On May 14 and 15, China hosted a two-day Belt and Road Forum in Beijing, which was attended by high level delegations from around the world that included 29 heads of state. The discussion, as the name of the forum indicated, centered on President Xi Jinping’s pet project—One Belt One Road (OBOR). OBOR is the 21st century remaking of the fabled medieval Silk Road which connected ancient Asia and Europe and one that was traveled by the legendary Marco Polo. The stated intent is to revitalize international trade.
What is OBOR?
OBOR is a Chinese strategic and economic initiative to connect Eurasia, Africa and Oceania through a combination of an overland and maritime route. The initiative is aimed at resurrecting the ancient Silk Road through infrastructure projects to link the Eurasian economies within a China-centered investment and trade network.
The ‘Belt’ refers to three overland routes originating in China. One, from China, through South-East Asia and South Asia to the Indian Ocean; two, starting in China and going through central and West Asia to the Persian Gulf and the Mediterranean Sea; and three, again from China, through central Asia to Europe and Russia. The three routes involve the creation of six economic cooperation corridors involving territories in 25 different nations. The ‘Road’ is the old Silk Road, rejuvenated to fit 21st century purposes by bifurcating the old trade route. First is a maritime route from China to Europe through the South China Sea and the Indian Ocean and second is one that connects China to the Pacific Islands, charted from the South China Sea to the Southern Pacific Ocean.
OBOR is an ambitious project that encompasses trade, energy and transportation projects, which when finished, will connect 64 countries with 15 Chinese provinces. The fundamental premise that underpins the entire initiative is the assumption that China will continue to be the manufacturing hub of the world and that its products will continue to be exported in a global scale. This belief could also prove to be the Achilles’ heel to the entire project, which is enormous in its scale.
China: In a Dominant Position
The May summit was one long spiel of praise for the OBOR initiative and mostly meant to attract Chinese investment and then make it palatable for the smaller economies to accept. There were no debates or questions regarding the Chinese motives to involve itself in this massive economic exercise.
On the other hand, most of the smaller nations involved accept that the huge infrastructural spending being envisaged is essential to shore up their economies. OBOR is based on a Chinese version or concept of economic diplomacy. It does not, at least so far, cater for both the parties to deal with each other in an equitable manner and the model is heavily tilted towards creating economic dependence for the smaller economies involved, leading to Chinese dominance.
There is a lack of transparency from China regarding the details of the projects being proposed in different countries. This opaque position, when combined with the tendency of client governments to shroud the details of the agreements in secrecy, raises questions regarding the China’s ultimate objective in moving forward with this initiative. In turn, the doubts spark popular opposition in the affected nations. Recently a leaked document that purports to be the Chinese long-term plan for the China-Pakistan Economic Corridor (CPEC) was made public. If the document is indeed such a plan, the entire OBOR initiative becomes a questionable venture. The document states the objective of the CPEC to be the first step in bringing economic domination of the recipient nation, in this case Pakistan. It goes on to state that the client nation must be gradually turned into a ‘surveillance state’ where the media is manipulated, democracy undermined and political transition discouraged. Obviously these are not aims that are compatible with peaceful, cooperative and mutually beneficial development. The primary aim of the OBOR initiative, gleaned from available information, is to establish China as the dominant power in Eurasia.
China’s current focus is on agricultural projects in other countries. Analyzing the manner in which it is playing out in Pakistan is informative. The current projects being implemented in Pakistan are focused on Chinese farming consortiums that are financed by the Chinese government creating raw material. In turn the raw material will be used to develop the textile and garment industry in China that would help China soak up the surplus labor force within the nation, especially in the Xinjiang Province. The entire process is reminiscent of the process instituted by the British during their ‘Raj’ in the Indian sub-continent. Holistically viewed, the Chinese initiative in Pakistan provides an uncomfortable sense of history repeating itself in the Indus valley.
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The Chinese system of governance is very different to that practised in the Western democracies. The biggest fear of the central leadership is political instability brought about by a restive population which is not gainfully employed. There is a critical need to create infrastructure projects that will utilise some part of the labor force keeping it at least partially satisfied. Currently China is suffering from an overcapacity in all aspects of manufacturing. The situation is exacerbated by the diminishing attraction for investment in China in recent times. Under these circumstances, the fact that large parts of the OBOR initiative do not make economic sense can be attributed to the government’s efforts to ensure political stability by finding an outlet for the Chinese economy to spread.
