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INTERNATIONAL

POLITICAL ECONOMY SERIES


SERIES EDITOR: TIMOTHY M. SHAW

Mapping China’s
‘One Belt One Road’
Initiative
Edited by  Li Xing
International Political Economy Series

Series Editor
Timothy M. Shaw
Visiting Professor
University of Massachusetts
Boston, USA

Emeritus Professor, University of London, UK


The global political economy is in flux as a series of cumulative crises
impacts its organization and governance. The IPE series has tracked its
development in both analysis and structure over the last three decades.
It has always had a concentration on the global South. Now the South
increasingly challenges the North as the centre of development, also
reflected in a growing number of submissions and publications on indebted
Eurozone economies in Southern Europe. An indispensable resource for
scholars and researchers, the series examines a variety of capitalisms and
connections by focusing on emerging economies, companies and sectors,
debates and policies. It informs diverse policy communities as the
established trans-Atlantic North declines and ‘the rest’, especially the
BRICS, rise.

More information about this series at


http://www.palgrave.com/gp/series/13996
Li Xing
Editor

Mapping China’s
‘One Belt One Road’
Initiative
Editor
Li Xing
Department of Culture and Global Studies
Aalborg University
Aalborg, Denmark

International Political Economy Series


ISBN 978-3-319-92200-3    ISBN 978-3-319-92201-0 (eBook)
https://doi.org/10.1007/978-3-319-92201-0

Library of Congress Control Number: 2018950074

© The Editor(s) (if applicable) and The Author(s) 2019


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Contents

1 China’s Pursuit of the “One Belt One Road” Initiative:


A New World Order with Chinese Characteristics?   1
Li Xing

2 Understanding the Multiple Facets of China’s “One Belt


One Road” Initiative  29
Li Xing

3 A Framework for the Study of the One Belt One Road


Initiative as a Medium of Principle Diffusion  57
Anastas Vangeli

4 The One Belt One Road Initiative and China’s


Multilayered Multilateralism  91
Feng Yuan

5 The One Belt One Road Initiative and the Changing


Multi-scalar Governance of Trade in China 117
Erja Kettunen

6 China’s Momentum: The “One Belt One Road” Triple’s


Securitisation 143
Paulo Duarte

v
vi   Contents

7 Unpacking Economic Motivations and Non-economic


Consequences of Connectivity Infrastructure Under
OBOR 167
Ritika Passi

8 The One Belt One Road Initiative: Reintegrating Africa


and the Middle East into China’s System of Accumulation  197
Justin van der Merwe

9 Changing Regional Order and Railway Diplomacy


in Southeast Asia with a Case Study of Thailand 219
Laurids S. Lauridsen

10 A Power Shift Underway in Europe? China’s Relationship


with Central and Eastern Europe Under the Belt
and Road Initiative 249
Dragan Pavlićević

11 Conclusion: The One Belt One Road in the Politics


of Fear and Hope 279
Li Xing and Paulo Duarte

Index  291
Notes on Contributors

Paulo Duarte  is Researcher on China and East Asian issues at the Oriental


Institute in Lisbon, Portugal. He is a columnist for the Brazilian Revista
Sociedade Militar and member of the Editorial Board of Ela Journal
(IAPSS publication).
Feng  Yuan is Researcher affiliated to Institut d’études Européennes
(IEE) of Université Libre de Bruxelles, Belgium.
Erja Kettunen  is Adjunct Professor (docent) and Senior Research Fellow
at Centre for Collaborative Research, Turku School of Economics,
University of Turku, Finland.
Laurids S. Lauridsen  is Professor in International Development Studies
at Department of Social Sciences and Business, Roskilde University,
Denmark.
Li Xing  is Professor and Director, Research Centre on Development and
International Relations, Department of Culture and Global Studies,
Aalborg University, Denmark.
Ritika Passi  is Associate Fellow and project editor at Observer Research
Foundation, New Delhi, India.
Dragan  Pavlićević  is Lecturer in China Studies, Department of China
Studies, Xi’an Jiaotong-Liverpool University, Suzhou, PR China

vii
viii   Notes on Contributors

Justin  van der Merwe  is Senior Researcher at the Centre for Military
Studies of the University of Stellenbosch, South Africa.
Anastas  Vangeli  is a Doctoral Researcher at the Graduate School for
Social Research at the Polish Academy of Sciences and a Claussen-Simon
Ph.D. Fellow at the ZEIT-Stiftung Ebelin und Gerd Bucerius.
List of Figures

Fig. 2.1 The internal-external nexus in China’s development strategy


(1980s–2010s). (Author’s own drawing) 33
Fig. 2.2 The flying-geese model of East Asian division of labor. (Author’s
own figure) 34
Fig. 2.3 The gradual return of China’s historical position as the region’s
gravity. (cf Wong 2013: 288, Fig. 2.2) 36
Fig. 2.4 Asia’s growing economic dependence on China. (Source:
Schlesinger in The Wall Street Journal, May 12, 2014) 37
Fig. 2.5 Reflecting the OBOR initiative from Cox’s historical structure of
hegemony. (Left: Cox 1981: 136; right: author’s own figure to
reflect the left side) 39
Fig. 2.6 The OBOR initiative in the context of the Kautsky-Lenin
debate. (Author’s own figure) 48
Fig. 4.1 The silk road economic belt and the maritime silk road route.
(Source: Xinhua News) 93
Fig. 4.2 The percentage of each partnership type of China. (Author’s
own figure) 100
Fig. 4.3 China’s different types of partnership (updated until May 2016).
(Author’s own figure) 101
Fig. 4.4 Main countries (The One Belt and One Road project is planning
to include 177 countries. In this chart I have included only
countries that have agreed to participate in this project) involved
in “One Belt and One Road”, AIIB. (Author’s own figure) 105
Fig. 4.5 The integration of ASEAN+3 and SCO with the OBOR
initiative on China’s main issues of multilayered multilateralism.
(Author’s own figure) 107

ix
x   List of Figures

Fig. 4.6 Chinese crude-oil imports by country in 2016. (Source: China


Customs; illustration by the author) 109
Fig. 5.1 China’s merchandise trade as a percentage of GDP, 2011–2015.
(Source: WTO 2016a) 123
Fig. 7.1 China’s annual GDP growth rate (%). (Source: National Bureau
of Statistics, China. Available at tradingeconomics.com) 169
Fig. 7.2 One container shipping cost and time from Chongqing in
Western China to Western Europe. (Source: Image reproduced
from Kapan, Zeynep (2016) “EATL: The Trade Prospects for
EU and China.” Available at https://www.unece.org/
fileadmin/DAM/trans/doc/2016/wp5-eatl/WP5_GE2_2nd_
informal_session_Ms_Kaplan_1.pdf)175
Fig. 9.1 Railway lines negotiated with China. (Source: Kunapdamraks
2016, OTP/MoT) 232
Fig. 9.2 Railway lines negotiated with Japan (Source: Attananda
2015: 71).233
List of Tables

Table 4.1 Countries that have signed bilateral SWAP agreements with
China98
Table 5.1 Ease of doing business (with selected sub-categories) in
China, various years 125
Table 5.2 Import tariffs of China, compared to USA, the EU, Japan,
and South Korea 126
Table 10.1 The leverage framework 257
Table 10.2 Capital projects in the CEE region supported by China’s
loans258
Table 10.3 China’s investments in CEE, USD million 260
Table 10.4 China-CEE trade volume (USD billion) 262

xi
CHAPTER 1

China’s Pursuit of the “One Belt One Road”


Initiative: A New World Order with Chinese
Characteristics?

Li Xing

Placement of the Theoretical Discussion


The year 2018 will mark the 170th anniversary of Marx and Engels’ mas-
terpiece, Manifesto of The Communist Party (1848). Perhaps this booklet
can only be found in secondhand bookstores today. However, if we read it
again, we will be astonished to find that the manifesto can transcend space
and time and continue to yield itself to our reading in a new light, despite

The “One Belt One Road” (OBOR) initiative—Yi Dai Yi Lu Chang Yi, in the
Chinese language—is the standard term used within China. However, this is not
the case abroad: In light of the fact that the OBOR initiative covers both a land
belt that includes the countries on the original and historical Silk Road through
Central Asia, West Asia, the Middle East and Europe, and a maritime belt that
links China’s port facilities with the African coast, pushing up through the Suez

L. Xing (*)
Department of Culture and Global Studies, Aalborg University,
Aalborg, Denmark
e-mail: xing@cgs.aau.dk

© The Author(s) 2019 1


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_1
2   L. XING

the demise of the USSR and despite the end of the Cold War. The mani-
festo is of immense historical and contemporary importance with its
enduring insights into capitalism and the endless expansion of this. It pro-
vides us with a profound analysis and explanation of the most fundamental
phenomena on a global scale in the current era, that is, globalization and
transnational capitalism.
Seen from the global developments of the past decades and the direc-
tion toward which the world is moving, this is a historical moment in
which it is most appropriate to bring back Marx. As one prominent scholar
points out:

We’re living in a moment when, for the first time, capitalism has become a truly
universal system. It’s universal not only in the sense that it’s global, not only in
the sense that just about every economic actor in the world today is operating
according to the logic of capitalism, and even those on the outermost periph-
ery of the capitalist economy are, in one way or another, subject to that logic.
Capitalism is universal also in the sense that its logic – the logic of accumula-
tion, commodification, profit-maximization, competition – has penetrated just
about every aspect of human life and nature itself…. (Wood 1997: 1)

In line with culturalist and sociological studies (Weber 1958), the his-
torical advancement of market capitalism and its overseas expansion is a
historical process which includes cultural and religious dimensions (his-
torical, divine, spiritual, miraculous). However, as many scholars, includ-
ing this author, rigorously argue, the establishment of capitalism is not so
much the result of cultural and religious dynamism, but rather the out-
come of a political economy project (Li and Hersh 2004). The capitalist
mode of production was born in Europe, and its starting point was the
imposition of ruthless coercion through the compulsory enclosure and
enforced formation of new property relations and legal systems. With the
restrictive access to land accompanying industrial transformation began a
new form of production relations based on primitive capitalist a­ccumulation.
Simultaneously, Europe’s expansion overseas, which began with conquests

Canal into the Mediterranean, the plural term “Belt and Road” initiative has
entered into common use. The different authors of this book alternately make
use of both the terms OBOR Initiative and “Belt and Road” Initiative. The
editor of this book would like to point out that the most recent international
expression to replace the OBOR Initiative is the “Belt and Road” Initiative.
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    3

and trading relationships, resulted in the extension of the capitalist system


of production. The globalization of the capitalist world system was real-
ized through three historical development phases: a merchant phase of
trade, a phase of industrial expansion and an expansive period of financial
capitalism. Is China’s One Belt One Road (OBOR) initiative perhaps the
contemporary expansion of the capitalist world system encompassing the
three phases at the same time?
Through slave trade, colonialization, “free trade”, and World Wars,
the capitalist world system has successfully absorbed multiple cultural
systems into a single integrated economic system and has incorporated
various parts of the world into its division of labor (Wallerstein 1976).
Historically, the system has been safeguarded by successive hegemonic
system guarantors and has been maintained through fixed “social, polit-
ical, and economic arrangements” (Strange 1988). These arrangements
are what we know as the “world order”. Since “those arrangements are
not divinely ordained, nor are they outcome of blind chance”, and since
“they are the result of human decisions taken in the context of man
made institutions and sets of self set rules and customs” (Strange 1988:
18), the international political economy (IPE) provides the framework
for understanding the global “structural power” that preserves those
arrangements. In this context, structural power refers to “the power to
decide how things shall be done, the power to shape frameworks within
which states relate to each other, relate to people, or relate to corporate
enterprises” (Strange 1988: 25). Fundamentally, the hegemony of the
existing powers is based on the possession of structural power.
Strange’s analysis on the imperative of maintaining “structural power”
and “global arrangements” was expressed clearly by George Kennan1 in
the aftermath of the Second World War. Kennan advised the US to uphold
its hegemonic power and maintain the patterns of global relationships that
had been playing the role of maintaining the gross inequalities in the
international order and the tremendous privilege and power this global
disparity of wealth had brought for the US. This is why the US is watch-
ing carefully how the rising states, particularly China, are applying their
power in the existing world order; the historical lessons suggest that
emerging powers can generate a dramatic and even violent impact on the
established order.
The economic rise of China is an integral part of the continuously his-
torical process of the global expansion of capitalism, and such a ­phenomenon
must be understood within the capitalist world system rather than outside
of this. This study of IPE calls attention to the historical formation of
4   L. XING

global social, political and economic arrangements and emphasizes that


IPE does not only study global power relations underneath institutions or
organizations but also the ideas, norms and values they reflect. The prem-
ise of IPE shows that all states and markets are connected in global systems
of production, exchange and distribution, and IPE investigates the ways in
which states and markets of the world are connected to one another and
the arrangements or structures that have evolved to connect them. The
rise of China and other emerging powers have indeed “disturbed” the
conventional distribution of power and the ways in which states and mar-
kets are interrelated with each other.
The existing global arrangements were shaped by power and politics,
but also by history, culture and values. These are changing and will con-
tinue to change in the future. The end of the Cold War, the fall of the
Soviet Union, the triumph of economic liberalism, the decline of the US
unilateralism, the world financial crises and the rise of emerging powers in
general and the rise of China in particular have been influencing almost
every aspect of international affairs. Currently, these arrangements are
continuously changing as a result of the “emerging powers”, t that is,
“emerging states”, “emerging markets” and “emerging societies”. Is the
world witnessing the end of Western hegemony? Is the world order trans-
forming into more horizontal relationships? Will the rejuvenation of China
lead to the emergence of an alternative conception of development, result-
ing in a stronger role for the state in the organization of local, national and
world economies; a horizontal system of South-South relations; and a new
type of East-West major power relations?
Today we are witnessing movements toward new patterns of IPE in
terms of new alliance formations resulting from global responses to the
new situations (Christensen and Li 2016) as well as from a new type of
hegemonic relations between the existing and the emerging powers (Li
2016). The “BRICS” and “Second World”, “Belt and Road”, “Silk
Road”, “BRICS Bank” and “AIIB” are now part of international relations
and international political economy vocabularies, symbolizing a growing
phenomenon of the changing world order in which the system is no lon-
ger ruled and governed by the US-led postwar treaties.
Seen from the perspective of realism, the rise of emerging powers in
general, and the rise of China in particular, is perceived as a serious threat
to the maintenance of Strange’s “structural power” and Kennan’s ­“patterns
of global relationships”. Viewing the world as an anarchical state of affairs
and all international relations as a zero-sum game, realist scholars tend to
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    5

foresee the eventual conflict between the rise of China and the existing
powers (Krauthammer 1995; Mearsheimer 2006, 2010). China’s ascent is
seen as the repetition of a hegemonic transition during which a rising power
would ultimately become discontent with the rules and institutions defined
and set by the existing hegemon. Consequently, Chinese production and
outward capital expansion would unavoidably challenge the geopolitical
and geoeconomic status quo of the patterns of global relationships.
However, emphasizing the interdependence of states through economic
exchange and international institutions, and believing in positive-­ sum
international relations (Keohane and Nye 2012), liberal scholars tend to
acknowledge the fact that China’s economic rise is achieved on the basis of
its expanding and intensifying integration within the international system.
Hence, it is seemingly impossible for China to take a revolutionary depar-
ture from the existing capitalist world order. Liberalism tends to emphasize
the fact that China’s national interests and foreign policy behavior increas-
ingly reflect and embrace the status quo of the world order because its
economic growth and wealth accumulation are generated from within and
not without the capitalist world system (Ikenberry 2008, 2013).
The world system theory (Wallerstein 1979, 2004) sees the rise of
emerging powers from a long historical perspective. The modern world
system is conceptualized as a capitalist world economy, which is governed
by the drive for the endless accumulation of capital, also referred to as the
“law of value”. This world system has been expanding over centuries, suc-
cessively incorporating other parts of the world into its division of labor.
Capital mobility and production relocation result in geographical shifts in
accumulation and power, without changing the fundamental relations of
inequality within the system. The world economy today is characterized
by capital mobility, globally integrated circuits of wealth accumulation,
regional and international segmentation of production and merger of
national and global capital and investment. The emergence of a new global
economic geography and the changing pattern of economic interdepen-
dence, as well as a new international division of labor, are the results of the
cycles constituted by the rise and decline of successive hegemons of global
order, with each rising power having its own particular mode of gover-
nance. The ascendance of new rising powers will redefine international
relations and the international political economy in terms of upward
mobility or downward movement among core, semi-periphery and periph-
ery countries.
6   L. XING

The Research Inquiries and Questions


The idea of China’s “One Belt One Road” (OBOR) initiative is derived
from the ancient “Silk Road”, an overland route stretching from China’s
inland and western provinces across central Asia, through the Middle East
and ending in the heart of Europe. Another road is the “21st Century
Maritime Silk Road”, which stretches from Fujian on China’s coast,
through the Malacca Straits, around the horn of Africa and up through the
Red Sea into the Mediterranean, ending in Venice. This Maritime Silk
Road resonates the historical sea routes in China’s Ming Dynasty of the
fifteenth century, in which the Chinese imperial fleet, under the command
of Admiral Zheng He, set out on seven voyages under the banner of the
“mandate of heaven” to explore and trade with the outside world.
The central idea of the IPE of the “One Belt, One Road” initiative,
which covers about 65 percent of the world’s population and one-third of
the world’s GDP, is to create viable economic belts: (1) a land belt that
includes neighboring countries surrounding China, especially those coun-
tries on the original Silk Road through Central Asia, West Asia, the Middle
East and Europe; and (2) a maritime belt that links China’s port facilities
with the African coast, pushing up through the Suez Canal into the
Mediterranean. The Chinese official OBOR vision and plan were clearly
spelt out in a central piece of documentation “Vision and Actions on
Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk
Road”2 in March 2015. The key message of this document to the outside
world is “peace, development, cooperation and mutual benefit”. The
OBOR project involves billions of Chinese-led investment programs cov-
ering a web of infrastructural projects, including roads, railways, telecom-
munication systems, energy pipelines, ports and so on. This would serve
to enhance economic interconnectivity and facilitate development across
Eurasia, East Africa and more than 60 partner countries. Beijing sees
OBOR as a great potential for economic gain and increased border secu-
rity and peace, while positioning China’s western regions as its future cen-
ter of economic gravity. In a world, the OBOR’s utmost objective is no
doubt to reposition the global economy, with China as one of the domi-
nant players in the coming new world order.
China’s overall nationwide reaction to the country’s grand cross-­
continental economic project is both positive and enthusiastic. Despite
some criticism and worries expressed by a minority of opinion makers, the
majority of Chinese academics, policy makers, think tanks and business
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    7

communities see the OBOR initiative as a new platform for realizing the
objective officially stated by China, that is, to “inject new positive energy
into world peace and development”. Moreover, it is seen as an effective
instrument to achieve the “Chinese Dream”, a dream of restoring and
legitimizing the reemergence of China as a world power. In recent years,
the OBOR initiative has been one of the hottest topics both in Chinese
media and academia (Feng 2016; Zhao 2015; Zou 2015). One of China’s
most active academics in writing about and legitimizing the OBOR initia-
tive is Wang Yiwei (2015, 2016, 2017a, b, c), who sees the initiative as
China’s fundamental transformation from being a rule-follower to becom-
ing a rule-settler or norm-shaper. Wang sees the initiative as a global pub-
lic good created through international cooperation and anticipates that
the neighboring countries and regions will greatly benefit from China’s
economic outward expansion.
On May 14 and 15, 2017, the Chinese government held an interna-
tional summit on the “One Belt, One Road” initiative. Twenty eight
heads of state and top officials from more than 60 nations and a dozen
international organizations attended the summit, whose aim was to dis-
cuss China’s new Silk Road initiative. The summit, equally important as
the G20 and the APEC, was China’s major diplomatic event that year. The
Chinese President Xi Jinping first announced his grand idea of the “Belt
and Road Initiative” in 2013, followed by the launch of a series of infra-
structure projects across Asia, Europe and Africa. With the new OBOR
initiative, China is seeking to portray itself as a new champion for free
trade and globalization at a time when the world economy has been con-
strained by economic/financial crises as well as by the isolationist policies
and inward orientations of the new US administration. Summit partici-
pants expressed both hopes and fears. The prevailing questions in the
minds of Western leaders are “What are China’s strategic objectives for the
OBOR?”, “Are there any hidden Chinese agendas?”, “How will China
benefit from the OBOR?”. Their miserable experiences with Western
powers cause developing countries in Southeast Asia and Central Asia, to
wonder “Will the OBOR be another repetition of a historical colonial pat-
tern in the twenty-first century?” “Will Chinese cheap loans be payment
for submitting to China’s leadership and hegemon?” After all, the
­consensual concern is that the potentials to realize the OBOR project
seemingly depend on the nature of China’s objectives.
Despite Beijing’s emphasis on the “win-win” prospect for the OBOR
project, this is still seen by the realist line of the IPE rationale as a strategy
8   L. XING

that is derived and extended from China’s geopolitical and geoeconomic


interests. The ultimate goal of the OBOR initiative is often interpreted as
a way to redirect the country’s domestic overcapacity and capital for
regional infrastructure development in order to, on the one hand, con-
tinue to keep Chinese industry and production robust, and, on the other
hand, to maintain a low unemployment rate through retaining an accept-
able GDP growth rate. Externally, the goal is to continue to pave the way
for the transmission of Chinese goods and services to new markets and to
improve trade and other relations with Southeast Asia, Central Asia and
the European countries. One Chinese scholar probes into the Chinese
“geo-political” and “geo-economic” rationale and driving force behind
the pursuit of the OBOR initiative:

The combination of “capital logic” and “territorial logic” in Giovanni


Arrighi’s framework gives both the Chinese state and Chinese capital strong
incentives and pressure to actively engage in a “spatial fix” by reconfiguring
its geographic vision in order to further capital accumulation and expansion
on a larger spatial dimension, culminating in the “One Belt, One Road”
Initiative, including the Maritime Silk Road Initiative (MSRI). (Zhang, Xin
2017: 310)

Drawing lessons from history, realist analysts argue that as a rising eco-
nomic power, China will unavoidably become a rising military power.
China’s extraordinary economic growth has been coupled with the
“world’s largest military build-up” (Economist 2012). A country that has
a large merchant fleet, that is, capital and production outward expansion,
definitely needs a military navy and support points (security for capital and
production) across land and ocean. The fact that China is expanding its
Marine Corps for deployment in Gwadar port in Pakistan and Djibouti
port in the Horn of Africa is seen as a repetition of the history of imperial
expansion (Financial Times 2017, January 12). The expansion seems to
be imperative in order to protect China’s maritime lifelines and its grow-
ing interests overseas, such as the OBOR initiative.
In many ways, the OBOR initiative does pose many challenging ques-
tions to researchers, academics, policy makers and think tanks. Does the
Chinese OBOR initiative further demonstrate the uninterrupted intensifi-
cation and expansion of global capitalism envisioned by the Manifesto?
Does Beijing’s “multilateral approach” to promoting development strate-
gies including the OBOR initiative aim to achieve “coercive power and
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    9

political influence” (Moore 2008: 48) and to advance its own national
interests, as realist thinkers always believe? Or, does OBOR actually show
the world that through the integration with the “rules and institutions of
international order” China’s own success will be extended outward to
benefit the regions beyond its territory (Ikenberry 2013: 71)? Does real-
ism have a point in claiming that through infrastructures and trade agree-
ments with weaker and less influential states, the OBOR initiative will
place China in a position to dictate economic and political policies in the
OBOR countries/regions? Or taking a middle ground between realism
and liberalism, does the OBOR initiative represent the dual reality of
adopting a grand strategy to gain market access for regional growth while
maximizing the interdependent opportunity to increase China’s regional
influence (Economy 2010; Holslag 2004)?
Seen from the perspectives of the world system theory, the outward
expansion of Chinese production and capital is a continuous part of the
system’s “rhythmic cycles” in upward mobility. Accordingly, the Chinese
OBOR initiative reflects the endless systemic cycles of accumulation. By
paraphrasing Marx’s logic of capitalist production M-C-M’ (M’ must be
larger than M), Arrighi (1994: 33) develops the notion of “capitalist
logic”, in which he differentiates two opposing logics of power: T-M-T’
vis-à-vis M-T-M’. The former depicts the territorial logic of power, por-
traying territory (T) as a means of wealth accumulation (money is a means
to expand the Territory), whereas the latter treats money (M) as an inter-
mediate link aiming at the acquisition of additional territories (seizing ter-
ritory only in so far as it provides greater profits).
As described in the Manifesto, the history of the evolution of the capi-
talist world system shows that in different parts of the world, the expan-
sion of capitalism went hand in hand with territorial annexation and
colonization. China’s contemporary history itself also includes significant
events such as the Opium War and the Japanese invasion under the so-­
called Greater East Asia Co-prosperity Sphere. In the current context of
China’s rise is the OBOR initiative packed with the abovementioned “cap-
ital logic” and “territorial logic” of power (Zhang 2017)?
While Liberalism believes that China’s outward expansion in the form
of OBOR will inevitably be shaped and molded by the system’s law of
value, and that OBOR is an extension of China’s internal economic, politi-
cal and cultural structures and it will not alter the core architecture of the
liberal world system, realism takes it for granted that through the OBOR
project, China will combine political, economic and socio-cultural innova-
10   L. XING

tions in developing and exporting the political economy of capitalism with


“Chinese characteristics”. If “world order” (politics, institutions and
ideas) is understood in a specific historical context, does the world see the
emergence of a new historical context in which globalization and transna-
tional capitalism are generating new social and political forces and actors
that are shaping new politics, institutions and ideas in a dialectic and
dynamic nexus? Does China’s rise and its OBOR initiative reflect the neo-­
Gramscian understanding that the interplay of ideas, institutions and
material capabilities will shape the specific contours of the world order?
Since world orders are shaped by a combination of particular constella-
tions of social forces, the state and the neo-Gramscian dominant ideational
configuration (Cox 1981, 1983), does the OBOR initiative aim to create
“China’s New World Order” (CNN 2017) or a world reorder with
Chinese characteristics?

