Rethinking ‘one belt, one road’, though doubts linger
Am I too sceptical about the “one belt, one road” vision? So many are so very excited, I have been forced to pause, and to wonder whether I am wrong.
You may recall I wrote two weeks ago that the one belt, one road concept is “likely to be empty of short-term significance from a strict trade and investment point of view”, and that it is instead much more “a new prism with which to view the world economy, and the global balance of power – not a prism hovering over the Atlantic, with the US on one side and Europe on the other, but one firmly over China”.
But as I learned this week of a major three-day “East Russia Economic Forum” being hosted in Vladivostok early in September by President Vladimir Putin, I have been forced to pause. Perhaps there are aspects of the one belt, one road vision that may have very immediate significance from both a trade and investment point of view. So too with the focused Hong Kong government commitment to develop the concept around its long-neglected trade and investment relationship with the Asean economies.
Let me re-emphasise my original reasons for scepticism: first, many of the elements of the concept are old wine in a newly marketed bottle. China’s economic relationship with Southeast Asia is set to grow apace anyway, with or without one belt, one road. So too its relationship with the EU economies at the far western end of this new silk road.
The idea of building stronger economic links west into the long-neglected “stans” – Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and so on – may be exciting and new, but these economies are so small and unpopulated that trade and investment will take many years to warm up.
Trade links with Iran, Iraq and other Islamic states of the Middle East and north Africa may offer great potential, but I am very confident that these are going to remain deeply troubled economies for at least my lifetime – hardly a region around which to build a radical new economic policy.
Links with Africa’s economies will be increasingly important, but do not sit in any natural way on any silk road or maritime belt. Since the early 1980s when I read daily reports of high-level exchanges, and trade and investment commitments between China and African states large and small, it has been clear that Beijing has a keener and more focused interest in Africa than most Western economies. The one belt, one road vision in no way alters that.
I still believe there are strong echoes of the 1990s “Go West” initiative driven by Beijing to encourage investment in China’s poor western provinces.
Just as many Hong Kong businesses were then strong-armed to join largely pointless business missions to Xinjiang and Guangxi and Inner Mongolia, so I am sure we will now see an explosion of such missions exploring investment opportunities along the maritime belt, or one of the silk roads. Many of them will be similarly fruitless, for the simple reason that commercially viable investments through these remote, unpopulated and rather poor economies will remain few and far between for many years to come.
So you can see my scepticism remains strong. But the upcoming Putin summit in Vladivostok provides a valuable example of a one belt, one road-related initiative that could be truly significant even in the short term.
Russia has for the past five years talked of the urgent need to develop the rich resources of its impoverished and underpopulated far east. The global collapse in oil and gas prices, coupled with a massive fall in exports since the invasion of Crimea, adds even greater urgency to this priority.
China, Korea and Japan will be wooed very hard to share in the cost of developing this region. This particular northern silk road may well be developed very rapidly as relations between China and Russia warm.
But President Putin should be under no rose-tinted illusions. Only yesterday we read reports on how Sino-Russian negotiations have stalled over a 30 billion cubic metres-per-year natural gas pipeline from western Siberia into China. The reality remains that – silk road or no silk road – China’s investors will remain as hard-headed as they have ever been.
David Dodwell is the executive director of the Hong Kong-APEC Trade Policy Group