OBOR (BELT AND ROAD INITIATIVE)

                                                       Executive Summary

China’s Belt and Road Initiative (also known as One Belt, One Road
(OBOR)) is one of President Xi’s most ambitious foreign and economic
policies. It aims to strengthen Beijing’s economic leadership through a
vast program of infrastructure building through out China’s neighboring
regions. Many foreign policy analysts view this initiative largely through a
geopolitical lens, seeing it as Beijing’s attempt to gain political leverage
over its neighbors. There is no doubt that is part of Beijing’s strategic
calculation. However, this Analysis argues that some of the key drivers
behind OBOR are largely motivated by China’s pressing economic
concerns.

            One of the overriding objectives of OBOR is to address China’s deepening
 regional disparity as the country’s economy modernizes.
Beijing hopes its transnational infrastructure building program will spur
growth in China’s underdeveloped hinterland and rust belt. The initiative
will have a heavy domestic focus. The Chinese Government also wants to use OBOR as a platform to address the country’s chronic excess capacity. It is more about migrating surplus factories than dumping excess products. One of the least understood aspects of OBOR is Beijing’s desire to use this initiative to export China’s technological and engineering standards. Chinese policy makers see it as crucial to upgrading the country’s industry.

 INTRODUCTION 

At the end of 2013 Chinese President Xi Jinping announced one of

China’s most ambitious foreign policy and economic initiatives. He called for the building of a Silk Road Economic Belt and a 21st Century Maritime Silk Road, collectively referred to as One Belt, One Road (OBOR) but which has also come to be known as the Belt and Road Initiative. Xi’s vision is an ambitious program of infrastructure building to connect China’s less developed border regions with neighboring countries. OBOR is arguably one of the largest development plans in modern history. On land, Beijing aims to connect the country’s underdeveloped hinterland to Europe through Central Asia. This route has been dubbed the Silk Road Economic Belt. The second leg of Xi’s plan is to build a 21st Century Maritime Silk Road connecting the fast growing Southeast Asian region to China’s southern provinces through ports and railways.  

It’s all about building massive stuff, mostly around transport and energy: roads, bridges, gas pipelines, ports, railways, and power plants. Proposed by Xi in 2013, the program is an estimated $5 trillion. infrastructure spending spree that spans 60-plus countries across Asia, the Middle East, Europe, and Africa. Hailed by Xi as a “project of the century,” the plan fits into his bigger narrative that China is setting an example of globalization, filling the void left by the US under Donald Trump’s “America First” policy.


Vision

 
 The Belt and Road initiative is geographically structured along 6 corridors, and the maritime silk road^.

• New Eurasian Land Bridge, running from Western China to Western Russia.
  
• China–Mongolia–Russia Corridor, running from Northern China to Eastern Russia.
• China–Central Asia–West Asia Corridor, running from Western China to Turkey.
• China–Indochina Peninsula Corridor, running from Southern China to Singapore.
• Bangladesh-China-Myanmar Corridor, running from Southern China to Myanmar..
• China–Pakistan Corridor, running from South-Western China to Pakistan.
• Maritime Silk Road, running from the Chinese Coast through Singapore to the Mediterranean

Who’s in and who’s out?

China says the project is open to everyone, but it has also identified 65 countries along the Belt and Road that, since the early stages of the proposal, it has insisted will participate in the initiative whether they’ve confirmed it themselves or not.
 Together, the 64 nations plus China account for 62% of the world’s population and 30% of its economic output Nevertheless, only 20 of those nations sent their heads of state to the OBOR summit over this past weekend, and most of them are smaller Asian countries that are economically dependent on Beijing. A total of 52 nations are confirmed to have had some level of participation in the forum.

How’s it going so far?

China has never published any comprehensive list of all OBOR-related projects or deals. The initiative is vaguely conceived and described at the first place, perhaps to make it easier to bundle anything it wants into it. As leading players in the initiative, about 50 Chinese state-owned companies have invested in nearly 1,700 OBOR projects since 2013, said the Chinese government days ahead of the Beijing forum.
The flagship projects include the ss c$46 billion China-Pakistan corridor, a 3,000km high-speed railway connecting China and Singapore, and gas pipelines across central Asia. The Belt and Road initiative has also entered regions as far as New Zealand, Britain and even the Arctic. Nearly $500 billion worth of projects and M&A deals were announced in 2016 across seven infrastructure sectors including utilities and telecoms in OBOR countries, a decline from 2015, according to a report from audit firm PricewaterhouseCoopers (pdf) in February. A third of the projects and deals were in China, PwC said, and the rest spread across other OBOR nations. Breaking them down, PwC found that the value of newly announced projects has been flattening, going up just 2.1% in 2016 from the earlier year to about $400 billion. And M&A deals in 2016 fell 49% in dollar value from the previous year, PwC noted, citing stricter capital controls amid a weakening yuan.

Where does the money come from?

