China's Belt and Road aka the New Silk Road

China’s One Belt, One Road (OBOR). Belt and Road. The New Silk Road. It’s known by many names, but what exactly is it? Bruno Macaes’ wonderful book, Belt and Road, explains it all.

 

Most of us know/think of OBOR as an “interconnected system of transport, energy, and digital infrastructure”, cutting across land in Central Asia to connect China to Europe, and also creating sea routes from the Middle East to China via Pakistan or Bangladesh or Myanmar. China calls it all for “trade”, while India, Japan and the West worry over the “thinly disguised military element” of OBOR.

 

The idea for OBOR started in 2008. As the financial crisis brought to the West to its knees, China’s steel industry got hit hard. China’s own infrastructure needs wasn’t enough to compensate for the recession in the West. Ergo, China decided that it needed new markets to “absorb China’s steel production”. But for that it needed countries of Central Asia to have road connectivity (they’re all inland countries, without ports), and they’d need to get richer to buy Chinese goods. And trains from Europe to China would have to pass via Central Asian countries. So where exactly does OBOR end?

“The geographic scope of the initiative remains vague and indeterminate.”

 

While it may have started off as a means to create new markets for Chinese exports, policy makers soon realized it could serve other purposes. As China grows richer, manufacturing (in China) will get costlier. If the Central Asian countries got richer, perhaps manufacturing jobs that were no longer sustainable in China could be moved there. And China could then import cheaper goods from there. China is planning for the day when it would need to be the outsourcer!

 

China’s economic growth is currently restricted to the coast. The more inland you go, the disparity from the coasts gets worse. A road and train network for trade running inland from China to Central Asia (and from there to Europe) would benefit those inland, poorer provinces of China.

 

In addition, China wants to secure cheap and reliable access to Middle Eastern oil. The current route is too close to Indian waters, and at risk in the Straits of Malacca with American naval bases all around. A pipeline from Pakistan and/or Bangladesh (or even better Kolkata. Yes, Kolkata was a major port in OBOR’s initial plans, until India opted out) to China would eliminate those risks.

 

Further, China understands that they can’t keep burning carbon fuels. That level of consumption would destroy the planet. But alternate sources like wind, solar, electrical and nuclear power are too expensive. But that could change if China created a market for those sources not only in China, but in the still growing countries of Asia and Africa.

 

China resents the power of the US dollar. But making the Chinese yuan/renminbi an international currency isn’t easy. What if the OBOR investments (and repayments) in those countries was done in Chinese currency? Wouldn’t that nudge the yuan/renminbi closer to an international currency? China’s policy makers certainly think so.

 

Today, most standards are owned and controlled by the West. Often, they have license fees. It’s not easy to get a new standard accepted. But China hopes that the OBOR would tie so many countries to China via loans, trade and possibly military ties that it would then become easier to push Chinese standards across those regions, thereby creating an alternative framework than the current one.

 

Did you find all that informative but also confusing? You’re not alone:

“No one knows if it is meant to represent a road, railway or something less material, such as influence or power.”

In fact, China likes things to be that way:

“One of the main advantages of working within a framework as vague and ductile as the Belt and Road is that different policies can actually be pursued simultaneously… It is deliberately intended to be informal, unstructured and opaque.”

 

But make no mistake about it – China is very serious about it:

“The Belt and Road was included in the Chinese Communist Party’s Constitution, an entirely unprecedented honour for a foreign policy or infrastructure initiative, ensuring that it will become a core principle, impossible to abandon.”

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