China’s grand plan, known as One Belt One Road, has raised endless questions. Business writer Chris Sheedy, having spent much of the past 12 months in China, supplies the answers.
When I arrive at the cavernous main lecture hall of the University of International Business and Economics in Beijing, there is standing room only. Long before the guest lecturer, a professor of economics from Poland, begins speaking, every seat is taken. Soon, keen students, other academics and outsiders such as myself fill aisles and crowd the spaces along the walls.
The professor is speaking about One Belt One Road (OBOR) and the topic, quite clearly, is one that interests many people. Those within China are keen for an outsider’s point of view on this initiative that variously encompasses the financing, building, ownership and management of major infrastructure projects around the globe. Those from elsewhere, perhaps tired of the typically negative media coverage around anything to do with China, are after a balanced report.
That’s mostly what we receive. The professor begins by discussing the fact that OBOR is the most ambitious and complex investment initiative in modern times by geographical scope, monetary volume, financial risks and political outreach. But, he says, it lacks an overall business plan, a detailed management plan and an institutional framework. That results in the initiative sometimes committing finance, resources and expertise to infrastructure projects that offer questionable opportunities for success over unknown timeframes.
Some projects, he says, such as the Port of Piraeus in Greece, are good investments. In this case, the 67% owner COSCO Shipping (China Ocean Shipping Company) is modernising the infrastructure and therefore creating the opportunity for an increase in container-handled volume of more than 14%. But then there is the rail project attached to the port, the Piraeus-Belgrade-Budapest high-speed route, which has seen a successful agreement between China, Hungary and Serbia on paper but which has not allowed for the fact that Hungary is subject to the full rigour of the EU’s procurement laws. It’s possible that the rail plan will have to be unwound once the EU has had its say.
But these are only a few of the many projects – including airports and high-speed railways, motorways and seaports, energy plants and gas lines – sitting under the OBOR umbrella. Many other major infrastructure works, such as those that make up the China-Pakistan Economic Corridor rail/road/power/pipeline project and the China - Laos - Thailand High-Speed Rail project, are moving ahead at pace.
What exactly is One Belt One Road?
OBOR is not a single project. It is not even a single idea. OBOR is a social, economic and political direction that has been outlined, developed and championed by Chinese President Xi Jinping.
“It is China’s soft diplomacy to build hard infrastructure, and to push economic development and prosperity in the region and across the globe,” says Professor Mahendhiran Nair, Vice-President, Research and Development, Monash University Malaysia and CEO of Monash Malaysia R&D Company.
“What’s in it for China? The best way to have influence over a region is through commerce and trade. China has become very dependent on other countries, particularly the US and those in the EU. The current ‘inward-looking’ US administration and the downturn in Europe have had a dampening effect on the Chinese economy. China has looked to diversify its market into developing and underdeveloped countries where populations are large and where there is potential for local income levels to rise. China can play an important role in raising those income levels by building infrastructure including roads, railways, ports, gas pipelines, energy sources etc.
“China is seen as the new ‘big brother’ for many of the developing and under-developed countries in providing them much-needed capital, knowledge and technology to modernise their economies. As economic prosperity increases in those regions, China can export to these markets and the natural resources, products and services from these countries will become an integral part of the Chinese supply chain.”
It would be a mistake, however, to consider that OBOR is only about developing nations. OBOR tendrils have found their way into discussions around Sydney’s new airport and into the $5 billion Northern Australia development plan. Neither of these resulted in a partnership, partly because of security concerns and the politically unacceptable flavour of greater Chinese investment in Australia. But while Australian leaders chose not to sign a memorandum of understanding with China formalising its involvement with OBOR, New Zealand did, along with another 67 countries. Nair says OBOR has the potential to become a formidable economic grouping in the coming years that might change the global economic landscape.
“China knows the centre of global economic growth and development is shifting to Asia and that it has to be proactive in engaging the region to stay ahead of other regional economic powerhouses, such as Japan and Korea,” he says. “OBOR will give China the leverage to strengthen its economic and geo-political position in Asia and extend its reach beyond Asia into Africa, Europe and Latin America.”
Dr Pichamon Yeophantong, a specialist in Chinese foreign policy and an Australian Research Council DECRA Fellow at UNSW Canberra, explains OBOR like this: “It is all about expanding China’s economic and political influence across Asia and Eurasia, but it’s also about material concerns. It’s about enhancing the capacity of countries to engage in large infrastructure projects, and to address the infrastructure gap that currently exists, and which organisations like the G20 have acknowledged as being one of the key barriers to development that developing countries face,” she says.
“In the Chinese system, one-party rule means long-term strategic vision is not just preferable, it’s the norm.”
