Connecting the dots per watch & brief w/r to OBOR Jade Belt / Silk Road
Whereby domestic policy enables international initiative for win win outcome
The USD 1 trillion intention is backstopped by rural land reform enabling USD 250 trillion of printing, be it over 40 years or w/i 30 but a detail
Natural scale and all that etc etc
ft.com
China encircles the world with One Belt, One Road strategyBeijing’s $900bn of planned investments include ports and railways across Asia
8 hours ago
New Silk Road: a truck delivers rocks for the development of Pakistan’s Gwadar port, a terminal point on the China-Pakistan Economic Corridor © BloombergWith $900bn of planned investments ranging from ports in Pakistan and Sri Lanka to high-speed railways in east Africa to gas pipelines crossing central Asia, China’s One Belt, One Road project (Obor) is arguably the largest overseas investment drive ever launched by a single country.
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The initiative — motivated by concerns about slowing domestic growth and a desire to boost China’s global influence — has the potential to help solve a global infrastructure gap, advocates say. It could also aid growth in developing countries while boosting trade and generating investor returns.
Obor began as a plan for trade-boosting infrastructure projects along two routes — one roughly following the ancient Silk Road from China through central Asia and the Middle East to Europe, and the other linking China to Southeast Asia and east Africa by sea.
It was formally announced by President Xi Jinping in 2013 as the drivers of China’s economic growth for the past three decades — exports to developed countries and infrastructure spending at home — became less viable. Western economies’ growth had stalled and returns on domestic investment had rapidly diminished as overcapacity in sectors from real estate to steel and cement grew problematic.
At the same time, Chinese policymakers are seeking to boost growth in border regions, which lag behind the country’s developed east coast, and they hope for a better return on their $3tn hoard of foreign exchange than from their $66bn in US Treasury bills.
Since a search for domestic economic growth is a main motivation, Obor is ultimately “a domestic policy with geostrategic consequences rather than a foreign policy”, says Charles Parton, a former EU diplomat in China who has researched the initiative.
Obor continues a drive by Beijing to provide domestic companies — from high-speed rail manufacturers to telecoms companies — with experience to become global brands. “They think the next step is making Chinese companies globally competitive, learning management techniques and so on?.?.?.?Building up these champions as China wants to do is a big part of Obor,” Mr Parton adds.
Since 2013 the Obor label has ballooned to embrace projects as far afield as New Zealand, Britain and even the Arctic. China has identified 65 countries along the Belt and Road that will be home to hundreds of projects bearing the Obor stamp.
Forging new links: Iranian officials applaud the arrival in Tehran of the first train to connect China and Iran, which arrived laden with Chinese goods © GettyCore projects include a $54bn land route from China’s Xinjiang region to a deep water port in Pakistan, Gwadar. It will spend $1.1bn on creating a “port city” in Sri Lanka’s Colombo, across from Gwadar. A planned 3,000km (1,900 mile) high-speed rail line from south-west China to Singapore will cost even more.
There has also been a wave of fundraising and institution-building. China’s sovereign wealth fund announced a $40bn Silk Road Fund in 2014. With other countries it launched the Asian Infrastructure Investment Bank (AIIB) in 2015, and has $100bn of initial capital that is expected to be spent chiefly in Obor countries. That year China transferred $82bn to three state-owned banks for Obor projects.
The all-embracing nature of Obor has been aided by Chinese officials, eager to curry favour with President Xi Jinping, the most powerful Chinese leader in decades. In China, “If you want to get projects or programmes approved, you say it’s Obor, so everything becomes Obor,” Mr Parton says.
Security forces patrol at Gwadar port © BloombergSome are optimistic that results will be achieved after decades of infrastructure-driven growth within China. “It’s doing what the Chinese do best, state-backed infrastructure projects,” says Jane Golley of the Australian National University. “I think it has the potential to succeed as an economic strategy.”
As China’s foreign policy becomes more assertive, Obor is also a geopolitical gambit, analysts say. China’s main rivals, the US and Japan, are not listed among the Obor countries, drawing comparisons with what Edward Luttwak, the military strategist, has called “geo-economics” — when the “logic of conflict” is pursued through “methods of commerce”. “It’s a serious long-term geo-economic strategy that will potentially shift the global economic centre of gravity,” Ms Golley adds.
The geopolitical nature of many of the planned projects, including in regions plagued by corruption and instability, has observers in China and abroad worrying that the scheme could simply add to China’s fast-growing debt burden, now standing at more than 250 per cent of GDP. “The lack of commercial imperatives behind Obor projects means that it is highly uncertain whether future project returns will be sufficient to fully cover repayments to Chinese creditors,” rating agency Fitch said in January.
© AFPThe Pakistan corridor, for instance, runs through unstable tribal areas, while the Gwadar port is in the middle of a region where insurgents have battled government forces for decades, prompting Islamabad to promise a special unit of 12,000 soldiers to protect the corridor’s construction. Multiple projects in the Middle East mean China will increasingly be drawn into the region’s fractious politics.
So far, little outside China has been completed. For example, the Khorgos “dry port” on the Kazakh-Chinese border is intended to be a hub for goods passing from China into central Asia and Europe. China plans to invest $600m in the project, building a vast complex of wholesale markets, train lines and cargo cranes. While the Chinese side of the border is surrounded by newly built tower blocks, the Kazakh side consists of a few semi-abandoned buildings. Talks with Thailand over high-speed rail have also stalled.
Since 2013, Obor has ballooned to include projects in New Zealand, Britain and even the Arctic
The apparently slow pace prompted President Xi in August 2016 to call for some “model projects” to be implemented “with early results, so that relevant countries can feel some real benefits”, according to state media.
The fear that Obor is a vehicle for Beijing to increase its political influence abroad could also create a backlash. Australia declined an opportunity to embrace the initiative formally last month — following its ally the US, which has also kept a clear distance. (New Zealand, however, did not have such objections.) “There is increasing buy-in from other parties but [Beijing] has got to overcome the political minefields,” says David Kelly, head of research at China Policy, a Beijing consultancy.
China has learnt some lessons from an earlier round of overseas investment known as the “going out” policy, which involved Chinese state-owned enterprises embarking on a shopping spree for global resources, resulting in widespread overpayment for assets and subsequent writedowns, as well as resentment from countries that perceived resource-extraction deals as one-sided.
“The driver is now going to be return on investment,” Mr Kelly says, adding that Chinese banks had wrested some power over the projects away from SOEs. Beijing, which stresses that Obor is “open” to companies from across the world, is also “downplaying the Chinese presence” in Obor projects, he adds.
That could hand opportunities to western companies. The joint China-France Hinkley Point nuclear project in Britain has also been listed by Chinese officials as an Obor project. “We believe there will be real opportunities for British companies to work with Chinese partners in third countries,” the China-Britain Business Council said in a report on Obor. Siemens has won a $1bn order from a Chinese SOE for a power plant in Saudi Arabia, and General Electric says it is targeting billions from Obor.
There is no sign that Beijing is backing down on its plans. A wave of anti-globalisation sentiment sweeping the developed world, typified by the election of US President Donald Trump, has even provided an opportunity to present Obor as the leading vehicle for increasing global trade, with Mr Xi linking the two in a January speech at Davos.
“Belt and Road is now seen as part of the China solution for the whole world, not just the developing world,” Mr Kelly says. “The question is what is the cost of stepping up to play that role. If they step up to the mark, it is not cheap.”
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