SEATTLE — The U.S. is officially out of the Trans-Pacific Partnership, but the next largest economy in the world isn’t closing its doors to increased foreign economic engagement. One Belt, One Road is a two-pronged plan China is pursuing to enhance trade opportunities. According to Kevin Sneader of McKinsey Publishing, this initiative is “the world’s largest platform for regional collaboration” and will include 65 percent of the world population, one-third of global GDP and a quarter of all goods and services.
With an estimated annual investment of $3 trillion, the initiative is 12 times the size of the Marshall Plan, which helped Europe recover after World War II. The initiative faces many challenges, however, which include finding investors that are willing to be a part of a massive project which would link many countries from China to Europe by land and by sea.
One Belt, One Road should be understood in terms of the geography. The “belt” half of the plan refers to overland routes and includes railways, pipelines, special economic corridors and free trade zones. One of the major routes goes from northeast China through Mongolia, Russia, and Germany before dipping down to Spain.
The “road” half of the plan refers to shipping lanes from China’s southeast coast to Europe through the Indian Ocean, west to the Horn of Africa, and north through the Suez Canal in Egypt. The six economic corridors link different areas across Asia, and oil and natural gas pipelines are planned that would supply China from the Middle East, Russia, and Africa.
The economic and strategic implications of One Belt, One Road are enormous. The pipelines would bring China energy security while the transit connections would unite destinations along the routes, likely to allow for easier resource extraction. Many Chinese provinces have enabled free-trade zones to encourage investment with countries in the initiative, and 44 percent of new Chinese engineering projects targeted countries along this “new Silk Road”. Official estimates are that 900 projects are currently under way, according to The Economist.
There is speculation on the Chinese intent for the initiative. Dingding Chen, writing for The Diplomat magazine, sees the initiative not as a strategy “to become a hegemon,” but rather to develop other countries. One major reason for this is to create a large population of people who have money to spend on Chinese goods.
The Asian Infrastructure Investment Bank, a new multilateral lender to which China contributes 33.4 percent of funding, is set to finance some of the projects for the initiative. This brings a degree of democracy to the table, and also means that a broader range of governments will make investments. Each of these governments has its own national interest and acceptable level of risk, and all will have a different stake in the individual projects. This means accountability will be important, to maintain trust between those building the infrastructure and those living around it.
As China’s economic growth slows, this initiative is a way to avert economic damage by beefing up infrastructure and a new consumer base. The U.S. will be hesitant to empower China to become the largest global economic power but by joining the initiative they, too, would be able to reap the rewards of economic interconnectedness and have a hand in shaping global policy. As The Economist notes, however, the plan as it appears now obviously places China, the Middle Kingdom, as the pivot point.
Whether One Belt, One Road will primarily benefit China and other industrialized countries or create sustained mutual growth remains to be seen. If China truly seeks to establish a multipolar world order, as Moritz Rudolf of the Mercator Institute for China Studies writes, the One Belt, One Road initiative will serve as a starting point for bridging the gap between Europe and Asia.
– Lucas Woodling