The OBOR initiative is aimed at achieving two major objectives. The first is political. It is meant to boost President Xi Jinping’s stature by demonstrating his hold over the economy. The need to control the economy is part of the bid that Xi Jinping is making to consolidate power into his hands as the ‘chairman’ or dictator and unquestioned leader of the Chinese Communist Party. From the events that have transpired in the past few years, it is clear that the collective leadership practised in the past two decades is well and truly over. The second objective is purely economic. The leadership has to keep the Chinese economy moving along at an acceptable pace through initiating large infrastructure projects, wherever possible. Since there are only scant opportunities for large-scale investment domestically, foreign infrastructure initiatives are the only means to ensure that the economy continues to be adequately serviced.
From a Chinese viewpoint, therefore, the OBOR initiative makes abundant sense. However, for the client nations, the initiative is beset with an overwhelming number of challenges. It is certain that financial inducements or sanctions do not normally work in changing the attitude of sovereign nations.
The China-South Korea relationship is a clear example. Even though China threatened the South Korean economy with a reduction in Chinese tourism and other punitive measures, South Korea did not back down from permitting the deployment of the US anti-missile systems. The fundamental lesson from this event is that the smaller economies of the region may have enthusiasm for Chinese finances, but that enthusiasm does not equate to acceptance of, or support for unilateral Chinese leadership in economic, political or security matters. Similarly, there is popular resistance in countries such as Myanmar and Sri Lanka to the OBOR projects. There is widespread discontent in the Pakistani province of Baluchistan, where the Baloch Liberation Army has vowed to thwart the OBOR section passing though the province. It is seen that the initiative does not create any benefits for the Baloch people, including the minimum expectations of creating employment for the local population.
OBOR is intended as multi-national enterprise—the success of is built on a foundation of stability. Stability in such ventures is best achieved by having absolute transparency in bilateral transactions, and transparency is currently lacking at the base level of OBOR. For any success to be achieved, China needs popular ‘buy-in’ of the general public in the client states. Currently what it has is the tacit approval of autocratic and even democratic governments that have kept the details of the OBOR proposal and related bilateral agreements with China secret.
The financial burden brought about by loans from China that the client state may not be able to service that, in turn, would lead in the mid-term to financial servitude for the smaller economies and the opaqueness of the details of the scheme are the weak links in the initiative. Both are not easy to overcome.
Even though the OBOR initiative is seen to have many challenges to overcome, there are three economic factors that favour its progress. First, the existing hard currency reserves that China has would be better utilised towards infrastructure projects in the developing world. The loan conditions that are being put forward are fairly benign, although the amounts are large vis-à-vis the domestic economies of most of the recipient nations. Second, improving infrastructure with reduced transactional costs will provide a boost to the slowing economic growth in most of the proposed host nations. So far Chinese loans have proven to be more equitable to developing nations in comparison to US loans that have been confined to few sectors and made available only to a handful of nations. Third, the Chinese financing model has become an alternative to other models that have been used till now. It is cheaper, leaner and more flexible and tailored to suit the requirements of emerging economies.
Meeting the peculiar needs of the developing economies is important to obtain their concurrence. The emerging economies are predicted to account for 59 percent of the world GDP in 2018, upending the fact that between 1980 and 2007, on an average 59 percent of the world GDP was accounted for by the so-called advanced economies. China is attempting to leverage this not so subtle change in global economic progression.
The above are purely economic factors that have not been superimposed by international politics and both bilateral and multi-lateral relations within the comity of nations. Politically, the OBOR initiative is meant to extend China’s sphere of influence, creating a sort of virtual borderland as far as Africa, in an embrace that China will control. China proclaims this as a win-win situation achieved through collaboration that it believes is necessary for progress to be achieved in the post-colonial age. The key point in this explanation is the need for the initiative to be truly collaborative and mutually equally beneficial—two factors that have not yet been demonstrated in a tangible manner. The OBOR initiative so far has been one that is directed at China assuming global leadership as the provider of goods—a further step in its continuing journey along the path to overtake USA as the world’s largest economy, sometime in the next decade.