Global Debate on China’s “One Belt


One Road” Initiative
In the second decade of the new millennium, the impact and implication
of the rise of China have been globally debated. What will China become?
What implication and impact will China’s ascent have on the world? Will
China ever be able to fulfill Western expectations, whatever these may be?
How will China’s rise affect the underlying rules of the game of the exist-
ing world order? Ever since Napoleon warned the world that it would be
better not to wake the “sleeping giant,” China has been a source of fasci-
nation and opportunities as well as of uncertainties and disturbance for the
existing world order.
The great difficulty facing the existing Western powers which are the
creators and the stakeholders of the existing world order is how to respond
and adjust to the impact brought about by the rise of China. Periodically,
the failure in forming a comprehensive understanding of China and China-­
related policies in the West has been translated into a chronic symptom,
the “China syndrome”, which can be characterized as a mixture of psycho-
logical anxiety, emotional hysteria and emphatic demonization. In the past
decades, either fascination or irritation with China has influenced Western
scholarship and journalism to such an extent that it often produces abrupt
attitudes ranging from excessive approval and optimism in claiming China
as a “superpower” (Subramanian 2011; Scissors and Subramanian 2012)
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    11

to unwarranted revulsion and pessimism in foreseeing the coming collapse


of China (Chang 2001; Masoud 2014; Shambaugh 2015). Nowadays,
various books and media reports are full of speculative theories and
assumptions that describe China’s future scenarios, such as the “China
opportunity theory” and the “China contribution theory”, the “China
threat theory” and the “China collapse theory”. From time to time,
Western politicians, opinion makers and academics use China’s successes
and failures selectively to justify existing theories and prejudices in line
with their own assumptions and perceptions. Despite Beijing’s consistent
commitment to embracing economic globalization and improving rela-
tions with the rest of the world, especially with the Western powers, China
still finds itself to be a “middle kingdom” surrounded by jealousy, admira-
tion, anxiety, worry and even resentment.
At the superficial level of global discussions on the OBOR initiative, a
consensual interpretation is that the Chinese objective is to “reshape the
global trade” (McKinsey 2017) and “to redefine the global economy of
the 21st century by integrating the economies of Europe, Asia and Africa
through an unprecedentedly powerful network of transport and commu-
nications infrastructure” (White 2017). However, one of the central
debates is on the relationship between the existing US-led world order
and the rise of China. More specifically, this debate is about whether China
should be seen as a “status quo” power or as a “revisionist” power in rela-
tion to the established “rules of game” of the existing world order. The
existing powers in general and the US in particular perceive many of
China’s foreign policy orientations and ways of behaving as “revisionist”
when it comes to the defined rules, norms, values and systems. It is on the
basis of these established rules, norms, values and systems that Chinese
foreign policies, including the OBOR initiative, are often judged to be
either challengers or contributors to the existing world order.
As China is planning to forge a new global economic order by drawing
on the millennia-old legacy of the Silk Road trading route, global attention
on its OBOR initiative has been linked with Beijing’s proactive engage-
ment in financial “minilateralism” in recent years as an attempt to create
global alternative financial institutions, such as the BRICS Bank, the New
Silk Road Foundation, and the Asian Infrastructural Investment Bank. At
the present time, China is not just investing in developing countries but in
developed economies as well. China’s relationship with international insti-
tutions has been controversial for many years. Early disagreement on
China’s role and position in international institutions either as a “free-
12   L. XING

rider” or as a “stake-holder” is being turned into a dispute about whether


China is a “status quo” or “revisionist” power in the current world order.
Being a “status quo” power refers to the extent to which Beijing respects
international relations, seeing these as elements in a system based on the
acceptance of norms. Being a “revisionist” power denotes the opposite,
that is, that the China-led financial institutions providing financial support
to the country’s OBOR strategy are seen by some Western mainstream
media as good examples of “Beijing’s challenge to the world of Bretton
Woods” and “China’s New Way of Integration with the World”. In addi-
tion, the OBOR strategy can possibly revive the reincarnation of the
“dependency theory”, in which developing countries were seen as victims
of unequal exchange systems imposed by external mercantilist forces and
driven by neoimperialist and neocolonialist powers.

A “Marshall Plan” with Chinese Characteristics?


Since China’s OBOR initiative was announced in 2013, most global opin-
ion makers have been concentrating on the nexus between China’s inter-
nal development constraints and its search for external spatial solutions.
Some opinion makers and researchers adhering to the geopolitical and
geoeconomic line of thinking draw a historical analogy between the cur-
rent Chinese OBOR initiative and the US Marshall Plan in the aftermath
of the Second World War. Such a comparison appears in newspaper head-
lines, such as “China’s Marshall Plan” (Bloombery 2016, August 7), and
“One Belt, One Road: China’s 21st Century Marshall Plan?” (CaiXin
2017, March 17).
First of all, Chinese state media have declined such an analogy (Global
Times, May 7, 2017). The Chinese rejection was based on the following
arguments (Xinhuanet, May 13, 2017): First, for the postwar reconstruc-
tion of Europe, the Marshall Plan was designated as part of the US-led
attempts to contain the expansion of the Soviet Union. This type of Cold
War geopolitical and geoeconomic premise has no resonance with the cur-
rent OBOR initiative. Second, OBOR was not designed to form any kind
of economic coalition/alliance for political purposes in order to confront
any other country. Third, unlike the Marshall Plan, which was packed with
political conditions, the current OBOR has no political conditionality and
no objective to form political and security-related alliances.
However, history tends to repeat itself in many ways, and China’s
OBOR, in one way or another, does share similarities with the US postwar
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    13

“Marshall Plan”, the extensive development assistance initiative under-


taken by the US to rebuild Western Europe in the aftermath of the Second
World War. The “Marshall Plan” was coined as the first major “interna-
tional aid” program initiated by the US, a country that had emerged as a
global superpower. According to the analyses by Simon Shen (2016), the
OBOR initiative is driven by a number of political, economic and security-­
related logics similar to those upon which the Marshall Plan was
initiated:

1. The Marshall Plan aimed at boosting US exports in order to cope


with overcapacity through investments in and exports to Western
Europe, while one of OBOR’s rationales is to deal with the similar
internal overcapacity problems and to externalize the absorption of
the overcapacity.
2. The Marshall Plan had the clear objective of exporting currency in
order to allow the US dollar to become a tool for global/regional
stability and to be used for the subsidies, while OBOR is an ideal
channel for China to seek to increase the international use of its
currency.
3. The Marshall Plan targeted at countering the Soviet Union as a
potential security rival through aiding Western Europe to become
an effective power for balancing the Soviet Union, while the OBOR
is an effective way for China to outcompete the US through enlarg-
ing regional/global trade networks and investment relationships so
as to secure its commodity export and energy import.
4. The Marshall Plan was designed to foster a strategic division between
West and East Germany, while the OBOR signifies Beijing’s response
to the US “rebalance to Asia” policy under President Barack Obama
(Clarke 2015), such as the US-initiated TPP economic alliance
(Trans-­Pacific Partnership). OBOR presents an alternative and is an
attractive project to compete with the US regional and global eco-
nomic and security alliances in the Eurasian and Asia-Pacific regions.

Outward Expansion of a “Development Model”


with Chinese Characteristics?
According to the World Bank’s estimation, about 600 million Chinese
citizens have been taken out of poverty in the past 30  years. The UN
World Food Program believes Beijing’s success with its indigenous meth-
14   L. XING

ods of poverty alleviation and food production security is a source of great


inspiration to other developing nations. In the Chinese understanding,
the root causes of global insecurity, conflict and wars, such as the endless
conflicts in the Middle East and in many parts of Africa, are poverty,
underdevelopment, and a lack of economic growth. An effective method
of bringing about economic growth is to resolve the problem of infra-
structure deficiencies. China’s own economic success and the lessons it has
brought to developing countries in general and Africa in particular are that
infrastructure is a vital means of boosting economic growth. Infrastructure
construction has become the “Chinese solution” in promoting regional
economic integration. China’s pivotal emphasis on the priority of infra-
structure as the precondition for development can be comprehended by
the popular saying, “If you want to get rich, first build a road (要想富先
修路);” and “if you want to get rich, build roads; if you want to get rich
quickly, build highways, if you want to get rich immediately, build internet
networks”. More importantly, infrastructure construction has become a
Chinese norm that is accepted as the policy framework for the China-led
AIIB Bank (Peng and Tok 2016), and is without doubt the key compo-
nent of the OBOR initiative.
For developing countries, the global expansion of China as their alter-
native economic partner seems to be the major source of attraction.
However, it is impossible to separate material factors from attraction to
values and worldviews (Breslin 2011). Therefore, China’s economic suc-
cess allows for multiple interpretations and explanations regarding the
mechanisms that cause nations to grow and the set of mutually dependent
relationships between property ownership and economic growth, between
rule of law and a market economy, between a free currency flow and an
economic order, and most importantly, between democracy and develop-
ment. These norms and values used to be defined by the existing hege-
monic powers alone, and now they are increasingly becoming
“interdependent” – open, less rigid, and non-universal.
For example, one crucial lesson to be learnt from China’s economic suc-
cess is that economic development is conditioned by professional ­management
and good governance rather than by the political architecture of Western
liberal democracies and free market capitalism. Perhaps the Chinese attraction
in this context has less to do with the fascination of the Chinese political sys-
tem and China’s cultural values than with China as a metaphor for “doing it
your own way” or as an example of what can be achieved (Breslin 2011).
OBOR is a best example of what can be done, and a concrete one!
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    15

Accordingly, OBOR is providing Beijing with emerging “normative


power”, enabling the Chinese government to influence the policy behav-
ior and attitudes of other states regarding trade, investment, commodity
pricing, tourist markets and so on, especially in the developing world.
OBOR represents the effort China is making today in socializing various
actors into the “Chinese way of doing things” and integrating them into
the current international structures.

Reintegrating the OBOR Countries and Regions into a Chinese


System of Accumulation?
First, OBOR signifies China’s shift toward a more proactive development
strategy and foreign policy as extension of domestic power accumulation.
One worldwide heated discussion on the “rationale” behind China’s
OBOR initiative is the internal-external linkage. Some consider it to be an
attempt at economic calculation by a Chinese economy looking for a new
growth model, a new system of capital accumulation designed and struc-
tured beyond China’s borders.
Externalizing the Chinese system of accumulation would imply reorga-
nizing its economy (production and trade) sectors, which have been facing
the problem of overcapacity. The OBOR initiative is precisely advocating
“production capacity cooperation” (产能合作) to various international
partners, particularly the Central Asian countries, in the hope to resolve
China’s domestic overproduction problem through intensified interna-
tional cooperation, for example, by transferring overproduction and over-
capacity to new markets in neighboring countries.
By facilitating connectivity through massive infrastructural construc-
tion and the free flow of trade, labor, capital, people and information,
OBOR is aiming at achieving deep market integration and expansion, and
at creating multiple cross-regional economic cooperation frameworks. By
enhancing Eurasian economic connectivity, the OBOR project has posi-
tioned Eurasia as one of the pivotal centers of China’s foreign policy
­strategy. Beijing will be able to not only turn its historical vulnerability (a
border with 14 nations) into a strategic asset but also consolidate its part-
nership with Russia and integrate Eurasia into a system of accumulation
with Chinese characteristics, that is, “authoritarian state-centric capital-
ism” (Clarke 2015).
Moreover, OBOR can be perceived as one of Beijing’s major political
projects, that is, occupying a hegemonic position in the world order in
16   L. XING

trade, production and finance and providing financial and infrastructural


“public goods” to pave the way for an emerging world order with Chinese
characteristics. As one European Parliamentary report states, OBOR will
enhance China’s “regional and international profile as a responsible global
power by providing public goods…., and by assuming significant financial
risks involved in individual projects from which other investors would have
shied away” (Grieger 2016: 6). OBOR has the potential to grow into a
model or a vision for alternative rule-making within international politics
and economics.
However, another debate taking place both inside and outside of China
is whether it is economically rational to pour such huge investment into
slow-return projects and high-risk countries/regions, especially with
regard to the massive infrastructural projects which are being planned.
Although a seemingly solid rationality is found behind the reconfiguration
and restructuring of China’s economic landscape, as a grandiose foreign
policy ambition, OBOR may overstretch China’s strategic resources. Is
China overreaching in its global power play? Will the OBOR create an
uncertain future for China? In addition, as is well known, the Middle East,
South Asia, Central Asia and the South China Sea are the areas and regions
in which the interests of major powers regularly clash, and political and
security challenges are rampant. Historically, China has no rich experience
and involvement in dealing with geopolitical and geoeconomic problems
in these regions.

The Objective of the Book and Chapter


Contributions
Acknowledging the fact that the rise of China poses the most serious chal-
lenge to the hegemony of the existing world order, the editor of this book
has, over the past eight years, published a series of edited volumes around
the themes of the rise of China and the impact of this on the existing world
order (Li 2010, 2012, 2013, 2014, 2016). The latest Chinese impact, and
perhaps the most significant, is the “One Belt, One Road” initiative.
Obviously, it is beyond the editor’s and the book’s capacity to cover the
research inquiries/questions of the theoretical discussions and global
debates on the OBOR initiative presented in the extensive literature in the
field. The book is an attempt to cover a range of aspects involved in these
questions, discussions and debates. The explicit premise of this book is
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    17

that the rise of China and its OBOR project will invariably “affect” and
“disturb” a number of existing “global relationships” and “global arrange-
ments” as well as the “structural power” of the existing world order.
The aim of this book volume is to join the global discussions on China’s
OBOR initiative, focusing on the implications and impact of this initiative
on China, its neighbors, the extended regions and the world at large. With
its chapter contributions, the book, intends to cover aspects that deal with
a number of burning questions: How to understand China’s OBOR initia-
tive? How will China’s OBOR initiative influence the global geopolitical
and geoeconomic environments across the Belt and Road countries and
regions? What opportunities does OBOR offer for the countries and
regions along the OBOR economic corridor, and what challenges and
constraints will they face in terms of security issues, for instance? What are
the possible barriers that will keep some actors from fully participating in
the initiative? And what can be done to address the tensions and conflicts
along the “Belt” and the “Road”, such as the Middle East turmoil and the
South China Sea crisis? What will be the reaction of the US and other
economic powers when OBOR inevitably brings about capital competi-
tion? The OBOR initiative will no doubt generate complex interactions of
opportunities and alternatives as well as challenges and contradictions that
will coexist dialectically and at the same time contest each other. Since
OBOR is indeed a multidimensional strategy linking all components of
power, how will OBOR help enhance Beijing’s hard and soft powers?
Chapter 1 (Introduction) by Li Xing, who is also the editor of the
book, places the OBOR initiative in the thematic context of the interna-
tional political economy discussions, which include the debates between
different schools of IR theories on emerging powers. It functions as a
general background setting, providing historical, IR and IPE frameworks
for a holistic understanding of the rise of China and the OBOR initiative
as an inherent part of the continuous expansion of the capitalist world
system driven by endless capital accumulation. One of the essential “mes-
sages” disseminated from this chapter is that the rise of China and the
OBOR initiative are altering the existing “global arrangements” and the
“structural power” that preserves those arrangements. Thus, the crucial
question raised in this chapter, which is also the central background ques-
tion for all chapters in the volume, is whether the OBOR initiative sym-
bolizes the emergence of a “new world order with Chinese characteristics”
by integrating the OBOR countries and regions into a Chinese model of
capital accumulation. The author sees the OBOR initiative as a representa-
18   L. XING

tion of Chinese hard power in that, similar to the postwar US Marshall


Plan, it provides global “public goods”, and as the outward expansion of
Chinese soft power, that is, a type of symbolic power derived from the
Chinese economic success and diffused from in the interactions with
Chinese policy makers and intellectuals. Finally, the chapter also summa-
rizes the core analyses and contributions of each chapter in this volume.
Chapter 2, again by Li Xing, aims to provide a theoretical framework
for understanding the multiple facets of China’s OBOR initiative. Firstly,
the chapter sees the OBOR initiative as Beijing’s shift toward a more pro-
active foreign policy and strategic repositioning following a few decades of
maintaining a “keeping a low profile” policy. The author argues that China
is changing its position from being a passive rule-follower and from join-
ing the regional and global division of labor to becoming a proactive rule-­
settler through external capital expansion and production outsourcing in
line with China’s internal economic restructuring. Secondly, through the
analytical lens of combining both Neo-Gramscian IR theory and the world
system theory, the chapter provides a framework for understanding the
nexus between China’s internal capital accumulation and hegemonic con-
solidation and its inevitable outward expansion. The author claims that
the OBOR project will dialectically enlarge the “room for maneuver” and
increase the “upward mobility” of the countries and regions along the
OBOR economic corridors, enabling them to seize the chance of this
external “promotion by invitation” and to increase their upward mobility
by finding the strategic convergence with China’s OBOR strategy. Thirdly,
the author places the OBOR project in the context of the Kautsky-Lenin
debate on capitalism and imperialism, in which China’s roles take on two
contrasting faces: that of a historical victim of external capital penetration
and exploitation and that of a current dominant force for capital accumu-
lation and outward competition. The chapter concludes that OBOR is
Beijing’s hegemonic project that will bring China potential prospects as
well as constraints and risks.
Chapter 3 by Anastas Vangeli presents a deeper level of analysis on the
One Belt One Road initiative different from the mainstream discussions
on its economic and security components. The author sees the OBOR
initiative as a facilitating process in which normative matrices and deci-
sions in countries involved in the initiative are influenced by the thinking
and practice of Chinese policy makers and intellectuals. To grasp this pro-
cess, the chapter applies the theory of diffusion, discussing the appropri-
ateness of the diffusion approach to the OBOR initiative with regard to
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    19

the object and logic of diffusion. The author argues that the OBOR initia-
tive serves as a medium of non-coercive diffusion of policy principles
rooted in “state neoliberalism”. These are principles of state-led economic
cooperation, that is, sovereignty-first, rule by law, “flexible means to a
common end” and priority of growth and stability but with the end goal
being to advance the world market. Normative, utilitarian and bounded
rationality in isolation, or in combination, create the demand for such
principles in countries along the OBOR initiative, which also contributes
to the process of diffusion. The study concludes that as a cumulative out-
come, the OBOR initiative is both inside and outside of hegemonic mar-
ket neoliberalism, seeking a way to advance economic globalization
through state-led cooperation. While respecting the national sovereignty
and the choice of development path, the OBOR initiative facilitates norms,
ideas and principles of policy-making that have the potential to affect the
behavior of others and alter their trajectories, contributing to a process
that Chinese scholars and policy makers often dub “diversification” of
governance, policy-making and legislation paradigms.
Chapter 4 by Feng Yuan relates the OBOR discussion to a broad global
discussion on the rise of China and its possibility of becoming a new hege-
mon, especially in terms of institution-building. The author contends that
the OBOR initiative is an important and comprehensive project that
touches many aspects of China’s international relations policies, including
the objective of constructing a new set of institutions in order to support
a new set of ideas and norms. By analyzing the relationship between the
OBOR countries, the Asian Infrastructure Investment Bank’s (AIIB)
founding members and China’s bilateral relations and multilateral institu-
tional arrangements, the chapter suggests that China is developing a
“multilayered multilateralism”, which is to become its institutional tool
for realizing the OBOR initiative. “Multilayered multilateralism” implies
an active combination of China’s bilateral relations and its newly estab-
lished multilateral institutions while emphasizing the active interaction
between the two layers. This China-led institutional arrangement is both
new and innovative in its international relations, marking Beijing’s adjust-
ment to a more proactive approach in its foreign policies. It also denotes
that China’s pursuit of the OBOR initiative through multilayered multi-
lateralism will consolidate China’s new role in norm-setting and norm
diffusion. At the same time, “multilayered multilateralism” is also a phe-
nomenon that relates closely to the rise of regionalism, especially among
China’s neighboring countries.
20   L. XING

