Insights into Editorial: Xi Jinping’s big road is going to be bumpy
Insights into Editorial: Xi Jinping’s big road is going to be bumpy
Over the past decade, a richer, more confident China has attempted to assert greater global influence. President Xi Jinping has boldly presented himself as a statesman prepared to champion big global causes, from fighting climate change to promoting free trade. The most visible symbol of Xi’s ambitions is what’s now known as the Belt and Road initiative or One Belt, One Road initiative. A summit has also been organized by China which will see participation of heads from various countries to highlight the grandeur of the scheme.
What is One Belt, One Road initiative?
The One Belt One Road initiative is the centrepiece of China’s foreign policy and domestic economic strategy. It aims to rejuvenate ancient trade routes–Silk Routes–which will open up markets within and beyond the region. Through this initiative, China’s plan is to construct roads, railways, ports, and other infrastructure across Asia and beyond to bind its economy more tightly to the rest of the world.
Why is OBOR important for China?
- China is obviously going to benefit from the “Belt and Road Initiative,” but what is unclear is to what extent. Critics said that Beijing is going for a bigger role as a global superpower. With this in mind, having a direct link to major countries may not only boost its economic power, but also its political clout in both the Western and Eastern hemisphere.
- Also, many of China’s production sectors have been facing overcapacity since 2006. The Chinese leadership hopes to solve the problem of overproduction by exploring new markets in neighbouring countries through OBOR. The OBOR initiative will provide more opportunities for the development of China’s less developed border regions.
- China also intends to explore new investment options that preserve and increase the value of the capital accumulated in the last few decades. OBOR has the potential to grow into a model for an alternative rule-maker of international politics and could serve as a vehicle for creating a new global economic and political order.
- China has cash and deposits in Renminbi equivalent to USD 21 trillion, or two times its GDP, and expects that the massive overseas investment in the OROB will speed-up the internationalization of the Renminbi.
- OBOR is also seen as a strategic response to the military ‘re-balancing’ of the United States to Asia.
- China can also benefit from the New Silk Road project through other means like the easing up of growth of state-owned enterprises as well as an increase in the Chinese people’s income.
Many countries are supporting China’s OBOR initiative for the following reasons:
- Many ASEAN countries are rich in resources but lacking in construction funding which slows their economic growth, causing an infrastructure deficit and resulting in a low level of industrial development. The OBOR Initiative is probably a direct response to the ASEAN countries’ cry for help.
- Infrastructures could boost the potential for growth in many underdeveloped regions. So far, no one has been willing to build it. Many of the countries involved are unstable and corrupt, which means operating in them is especially treacherous.
Why should China be concerned?
- China’s remarkable economic ascent over the last four decades has steered clear of messy international entanglements that could undermine economic progress, and with it the public support that keeps them in power.
- While its economic rationale remains at best uncertain, the Belt and Road programme will embroil China in the tangled affairs of other countries to a degree unparalleled in its modern history. That’s an area where China’s strengths—its financial clout, skill at building infrastructure and top-down management style—aren’t likely to be much help.
- The scheme is ultimately meant to further Chinese economic interests by generating new business for Chinese companies, especially in sectors like steel and construction that suffer from excess capacity, and by promoting Chinese finance on an international stage. Participating governments could find themselves loaded down by debt from Chinese banks—all to pay Chinese companies and import Chinese workers to build infrastructure designed to expand Chinese exports.
- The Belt and Road initiative “risks stirring domestic political competition, fuelling networks of graft and rent-seeking, and not fulfilling its transformative potential”. That could spark local resistance and complaints that China is unfairly hoarding the benefits of the projects it sponsors, as has happened already in Africa and Sri Lanka.
- And while new pipelines and power plants may win China friends, especially among the poorer nations along its periphery, the fact that Belt and Road is a Chinese state initiative will create new frictions. India, for instance, has so far given the programme the cold shoulder, despite Chinese pleas.
Is OBOR a threat or an opportunity for India?
The answer undoubtedly ticks both boxes. Chinese political expansion and economic ambitions, packaged as OBOR, are two sides of the same coin. To be firm while responding to one facet, while making use of the opportunities that become available from the other, will largely depend on the institutional agency and strategic imagination India is able to bring to the table.
Way ahead for India:
India now needs to match ambition with commensurate augmentation of its capacities that allows it to be a net security provider in the Indian Ocean region. This will require the government to not only overcome its chronic inability to take speedy decisions with respect to defence partnerships and procurement, but will also necessitate a sustained period of predictable economic growth; OBOR can assist in the latter.
- Chinese railways, highways, ports and other capacities can serve as catalysts and platforms for sustained Indian double-digit growth. Simultaneously, India can focus on developing last-mile connectivity in its own backyard linking to the OBOR — the slip roads to the highways, the sidetracks to the Iron Silk Roads.
- Currently, India has neither the resources nor the political and economic weight to put in place competitive and alternative connectivity networks on a global scale. Therefore, for the time being, it may be worthwhile to carefully evaluate those components of the OBOR which may, in fact, improve India’s own connectivity to major markets and resource supplies and become participants in them just as we have chosen to do with the AIIB and the NDB.
Ultimately, though, the success of the programme will depend on how transparent and inclusive China can bring itself to be. Its leaders will have to be willing to share not just the costs, but the benefits of these projects. They will have to bring locals into the decision-making process, be more attuned to their concerns and strive to meet high environmental and legal standards.
For a government accustomed to ordering around companies and banks, the diplomatic nuance and cooperative spirit necessary to make the Belt and Road work present a steep challenge. And with so much of Xi’s international prestige now wrapped up in the programme, China could feel compelled to press ahead, no matter what disputes and financial losses ensue.