The Belt and Road Initiative (BRI) promises to radically transform a vast swathe of the world’s trade and transport infrastructure, which will have a marked impact on how Asia does business with the world and vice versa.
While it is a relatively new idea, the BRI also harks back to medieval times, when the Silk Road flowed between East and West. The Silk Road was a series of trade routes criss-crossing the Asian landmass. Its more famous travellers included Marco Polo and Ibn Khaldun. During this time this trade flow was responsible for the transfer of goods, services and ideas across the globe.
The BRI seeks to update this idea to meet the demands of the 21st century, adding a maritime arm and a host of road and rail links. Previously referred to as One Belt, One Road, the infrastructure investment needed for the plan is estimated at $5trn by PwC.
In May 2017 China pledged an extra $113bn for the BRI, to be disbursed via the state-owned Silk Road Fund, set up in 2015 with $40bn of initial capital from the China Development Bank and the Export Import Bank of China.
In addition, the Asian Infrastructure Investment Bank (AIIB), with some $100bn in capital, and the New Development Bank, with $50bn, are financing the project from their respective bases in the cities of Beijing and Shanghai.
This funding is backing up a range of infrastructure projects, with the BRI also making clear provisions for partnerships, particularly with non-Chinese enterprises.
The benefits of this are considerable: foreign outfits can engage in major projects that enjoy Chinese government-backed guarantees, while also contributing their expertise and local knowledge to ensure project success, further reducing risk all around.
Doors open to China
Such partnerships with third-party countries can also help open doors in China itself, by helping to establish good working relationships, which are at the heart of doing business in a market that can be difficult to navigate.
For China, the BRI builds on the outward momentum of its foreign policy, which started with the Go Out policy of the late 1990s. The increase in overseas trade and investment is boosting Beijing’s drive to internationalise its currency and find new markets to maintain growth momentum and use up excess capacity at home.
The BRI addresses a major need for improvement in Eurasia’s infrastructure
This is critical if economic growth is to move many of the supercontinent’s countries out of the low- and middle-income traps. In February 2017 the Asia Development Bank estimated that this would need $22.6trn in the lead-up to 2030, which could rise to a possible $26trn if climate change is taken into account.
The BRI, and the AIIB in particular, are thus seen by advocates as crucial ways to address this shortfall. Indeed, the AIIB has been cautiously welcomed by a number of regional observers as a more Asia-focused addition to the range of multilateral lenders, such as the IMF, the World Bank and the European Bank for Reconstruction and Development. The BRI is not without its challenges, however.
The initiative is vast, with a geographic scope that can lead to political tensions. Transnational projects by their nature involve a wide variety of stakeholders, with success depending on ability to bring many, often disparate, groups into harmony.
For all the difficulties, the rewards are potentially game-changing, as those who witnessed the first train from China roll into London’s Waterloo station in April 2017 would undoubtedly attest.
Routes & Corridors
The BRI identifies three main land routes and two maritime routes for its implementation.
On land these stretch from China to Central Asia, then to Russia and finally Europe via the China-Mongolia-Russia Corridor and then the New Eurasian Land Bridge. The two other routes are attached to this: one branches off to South-east and South Asia and includes the China-Pakistan Corridor, and the other branches off to form the China-Central Asia-West Asia Corridor.
The South China Sea becomes the junction for two routes, one leading south and east to the South Pacific, and the other heading west, connecting to the Indian Ocean, the Middle East and Europe. The paths begin with China’s coastal ports, while also connecting the China-Indochina Peninsula Corridor and the Bangladesh-China-India-Myanmar Corridor.
These routes bring together a string of nations
In May 2017 President Xi announced at the first BRI summit that some 68 countries and international organisations signed agreements with Beijing over the initiative. The Chinese leader has stressed that the project is open to all, with the likelihood that at the next summit in 2019 its numbers will have considerably swelled.
This may be all the more likely since the US decided to pull out of the Trans-Pacific Partnership, a free trade deal that the previous US administration of President Barack Obama had been pursuing and that was also widely seen as a counterbalance to Chinese influence in Asia.
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