The Silk Road Economic Belt (SREB) component recreates an old Silk Road land route which was launched during the Chinese Western Han dynasty by Zhang Qian. The Silk Road was an ancient land route across Europe and Asia that connected traders and travellers from regions like the China, Persia, and the Roman Empire. Merchants used to transport silk and other commodities by camel or horse along those roads (Alexandra Ma, 2018).
The initiative focuses on connectivity and cooperation between Eurasian countries, primarily the China (Belt and Road Initiative, n.d.) and was unveiled by Xi Jinping in September and October 2013 during visits to Kazakhstan and Indonesia, and was thereafter promoted by Premier Li Keqiang during state visits to Asia and Europe (Belt and Road Initiative, n.d.).
It is a massive trade and infrastructure project that focuses on improving connectivity and economic cooperation among multiple countries spread across the continents of Asia, Africa and Europe (One Belt One Road, n.d.). The initial focus has been infrastructure investment, education, construction materials, railway and highway, automobile, real estate, power grid, and iron and steel. The OBOR is one of the largest infrastructure and investment projects in the world history, covering more than 68 countries, including 65% of the world's population and 40% of the global GDP as of 2017 (Belt and Road Initiative, n.d.).
The OBOR addresses an "infrastructure gap" and thus has potential to accelerate economic growth across the Asia Pacific area and Central and Eastern Europe. This programme aimed at encompassing countries, financially, receive the support of Silk Road Fund and Asian Infrastructure Investment Bank (Belt and Road Initiative, n.d.).
OBOR’s Importance to China
OBOR is of prime significance to China as it aims to boost its domestic growth, and is also a part of the country’s strategy for economic diplomacy. By connecting the less developed border regions like Xinjiang with neighboring nations, China expects to bump up economic activity. OBOR is expected to open up and create new markets for Chinese goods, and will also enable the manufacturing powerhouse to gain control of cost-effective routes to easily export materials. Any excess capacity in terms of production can be channelized effectively to regions along OBOR routes. China has announced investments over $1 trillion in the various infrastructure projects, and is funding them by offering low-cost loans to the participating countries (One Belt One Road, n.d.).
Many participating countries, like Kyrgyzstan and Tajikistan, are positive about OBOR owing to massive investments by China in local transmission projects in these nations. Landlocked Nepal has recently joined OBOR by signing a deal that will help it improve cross-border connectivity with China, and Pakistan is set to benefit from the $46 billion China Pakistan Economic Corridor (CPEC) that will connect South Western China to and through Pakistan, allowing access to Arabian Sea routes (One Belt One Road, n.d.).
While China continues to pitch OBOR as an all inclusive project for regional development, other nations perceive it as a strategic move by China to attain significance and control at a regional level, and to play a larger role at the global level by building and controlling a China-focused trading network. With US President Donald Trump posing challenges for Asian nations through measures like trade tariffs, China sees it as an opportunity to emerge as a regional leader. (One Belt One Road, n.d.).
The OBOR enables China to make more efforts to internationalize and promote the use of Renminbi in the OBOR region. Currencies complicate cross-border transactions. A widely usable Renminbi would reduce costs of trading, account settlement times, financing shortfalls and exchange-rate risk for Chinese businesses. BRI countries such as Russia, Iran, Pakistan, Malaysia, Vietnam and India are increasingly using Renminbi for trade settlement. They’re quite underdeveloped and they need to rely on China’s fast economic development. Lately, a new Iranian hydroelectric dam that is using Renminbi for payments (Joshua Bateman, 2018).
The Belt and Road countries are expected to use the Renminbi as a reserve currency in the future. This year, for example, Pakistan’s central bank announced that it will replace US dollar reserves with Renminbi (Joshua Bateman, 2018).
Chinese language is expected to be Asia’s future lingua franca. Read Why Learning Chinese Is Important ?
Benefits of the OBOR
OBOR aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration as well as social and cultural cooperation (Grace Xavier, 2018).