Chapter 5 by Erja Kettunen-Matilainen looks into the OBOR initiative


by focusing on policies and regulations for China’s institutional environ-
ment for trade and analyzes how China’s OBOR initiative might be
changing the multiscalar governance of trade in the future. In order to
reduce regional imbalances due to the rising cost levels in its coastal cities,
and because of intense competition from other emerging economies,
China is actively promoting foreign investments in its interior. The OBOR
initiative can be seen as a good strategy to encourage companies to settle
in western and central China, leading to an increase in the transportation
of goods between inland locations and the major ports in coastal cities
that are the cross-border points for China’s foreign trade. At the same
time, China is planning to engage in free trade agreements (FTAs) with
the over 60 countries in Europe, the Middle East, Central Asia and South
Asia that are part of the OBOR initiative, in addition to its existing FTAs.
The author argues that through policies affecting foreign trade, both of
these developments are aimed at shifting the regional balance of China’s
economy from congested coastal regions toward inland regions. Drawing
from the notions of formal and informal institutions, and from the insti-
tutional approach to business studies and multiscalar trade governance,
the author elaborates on China’s subnational, national and international
trade policies. The chapter’s empirical analysis is based on multiple sources
of data, including company surveys and interviews, as well as reviews and
indicators of China’s regulatory environment. Its analytical discussion
focuses on the regional development aims of the current five-year plan
and the OBOR initiative, the institutional environment of trade for for-
eign firms in China and the case of Chengdu as a host city for foreign
investment. The findings provide a basis for sketching prospective changes
in the regional emphases of China’s trade policy. By addressing OBOR in
the context of multiscalar trade policies, the chapter provides a framework
for understanding the changing institutions affecting cross-border trade
in China and beyond.
Chapter 6 by Paulo Duarte explores the security implications of China’s
OBOR initiative in the context of Chinese (re)emergence. Based on a
hermeneutic analysis and through the conceptual lenses of the Copenhagen
School, the author analyzes the securitization logic inherent to OBOR. The
chapter’s assumption is that OBOR can be perceived as a perfect securiti-
zation instrument for the expansion of China’s interests worldwide. It
sees the OBOR project as being embedded with the triple securitization
of Chinese interests: economic, physical/military and soft powers. It
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    21

argues that at the political level, OBOR is a narrative aiming to mitigate


the international community’s concerns over China’s rise as well as to
legitimize the Party’s continuity. Besides, the author sees a soft power
component in the OBOR initiative that is aiming to ensure that economic
development is driven in a way that is advantageous for Beijing. At the
financial level, OBOR intends to provide momentum to the competition
of the Chinese yuan vis-à-vis the US dollar. Part of the OBOR objective is
perceived to be to (re)bring Europe closer to “Mackinder’s Heartland”,
thus weakening the long transatlantic momentum. At the military level,
transportation projects attached to the OBOR initiative offer Beijing the
advantage of projecting extraordinary hard and soft powers, for instance,
to mobilize the People’s Liberation Army for several theaters, including
the preparation for armed conflicts or war. In the maritime context,
China’s renting of the two maritime ports of Gwadar and Djibouti can be
seen as an initiative to provide logistic hubs for navy operations in order
to protect the Chinese merchant fleet and to overcome the US-led “1st
and 2nd Island Chains”. OBOR is the initiative of a pragmatic and nostal-
gic China to maintain internal stability and to deal with the economic
downturn. At the same time, it might provide leeway for Beijing to move
west in a context where its eastern frontier is faced with many uncertain-
ties and even tensions.
Chapter 7 by Ritika Passi intends to explore the geopolitical motiva-
tions behind China’s OBOR initiative. The initiative has been presented as
primarily an economic initiative: a trade and infrastructure network that
will boost economic prosperity, especially in the face of sluggish global
economic growth. While its true nature remains elusive and conjecture is
rife, the author argues that OBOR represents the twinning of globaliza-
tion and geopolitics. China’s push for expanding value chains beyond its
borders through connectivity is a result of its participation in the global
economy and its desire to play a bigger role in this. At the same time,
China is expected to be seeking geopolitical gains through this economic
agenda. The chapter intends to unpack the extent to which OBOR is an
economic enterprise that is embedded with geopolitical motivations. The
chapter focuses primarily on the Silk Road Economic Belt that has been
continuing apace and for which figures are readily available. Likewise,
given the breadth and scope of OBOR, primarily the commercial merit of
the tangible connectivity infrastructure being built is in question, and not
the value Beijing will derive from the non-physical layers. The author
explores (1) the economics of the Iron Silk Roads that form part of the
22   L. XING

SREB to illustrate the kind of commercial gains that will accrue to China
through OBOR; (2) the Chinese economy vis-à-vis the current global
economic situation and sentiment regarding globalization, in order to
determine to what extent OBOR as a policy is expected to drive forward
China’s “new normal”; and (3) the financing of the venture in order to
address the financial viability of the project. A frank appraisal of the eco-
nomics of OBOR will help determine, to the extent possible at present,
where the economics of OBOR stops and geopolitics begin.
Chapter 8 by Justin van der Merwe adopts a historical-geographical
materialist approach to illustrate how China’s Belt and Road initiative can
be understood as part of a broader system of accumulation based on what
may be called the government—business—media (GBM) complex. The
analysis follows a critical rewriting of China’s regional and transnational
relations as seen through the lens of the GBM complex, with special atten-
tion paid to its involvement in Africa and the Middle East. Thus, this paper
seeks to lay the foundations for an alternative understanding of China’s
political economy. The chapter suggests that through the provision of
China-led public goods, the OBOR initiative is an opportunity to reinte-
grate Africa and the Middle East into China’s system of accumulation,
arguably as a countermeasure or an alternative system to the dominant
Western-led system of accumulation.
Chapter 9 by Laurids S. Lauridsen applies a Chinese proverb saying that
“two tigers cannot occupy the same mountain” to describe the situation
related to the stronger participation of China in the evolving regional
order. For more than half a century, American hegemony in East and
Southeast Asia has remained unchallengeable, while Japan has been play-
ing a leading role as an investor, aid provider and promoter of regional
cooperation. During the 2000s, especially during Xi Jinping’s leadership,
China has been seeking to expand its regional influence by engaging in
regional rule-making and institution-building activities. The two-pronged
strategy of setting up new multilateral investment banks, especially the
Asian Infrastructure Investment Bank (AIIB), and playing active roles in
overseas infrastructure projects under the One Belt One Road initiative
have taken regional competition and infrastructure diplomacy to an ele-
vated level. By examining an empirical case of high-speed railway projects
in Thailand, the chapter seeks to analyze regional rivalry and the evolving
alternative regional order in terms of tangible forms of infrastructure
development. China and Japan are competing to secure overseas infra-
structure projects in Asia, and both countries are deploying considerable
  CHINA’S PURSUIT OF THE “ONE BELT ONE ROAD” INITIATIVE: A NEW…    23

financial resources to attract orders. Railways, and especially high-speed


railways (HSR), are a key element in the China-Japan rivalry taking place
not least in their regional backyard. The author examines the following
questions: What are the rationales behind the Chinese and Japanese HSR
competition/diplomacy in the region, and how does regional competition
come to light in the case of HSR projects in Thailand?
Chapter 10 by Dragan Pavlićević perceives the One Belt One Road
initiative to be a vehicle for China to expand its influence on the Eurasian
continent and beyond. This chapter examines the current trends in the
relationship between China and Central and Eastern Europe in connec-
tion with the OBOR initiative. China’s engagement in the region has
resulted in widespread concerns that Beijing is accumulating leverage over
the countries in the region and pursuing goals detrimental to the interests
of the region and the dominant regional power, that is, the EU. This study
explores economic, political, security-related and normative aspects of
China’s engagement in the region in order to determine whether these
concerns are well-merited. The findings suggest that China does not pos-
sess the leverage to alter significantly the strategic and policy choices of
Central and Eastern European states and erode the EU’s dominant posi-
tion in the region. Even if the substantial deepening of ties between China
and the region under the OBOR framework continues, Beijing is lacking
both the incentive and the means to compete with the EU and pursue the
role of a major regional power.
Chapter 11 is the concluding chapter by Li Xing and Paulo Duarte.
The authors summarize the various debates on the Chinese OBOR initia-
tive presented in each chapter and find that, although the OBOR initiative
generates a mixture of hope and fear, it is nevertheless altruistic to the
extent that pragmatism and the fulfillment of China’s national interest
cause the country to adapt its foreign policy to the requirements of domes-
tic and international realities. China is becoming an important global role-­
player, and the country does not want to be a bystander. The message
from this book is that, on the one hand, China has a growing interest in
adapting to the international system, and it is expected that the OBOR
initiative will be constrained by geoeconomic and geopolitical complexi-
ties within the OBOR countries and regions. On the other hand, the
OBOR initiative is part of an emerging new order characterized by made
in China and the growing role of the Chinese yuan, and by the inspiration
of a normative power to project an alternative development model. In
conclusion, the OBOR initiative reflects, therefore, a multifaceted inter-
24   L. XING

play of realism, liberalism, constructivism, altruism, hope and fear between


China and the rest of the world. Rather than looking for answers, this
book wants to bother the reader who is eager for knowledge of a grand
project that is extremely complex and heterogeneous. After all, the rise of
China and the principal powers of the existing world order will have to go
through a considerable period of struggle, adjustment and tension.

Notes
1. George Kennan was the former Head of the US State Department Policy
Planning Staff. His selective quotations are taken from the complete text of
the section of Policy Planning Staff/23 (Kennan 1948). The complete
paper was published in 1976 in Foreign Relations of the United States 1948,
Vol. 1, No. 2.
2. “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st
Century Maritime Silk Road,” issued by the People’s Republic of China’s
National Development and Reform Commission, Ministry of Foreign
Affairs, and Ministry of Commerce of the People’s Republic of China, with
State Council Authorization, March 2015. Available at http://en.ndrc.gov.
cn/newsrelease/201503/t20150330_669367.html

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CHAPTER 2

Understanding the Multiple Facets of China’s


“One Belt One Road” Initiative

Li Xing

The Placement of the Discussion


During the last four decades, China has grown from a poor agricultural
country into a global manufacturing powerhouse. The “Chinese model”
is based on internal infrastructure investment and production in combina-
tion with external export promotion, and it has made the country the
second largest economy and one of the largest trading nations in the
world. In recent years, however, the Chinese model has faced a number of
challenges and constraints such as slowdown in economic growth, exces-
sive debt, overcapacity, constraints on resources and environment and lack
of new sources of growth.
Now the Chinese leadership is looking for new sources to sustain eco-
nomic growth. One of the most important shifts in the orientation of
China’s development is the attempted transition from export-oriented
growth to a new model based on consumption and outward investment.

L. Xing (*)
Department of Culture and Global Studies, Aalborg University,
Aalborg, Denmark
e-mail: xing@cgs.aau.dk

© The Author(s) 2019 29


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_2
30   L. XING

The “One Belt One Road” initiative (hereafter the “OBOR” initiative)
covers about 65 percent of the world’s population and one-third of the
world’s GDP, and the central idea is to create viable economic belts: (1) a
land belt that includes neighboring countries surrounding China, espe-
cially those countries on the original “Silk Road”1 through Central Asia,
West Asia, the Middle East and Europe; and (2) a maritime belt that links
China’s port facilities with the African coast, pushing up through the Suez
Canal into the Mediterranean. The OBOR seems to revive the ancient Silk
Routes with a twenty-first-century twist.
The OBOR initiative is an ambitious project that aims to link interre-
gional trade across more than 60 Asian and European countries along a
new Silk Road. It is China’s most important and grand initiative and a
crucial component of President Xi Jinping’s foreign policy strategies.
Whereas the conventional hegemonic tradition sees the world through the
prism of the Atlantic, with the United States on the one side and Europe
on the other, the OBOR initiative attempts to provide a new prism that
will allow us to view the world economy and the global balance of power
as they relate to China and its nearby regions.
As the OBOR initiative gains momentum, international relations (IR)
and international political economy (IPE) scholars and policy makers
worldwide are engaged in passionate debate about whether such an initia-
tive could potentially reshape the world order. In historical retrospect,
rising powers repeatedly struggle to redefine the global economic and
political order, and each shift in the balance of power has been followed by
conflicts and wars. For many years now, global debate on the rise of China
and on Beijing’s relationship with the existing US-led world order has
been controversial and has divided realists and liberalists (Mearsheimer
2006; Ikenberry 2008). Early disagreement on China’s role and position
in international institutions as a “free-rider” or as a “stake-holder” has
now turned into a dispute about whether China is a “status quo power”
or a “revisionist power” when it comes to the current world order (Zhao
and Korbel 2016). The term “status quo power” refers to the extent to
which Beijing respects international relations as a system based on the
acceptance of the existing norms. On the other hand, “revisionist power”
is a concept derived from conventional power transition theory which
automatically assumes that rising powers are revisionist (Organski and
Kugler 1980; Gilpin 1981). Although it is not easy to put China into one
of the two categories, the country is nevertheless considered to have a
“revisionist orientation” (Åberg 2014).
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    31

Beijing’s revisionist orientation has already been linked with its proactive
engagement in financial “minilateralism”, which is an attempt to c­reate
alternative global financial institutions, such as the BRICS Bank,2 the AIIB3
and the New Silk Road Fund.4 Some Western mainstream media see China-
led minilateral financial institutions as good examples of China’s move
toward revisionist power. They symbolize “China’s Great Game: Road to a
new empire” (Financial Times 2015, October 12). In a similar way, the
OBOR is seen as part of China’s own global “public goods” efforts in the
process of constructing a post-US economic order (Li 2016b).
Another heated debate on Beijing’s OBOR initiative is related to the
revived reincarnation of “dependency theory”. The debate touches upon
the most important question concerning China’s economic relations with
the developing world: South-South partnership or North-South depen-
dency (Li 2016a). Dependency theory posits that the underdevelopment
of developing countries is caused by unequal exchange imposed by exter-
nal mercantilist forces and driven by imperialism and colonialism. Thus,
much of the literature focuses on China’s external trade relations and
draws on the “unequal exchange” thesis of dependency theory. The thesis
is that “the economy of certain countries is conditioned by the develop-
ment and expansion of another economy to which the former is sub-
jected”, and consequently, “some countries (the dominant ones) can
expand and can be self-sustaining, while other countries (dependent ones)
can do this only as a reflection of that expansion” (Santos 1970: 231).
Hence, it follows that China’s economic relations with the developing
world replicate the historical North-South dependency and that the
Chinese government is mainly aiming at the strategic pursuit of resources
and raw material supplies. Both Africa and Latin America are seen as good
examples of “economies of dependency”: both are dependent on com-
modity export to the Chinese market (Ferchen et al. 2013; Pereira and
Neves 2011; Li 2016a). At a global level, China is perceived as “laying the
groundwork for potentially securing regional hegemony by creating a
neo-Sinocentric periphery structure” that will eventually lead to its objec-
tive for global hegemony (Durani 2016).

The Objective and Theoretical Considerations


This chapter aims to provide a conceptual and theoretical framework for
understanding the multifaceted aspects behind China’s “One Belt One
Road” initiative. First, the OBOR initiative is seen as a shift from a “Tao
32   L. XING

Guang Yang Hui” (韬光养晦)5 foreign policy to a more proactive “You


Suo Zuo Wei” (有所作为)6 strategic repositioning. The OBOR also dem-
onstrates that China has transformed itself from being a “rule-follower” in
joining the regional and global division of labor to becoming a “rule-­
settler” through its proactive global financial role, its overseas capital
expansion and its production outsourcing. The initiative also reflects
China’s internal economic restructuring as shaped by Beijing’s 13th five-­
year national plan.
Second, through a theoretical perspective produced by combining neo-­
Gramscian IR theory and world system theory, the OBOR initiative is
understood as the logical nexus between the accumulation and consolida-
tion of China’s internal achievement (hegemony) and its inevitable out-
ward expansion. The initiative can also be interpreted as part of the
capitalist world system’s continuous cyclical rhythms, which always result
in regular and slow-moving but significant geographical shifts in accumu-
lation and power without changing the fundamental mode of production
and relations of inequality within the system. Each new round of capital
and production relocation dialectically enlarges/reduces the “room for
maneuver” and increases/decreases “upward mobility” for various coun-
tries and regions. The OBOR initiative represents the latest round of cycli-
cal rhythm and geographical shift of accumulation and power in the
current era of the world system, and it calls for the regions and countries
along the Belt and Road to seize the opportunity offered by this external
“promotion by invitation” and to increase their upward mobility by pro-
moting strategic convergence with China’s OBOR project.
Third, inspired by disputes between Kautsky’s ultracapitalism theory
and Lenin’s ideology of imperialism, the chapter explains that the OBOR
initiative has dual characteristics: on the one hand, it can be seen as an
example of China’s participation in the formation of a partnership “cartel”
with international capital to jointly “exploit” the world. This would be in
line with Kautsky’s understanding. On the other hand, it can also be con-
ceptualized in terms of Lenin’s view that the expansion and intensification
of competition among the core capitalist states would lead to chronic con-
flicts and even to wars. To put the OBOR in the context of the Kautsky-­
Lenin debate, this chapter argues that China is facing a contradictory
situation: a self-identified “developing” country is cooperating with inter-
national capital, while at the same time acting as a strong force for the
capital accumulation and outward competition that may lead to recurrent
crises and conflicts among major capitalist powers.
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    33

The Internal-External Nexus of the OBOR Strategy


The post-Mao development strategy adopted during early periods of eco-
nomic reform in the late 1970s was heuristically underlined by Deng
Xiaoping’s maxim, “watch cautiously, hold our ground, meet the danger
calmly, hide our capacity, while also getting something done” (冷静观
察、稳住阵脚、沉着应付、韬光养晦、有所作为). Deng’s words implied
a strategy of concentrating on China’s internal development while waiting
for the right time for the country to assert itself in the global sphere and
to achieve an accomplishment. The slogan under which Beijing has chosen
to project its development objectives during recent decades has been
“peaceful ascent” (和平崛起),7 or “peaceful development” (和平发展).
Figure 2.1 shows the internal-external nexus of China’s economic
development strategy during various periods of the past four decades in
which China gradually moved from the “Tao Guang Yang Hui” policy as
a passive rule-follower and recipient of international institutional norms
and rules to the “You Suo Zuo Wei” strategy. With the “You Suo Zuo
Wei” strategy, China became an indispensable contributor to global eco-
nomic growth and a proactive rule-shaper in global governance. Internally,
the OBOR initiative is a further extension of China’s “go out” and “go
global” strategies in an attempt to improve the quality and equality of
economic growth rather than to pursue quantitative growth at any cost.
Quite apart from economic considerations, the OBOR initiative is Beijing’s
foreign policy tool to shape its international leadership and to provide an

You Suo Zuo Wei


Rule-player
•Joining regional/global •OBOR and new Silk Road
division of labour •Global finance, AIIB
•Market/resource
•Deng’s maxim and occupation •13th 5-year plan and new
pragmatism growth model
•BRICS, capital expansion
Tao Guang Yang Hui •Go out, and go West Chinese Dream and
Rule-follower global re-ordering
Rule-shaper

Fig. 2.1 The internal-external nexus in China’s development strategy


(1980s–2010s). (Author’s own drawing)
34   L. XING

internal-external channel for Chinese industrial and capital expansion by


leveraging China’s comparative advantages in infrastructure development,
financial power and manufacturing capacity.

Joining Regional and Global Division of Labor


The “Tao Guang Yang Hui” strategy in the early period of China’s eco-
nomic reform reflected Beijing’s willingness to accept the regional division
of labor and to be part of the regional flying-geese economic order based
on dynamic comparative advantage. The concept of the East Asian “flying-­
geese” pattern of regional economic integration was coined in the 1930s
by Japanese economist Kaname Akamatsu (1935). Akamatsu developed
the theory of a multitier hierarchical “flying geese” model in which indus-
trialization could be promoted and spread from developed countries to
developing countries as costs in the former rose. The hypothesis of the
flying-geese pattern was that a group of nations in this region were flying
together in layers with Japan at the forefront. The layers signified the dif-
ferent stages of economic development of various countries. The flying-­
geese model of regional economic integration implied a life cycle of
industries in which older technology and know-how were passed down to
the next generation of developing economies. It also entailed a product
cycle theory of trade and investment (Fig. 2.2).
After China’s economic reform in the early 1980s, its production and
division of labor within the region reflected the flying-geese model.
However, what was unique about China’s role in the flying-geese model of
regional development was that the nation’s vast size and the unbalanced
development between its interior regions indicated that the Chinese

Fig. 2.2  The flying-geese model of East Asian division of labor. (Author’s own
figure)
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    35

e­conomy was flying in different layers simultaneously and had multiple


production and labor relations with many countries (Li 2007). On the one
hand, China’s domestic development in the past three decades resembled
certain flying-geese characteristics, as manifested by its coastal and inland
economic interactions (Yue et  al. 2012), and its economic success was a
result of its integration in intraregional flying-geese dynamics. On the other
hand, China’s vast size and the unbalanced development between its own
regions enabled the country to cooperate and compete in both high-tech
and labor-intensive industries with the rest of the countries of the region
and even the whole world—core, semi-periphery and periphery countries.
Economic zones in China’s coastal regions were capable of competing with
the West, Japan and other East Asian newly industrialized economies
(NIEs) in high-tech industries, while other provinces and regions could
absorb the global outsourcing of labor-intensive industries. Outsourcing of
industrial production also took place within China as coastal areas passed
on their labor-intensive production to the inland regions.

The Emergence of China-Centered Regional Economic Order


The effect of the “You Suo Zuo Wei” strategy since the 2010s is witnessed
by the fact that East Asia has experienced a gradual shift away from the
flying-geese model to a new model of regional economic integration. The
rise of China as a new regional economic hegemon has changed the tradi-
tional dynamics of flying-geese economic relations. Recently, China’s eco-
nomic power in general and its growing domestic market in particular
have acted as a major engine for growth in East Asia, boosting regional
trade growth and economic integration. China is now the most important
trading partner for most East and Southeast Asian countries, and only in
2013 did the United States take over China’s position as Japan’s largest
trading partner (due to the China-Japan crisis over territorial disputes).
Figure 2.3 reveals the interplay of various economic relations underly-
ing the Chinese development model, combining the input of external
technology, resources, investment and markets with the output of Chinese
manufacturing. It indicates that for many years, China has been looked
upon as the locomotive of the region’s economic growth and develop-
ment. When the analytical perspective is extended to include the regional
“economic order”, recent studies show that the Chinese economy plays a
pivotal role, not only as an engine of growth for East and Southeast Asia
but also as a hub for regional economic integration (Fig. 2.3):
36   L. XING

Fig. 2.3  The gradual return of China’s historical position as the region’s gravity.
(cf Wong 2013: 288, Fig. 2.2)

China has in fact become an important regional ‘integrator’ through its


many global and regional production networks. China’s exports (over 50%
being processing trade) embody raw materials, parts and components, tech-
nology and equipment, and financial and economic services from different
Asian economies, converting ‘Made-in-Asia’ into ‘Made-in-China’ products
for the world market. (Wong 2013: 288)

Today, virtually all East Asian countries count China as their largest
trading partner and largest market (Fig. 2.4).

The OBOR Initiative and China’s Internal Economic


Restructuring
There is an internal aspect behind the OBOR strategy in which the Chinese
government is looking for a new growth model fueled by consumption
and services instead of fixed-asset investment. China’s high economic
growth during the past decades has been based on massive state-led fiscal
stimulus projects that also aimed to shield China from the destructive
effects of the global financial crisis. However, the adoption of this
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    37

Fig. 2.4  Asia’s growing economic dependence on China. (Source: Schlesinger in


The Wall Street Journal, May 12, 2014)

investment-­driven growth model also intensified economic imbalance and


wasteful spending. In addition, some of China’s production sectors have
been facing the problem of overcapacity since 2006, and the OBOR
­initiative is intended to transfer overproduction and overcapacity to new
markets in neighboring countries (Zhang 2016).
One of the crucial goals of the grand OBOR initiative is to redirect the
country’s domestic overcapacity and capital for regional infrastructure
development in order to keep Chinese industry and production robust,
38   L. XING

keeping down unemployment by maintaining a decent GDP growth rate.


