Taking the initiative: China pushes ahead with strategy to establish One belt, One Road

As the US and Europe retreat further into isolationism, China is pushing ahead with its strategy to connect China to the Eurasian continent

PUBLISHED : Tuesday, 28 March, 2017, 1:43pm
UPDATED : Monday, 01 May, 2017, 2:01pm

As the United States and Europe increasingly withdraw from the spirit of internationalism, China is using its longstanding One Belt, One Road policies to expand its reach across Central Asia and into Europe. The policies are seeing a drive to create new markets for Chinese goods, political influence in the region, and security for the country’s natural resources supply chain.

“The belt and road [initiative] is a century strategy for China, and the Chinese central government is determined to push it ahead in the coming decades however difficult or easy the political and economic environment will be,” says Liao Qun, chief economist and general manager of China Citic Bank International’s research department. “The recent decision by the [Donald] Trump administration on the US withdrawing from the Trans-Pacific Partnership (TPP) is good for the strategy ... as Asian countries will be more willing to buy [into] the belt and road idea in view of a more important role that China is expected to play given the US departure, albeit temporary.”

Most experts in this area see the US withdrawal from TPP as being good for China’s strategy. “The collapse of the TPP is a diplomatic windfall for China because it allows Beijing to claim leadership of globalisation at a time when the United States and Europe are turning away from free trade and open borders,” says Robert Bianchi, a commentator on Chinese politics. “This eases the task of attracting partners to the New Silk Road projects, thereby enhancing China’s economic and political influence throughout Afro-Eurasia.”

And spreading this influence has a wider objective, according to Andrew Leung, a China strategist. “This is not just about business, it is for China to achieve its national geopolitical and security objectives. This is the realisation of the China dream, of making it great again, and this also has a historical narrative with Central Asia and the Silk Road,” Leung says. “These countries are very rich in natural resources, and by providing high-speed rail, economic benefits will be available to both sides and increase China’s influence.”

This is not just about business, it is for China to achieve its national geopolitical and security objectives
Andrew Leung, a China strategis

One of the hallmarks of the belt and road initiative is infrastructure, which according to chief China economist of UBS Wealth Management, Hu Yifan, is not only something related to China, but a global phenomenon. “With the ineffectiveness of monetary policy to push the real economic growth, many countries have started rethinking their approach, and there is a demand for global infrastructure investment,” she says. “Many countries realise infrastructure spending can boost their economy and we see that China is becoming a new engine of global trade, and investment.”

While the US risks its geopolitical stature in Asia, China itself is finding new ways to spend its reserves. “One Belt, One Road is a shift in the way that China is recycling its savings surplus,” says Mark Tinker, head of Framlington Equities Asia, AXA Investment Managers Asia. “It is no longer financing the US consumer by buying US treasury, it is investing in real assets and infrastructure, and there is a greater potential return on capital in all sorts of ways.”

Could the initiative be just a reaction to what is happening on a larger scale in the new international grand game? “America is trying to contain China in many ways, China relies heavily on international trade and imports of energy and resources, all of which pass through the Malacca Straits and the South China Sea – when push comes to shove, all the trade routes could be blocked,” Leung says.

A central part of the initiative is connecting the Eastern Chinese seaboard to the central part of China and further beyond to Central Asia and Europe. While there is a great deal of scepticism about what the belt and road is, there are tangible results on display, with more trains for example, connecting China to Europe.

The initiative is part of the larger plan to shift Chinese goods to markets, create jobs for Chinese companies, and secure natural resources.

“As China’s infrastructure has already been developed, isn’t it better if I connect my high speed rail in China to build more high speed rail throughout Central Asia and connect this to Europe? Is it not better to have energy and infrastructure pipelines to connect me better to the Middle East?” Tinker says.

The infrastructure means products can get from China to Europe in days rather than weeks – a significant reduction in cost and time.

“Look at what China is doing with Pakistan, which is the first real driver in the initiative, and in the Pakistan development corridor, where they are putting in power, energy infrastructure, roads, rail, all the way down to the port that they have built on the Indian Ocean, which is 400km from the oil fields of the Middle East,” Tinker continues.

“This is a long-term strategic plan to connect China to the whole of the Eurasian continent.”