China’s One Belt One Road

May 28, 2017 – 11:44

China’s One Belt One Road (OBOR) initiative has generated huge excitement both within the country and outside of it. Trillions of dollars is expected to be invested in OBOR across more than 65 countries representing around 60% of the world population and representing around one- third of the global GDP.

OBOR’s focus encompasses an entire gambit of infrastructure including roads, railways, airports, seaports, power plants, oil and gas pipelines and refineries as well as IT, telecom and finance infrastructure.

However, a close look at planned initiatives indicate that it is primarily aimed at diversifying Chinese trade lanes and increasing Chinese access to the western markets. Falling exports, slowing GDP growth rates, rising pollution concerns and a need to move away from an investment-led model to consumption-led model appear to be the main inspiration for the policy makers to adopt such a vast project which could bring all undergoing projects as well as planed ones under one umbrella. Because of the centralised planning processes and an emphasis on heavy industries, China has been struggling with huge overcapacity, which it needs to export to other countries.

While most of the plans in Central Asia and in SE Asia have been under progress for a while, OBOR has integrated it under one umbrella. A look at these plans indicate a clear intent to push Chinese capacity, not only into neighbouring countries, but also as far as to Europe. This will certainly help internationalise the Chinese currency along with goodwill among trading partners. Not to forget, it will also help develop relatively lagging west side of China. In fact, the OBOR initiative can be traced back to the government’s development efforts in the west part of the country.

China has in tandem been meticulously investing in strategic locations, such as in Colombo’s port and in Piraeus, and has also shown a deeper interest in the Nicaraguan Canal.

Amid the rise of a new wave of nationalism across the US and Europe, China seems to be evolving as the guardian of globalisation through the repackaging of an age-old proven trade lane. After the withdrawal of the US from TPP, and an eminent threat to NAFTA, the OBOR initiative could provide a new lease of life to the IMF’s prescription for globalisation. It sure looks like a case of role reversal where the west is progressively embracing inward-looking policies, while China is preaching the benefits of comparative trade advantage.

Whatever the intention is behind such initiatives, the simple rule of thumb economics says is that such a massive investment in projects will certainly help boost regional as well as global economic prospects. For the shipping community, however, one will have to wait and see, although there does not appear to be any eminent threat in the near-to-medium term as land-based mass transportation just cannot beat the massive cost advantage that the shipping industry enjoys. Nonetheless, it will not be exaggerating to say that OBOR can be extended as the global transport system. However such a statement of course has many ifs and buts attached to it which only time can unwrap!

Photo Credit: Shutterstock

By |2018-09-06T15:02:31+00:00May 28th, 2017|News|Comments Off on China’s One Belt One Road

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