One concrete aim of the initiative is to resolve China’s internal overinvest-
ment problem by exporting the production of products, such as steel,
cement and aluminum, to the construction of overseas infrastructural
projects, such as railways, sea ports, highways and airports. In doing so,
the OBOR project will help Chinese goods and services to enter new mar-
kets and will improve trade and relations with Southeast Asia, Central Asia
and European countries. It is an effective way to boost China’s regional
influence and leadership.
The OBOR initiative will provide extra opportunities for the develop-
ment of China’s less developed border regions. China also intends to
explore new investment options that will preserve and increase the value
of the capital accumulated in the last few decades. The OBOR project has
the potential to grow into a model for an alternative rule-maker in inter-
national politics and could serve as a vehicle for the creation of a new
global economic and political order.
The OBOR initiative is also inextricably linked with China’s 13th Five-­
Year Plan (2016–2020). The new five-year plan will function as a national
guide for countrywide development and investment strategy throughout
the period. It marks a dramatic shift in China’s growth model from capital
accumulation-led growth to innovation-led growth combined with inte-
grated urban-rural development and green development. The Plan echoes
the OBOR initiative, urging metal, steel and heavy machinery companies
with overcapacity (particularly those with declining domestic demand) to
find overseas markets. From the OBOR point of view, the regional dimen-
sions of the five-year plan involve a long-term economic strategy to boost
economic integration across the Belt-Road countries and regions.

The OBOR Initiative and the Neo-Gramscian


Perspective
The connection between a state’s internal accumulation of power and con-
solidation of hegemony on the one hand and its projection of external
power to shape the regional and global order on the other can be concep-
tualized through the lens of the neo-Gramscian school of international
relations represented by the theory’s leading proponent Robert Cox. Cox
raised the level of the hegemony concept from the national to the interna-
tional level, seeing the formation of global hegemony as an outward expan-
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    39

sion of internal (national) hegemony. He developed a critical theory to


explore the nexus between hegemony, world order, and historical change.
Such a nexus explains how internal hegemony, driven by dominant class
and social forces within a nation-state, is then extended and projected out-
ward on a world scale to shape the international order (Cox 1981, 1983).
Bieler and Morton (2003) provide a useful description of the domestic-
international interplay between ideas, material capacities and institutions:

Yet once hegemony has been consolidated domestically it may expand


beyond a particular social order to move outward on a world scale through
the international expansion of a particular mode of social relations of pro-
duction …. This can further become supported by mechanisms of interna-
tional organisation. Finally, within each of the three main spheres it is argued
that three further elements reciprocally combine to constitute an historical
structure: ideas, understood as intersubjective meanings as well as collective
images of world order; material capabilities, referring to accumulated
resources; and institutions, which are amalgams of the previous two ele-
ments and are means of stabilising a particular order. (Bieler and Morton
2003)

Figure 2.5 places China’s internal power constellation and its external
expansion (right) in the context of Cox’s historical structure of hege-
mony (left, Cox 1981: 136). The rise of China and the OBOR initiative
neatly reveals the structural connections between material capacities
(accumulated resources), ideas (collective images of social/world order)
and institutions (means of perpetualizing a particular order). It implies

Fig. 2.5  Reflecting the OBOR initiative from Cox’s historical structure of hege-
mony. (Left: Cox 1981: 136; right: author’s own figure to reflect the left side)
40   L. XING

that change can come from any one of the three spheres: for instance,
the rise of contending socio-political and socio-economic forces may be
linked to changes in production and lead to the transformation of state
and world order.
Cox’s theory of hegemony initially aimed to explain how the United
States, driven by domestic power relations and social forces, was able to
shape and lead the postwar world order. Cox’s empirical ground was his
study of how US hegemony was institutionally sustained by the US-led
international organizations (the Bretton Woods order) that enabled the
United States and its allied regimes to perpetuate their favorable position
in the world order and to shape the development of the system as a whole.
Multilateral international institutions are an important instrument through
which the norms and values of a global hegemony are expressed. They act
as legitimizing mediators of the hegemonic order and as an embodiment
of the essential norms around which the international order is constructed.
These US-led multilateral international institutions are in themselves sus-
tained by Western hegemonic norms, also termed “universal norms”,
which define the rules of behavior for both institutions and states.
In neo-Gramscian terms, the OBOR project can be seen as an attempt
to create an alternative historical bloc to challenge the existing order, with
China seemingly striving to assume ideational and material leadership
(Yilmaz 2014). The OBOR strategy reflects the Gramscian notion of “war
of position”,8 in that Beijing is developing alternative “multilateralism”
(China-led international financial institutions) as an institutional tool to
realize the OBOR initiative. This China-led institutional arrangement is
innovative in terms of international relations, marking Beijing’s adjust-
ment to a more proactive approach in its foreign policies. It also indicates
that China’s pursuit of the OBOR initiative through multilateralism will
consolidate its position as a new player in the game of norm-setting and
norm diffusion.

Chinese Capital Expansion and Financial Hegemony


According to Cox’s analytical method (1981, 1983), to understand and
measure the way in which hegemony is exercised and maintained at the
global level by a leading hegemon is to examine how international organi-
zations are led to function in a way that reflects the hegemon’s internal
ideology, interests and objectives. World system theory would assumedly
recognize the importance of international organizations, especially interna-
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    41

tional economic and financial institutions, where the core features of the
capitalist world system are produced/reproduced, maintained and expanded.
During the early reform periods driven by the “Tao Guang Yang Hui”
(韬光养晦) strategy, Beijing’s goal was to become a “good citizen” and a
“loyal member” of various international organizations that deal with eco-
nomic, political, security, cultural and environmental issues, and so on.
With its membership of the World Trade Organization from 2001, China
further integrated itself into the global economy and benefited from the
existing international economic and financial institutions. China has
learned to be more effective in utilizing international organizations to
advance its national interests as well as to extract what it needs from these
institutions. One Chinese scholar pointed out that “China’s growing role
in all kinds of international organizations is part of the story of China’s
rise” (Xie 2011: 85). As another scholar argued, “… globalization works
only because of a high degree of institutional and legal interdependence,
and China’s growing prosperity depends on tightening these bonds and
participating in those global and regional institutions” (Agnew 2010: 578).
However, since the devastating effects of the global financial crisis and
the stalemate of the “Doha Round” negotiation, the US-based institu-
tions—the World Bank, IMF and WTO—have been subject to criticism
and questioning about their authority, capability and legitimacy. More
broadly, the existing world order with these economic institutions as sup-
porting pillars is experiencing crises in four comprehensive dimensions:
functionality, scope, legitimacy and authority (Flockhart and Li 2010).
Ironically, while the United States and much of Europe were plunged into
a serious recession, China emerged to become a global economic power
and a pivotal stakeholder in international economic and financial institu-
tions: (1) the largest trading nation and the largest trading partner for a
global majority of countries; (2) an important source of aid and develop-
ment assistance; and (3) a relevant and attractive model of economic
development. Beijing’s presentations and roles are being increasingly rec-
ognized and appreciated:

China’s remarkable growth story, and its strengthened relative position as


result of the GFC cannot help but deeply impact the make-up and function-
ing of the international institutions in which it participates, many of which
have traditionally mirrored a US view of the world. In the aftermath of the
economic crisis, China’s calls for greater representation in institutions such
as the World Bank and the International Monetary Fund became more
42   L. XING

vociferous, and other nations, including western developed nations, have


seemed to signal a greater receptivity to this notion. The moral authority
and credibility the Chinese can now carry into a variety of international
economic institutions is greater than it ever has been. (Olson and Prestowitz
2011: 6)

In recent years, China’s proactive engagement in financial minilateral-


ism has attracted global attention (Wang 2014). China’s relationship with
international financial institutions has long been controversial. As it is
pointed out before, early disagreement on China’s role and position in
international institutions as a “free-rider” or as a “stakeholder” is turning
into a dispute about whether China is a “status quo” power or a “revision-
ist” power when it comes to the current world order. It is a “status quo”
power to the extent that Beijing respects international relations as a system
based on the acceptance of norms. It is a “revisionist” power to the extent
that it does the opposite, and the China-led minilateral financial institu-
tions are seen as good examples that demonstrate “Beijing’s challenge to
the world of Bretton Woods” (Financial Times 2014).

The Soft Power Components of the OBOR Initiative


The OBOR initiative is perceived as an outward expansion of Chinese
influence that is primarily driven by its economic power, but its ideational
and normative constituents (soft power) in terms of order-shaping, norm-­
negotiating, agenda-setting and policy-institutionalizing will eventually
become systematized or internalized. The OBOR initiative also includes a
heavy dose of expanding Chinese soft power influence. It is an ideational
resource to show the communities of Eurasia that China is a benign rising
power and a reliable partner, a different type of global hegemon. The
OBOR initiative is portrayed as a means to create a “win-win” situation
for Eurasia, and it depicts a prosperous future with China leading a “com-
munity of common destiny”.
The phrase “community of common destiny” was popularized by
Chinese President Xi Jinping, who intended to construct a regionally
shared narrative and who particularly stressed “letting the awareness of
community of common destiny take root in the neighboring countries”
(Jin 2013). The concept of “community of common destiny” is one of
three core components of a well-designed and carefully constructed new
diplomatic strategy for Xi’s era (Jin, ibid.), consisting of (1) the “China
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    43

dream” of maintaining domestic unity and stability; (2) the “new type of
great power relations” involving the search for alternative means of peace-
ful coexistence with major powers; and (3) the “community of common
destiny” to ensure a peaceful and stable neighboring environment, which
is essential for China’s continued rise.
Since soft power presupposes a value-laden identity capable of setting
certain standards of social and political behavior on the basis of external-
izing successful domestic norms and projecting them beyond national
borders, the OBOR initiative is a good way to export the Chinese model
of economic success. China’s economic success is generating global
rethinking on the question of whether economic development is more
conditioned by the political architecture of Western democracy or by the
professional management of Chinese governance. China’s economic suc-
cess as an alternative development model seems to be the major source of
attraction for developing countries; nevertheless, it is impossible to sepa-
rate hard material factors from soft attraction to values and worldviews
(Breslin 2011). The Chinese development experience invites multiple
interpretations and explanations regarding the mechanisms that cause
nations to grow and regarding the set of mutually dependent relationships
between property rights and economic growth, between the rule of law
and a market economy, between a free currency flow and economic order,
and, most importantly, between democracy and development. These
norms and values should not be defined by the existing hegemonic powers
alone, and they are becoming “interdependent”—open, less rigid, and
non-universal.
There are many underlined values that are diffused from the “Chinese
model” (Ramo 2004), such as adherence to national self-determination, a
strong role of the party and state, gradual reform and innovation to achieve
economic growth, and international non-intervention and so on. They
have been normalized as “Beijing Consensus”, which “has begun to
remake the whole landscape of international development, economics,
society and, by extension, politics” (Ramo 2004: 3).
The OBOR was conceived as an important test case for the universal-
ization of the “Chinese Dream” concept (Li 2015). The concept is claimed
to have universal relevance as a dream of peace, development, cooperation
and mutual benefit for all. It is connected to the dreams and aspirations of
the people of the Eurasian regions in which the OBOR aims to increase
economic wealth, and to strengthen cooperative relations by reviving the
legacy of the historical Silk Road era. The OBOR is argued to be “a key
44   L. XING

instrument in achieving the Chinese Dream” in terms of “restoring and


legitimizing the re-emergence of China as a world power and once and for
all overcoming the nightmares experienced after the Opium Wars of the
19th century and their resulting humiliations by the European colonial
powers” (Müller-Markus 2016).

The OBOR Initiative from the World System


Perspective
The world system theory developed by Wallerstein (1974, 1979, 1997,
2004) provides a broad theoretical perspective on the historical evolutions
and changes involved in the rise of the modern capitalist world system.
This system expanded over a long historical period and brought different
parts of the world into its division of labor, leading to a perpetual condi-
tion of economic core-peripheral relations. Under this single division of
labor within one world market, a political structure consisting of sovereign
states and multiple cultural systems interacts within the framework of an
interstate system (1974). The world system is conceptualized as a dynamic
one in which changing positions within the system’s structural morphol-
ogy is rendered possible by taking advantage of global capital mobility and
the relocation of production. Historically, the division of labor within the
capitalist world economy resulted in flows of commodities, labor, and
capital across different geographical areas through chains of production,
exchange and investment. China and India are seen as the last reserves
(unexploited areas) that have been brought into the capitalist world sys-
tem (Li 2008). World system theory attempts to explain the embedded
inequalities of a system in which nation-states have quite different devel-
opment stages and positions within a seemingly integrated world econ-
omy. According to this theory, the variety of positions in the global division
of labor and changing patterns of competition and competitiveness have
planted contradictions in the system from the very beginning, leading to
the perpetual dichotomy of development and underdevelopment.
According to world system theory, the capitalist world system is charac-
terized by a series of cyclical rhythms and by recurrent features such as
economic prosperity or crisis, and upward or downward mobility. More
importantly, this series of cyclical rhythms is followed by the rise and
decline of new guarantors (new hegemons) of the world system, each with
its own unique pattern of control (Wallerstein 1997). The emergence of
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    45

China can be perceived as part of the system’s rhythmic cycles in a phase


of upward mobility as China continues to follow the core features of the
world capitalist system. China would thus be seen as motivated or driven
to act as a new political and economic system guarantor due to its eco-
nomic integration and its market dependence on the system’s mode of
production and capital accumulation.
Nevertheless, new emerging powers are also described as challengers
to the system’s existing dominant guarantor and to other core powers
because they have different political and economic governing cultures.
China is currently seen as having the intention of establishing a
“Sinicized” world order—an order with “Chinese characteristics”. To
follow world system theory thinking, however, even if the future world
order were to be injected with Chinese characteristics, it would simply
be a reflection and extension of China’s internal economic, political and
cultural structures without altering the core architecture of the world
capitalist system.
Thus, contrary to the pessimism of conservative realism, world sys-
tem theory does not view the rise of new guarantors (latecomers) as a
threat as long as they maintain the fundamental core features of the
system—the mode of production and the logic of capital accumulation.
This is because the advance of the latecomers hugely benefits from their
integration into the international division of labor and active participa-
tion in the process of capital and wealth accumulation. Accordingly, the
rise of China and its OBOR initiative are understood as part of the cycli-
cal rhythms of the system. This reflects the strength of the world system
and its success in bringing relatively “untapped” parts of the world to
the logic of capitalism without changing the fundamental relations of
inequality within the system. The world system theory argument is
clear: while China is successfully moving toward the core, it still needs
a periphery. This argument has been reinforced by recent studies of
Latin America’s growing commodity dependency on China (Ferchen
et al. 2013; Pereira and Neves 2011).
According to this point of view, the OBOR initiative and the emer-
gence of a China-led financial order do not represent a menace; rather,
they reflect China’s internal economic imperatives and extend them exter-
nally without altering the core architecture of the capitalist world system.
In other words, the OBOR project, while assisted by an emerging financial
order with “Chinese characteristics”, will still be shaped and molded by
46   L. XING

the system’s law of value. It will revitalize the continuous rhythmic cycles
of the world system in terms of “upward mobility” and enlarge the “room
for maneuver”. Through the lens of world system theory, we can under-
stand the multifaceted roles and benefits that the OBOR initiative can
bring to China and the rest of the world.

“Promotion by Invitation”, “Room for Maneuver”


and “Upward Mobility”
“Room for maneuver” refers to the external conditions for the “upward
mobility” in the world capitalist economy that is conducive to internal
development. In a long historical perspective, the global core-semi-­
periphery-­periphery hierarchy defined by world system theory has been
a relatively stable structure for centuries. The system’s rhythmic cycles
and the rise or decline of hegemonic powers provide both upward and
downward mobility. The postwar United States provided the world
with “upward mobility”, as has China since the 1980s. A positive effect
of upward mobility is reflected in the combination of “promotion by
invitation” (external forces) with “seizing the chance” (internal
responses).
“Promotion by invitation” refers to the path of upward mobility
enjoyed by a semi-periphery or periphery country whose geopolitical
position is vital during a period of global power struggles or whose inter-
nal conditions are conducive to global capital mobility and production
relocation. This upward mobility is stimulated by a favorable external
environment created by the existing hegemon or by a group of core
nations, for the sake of their own geopolitical and geoeconomic inter-
ests. In East Asia, Japan and the East Asian NIEs are good historical
examples of how upward mobility can be achieved taking advantage of
external promotion.9 “Seizing the chance” refers to a country’s internal
ability to take advantage of a new situation or condition (such as the
Chinese OBOR initiative) in the international political economy and to
adjust its internal mobility accordingly.
In terms of world systems analysis, the OBOR initiative seemingly repre-
sents another rhythmic cycle of the rise of a new hegemon. It is a strong
“invitation” to the countries along the Belt and Road to knit together with
roads, railways, cyber-connected hubs, smart cities and industrial parks. It
provides a valuable “invitation” for the Eurasian countries to enlarge their
“room for maneuver” and increase their “upward mobility”.
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    47

The Two Sides of the “OBOR Coin”


from the Kautsky-Lenin Debate

In his “Ultra-imperialism”, Karl Kautsky (1914) claimed that core capital-


ist countries could find a way out of the vicious competition and destruc-
tive wars between the imperialist powers. Kautsky believed in the
emergence of a new stage, which he termed “super-imperialism”, in which
monopoly had reached such a high stage that it could effect “the joint
exploitation of the world by internationally united finance capital”
(Kautsky, ibid). As he wrote, “On the contrary, the capitalist economy is
seriously threatened precisely by the contradictions between its states.
Every far-sighted capitalist today must call on his fellows: capitalists of all
countries, unite!” (Kautsky, ibid). According to Kautsky’s analysis, the
only way for core capitalist countries to sustain the basic profit of the
exploitation system while avoiding stagnation was for these nations to
form a “cartel” in order to maintain their export markets and super-­
exploitation and to divide the world between them. As a result of this capi-
tal alliance, no economic necessity for imperialist war would arise from the
capitalist system itself. He postulated that war and militarism were not
necessarily inherent features of capitalism and that a peaceful “ultracapital-
ism” (imperialism) was likely. In this stage of ultraimperialism, core pow-
ers would understand the importance of coalitions and cooperation as well
as the necessity of subsuming their economic contradictions and antago-
nisms into a system of coordination, whereby they would jointly exploit
the underdeveloped world.
However, Lenin’s theory of “The Highest Stage of Capitalism” (1948
[1917]) strongly criticized Kautsky’s “ultraimperialism” as a postulated
world order. Lenin understood capitalism as being in transition from the
stage of free competition to the stage of monopoly. He argued that capi-
talism had transformed itself from the nation-based competitive system of
Marx’s day into imperial capitalism, which was now characterized by huge
monopolistic or oligopolistic corporations. Imperialism as defined by
Lenin was “the monopoly stage of capitalism” (Lenin, ibid), in which
Kautsky’s ultraimperialist amalgamation was impossible. Lenin’s view was
similar to John Hobson’s vision in Imperialism (Hobson 1902), and
Lenin argued that the colonial exploitation of periphery states was a natu-
ral consequence of capitalism and that colonialism was driven by economic
competition between the core states. In line with this understanding,
Lenin argued that there was an economic tendency toward the formation
48   L. XING

of a single world trust, which was driven to expand beyond the framework
of the nation-state by productive forces and financial capitalism. Today,
these familiar phenomena are known as globalization and global capital-
ism. As core capitalist countries competed to expand their capital
­accumulation and exploitative sphere in overseas markets and resources,
their interests would intersect and conflict, inevitably leading to war.
To put China’s OBOR initiative in the context of the Kautsky-Lenin
debate (Fig. 2.6), we can observe the two faces of China. On the one
hand, many aspects of Chinese capital accumulation and economic
development resemble the historical experiences of most developing
countries in nineteenth-century capitalism: foreign penetration or domi-
nation of key industries, enclave patterns of unevenly distributed indus-
trialization, massive rural migration, rural stagnation and urban
overcrowding, environmental and ecological degradation, severe
inequality and exploitation and pervasive corruption. The economic rise
of China is derived from its participation in the global division of labor
and market competition in the US-led capitalist world system and from
its adaptation to the system’s mode of production and law of value.
China has been the site of capital relocation and production outsourcing

Fig. 2.6  The OBOR initiative in the context of the Kautsky-Lenin debate.
(Author’s own figure)
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    49

from core Western imperialist countries (the United States and EU) and
Japan. Foreign direct investment in China has reaped massive super-
profits from China’s cheap resources and labor power. Even though,
historically, China has enjoyed a trade surplus from its commodity
exports to the core countries, its share of the total profit percentage has
been very marginal due to its position at the lower end of the global sup-
ply chain. For a long time, China was a profitable destination for core
capitalist countries’ production outsourcing and capital relocation. Seen
from Lenin’s perspective, China was a victim of capital exploitation by
core capitalist countries and of the competition between them.
On the other hand, many characteristics of Chinese economic achieve-
ments may well place the country in the category of core capitalist coun-
tries: (1) China is the world’s second largest economy; (2) it is the world’s
largest trading nation (import-export) and the largest high-tech export
country (worldatlas 2017); (3) it is the largest energy and commodity
consumer; (4) its foreign exchange reserve was estimated at $3.20 trillion
in July 2016 (Reuters, August 6, 2016); (5) China owns $1.24 trillion of
American Treasury bills, notes and bonds (USgovinfo.about.com) while
it is financing American imports and spending; and last but not least, (6)
the Chinese currency (yuan) has recently become one of IMF’s major
SDRs.10 From these perspectives, China is no doubt a core country, a
“North” country, in the global financial system in terms of overseas lend-
ing and investment. Moreover, it is a “developed” country in the global
trading system in terms of unequal exchange (exporting manufactured
products vis-à-vis importing raw materials), as described by dependency
theory. China’s strong status as a vital part of the global capital “cartel”
was firmly established recently, when the IMF approved the Chinese
yuan’s Special Drawing Rights (SDR), making the Chinese currency a
major world currency. In these connections, the OBOR strategy aims to
provide new platforms to facilitate China’s emergence as a new generator
of production relocation and capital mobility in the capitalist world sys-
tem. This development will inevitably intensify global competition in
relation to production relocation, capital expansion and market share,
especially among the core capitalist countries.
China’s OBOR blueprint is supported by Beijing-led financial institu-
tions such as the Asian Infrastructure Investment Bank (AIIB) and the
New Silk Road Foundation. The situation reflects Kautsky’s ultra-­
imperialism theory: Chinese and global capitals intersect and merge in
order to jointly exploit the rest of the world in a form of amalgamated
50   L. XING

finance. One scholar even convincingly argues that the rise of China/BRICS
will not lead to a substantial change in world order; rather, what the world
is experiencing is a process of adaptation and cooptation of the emerging
powers, especially their economic elites, by traditional core powers and
leading transnational economic classes (Taylor 2016). However, the incor-
poration of Chinese capital and its global expansions is leading the world
into a stage of oligopolistic imperialism in which core capitalist countries,
including China, are accelerating the conflict over profit distribution, mar-
ket share and resource security. In this context, China is obviously torn
between coalition and cooperation with the United States and other core
capitalist countries on the one hand, and competition and conflict with the
very same countries on the other.

