China’s “One Belt One Road” initiative is a brilliant strategic move but its delivery holds many risks
January 07, 2016 | Sam Ahmed
The “One Belt One Road” (OBOR) initiative by China is arguably their most ambitious initiative to date. The project which was started in early 2013 by President Xi Jinping, has two parts. First, the New Silk Road is a plan for an overland route running through Central Asia and to Europe. The second is the Maritime Silk Road, which will connect the ports of South East Asia, South Asia and Africa. The end goal is to build a network of sea routes, overland roadways, railways, oil and natural gas pipelines and other infrastructure projects that will connect China to Central Asia to Venice and ultimately reach as far as Moscow.
The drivers behind the One Belt One Road
For more than three decades China experienced double-digit export led growth resulting in the creation of the world’s largest economy. The inevitable slowdown in growth finally transpired in 2014 when an annualised GDP of only 7.4% was achieved, the lowest figure recorded over the past 14 years.
While growth had slowed down, decades of strong manufacturing output, primarily aimed at offshore markets, had left the Chinese economy with a substantial pool of financial capital and foreign reserves along with a huge excess of manufacturing capacity in steel, cement and various other industries. This is a strategic initiative by the Xi Jinping government who, having anticipated a decline in domestic led growth ahead of time, had put in place strategies which could allow China to sustain its growth in the long run by using its excess manufacturing capacity for offshore projects, and allowing for full utilisation of its capital and reserves to fund such projects.
While the first motivation for the OBOR is economic, the second factor was political. The growth of China as an economic power has not been consistent with China’s representation and weighting in major world organisations. Currently, American, Japanese and European parties continue to dominate the i...
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Categories: Asia Pacific
, Industry Developments
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Keywords: World Bank
, Trade Partnership