The $113 billion in extra funding Xi promised will be disbursed through three different sources. These include the state-owned Silk Road Fund, which was officially launched in 2015 with $40 billion of initial capital, and two Chinese policy banks, the China Development Bank and the Export and Import Bank of China. Some analysts have warned (paywall) that some OBOR projects financed by these banks may lose money–maybe a lot of it.
Two multilateral institutions led by China, the Beijing-based Asian Infrastructure Investment Bank (AIIB) with its registered capital of $100 billion—and the Shanghai-based New Development Bank—with $50 billion starting capital—are also major financiers of the initiative. In 2016, for example, the AIIB  approved $1.7 billion in loans to nine development projects along the Belt and Road. Chinese lenders are also powering the new Silk Road plan. Louis Kuijs, head of Asia research at Oxford Economics, estimates that the annual Chinese lending to other OBOR countries stands at around $130 billion (paywall) in recent year and the bulk of that is from commercial banks. Speaking at the Beijing forum, Zhou Xiaochuan, governor of the Chinese central bank, has pledged (link in Chinese) to help domestic banks fund more OBOR projects in the years to come. He added that China is also seeking financial cooperation with other OBOR nations, as its own resources are limited.China is also hoping that other countries and funds will pitch in.

Economic risks

While China is very much confirmed about the major benefits from the OBOR project but it is also footing significant proportion of risks with it. OBOR targets most of the countries in Africa, Asia, and Southeast Asia, and they are prone to political instability, economic issues, and corruption. XU said that what happens when Chinese Government funds OBOR project, the consequences are utterly unclear. However, he also mentioned that if the series of the project fails, then everything would collapse. Balding mentioned China does own a poor record of accomplishment of investment especially overseas, which points to widespread problems along with the Chinese Projects in Venezuela, Myanmar, and Sri Lanka.He added OBOR is mainly characterized by projects along with the little economic rationale for China. Wuttke has warned that the project is remembered as huge white elephant, which left an enormous amount of wasted resources that is strewn along its path.

Political Risks

If the project gets successful, then OBOR will be able to see China supplant because the US is the leading superpower, but Xu apparently warned about the project, which can be backfired considerably because of the size.Talking about the economic fragility, most of the projects are in Asia, which will carry significant security risks hat particularly be the China-Pakistan Economic Corridor while more than 13000 Pakistani troops are deployed to protect the project which runs through the South Asian country’s restive tribal regions.
Many previous Chinese overseas investments earned a bad reputation for not delivering the local economies as stated by Marro. The re-export mined raw materials came back home and said that most notorious allegations are levied against Chinese investment in Africa and often sees state-owned companies set up the shop and bring in workers from China which opposed on hiring locally and then re-export the mined raw materials back.
However, it can be concluded that Chinese overseas investment is maturing but expressed concerns that OBOR project is large, and exercising effectively over the diverse elements, which may prove to be difficult.The OBOR project is vast and has taken the important initiative while if things go wrong, then major blight on Chinas reputation will be in front of the world.

CPEC (China Pakistan Economic Corridor)

China–Pakistan Economic Corridor is a collection of infrastructure projects currently under construction throughout Pakistan. Originally valued at $46 billion, the value of CPEC projects is now worth $57 billion. CPEC is intended to rapidly modernize Pakistani infrastructure and strengthen its economy by the construction of: modern transportation networks, numerous energy projects, and special economic zones.On 13 November 2016, CPEC became partly operational when Chinese cargo was transported overland to Gwadar Port for onward maritime shipment to Africa and West Asia.

(Note for more about CPEC Check our CPEC Section) 

The Reviving of the silk road.

It will involve 65 countries with a total population reach 4.4 billion and share of global economy of 30 per cent. It's more than seven times larger than America's Marshall Plan to rebuild Europe after the Second World War.

What are the benefits of the projects?

It will fill gaps in infrastructure in developing countries such as Afghanistan and Pakistan which see it as a "path out of poverty". It is likely to accelerate economic growth in at least some of the countries involved as well as China as it increases trade and facilitates the transit of goods and international cooperation.

Why is India opposed to China's OBOR?

As part of the OBOR, in Pakistan, there is a proposed $1.3 billion effort to expand the Karakoram Highway as part of the China-Pakistan Economic Corridor (CPEC). Now this involves power plants, roads and railways that will span the length of Pakistan and link China’s western region of Xinjiang to the Gwadar port, which was built with Chinese help.
But according to India the CPEC runs through Gilgit Baltistan disputed area
The establishment of a project with China in the disputed territory gives Pakistan’s occupation of the area a degree of legitimacy. And India’s clear stand on the issue is that Pakistan is illegally occupying Indian territory. Getting on board OBOR or talking to China and Pakistan about CPEC would be problematic for India as it could be seen as conceding ground to Pakistan. It would also involve a third country which goes against India’s stand that this is a bilateral issue which needs to be worked out between the two neighbors.China held a conference centred around OBOR in Beijing and heads of states, governments and representatives from 29 countries and international organisations were present, including the US, Russia and the IMF. India stayed away from it but the global representation definitely legitimised the initiative.

Thanks.
Regard.
syed Haider Ali