Concluding Remarks: Prospects and Constraints


The OBOR initiative is a gigantic cross-continental project which is sure
to have significant worldwide geopolitical and geoeconomic consequences.
It is a strong policy strategy to revolve around economic initiatives which
place China at the center of the regional dynamics. It marks the beginning
of a new economic diplomacy for China as the country sets out to become
a driver, determining the direction in which the regional and global econ-
omy will lead. The implications and impact of China’s new development
strategy and policy orientation are far-reaching not only for the core but
also for the semi-periphery and periphery countries.
Through the analytical lens of the various theoretical perspectives
applied, I conclude that the OBOR initiative can be seen as an “unin-
tended consequence” of China’s development trajectory in the past four
decades.
It represents China’s shift toward a more proactive development strat-
egy and foreign policy in the face of new challenges and constraints result-
ing from internal overproduction and overinvestment and from external
competition with the US-led hegemony. It is a clear reflection of China’s
growing need for deeper engagement with the regions surrounding it.
One phenomenon of unintended consequence is manifested by China’s
transition from passive capital and production recipient to proactive
exporter, from passive rule-follower to active rule-maker, and from periph-
ery country suffering from foreign capital exploitation to a rising core
country competing for global capital accumulation. Another consequence
brought about by the OBOR is the fact that China’s economic success will
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    51

eventually lead to the outward expansion of Beijing’s hegemonic position


in the world order in terms of trade, production and finance, and of pro-
viding financial and infrastructural “public goods”.
There are significant risks associated with China’s OBOR strategy. The
countries and regions along the OBOR remain unstable and unpredict-
able, especially South Asia (India and Pakistan), Central Asia and the
Middle East, where the interests of major powers regularly clash and where
the political and security challenges are considerable. Although China
intends to define the OBOR as an economic project, its impact is unlikely
to be confined to economic domains. It has to match Beijing’s fundamen-
tal geopolitical and geoeconomic interests. For example, the OBOR does
not and cannot provide an equal opportunity for all states, and Pakistan
receives far more investment than India. China still lacks mature global
experience and sensitivity in addressing religious, socio-political, socio-­
cultural and security issues in host countries, particularly regarding reli-
gion, culture, environment and ethnicity. Notwithstanding its great
success within China, Beijing’s state-led development model may be dif-
ficult to duplicate elsewhere and may impede effective cooperation with
countries that are shaped by democratic rules and by various contending
socio-political and socio-economic forces.

Notes
1. The conception of the “Silk Road” refers to the ancient Silk Road, a his-
torical network of trade routes started during the Han Dynasty
(206 BC–220 AD) between Europe, China, Africa and many other coun-
tries on the Afro-­Eurasian landmass. It had both land and sea routes, where
trade in goods and cultural exchanges between China and regions and
countries along the routes was vibrant.
2. China is the largest stakeholder of the BRICS Bank contributing 41% of
the total 100 billion US dollars capital base, at the 6th BRICS summit in
Fortaleza, Brazil. According to the official published Fortaleza Declaration,
“the BRICS Development Bank is designed to mobilize resources for
infrastructure and sustainable development projects in BRICS and other
emerging and developing economies” (BRICS  – Fortaleza Declaration
2014).
3. It refers to the “Asian Infrastructure Investment Bank” (AIIB), an initia-
tive led by the Chinese government in 2015. It is an international financial
institution with a pivotal aim to support and finance infrastructural projects
in the Asia-Pacific region.
52   L. XING

4. During the APEC Summit in Beijing in November 2014, China’s President


Xi Jinping announced that China would contribute 40 billion US dollars
to set up a Silk Road Fund at a dialog meeting on strengthening connectiv-
ity and improving cooperation in the country’s neighborhood. According
to Xi’s explanation, “the new Silk Road Fund will be used to provide
investment and financing support to carry out infrastructure, resources,
industrial cooperation, financial cooperation and other projects related to
connectivity for countries along the ‘One Belt and One Road’ initiative”
(Xinhua, May 14, 2017).
5. It is a Chinese idiomatic expression, which literally means “to hide bright-
ness, and to nourish obscurity.” The notion reflects an implicit strategic
way of thinking, namely “to be patient and to wait for a time when one is
ready to assert a big role and to make a challenge.”
6. The notion is often applied in connection with Note 3. It implies that one
is ready to strive for achievement after a period of accumulating strength.
7. The concept of “peaceful ascent” was formulated by Zheng Bijian in a series
of speeches and articles from 2002 onwards when he functioned as a spokes-
man for Chinese government viewpoints. The notion aimed to counterbal-
ance two worldwide perceptions on China—“the threat of China” and “the
collapse of China”. However, the word “ascent” (崛起) can also imply “chal-
lenge” in a revisionist manner, causing the concern led by the US-led world
order. Therefore, the term “peaceful development” is more often applied in
Chinese media and academia as a replacement of “peaceful ascent”.
8. The original concept is derived from Antonio Gramsci, who refers to the
stage of class struggle aimed at gaining positions of influence and at devel-
oping counterhegemonic forces. It is a slow, hidden and protracted strug-
gle in an attempt to seek to gain influence and power. The concept intends
to be distinguished from another notion termed by Gramsci as “war of
maneuver”, which refers to a direct, violent and immediate assault on the
state in order to gain political power (Gramsci 1971).
9. The economic success of Japan and East Asia attributes to the interplay of
many mutually related external and internal factors. It is the synergy of exter-
nal factors, such as the US security umbrella, the favorable postwar inter-
national environment, the US military aid and foreign direct investment,
correlating with internal factors, such as the role of the state, cheap labor,
export-led development policy, the role of education and cultural aspects.
10. SDR refers to Special Drawing Rights. They are supplementary foreign
exchange reserve assets defined and maintained by the International
Monetary Fund (IMF). Currently, the existing SDR currencies are the US
dollar, the euro, the British pound sterling and the Japanese yen. According
to the IMF’s recent decision, the Chinese yuan became part of the SDR
currencies as of October 2016. It is the third largest SDR currency after
the dollar, the euro, and is followed by the British pound and Japanese yen.
  UNDERSTANDING THE MULTIPLE FACETS OF CHINA’S “ONE BELT ONE…    53

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CHAPTER 3

A Framework for the Study of the One Belt


One Road Initiative as a Medium of Principle
Diffusion

Anastas Vangeli

Introduction
In recent years, and in particular after the leadership succession in 2012,
Chinese policymakers have reconceptualized Beijing’s new global role
and announced a proactive approach on the world stage (Burnay et  al.
2015; Zhang 2015). This in itself has been a surprise, as—prior to the
leadership succession in 2012—many believed that, given the domestic
concerns of China, the incoming leadership spearheaded by Xi Jinping
would not have an ambitious foreign policy. Yet,  in the words of Yan
Xuetong (Yan 2014), in the last several years China underwent a process
of transition from “keeping low profile” to “striving for achievement”.
China’s proactive approach on the global scene is shaped, of course, in
accordance with the changing circumstances and the contradictions which

A. Vangeli (*)
Graduate School for Social Research, Polish Academy of Sciences,
Warsaw, Poland

© The Author(s) 2019 57


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_3
58   A. VANGELI

emerge elsewhere. The shift in China’s global role comes at a time when
most developed countries are coping with the limitations of their own
models, a lack of competitiveness, and the eruption of mass discontent.
One of the central questions for the future trajectory of China as a
global power is whether China will successfully promote its own norms
and values, and whether they will be embraced by others. In a world with
an ever more active and relevant China, as Beeson and Li (2016) argue,
“nothing approximating global or even regional governance is no longer
possible without (its) participation and cooperation”. With the growing
number of problems experienced at home, key promoters of the hege-
monic liberal democratic normative blueprint—the US and the EU—have
backtracked in terms of their efforts to promote their values abroad
(Carothers 2015). This has turned the tables and enabled the proliferation
of non-Western, non-liberal democratic ideas of development and coop-
eration, and—in particular—opened a maneuvering space for China in the
process (Ignatieff 2014; Micklethwait and Wooldridge 2014). One of the
features of China’s new diplomacy is precisely that it is actively “offering
to the pluralistic world a non-Western alternative that features new think-
ing and practice” (Yang 2015: 7). This is, however, not an abstract phe-
nomenon, but a very concrete one: Beijing completes the “offer” by
establishing novel China-centered institutional mechanisms of interna-
tional cooperation and regional and global governance that supplement
the existing global order, while aiding China’s foreign policy core princi-
ple of “striving for achievement” (Heilmann et al. 2014).
Today, a central concept of China’s new diplomacy is the landmark
“One Belt One Road” (OBOR) initiative. It synthesizes and systematizes
a number of existing, as well as novel, foreign and domestic policies
(Pantucci 2016), and provides a focal point for China’s resources, institu-
tions, and ideas. After the OBOR International Cooperation Forum in
Beijing held in 2017, it is now clear that it is indeed a global vision that
covers not only Asia, Europe, and Africa but also Oceania and the Americas.
While the OBOR initiative has a significant political economic compo-
nent and can significantly affect the global economy and power relations,
this chapter emphasizes its potential to have a significant normative impact
as well (see Vangeli 2018b). Building upon the lessons of its own experience,
as well as highlighting the symbolic capital of the ancient Silk Roads not only
as trade routes but moreover as a historical platform for intercivilizational
dialogue and flow of ideas (Ma 2015),1 China has transformed its external
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    59

approach to state-level cooperation moving from a “business as usual” or


“no strings attached” engagement approach to one of cooperation that takes
place under a certain set of normative assumptions, which are purposefully
concerned with changing policy frameworks and governance principles (Liu
and Dunford 2016) through the OBOR initiative. These normative assump-
tions are rooted in Sinified Marxism and revolve around the ideas of state-led
economic cooperation and the sanctity of national sovereignty.
Can these normative assumptions that inform the OBOR initiative then
be promoted beyond China’s boundaries and internalized by other actors?
As seen in the existing literature, there is a common understanding that
China is indeed already changing the thinking and behavior of others.
Over the years, China’s growing economic, political, and symbolic clout
have inspired a debate on its potential to influence changes in the thinking
on and practice of governance, policymaking, and legislation around the
world. Authors have written extensively on the so-called China Model
(Zhao 2010; Breslin 2011) the Beijing Consensus (Ramo 2007; Li et al.
2010) and its diffusion (Ambrosio 2012), the tianxia model of global
governance and the Chinese concept of the world order (Godehardt
2016), and the rise (and recognition) of the “Normative Power China”
(Womack 2008; Kavalski 2013, 2014). Recently, the concept of symbolic
power was also introduced to the study of China’s new foreign policy
through a case study of the platform “16+1” (Vangeli 2018).
This chapter proposes that one approach that could offer insight into
these aspects of global China is applying theories of diffusion to the case
of OBOR. Diffusion is the process through which one adopts and adapts
the beliefs and practices of others.2 According to the diffusion perspective,
normative matrices and decisions in a given political unit are updated
based on the choices that had been previously made in different political
units elsewhere. This chapter starts from the premise that the OBOR ini-
tiative creates the conditions for a process in which normative matrices and
decisions in countries involved in the initiative are influenced by the think-
ing and practices of Chinese policymakers and intellectuals, and that this
constitutes a process of policy-principle diffusion.
By critically examining the normative setup of OBOR, the chapter out-
lines an analytical framework for the study of the OBOR initiative as a
medium of the diffusion of normative principles that serve as the ground
for developing novel governance, policy, and legislative thinking and prac-
tices outside of the hegemonic liberal democratic blueprint. OBOR is
comprised of asymmetrical relationships, where China has leverage
expressed in political, economic, and symbolic power; that China is pri-
60   A. VANGELI

marily on the normative supply side of the process, but the process itself is
at least equally driven by the demand side, as well as by misrecognition
and bounded rationality.3 In other words, key to the impact of OBOR is
not only China’s “offer” but also what regional actors make of it.
The component of OBOR formally expressed as “policy coordination”
and “mutual learning” in the official documents (National Development
and Research Commission 2015) constitutes the apparent dimension of
diffusion. At the same time, the level of the political practice of OBOR—
the creation of new venues of interaction and the process of the exchange
of ideas and deal-making—constitutes the substantial dimension of that
same process of diffusion.
Diffusion under the OBOR initiative is largely a voluntary process, one
which depends on the demand side of the interaction. The dispositions
and logic of political and intellectual elites in countries that are partners of
China in construing the OBOR vision and its implementation determine
the scopes and characters of the diffusion processes. The chapter develops
a taxonomy based on the different possibilities for the manifestations of
normative, utilitarian, and especially bounded rationality among the vari-
ous political and intellectual elites, all of which lead to different processes
and outcomes.
One of the key questions in diffusion research is whether “the goal is to
improve the understanding of diffusion itself or to use diffusion research
to explain another phenomenon” (Gilardi 2016: 8). My project belongs
to the latter group—I use the concept of diffusion to contribute to our
understanding of the OBOR initiative and the ideational complex that
underpins it. To do so, I first briefly outline the context and the main fea-
tures of OBOR in this chapter. Then, I link some of the features of OBOR
with a more general theory of diffusion. I then discuss the particularities
of principle diffusion and answer the questions “principles of what” and
“what principles” are diffused by OBOR. I close the analysis with an over-
view of the varying logic of diffusion via OBOR. The chapter is conceptu-
alized as a guideline for future studies. Aside from theoretical literature on
diffusion and secondary literature on OBOR, the insights here are
informed through an analysis of primary sources issued by the Chinese
government, media sources, as well as a number of interactions within
scholarly and “track 1.5” forums in which OBOR cooperation has been
conceptualized and analyzed.
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    61

Unpacking the OBOR Initiative


The OBOR (一带一路  - yidai yilu) initiative, also commonly known as
China’s New Silk Road (NSR – 新丝绸之路- xin sichou zhilu), is a land-
mark project of utmost priority for China’s current leadership. OBOR con-
sists of two components: the Silk Road Economic Belt (丝绸之路经济带 –
sichou zhilu jingji dai) and the Maritime Silk Road for the twenty-first
century (二十一世纪海上丝绸之路- ershiyi shiji haishang sichou zhilu),
officially announced in 2013. The OBOR initiative is a concept “with
Chinese characteristics”, meaning that it is being developed incrementally,
and with a long-term outlook, and it is a concept that demonstrates the
convergence between different foreign policy initiatives and China’s
domestic development (Vangeli 2017). Different sources have used differ-
ent terms (such as a vision, doctrine, strategy, framework, project, plan,
policy or umbrella of different domestic and foreign policies of the Chinese
government) to describe it. The Chinese government uses the word “ini-
tiative” as an official term (Berzina-Cerenkova 2016) in the document
“Vision and Actions on Jointly Building Silk Road Economic Belt and
21st-Century Maritime Silk Road”. This choice of words is not innocent:
OBOR is intended to be a Chinese “contribution” or “proposal” and is
therefore formally labeled an initiative (倡议 changyi), rather than a strat-
egy (战略 zhanlue):

Changyi 倡议 simply means a call for action, usually in the name of a public
good. It is a unilateral move that requires willing cooperation from others
who also have stakes in the provision of the public good. […] By contrast, a
strategy is a deliberate plan of actions that aim to achieve specific goals, and
these goals are usually exclusive (such as security or free trade), as opposed
to public goods, which are inclusive. (Xie 2015)

There are other conceptual concerns as well. OBOR, in terms of its


branding, extensively draws on the idea of the ancient Silk Roads, which
as Ma Junjie argues, was neither centered on silk, and nor was it a physical
road, but was rather a medium for the diffusion of ideas and innovations
across civilizations (Ma 2015). In that sense, this characteristic matters
greatly to the New Silk Road as well—it is, first and foremost, a medium
for the travel of ideas, innovations, and inspirations. Arguing a tangential
point, Wang Yiwei (2016) suggests that one should take into account the
meaning of the Chinese concept of daolu, which means a physical road
62   A. VANGELI

(lu) and also a way of practicing (dao—in this case of pursuing develop-
ment); that in the OBOR framework, “Lu is the method to realize Dao”—
meaning that physical infrastructure is central to the development
practice  (the development path) the OBOR initiative promotes (Chen
2016).
While rooted in China’s own experience, OBOR is conceptualized as
an “open-ended” and inclusive initiative, meaning that whoever accepts its
vision may become part of it. It is therefore a global initiative, even though
at the early stage of development it is primarily focused on Asia, northern
and eastern Africa, and Europe. In the process, aside from applying con-
cepts idiosyncratic to China’s development experience, Chinese policy-
makers have also applied their own taxonomies and mental maps, and (re)
constructed regions based on the country’s own convictions and
convenience.
In terms of its global orientation, OBOR was initially formulated in the
context of the post-crisis global recovery as a Chinese contribution to
efforts to alleviate the negative effects of the crisis itself. However, as
changes have occurred in the global political economy—primarily with the
rise of antiglobalist forces in the US and the UK, the beacons of liberal
democratic globalization—China has gradually assumed the role of a vocal
proponent of economic globalization. Symbolically, this transition was
marked with Xi Jinping’s speech at the World Economic Forum in Davos,
days in advance of the inauguration of the new American president Donald
Trump, a strong proponent of antiglobalism. Xi presented a vision for the
advancement of the process of economic globalization, drawing primarily
on China’s experience and achievements.
These new developments have also helped China to fine-tune the pre-
sentation of OBOR as a proposal for advancing global cooperation by
reinventing and revising some of the key tenets of economic globalization.
After all, OBOR is rooted in the normative assumption of the state-led
cooperation of sovereign nations. Developed in line with the tendency of
China’s new diplomacy to “deliberately target and address concerns and
policy gaps which could not be solved by existing international institutions
and multilateral arrangements” (Qiu 2015), OBOR has often been called
a proposal for an alternative pathway of globalization, or a Chinese vision
of globalization. Authors have referred to it as a blueprint for “inclusive
globalization”, a term originally coined by the former UN Secretary
General Kofi Annan, addressing the need for a more equitable global
order that would offer better provisions for developing countries. The
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    63

discourse on OBOR as a vision for globalization has been coupled with a


less elaborate, but more symbolically rooted discourse, in which the
OBOR initiative has been almost exclusively associated with the large
infrastructure projects that symbolize China’s growth and by now are
famous brands of China’s economic diplomacy, such as the high-speed
railways, highways, bridges, and seaports constructed, planned, or pur-
chased by China all around Europe and Asia. Infrastructure is indeed an
important tenet of OBOR, not as goal in itself but rather as part of a
broader developmental agenda that rests on the lessons of China’s own
experience (“build the roads first”).
Officially, as an institutionalized platform for international cooperation,
the OBOR initiative rests on five “priorities” or “major goals”: policy coor-
dination, facilities connectivity, unimpeded trade, financial integration, and
people-to-people relations (National Development and Research
Commission 2015). The initiative’s comprehensive approach to refashion-
ing international cooperation and aligning development agendas along the
areas of the New Silk Road, its aim of alleviating the consequences of the
global financial crisis of 2008 onward, its emphasis on the mitigation of
uneven development and inter-regional inequalities, and its intent to pro-
mote a new, inclusive way of cooperation is why some scholars have even
called it a proposal for a new type of globalization (Liu and Dunford 2016).
Its emphasis on policy coordination as a number one priority makes
OBOR a concept worth examining from a normative perspective, and par-
ticularly through the lenses of diffusion. As the Action Plan stipulates:

Enhancing policy coordination is an important guarantee for implementing


the Initiative. We should promote intergovernmental cooperation, build a
multi-level intergovernmental macro policy exchange and communication
mechanism, expand shared interests, enhance mutual political trust, and
reach new cooperation consensus. Countries along the Belt and Road may
fully coordinate their economic development strategies and policies, work
out plans and measures for regional cooperation, negotiate to solve
cooperation-related issues, and jointly provide policy support for the imple-
mentation of practical cooperation and large-scale projects. (National
Development and Research Commission 2015)

International policy coordination is crucial to the concept of global gov-


ernance and its study. It is defined as the “mutual adjustment of the inter-
ests, goals and actions of collective actors in the international system” (Busch
and Jörgens 2012). Diffusion is therefore a mode of governance, policy, and
legislation coordination. As Busch and Jörgens (2012: 224) argue:
64   A. VANGELI

Policy coordination is achieved by the fact that national governments


observe the decisions of other governments and react to these unilaterally,
without expecting other states to do the same, without centrally given rules
and without setting goals for the development of the overall system. Policy
diffusion corresponds largely to this basic logic of “partisan mutual adjust-
ment,” but constitutes a special case insofar as it comprises only imitative
behaviour. Thus, diffusion comprises all those cases of “adaptive adjust-
ment” that show a homogenizing effect.

As a phase in the interaction, diffusion is often considered a conse-


quence of economic cooperation; however, for diffusion to happen, eco-
nomic interdependence is a necessary but insufficient condition (Starke
2013). The OBOR initiative, in that sense, should be seen as raising the
stakes and transforming China’s relationships with partner countries from
mere economic cooperation to ones of a substantial normative nature.
This follows the general logic of the evolution of China’s global role, as
described by Yan Xuetong: whereas formerly China was primarily focused
on its own economic benefit and avoided showing its true capacity, after
2012 it not just openly displays its capacity but utilizes it to achieve its
desired political goals. In my chapter, however, I add that these are not
traditional political goals but rather comprehensive policy goals, whereby
politics and economics are enmeshed  and therefore cannot be analyzed
separately.
In practice, OBOR is being implemented through several types of mech-
anisms: bilateral cooperation between China and its partner countries; bilat-
eral cooperation through “multi-level and multi-channel communication
and consultation” (including innovative mechanisms such as the “16 + 1”
platform for cooperation with Central, East, and Southeast Europe); previ-
ously existing international organizations (Shanghai Cooperation
Organization, Asia-Europe Meeting); and old and new international finan-
cial institutions led by China (the ExIm Bank, the Asian Infrastructure
Investment Bank, the New Development Bank, the Silk Road Fund). Think
tanks and academic institutions and networks have been also crucial in pro-
viding intellectual input for its development. Through all of these mecha-
nisms, governance, policy, and legal innovations find a solid and coordinated
platform that provides much better conditions for their diffusion than ordi-
nary bilateral or multilateral cooperation does. While these innovations
could possibly spread independently, the OBOR initiative provides the
means to facilitate, streamline, and amplify this process.
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    65

The Concept of Diffusion


At the core of the study on diffusion lies the idea of interdependence of
trajectories of political development and an explicit rejection of the
“notion that processes of policy and political change can adequately be
understood by conceiving of national governments as making decisions
independently of each other” (Simmons et al. 2008: 7). Similar concepts
to diffusion when describing the movement of ideas and practices of gov-
ernance, policymaking, and legislation are “transfer” (Stone 2001),
“transplantation” (Peerenboom 2013), “translation” (Clarke et al. 2015),
and “dissemination”. Moreover, a myriad of mechanisms has been associ-
ated with the study of diffusion, “ranging from Bayesian learning to ratio-
nal competition through hegemonic domination to unthinking emulation
of leaders” (Simmons et al. 2008: 7). The term used in the official docu-
ments of the OBOR to describe the core concept of the initiative, “policy
coordination”, as argued above is also conducive of diffusion and some-
times used interchangeably. The selection of the term “diffusion” in this
chapter, however, is owing to the fact that it is a concept that is equidistant
to all others, allows for developing different typologies, and thereby can
be used as an umbrella concept, that has different manifestations and
mechanisms through which it takes place.
The process of diffusion is one of dynamic interaction centered on a
particular innovation (message), thereby essentially being a process of
interaction between different actors.4 Novel world views, ideas, and
approaches to governance, policymaking, and legislation as well as new
approaches to legitimizing and repacking old ideas are the innovations
being diffused; they are innovated primarily through the symbolic labor of
political and think-tank elites, and often the process of innovation itself is
a process of interaction with other actors. Particular institutions, organiza-
tions, or organization-like settings (such as OBOR) serve as platforms or
rather channels or mediums through which diffusion is facilitated. The
novelty that is central to the process of diffusion, however, does not neces-
sarily stem from the newness of the message, but rather from the fact that
now the message is seen as legitimate and desirable in the eyes of others—
or from the fact that the message is now communicated in a way that
makes it diffusible. For example, many of the ideas that shape China’s
economic policy have largely remained the same over time, but with the
OBOR initiative, they are presented in a way that makes them more
understandable to others, while being associated with China’s success
story and a global vision that is said to benefit everyone.
66   A. VANGELI

The role of political and intellectual elites and the transnational effects on
the agency of elites in (re) shaping normative blueprints and orientations is
central to the process of diffusion. Building on the seminal work of Levitsky
and Way (2006) on the role of external influence on domestic political
change, Tolstrup (2013, 2014) argues that political and other types of
national-level elites play a special gatekeeping role, which provides them the
opportunity to tune the level of linkages with global actors in order to steer
national development in a particular direction. While, in the literature across
various disciplines, authors have focused primarily on the US and the EU as
external actors who promote liberal democracy, based on the teleological
assumption of the “end of history” after the end of the Cold War, here we
adopt an “open-endedness” perspective: there are different kinds of exter-
nal influences, different ideologies, and a different direction of normative
change. National elites thus have the ability to tune the diffusion of external
ideas, in particular to choose the “role-models”, to select the specific ideas,
and to steer the direction of normative change in various directions. They
have the role of “double brokers” (Dezalay and Garth 2002)—they convert
policy practices into ideas to be discussed and presented in non-policymak-
ing settings (i.e. in think tanks or in popular media), and vice versa—they
convert domestic or external ideas into policies.
In such an approach, however, one has to account for the possibility
that different national elites (i.e. incumbents) may make different choices
based on structural predispositions at the international and national levels,
having different material resources, and having different intellectual and
ideological dispositions. Such framing is also in congruence with other
studies of diffusion, such as the one by Weyland (2007) which analyses
diffusion with regards to the cognition of policymakers and experts.
This also means taking into account Bourdieu(s)ian approaches to
global politics, and in particular to diffusion, that emphasize the role of
symbolic power, and symbolic domination, the (almost) subconscious
adaptation that results in the internalization of certain norms (Bigo 2011;
Adler-Nissen 2013). Asymmetrical institutionalized relationships are con-
ducive to symbolic domination:

the dominated in those contexts perceive and respond to the organizational


structures and processes that dominate them through modes of thought
(indeed, also of feeling) that are themselves the product of domination: the
“order of things” comes to seem to them natural, self-evident, and legiti-
mate. (Emirbayer and Johnson 2008: 31)
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    67

Thus, particular apparent and covert elements of subordination are


inbuilt in institutionalized relationships through a particular frame of ref-
erence. By repetitive practice, the world view and the language of the set-
ting for the cooperation is gradually normalized and naturalized as an
integral part of the habitus of those that are exposed to it. In essence, this
is how symbolic domination takes place. As such, it serves as a preparation
stage for the process of diffusion—once the power relations are estab-
lished in a way that the subordinate actors start speaking the language of
the dominant one, they will soon start adopting the norms and ideas of
the dominant side as well.

