In 2012, China’s President Xi Jinping announced the “One Belt, One Road” Initiative (OBOR) when visiting Indonesia and Kazakhstan. OBOR has since dominated discourse among China’s media and foreign policy analysts. However, the rest of the world is overlooking the initiative’s groundbreaking significance, which essentially amounts to a new Chinese grand strategy.
The OBOR initiative is the newest phase in China’s efforts towards “reform and opening up.” Throughout the 1990s and 2000s, China adopted a dual policy of “attracting in” foreign investment and “going out” and investing overseas. Overall, though, China stressed the former over the latter. This is now changing, as China believes that its economy and companies are mature enough to venture overseas.
This shift is borne out of China’s domestic and international political circumstances. First, China’s overall foreign policy stance is shifting away from the low-profile character of the 1990s and early 2000s. The effects of the global financial crisis have made China more confident about its rising power.
Second, China has carved out a major economic role in East Asia and Sub-Saharan Africa, and hopes to consolidate the strategic advantage in these regions that its economic influence has brought it.
Third, China hopes to counter the U.S. “rebalance” to Asia by using economic incentives to combat perceived negativity toward China. China also hopes to expand its influence westward through Eurasia instead of confronting the United States in the Pacific.
Fourth, President Xi Jinping is widely seen as a nationalist and ambitious leader who wishes to consolidate the rule of the Chinese Communist Party and boost China’s international status.
We should also not neglect OBOR’s economic dimensions. China has over-invested in its domestic manufacturing sector and infrastructure building, and hopes to create overseas demand to absorb the resulting overcapacity. China’s rising labor costs motivate Chinese companies to shift their labor-intensive activities overseas. China’s interior regions lag behind its coastal provinces, and it wants to stimulate their growth by linking them up with South and Central Asia.
When OBOR was first announced, it did not appear well thought-out, with no comprehensive study preceding it. This, though, is likely due the nature of Chinese policymaking, by which the center first lays down a “fangzhen,” or general guiding principle, filling in the details later. This fluidity may actually be an advantage, allowing the plan to adapt quickly to changes in overseas circumstances, while also being buttressed by the center’s political will.
Since then, China has set out a slew of policy initiatives: highlighting OBOR as the central foreign policy priority of 2015, launching the Asian Infrastructure Investment Bank (AIIB), and setting up a USD 40 billion Silk Road Fund. China’s National Development and Reform Commission (NDRC) has released a vision and action plan, highlighting five areas of connectivity: macro-economic policies, facilities, trade, finance, and people-to-people exchanges. The plan foresees the establishment of overseas industrial parks, economic corridors, trade and investment facilitation measures, railways and energy pipelines, and 10 thousand scholarships for students in OBOR-linked countries to come to China.
Many pundits say that these initiatives represent “old wine in new bottles.” There are already pre-existing plans for regional or sub-regional cooperation throughout Asia. However, OBOR will make the bottles bigger, filling them with more initiatives. Moreover, in the past, the winery’s workers had to coordinate the winemaking among themselves. Now, China, with its political will and technical expertise, is bidding to manage the winery.
As with any project this large, OBOR faces challenges. Some Chinese analysts worry that the plan is being implemented without sufficient attention to overseas political and economic risks. Although most countries have expressed their support, some have reservations; especially India, which fears its influence eroding in South Asia, and the Philippines and Vietnam, given the South China Sea disputes.
These reservations make it difficult to loop OBOR into multilateral arrangements; for example, ASEAN’s (Association of Southeast Asian Nations) consensus principle prevents the group as a whole from moving faster on OBOR. China would need to deal bilaterally with the relevant countries, hindering the objective of seamless connectivity across multiple countries. Also, other regional powers are taking action in response to China’s initiatives; Japan, for instance, is actively competing with China over building high-speed railways in Indonesia.
Despite the inevitable challenges, OBOR is driven by a fundamental economic and political logic. China, as the world’s second-largest economy, is a newly confident global power, and seeks economic space beyond its borders. Moreover, the flexibility inherent in China’s decision-making process may give it leeway to handle fluid overseas investment environments. Through the One Belt, One Road initiative, China wants to shape globalization, but on its own terms and not those of the West.
Lim Kheng Swe also contributed to this article and is a research analyst at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.
