially, China has to navigate through an equally, if not
more, incongruous political landscape. Looking at the Eurasian region for example, it is worth
noting that the fact that intraregional trade and connectivity has been historically low is only
partially due to economic or infrastructural underdevelopment; in most cases, the status quo
represents a depiction of chronic patterns of regional rivalry, confrontation and even conflict on a
geopolitical level. Even if one limits the focus only on the issue of infrastructure (where most
countries would not refute the obvious dividend involved), there is still an overabundance of
political sensitivities that have to be taken into account.

At the very least, countries might be willing to be recipients of infrastructure investment and
development, but many will be more than reluctant to accept a more Sino-centric rules regime
that could come tightly intertwined with such investment. In the foreseeable future, the very
existence of the initiative could also deepen rather than diffuse regional tensions both between
countries that participate and countries that do not, as well as among participant countries,
depending on the kind, location, and level of success of projects chosen for each country. This is
due to the very simple reason that, if implemented fully, OBOR has the potential to redraw the
Eurasian continent’s map. Two major regional players in the region that have already shown
signs of discomfort with OBOR along the lines of what has been described above are India and
Russia. The key issue is whether we will build our connectivity through consultative processes or
more unilateral decisions. Without a direct reference to OBOR or China, this reference was
clearly targeted to convey India’s preoccupations with various aspects of this initiative, which
include concerns about the China-Pakistan Economic Corridor that is part of OBOR and that
includes projects in territory that India claims, in addition to the way Beijing is pushing OBOR
forward and its underlying interests and motivations.

In this sense, and looking at OBOR initiative broadly, China’s readiness to expand in different
directions -both sector wises and geographically and therefore to become involved in one way or
another in a set of much wider regional realities, poses many risks on a geopolitical level.
 VI. CONCLUSION

Highly ambitious in its goals and Herculean in its proportions, the OBOR initiative has been
characterised as the ‘most significant and far-reaching initiative that China has ever put forward’.
4
If played correctly by China, the initiative has the potential of being much more than its
individual parts, elevating China both economically but also politically.

Inherent in the project’s vision and scope, both in its continental and its maritime component,
one can also trace the many obstacles that exist and that will largely decide the project’s future
success. Although the initiative is still in its early stages, critics point to the its sheer size and
ambition as the source of many vexing challenges: from the incredibly varied political,
economic, legal and regulatory framework within which OBOR will have to function, to the
political uneasiness, if not antipathy, it could create in many areas along its routes.

If the initiative succeeds, whether it is the intention of Beijing or not, this will create both an
opening and an additional layer of risk: China’s rise, not least in the economic sphere, will
embolden the country’s position internationally, yet, as the eyes of the world focus more on
China, there will be a greater degree of scrutiny regarding its praxis in the region. Whether
China’s Grand Design for its new trade routes will ultimately become a game-changer remains
an open question, yet its ‘back-to-the-future’ approach contained in its OBOR policy presents
many potential benefits for Beijing, despite the evident risks.

4
Chronology of China's Belt and Road Initiative, Xinhua (http://news.xinhuanet.com/english/2015-
03/28/c_134105435.htm)