Appropriateness of the Diffusion Approach


to the Study of the OBOR

Aside from being rooted in the scholarly literature, the approach that
emphasizes the actors and their relationships in studying diffusion is also
in accord with the practices of developing OBOR. The initiative is concep-
tualized as being aimed toward the alignment of development agendas
and at achieving policy coordination, which comes into being through the
signing of bilateral Memoranda of Understanding between China and
partner countries. The first and foremost measure the Chinese govern-
ment foresees in the promotion of OBOR therefore is “high-level guid-
ance and facilitation” with a pronounced role for national elites (Qiu
2015). Relationships between governments, often personified by
exchanges between Chinese and foreign officials and scholars have been
central in the development of China’s global relations, and play an impor-
tant role in the Chinese concepts of the global order. This logic of rela-
tionships is different from the depersonalized, rules-based logic of norms
typical for global players such as the EU (Kavalski 2013). The most impor-
tant implication of this is that while certain general rules exist, Chinese
policymakers try to tailor a unique approach based not only on their coun-
terpart’s objective conditions but also on the quality of their mutual rela-
tionship, which is also a goal worthy of being pursued in itself.
Political elites, as well as the think-tank elites who advise them and play a
role in the ideational grounding of OBOR, have a pronounced role in what
is known as “people-to-people exchange” in the Chinese discourse.5
Promoting “track 1.5” diplomacy, and the exchanges between mixed dele-
gations with participants both from government and think tanks (most often
68   A. VANGELI

official state-affiliated think tanks), has been one way to create so-called con-
tact zones that facilitate the diffusion of ideas.6 Indeed, think tanks play an
important part in China’s foreign policy (Shambaugh 2002; Jakobson and
Knox 2010), and this role has been amplified since 2012 (Menegazzi 2014).
Today they are perceived as being institutions at the intersection between the
political and intellectual elites in China. New think tank and expert associa-
tions that facilitate exchange of ideas, such as the Silk Road Think Tank
Association or the 16  +  1 Think Tank Network have been established in
recent years. The significant involvement of think-tank elites (or “intellec-
tual” elites) also matters for the processes of diffusion, as in the OBOR
framework they have particular venues to discuss existing ideas and conceive
new concepts, and at the same time, interact and potentially influence (or be
influenced by) policymakers, thus performing the role of double brokerage.
As a new type of institutionalized, organization-like international plat-
form, OBOR promotes a rather loose and voluntary mode of cooperation.
The partner countries all agree to the shared vision, the commitments to
OBOR, but in general, the level of interaction with China varies across
cases following the above-mentioned logic of relationships. At the same
time, the OBOR initiative does not foresee any explicit conditionality or
coercion mechanisms to ensure a certain normative blueprint is imple-
mented by the partner countries, even though, in theory, China has instru-
ments for pressuring others if it decides to, given that OBOR is
predominantly financed with loans made by Chinese or Chinese-led finan-
cial institutions. Nevertheless, the absence of explicit conditionality is why
the concept of diffusion is more appropriate than concepts of coercion or
the imposition of a certain world view.
Diffusion is a process that occurs at the intersection between the
national and international domains. OBOR, one must not forget, acts as
an extension of China’s Western development program and is a way of
engaging Western regions and provinces, and upgrading part of China’s
production capacity toward a more complex economy. However, in order
to understand the demand side of diffusion, the national contexts of part-
ner countries also matter. The countries that are so far involved in OBOR
have different characteristics in terms of their level of economic develop-
ment and complexity, type of political system, level of political stability, as
well as across the size of their territory, population, and economy—how-
ever the majority of them happen to be countries that have not greatly
benefited from neoliberal globalization. At the same time, while for many
countries there are some generally assumed benefits such as the flow of
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    69

capital, the improvement of infrastructure, and the boosting of interna-


tional status, there are many region- and country-specific features, as well
as features that may be seen as potential benefits by certain political actors,
but not by others even within the same country, or even within the same
party/institution, as this is the basis of policy dialogue. With the emphasis
on local cooperation, likewise, OBOR may be seen differently by different
levels/branches of the government. Through their continuous engage-
ment within the initiative, the representatives of participant countries are
directly exposed to the dominant discourse and logic presented by their
Chinese counterparts, which interacts with their own dispositions and
practices. Structural predispositions (such as the asymmetry in a given
moment), the level of linkages and leverages, the degree of political will,
as well as the individual characteristics of potential adopters determine to
what extent and how this interaction transforms into a process of
diffusion.
Putting China at the center of the diffusion processes as a main source
of inspiration and a main coordinator of OBOR implies that all of the
interactions, and in particular those of diffusion, occur primarily by China
influencing others. Hypothetically, however, elites from other countries
that partake in the initiative’s cooperation may also influence each other,
and individually stimulate the diffusion processes. Similarly, other coun-
tries may even influence China and inspire a diffusion process in the oppo-
site direction. In fact, in the case of China, experimentation (Heilmann
2008) and lesson-drawing from abroad have been crucial for the norma-
tive evolution of the Chinese Communist Party (Shambaugh 2009).
“Mutual learning”, which also includes the possibility of diffusion from
the outside into China, is one of the frequent themes of OBOR in the
official texts of the Chinese government, which plays into these possibili-
ties (National Development and Research Commission 2015). However,
notwithstanding these potential scenarios, the crucial diffusion processes,
however, do follow the direction from China toward everyone else.

The OBOR Initiative and Principle Diffusion


In the section above, the chapter has specified the actors and the directions
of the flows of the process of diffusion via OBOR, and in this section, I
discuss the object of diffusion. Diffusion can occur as a by-product of
ideological debates, policy proposals, legislation, and political outcomes at
70   A. VANGELI

home and abroad. In a more detailed division, the objects of diffusion can
include “(i) policies, (ii) institutions, (iii) ideologies or justifications, (iv)
attitudes and ideas, and (v) negative lessons” (Stone 2001).
A more collapsed approach divides the objects into two categories:
model diffusion and principle diffusion (Weyland 2007). The term
“model” here does not reflect a national development model, but rather a
concrete policy that is championed by one government, and later on dif-
fused among others. Model diffusion is the process of the “wavelike spread
of a compact policy model” (Weyland 2007) whereby the emulators
import a neat, concrete, well-defined blueprint, and the outcome largely
replicates the original model. The innovation spreads in a rapidly expand-
ing wave that sweeps across whole regions of the world. In reality, model
diffusion is less likely to happen, but it has gained a lot of attention in the
literature, as almost all studies on policy diffusion are studies of the diffu-
sion of certain models. Principle diffusion, on the other hand, happens
when there is an emulation of a new guideline, but it is enacted in various
concrete incarnations; the outcome is that there is a recognizable wave of
reforms, but specific design features and institutional characteristics differ:
the pattern of change is not as profound and uniform. This type of diffu-
sion is more common in practice. However, it is less researched in the
literature.
It is important to say that such an approach to model versus principle
diffusion transcends the rhetoric of the so-called China Model. The
common-sense assumption in the study of China as a source of diffusion
is that what diffuses is the so-called China Model, where the object is a
comprehensive national model of development. Authors have theorized
the possible diffusion of the China Model (Ambrosio 2012) and have
pointed to OBOR as a platform for the “exporting of the China Model”
(Fukuyama 2016). However, a number of interlocutors from China have
stipulated that firstly, it is very hard to define the China Model, and sec-
ondly, even if we take it for granted, it is still an outcome of China’s par-
ticular historical, cultural, and societal context which is impossible to copy.
One inference, therefore, is that instead of copying China or anyone else,
policymakers elsewhere should themselves seek to design the models that
would be most adequate for their own circumstances.
The principle diffusion approach corresponds better to the case of the
OBOR initiative which discusses principles and foundations, but no spe-
cific measures; it is closer to the logic of the initiator (China) which
emphasizes the inability of concrete policy and legislative blueprints to be
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copy-pasted and encourages tailor-made solutions, and the logic of a


loose, asymmetric constellation such as OBOR where interaction and the
logic of relationships has primacy over rules, regulations, and institutional
procedures. In this sense, a principle is a discursive construct that serves as
a “general guideline for designing programs or institutions” and “provides
a broad orientation for policy-makers that encompasses several specific
design options”, but no “specific course of action” (Weyland 2007: 8).
Moreover, in practice, principles (e.g. “sovereignty-first”) are more likely
to be diffused than models (e.g. “China’s diplomacy reform” or “Foreign
Trade Law of the People’s Republic of China”). This choice, however, is
only made for methodological reasons, and does not imply that potential
policy models of some sort cannot be diffused via OBOR.
Having laid out the contours of the initiative as a medium of principle
diffusion, we now turn to the specific questions: to what normative set do
the principles underpinning OBOR belong, and what are those particular
principles?

Principles of What?
The principles diffused via OBOR are identifiable in the initiative’s core
documents and the practices associated with its conceptualization, imple-
mentation, and promotion—which means that they are principles that are
found, first and foremost, in Chinese policymaking and legislation.
However, rather than being associated with what we call the China Model
or the Beijing Consensus, they are better understood if it is taken into
account that, once they become the object of diffusion, they are not exclu-
sively Chinese and so carry a certain level of generalizability, that even
throughout the process they may be translated and thus adjusted to local
contexts, cultures, and practices (Clarke et al. 2015). Yet, policy principles
lie on a particular normative plane that has its own logic and taxonomy,
which transcends the national and cultural contexts of their practice.
In linking OBOR as a product of China’s new foreign policy orienta-
tion to a particular normative matrix, I build upon the work of Alvin Y. So
and Yin-wah Chu (2012, 2015; also see Chu and So 2010), who coined
the purposefully self-contradicting term “state neoliberalism” to describe
the normative grounding of China’s governance, policymaking, and legis-
lation. Taking into account the logic of Chinese Marxism in thinking and
policymaking, the self-contradiction here aims to capture the reality that
divergent—if not theoretically opposing—tendencies in practice not only
72   A. VANGELI

do not exclude each other (either/or), but are even in some ways mutually
complementary (both/and). The term “state neoliberalism” thus aims to
translate the idea of dialectics between market and state, or even the con-
cept of “socialism with Chinese characteristics” based on the idea of creat-
ing the optimal conditions for unleashing productive forces into the
non-Marxist terminology of Western social science. At the heart of the
concept of state neoliberalism is the contradiction, as well as the comple-
mentarity, between the neoliberalization of the development agenda on
one hand, and the supreme role of the political elite in the economy of the
other, and the “ongoing process of policy ebbs and flows between market-
oriented and state-oriented policies” (So and Chu 2015).
As a particular normative matrix, “state neoliberalism” is a more spe-
cific concept than the otherwise vague term “state capitalism” since it
encompasses not only the mode of production and distribution but also
the particular neoliberal governmentality, or rather political technology,
built into the web of laws, policies, and official discourses (Ong 2012). It
is distinct from the “developmental state”, as the state does not simply
subject the market to state guidance, but rather plays an active role in its
creation and maintenance. The main distinction between state neoliberal-
ism and market neoliberalism is that, in the latter, neoliberalism is “a class
project by capitalists to fight high taxation, regulation and redistribution”,
as well as national boundaries of capital through a “shift from state domi-
nation to market domination”, and as such it is an ideological product of
developed Western contexts (So and Chu 2015). In state neoliberalism,
however, the political elite are in the “driver’s seat” in the economy and
utilize the neoliberal agenda to build legitimacy and sustain their rule
through economic performance, and by embedding the national economy
in global capitalism, making foreign actors stakeholders in their survival.
By the same token, state neoliberalism is distinct from the neoliberalism
introduced in the post-socialist countries of Central-Eastern Europe after
1989 (which are often compared to China in terms of their reform trajec-
tory). Aside from these countries dedicatedly following the Washington
Consensus, and China for the most part rejecting it, the goal of the neo-
liberalization in transitional countries was dismantling the communist
party-state and removing former elites from power; in China the goal of
neoliberalization, in particular after Deng Xiaoping’s Southern Tour, was
for the party-state to survive and become stronger, but also to advance its
interlinking with foreign actors so that they have interest in a stable China.
State neoliberalism is, in essence, an etatist, sovereigntist concept. It
assumes a strong-armed state, prioritizes political stability, and discourages
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external pressures for socio-economic reform. In terms of political devel-


opment, it is characterized by the hegemonic rule of a dominant political
party, which enables it to establish control over the state and the regula-
tory institutions. In terms of economic and social policy and legislation,
state neoliberalism is characterized by an uneasy agenda. The advance-
ment of neoliberalization is often complicated by ambiguity, contradic-
tions, and reversals in terms of both rhetoric and practice. These
complications, however, are functional in nature: they serve, for example,
to prevent or dilute social conflicts that can damage the political status
quo, or help the ruling party and the state to align with the currents in
global capitalism without weakening their positions. In terms of foreign
policy, state neoliberalism is characterized by an adherence to national
sovereignty and attempts to renegotiate the responsibilities of the state in
global affairs, in light of evolving national interests and in the name of the
democratization of international relations, while pursuing economic
nationalist trade policy which—based on the national circumstances—can
be pro free trade or protectionist.
Outside of China, elements of state neoliberalism are found in most
East Asian tiger economies, and in particular in Singapore (itself consid-
ered an inspiration for Chinese policymakers), but also in most of the post-
socialist states in Asia and Europe, including both Russia and the
Central-East European and Southeast European countries, often dubbed
illiberal democracies or hybrid regimes. Discussing the various forms of
capitalism and the relationship between the political elites and the market
during and after state socialism, Ivan Szelényi has discussed several possi-
ble pathways and trajectories of change and convergence—“capitalism
from the outside”, “capitalism from above”, “capitalism from below”
(Szelényi 2015), as well as neopatrimonialism and (neo)prebendalism,
which make these countries very fertile ground for the diffusion of the
principles of state neoliberalism (Szelényi and Csillag 2015). State neolib-
eralism, however, as a model born out of the backlash against market neo-
liberalism, is taking root in the West too, the most prominent example
being the new American administration under Donald Trump.7

What Principles?
Just as the China Model cannot diffuse as a comprehensive model of
development, neither can state neoliberalism diffuse as a wholesale ideo-
logical package. Principle diffusion works sequentially—first, some prin-
74   A. VANGELI

ciples are diffused, and then others follow. Through the OBOR initiative,
certain principles of state neoliberalism upon which the initiative rests
come to the forefront and are more likely to be diffused than others.

Sovereignty-First  The most basic normative point of OBOR is that it


“upholds the Five Principles of Peaceful Coexistence”.8 This is a general
reflection of China’s foreign policy, which has consistently repeated its
commitment to peaceful coexistence for 60 years. By doing so, Beijing has
become an important guardian of the idea of a global order in which there
are countries with different, non-liberal democratic outlooks whose differ-
ence can be recognized and accepted as legitimate (Nathan 2015). The
centrality of the set of sovereignty-first principles thus implies a recognition
of the right of every state to pursue its own “path of national development”
and to practice its own national “policy rights” (Li et al. 2010). This is also
accompanied by an implicit and sometimes explicit rejection of what is
considered “universal values” in the West (Bradford and Posner 2011).
The sovereignty-first principle is also compatible with what some interlocu-
tors have deemed the “diversification of political systems” and with coun-
tries proclaiming their own national development “models”. This also
could go hand in hand with nationalist, nativist, and anticolonial discourses,
with the goal of stating that no nation is morally superior to others.

Adjacent to the sovereignty-first principle is the principle of non-


interventionism abroad, or rather the respect of others’ sovereignty. This
has several implications. First, in terms of official contact, there is a strong
preference for official, state-controlled channels (and state-framed dis-
course) of communication, even in areas such as “cultural cooperation” or
“people-to-people contact” that are part of OBOR.  Second, the “non-
intervention” principle implies that cooperation, in particular in terms of
economic and cultural exchange, is to be developed regardless of each
party’s domestic circumstances. In other words, the determinants of coop-
eration are blind to moral concerns—every sovereign state, regardless of
its political system, is a potential partner and is to be judged solely through
the lens of the cooperation itself and not by moral standards.
The underlying logic of this, however, is not political, but economic.
OBOR is an initiative for state-led economic cooperation. The role of
state in the economy, and in international economic cooperation has been
greatly constrained by the present hegemonic models of global gover-
nance. In order for the states to be able to act as key economic actors, and
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to steer balance with market forces, they have to retain a high degree of
sovereignty and immunity from other states and international organiza-
tions for doing so.

Rule-by-law  The OBOR Action Plan speaks of law enforcement, and the
lawful rights and interests of investors, but does not mention the rule of
law or legal frameworks. This potentially reflects a functional understand-
ing of the law, whereby the law is a means in the hands of the authority
through which they govern (rule-by-law instead of rule of law, which
touches upon the ambiguity of the Chinese concepts 法制 and 法治  –
both pronounced fazhi) (Castellucci 2007). Law, in this sense, which
approximates to 法制, is the moral expression of political power. It is not
an outcome of proactive law-making, but rather a reactive one: it is not a
prescription of an ideal model, but rather the transcription of an already
existing reality. As such, it is devised only after a political framework has
been set. This, however, does not mean that laws are not enforced or that
they are ignored. The intensity and scope of law enforcement can also be
a matter of fine-tuning, and can vary from a selective manner of enforce-
ment to a thorough and consistent one.

In an international context, rule-by-law means a pragmatic, case-by-


case approach. In dealing with international partners and in devising eco-
nomic cooperation, law can be sidelined on account of the quality of
relationships between the different partners. Cultural and political disposi-
tions, as well as material interests, matter more than the law in making a
partnership work; when a legal obstacle exists, the law is amended. This
can play both a facilitating and impeding role in developing cooperation
via OBOR—on the one hand, elites who internalize such an understand-
ing of the law could distort legal terms in order to increase their benefit;
on the other hand, unsystematic application can weaken accountability,
leading to potential breaches, which could create a lack of legal mecha-
nisms for solving any disputes that arise, which would mean that the solu-
tions would be left to politics.
Another aspect of this is OBOR will also be advanced with a reliance on
special legislation (lex specialis), especially in countries where existing legal
frameworks are not fit for state-led economic cooperation. Special legal
instruments that override general laws can be utilized to pass economic or
other types of cooperation, through parliament or executive power, through
76   A. VANGELI

the justification of national interests or special priority. So far, this has been
the case with many Chinese-financed projects in all parts of the world.

“Flexible Means (to a Common End)”  This principle, besides that of


rule-by-law, was originally identified in an attempt to define the principles
of the so-called Beijing Consensus (Li et al. 2010). It denotes the practice
of pursuing a pragmatic, flexible, and incremental step-by-step reform,
often in an unconventional way, with a lot of experimentation and impro-
visation along the way—without ever reaching a concrete policy model,
but rather fulfilling common visions of prosperity. Elites, in this respect,
while guided by an ideal shared across countries, promote ambiguous and
possibly contradictory social and economic policies, depending on struc-
tural pressures, their interests, and the domestic as well as international
political contexts.

This principle reflects the neoliberal in state neoliberalism and the par-
ticular mentality or “particular political technology that actively seeks to
create optimal conditions for entrepreneurial activities” (Ong 2012).
Instrumental here is the use of “exceptions”—at one time, a particular rul-
ing elite may have an approach that seems to deregulate some sectors of
the economy, and (re)regulate others; it can overall regulate a number of
areas, but then create Special Economic Zones (SEZs) as spaces of excep-
tion. It may abruptly reverse its own policies, or disrupt policy sequences.
The only constant in the policymaking and legislation process is the pro-
nounced role of the state and its capacity to assert its will and to create
exceptions, regardless of the direction of reforms at a certain point in time.
This principle is visible in both the letter and the practice of OBOR, as it
heavily promotes the logic of exceptions and flexible means in pursuit of a
common vision, and it promotes the creation of SEZs.9 The SEZs also
combine the “flexible means” principle with that of rule-by-law, as they are
framed as a “way of resolving and overcoming differences” rooted in con-
flicting legal frameworks and cultures (Vasiliev and Shmigelskaia 2016).

