As advertised by Beijing, the “One Belt, One Road” (OBOR) initiative, China’s grand scheme for knitting a network of roads, ports, railways and other links from East China through Southeast and South and Central Asia all the way to Europe exceeds both in scope and ambition the Marshall Plan used to rebuild Europe after World War II.

The “belt” of land-based links is paired with a 21st century “Maritime Silk Road” stretching from Australia to Zanzibar. Chinese President Xi Jinping launched the OBOR initiative in 2013, two years after then-U.S. President Barack Obama initiated the Trans-Pacific Partnership (TPP) trading bloc across the Pacific region. Now that Obama successor Donald Trump has carried out his pledge to withdraw from the TPP, the expectations are that Chinese-backed strategies like the OBOR will gain momentum. China experts say that this is a positive development, but there is skepticism over whether Beijing will follow through with the gargantuan amount of funding needed, whether big debt-financed projects bankrolled by China will benefit the recipient countries, and whether those projects will actually make sense in the long run.

For many countries in the region, China is by far the biggest source of financing: Beijing’s Export and Import Bank of China alone lent $80 billion in 2015, compared with over $27 billion from Asian Development Bank. Chinese involvement in building railways, ports, roads, dams and industrial corridors is helping to expand its economic and geopolitical sway across Asia, the Middle East, Europe and Africa.

China experts and economists say that the initiative makes sense and that it will accelerate as the U.S. turns more insular under Trump. “It is unfortunate that many U.S. diplomats and members of the previous administration worked for nearly a decade to push toward the TPP and now it is torn apart,” says Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. The U.S. is turning its back on the rest of the world at a time when the world needs an open and engaged America, he says. “It is very likely and understandable that China … will try to fill those gaps with this initiative, and that is very logical — it’s something the U.S. will later deeply regret,” Kuijs says.

The OBOR effort has not gotten the degree of attention it deserves, says Pieter Bottelier, visiting scholar of China studies at Johns Hopkins School of Advanced International Studies in Washington, D.C. “I am concerned that its significance is underrated in the U.S. and West in general. I think it is a very positive initiative and a major vision of how China can collaborate with countries in its neighborhood, Europe, Latin America and Africa in a way that is in the long-term interest of China and [the global economy],” Bottelier says.

“I am concerned that its significance is underrated in the U.S. and West in general.” –Pieter Bottelier

The geopolitical aspects of the OBOR initiative could eventually draw attention from the Trump administration, given its strong stance on national security. “It is an economic initiative, but along the way China will expand its military bases and so forth,” says Wharton emeritus professor Franklin Allen, who also is a professor of finance and economics at Imperial College in London. “On the sea routes they will develop their military capability and on the land routes, too.”

China OBOR

China’s OBOR

From Kuijs’ point of view, Beijing views the OBOR initiative as a strategy needed to support its growing economic might. “Many outsiders are skeptical and do not know exactly what it is, but it is taken very, very seriously by the Chinese government and we should take this very seriously,” he says. “The Chinese government is thinking, ‘We are the second-biggest economy in the world, and it may take 10 years or 20 years but we will be the world’s biggest economy at some point.’”

While it is sweeping in scope like the stalled TPP, which aims to create a trading bloc around the Pacific Rim, the “One Belt, One Road” plan is not a free trade agreement. It’s more of a blueprint for integrating China’s trading partners by developing their infrastructure — ports, roads, airports and railways — in a way that complements Beijing’s own interests. Infrastructure-led development worked well for China, in Beijing’s view, and now it wants to expand that approach internationally, Kuijs says.

The “One Belt” refers to a “Silk Road Economic Belt” from China through Central Asia to Europe. The “One Road” refers to Beijing’s concept of a “21st century Maritime Silk Road” to connect China to Europe via the South China Sea and Indian Ocean. The initiative involves developing six economic “corridors”: 1. a China-Mongolia-Russia corridor; 2. a new Eurasian “Land Bridge”; 3. a corridor from China to Central Asia and Western Asia; 4. a China-Indochina peninsula corridor; 5. a China-Pakistan economic corridor; and 6. a Bangladesh-China-India-Myanmar economic corridor.

Chinese President Xi Jinping said in his speech at the World Economic Forum in Davos, Switzerland in January that more than 100 countries and international organizations have given warm responses and support to the initiative and that more than 40 countries and international organizations have signed cooperation agreements. So far, Chinese companies have made over $50 billion of OBOR-related investments and launched a number of major projects in the countries along the route, he added. At least 65 countries are included in the OBOR initiative.

Unanswered Questions

While the grand vision is laudable, there are many unanswered questions: How would it be done? And what would be the project, environmental and engineering standards implemented under this umbrella?

“There would be serious doubts over protection of minority populations and environmental concerns,” Bottelier says. As for the scale of OBOR, there’s no consensus over how many projects it would involve at what cost and in what time frame. “It is pretty obvious that there is no limit to the amount of infrastructure that is needed in those countries.”

The Japan and U.S.-led Asian Development Bank says infrastructure development in Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. In a recent report, “Meeting Asia’s Infrastructure Needs” issued in February, the estimate rises to over $26 trillion, or $1.7 trillion per year when costs for climate change adaptation and mitigation are included. “This is a grand vision, and it may take a decade, but there is no rush. You cannot really put any number on the total investment,” says Rajiv Biswas, Singapore-based Asia-Pacific chief economist at IHS Global Insight.

“One Belt, One Road is relevant for Europe since China wants to link its rail to Europe. So, China wants Europe to be part of [OBOR], but not as a key driver.” –Rajiv Biswas

The China-led Asia Infrastructure Investment Bank, or AIIB, is seen as a linchpin for OBOR financing. So far, however, it has provided only $1.73 billion to support infrastructure projects in seven countries, including Pakistan, Bangladesh, Tajikistan, Indonesia, Myanmar, Azerbaijan and Oman since it was launched in January 2016.

Noriyoshi Ehara, chief economist at the Tokyo based Institute for International Trade and Investment, says the financial infrastructure for OBOR is gradually taking shape. Apart from AIIB, China also has a US$40 billion Silk Road Fund and a New Development Bank to fund the

1, 2  - View Full Page