BRIAN EYLER·Who’s afraid of China’s One Belt One Road Initiative?

A month ago China unveiled an action plan for China’s controversial One Belt, One Road initiative. The action plan introduces a series infrastructure development projects and trade related agreements along three Silk Roads emanating from China and reaching as far as Europe, Africa, and South America. It undoubtedly will be the subject of scrutiny as analysts and pundits on both sides of the Pacific chime in to make hasty comparisons to China’s 14th century maritime expansion and the more recent U.S. led Marshall Plan. Some may even go as far to equate the One Belt, One Road to Japan’s pernicious WWII era East Asia Co-Prosperity Sphere – this analogy, to the Chinese, is ultimately insulting.

Scrutiny and false comparisons aside, China and the world will be made economically better off by a successful implementation of the One Road, One Belt initiative. China estimates the total benefit stream for investors and firms that participate in the initiative to reach an astronomical USD 21 trillion. Moreover, the prospects of such benefits are particularly timely at a time when global aggregate demand is on a downslide. During a series of fall 2013 visits to Asian neighbors, China’s president Xi Jinping first announced the One Road, One Belt proposal as an umbrella concept describing three economic belts extending westward from China toward Europe and Africa. The three economic belts roughly follow historical trade routes linking China with the West and are known as the New Silk Road, South Silk Road, and the 21st Century Maritime Silk Road (See map).

According to the Chinese Foreign Ministry, the initiative seeks to strengthen economic collaboration, improve road connectivity, promote trade and investment, promote currency conversion, and bolster people-to-people exchanges. The timing of the initiative is critical. China’s current development trajectory requires an infusion of economic growth emanating from its under-developed interior using an outward focused plan to export its finished products abroad while importing much needed raw materials and foodstuffs from the rest of the world.

The catchword among the planners of the Belt and Road system is youwai zhinei (由外至内) or ‘to bring the outside in.’ This concept reveals the actual logic of the plan as an outward looking plan that fills domestic economic needs first. Xi Jinping is betting his political future, and by extension, the continued legitimacy of the Chinese Communist Party, on this plan to solve China’s economic woes and deliver successful reforms. Thus, criticism should not pontificate on how the initiative is China’s grand strategy for global domination, but rather focus on assessing the efficiency of the various related project and prognosticating whether Xi can drive the initiative’s benefits home in time to stave off an economic slowdown.

To address current criticism, pundits are quick to draw historical comparisons to when Ming dynasty Admiral Zheng He, a court eunuch whose naval fleets, sailed as far as the east African coastline collecting tribute and expanding China’s sphere of influence. To be sure, Zheng He’s ships were equipped with soldiers and were not simply diplomatic missions. However, historian Jeremiah Jenne Executive Director of The Hutong in Beijing says, “Zheng was not trying to conquer or colonize in the name of the Ming Court. China gets into a lot of trouble in contemporary diplomacy because there seem to be elements in the foreign policy and military establishments and a whole swath of the general population who have trouble separating tributary arrangements from actual control and sovereignty.”

Jenne’s comments are generally made in reference to China’s historical claims to most of the South China Sea, many of which are based on Zheng He’s naval explorations. However, on equal measure, Western detractors of the One Belt One Road plans should also not claim Zheng He as a world conqueror or challenger to the status quo.

Some analysts suggest the cheap financing and aid packages attached to the One Belt One Road plan are part of a political strategy for China to placate its neighbors over territorial disagreements with trade incentives and cash. China indeed ill-advisedly attempted this strategy in the mid 1990s with its economic cooperation strategies vis-à-vis mainland Southeast Asia, but its track record with this strategy, particularly with Vietnam and Indonesia is spotty and has not produced desired results.

Yun Sun, resident fellow and Chinese foreign policy expert at the Stimson Center in Washington D.C. does not quite agree with the view that One Belt, One Road is motivated primarily by strategic and political calculations. She says, “The plan is primarily an economic campaign designed to serve China’s economic restructuring and export needs. It will benefit the region, as well as China.” She admits the initiative will inevitably have a political impact and Beijing conceivably sees the political benefit as a part of the package.

