Abstract: One Belt, One Road (OBOR) is a Chinese-led initiative that seeks to enhance Eurasian economic connectivity through the overland Silk Road Economic Belt and the Maritime Silk Road. OBOR covers 58 countries and accounts for 65% of global economic production. The initiative is managed by the National Development and Reform Commission and is financed by the Chinese government through banks and financial international institutions. OBOR has brought significant economic benefits to its participants, but some countries have not enjoyed GDP acceleration due to local high construction expenditures. OBOR serves as a strategic pivot to the West for China to improve regional security and raise political influence, as well as to address domestic economic issues such as regional disparity and excess capacity.
One Belt, One Road was launched by Xi Jinping in two phases – during his visits to Kazakhstan and Indonesia in 2013. OBOR consists of the overland Silk Road Economic Belt and the Maritime Silk Road, where Belt was to become the qualitative shift towards the Eurasian economic connectivity: according to Chinese leader’s vision networks of railways, highways, energy pipelines, new power plants and other global supply chains as well as crucial infrastructure projects should have stretched westward from China[1].
OBOR’s scope is terrific: nowadays it embraces 58 developed and emerging countries with total population of over 4 bn and economic aggregate of $21 tn – accounting for 65% in land Belt and 35% in maritime Road of global economic production respectively[2]. OBOR is the most prominent initiative that modern Beijing has ever put forward – it is estimated that the total amount of Chinese investments may exceed $1 tn by 2027[3]. In 2020, despite COVID-19 pandemic, China invested overseas $17 bn under the OBOR brand[4].
Unlike Western countries’ projects with the concrete stated numbers, plans of actions and transparency, Chinese OBOR is the initiative. It is an offer to other players to find some win-win cooperation opportunities with China on the pragmatic basis. Since 2013 a plenty of bilateral projects in Asia, starting from trade and finishing infrastructure investment, were implemented under the OBOR label [Shapiro 2017]. On behalf of the Chinese government OBOR is managed by the National Development and Reform Commission (NDRC) – country’s top economic planner body[5].
OBOR is financed by Chinese government through banks – China Construction bank (中国建设银行), China Development bank (国家开发银行), Export-Import bank of China (中国进出口银行). And also, through Beijing-led financial international institutions: Silk Road Development Fund – the total capital $40 bn, BRICS New Development Bank with $100 bn capital and AIIB with the same capital amount [Carrai 2018]. Thus, AIIB is one of the driving forces of OBOR – in 2020 the AIIB’s overall portfolio accounted for $22 bn or 15% of the whole OBOR’s investment[6].
The Eurasian states highly welcomed Beijing’s investment initiative for two reasons. Firstly, Asian countries, especially Central Asian, couldn’t meet their infrastructure demands on their own due to the poor economic performance. Simultaneously, the regional necessity for the new infrastructure sharply increased: Asian Development Bank estimated $1.7 tn infrastructure investment were required yearly from 2016 to 2030 in Asia to maintain its growth, cope with the poverty, and respond to climate change[7]. Secondly, OBOR realization brought obvious economic benefits to its participants: transport infrastructure projects increased national GDPs by 2.8% and coordinated tariff reduction lowered costs. However, some countries-participants didn’t enjoy GDP’s acceleration due to local high construction expenditures[8].
From the Beijing’s point of view, OBOR started in the right place and at the right time. Since the collapse of the USSR Russian influence in the Central Asia was declining and the USA didn’t truly pay too much attention to regional economic connectivity. The Japanese-led Asian Development Bank (ADB) was trying to improve regional infrastructure conditions for years, but its capacities were not enough. For example, the overall ADB portfolio made up only $116.5 bn up to 2020[9].
China carried out OBOR as a strategic pivot to the West on two purposes. First: Beijing-led regional production chain would raise its political influence in the Chinese Western periphery. It is important strategic move against the background of sharpening global competition with Washington and the US proactive attempts to organize anti-Chinese regional QUAD coalition[10]. Also, stronger ties between Beijing and its Western neighbors would improve Chinese regional security – this was emphasized by President Xi in 2013 at the Peripheral Diplomacy Work Conference[11].
