Forbes India 15th Anniversary Special

One Belt, One Road, but not all onboard

China's grand infrastructure initiative is a double-edged sword, with opportunities and threats alike for participating countries

Published: Jul 31, 2017 06:58:04 PM IST
Updated: Aug 2, 2017 09:00:46 AM IST

One Belt, One Road, but not all onboardChinese Premier Xi Jinping
Image: Reuters

The ‘One Belt, One Road ’ (OBOR) initiative, which was first proposed by Chinese Premier Xi Jinping in 2013, is perhaps the single largest infrastructure project ever planned. Aiming to connect 68 nations across Asia, Europe and Africa, it is a network of land and sea routes, longer than the famed Silk Road of the ancient and medieval times that stretched over 6,437 km from China to Western Europe. OBOR involves an investment of about $1 trillion, almost fully bankrolled by China in the form of loans to participating countries, according to Ning Jizhe, the vice chairman of the National Development and Reform Commission of China.

It is an idea that looks “to create a network of railways, roads, pipelines and grids that would link China to the world,” said Deepak Nayyar, professor of economics at Jawaharlal Nehru University and chief economic adviser to the Government of India from 1989-91, to the media this June. In May, Beijing hosted a two-day Belt and Road Forum (BRF) that saw the presence of 68 participating countries, with 28 heads of state in attendance.

China and its allies hail OBOR as an infrastructure project that will connect remote areas and create new networks that will facilitate increased trade and commerce between all the countries it connects. But no matter how attractive the project might appear to some of the countries involved, not everyone is convinced.

The three most prominent players opposing the project are Japan, the USA and India. By not having their support, China opens itself up to political litigations from all the countries affected by this initiative, with accusations such as breaching of national boundaries.

Japan has been suspicious of China’s rise in power and its expanding sphere of influence. However, it has been predicted by Prime Minister Shinzo Abe that this stance might soon change if the country’s national legislative bodies pays heed to popular sentiment created by the possible rapprochement between the USA and China over North Korea.

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The United States has taken a precarious measure that contradicts the foreign policy established by former President Barack Obama. Although the Donald Trump administration did not send any major dignitaries to BRF (it did send a delegation), it has been noted that Trump is heading towards condoning OBOR. This stance is in complete contradiction to Obama’s, who was clear about curbing China’s influence in order to maintain the US’ own position in global politics.

It has allowed China to move ahead with OBOR at an accelerated rate. Not only is this troubling to many nations—given the US’ role as a deterrent to global funding—but is also a threat for India, with the Trump administration using its influence to urge India to participate in OBOR.

India’s beef with OBOR is because of China’s other project, the China Pakistan Economic Corridor (CPEC), which runs through parts of Pakistan Occupied Kashmir and which India considers to be a breach of its own sovereignty. China has already invested more than $60 billion into the CPEC since its inception in 2015, and changing any aspect of it would incur more costs. India will not back down from its opposition to CPEC, as that would be seen as a submission of territory. The best bet of resolving this is through dialogue between China and India, and arriving at an amicable solution.

Adding to India’s concern over CPEC is China’s increasing influence in the Indian subcontinent, thanks to its String of Pearls manoeuvre. China wants India to participate in OBOR mainly to continue with work on CPEC, and is presenting the OBOR as a cloaked offer to promote an all-Asian rise in influences.

This is a situation that, according to Sudheendra Kulkarni of the Observer Research Foundation (ORF), is similar to how leaders feel about Prime Minister Narendra Modi being quoted as saying that although OBOR provides many opportunities, the breach in India’s sovereignty is what is preventing it from going through, or even beginning.

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This raises questions about the exact motives behind OBOR. Is it simply an economic manoeuvre that is meant to divert export revenue to itself in excess to its neighbours, and fellow future beneficiaries? Or is it something greater on the political front, with attempts to move the sphere of influence from the USA to China, while also helping it seal its lead in the struggle for dominance in South Asia as well as the South China Sea and the Indian Ocean?

“Its [OBOR’s] implicit, unstated objectives, both economic and political, also deserve attention,” says Deepak Nayyar. ORF’s Ritika Passi says, “Infrastructure is just one layer of the BRI [Belt and Road Initiative], although the most important one right now. Other elements—such as trade in Chinese currency, humanitarian aid and development projects in the social sector, instituting cooperation—altogether inevitably increase China's presence and influence across Asia.”

She adds, “Even if you think of the BRI just in terms of infrastructure projects, note that China is not only a key source of investment right now (biggest one for several countries in India's neighbourhood), it is also a willing one. Even as Chinese lending for infrastructure comes with no explicit strings, the fact that its investments in many poorer countries are worth significant proportions of the recipient country's GDP gives China the opportunity to use said investment as leverage to influence decisions; and to punish actions that it feels run contrary to its interests. For example, recipient countries falling into debt traps gives China opportunities for turning debt into equity in these infrastructure projects, and gaining control of strategic spaces.”

Passi, however, adds: “…many observers recommend joining the BRI to be effectively part of the loop, to sway decision-making away from projects that hurt Indian interests and suggest alternatives, in return for the substantial goodwill it will bring to the table as well as investment opportunities. I would argue that as long as India is in the picture in these various spaces, it offers countries another option of partnering for development.”

Thus, not only does OBOR offer investment opportunities, it also allows India to bring itself to the forefront alongside China, and act as a deterrent to China’s complete dominance over the continent.