China's One Belt, One Road

It is an attempt by the Chinese to secure global dominance at a time when the United States is stepping back, and on the domestic front to keep growth and wealth strong for decades to come.

More than 2,000 years ago, China’s imperial envoy Zhang Qian helped to establish the Silk Road, a network of trade routes that linked China to Central Asia and the Arab world. The name came from one of China’s most important exports—silk. And the road itself influenced the development of the entire region for hundreds of years.

In 2013, China’s president, Xi Jinping, proposed establishing a modern equivalent, creating a network of railways, roads, pipelines, and utility grids that would link China and Central Asia, West Asia, and parts of South Asia. This initiative, One Belt and One Road (OBOR), comprises more than physical connections. It aims to create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural cooperation.

China wants ‘new Silk Road’ One Belt One Road project to help it dominate world trade

The Chinese Government has opened a two-day summit in the capital Beijing to consolidate its massive global development project called One Belt One Road, or the New Silk Road project.

President Xi Jinping will host 28 world leaders and representatives from another 70 countries to sell his hugely ambitious signature project.

The plan is to build a vast network of new trade routes across the globe, multiple high-speed rail networks to penetrate Europe, massive ports across Asia and Africa and a series of free-trade zones.

Closer to home, it will cement Chinese influence in the Pacific in countries like East Timor, Fiji and Papua New Guinea.

China is going to spend up to a trillion dollars on infrastructure projects and hopes to bind more than 65 countries and two thirds of the world’s population to its economy.

Economists have likened the project to a modern day Marshall Plan — which helped secure the US as the world’s superpower after World War II — but it’s much bigger.

In today’s terms, the US only spent about $130 billion on the Marshall Plan. China is hoping to spend much more.

It is an attempt by the Chinese to secure global dominance at a time when the United States is stepping back, and on the domestic front to keep growth and wealth strong for decades to come.

China’s aim is to lift trade by $2.5 trillion in a decade by flooding world markets with cheap, high-quality Chinese goods.

It is empire-building on a scale the world has not seen before.

Professor Wang Yiwei from the China and Globalisation think tank said: “After Trump took power, he stopped the TPP and became isolationist”.

“China is the biggest rising power and we welcome other countries along with us to achieve our great rejuvenation, our China dream,” he said.

Modern efficiency for ancient trade routes

The One Belt One Road project is already in action at the industrial hub of Chongqing in southern China.

In its massive logistics centre, containers are moved 24 hours a day onto trains that move Chinese goods like iPads and car parts west into Central Asia, Russia and Europe.

The trains, which are 2 kilometres long, travel 12,000 kilometres to reach distribution points in Germany in just 13 days, reviving ancient trade routes with modern efficiency.

 

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Spokeswoman for the Chongqing Logistics City, Gu Xin, said the trains were a game changer in providing reliable, secure and cheap access to world markets.

“The new trade routes will bring more business and big international companies here. It will open southern China and Chongqing to the world,” she said.

Car company Lifan at Chongqing is producing exactly the kind of products China wants to push onto the world markets.

Every two minutes a high-quality SUV comes off the assembly line and they retail at just $12,000.

They are already exporting to 30 countries and Lifan president Mu Gang said they were successful because they focused on innovation and responded quickly to consumer needs and demands.

“Technology-wise, design, workmanship, quality — all those kinds of things are a system, a comprehensive system in our company and the way we do things,” he said.

Lifan is also the model company for the One Belt One Road initiative. It is privately owned and driven by the needs of the market, not the demands of the state.

Mu Gang said the moribund state-owned enterprises in China would have to reorientate if the plan was to be successful.

“There is a joke here in China: state-owned enterprises only care for the mayor, and the privately-owned enterprises, we are focused entirely on the market. It is completely different,” he said.

Photo: Privately-owned Lifan produces an SUV every two minutes, and exports them to 30 countries. (ABC News: Matthew Carney)

Challenges in and out of China

The city of Chongqing has already seen the benefits of One Belt One Road. It has economic growth rates of 11 per cent — almost double the national average.

It is hoped that what is happening in Chongqing is just the beginning.

But there are huge challenges ahead if success in Chongqing is to be replicated.

“China is a Communist state run by a hierarchical leadership and many of the Western countries are democratic and opposition parties can have different plans,” Professor Wang said.

He said coordination and planning would be difficult.

The countries along One Belt One Road are a mix of cultures and systems. Some are not market economies and half are Islamic with different laws. Some, such as Turkey and Egypt, are unstable so it is harder to build and maintain projects.

Photo: Chongqing has seen growth rates of 11 per cent as a manufacturing and export hub. (ABC News: Matthew Carney)

Other critics, like Tom Miller from Gavekal Dragonomics who recently published a book on the subject, said the massive project lacked definition and detail.

Jorge Wuttke, the president of the EU Chamber of Commerce in China, wrote in the Financial Times that he feared the trade could all be one-way.

He said for it to be a success, China would have to truly open its markets and lift regulatory barriers or One Belt One Road would be in danger of becoming a huge white elephant.

“We are worried that in the next decade the initiative will be remembered as ‘One Belt and One Trap’, a waste of resources that depends too heavily on lumbering and inefficient state-owned enterprises,” he said.

China says One Belt One Road is about partnership and cooperation and is pushing ahead.

Since President Xi’s announcements more than three years ago, Chinese banks, state-owned enterprises, and economic planners have rolled out a raft of programs to implement the supreme leader’s vision. China Development Bank, which has a balance sheet larger than the World Bank, is tracking more than 900 projects in 60 countries worth more than US$890 billion.

The Bank of China has also pledged to lend no less than US$100 billion between 2016 and 2018. The Industrial and Commercial Bank of China, one of the world’s largest banks, is looking at 130 Belt and Road Initiative-related projects worth about US$159 billion. In short, Chinese financial institutions are prepared to inject hundreds of billions of dollars into infrastructure projects around the region.

Shovels are already in the ground, with a high-speed railway project connecting the Indonesian capital Jakarta with Bandung and various transport and energy projects in Pakistan. These projects represent just a fraction of the potential pipeline of initiatives.

The region suffers from a massive infrastructure deficit with the Asian Development Bank estimating that the Asia and Pacific region needs nearly $1 trillion a year by 2020 to bring its infrastructure up to scratch.
The Greater Mekong Region alone has been earmarked for more than US$ 50 billion in infrastructure spending.

The Chinese Government has opened a two-day summit in the capital Beijing to consolidate its massive global development project called One Belt One Road, or the New Silk Road project.

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