Second: to deal with the domestic economic issues like regional disparity and excess capacity. Development of Western China is one of the important government’s economic policy objectives. For instance, in 2019 the incomes of people in East China were almost two times higher than in West. GDP of Shanghai is bigger than the GDP of the whole Gansu province (甘肃省)[12]. The regional OBOR infrastructure construction and integration with neighbors’ economies already increased people’s incomes in Western China by 5.5%[13].
In 2008 China used infrastructure construction as the economic growth acceleration after the financial crisis, however, this led to creation of huge excess capacity in industrial sectors, especially in steel and cement production. In 2015 Chinese overproduction was 300 million tons[14]. Chinese government found another mechanism to partially cope with this issue via OBOR: China finances infrastructure projects, constructed by the Chinese companies which are using domestic materials (90% of all OBOR projects were built by Chinese enterprises[15]), later the host countries have to repay the loans.
Conclusion: OBOR is a significant initiative that serves as a critical element of China’s foreign policy and economic development. The initiative has brought substantial benefits to its participants, including improved infrastructure and coordination, as well as increased economic growth. OBOR also serves as a strategic pivot for China to enhance its political influence in the region and to address its domestic economic issues. Despite criticisms of its lack of transparency and potential debt issues, OBOR represents a substantial opportunity for global cooperation and development. As the initiative continues to expand and develop, it will be important to monitor its progress and assess its long-term impact on the region and the world.
[1] Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, Ministry of Foreign Affairs, 2015, available at: https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1249618.shtml
[2] George Magnus, Financial Times, 2015, available at: https://www.ft.com/content/6e8e7f74-f26d-11e4-b914-00144feab7de
[3] Inside China’s Plan to Create a Modern Silk Road, Morgan Stanley Research on China and trade, 2018
[4] 博鳌亚洲论坛旗舰报告:面对疫情考验 “一带一路”建设展现出强大的韧性和活力, available at: https://www.ccdi.gov.cn/yaowen/202104/t20210418_239843.html
[5] Michael D. Swaine, “Chinese Views and Commentary on the “One Belt, One Road” Initiative”, 2015, available at: https://www.hoover.org/sites/default/files/research/docs/clm47ms.pdf
[6] 2020 AIIB annual report and financials, available at: https://www.aiib.org/en/news-events/annual-report/2020/home/index.html
[7] ADB, “Meeting Asia’s Infrastructure Needs”, 2017
[8] Francois de Soyres, Alen Mulabdic, Michele Ruta, “Common transport infrastructure: Welfare effects of the Belt and Road Initiative”, VoxEU, 2019, available at: https://voxeu.org/article/welfare-effects-belt-and-road-initiative
[9] ADB, APPR, 2020, available at: https://www.adb.org/sites/default/files/institutional-document/697726/appr-2020.pdf
[10] Derek Grossman, RAND corporation, 2020, available at: https://www.rand.org/blog/2020/07/the-quad-is-poised-to-become-openly-anti-china-soon.html
[11] 央视网, 习近平在周边外交工作座谈会上发表重要讲话, 2013, available at: http://www.xinhuanet.com//politics/2013-10/25/c_117878897.htm
[12] Annual disposable income per capita of residents in China in 2019, by geographic region , available at:https://www.statista.com/statistics/1184088/per-capita-annual-income-in-china-by-geographic-region/
[13] Julia Bird, Mathilde Lebrand, Anthony J. Venables, “The Belt and Road Initiative Reshaping Economic Geography in Central Asia?”, World Bank report, 2019, available at: https://openknowledge.worldbank.org/handle/10986/31536
[14] Understanding China’s Belt and Road Initiative, Lowy Institute, 2017, available at: https://www.lowyinstitute.org/publications/understanding-belt-and-road-initiative
[15] Jacob Mardell, “Dispute settlement on China’s terms: Beijing’s new Belt and Road courts”, MERICS, 2018, available at https://merics.org/en/analysis/dispute-settlement-chinas-terms-beijings-new-belt-and-road-courts