Priority of Growth and Stability  In state neoliberal polities, the ideo-


logical mediation of “material realities such as ‘economic performance’
and ‘economic crisis’” is a way of establishing political hegemony, legiti-
mizing one’s rule, and manufacturing public consent (Sim 2006). In order
to maintain the capacity to steer the economic agenda toward success,
sometimes even arbitrarily, a ruling elite requires a dominant, uncontested
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    77

position in the political arena, regardless of whether or not political com-


petition is allowed. All forms of counterhegemonic discourse, be it in the
realm of politics or society, are thus taken not only to be threatening to the
incumbents, but to be bringing into question the prospects for growth,
and thereby social well-being. Therefore, the legitimization strategy of
regimes and ruling elites in such polities—which include China and much
of Asia, including the post-Soviet states—is often built around the idea of
a trade-off between political rights and economic security (Ahrens et al.
2015). In other words, the state neoliberal project tends to be inclined
toward authoritarianism or “democracy with adjectives” (such as sover-
eign democracy, managed democracy, consultative democracy, democratic
centralism, or illiberal democracy, whereby the use of the term “illiberal”
is not meant to be derogatory), as it prioritizes economic performance and
political stability. This does not mean that state neoliberalism is essentially
opposed to the idea of democracy; however, unlike market neoliberalism,
it is ready to sacrifice it to ensure stability.

OBOR itself is a platform that disregards the question of democracy and


democratization as defined and enshrined as a guiding principle by the West
and in many indirect ways challenges it. For instance, insights from the
primary mechanism to be “fully used” for its implementation, the Shanghai
Cooperation Organization, have so far served as coordination platforms to
circumvent the values of liberal democracy, fend off external (and domestic)
regime change attempts, and to legitimize non-Western types of political
order in Eurasia (Ambrosio 2008; Cooley 2009, 2015). Authors have
already explored the link between OBOR and the notion of the “promo-
tion of autocracy”, although, similarly to this chapter, they have argued that
whatever values are promoted or diffused via the initiative, the main char-
acteristic of the process is its novelty (Bryant and Chou 2016).

The Logic of Diffusion Via the OBOR Initiative


While OBOR is not a top-down hierarchical structure, it is also not truly
a horizontal one, as it does not occur in a relationship of equals nor
through a decentralized network. The relationships between actors in the
context of the initiative are thus asymmetrical given the size, clout, and
resources that are self-evident when one compares China to other partici-
pant countries. One particular asymmetry at the core of OBOR is in terms
of symbolic power, or the power of recognition, which also provides the
78   A. VANGELI

capacity to shape discourses and set paradigms. Utilizing its resources,


China institutionalizes a myriad of asymmetrical relationships, thereby
establishing OBOR as a “structuring structure” that silently creates a
dominant code of communication and practices.10 Thus by projecting
China’s symbolic power, Chinese policymakers and experts are the only
legitimate “spokespersons” for OBOR, and the initiative can only develop
through their own discourse and practice.11 Diffusion through OBOR
thus represents a particular type of asymmetrical, multilateral relationship,
with China at the center and the adopters revolving around it.
Diffusion via OBOR is thus driven by China’s particular global vision,
by providing an institutional setting for new practices of international
cooperation, and by incentivizing rather than pushing others into taking
part in the process. As argued above, participation in the platform is nomi-
nally voluntary, within the limits of one’s economic rationale to reject
China’s proposals. The process of diffusion is asymmetrical, but non-
coercive, as there is no conditionality imposed by China on the others.
This is what makes the diffusion through OBOR a process distinct from,
for example, the diffusion through the process of cooperation with the
International Monetary Fund, the World Bank, or the diffusion through
being a member, candidate, or associate country of the European Union.
However, the question we need to answer before proceeding further is, if
not an authoritative “stick and carrot” behavior, what motivates the diffu-
sion of the OBOR? In answering this question, we need to take into
account the fact that not all actors involved in the process share the same
predispositions, motivations, and courses of action.
Important insights regarding the logic of diffusion can be found in the
work of Börzel and Risse (2009), who discuss two dimensions of diffused
innovations: a cognitive and a normative one. The cognitive dimension
refers to the “causal beliefs and knowledge” on how the world works,
while the normative dimension refers to “principled beliefs or norms” that
are shared by a particular community of practice and grounded in an
assumed identification. Defined like this, the object of diffusion is interde-
pendent with the logic of the process of diffusion, but also with the actors
involved in the process and their predispositions. The former “cognitive”
dimension refers to a rather pragmatic or rational choice aspect of politics
and policy—while an idea can be diffused due to its effectiveness in deal-
ing with particular challenges or its proven success elsewhere, it can also
be diffused because of certain external impulses (incentives or conditional-
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    79

ity). The latter “normative” dimension refers to ideas promoted and per-
ceived as legitimate.
In a similar fashion, Heinze (2011) provides a twofold explanation.
One path of understanding diffusion is the “rationalist” or “instrumental-
ist” one—to which the “material preferences, interests, and desires” of the
actors involved are central. This rationalist-instrumentalist explanation
assumes that policymakers are utility-maximizing, goal-oriented agents
who make certain pragmatic policy choices that better serve their own
predefined goals. Another way of analyzing diffusion is through the “con-
structivist” lens, which assumes actors’ interests are “constituted by social
expectations, values, and rule-driven behaviour”. According to this per-
spective, actors adopt innovations based on moral and situational interpre-
tations, where context, justification, and ideology play the key roles, with
less emphasis on actual outcomes.
Following this approach, one can argue that the principles of state neo-
liberalism as an innovation diffused through OBOR have a particular
appeal for those who consider alternative approaches, and who consider,
in the first place, that the hegemonic blueprint of market neoliberalism is
(a) ineffective, and/or (b) morally unjust. The crisis in and the  relative
decline of the West has also encouraged actors who rejected the post-1989
consensus to use the opportunity to look outside of the West for inspira-
tion. This essentially is the normative-constructivist logic of diffusion
through OBOR.  However, at the end of the day, policymakers have to
answer a concrete question: what policy approach is most efficient? If the
goals are growth, stability, and the pursuit of sovereignty, then one can
find answers in Chinese practice. This would be the basis of the rationalist
logic of diffusion through OBOR.
These two dimensions of diffusion, however, assume that actors behave
in an ideal-type way (they are smart, well-informed, responsible, etc.), and
that they have sufficient resources on their side to help them make
informed decisions. The normative-constructivist logic presupposes that
actors also have a rather solid set of normative convictions that they follow.
The rationalist-instrumentalist logic presupposes a well-informed and,
overall, very rational pragmatic reasoning on the efficiency of policies.
One blind spot of these two approaches is the power-centered, interest-
driven, and often corruptible nature of policymaking processes. Regarding
the former, it is useful to invoke the suggestion by Bremmer that “political
leaders looking to build wealth and micromanage markets” are particu-
larly interested in China-inspired policy innovations (Bremmer 2013).
80   A. VANGELI

This is, in a way, a subcategory of the rational-instrumentalist logic, which


has a pronounced utilitarian element, as efficiency here is not measured
through a benefit to the public, but through the possibility of a benefit to
the elite.
Another blind spot is the potentially haphazard, somewhat unprofes-
sional, or, simply, human element of practicing politics.12 This is an
approach that argues that, more often than not, elites are neither too
rational or in possession of sufficient resources nor are they guided by
strong normative convictions when it comes to processing external
impulses that may lead to diffusion (Weyland 2007). This means that, in
their external interactions, elites could be rather complacent (not actively
seeking sources of inspiration, but once a proper impulse appears, they
react), they have sometimes imperfect and uncritical understanding of the
matters at stake (sometimes because of an obvious lack of resources and
knowledge), or, simply, somewhat unconsciously internalize dominant
discourses served to them by actors with an exceptional level of symbolic
power, through repeated practices of interaction within a particular frame-
work. As a result, they display tendencies to simplify complexities, general-
ize from a small sample size of outcomes, jump on the bandwagon, and
possibly to execute the innovation poorly. Such a reading is closer to the
assumption of mimetic theories of politics and society. The logic of diffu-
sion here is one that approximates the concepts of “bounded rationality”
and Bourde(s)ian symbolic domination in cases where there is an uninten-
tional or even subconscious internalization.13

Concluding Remarks
The global role of contemporary China is shaped by several contradictions.
In the last four decades, China has become an economic giant and has
achieved an economic growth that many consider “miraculous” but, at the
same time, China is threatened by an economic slowdown as a result of an
adjustment toward its new circumstances (or what analysts call the “new
normal”), making its policymakers pursue new ways of sustaining China’s
growth ever more vigorously. China’s success so far has been greatly owing
to its ability to gain from a Western-led market neoliberal global order, yet
China has been actively working on amending the very same order it ben-
efited from. China champions global trade, calls for a “community of
shared destiny”, and sees its own fate as interlinked and interdependent
with the fate of the rest of the world, but at the same time it insists on
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    81

upholding national sovereignty and negates the existence of a universal


system of values and universal blueprints of development as defined in the
West. While upholding a strict ideal of non-interference, China does grow-
ingly promote a discourse of leading by example, and argues that socialism
with Chinese characteristics now offers wisdom and solutions to problems
not only in China but in other countries as well. Cumulatively, despite the
perpetuation of the image of China as internally troubled in the last few
years, the perception of China as ever more relevant outside its own borders
increases in different corners of the globe.
Contradictions can lead to different outcomes—they can amplify or
extinguish effects, when different social forces contradict one another.
When it comes to China’s foreign policy, authors have historically argued
that some of the above-mentioned—and other—contradictions have had
the effect of constraining China’s global role (Wu 2001). Nowadays, how-
ever, these contradictions produce different outcomes, as instead of a con-
straint they act as an opportunity for making crucial advancements toward
the proclaimed goal of national renewal.
Essentially, the OBOR initiative is a concept that is a direct outcome of
the above listed contradictions: it is an effort that both capitalizes on
China’s four-decade long growth and also provides the necessary impetus
for a new round of reform and opening up. As a medium of principle dif-
fusion, it is also a self-contradicting concept that is both inside and outside
of the hegemonic market neoliberalism, seeking a way to advance state-led
cooperation—but with the end goal of advancing the world market.
Respecting national sovereignty and the choice of development path,
OBOR at the same time facilitates norms, ideas, and principles of policy-
making that have the potential to affect the behavior of others and alter
their trajectory.
Discussing its potential to change the global landscape, Francis
Fukuyama argued that, because of OBOR, “the whole of Eurasia, from
Indonesia to Poland will be transformed in the coming generation”. He
goes on to argue that “China’s model will blossom outside of China [a]nd
China’s form of authoritarian government will gain immense prestige,
implying a large negative effect on democracy worldwide” (Fukuyama
2016). By providing a comprehensive theoretical framework for under-
standing OBOR as a medium of the diffusion of principles of state neolib-
eralism, in some ways my chapter reiterates the assessment that the
consequences of China’s OBOR is not only an immediate economic and
political gain for China and/or its partner countries but also the reshaping
82   A. VANGELI

of the world order in subtle, inconspicuous ways. Instead of a normative


battle inside existing mechanisms and institutions, China circumvents the
potential conflict zones with “major powers” by establishing contact zones
with less powerful actors in the form of parallel mechanisms and institu-
tions of cooperation, of which OBOR is crucial.
This having been said, it is important to note that predictions such as
Fukuyama’s contain hyperbolic elements. Even if the diffusion of princi-
ples of state neoliberalism through the OBOR initiative picks up intensity,
this does not mean that these principles are going to one day fully replace
or marginalize those of Western-style liberal democracy. Diffusion of prin-
ciples does not necessarily have to be part of a zero-sum game that ends
with “China replacing (or being sidelined by) the West” as a dominant
normative power. The OBOR initiative, moreover, has a twofold and
somewhat contradictory nature: on the one hand, it is oriented toward the
same goals as initiatives pursued by the major global actors such as the US
and the EU—that is, to advance the world market (OBOR is officially
framed as “an ambitious economic vision of the opening-up of and coop-
eration among the countries along the Belt and Road”),14 while, on the
other hand, being a brainchild of the Chinese leadership, it belongs to a
context that is not only distinctive, but its normative foundations are in
many ways at odds with the Western hegemonic ones. This ambiguous
and contradictory context of the initiative thus reflects the very role China
plays in the world today, which can be described as neither strengthening
the hegemonic order nor subverting it. I therefore propose a more modest
formulation of merely “altering the trajectories of change” and contribut-
ing to a process that Chinese scholars dub the “diversification” of gover-
nance, policymaking, and legislation paradigms. This, however, does
presuppose some weakening of the leverage and the appeal of Western
blueprints in the regions along OBOR and beyond, and the emergence of
global pluralism in terms of approaches to governance, policymaking, and
legislation (Beeson and Li 2016).
Importantly, China does not always have to actively promote an idea
for it to be diffused via OBOR. The initiative can also be a platform for
“non-relational” mechanisms, or through processes of spurious diffu-
sion.15 However, creating new China-centered institutionalized channels
of communication certainly facilitates the process. Likewise, China may
not have a direct interest in diffusing state neoliberalism abroad but, in a
world that demands new ideas, China gains legitimacy and neutralizes
external normative influences. Yet, at the end of the day, political and
  A FRAMEWORK FOR THE STUDY OF THE ONE BELT ONE ROAD INITIATIVE…    83

intellectual elites of partner countries whose beliefs, rationality, (self)inter-


ests, (mis)recognition of what they see abroad, and their internalization of
the “spirit” of the OBOR initiative as a form of cooperation are some of
the overlooked driving forces of the process of diffusion.
What will the state of global governance in the years to come then be,
provided that China maintains the same pace of promotion of the OBOR?
For one, there will certainly be a weakening of the so-called Washington
Consensus and the proliferation of various versions of state-led economic
models, many of them rooted in the matrix of state neoliberalism.
Economic development driven by political will and geoeconomic planning
will flourish in the regions involved in OBOR, but also in places where
actors will want to compete with the Chinese vision (currently there is a
contemplation of a joint Indo-Japanese initiative for cooperation with
Africa). There will be a proliferation of projects and modes of cooperation
that transcends legal frameworks—in the form of Special Economic Zones,
or projects carried by special legislation. Last but not the least, the ideal
of state-led economic development will gain priority and will become the
main source of legitimacy, significantly diminishing the relevance of the
Washington Consensus.

Acknowledgments  The author would like to thank the ZEIT-Stiftung Ebelin


und Gerd Bucerius for the support of their work in the period 2015–2018.

Notes
1. It is also important to note that the concept of the ancient Silk Road is
itself a construct as well, dating to the work of nineteenth-century Western
European scholars.
2. Some relevant works on diffusion are those by Simmons, Dobbin and
Garrett (2008), by Ambrosio (2010), Gilardi (2010, 2013).
3. The supply-demand interaction in terms of the logic of legal transplants
has been discussed in Peerenboom (2013).
4. A particular work that has popularized the concept of diffusion is one by
Rogers (2003).
5. This concept was discussed at great lengths by Liu Zuokui (2015).
6. The concept of the “contact zone” was first developed by Pratt (1991). It
was introduced in policy translation studies by Lendvai and Stubbs in
Clarke et al. (2015).
7. On Trump and “national neoliberalism”, see Breger Bush (2016). On
Trump, neoliberalism and China, see Lagerkvist (2016).
8. Those are mutual respect for each other’s sovereignty and territorial integ-
rity, mutual non-aggression, mutual non-interference in each other’s inter-
84   A. VANGELI

nal affairs, equality and mutual benefit, and peaceful coexistence. For a
critical overview, see Panda (2016).
9. SEZs are explicitly mentioned in the Action Plan on the OBOR initiative.
10. For the effects of symbolic power and processes of symbolic domination,
see (Bourdieu 1989, 2000).
11. For the concept of “spokesperson” and “charisma” in international affairs,
see Williams (2013).
12. Or, what has emerged in a discussion with a former European diplomat
—“the variable of vanity.”
13. For a discussion on the link between bounded rationality and Bourdieu(s)
ian sociology, see Collet (2009).
14. National Development and Research Commission, “Vision and Actions on
Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk
Road.”
15. For “non-relational diffusion”, see Tarrow (2010); for “spurious diffu-
sion”, see Gilardi (2003).

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CHAPTER 4

The One Belt One Road Initiative


and China’s Multilayered Multilateralism

Feng Yuan

Introduction
The second decade of the twenty-first century seems to have witnessed an
acceleration of world order change. The successful election of Donald
Trump as president of the US and the rise of populism have caused the
world order after the Cold War to become even more unclear. With the
rise of China and its possibility of becoming a new hegemon, the conflict
between different actors has appeared in many aspects of the international
community, but especially in institution building.
As indicated in Chap. 1, the One Belt One Road initiative (the OBOR
initiative in the following) represents the capitalist world system’s new
round of capital and production relocation, which will dialectically enlarge/
reduce the “room for maneuver” and increase/decrease the “upward
mobility” of the countries and regions along the Belt and Road. In this

F. Yuan (*)
Institut d’études Européennes (IEE), Université Libre de Bruxelles,
Brussles, Belgium
Chahar Institute, Beijing, China
e-mail: Yuan.Feng@ulb.ac.be

© The Author(s) 2019 91


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_4
92   F. YUAN

sense, the OBOR initiative has been one of China’s most important foreign
policy strategies since Xi Jinping became Chinese president. China has
deployed many political and economic resources to promote this ­initiative.
Within the context of the newly elected US president’s decision to drop the
Trans-Pacific Partnership (TPP) project, the process of regional economic
order led by the US is currently at a halt. In this context, the OBOR initia-
tive might obtain more opportunities and room to develop. However, one
of its most critical functions is to construct a new set of institutions to sup-
port a new set of ideas and norms for the new hegemon into which China
might develop. This makes the OBOR initiative a more valuable subject of
research regarding China’s foreign policy. What merits attention is the
question as to how China would realize the OBOR initiative.
In this chapter, I wish to discuss the multilayered multilateralism which
is emerging in the process of China’s promotion of the OBOR initiative.
This is a phenomenon to which attention should be paid as it is a new
model for China’s foreign policy. I will mainly include empirical material
to support the discussion, including Chinese government’s foreign poli-
cies and discourses of Chinese government leaders. I will also employ
some data concerning China’s trade and international relations to nurture
this discussion.

The Context of China’s OBOR Initiative


General Introduction to the “Silk Road Economic Belt”
and the “Maritime Silk Road”
The Silk Road economic belt is a new economic growth initiative pro-
posed by Xi Jinping during his visit to Kazakhstan in September 2013.
This is an ambitious initiative that aims to boost regional economic growth
with new ideas containing propositions for central Asian countries to pro-
mote “local-currency settlement so as to improve their immunity to finan-
cial risks and their global competitiveness”.1
Like the Silk Road economic belt, the Maritime Silk Road is a completely
new proposition from Xi Jinping’s visit to China’s neighbouring countries
in Southeast Asia in October 2013. The project covers an area completely
different from the Silk Road Economic Belt: It reaches out to ASEAN
countries and aims to provide deeper and more profound ­cooperation with
ASEAN on maritime matters, which allows China to manage, develop and
exploit maritime territories under dispute (Zou 2014: 40).
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    93

As China has a wide strategic partnership network and multilateral


institutions based on this network, the country enjoys both economic and
political advantages as regards the promotion of new economic projects in
accordance with its long-term interest. The “Silk Road Economic Belt”
and the “Maritime Silk Road” are projects aiming to rearrange China’s
economic interests in Asia and also to try to connect the world. As Li Xing
has pointed out in Chap. 1, the OBOR initiative is understood as the
nexus between China’s internal capital accumulation and hegemonic con-
solidation and its inevitable outward expansion. Thus, China’s One
Belt Road and One Road Belt project has both a domestic and an interna-
tional context, and I will begin by discussing the international context.
Figure 4.1 outlines the routes designed for “The Belt and the Road”.
This can be understood as an extension from China’s neighbouring
regions to the “pan-peripheral” regions, thus building an economic body
with China as the centre. Compared to China’s partnership network, it is
also easily discernible that both the two routes pass over countries that are
China’s partner countries.

Fig. 4.1  The silk road economic belt and the maritime silk road route. (Source:
Xinhua News)
94   F. YUAN

In the following sections, I will introduce the international and domes-


tic contexts of the OBOR initiative.

The International Context of the OBOR Initiative


First, the OBOR initiative is related to China’s international policies in
that it is pivoting towards its neighbouring countries. Since Xi’s accession
to power, China has directed many of its diplomatic resources towards it
neighbouring countries. A series of China’s initiatives to strengthen the
importance of neighbouring countries in its foreign policy may be
observed. Starting from the meetings with diplomats from neighbouring
countries ordered by himself, Xi has extended the idea of a Chinese Dream
into an Asian Dream2 and incorporated the new concept of common com-
munity (共同体), which has been followed by a large variety of grand
vision vocabulary, such as common community of fate3 or community of
responsibilities. Following these ideas that are trying to sum up a sense of
belonging in Asia, Xi has begun to conceive new institutions that can
strengthen China’s influence and decision-making power in Asia. The first
initiative was China’s proposition to strengthen ASEAN-China FTA, fol-
lowed by China’s proposition to set up the Free Trade Area of Asia-Pacific
(FTAAP)4 in order to win over Asian countries from the US negotiation
table of the TPP. This was followed by the OBOR initiative to integrate
grand economic projects with China’s power, and finally by the initiative
to establish the “Asian Infrastructure Investment Bank” to challenge the
IMF and the Asian Development Bank.
Second, the initiative strengthens China’s ability to consolidate and
integrate the multiple multilateral institutions in the region. From China’s
perspective, the Silk Road Economic Project is playing a prominent role in
supporting the Shanghai Cooperation Organization’s development and
strengthening China’s collaboration with the ASEAN.  I will elaborate
each of these two aspects:

(a) The initiative justifies China’s presence in Central Asia. As Central


Asia has been ruled under Russian Tsardom and the USSR in con-
temporary history, and has become highly Russianized, China finds
it important to justify, at both historical and cultural levels, that
China is an interest holder in this region as it has always kept a close
link with it. The adoption of the “Silk Road” avoids the period
when Central Asia was integrated into the USSR and had no diplo-
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    95

matic relations with China. As Russia is worrying about China’s


growing influence in Central Asia, a larger realm covered by this
project will be able to dilute the worries about China’s grip on the
region: The OBOR initiative expresses that China’s vision is beyond
the competition of influential spheres and is only aiming for closer
cooperation. The OBOR initiative is also a concept that can be eas-
ily expanded in a cultural perspective in order to nurture an identity
of integration and connection. This concept recalls a friendly, peace-
ful, and mutually beneficial world order under China’s influence
(Wen 2014). It also corresponds to Xi Jinping’s idea of a “fate com-
munity” that calls for a deeper mutual understanding and concern
about the common issues confronting the world.
(b) The initiative guarantees China’s leading role in promoting Central
Asia’s economic integration. Xi Jinping’s Silk Road Economic Belt
project is essentially different from the US’ strategy. It aims to
expand collaboration between China, Russia and Central Asia but
excludes Afghanistan. On the other hand, Xi Jinping has invited the
EU to collaborate in this project as an international organization.
(c) This project aims at integrating multilateral collaboration initiatives
already conducted by the Shanghai Cooperation Organization
(SCO) through a process facilitated by an extensive infrastructure
construction: The project itself aims not to establish new institu-
tions to conduct these constructions but to strengthen and con-
cretize the function of the SCO, the existing institution (Wang
2014). The SCO is an important institutional instrument as it is
the only multilateral arrangement in Central Asia that includes
both Russia and China, and its function is expanding gradually
from security collaboration towards economy collaboration. As the
first multilateral institution initiated by China, the SCO serves the
OBOR initiative to regulate the multilateral relations between
China, Russia and the Central Asian countries.
(d) The OBOR initiative is important for the promotion of interre-
gional cooperation. Following this project, it would be possible for
China to coordinate global-level cooperation projects with part-
ners in Central Asia, East Asia and South Asia, as well as in Europe
and Africa. This would provide an opportunity to mobilize these
partners in both bilateral and multilateral arrangements.