The skeptical nations, India being one of the larger ones, will wait and watch for demonstration of China’s ability to be collaborative, not unilateral as it has so far demonstrated, in pursuing the stated objectives of the OBOR initiative.
The Smaller Nations in the Game
India has almost boycotted the initiative, although it is yet to state an unambiguous position. However, the smaller nations within the scheme may not have the capacity, or for that matter the self-assurance, to push back on the covert pressure that comes with the Chinese initiative. The OBOR in Sri Lanka is an example. Sri Lanka is a major participant in the initiative and a critical member because of its geographical location at the heart of the Indian Ocean. In Sri Lanka, public discontent with the Chinese project that has not created any appreciable local employment has erupted in violent protests.
The change of government in the 2015 elections in Sri Lanka was no doubt a great victory for democracy. The new government also started the process of renegotiating projects that were quietly accepted by the previous government. China’s strongarm tactics that had worked earlier now seems to be backfiring.
Sri Lanka is the not the only country that is having second thoughts regarding the benefits that is supposed to accrue from this vast project. The public in Myanmar, Thailand and Laos are becoming vociferously hostile to Chinese projects. Similarly Pakistan has deployed more than 50,000 soldiers only to protect the Chinese project. Chinese insensitivity to the client nation’s domestic dynamics has become the Achilles’ heel of the OBOR initiative. The entire project is based on infrastructure development in host nations with Chinese financing delivered though Chinese companies employing only Chinese resources, both human and material. When the reality of the schemes dawn on the general public in recipient nations, the reactions may not be containable.
On the other hand, OBOR is an ambitious and critically essential initiative for the Chinese government. If China feels that its interests are being jeopardised, its projection of being a patient benefactor of smaller nations may not last for long. Domestic push-back from smaller nations that may impede the nation’s forward march will not be viewed sympathetically in Beijing. There are bound to be repercussions for the host nation that becomes a proverbial ‘spoke in the wheel’.
From around the 1950s, China has repeatedly emphasized its benign nature as a growing power. It has touted non-interference in another country’s internal affairs as a core principle in applying its increasing influence on the world stage. At least for the time being, OBOR is being projected as China’s effort to spread its developmental achievements across other nations for mutual benefit. Considering the manner in which China has reacted to the current ruling by the international tribunal on matters related to the South China Sea, it would not be wrong to assume that the benign attitude, so far put forward, is wearing thin. It is only a matter of time before the dragon shows its fire-breathing form.
There are a number of reasons for India’s obvious unease at the OBOR initiative. First and foremost is the CPEC, meant as a transportation and energy network that will eventually connect the Chinese-built Pakistani port at Gwadar with Kashgar in Xinjiang Province in Western China. This corridor passes through the ‘Pakistan occupied/administered’ part of Kashmir that India claims as its sovereign territory.
Obviously India views the project as directly impinging on its territorial integrity, especially since India has not been consulted before establishing the project. There is a certain amount of wariness on the part of China regarding India’s objections. China has attempted to diffuse the situation by stating that it will not get involved in territorial disputes that must be sorted out bilaterally. It is difficult to envisage how China’s stance will work, if the project is to go forward. The situation is exacerbated by the fact that once China has invested a critical mass in the corridor, it will be a resource-asset that, realistically, China will want to protect.
Second is that India perceives the OBOR as a unilateral initiative being pursued by China, whereas India has followed a multi-lateral approach to building trust and confidence within the region. There is an undercurrent within the Indian policy establishment which thinks that China does not respect or even consider India’s sensitivities and concerns vis-à-vis its relations with the smaller nations of both South and South-East Asia. India believes that peace and stability brought about through mutual trust and steady interactions is the only long term solution to the myriad differences that plague the region. An acceptable level of trust is lacking at the moment and a unilateral initiative will only increase the tensions.
The third reason is that India has grave concerns regarding the ability of the host countries to pay back the large loans that are being given by China for these nations to undertake the huge infrastructure projects that are being envisaged. Further, there is also the methodology of the utilization of these loans, which are at least nominally meant to benefit the host nation.
