Belt, Road built on reciprocity

It is a vision with world-changing implications, an unfolding plan that will weave much of Asia, Europe, Africa, Oceania, and the Middle East much more closely together through a patchwork of diplomacy, new infrastructure and free-trade zones.

In China, where it is big news, the blueprint's architects are calling it the One Belt, One Road initiative. Yet for many people in Europe, this grand design, for all its undoubted importance and the bold, far-reaching ambitions that are driving it, remains little known.

However, several weeks ago it finally took concrete shape. On a visit to Pakistan on April 20, China's President Xi Jinping unveiled the first major project to be funded by the $40 billion (35.9 billion euros) Silk Road Infrastructure Fund that China has set up to make the One Belt, One Road initiative a reality. The project is a $1.65 billion hydropower plant on the Jhelum River in Pakistan's northeast.

President Xi Jinping is accompanied by his Pakistani counterpart Mamnoon Hussain (left) and Pakistani Prime Minister Nawaz Sharif on arrival at Nur Khan air base in Rawalpindi in April. Xi unveiled the first major project to be funded by the $40 billion Silk Road Infrastructure Fund, which China has set up to make the One Belt, One Road initiative a reality. Lan Hongguang / Xinhua

 

And the Karot Hydropower Project, which is a subsidiary of China Three Gorges Corp, is due to begin building before the end of this year, was the subject of just one of 51 agreements worth a total of $46 billion that leaders of the two countries signed.

More than 30 of the agreements relate to a keystone of the One Road One Belt initiative, creating a 3,000 kilometer economic belt and trade corridor linking the Xinjiang Uygur autonomous region of China to Gwadar Port on the Arabian Sea. The projects given the green light include an upgrade to Gwadar Port, a new airport, roads, rail links and resource pipelines.

Kamel Mellahi, professor of Strategic Management at Warwick Business School in Britain, says the investment will shorten China's energy import route from the Middle East and transform Pakistan into a regional economic hub.

"This is China's Silk Road strategy in action," he says. "Regional connectivity is the main objective of the strategy, and there is little doubt that we are going to see similar, albeit not this large, Chinese investment projects in other parts of Asia. It's a win-win project for all involved."

Last month a government official working on the One Belt, One Road initiative, Ou Xiaoli, said China's leadership had already approved a list of big-ticket infrastructure projects.

Although details about the location and nature of the other projects are yet to be made public, the news came after official documents issued in March confirmed the scope of the plan China hopes to forge in consultation with more than 60 countries and regions.

The "vision and proposed actions plan", issued by China's State Council, calls for stakeholders to "jointly push forward the construction of international trunk passageways and form an infrastructure network connecting all sub-regions in Asia, and between Asia, Europe and Africa, step by step".

It also reveals China is advocating a network of free-trade and bonded zones, and massive cross-border financial reform, potentially across three continents.

The initiative is dominating discussion in political, business and media circles in China and has begun to gain more attention in Central and Southeast Asia.

But in Europe, One Belt, One Road continues to be accompanied by a question mark.

So what exactly is it?

The idea was first floated by President Xi in late 2013 and aims to create a contemporary equivalent of the Silk Road trade routes that linked Asia and the Mediterranean in ancient times. But the contemporary Belt and Road will attempt to go well beyond bales of Chinese silk on swaying camel backs or crates of spices crossing oceans on trade winds.

Professor Kerry Brown, director of the China Studies Center at Sydney University, says the initiative seeks to create a "massive free-trade zone", a "belt of prosperity" and "an area of common economic interest" that in part leverages the shared cultural and historical narrative of the ancient Silk Road.

"It's a relatively easy way of China demonstrating more regional importance without people leaping up and down and saying, 'This is China being too domineering.' It stresses reciprocity. Presumably, it's going to involve things that all the countries (involved) want to embrace. So far the idea has been embraced. There are a lot of other countries keen on it. People haven't been getting too uneasy."

While the scope and scale of China's initiative remains hazy, Professor Rana Mitter, director of the University of Oxford China Centre, says what could be interpreted as a lack of detail may be planning flexibility on the part of China.

"I suspect there's been a great deal of planning behind the scenes in various think tanks and institutions in China to put flesh on the bones of the idea, but I suspect there's also a certain amount of flexibility of mind. Ever since the era of opening-up and reform, there's been a willingness to be flexible on economic thinking in China. I think it will be likely that in this particular case, there will be a certain amount of understanding that one will have to adapt to circumstance as the policies are put forward and things actually change."

Sheng Shiliang, a researcher at the Development Research Center of the State Council, one of the think tanks helping to shape the One Belt, One Road policy, describes it as a means for countries to "connect development strategies with each other and make their respective advantages complementary to each other".

The connections will be literal, Sheng says, creating physical trade routes and integrated zones of economic collaboration that stretch north, west and south of China.

"The One Belt emphasizes creating passages (from China's) west and south. It includes a road that will connect to Europe through Central Asia and Russia, a road that connects (China) to the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia, and a route through Southeast Asia, South Asia and the Indian Ocean. The One Road will head southwards. It will include two routes, one from coastal ports in China to the Indian Ocean through the South China Sea that eventually goes to Europe, and another from coastal ports in China to the South Pacific Ocean through the South China Sea."

Arterial roads suitable for freight trucking and heavy traffic, new airports and deep-water ports, and international, conventional and high-speed rail lines are all options that either experts have predicted or the Chinese government has floated.

In the Pakistan deal, almost all of these options have been employed.

Brown says a high-speed railway linking China to places like Europe and Russia is a "perfectly doable deal".

"The idea of having fast trains to get from Beijing to Moscow in a couple of days, or even into Europe, would be revolutionary," he says.