“Using the counter-factual approach,” continues Sun, “China would still pursue One Belt, One Road without South China Sea disputes, so we can’t really say that the South China Seas or mending ties due to disputes there is the cause of China’s One Belt One Road.”

The post-WII Marshall plan which successfully lifted both the US and Europe out of its post-WWII economic woes and acted as the keystone to US led global restructuring models such as the Bretton Woods system indeed serves as a useful comparison to the One Belt, One Road initiative. While we should be mindful that there is no guarantee the plan will deliver the local and global economic benefits that China hopes for, we should be more mindful that unlike the Marshall Plan, China has no economic restructuring model to offer the rest of the world, its stock of soft power is not necessarily improving, and this plan, still in its proposal stage, will be no easy sell.

To provide a comparison, China’s scorecard in regard to economic belt and road development in mainland Southeast Asia is murky and has contributed much to its current reputation rising regional power with unclear intentions. Vietnam has stringently followed China’s export-led growth model and as a result is currently heading toward dire and inexorable economic straits unless it considers other alternatives. Even in poor countries like Laos, where mid-to-high-value Chinese exports are not preferred to Thai or even Vietnamese products, scant evidence exists to demonstrate the “Made in China” image is improving.

The record of Chinese firms abroad in regard to environmental protection and labor practices is abysmal in countries like Laos, Myanmar, and Cambodia with no evidenced improvement in corporate social responsibility practices. Tied to this, Xi Jinping’s anti-corruption crackdown will reveal deep corruption and graft in many of China’s overseas infrastructure development projects. Moreover, Xi Jinping is pledging to break-up the monopolies of many of China’s powerful state firms – construction and energy firms are already in his sights – thus, it is unclear who will build the One Belt, One Road projects.

To reiterate, these are the issues that deserve scrutiny and attention rather than the high-level rhetoric of China’s grand strategy.

Liu Jinxin, regional logistics expert and chief architect of the Bangladesh-China-India-Myanmar Corridor (a westward stretching leg of the South Silk Road – see map), says that the greatest challenge facing the One Belt, One Road strategy is in China’s public relations strategy. “Too many out there misunderstand China’s intentions, and factions, particularly within democratic countries, will misinterpret the benefit flows that this plan will deliver.” Liu also cites the need for harmonizing legal structures between cooperative partners in sectors related to trade, commerce, and logistics. “China will learn the most from this process, specifically through interaction with countries in Europe where the rule of law is strong. However, since China’s legal system is not based on rule of law, it will be difficult for China to emerge as a conversation leader on this initiative. In many ways China’s role is passive.”

Thailand’s refusal to pass a regional cross-border transportation agreement sponsored by the Asian Development Bank (which China and other mainland Southeast Asian states have ratified) is reflective of Liu’s commentary. The ratification of this agreement would require the break-up of many entrenched factions within Thailand’s customs and inspection agencies as well as the military – a move these powerful groups are unwilling to budge on despite Thailand’s overall enthusiasm for economic cooperation with China.

When applying a critical eye to the One Belt, One Road initiative, its best to begin with a consideration toward the feasibility of such a project and looking at China’s real capabilities. Many worthwhile questions arise amidst such an inquiry, and certainly no one should take for granted that China can pull such an endeavor. The functionality of the initiative is to push China successfully through its next wave of economic reforms promising further stability to East Asia and delivering a substantial contribution to global economic growth. （APRIL 24, 2015，http://www.eastbysoutheast.com/）

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Comment by 用心涼Coooool on July 13, 2015 at 5:34pm: Narrowing US-China Perception Gap on “Silk Road” Proposals

The “One Belt, One Road” strategy can be considered an upgraded version of China’s “going out” strategy in the Xi Jinping-Li Keqiang era, and may also be a new topic for Xi and U.S. President Barack Obama at their APEC meeting.

“One Belt” refers to the “Silk Road Economic Belt” Xi proposed during his September 2013 Central Asia visits in Kazakhstan. “One Road” stands for the “Maritime Silk Road” Xi proposed in the Southeast Asian country of Indonesia last October. With one route extending from China to the central and western parts of Eurasia, the other from China to the Pacific and Indian oceans, the proposed “belt” and “road” are like two wings of a flying eagle.

