The One Belt One Road: A “Made-in-China” World
“Made-in-China.” It’s a term that everyone has seen—on the back of your T-shirt, to your newest iPhone X. If you follow the global economy, you know that China dominates the world in manufacturing. Since entering the World Trade Organization in 2001, China has been rising significantly in the world economic ladder: number one in GDP in terms of purchasing power, second in nominal GDP, the largest exporter country, and second largest importer country. But China is not willing to accept the role of just being a manufacturer—they want to dominate the supply chain entirely. With the right ingredients, China can surpass America for the top spot in all economic indicators, and The One Belt One Road (OBOR) initiative might just be the final push China needs to turn the tides.
Often coined as the “Modern Silk Road”, the One Belt One Road (OBOR) was instigated by President Xi Jinping in his first year in office in 2013. Identical to the ancient Silk Road’s purpose, the OBOR’s function is to increase China’s global affairs and facilitate trade and economic growth through a series of communal routes, railroads, ports, and other transportation devices. From Beijing to London, spanning 68+ countries, the OBOR will consist of continuous routes that connect Europe, Africa, and APAC with China, affecting potentially 4.4 billion people and cover over 40% of the world’s GDP. To truly understand the massive scale that this project is on, both economic and political factors must be discussed.
Development is currently primarily focused on infrastructure investment, construction materials (iron & steel), railway and highway development, automobiles, real estate, and power grids. Since inception, over a trillion USD has been invested into materializing President Xi Jinping’s vision. The World Pensions Council (WPC) experts have estimated that the entire project will require up to an additional ~US$900 billion from Asia—excluding China—every year for the next decade. Overall, the estimated cost is between $4-8 trillion USD.
China’s incentive for other participating countries is the promise of economic growth; China will help create wealth for other countries by providing cheap, affordable products & access to global trade partners, and in return receive resources and international partnerships. Countries in Africa and APAC will have direct connections to China, hopefully receiving technology and market knowledge along with imported physical goods. However, there are some evident questions about such a seemingly perfect plan: who truly benefits? Will this just be a one-way street for Chinese products? China’s trade balance has always been a surplus; for every five export trains they send out, only two come back with imports. Furthermore, poorer countries need to carefully examine their financial situation before participating in such a large project that requires mass capital. Whereas developing countries will suffer exponentially from any setback to their future, Beijing has the economic and political stability, or at the very least, state control, to endure any potential roadblocks.
KENYA & INTERNATIONAL INVESTMENTS
Foreign investment is nothing new to the Chinese, as China’s vision includes “investing in human capital” and uniting countries. In 2016, China announced The One Belt One Road Scholarships, which will fund study abroad programs for 2,500 Chinese students per year for the next three years and 10,000 inbound students over five years. In the same year, China’s government founded the Asian Infrastructure Investment Bank (AIIB), a rival to the IMF and the World Bank, which now has 87 members and over $160 billion USD planned for infrastructure projects to support international growth. One of their first projects was to help improve neighborhoods in Indonesia for bottom-up development.
In 2017, Kenya saw the largest infrastructure investment since independence in the form of the US$3.2 billion price tag “Madaraka Express” train line, 90% of which was financed through China’s Eximbank. Training programs and technical expertise for Kenyan citizens have also been made readily available overseas. It is common nowadays to see Kenyans, fluent in Mandarin, driving the trains. Prior to the “Madaraka Express”, a 24-hour journey Nairobi to Mombasa was standard. Now, that journey takes a little over 4-hours. President Uhuru Kenyatta hailed this milestone as “a new chapter,” and the title page has China written all over it.
If the OBOR comes to fruition, America will be one outsider country that will not necessarily bear the direct fruits. However, U.S. may already be preparing to become more independent in trade, notably by restructuring and outright retracting from trade agreements, such as NAFTA and TPP, respectively. The Trump administration has also been quite liberal in implementing their “America First” policy; in January 2018, Trump imposed tariffs on solar panels and washing machines, and soon after, imposed tariffs on steel and aluminum. In June, the United States imposed a 25% tariff on imports of steel, and a 10% tariff on aluminum, targeted towards the European Union, Canada, and Mexico. Most notably, on July 6th, Trump instigated the current trade-war tensions with rising power China, with over US$34 billion announced tariffs, and then another round of US$200 billion less than a week later, on the 11th. In total, threats of up to US$500 billion have been insinuated by Trump. Perhaps America sees the potential threat of the OBOR that will exclude America from the trade benefits and is preparing for independence. Or perhaps America has simply put themselves in a worse situation by slowly closing trade doors to multiple allies.
Political agendas exist in every country’s actions. China has already expressed intent to use the OBOR as a way of connecting countries not only in an economic climate but also in a cultural setting. The potential for better international relations is exponential, as the OBOR will be one large step taken by China to unite partnering countries. With the US global trade-war looming, China’s philosophy of unity seems increasingly appealing. Yet, although the OBOR will ideally support many countries, it is still very much a way for China to push their global affairs presence. Christopher Balding, an economics professor at Peking University, considers China’s OBOR “more like a diplomatic effort for China to win friends and influence people,” rather than a strictly economic program.
Ideally, China intends to build lasting connections—both economically and politically—
with much of Europe and Asia. A crucial partner for China will be Russia, who, like China, has a wavering friendship with America. UK and Britain will also benefit greatly, as an 18-day route already connects Beijing directly with London, spanning 7,456 miles of railways, and crossing Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, France and the UK. Much of Southeast Asia will be included in the project, as well as Central Asia, East Africa, and India.
A GLOBAL LEADER INVESTING IN THE FUTURE
President Xi Jinping is a phenomenal leader and has a great vision for unity and the future. In February 2018, President Xi’s two crucial proposals to the Constitution was made public: 1) The addition of Xi Jinping “Thought on Socialism with Chinese Characteristics for a New Era” and 2) the removal of the two-term rule for President and Vice-Presidents. With these two proposals, President Xi Jinping has shown his vision to take China into the future, one where he can retain leadership and power to oversee the OBOR into maturity. Alternatively, Xi’s actions are reminiscent of former President Mao Zedong, and fears of a ruling dictator loom.
Despite the many potential benefits, there is one evident problem: what if the OBOR does not provide the promised wealth in time, or even at all? Then a gateway towards disaster opens, with trillions of USD in infrastructure and development potentially wasted, and massive economic backlashes to participating countries. Historically, many of China’s large-scale industrial projects never come to fruition. And one elephant in the room no one wants to address is the fact that the OBOR is a massive debt machine waiting for a screw to pop out and blow up. Countries unable or unwilling to assume such a risk need to be wary before jumping onto the train, because the train might end up not have a track to run on.
Ultimately, the One Belt One Road initiative is the most important world-wide subject in the first half of this century. As America gravitates towards unilateralism, China offers a solution for the rest of the world to unite through trade. Will we see a world “Made-in-China” in the upcoming years?
Originally written July 15th, 2018
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