OBOR A New World Economic Order

From the day first, the economists perceived the Chinese One Belt One Road initiative as bidding good bye to the existing economic world order with a new global order. In May 2017, in an address at the Belt and Road Forum’s opening ceremony in Beijing, Chinese President Xi Jinping said his nation would “foster a new type of international relations” based on mutual cooperation, co-existence and co-prosperity, thereby attempting to place a check on the existing order that is centred on the US. He unveiled a plan to extend about 1.64 trillion yen (S$20 billion) in additional contributions to the Silk Road Fund, which would cover funding for such schemes as infrastructure investment.

China started to liberalize its economy in the 1970’s, coinciding with a crucial time in United States economic history. Much attention has been paid to the geostrategic reasons for the US engagement with China vis-a-vis the Soviet Union, but relatively few analysts acknowledge the role economic considerations played in the historical events of that period.

After the US defaulted on the gold exchange window established at the Bilderberg conference in 1971, then-Secretary of State Henry Kissinger and his team set their sights on a new petro-dollar standard. Conspiracy theories abound regarding the US government’s alleged role in orchestrating the oil supply shock of the 1970s and other catastrophes in order to strengthen the US dollar to support spending on the Vietnam War efforts. An examination of these theories falls beyond the scope of this paper. It is important to note, however, that, regardless of whether or not there is any truth to such claims, the US is widely held in non-American circles to have acted less than virtuously in creating and preserving the current economic order.

When President Xi Jinping of the People’s Republic of China first unveiled the One Belt and One Road Initiative (OBOR) during the second half of 2015, the world reacted with much fanfare. While the OBOR was in hindsight a natural extension of China’s increasingly external-oriented economic growth and development policies, the official announcement of the project, its ambitions, and the costs they entail sent shockwaves throughout the international community.

Two years later, the hype surrounding the project has died down amid the multiple problems and obstacles it has encountered. In light of China’s explicit statement of intent regarding the OBOR, policymakers and citizens of the world would benefit from understanding the nature and characteristics of the OBOR and the implications it has for the international arena.

While President Xi Jinping foresaw the project connecting much of the world when he initiated it in 2013, the countries to be traversed are not merely waiting for China to pour money into it. They also want to have some say in how the project proceeds. China’s grand geopolitical strategy to reshape the international landscape would be more palatable if Beijing showed greater affinity for multilateralism and the fostering of mutual interests. The Belt and Road scheme provides crucial economic respite for nations across the region and inspire communal cooperation that would benefit all. While many regional leaders regard the initiative as little more than a series of giant infrastructure projects aimed at extending China’s power, Beijing has always touted the plan as a means to economic security.

President Xi Jinping’s ambition of propelling China to the centre stage of the global power game represents a sharp departure from the approach of previous Chinese leaders who adhered strictly to Deng Xiaoping’s tenet to “hide our capabilities and bide our time, never try to take the lead”.

It is not surprising that the One Belt, One Road (Obor) initiative is being embraced by a wide range of countries, from Asia and Africa to Europe and even South America, notwithstanding some serious concerns about the cost and benefits of the enormously ambitious project.

It is evident that Obor is not just about infrastructure development; one of its major objectives is to turn Eurasia into an economic and trading centre, breaking the domination of the American-led transatlantic regime. It is also a manifestation of the changing geopolitics and the realignment of forces, reflecting a move to shift the centre of gravity of trade to the East and establish China’s predominance in global politics. Obor is a new geo-economic reality representing an emerging world order. The process cannot be reversed.

Now within a short span of time, it has become clear that Chinese “One Belt, One Road” (OBOR) initiative is set to play a momentous role in creating a new world order based upon equality and openness towards the economic opportunities existing around the globe. With its focus on infrastructure, the OBOR initiative promotes a more sustainable and inclusive version of globalisation compared to the one led by Western countries. It is a significant development strategy launched by the Chinese government with the intention of promoting economic co-operation among countries along the proposed Belt and Road railway routes.

