1. China’s “One Belt, One Road” Initiative
Wen ZHA
Associate Professor
Institute of International Relations
China Foreign Affairs University

2. What is “One Belt, One Road”?
Unveiled in 2013:
September 2013 —The Silk Road Economic Belt concept was introduced by President Xi during his visit to Kazakhstan;
October 2013—The 21 Century Maritime Silk Road initiative was first proposed by President Xi during a speech to the Indonesian Parliament.

3. “One Belt, One Road” Initiative
An “initiative”, not a “strategy”;
A strategy requires planning and designing by one country; “zero-sum”;
The success of an initiative depends on support of other countries;
Multilateral mechanism & More mutual-beneficial;
E.g. Pakistan’s “Vision 2025”; Mongolia’s “Steppe or Grassland Road”; Kazakhstan's “Bright Road” Initiative, etc.
China has signed MOU on cooperation with more than 30 countries under OBOR framework.
No specific list of participating countries;
The initiative covers, but is not limited to, around 60 countries and 4 billion population;
It is open to all countries, and international and regional organizations for engagement;
E.g. Asian Infrastructure Investment Bank’s non-regional members.

4. Cooperation Priorities
“Hard”/Facilities Connectivity:
Transport, energy, communication infrastructure;
E.g. Give priority to linking up unconnected road sections, removing transport bottlenecks;
E.g. Ensure the security of oil and gas pipelines;
E.g. Upgrading of regional power grid;
Facilitate the formation of six economic corridors:
1) Eurasian Land Bridge;
2) China-Mongolia-Russia Economic Corridor;
3) China-Central Asia-West Asia Economic Corridor;
4) China-Indochina Peninsular Economic Corridor;
5) China-Pakistan Economic Corridor;
6) Bangladesh-China-Indian-Myanmar Economic Corridor;

5. “Soft” Connectivity:
1) Enhancing policy coordination:
e.g. build a multilevel intergovernmental macro policy exchange and communication mechanism;
2) Remove investment and trade barriers;
e.g. reduce costs of customs clearance;
e.g. multilateral cooperation in the field of inspection, certification, standard measurement, etc.
3) Financial integration:
e.g. support foreign governments, companies, and financial institutions with good credit-rating to issue Renminbi bonds in China;
e.g. enhance currency stability system; expand the scale of bilateral currency swap;
4) Enhance people-to-people bond:
e.g. provide 10,000 government scholarships to the countries along the Belt and Road every year.

6. Asian Infrastructure Investment Bank
Silk Road Fund and AIIB
Silk Road Fund
Asian Infrastructure Investment Bank
Trans-border infrastructure investment to developing countries;
Multilateral institutions
Open to domestic and foreign investors in the second and third phase;
54 members;
24 perspective members;
First stage: jointly backed by China's foreign exchange reserves (65%), the China Investment Corp. (15%), the Export-Import Bank of China (15%) & China Development Bank (5%);
China’s shareholding: %;
China’s voting rights: 26.06%;
de facto veto for key decisions;
Voting rights of China will reduce as new members join AIIB;
Based on market principles;
Safeguard shareholders’ interests;
Reasonable returns.
Development bank focusing on infrastructure investment.

7. Opportunities Huge demand for infrastructure investment;
ADB: in Asia, the gap between supply and demand for infrastructure investing is $8,000 billion in the next decade;
Lack of investment is likely to hold back these countries’ economic growth;
Developing countries also face the challenge of de-globalization and the rise of protectionism in Western countries;
OBOR will meet gap in investment to some extent and enhance trade liberalization.
Chinese Foreign Minister Wang Yi, “the initiative is China’s idea, but the opportunities it has created belong to the world”.

8. China’s “Hidden Agenda”?
Economic reasons;
Economy has entered the “New Normal”;
Slower growth rate: 7.0 % in 2015; 6.7% in 2016;
Transformation of the old export-oriented and environmental damaging growth model;
Aging population & no competitive edge in labor-intensive industries;
Consumption, services, and outbound investment—new engines for growth;
OBOR will connect China’s interior with major economic zones: Southeast Asia, South Asia & the Middle East;
Create market for industries (e.g. cement, steel, etc.) that face overcapacity issues.

9. Geopolitical reasons:
Not to cultivate sphere of influence;
Economic interdependence and regional stability;
68 percent of China's crude oil imports originate in the Persian Gulf and Africa and bypass the Strait of Malacca ;
“Malacca Dilemma” ;
Ensure energy security.
E.g. China-Pakistan Economic Corridor—pilot project of the OBOR—shortens maritime distance by 10,000 kilometers;
China committed $57 billion in projects along the corridors, including the building of Gwadar Port.

10. Risks
1) Increasing risks of geopolitical rivalry with major powers and regional powers:
Chinese perspective: economic driver;
U.S. perspective:
View AIIB as a competitor to IMF and WB;
Will institutional competition or competition for economic influence lead to political, even military confrontation?
“Thucydides trap” : The Peloponnesian War was caused by the rise of Athens and the fears it generates in Sparta;
Irreconcilable structural conflicts between a rising power and the hegemon;

11. 2) Concerns of neighboring countries:
Economic over-dependence on China gives China leverage on other issues;
Most small and medium size states want to maintain a balance between China and other major powers;
3) Political Risks for Chinese capital
Democracy Index: among the 65 countries along the Belt and Road, only 2 “full democracy”; 22 “flawed democracy”; 17 “hybrid regime”;
Political transition;
Protracted political crisis, such as military coup, ethnic riots, protests, etc.
Domestic political crisis or power-transition may lead to discontinuities in foreign policy;
Infrastructure projects take long time period;
Economic losses & negative impacts on bilateral relations.

12. To counter these challenges:
1) confidence-building with major global and regional powers:
China: develop “A New Type of Major-Power Relationship” with the U.S.;
Better management of the relations with regional powers, such as India and Indonesia;
2) understand the mentality of small and medium size countries:
Non-intervention principle;
Multilateral mechanisms;
Diversified membership of AIIB may reduce concerns;
3) increase transparency of cooperation project and rely on institutionalized channel of decision-making rather than individual leaders;
4) involve local companies and share the benefits with local societies.

13. Thanks!
Q&A