CONNECTING CHINA- THE BELT AND ROAD INITIATIVE By Jayanth Potharaju from Jindal Global Law School
Starting May 14th, 2017, a meeting spanning over two days was hosted in Beijing, China. Attended by 29 heads of states, this was the Belt and Road Forum (BRF). The One Belt One Road (OBOR) project was announced by Chinese premier Xi Jinping in 2013. In the meeting in May, Xi claimed that 70 countries and international organizations have signed up for this project, and pledged an amount of $113 billion for the project.[i]
What is this OBOR all about? What are the purposes it aims to serve?
The aim is to connect countries in Asia, specially the developing countries of East Asia, with the other parts of the world, such as Europe and Africa, with the primary focus being on the developed countries. The Belt comprises of the Silk Road Economic Belt which consists of three overland courses: interfacing China, Central Asia, Russia and Europe; connecting China with the Persian Gulf and the Mediterranean Sea through Central Asia and West Asia; and further connecting China with Southeast Asia, South Asia and the Indian Ocean. The Road is analogous to the 21st century Maritime Silk Road intended to push exchange from China's drift to Europe through the South China Sea and the Indian Ocean in one course, and from China's drift through the South China Sea toward the South Pacific in the other.[ii] Another important fragment of the initiative is the CPEC, i.e. the China-Pakistan Economic Corridor.
At an estimated cost of $3 trillion, OBOR is China’s strive towards globalization. With President Trump’s focus on ‘Buy American, Hire American’, a certain void has been created on the global level. With this project, China can foresee to fill that void.[iii] The primary idea behind the construction of the belt and the road is to ease communication and transportation in order to attract investment in China. The Chinese government has outrightly tried to state that OBOR comes without any political strings attached. However, while this may strictly be the case, the investment is de facto building political and economic ties between China and the host government. OBOR will serve to facilitate greater market access to economies along the trade routes for Chinese companies, secure natural resources for China, expand and strengthen Chinese hegemony, and provide an outlet for China’s investment-led growth model to continue.
Many developing nations have an incredible opportunity to get inspired from such an activity, however, there are various dangers in putting resources into such markets, including: foreign exchange volatility; risk of recession; price instability; ‘crowding-out’ of private sector investment; legal and regulatory issues; dearth of pre-existing basic infrastructure; corruption; bureaucratic issues; and poor transparency.[iv]
It is to be noted that India has not signed up to be a part of OBOR. As a matter of fact, India has opposed to the initiative. The primary reason behind this opposition is the CPEC, which is a part of OBOR. This project aims to increase investments within Pakistan and help it in becoming an active player in the global market. Chinese reports claim that following the launch of CPEC, Pakistan has received investments over $46 billion. The reason behind India’s objection is that certain parts of the project, CPEC, are taking place in Pakistan occupied Kashmir (PoK), which is a disputed territory. But with all its neighbouring countries signing up for the project, India might be under some form of pressure to become a part of the initiative.[v]
The initiative, if implemented well, can vastly help in connecting countries. But it can also have adverse effects. Once China invests in the developing countries, it will establish a sort of control over them and can bind them financially.[vi] Already, some of the poor Asian countries have signed up for OBOR only because they are dependent on the Chinese banks. With the next BRF meeting scheduled in Beijing in 2019, India has time to ponder over the pros and cons this initiative can lead to.
[i] Jinchen, Tian. “'One Belt and One Road': Connecting China and the world.” McKinsey & Company, www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/one-belt-and-one-road-connecting-china-and-the-world. Accessed 15 Aug. 2017.
[ii]Apurva. “China’s Belt and Road initiative: In giant trade Belt, Road to new growth rush.” The Indian Express, 12 May 2017, indianexpress.com/article/explained/china-belt-and-road-initiative-in-giant-trade-belt-road-to-new-growth-rush-4651727/. Accessed 15 Aug. 2017.
[iii]Huang, Zheping. “Your guide to OBOR, China's plan to build a new Silk Road.” Quartz, Quartz, 15 May 2017, qz.com/983460/obor-an-extremely-simple-guide-to-understanding-chinas-one-belt-one-road-forum-for-its-new-silk-road/. Accessed 15 Aug. 2017.
[iv] “The Impact of China's One Belt One Road Initiative on Developing Countries.” LSE International Development, 2 Feb. 2017, blogs.lse.ac.uk/internationaldevelopment/2017/01/30/the-impact-of-chinas-one-belt-one-road-initiative-on-developing-countries/. Accessed 15 Aug. 2017.
[v]Express Web Desk. “What is China’s One Belt One Road (OBOR) project?” The Indian Express, 14 May 2017, indianexpress.com/article/what-is/china-one-belt-one-road-project-obor-4653564/. Accessed 15 Aug. 2017.
[vi]Brant, Robin. “What is China's One Belt, One Road?” BBC, 12 May 2017, www.bbc.com/news/av/business-39881895/what-is-china-s-one-belt-one-road. Accessed 15 Aug. 2017.
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