The evolution on OBOR will also pave way for policy co-ordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds between the partner countries in future. The initiative had been designed to enhance the orderly free-flow of economic factors and the efficient allocation of resources. The project has also a wide scope of further market integration and creates a regional economic co-operation framework of benefits to all.

The railway track under OBOR would be focusing on linking China to Europe through Central Asia on one side and connecting China with the Middle East through Central Asia on the other side by also knitting China with South Asia and the Indian Ocean. It will also create connectivity of China with Europe through the South China Sea and Indian Ocean.

China is playing an increasingly central role in the global economy, which was also reflected in Pakistan-China relations. China is Pakistan’s largest trading partner, with total volume exceeding $20 billion and through the railway track expansion under OBOR the bilateral trade will become more accessible and beneficial for Pakistan too.

Now well into the second decade of the 21st century, the world is witnessing the true extent of China’s economic, political, and growing military reach. This reach and integration into the globalized world has been gradual, incremental, and quiet over the past three decades. In the shadows, China has accelerated significantly in the past 10 years. What does this mean for the established global order? This paper is a roadmap looking to join the dots on that journey.

China has experienced unprecedented success in recent years in its opposition to the Western-dominated international economic order.
These successes, from the establishment of the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB) to the rolling out of the One Belt One Road (OBOR) initiative and the internationalization of the Renminbi (RMB) are all part of a grand strategy to achieve economic hegemony. China’s strategic concept has, as one might anticipate, evolved and mushroomed since its 2013 announcement. The foundations of the strategy, however, remain firm. The Silk Road initiative intends to enable not only the linkages discussed above, but also China’s overarching challenge to the contemporary world order. China has laid the groundwork to achieve this goal incrementally over the last two decades. The world is currently witnessing the galvanization and culmination of those plans.

The BRICS block (Brazil, Russia, India, China, and South Africa) is moving towards veto power in the IMF. Coupled with China’s range of economic initiatives intertwined with their OBOR and globalization strategy and the coupling of China initiated financial mechanisms towards integration of regional economies, China sits in a prime position of influence, power and patronage. The sweeping changes pursued by China today are intended to contribute to the rebalancing of world economic order. They essentially seek to challenge US hegemony and bring about a Eurasian century. The RMB is being positioned to overtake the USD over the next few years as China works from within and without the existing world community to establish a new economic order that it sees as more equitable than the current US-dominated order. If they are prepared, investors do not need to fear this new order.

The extent to which China’s OBOR can be truly regarded as the harbinger of a new global economic order depends on whether President Xi and the CCP can appropriately modify their present strategy to address a considerable array of problems the OBOR has encountered.

The economic and geopolitical rise of China, which has essentially been formalized by its OBOR initiative, coincides with the US’ steady retreat from its position of global leadership as President Trump pursues his inward-looking America First Policy. While China has steadily endeavored to execute its OBOR initiative, the US has pulled out of the Trans-Pacific Partnership. In the geopolitical contest presently being waged in Asia, the TPP represented America’s most potent means of combating China’s strategic economic position in East Asia. By withdrawing from it, the US fails to offer regional countries a viable alternative for regional trade and investment. Indeed, experts warn that President Trump’s withdrawal from the TPP leaves an economic and geopolitical void that China may soon fill.

Over the coming decade, China is expected to invest up to $5 trillion in transcontinental infrastructure projects, which will connect the country’s industrial heartland to the world’s largest consumer markets in Western Europe. The mega-project is slated to cover as many as sixty-four nations across four continents (Asia, Australia, Africa and Europe), accounting for 62 percent of the world’s population and about a third of the global Gross Domestic Product. China’s policy banks, namely the China Development Bank, Export-Import Bank of China, The Industrial and Commercial Bank of China, are set to play a central role in funding the ambitious transcontinental infrastructure initiative.

More than anything, the BRI project is a harbinger of a new era of Chinese global dominance. During the 19th Chinese Communist Party National Congress at the Great Hall of the People in central Beijing, Xi unveiled a two-stage national development plan. From 2020 to 2015, China will forge ahead with two fifteen-year development plans. The first one aims to turn China into a moderately prosperous society in 2035.

Newsletter SignUp