Elcano Scholar Mario Esteban on China’s One-Belt-One-Road StrategyNewsarticles

Q:What do you think of China’s One-belt-one-road (OBOR) strategy? What does it mean?

A:When OBOR was presented by president Xi Jinping in 2013, it was a foreign policy strategy envisaged to improve relations with China´s neighboring countries and to favor the internationalization of Chinese companies. The official document Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road, published on 20 March 2015, showed that this imitative has been also integrated inside the domestic economic growth strategy by the central and the local authorities of China. Therefore OBOR has both international and domestic implications.

OBOR is a clear example of a confident and proactive foreign policy, launched by a country that wants to depict itself as an attractive partner for economic development. Unlike in the ancient Silk Road, Beijing is willing to take the initiative in promoting an initiative that could shape regionalism in Eurasia.

With regard to the domestic implications it seems a strategy for re-igniting economic growth, reducing interregional inequality and promoting stability in some regions as Xinjiang.

Q:Based on your observation, do many Europeans know OBOR? How do they comment on it?

A:OBOR is quite popular among political and academic circles, relatively well known by the business community, but almost unknown by the general public. This last point may change in the short and medium term, since European media is devoting growing attention to this issue.

So far there is a lot of uncertainty on the impact that OBOR would have directly on Europe and on other neighboring regions Europe is closely interlinked with. Anyway, those familiar with OBOR are aware that this initiative has the potential to transform Eurasia quite significantly and to offer opportunities for cooperation in many areas between Europe, China, and all the other countries participating in this project.

Q:OBOR is composed of five connections in the areas of policy, road, financial flows, trade and investment, and people-to-people exchanges. Which part is easy and which part is not?

The key point to answer this question is expectations. I am confident OBOR will help to promote exchanges in all those fields; however, it is still too early to tell the intensity of those changes. Some people may feel disappointed if OBOR does not bring a significant increase in all those five areas in a short period of time.

I consider trade and people-to-people exchanges the easiest areas to promote, since they are less sensitive and required a lower level of commitment than the rest.

Q:China suggests that OBOR can be integrated with the Juncker Plan’s strategic investment fund. Specifically, how can that be achieved?

A:The Juncker Plan and OBOR have obvious synergies, since both initiatives try to trigger economic growth building new infrastructures that would improve connectivity. The EU´s investment fund is open to non-European countries and, during the last EU-China Summit, premier Li Keqiang showed interest in contributing to this fund, mainly for the development of large infrastructure projects. The establishment of a joint connectivity platform was a step in the right direction and in the next session of the EU-China High-Level Economic and Trade Dialogue in September the development of a EU-China co-investment mechanism will be discussed. Even if that possibility does not prosper, there are other ways for cooperating.

Probably the most obvious is using the Silk Road Fund to finance projects in Eastern, Central and Southern Europe. For example, on the 9th June Hungary became the first country to sign a memorandum of understanding to promote the new Silk Road. In addition, according to the news on the negotiations inside the Asian Infrastructure Investment Bank, this institution would be able to finance projects outside Asia and to co-finance projects with other financial institutions, such as the European Investment Bank. Anyway, this kind of cooperation would benefit from the completion of the negotiations for a Comprehensive Agreement of Investment.

Q:What are the biggest challenges for OBOR?

A:Such an ambitious project will face many challenges, such as resistance by other powers afraid of losing their influence (mainly the US, Japan, Russia and India), contention by local communities and the political opposition of the countries participating in OBOR, terrorism, territorial disputes, overinvestment by Chinese local governments and SOEs, over-indebtedness of the countries in which the infrastructures will be built, etc.

Moreover, I would like to highlight another challenge, the dubious economic logic of some parts of the initiative. Although this is supposed to be a market driven imitative led by companies looking for profit, there is a reason many of the countries involved in the OBOR have not attracted much private investment in the past. Some of those countries have low economic development, limited market size, and are plagued by political instability and poor governance. It would be quite difficult to revert this situation, even if the Chinese government tries its best to promote OBOR.

(Mario Esteban is Senior Analyst of the Elcano Royal Institute and Assistant Professor of the Autonomous University of Madrid.)