RECREATING THE SILK ROAD: CHINA’S BELT AND ROAD INITIATIVE AIMS TO BOOST TRADE ACROSS 65 COUNTRIES
By Helen Gardiner
China’s “Belt and Road Initiative” (BRI), launched by President Xi Jinping in 2013, is an ambitious plan to recreate China’s historic Silk Road and maritime trading routes connecting Asia, Europe and Africa. It covers a huge geographic area across 65 countries, accounting for two thirds of the world’s population and a third of its GDP, and is intended to increase trade flows and boost long-term regional economic growth.
“High-speed trains, railways and nuclear power are China’s new global industrial calling cards”
Connecting trade, tourism and education
Dr. Tim Summers, senior consulting fellow of the Asia Program at the international affairs think tank Chatham House, says that BRI “is about building networks of connectivity. The geographical linkages envisioned by the belt and the road are to multiple locations. And these links are not limited to physical infrastructure—President Xi has talked about connectivity in terms of trade, investment, finance and flows of tourists and students.”
He adds: “Some people see BRI as a grand geopolitical strategy for China’s dominance, but in my view it’s being driven by economic, commercial and development factors.”
Dr. Summers says that the Chinese government does not have an official list of the countries involved. “They talk about it as an open initiative and the line is that anyone can join.”
There are a number of reasons for the development of BRI, including the slowdown in China’s economic growth and overcapacity in industries such as steel, aluminum, coal and cement. Meredith Sumpter, Asia director at global political risk consultancy Eurasia Group, says: “Although Beijing has high hopes that new infrastructure construction along BRI will create opportunities for firms hit hard by China’s economic slowdown, its utility will be limited in addressing China’s overcapacity problem. However, firms in China’s power generation and rail industries are likely to benefit from Xi’s drive to build greater connectivity along BRI.”
Investing in infrastructure
HSBC’s Chief China Economist, Qu Hongbin, says that infrastructure is a key component of the initiative, including railways, roads and ports. “High-speed trains, railways and nuclear power are China’s new global industrial calling cards,” he says. And he adds: “Railways in Indonesia, Thailand, Laos and Europe are all entering the implementation stage. Nuclear power equipment and technology have been exported to Pakistan, the U.K., Argentina and South Africa. After initial heavy investment in sub-Saharan African transport networks, China is now focusing on Europe, West and East Asia plus the Middle East and North Africa.”
David Wijeratne, the Singapore-based growth markets center lead at global professional services firm PwC, says that BRI “provides excellent opportunities for China to showcase its capability in building large infrastructures globally, as its state-owned enterprises take up lead contractor roles in infrastructure projects.” He says that the initiative will also have an impact on China’s currency: “Large funding of infrastructure projects overseas helps to expand circulation of the Renminbi and internationalizes and diversifies potential currency risks.” In addition, BRI is likely to foster inter-governmental cooperation with the countries along the belt and road. “China has signed bilateral agreements with over 30 countries now, as well as providing over US$15 billion worth of infrastructure in developing countries, and BRI could help enhance geopolitical relations,” he says.
A broad vision
BRI is currently more of a vision than a practical implementation plan and most of the announcements made by the Chinese government have so far been broad and rather vague. Eurasia Group's Sumpter says: “While precise figures for BRI spending are elusive, and even Chinese financial institutions probably do not know how much they will ultimately spend on BRI, there is enough data to provide a preliminary estimate of several hundred billion dollars over the next few decades.”
As BRI is an umbrella term, it is being used to badge a collection of current, planned and future projects, as Dr. Summers explains: “A lot of this sort of activity has been going on for long time—not in a grand, coordinated way but in a localized way.” He cites the examples of rail routes between southwest China and Burma and Vietnam, and of a goods train route from the central-western municipality of Chongqing through central Asia to Europe. He also points to gas and oil pipelines between northwest China and Turkmenistan and Kazakhstan. “Chinese companies and government officials are taking BRI as an opportunity to repackage things they were already doing, or to get more funding,” he says.
While BRI is still evolving, it is likely to be of benefit to many of the countries along the route. PwC’s Wijeratne says: “Some of the activity hotspots are in Central and West Asia. China has already made infrastructure investments in Kazakhstan, Tajikistan, Turkmenistan, Kyrgyzstan and Uzbekistan. Southeast Asia is another focus of the initiative and Europe also stands to benefit from increased connectivity via greater trade and market access through Central Asia and faster, more cost-efficient logistical routes to China.” Since China has no set list of countries involved in BRI, Wijeratne says: “There will be opportunities for other regions as well as for the private sector.” The open-ended nature of BRI means the global impact could be huge.
Helen Gardiner is a freelance writer based in the UK.
