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No Chinese initiative has been lapped up so eagerly since Chairman Mao’s Little Red Book inspired millions across the globe in the 1960s. This time the proponents of the “One Belt, One Road” slogan are not young idealists but suit-clad and normally more sobersided politicians, bank analysts and economists.
One Belt, One Road is a Chinese foreign policy initiative promoted by president Xi Jinping and sometimes known as China’s answer to the Marshall Plan (although Beijing rejects that analogy).
The numbers are impressive: $40bn from the new Silk Road Fund, to support private investment; not to mention the lion’s share of the expected $100bn to be dispersed from the new China-led Asian Infrastructure Investment Bank (AIIB).
So far there is little indication of where the money might flow, or how to tap it.
The confusion starts with the name itself. One Belt refers to what was historically called the Silk Road, stretching from China through central Asia. One Road refers to a “maritime road” which more or less draws inspiration from the voyages through Southeast Asia to the east coast of Africa by Zheng He, the eunuch admiral of the Ming Dynasty.
Rather than being limited to China’s near neighbours in central and Southeast Asia, One Belt, One Road is geographically elastic.
“Some people say there are only 65 countries involved but that’s a misunderstanding,” says Zhao Changhui, chief risk analyst at China Export-Import Bank and an enthusiastic proponent of the concept. “It’s a new method of development for China and the world.”
In the absence of concrete plans, international enthusiasts are left to fill in the blanks.
George Osborne, the UK chancellor believes One Belt, One Road investments will dovetail nicely with his promise to develop the north of England. In September he visited ethnically divided Xinjiang on China’s borders with central Asia to evoke the Silk Road. While there, he announced £60m of investment into real estate projects in Manchester and Sheffield by the Hualing Group, known for developing wholesale markets in Xinjiang.
Others see a spurt of investment into regions that are already close trading partners with China. Singapore, the trading hub for Southeast Asia, could capture some of the flow.
“The country’s role as a major business, financial and trade hub for the Asia Pacific region will only be enhanced,” says Stuart Fuller of law firm King & Wood Mallesons.
Mr Zhao believes that investors from third countries would also benefit, if the investment from the Chinese side improves infrastructure such as roads, ports or airports in the host country.
Bert Hofman, country director for the World Bank in Beijing, also views the potential whole as greater than the sum of its parts, writing: “The benefits only accrue if each part of the belt and road gets built, or at least a significant part”.
Within China, regional promoters are rushing to tie their projects to the One Belt, One Road initiative with the same enthusiasm and lack of geographic distinction as China’s earlier “Develop the West” slogan, which ultimately grew to include much of the nation.
But when it comes to committing their money overseas, Chinese business people have so far been more cautious than international politicians. There are very few identifiable One Belt, One Road projects outside China’s borders. The exceptions are a slew of Chinese investments announced for Pakistan, where 51 memoranda of understanding were signed during an April visit by President Xi, and a steel mill that state-owned Hebei Iron and Steel proposes to build in South Africa.
One consultant, who advises Chinese businesses in Africa, says that would-be Chinese investors always ask whether a proposed project would be eligible for earmarked One Belt loans from Chinese banks, before taking talks further.
Mr Zhao says the lack of projects so far is simply because the concept is new. “The time is not ripe. It’s not that there aren’t projects, it’s just that they aren’t developed yet.”
Others believe the lack of specific projects reflects a lack of clear business rationale. Chinese state-owned and private businesses have already rushed into any promising projects during the oil and commodities boom. New projects, when they are finally detailed, would have to be profitable at lower prices, or heavily subsidised by the Chinese state. Potential host nations are already pulling back on investment to ride out the anticipated trough so they cannot be counted on for the funds.
The AIIB could fill in the gaps once it is up and running, but details of how it will operate are still to be finalised.
Another concern for Chinese companies is the security of any investment. After the fall of the Soviet Union, European companies led by oil investors had to develop investment protocols to bridge central Asian countries’ Soviet-based legal and corporate structures with western corporate norms.
China is now developing similar protocols to support an expected influx of Chinese investment to the region.