“There are two simple ways of describing One Belt One Road,” says Kevin McConkey, Emeritus Professor at UNSW and consultant on international affairs with Chinese companies. “One is that it’s an attempt by the Chinese government to connect, across selected countries of the world, with governments and with private sectors. The other is that it’s China reflecting on where it can make social, economic and political inroads into influencing the world, in a positive way. Many of the targeted countries have been ignored and neglected by other world powers, but everybody needs friends.”
In essence, McConkey says, the name ‘One Belt One Road’ is a nod to different periods of the history of China and is not necessarily a reference to any specific land or sea route. “It’s a reflection of China’s attempt at active globalisation,” he says.
Playing the long game
China’s ‘active globalisation’ has four components: knowledge, economic, social and political.
“When you look at those four components and consider different weightings and different aspects of each of those, it explains why One Belt One Road moves in different directions and does not simply target one type of project or one type of country,” McConkey says.
Infrastructure projects across Central Asia and into Europe, he explains, have enormous economic and political benefits for China. Papua New Guinea, however, which signed on to some OBOR projects recently, offers no immediate economic benefits but potentially great political benefits. And when Chinese businesses carry out an infrastructure project in partnership with German engineering firms, the Chinese businesses gain valuable technical knowledge.
“It’s very Western to want a nice, defining boundary condition as to why One Belt One Road exists, but it is much more complicated,” McConkey says. “The only boundary condition is ‘the world’.”
Another Western frustration with OBOR, Yeophantong says, is the inability to identify a short-term benefit of many of the partnerships and projects. In Western society, where political careers are often counted in months rather than years, every infrastructure project must offer short-term political advantage to gain traction. But in the Chinese system, one-party rule means long-term strategic vision is not just preferable, it’s the norm, and perhaps even more so now that President Xi has been granted an unlimited term in office by the People’s Congress.
“Infrastructure projects take a very long time for the real impact to manifest,” Yeophantong says. “We’re not just talking about economic impact. It’s also about power, about social effects, about the kind of real-world impact that these infrastructure projects will have on communities and on the sustainable development of the countries in question.”
Sustainability, Yeophantong says, could be a challenging area for OBOR. We’ve seen examples in Africa and Asia of OBOR projects feeding “empty national discourses about economic development”, she says. Some projects have involved forced relocation of communities and others have caused irreparable environmental damage.
But the Chinese government, learning from past mistakes and alongside the OBOR’s financial manifestation, the Asia Infrastructure Investment Bank, is now actively attempting to promote sustainability guidelines around how financing should happen and how construction should take place.
And this is the point that I believe the professor at the University of International Business and Economics has missed – OBOR is learning from its own mistakes. Rather than organising every detail, it is instead forging ahead in that most Chinese of ways and, as a result, getting things done. Along the way it makes great mistakes and learns valuable lessons, but all the while it moves forward rather than being bogged down by the constant need to analyse, plan, manage risk and strategise.
What does One Belt One Road mean for us?
OBOR is going to make a significant difference in the ASEAN/Asia Pacific region, Nair says. “We will continue to see China’s investment spread broadly across the ASEAN region, and clearly it will have an important influence,” he says. “We are beginning to see their footprint in Africa very strongly, and in South Asia, particularly Pakistan and Sri Lanka. We’re seeing them make good inroads in Mexico and other Latin American countries, also. In our region too, it is going to make a lot of difference in terms of the geo-politics and dynamics.”
McConkey agrees, saying that those in the engineering and infrastructure game are going to have to prepare themselves for OBOR-driven change. First, he says, there’s the fact that many engineering schools around the world are experiencing an influx of Chinese students. So the very nature of engineering globally is likely to undergo a change as people with Western knowledge but a Chinese mindset begin to influence the industry.
“The second point is that large-scale infrastructure engineering always happens within a broader context. Although some might say that many technical matters, such as the materials in the build, are not affected by the context, I think almost every engineering decision in a One Belt One Road project will have to take into account the social, political and economic context in which it is occurring,” McConkey says.
“The third point is that for any Australian or New Zealand engineers who get involved with any of these large-scale projects, much of what they have been taught, and much of what they assume to be the appropriate approach to project management and risk management, gets thrown out the window. This is putting it far too simply, but it’s a very Western approach to want to work out every detail in advance, and only when all of those details are worked out do we come to an agreement to proceed with the project. Again I’m putting it simply, but it is the Chinese approach to come to an agreement, to proceed with the project, and then to worry about all of those millions of details as you go along.”
I recall a recent conversation with an Italian architect, raised and educated in Milan and now working in Tianjin, who told me he was in shock when he first witnessed the way the Chinese approached construction – planning on the run and laying foundations before drawings were finished. But now he sees value in doing things differently. It’s like standing in a powerful river’s flow and directing whatever water you can to where you need it, he said. What’s impressive is the power of the flow, always onwards and always forwards.
That’s my sense of One Belt One Road right now. A lot of water will be wasted, but nothing is going to stop that river from flowing.
This story was first published in IPWEA's inspire magazine. Read the original here.