Since the end of last year, the proposed “belt” and “road” have been an important component of Chinese diplomacy, comprehensive reforms, and economic work at the central level, and will inevitably be a new factor affecting China-US relations. Since they are new, a perception gap is inescapable between China and the US. The two sides need to enhance communication, narrow differences, and prevent strategic misunderstandings and their potential negative consequences. By now, two differences have already emerged regarding the proposals:

One is about the significance of the proposed “belt” and “road”. China takes the “belt” and “road” as embodiments as its ideas of “community of common destiny” and “amity, sincerity, mutual benefits and inclusiveness”, and concrete measures for the “going out” strategy in the Xi-Li era. The “Silk Road” is becoming a major hot topic of all walks of life in China. Party and government authorities at all levels have placed considerable emphasis on it in their work. Taking advantage of the new concepts, industrial and financial sectors are creating a huge cake of opportunities and interests. New and traditional media outlets are running special columns on it. Civil institutions and non-governmental organizations are working on various exchange programs. A fresh round of “Dunhuang craze” and “Maritime Silk Road craze” is on the rise in literary and art circles. Think tanks, colleges, and consulting companies are convening all kinds of forums and symposiums to contribute wisdom. In contrast, US leaders, government, media and scholars have shown little interest. Some American scholars liken it to a mirage, tantalizing yet difficult to materialize, because their goals are too ambitious, their contents numerous and jumbled.

The other has to do with their nature. The proposed “belt” and “road” are pure propositions for economic cooperation, which are open and meant to provide public goods for the region’s common development. However, some American strategists take the proposals as Chinese macro strategies in the deceptive disguise of the “Silk Road,” which could be a strategic tool for challenging, even transforming, regional or international order. They see the proposed “belt” and “road,” BRICS Bank, Shanghai Cooperation Organization Bank, and Asian Infrastructure Investment Bank as attempts to create a new regime and challenge U.S. hegemony.

Therefore, China and the U.S. should take measures as soon as possible to strengthen communication over the proposals, narrow differences, build consensus, and make the proposed “belt” and “road” positive factors that facilitate the new-type major-country relationship between the two countries, rather than the opposite. This first calls for the two sides to conduct communication via a shared concept. Though the proposed “belt” and “road” are all-inclusive and multifarious in contents, the concept of “global interconnectivity” can to some extent apply to past and present, east and west, south and north, as well as all stake holders.

Interconnectivity is a widely accepted international concept. Global interconnectivity is a fundamental trait of the era of globalization. The Silk Road itself was a history of global interconnectivity that lasted 25 centuries. The Silk Road was a major artery of economic, political, cultural and ideological exchanges between East and West, which involved Eurasia, North Africa, and the Middle East. If we take into consideration of the export of Chinese china and tea, as well as the inflow of Mexican Silver into China, it had even reached the American continents. This means all countries related to the Silk Road are stake-holders. Therefore, even former US Secretary of State Hillary Clinton had also raised the idea of a “New Silk Road,” which reflected the global and open nature of the Silk Road.

At the same time, any country’s strategy of open development can be perceived as an organic part of global interconnectivity. Over the past thousands of years, there in deed have been traceable rules and laws in the development of global interconnectivity: First, major countries should have shared aspirations, and not pull the rug from each other’s feet. Second, peace boosts prosperity; war and turmoil result in a fiasco. Third, fulfilling others is fulfilling oneself; a mutually beneficial relationship. Fourth, eradicating barricades to global transport and communication delivers universal benefits.

For the last 30 years, China’s rise and global interconnectivity have been synchronous, mutually facilitating, and mutually complementary. In that very process, the US, as the most important pusher for global interconnectivity and creator of global public goods, has to a great degree helped China’s rise. Today, with the tremendous energy for development it has accumulated, China is capable of providing regional, even global, public goods through interconnectivity construction, which is naturally conducive to the US’ own development. The proposed “belt” and “road” constitute a Chinese version of global interconnectivity strategy, which is universally beneficial and inclusive. The benefits will be both logical and obvious. It is thus crucial to make it very clear to the US.