A clear example, already visible, is the loan that has been given to Pakistan to build their energy infrastructure. The ‘aid’ in terms of loans being given to Pakistan will be used by Chinese companies that employ only Chinese labor to construct power plants that will be owned, managed and operated by Chinese companies. The power generated by these companies will be sold to Pakistan. The benefit for the Pakistan economy or the general population in this equation is difficult to fathom. Simply put, China is creating business opportunities for Chinese companies in the guise of soft developmental loans to other nations. In stark terms this can be labelled economic colonization that leaves no exit route for the smaller economies who are the recipients of such ‘largesse’.
The fourth reason is that China has not considered the sovereignty claims of nations regarding the territories through which the infrastructure projects are being developed. Control of some of these territories are disputed by two or more nations. India’s stand is that all parties must agree on the developmental or construction process through a consultative process and not as a follow-up to an arbitrary decision. India judges that the current situation is one that will fuel increasing competition between nations. Its stated position and advocacy is that the kind of connectivity that China is proposing should diffuse rivalries, not increase the tensions in the region. The OBOR initiative is seen as pitting nations of the region against each other.
Even so, India has to carefully engage in the broader initiative for three very valid reasons. First is that the smaller nations of the region are supportive of the initiative since it provides a guarantee for their own on-going development. Whether or not this will prove to be a double-edged sword cannot be determined at this stage in the development of the scheme. Therefore, India’s unilateral rejection of the scheme will be seen as detrimental to the progress of an initiative that promises to benefit all participants, at least outwardly till now. In turn, such an attitude has the potential to isolate India in the region at a point in time when India is undertaking a concerted diplomatic endeavor to become a regional power by consensus.
Second is based on the fact that the OBOR initiative will not work effectively without India’s participation, primarily because of the size of its economy and geographic location. Therefore, India will be able to engage on its own terms in the scheme and bring to bear positive influence in the development work that will be undertaken. It is always more beneficial to be working for change from the inside rather than being in opposition outside the loop. The third reason stems from the second.
India will be able to bring the necessary transparency to the entire project, something that is lacking at this stage. The client states are in awe of Chinese power, its economic clout and the covert pressure that China can bring to bear to achieve its objectives. India could become the bulwark against the subtle ‘bullying’ that will definitely take place as the initiative matures. This is an opportunity for India to further its ambitions of becoming a regional power. India must engage, but with clarity about the red lines that it must draw regarding the sovereignty of its territories.
The OBOR initiative is clearly oriented towards increased connectivity within Eurasia, and subsequently in Europe, on China’s unilateral terms. So far its primary objective can only be described as opening the land-locked Chinese provinces, which have a surplus of labor capacity, to Central Asia.
The initiative is based on a different style of statecraft from what has so far been practised in modern times by the Western democracies. However, there has been a lack of transparency regarding details of the project and absolutely no multi-lateral leadership in its management. It has remained a Chinese one-way directive for globalization according to its demands.
The globalization that is envisaged looks to be a gradual Chinese encroachment into host nations, one that will, in time, turn into an unprecedented move in both scale and depth of penetration. Holistically, the OBOR initiative is a project of loans that will see China investing and re-investing its surplus capital that has the potential in the long-term to alter the global economic and strategic order in China’s favour. Even though Chinese predominance can be discerned, the ultimate strategic objective remains shrouded in opaqueness. Chinese plans, which include 24-hour surveillance in major cities and other hubs on the OBOR in host nations, have not been formally been accepted. It is highly unlikely that these details will ever be declared officially. These actions can be considered to be the first steps in 21st century colonization. Loans that cannot be repaid invariably become the foundation for economic colonization.
From India’s perspective, the CPEC lacks justification, impinges on its sovereignty, and is completely tailored to suit only Chinese interests. Obviously it is not an acceptable situation. India seems to be convinced that the OBOR initiative is an instrument carefully crafted to ensure Chinese hegemony and does not cater to inclusive and sustainable development of all parties concerned. Whether this assessment is right or wrong is another debate. However, the tug-of-war between India and China for regional power status and global influence only got a bit more complex with India’s boycott of the OBOR summit in May this year.