One Belt, One Road: a Primer on China’s Ambitious Infrastructure Initiative
China has a long history of massive infrastructure projects from the Great Wall to the Three Gorges Dam but it has embarked on an initiative that will dwarf them all. Unveiled by President Xi Jinping in 2013, the plan was to revive the historical Silk Road trade routes through the construction of vast railways, bridges, roads, ports, and power stations to connect 65 countries across Asia, the Middle East, Europe, and Africa. The colossal undertaking was dubbed: One Belt, One Road (OBOR).
History of a Name
The name was derived from the two routes components of the ancient silk trade. The overland roads encompassing Central Asia, Russia, Turkey, and Europe are called the Silk Road Economic Belt. On the other hand, the sea lanes are named the Maritime Silk Road. It passes through the West Philippine Sea, the Indian Ocean, the Persian Gulf, the Red Sea, and the Mediterranean, and involves the countries that border them, such as the Philippines and the ASEAN, India, Pakistan, and Iran, Saudi Arabia, and Egypt. Combined, these countries contain 62 percent of the world’s population and 30 percent of its economic output.
68 countries have already signed up, becoming recipients of a China willing to spend an estimated $150 billion a year on infrastructure projects. The plans and financing worth $900 billion are slowly being realized, such as:
- An overland rail link to connect East Asia to Russia and Europe
- A host of projects under the China-Pakistan Economic Corridor (CPEC) including a 1,100 kilometer motorway between Karachi and Lahore
- A three thousand km railway between China and Singapore
- An airport and industrial zone in Hambantota, Sri Lanka
- A rail link from Piraeus, Greece to Budapest, Hungary
- Gas extraction in the Arctic
And even more OBOR or Belt and Road Initiative (BRI) projects are on their way.
Not all countries that are part of the Belt and Road welcome the investments. Some are distrustful of Beijing or simply have other agendas. The Belt and Road Forum held last May, 2017 was attended by 29 heads of state, including President Rodrigo Duterte, but it wasn’t attended by India, which is disturbed by CPEC, and only a few European leaders sent a major presence.
Building a Better Economic Future
China’s incredible infrastructure campaign might seem overly ambitious but the rising dragon has its reasons. First, Beijing hopes to open and create new markets for the Chinese economy. Its excess manufacturing capacity couldn’t be absorbed by its domestic and existing overseas markets; the country needs new customers or it might face a permanent economic slowdown. Pursuing all these infrastructure projects also enables China to diversify its foreign-exchange reserves and move away from low-interest-bearing American securities. Additionally, the investments are supposed to pacify Beijing’s volatile neighbors. Ultimately, OBOR aims to create a Eurasian economic and trading area dominated by China.
To fund all this, the Chinese government has created a Silk Road Fund with an initial capitalization of $40 billion. It is also encouraging private companies to invest in OBOR projects. Chinese firms have already contributes a total $50 billion while companies other countries are getting into the action. As Foreign Minister Wang Yi explains, “[OBOR is] not China’s solo but a symphony performed by all relevant countries.”
Business in OBOR countries can expect a boost as the investments pour in. Many parts in Asia, including the Philippines, are hungry for new infrastructure to facilitate internal and external trade, manufacturing, and business in general. Construction, steel, petroleum, and power firms might be the initial beneficiaries but as the roads, railways, and electric generators are built, other sectors will follow. Consumer businesses will also see gains as people are put to work and gain more purchasing power.
There are risks. But it is dependent on the political institutions of the OBOR countries. Weak institutions and governments might take in far more debt than it could pay, which places greater strain on the other initiatives.
OBOR is a grandiose vision but it might be exactly what the countries in it need.