"Its actually been talked about. It's not an issue of technology. The capital probably is there. It's kind of a question of all parties agreeing and feeling like they get something, and (then working out) who pays what."

Bu Shaohua, research assistant with China's Research Institute of the Foreign Ministry, says participating countries will be connected with a patchwork of old and new infrastructure.

"It is a mixture of both (old and new), he says. "In some areas we need to improve the railways that exist, but in other areas we need to build new ones, like those connecting Kazakhstan, Turkmenistan and Iran, and the south Caucasus area."

But beyond physically connecting participating counties, the initiative will also seek to create trade and financial compatibility.

This, the experts say, is the wild card in the deck that could prove to be either the easiest or most difficult to play.

Sheng says: "At present the level of economic collaboration between China and other countries along the road is not good enough to set up free-trade zones, but there is no doubt that free-trade zones will eventually become a reality."

Brown says a common economic framework in Asia has been lacking for a long time.

"They (Asian economies) don't easily work together at the moment because their economic levels are all different, the sophistication of their finance markets is different. In one fell swoop, this One Road, One Belt kind of creates a world in which economically, everyone's path ends at the door of China. But it's not a path that people are unwilling to walk. It's not a political domination; it's more like a stressing of mutual benefits."

But for all the mystery that enshrouds the initiative for some people, the biggest question mark that hangs in the air may be who is going to pay for what.

Fifty-seven countries have signed on as founding members of the new China-backed Asian Infrastructure Investment Bank, the establishment of which Brown sees as a sign that China is "willing to offer some capital support".

In addition to the $100 billion for the bank's coffers, China has also established the $40 billion Silk Road Fund, and in March private investors created the 30 billion yuan ($4.8 billion; 4.3 billion euros) Green Silk Road Fund.

But while Brown says it is possible China will provide some countries along the road with low-interest, long-term loans - similar to those given in Africa for big infrastructure projects - he believes that for the most part Beijing will be seeking investment partners.

"I think that they will probably look for reciprocal deals where part of the money comes from China and part of the money comes from elsewhere. I think they would want a pretty big benefit, or it would have to be a pretty important sector for them to go ahead solo. I don't think China at the moment is in a position where it is going to be a big giver of charity. It wants reciprocity and shared risk, and I think that's more sustainable."

The other big question international commentators have been grappling with is China's motives for the One Belt, One Road initiative. Some pundits see it primarily as a push for more diplomatic clout.

Mitter says the initiative is "a new vision of geopolitical order in which China is seen as a cooperative, responsible power that brings something to the table in terms of a recasting of order.

"The idea of the Silk Road strategy, I think, is very much to try to go to the next stage in terms of this idea or a new offer in international order. I think that the only way that such an order can be successful is if there are advantages to be found on all sides," he says.

"Clearly other actors, whether it is countries or international institutions, are not going to sign up to a new vision of order where they are going to be disadvantaged compared to the present scenario. Therefore, if China is taking a leadership role in this, it has to think very carefully and very strategically about how it can bring that about."

Professor Yang Cheng of East China Normal University says that beyond politics, China's economy needs the plan to work, particularly because making landlocked western China a trade gateway to Europe and Asia and the Middle East will provide the long sought after springboard for the region to develop.

"We need it in both political and economic terms," he says.

"As China is undergoing economic transformation, economic growth is slowing down. Against the background of this new normal (lower GDP growth as a result of economic restructuring), we should find a new engine for development. So we need to seek new markets to export our products. Another domestic problem is that the level of development in the eastern, central and western regions of China is not balanced. The central and western regions lag behind the eastern region (in turns of development and) in going global. This problem is urgent because it affects our sustainable development."

Brown says it is possible that, like in Africa, Chinese companies will most likely benefit from any infrastructure boom in Asia driven by the initiative. In the case of the recent Pakistan deal, Chinese companies have won contracts to build and operate a number of facilities, including the new hydropower dam.

However, Brown says that just because One Belt, One Road is good for China does not mean it is not good for other countries, too.

Inherent in the need to get countries on board is the opportunity for other players to get what they want, he says.

"They (participating countries) can probably get a lot from this engagement if they are very clear about what they want," Brown says.

Mitter agrees.

"One would imagine that there would be a whole variety of people coming out of Beijing going and saying to a variety of potential partners, 'What is it that will help you to buy into this vision?'"

Beyond Asia, Mitter sees clear opportunities for Europe, too.

"One thing that will clearly be advantageous for the UK and Europe as a whole is the possibility of access to a much more integrated trading area in Eurasia. I think what seems key here is free-trade agreements. If free-trade agreements are actually signed up and genuinely offer a reduction of the current investment barriers that exist in large parts of the region, that will be a huge advantage."

Bu says the new transport routes will transform economically stagnant parts of southern Europe.

"The current sea transport between China and Europe mainly relies on Western Europe, such as the ports in Rotterdam and Hamburg. If the high-speed transport corridor at sea and land between China and Europe proposed by Premier Li Keqiang is constructed, South Europe will become another important transport hub. Many other such railways are being planned."

Brown says the benefits of One Road will probably go two ways, with participating countries able to get more access to sell their goods and services in China's growing consumer market.

But that may still be far off.

Mitter says China's challenge of juggling a changing domestic economy at home while pushing forward with One Belt, One Road outside its borders cannot be understated.

Brown says that when it comes to the kind of financial reform, new infrastructure and free-trade agreements the initiative calls for, China has a big incentive "to do it, and do it quickly".

"I think they'll want to see some kind of specific returns quite soon, even in the next seven or eight years. I think they will want to see action and joint projects and some increases in trade volumes. I don't think they are in it for the short term. I think they are thinking 10, 20 and 30 years down the line. I think its both a short- and long-term strategy."

Contact the writers through josephcatanzaro@chinadaily.com.cn