On May 14th President Xi Jinping entered the stage for the opening ceremony of the Belt and Road Forum for International Cooperation, an event with the potential to have a much larger grasp than the last G20 summit in Hamburg for the global economy, despite it going largely unnoticed in Western Europe and the United States.
Representatives of about 130 countries, including Putin, Erdogan, Tsipras, Duterte and Orban, gathered to celebrate Xi’s “project of the century”. It is the biggest event taking place in Beijing since the Olympic games in 2008. It is an attempt to recreate the legendary Silk Road, which connected Europe and China for one and a half centuries until Portuguese sailors discovered the ocean route, ensuring a much faster journey and much more efficient trade.
Ambitious Aims
Xi’s ambitious goals do sound inspiring indeed. “We should build the Belt and Road into a road of peace … of prosperity … of opening up … of innovation … connecting civilisations” he said. Surely, just the term “silk road” itself has a grand connotation.
People may think of caravans and camels transporting spices and silk or they may think of Marco Polo, who reputedly brought the noodle to Italy. However, it is much more than an adventurous journey ending in glory and wealth.
“One Belt, One Road”, OBOR in short, is Xi’s counterpart to Trump’s quest to “Make America Great Again”, albeit with a much more international focus. Since Xi announced his plans in 2013, the total trade between China and other Belt and Road countries has exceeded US$3trn. China’s investment has surpassed US$50bn. Chinese companies created almost 200000 jobs and over US$1bn of tax revenue. Of course, these numbers have not gone unnoticed by world leaders.
Open to Closed
“Protectionism is becoming the new normal,” Putin warned, adding that the “ideas of openness and free trade are increasingly often being rejected by those who until very recently expounded them”. The Russian president expressed his gratitude to President Xi for taking the initiative to a new global system. Turkey’s President Erdogan passed on the “love and respect of all the citizens of Turkey”.
Certainly, it’s no surprise that such big shots as Vladimir Putin or Recep Erdogan, who usually show a rather dominant demeanour, are expressing their support to China’s president. What they hope to achieve by supporting Xi’s master plan, can easily be explained with the aid of an example: Greece, more precisely Piraeus. While debt was plunging Greece into a severe crisis, which is far from over, the Chinese logistics company Cosco took over a scrapped terminal which had been neglected for decades.
The Chinese modernised the terminal, created hundreds of jobs and turned the harbour of Piraeus into the most modern container port in the European Union. Piraeus is the only large deep sea port between Suez Canal and Bosporus. In 2016 Cosco bought the terminal from the Greek government for mere €280.5 million, a true bargain. It is a simple equation: an unstable but geographically attractive country, a government in need of investments, and no private investors willing to invest.
China’s Advantages
Here, China has two advantages: first, China has become quite experienced in such environments, given its investing activities in several African countries such as Ethiopia. Second, the CDB (China Development Bank) is providing state money to public companies to invest in projects private investors would hesitate investing into.
Another example: Pakistan. Here, China built a whole economic corridor composed of streets, railroads, power plants and a deep sea port in Gwadar at the Arabic ocean. There are countless other examples: Myanmar, Mongolia, Iran, Sri Lanka, Laos.
There is little doubt that OBOR is the economic form of Chinese geopolitics. However, by simply taking interests of all parties into account, China is generating mutual benefits by creating jobs and supporting the domestic economy of those countries it’s investing into, thereby slowly reinstalling itself as the Middle Kingdom it used to be before European powers claimed the spotlight for themselves.
Chinese Hegemony?
Even though most international policy scholars claim that China lacks the soft power (in terms of cultural attractiveness to other countries) to become a true new hegemonic power – at least for now – OBOR is the foundation of a new multilateral system under Chinese leadership. With the US and Japan dominating international economic institutions like the International Monetary Fund, the World Bank or the Asian Development Bank, realising China’s agenda might be problematic.
As a result, China formed its own multilateral institution as a new competitor to IMF, World Bank and ADB. However, as the graphic below shows, the founders of the new Asian Infrastructure Investment Bank (AIIB) are not just countries in East Asia and the Middle East. In fact, there are 57 founding countries including Australia or even Western European countries such as France, Germany or the United Kingdom.
Kerry Brown from the Chatham House Asia Programme states that the decision by the UK to “join the China-instigated Asian Infrastructure Investment Bank […] shows overdue strategic clarity and awareness among the political establishment that foreign policy towards China should aim to advance the national interest rather than placate Britain’s other allies”.
However, China holds about 28% of the voting rights while only 25% are needed to veto fundamental decisions. In other words, the AIIB won’t be able to do anything without China’s consent. Surely, $100bn, which Vice Director von Amsberg claims as a goal, won’t even be nearly enough to finance the $1trn OBOR project, even though it’s almost comparable to the $240bn the mighty World Bank has in its accounts.
Anyway, the state banks CDB and Exim-Bank (Export-Import Bank of China), as well as a newly established silk road fund, are already providing a total of $240bn plus $69.5bn soon. The rest amount shall be raised from private investors. It is not clear if the Chinese government will ever be able to collect the total amount of US$1trn.
Conclusion
However, it is not a big concern as the Chinese simply follow Deng Xiaoping’s advice to “cross the river by feeling the stones”. However, the AIIB is only a minor hint of how much influence China has gotten recently, mainly because of OBOR. Even the European Union, which used to condemn China’s violations of human rights, seems to be affected by China’s new geopolitical strategy. This time, there has been one member which didn’t agree with the position: Greece.
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