The Modern Silk Road Belt: Can It Be Bilateral or Not

The One Belt One Road project is developed by China, aiming to commercially connect more than 60 countries, from Asia to Middle East and finally to Europe. This project is based on the ancient Silk Road, while it is known as the Modern Silk Road Belt. OBOR is an aspiring project mainly aiming to open EU market to Chinese companies on which there is extensive analysis in the literature. However, will this project only serve China’s expansion plans or it will also offer bilateral development to both China and EU? Several questions are also raised concerning potential indirect motives from China’s side and the short and long term benefits for both parties.

Literature Review

The OBOR’s Initiatives and Statistics

The project was first introduced to the global community in 2013 by president Xi Jinping (Julan Du, 2018). The project’s goal was to commercially, geographically and culturally connect countries of Asia with countries located in North, South and West Europe (Yakov Silin, 2017). According to the project’s financial estimations, these countries represent almost 30% of the global GDP. The overall investment in the OBOR countries is also expected to exceed $4 trillion (Yang, 2018). As Wang analyzed in his study (Wang X., 2017), the initiative will be focused on developing five main areas, including infrastructure investments, policies and regulations, commercial relationships, social interaction and bonds and trade without obstacles.

Reflection on China’s Motives

China’s foreign policy has become increasingly pluralistic compared to the one of Mao’s era (Yu, 2018). China seems committed to implement projects and initiatives not only at a local or national but also at an international strategy level (Julan Du, 2018). China traditionally chose to invest on developing countries, with natural resources but with unstable political environments which could have been evaluated as risky under the perspective of business development. Nowadays, China is interested in investing on high tech projects and products designed in developed countries in order to gain access to the most innovative technology developed by local and international branches and institutions. The global financial crisis together with the ‘Going Global’ strategy have also served as a trigger for Chinese companies to increase their investments in EU (Yu, 2018).

On the other hand, countries seem skeptical and criticize China’s motives. Chinese government is believed to take advantage of its economic growth and liquidity in order to accomplish economic inducements (Reilly, 2017). It is also criticized of ‘harvesting’ the project’s magnitude, in order to increase its economic and political influence in the West (Meunier S. , 2014). Beijing is even criticized that implements a ‘divide and rule’ plan towards EU members so as to earn the most for its growth (Yu, 2018).

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OBOR and EU

The relationship between China and EU is not fresh news. Both parties are among the biggest trading partners for each other, with EU holding €304 billion as Foreign Direct Investments (FDI) stocks in China investments in 2016 and €136 billion for the opposite site (Eurostat, 2017). China’s FDI stock may be big as a number, but under its perspective it is still considered as ‘small’ (Voss, 2016).

At the same time, the global economic crisis had significantly affected Europe making legal or political barriers smother and creating competition amongst the EU members that were trying to attract foreign investors (Meunier S. , 2014) (Meunier S. , 2014). Europe having already commercial relationships with China, evaluated the positive benefits that would easily be derived from China’s additional plan and agreed on it while some EU country members even showed enthusiasm (Wang X., 2017). Short and long term economic investment would flow in the EU from economic resources outside Europe (Meunier S. , 2014) while at the same time, China’s surplus production would be accessible to Europe to cover its increasing needs. Moreover, Europe’s big infrastructure projects would gain immediate funding that otherwise would have been cancelled or delayed.

Thus, in 2015, China was the first non-EU country that was involved in the ‘Junker financial plan’ including an €315 billion monetary investment (Commission, 2015). Moreover, China has already signed a ‘CEE 16 + 1' agreement which gave the green light to cross country projects (T.Bieliński, 2019). As a matter of fact, financial investments are already flowing towards many ‘belted-road’ projects (Julan Du, 2018). Some of them are Belgrade-Montenegro Bar Port Motorway, the Europe-China – Rail Link I & II and the expansion of Piraeus port (Wang X., 2017). This leads to what F.Godement and A.Vasselier wrote that China is now inside Europe (Vasselier, 2017).

However, the legal and economic context of EU investment in China is not yet adequately defined. China and EU are at the moment in the middle of negotiations regarding the Comprehensive Agreement on Investment, a set of regulations and agreement that are expected to bring bilateral positive outcomes. Both parties expect investment securities, removal of legal investment barriers and increase of the two- ways cash flow. The last goal of this process is to set the basis on negotiating China’s next goal, signing a free trade agreement (FTA) with EU (A.Garcia-Herrero, 2016).

Conclusion

OBOR is a plan developed by China and supported by China’s global expansion strategy which consequently serves first and above all the Chinese interests and position in the global economic and political scenery. Though, the question remains if this is a one-way trading route or this master plan will also assist European companies to expand their activities in China and in greater Asia. Will this new commercial route enforce bilateral commerce or Europe will only absorb investments, cash and products from China in the long run and its exports to Asia will remain steady or even decline? Further analysis is identified towards this direction.

References

1. A.Garcia-Herrero, J. (2016). China’s Belt and Road initiative: can Europe expect trade gains?
2. Commission, E. (2015, September 28). Investment Plan for Europe goes global: China announces its contribution to #investEU. Retrieved December 12, 2019, from https://ec.europa.eu/commission/presscorner/detail/en/IP_15_5723
3. Eurostat. (2017, December 21). Eurostat newsrelease. Retrieved December 12, 2019, from Foreign Direct Investment stocks at the end of 2016: https://ec.europa.eu/eurostat/documents/2995521/8558940/2-21122017-BP-EN.pdf/ee180a2c-5dd4-44c6-b2e1-856bc8946c29
4. Julan Du, Y. Z. (2018, February). Does One Belt One Road initiative promote Chinese overseas direct investment? China Economic Review 47 , Volume 47, pp. 189–205.
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12. Yakov Silin, L. K. (2017, December 6). China’s economic interests in the “One Belt, One Road” initiative. SHS Web Conf. (39).
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