Perhaps the most fascinating aspect of Chinese President Xi Jinping’s foreign visits relate to China’s enormously ambitious One Belt One Road or the Belt Road Initiative. There is a great deal of confusion as to what exactly OBOR means. It is a compound of two separate plans to develop connectivity — one over the land across Asia to Europe, and the other through sea routes. The OBOR is not simply a collection of highways, pipelines and sea routes, but a geopolitical destination. That endpoint in both the land and maritime versions is Eurasia and the aim of OBOR is to compact the vast region and make China its driving force in the coming two decades. So, even as the US pivots to Asia, China is rebalancing to Europe.
Europe is the largest economy in the
world, if you count the 28 EU nations, Norway, Switzerland and Iceland.
This grouping accounts for 25.4% of the world’s output in 2014 as
compared to the US (22.5%) and China (13.4%). They also account for
28.5% of all consumer spending in 2014, above the 26.6% spent by US
consumers and 15.6% by all BRICS nations combined. So the EU is both a
potential market, as well as a source of high-tech and trade and
So, there is a class of foreign visits of Xi that are aimed at a
Eurasian consolidation. It began with his first visit abroad as
President, to Russia. Now it is clearer through his most recent tour to
Poland, Serbia and then Uzbekistan, the last named also being the venue
of the Shanghai Cooperation Organisation summit. Prior to this, in
March, Xi was in the Czech Republic, and before that in October 2015,
UK, and in May 2015 in Kazakhstan, Belarus and Russia.
The visits are tied to more complex regional diplomacy that is
visible in the summits of China and Central and East European Countries
(CEECs), also known as the 16+1 summit. In November 2015, China hosted
the fourth summit in Suzhou. Countries like Poland, Czech Republic,
Serbia, Albania, Bosnia, Bulgaria, Croatia, Estonia, Latvia, Hungary,
Lithuania, Macedonia, Slovenia, Montenegro sent their Prime Ministers or
heads of state to the event and a few others sent senior ministers. Not
surprisingly, the major theme of the meeting was connectivity. CEECs
want to join up with China, hoping to rub off its prosperity and gain
investments through the OBOR schemes.
China has already built up an impressive set of pipelines, roads and
railways to link up to Central Asia. For some years, trains have begun
carrying cargo from China to European destinations — Suzhou is now
connected to Warsaw, Lianyuang to Rotterdam, Chengdu to Lodz, Chongqing
to Duisburg, Yiwu to Madrid, Zhengzhou to Hamburg. The time taken for
freight to reach from China is two weeks, and currently they go north
and join up with the Trans Siberian route, or they go through Central
Asia, Iran and Turkey, which however, is not too well developed. The
Chinese also have ambitions of building a third route south of Kunming
to Yunan, Myanmar, Bangladesh, India, Pakistan, Iran and Turkey before
The relatively lower labour costs in some of these European states
are being viewed by China as intermediate bases to establish its
logistics and manufacturing facilities to target the richer states of
EU. The way the Chinese plan it, in the coming decades they plan to get
out of low-end manufacturing and move to higher value, innovation-based
products. These would obviously require better off markets, and Europe
fits well into this, having markets that become progressively richer as
you move from east to west.
China is also working at this problem from the other end, which was evident from Xi’s visit to
UK in October 2015. He plonked down $8.7
billion in a one-third stake on a British nuclear power plant, a deal
for British Petroleum to supply China with 1 million tonnes of LNG per
annum, worth $10 billion, for 20 years, Rolls Royce got engine sales
worth $3 billion. In addition, there were announcements of other joint
ventures and investments in areas ranging from cruise ships, research
and development in tissue engineering, hospitals, real estate, electric
cars, education and training. London is of great interest to the Chinese
as a finance centre and in the past two years, the trading volume of
the RMB has doubled and recently, the London Metal Exchange announced
its acceptance of RMB. Similar Chinese investments exist in the other
two major European economies, Germany and France.
In this grand scheme of things, the message to countries like India
is that either you participate, or risk being bypassed. The
China-Pakistan Economic Corridor (CPEC) is a manifestation of this.
However, India is riposting through the Chah Bahar project and the
International North South Transport Corridor to link Bandar Abbas in
Iran with Russian ports. The hurdles before India are many, scarce
finance being the lesser one. The big challenge is to implement the
projects on schedule, something New Delhi is simply not good at.
Mid Day June 21, 2016