Since the launch of OBOR in 2013, a lot of progress has been recorded. China has reached consensus with a number of countries and agreements have been signed. Many projects on improving infrastructure connectivity with respect to the construction of railways, energy pipelines and electricity have been initiated (Grace Xavier, 2018).
Frameworks of financing mechanisms have formed; for example, the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund are operational. Projects have started, with a train connection between eastern China and Iran that may be expanded to Europe. New rail links connecting Thailand and Laos are underway. There are high-speed-rail projects in Indonesia. On the Maritime Route, negotiations have begun with China’s Ningbo Shipping Exchange and the Baltic Exchange (Grace Xavier, 2018).
OBOR is designed to open up new markets for Chinese goods and technology. China would be able to move factories overseas to more less developed countries. Economies of less developed countries may improve as they would then be linked with neighbouring countries through OBOR (Grace Xavier, 2018).
The projects planned under OBOR could be beneficial to the partner countries in that short-term unemployment woes may be resolved. Construction crews will build the necessary infrastructure for the movement of trade between the belt and the road, and there will also be increased employment in trade and industry-related sectors (Grace Xavier, 2018). As of March 2017, Chinese firms have contributed 180,000 job opportunities and nearly $1.1 billion in tax revenue along the OBOR routes (Dai Tian, 2017).
The participating countries getting greater access to China as well as other interconnected markets along the proposed routes. Smaller and landlocked countries will gain from the increased accessibility (Grace Xavier, 2018). For example, Kazakhstan is a landlocked country in Central Asia, and as its winters are very cold, there is barely any vegetable production. One Belt One Road connects Kazakhstan and the northwestern Chinese Xinjiang Uygur Autonomous Region. The cross-border trade of vegetables provides Kazakhstan’s people with their basic needs (Judy Lu, 2018).
Another example of OBOR comes in the form of the trade routes of Brunei. Brunei has abundant oil and gas resources, but the nation lacks the material for producing oil and gas pipelines. Liaoning, a province in northeastern China, provides $2.123 million in financing loans, and Huludao City Steel Pipe Industrial Co., Ltd. produces 100,000 tons of oil and gas pipelines. This investment not only generates $100 million, but it also offers more than 300 job opportunities (Judy Lu, 2018).
Other benefits include infrastructure improvement will result in increased investment from China and the partner countries and result in lowering of costs of transporting goods to countries according to the economies of scale and availability of better infrastructure. Furthermore, the exchange of ideas, information and technology among the partner countries will be enhanced (Grace Xavier, 2018).
The Bottom Line
One Belt One Road shortens the distance between each country and promotes the global economy, and will hopefully see ongoing progress and generate benefits for every participating country (Judy Lu, 2018).
Edited by: 浪子
Bibliography
Belt and Road Initiative. (n.d.). Retrieved from https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
One Belt One Road. (n.d.). Retrieved from https://www.investopedia.com/terms/o/one-belt-one-road-obor.asp
Alexandra Ma. (2018). Inside ‘Belt and Road,’ China’s Mega-Project that is Linking 70 Countries Across Asia, Europe, and Africa. Retrieved from
https://www.businessinsider.my/what-is-belt-and-road-china-infrastructure-project-2018-1/?r=US&IR=T
Grace Xavier. (2018). Benefits and Risks of the OBOR Partnership. Retrieved from
https://www.nst.com.my/opinion/columnists/2018/07/388961/benefits-and-risks-obor-partnership
Judy Lu. (2018). How One Belt One Road Benefits Developing Countries. Retrieved from
https://borgenproject.org/one-belt-one-road-benefits/
Joshua Bateman. (2018). One Belt, One Road, One Currency. Retrieved from
https://www.gfmag.com/magazine/june-2018/one-belt-one-road-one-currency
Dai Tian. (2017). 180,000 Jobs Generated by Belt and Road Initiative. Retrieved from
http://www.chinadaily.com.cn/business/2017-03/11/content_28519694.htm
China's One Belt and One Road Initiative (OBOR)
Reviewed by 浪子
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October 13, 2018
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Reviewed by 浪子
on
October 13, 2018
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