Zhai Kun

Professor, Peking University

Zhai Kun is a professor at School of International Studies, Peking University, and Eminent Person and Expert of ARF.

(http://www.chinausfocus.com/ Nov 12, 2014）

Comment by 用心涼Coooool on July 13, 2015 at 5:02pm: Ben Simpfendorfer: What Does China's Silk Road Policy Mean In Practice?

The Silk Road is one of the world’s most powerful brands, perhaps even bigger than Disney or Coca-Cola KO +1.18%. In my conversations across the region, whether speaking with a Chinese policy official or Egyptian taxi driver, simple mention of the Silk Road brings immediate recognition.

By adopting the concept to explain China’s own regional ambitions, President Xi Jinping has leveraged the brand at little cost. And his early November announcement that China would fund a $40 billion Silk Road Fund rightly caught news headlines around the world.

And yet trying to decipher the implications of China’s strategic ambition is less straightforward. What does it mean in practice?

Scale matters when it comes to China

There is speculation that China’s Silk Road policy, more popularly known as ‘One Belt, One Road’, is intended to support the country’s GDP growth at a time of slowing domestic activity. But that isn’t going to happen; China is simply too big and most of the Silk Road’s economies too small.

Just consider that China’s five largest provincial economies would rank among the Silk Road’s 10 largest economies; or the fact that Bangladesh, Cambodia, Laos, Mongolia, Myanmar, Pakistan, and Tajikistan collectively have a GDP smaller than southern Guangdong province.

To be fair, the policy will benefit individual Chinese firms, especially smaller and midsized firms. But it’s critical to recognize that the benefits to national GDP from China’s One Belt, One Road policy are more likely to be felt by the country’s neighbors rather than by China itself.

Are you aligned with government policy?

I’ve heard concerns from multinationals that foreign companies will be squeezed out from bidding on construction projects in many Silk Road countries as a result of the policy. This is always a risk, but CEOs should always be considering the political benefits to aligning themselves with China.

The opportunities lie in the reality that many Chinese companies, aside from the largest, lack truly global operations and so may struggle to realize the government’s ambitions. Many may find it helpful to collaborate with foreign companies in areas where they lack capabilities.

This would result in not only financial gains, but also political gains. It’s a common practice for local and foreign companies to align themselves with Beijing’s policy priorities. Being helpful to China is a strategy that can reap rewards and the One Belt, One Road policy offers similar opportunities.

A public versus private Silk Road

For all the tendency to focus on China’s biggest state-firms building out infrastructure, it’s the country’s private sector that will ultimately determine whether the policy is a success at home as they make the most of improved market access and distribution.

There are early signs of success, such as in India where Chinese smartphone makers are already seeing strong market share gains: Xiaomi talks of investing in local research and development capabilities and Gionee recently sponsored Bollywood’s annual music awards extravaganza.

And yet, they are also in the minority. Speaking with C-level executives across a range of foreign multinationals in Southeast Asia earlier this year, I was struck by the number who said they aren’t yet bumping up against serious Chinese competition. They can see it coming eventually, but not just yet.

Infrastructure isn’t just about capital

There are signs that China is already having an impact on the region’s infrastructure. Speaking with Karachi-based industrialists a few weeks ago, I heard reports of Chinese construction companies widening roads in Sindh and building small hydroelectric dams in Punjab.

The Silk Road Fund and Asian Infrastructure Investment Bank will only add to the momentum as they provide much needed capital, technical expertise, and possibly an intention to take a light touch with respect to the environmental and social safeguards that slow down the World Bank’s capacity to invest.

And yet the region’s infrastructure shortfalls aren’t just capital related. Corruption, bureaucracy, and litigation are equally important and it’s not clear whether the Silk Road Fund or AIIB will be any more successful in forcing projects through where delays aren’t purely capital or expertise related. (6/15/2015 Forbe Asia Follow Ben Simpfendorfer)