Third, the realization of the OBOR initiative promotes the formation


of new multilateral institutions following China’s norms and principles.
96   F. YUAN

The Maritime Silk Road, in combination with the Silk Road Economic
Belt and the Asian Infrastructure Investment Bank designed to finance
them, is an ambitious project aimed at establishing a regional economic
order. As the second largest economy in the world, China is attempting
to translate its economic power into political advantages by reshaping the
regional institutions and their economic orders. The reshaping of the
economic order in East Asia is an opportunity for China to establish an
economic order that complements the deficiencies and unsatisfactory ele-
ments in the global economic world order, especially the WTO.  This
aspect has become especially prominent as the US has decided to with-
draw from the TPP following Trump’s election as the new American
president. The US’ withdrawal signifies that the US believes bilateral
negotiation would protect its interests better than multilateral negotia-
tions. This change in US foreign policy leaves many impacts on the world
order, especially that of Asia-­Pacific. A direct impact is that it leaves China
as the strongest actor, capable of reconstructing a multilateral order in
this region.

Domestic Context
Besides the international context, the OBOR initiative is also an answer to
many domestic demands. Here are the main aspects of the domestic con-
texts of the OBOR initiative.

(a) Arrangement of excess production capacity


China possesses excess production capacity in electrolytic alumin-
ium, iron and steel; moreover, China has abundant foreign cur-
rency reserves. Through the OBOR initiative, China might
establish an appropriate way to enable the consumption of its
excessive ­production capacity and foreign currency reserve, which
would facilitate China’s contribution to Central Asia’s infrastruc-
ture investment (Liu and Wang 2014)
(b) Internationalization of the Chinese currency
In order to support the development of this project, the Asian
Infrastructure Investment Bank (AIIB) will be established, and this
will cooperate with the BRICS Development Bank, within which
China is an initiator. As soon as the AIIB has been established,
China can, on the one hand, regulate regional economic develop-
ment with its norms, and, on the other hand, promote the Chinese
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    97

yuan as the regional currency, replacing the US dollar. From the


following list we see that China has endeavoured to international-
ize its currency among its neighbouring countries, which include
many SCO member-­states, observer-states and dialogue partners.
Most importantly, Russia and China concluded the yuan-rouble
settlement during the 2014 APEC meeting, and as Russian
President Putin has pointed out, this settlement would make Russia
less dependent on the dollar5 and would boost the role of the
Chinese regional currency.6 Table  4.1 summarizes the countries
that have signed the SWAP agreement with China. This table shows
that the Shanghai Cooperation Organization and its strategic part-
ner network have played an important role in promoting the inter-
nationalization of the Chinese currency.

Table 4.1 lists 37 countries that had signed Bilateral Swap Agreements
with China by 2016. Among these 37 countries, 30 countries had signed
strategic partnership agreements with China. Some other countries, such
as Armenia, which currently share “partnership agreements” with China,
would probably upgrade into a strategic partnership agreement in the
future. As indicated in the table, many SCO members have also signed
Bilateral Swap Agreements with China. This shows that China’s bilateral
and multilateral networks are serving China’s domestic priorities.

(c) Guarantee of China’s energy supply


As China needs to import 60% of the oil it consumes (Chen 2003),
its resource security is considered to be very fragile. As China
depends heavily on the Gulf Region countries to provide its oil
(Wu 2003), most of the imported oil is transported to China via
the Strait of Hormuz and the Strait of Malacca, which have been
identified by many Chinese scholars as unstable transportation
pathways that are subject to the US influence and to emerging
security issues such as pirates and terrorists (Wang 2006; Xue 2010;
Zhang 2005). Yet China estimates that in order to protect the
country’s energy security, a new tunnel for oil transportation is far
from sufficient: Thus, strengthening China’s sea power is the long-
term strategy, especially vis-à-vis traditional maritime powers such
as the US (Wu and Zhu 2009: 36). As Xi Jinping has proposed, the
great revival of the Chinese nation as a sea power is connected with
the Chinese nation’s general revival, as it is believed to be the key
98   F. YUAN

Table 4.1  Countries that have signed bilateral SWAP agreements with China

(continued)
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    99

Table 4.1 (continued)

Data source: Garcia-Herrero and Xia (2013)


*Countries in red letters are Strategic Partner Countries of China
*Framed countries are SCO members
(Author’s own table)

to its transformation into a global power.7 At the same time,


China’s main strategic conflicts with foreign countries all concern
maritime issues: territorial conflicts exist between China and Japan,
China and the Philippines, China and Vietnam. The US’ “Back to
Asia” strategy also leaves China with very little alternative but to
develop its sea power as quickly as possible; the pending Taiwan
issue is also a key problem related to China’s sea power. China’s
urgent need for more sea power and its imminent conflicts with its
neighbours require that China seeks to collaborate with countries
situated on the maritime passage to the South China Sea, which
China considers as “the second Persian Gulf” and which directly
concerns China’s national interests (Chen 2010; Zhou and Yu
2014).

Multilayered Multilateralism: The Combination of Bilateral


Partnership and Multilateral Initiative
From the previous introduction and analysis, it is evident that the OBOR
initiative is an ambitious project whose realization requires tremendous
political and financial resources. The core interest of my chapter is to
explore which tools China would need to use to make this project work? I
argue that multilayered multilateralism is coming into formation. My defi-
nition of multilayered multilateralism is a combination of China’s bilateral
(especially the partnership networks) and multilateral relationships. In the
following section, I will introduce and elaborate this definition.
100   F. YUAN

Partnership Networks
Writers of The Economist have quite reasonably and understandably sensed
that China has been trying to establish a new order, starting from Asia
(The Economist 2014). The relevant question is: By which means could
China create this new order? Since Xi Jinping took power, the number of
strategic partnerships has skyrocketed, and most of the new partners are
neighbouring countries.
Figure 4.2 presents the percentage of each type of Chinese partnership.
These types are defined by the Chinese government and are accepted by
each partner before their signing of the strategic partnerships. The Chinese
government has emphasized that no rankings exist among different part-
nerships. However, some types of partnership are certainly more honoured
than others. The figure shows that most of them are comprehensive strate-
gic partnerships and strategic partnerships. Countries which have their own
partnership title are often the most distinguished partners. These 59 coun-
tries include almost all the countries in the OBOR initiative.

Fig. 4.2  The percentage of each partnership type of China. (Author’s own figure)
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    101

Figure 4.3 presents the countries in each category. These strengthened


bilateral relations have been combined with existing multilateral institu-
tions in the region and are expected to support greater projects. With a
large strategic partnership network and multilateral institutions based on
this network (the most important networks being the Shanghai
Cooperation Organization and ASEAN+3), China enjoys both economic
and political advantages with regard to the promotion of new economic
projects in accordance with its long-term interests. As pointed out by
Zhang Xiaotong from Wuhan University, economic diplomacy has become
increasingly important for China to realize its goal of becoming a “major
country” (Zhang 2014: 78). When implementing its economic diplomacy,
China chooses to launch grand economic projects in a multilateral way
based on its strategic partnership networks. The “Silk Road Economic
Belt” and the “Maritime Silk Road” are typical examples of China’s aim to
rearrange its economic interests in Asia and also to connect to the world.

Fig. 4.3  China’s different types of partnership (updated until May 2016).
(Author’s own figure)
102   F. YUAN

Multilateral Relationship
China has gradually become favourable to multilateralism since the
Opening Up and Reform in 1978 and has accelerated the embracement of
multilateralism since 2002, with the integration of “multilateralism as a
platform” into China’s foreign policy strategies. This phenomenon is
related to China’s attention towards institution building as a critical com-
petition factor in the new era.
As John Ruggie observed as early as 1993, institutions are “in demand”
because they are “robust and adaptive”, both in economic and security
affairs, and “a core feature of the current international institutional order
is its multilateral form”, which “appears to have characteristics that
enhance its durability and ability to adapt to change” (Ruggie 1983: ix).
Multilateralism has become “increasingly accepted as the modus operandi
in world politics” (Powell 2003: 3), as nations have gradually realized that
many issues pose challenges to several nations at the same time, thus
demanding multilateral cooperation to deal with them. Moreover, many
issues also have linkages with different aspects of human activities,8 requir-
ing multilateral cooperation to provide a comprehensive solution.
Keohane defines multilateralism as an “institutionalized collective action
by an inclusively determined set of independent States” and “persistent sets
of rules that constrain activity, shape expectations and prescribe roles”
(Keohane 2005), while Ruggie defines multilateralism as “an institutional
form that coordinates relations among three or more States on the basis of
generalized principles of conduct” (Ruggie 1993). Multilateralism has
developed through three different epochs: the nineteenth-­century arrange-
ments and conferences within the context of the evolving multipolar con-
cert of the “Great Powers”; the institutionalized multilateral system set up
at the political and economic levels under the hegemony of the US after the
Second World War; and the heterogeneous and uncertain development of
multilateral cooperation following the termination of the Cold War and
within the multipolar world of the twenty-first century (Telò 2014: 35). It
has been believed that hegemony is a decisive factor in the formation of
multilateral cooperation, as it shoulders the responsibility of providing
public goods. Yet, in After Hegemony, Keohane has predicted that it is
possible to have multilateral cooperation without the coordination of a
hegemonic power: “International institutions help to realize common
interests in world politics” as the “complementary interests” make “certain
forms of cooperation potentially beneficial” (Keohane 2005). It seems
that the emerging multilateral institutions which are rising with new
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    103

regionalism confirm Keohane’s statement. According to Telò’s observa-


tion, multilateralism is developing into pluralistic multilateralism with the
following characteristics: (a) a decentralized multipolarity has proven to be
compatible with multilateral cooperation, provided that power balance
and security alliances are no longer the priority. Hegemony is not neces-
sary for multilateral cooperation, but leadership (either as an individual or
a collective driving force) would be needed; (b) a shift from specific to
diffuse reciprocity occurs, in which any exchange takes place in the context
of an issue-linkage and in which gains are expected over a larger time span
through enhanced trust.
Another important phenomenon is the rise of regionalism. Primarily
since the focus of China’s foreign relations has shifted to its neighbouring
countries, the development of regionalism, especially in combination with
multilateralism, is an important issue for discussion (Wang 2002: 7). This
new round of regionalism after the Cold War has become an important
phenomenon for research in international relations: New regionalism has
developed in the shape of multilateralism in order to oppose unilateralism,
limiting the old-fashioned logics of balance of power and preventing local
conflicts and fragmentation. The balance between the regional and global
dimensions of multilateral cooperation is an important source for the
development of multilateralism (Telò 2014).
Thus, the post-hegemonic era and the development of pluralistic mul-
tilateralism, combined with regionalism, leave China room to manoeuvre
its foreign relations through multilateralism. China’s rise and its engage-
ment in multilateralism are developing hand in hand. This means that
China has chosen multilateralism as its integration pathway into interna-
tional affairs. The importance of institutions has increasingly attracted the
attention of Chinese scholars as China has become increasingly involved in
reshaping the world order after the Cold War, and China has long realized
that its real challenge and opportunity lie in how much it can influence the
formation of new institutions in the wake of US hegemony (Yu 2013).
China has realized that to form a new set of international institutions
requires governments to redefine their national interests within this new
framework (Qin 1999: 279–80). Thus, how to justify and legitimize
China’s ideas about the new world order is a critical issue. Men Honghua
argues that the fundamental value of international institutions still lies in
their ethnical values, as they represent human beings’ pursuit of common
interests and common justice and provide a platform to realize them (Men
2005: 48). In this perspective, China’s participation in institution building
104   F. YUAN

has taken a strong normative orientation since the beginning, in order to


achieve consensus with other regimes on a new set of values (Li 2014;
Yang 2007). To phrase it differently, China is constructing a new institu-
tion in order to convey its norms and values, and through this institution,
it can achieve consensus with other countries which are willing to join and
accept the norms and values proposed by China.

The Dynamism of Multilayered Multilateralism


China’s multilayered multilateralism is a combination of bilateral relation-
ships constituted by a partnership network and multilateral institutions in
which China participates. The bilateral and multilateral sides are not
divided but share active interaction. As suggested above, the “partner-
ship” that defines China’s bilateral relations is not an alliance. Rather, it is
a type of convergence concerning certain issues and shows a willingness to
collaborate. I will elaborate this dynamism according to the different sub-
jects that are due to be resolved by multilayered multilateralism.
The first issue is the internationalization of China’s currency. As men-
tioned above, almost all countries that signed SWAP agreements with
China are countries that have established partnership relations with China,
and almost all the members of the Shanghai Cooperation Organization
have also signed the same agreement with China.
The second issue is of China’s energy security. The Shanghai Cooperation
Organization is a good example that within a multilateral institution where
many members are China’s strategic partners, it would be easier for China
to coordinate the exploitation of the energy resources needed. At the same
time, the SCO is also supporting China’s strategy by promoting the eco-
nomic development in its western parts. ASEAN+3 is not only of great
significance in the internationalization of the Chinese yuan (though the
negotiation with Japan could be tough); by establishing FTAs, it has also
become an important terrain for the development of China’s new eco-
nomic rules, and it is important for China’s sea power development.
Especially with the design of the AIIB, the OBOR initiative is the ulti-
mate attempt so far to coordinate all these issues within one large strategy.
The “One Belt and One Road Initiative” incorporates ASEAN+3 and the
Shanghai Cooperation Organization instead of replacing them. It tries to
establish a new collaboration tool by combining financial cooperation,
development of natural resources and construction of infrastructures (Zou
2015: 128). China provides financial support to countries included in
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    105

these two projects in order to finance Chinese companies involved in the


construction of infrastructure. Once completed, the infrastructure proj-
ects would mainly serve the transportation of Chinese products to these
countries and of natural resources from the countries to China.
The export of infrastructure construction provides domestic enterprises
with new contracts, and the natural resources imported would quench
China’s thirst for energy. The circulation of money provides more chances
for the internationalization of the Chinese yuan. The development of
ports among China’s strategic partners diminishes China’s “Malacca
Dilemma”, while at the same time promoting China’s control over mari-
time transportation and enhancing China’s sea power (Zhang et al. 2015).
Thus, the strategic partnership networks and multilateralist regional
institutions (ASEAN+3 and Shanghai Cooperation Organization) are
linked and coordinated in the context of the OBOR initiative, which is
explained in Fig. 4.4.

Fig. 4.4  Main countries (The One Belt and One Road project is planning to
include 177 countries. In this chart I have included only countries that have agreed
to participate in this project) involved in “One Belt and One Road”, AIIB.
(Author’s own figure)
106   F. YUAN

–– Countries in green boxes are founding members of the AIIB.


–– Countries in boxes with black lines are in partnership relations with
China.
–– Countries in yellow boxes of ASEAN+3 and SCO are involved in the
two regional arrangements respectively
–– Countries in purple boxes are included in “One Belt and One Road”
but are not founding members of AIIB

Figure 4.4 presents the relations between (a) the partnership networks
established by China; (b) ASEAN+3 and the Shanghai Cooperation
Organization—the two most important multilateralist regional institu-
tions in which China participates; (c) the “One Belt and One Road”
project9; and (d) the Asian Infrastructure Investment Bank. This figure
gives a clear indication that the countries that have established partner-
ship relations with China are the most important ones that cooperate
with China in its new grand strategy. At the same time, almost all the
member-states in ASEAN+3 and SCO have already established partner-
ship relations with China. Partners also constitute the majority of the
founding members of AIIB.
“One Belt and One Road” was clearly designed to expand the realm of
cooperation and economic development of ASEAN+3 and SCO: hence,
West Asia, the Middle East and Europe are connected. China is building a
“horizontal institutionalized structure rooted in organized regions linked
to each other” (Hettne and Ponjaert 2014: 124) through the combina-
tion of different layers of relations: bilateral partnership networks as the
first layer, regional multilateral arrangements as the second and, most
importantly, the third layer of more expanded economic development
projects. I will use another figure to illustrate how the OBOR initiative
combines with SCO and ASEAN+3 in tackling the main issues in China’s
multilayered multilateralism development.
Figure 4.5 shows that AIIB is the economic part of the grand OBOR
initiative. It finances the infrastructure construction in the “Silk Road
Economic Belt” (One Belt, i.e. OB) region, which comprises the SCO
countries but may eventually reach Europe, and West Asia and the
“Maritime Silk Road” (One Road, i.e. OR), for which the centre is the
ASEAN+3 countries but may extend to Africa. The strategies that China
uses to reach the goals set by the four main issues are related to SCO and
ASEAN+3. The small circles at each intersection in the figure specify how
these main issues are connected with the two multilateral institutions in
Internationali
Domestic Energy Sea Power -zation of
Development Security Development Chinese
Yuan

SWAP SWAP
West Agreements Agreements
China
Development

Fishing
Resources

Extra ASEAN+3
Productivity SCO Energy
Malacca
in Central
Dilemma
Asia

AIIB

Loaning in
Yuan

Productivity OROB
Consumption
Fate Community
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…   
107

Fig. 4.5  The integration of ASEAN+3 and SCO with the OBOR initiative on China’s main issues of multilayered mul-
tilateralism. (Author’s own figure)
108   F. YUAN

which China participates. With the establishment of AIIB to finance the


infrastructure development in the corresponding regions, the OBOR ini-
tiative supports the pursuit of the four main issues, the AIIB projects,
SCO and ASEAN+3 so as to form a complete and interacting circle. The
financial support provided by AIIB enables the infrastructure projects to
develop, through which the excess productivity in China will be con-
sumed. The development of infrastructure projects will promote the inter-
nationalization of the yuan as China will prioritize the yuan as the principal
currency for lending (Huang 2015). This development will elevate the
yuan’s importance in world capital markets and promote its international-
ization, especially by making the Yuan the regional currency (Liu 2015).
The infrastructure construction realized through AIIB will reinforce
China’s influence in the regions that are strategically included in the
OBOR initiative. The construction and management of important infra-
structure projects, for example, ports, railways and oil pumps, will also
strengthen China’s influences and provide privileges for China as regards
the exploitation of energy and maritime resources.
Although economic development is very important, this is not the only
element in the OBOR initiative. The “fate community” concept is trying
to provide an alternative understanding of international relations. With an
economic order that is different from the Western pattern, this alternative
concept provides a different world view and a different value recognition
of China’s multilayered multilateralism.
Chinese president Xi Jinping’s visits to Saudi Arabia, Egypt and Iran
from 19 to 23 January 2016 provided a very vivid illustration as to how
China is adopting the OBOR initiative to promote its multilayered mul-
tilateralism. Xi Jinping had chosen a very critical time to visit the three
most important countries in the Middle East: The bilateral relationship
between Saudi Arabia and Iran had deteriorated drastically;10 terrorism
continued to menace the regional security and political stability; and
Iran’s economic isolation had just been terminated as the UN and the
US had lifted their sanctions on 16 January (Al Jazeera 2016a;
Wroughton and Torbati 2016). During his visits, Xi Jinping signed 52
agreements: 14 with Saudi Arabia, 21 with Egypt and 17 with Iran; all
three countries have also signed the memorandum to participate in
“One Road One Belt” with China, and the collaboration agreements
cover trade, energy, communication, aeronautics and climate change
(Sina News 2016).
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    109

It is not wrong to link Xi’s visit with China’s energy resources (The
Economist 2016), as the Middle East is an important oil supply region for
China (see Figs. 4.5, and 4.6).
However, concluding that China’s only motivation to maintain a good
relationship with the Middle East is its need for oil would compromise the
richness of China’s foreign policy. The guiding idea in China’s promotion
of its multilayered multilateralism in this region is that of a “community of
common destiny”, and the OBOR initiative serves as the main structure
to realize this goal. By combining energy supply and collaborations in dif-
ferent domains under the OBOR initiative, China is trying to develop new
common interests in this region. China’s provision of investment and
technology to its Middle Eastern partners is expected to retrieve energy
supplies and political support from them via diffused reciprocity. Another
clear signal is that China published its first Arab Policy Paper five days
before its president’s departure to the Middle East (The Ministry of
Foreign Affairs of PRC 2016). This states clearly that China is looking
forward to establishing a new pattern of collaboration based on the OBOR
initiative,11 which, if realized successfully, will greatly increase China’s
presence in the region.
China’s plan for its approach to the Middle East is a good example of
the multilayered multilateralism in formation: adopting the structure of
multilayered reaction (built on and supported by the partnership net-
work), following the principle of diffused reciprocity and aiming to

Fig. 4.6  Chinese


crude-oil imports by
country in 2016.
(Source: China Customs;
illustration by the
author)
110   F. YUAN

strengthen the institution by nurturing mutual interests. At the same time,


multilayered multilateralism is also an important path to promote China’s
ideology and establish its own political value system.

Conclusion
Chapter 1 discussed the theoretical framework of analysing the OBOR
initiative based on Cox’s historical structure of hegemony (the interrela-
tion between ideas, material capacities and institutions). In this chapter, I
have focused on the analysis of the institutional aspect of this structure,
and I have found that a multilayered multilateralism is forming. This com-
bination of bilateral and multilateral relations will become an important
tool to institutionalize the OBOR initiative.
The OBOR initiative is the most evident example of this multilayered
multilateralism in China. It is developing into the most exquisite design of
institutions that should enable positive interaction between the bilateral
and multilateral sides. China’s OBOR initiative combines its neighbouring
countries and expands the economic collaboration in order to reach out to
China’s “grand periphery”, and consolidates regionalization by nurturing
“mutual interests” based on China’s provision of infrastructure construc-
tion and coordinated financing. It is a cooperation model that is capable
of continual expansion and growth (as partnership countries can continue
to grow, and the AIIB model could well be replicated), and it represents
China’s approach of constructing multilateralism via economic spill-over
effects rather than values or forces. We can expect a new set of institutions
to be consolidated and new values and norms to be established, and public
goods will be provided in a different way as China becomes the regional
hegemon.

Notes
1. For more information about Silk Road Economic Belt, please refer to Xi
Jinping’s speech at Nazarbayev University, 7 September 2014. http://
news.xinhuanet.com/english/china/2013-09/07/c_132700695.htm
2. See China News: Xi Jinping’s new foreign policy idea: Community of inter-
est, responsibility and fate: http://www.chinanews.com/gn/2014/10-
10/6660509.shtml
3. See Xi Jinping’s speech: Community of common fate and a favourable
environment for China’s development: http://www.fmprc.gov.cn/mfa_
chn/zyxw_602251/t1093113.shtml
  THE ONE BELT ONE ROAD INITIATIVE AND CHINA’S MULTILAYERED…    111

4. See Li Keqiang, Chinese prime minister’s propositions on East Asia


Summit: 13 November 2014 http://news.xinhuanet.com/2014-
11/14/c_1113240192.htm
5. See Reports on 24 Ore « Putin Scommette sullo yuan: la conversione
con il rublo ci rendera meno dipendenti dal dollaro: http://www.
ilsole24ore.com/art/notizie/2014-11-10/putin-scommette-yuan-
conversione-il-rublo-ci-rendera-meno-dipendenti-dollaro-101845.
shtml?uuid=ABngOECC&fb_action_ids=10153304259468976&fb_
action_types=og.recommends
6. See reports on Russia Beyond the Headlines « Yuan settlements with
Russia could boost Chinese currency’s regional role: http://rbth.co.uk/
news/2014/11/09/yuan_settlements_with_russia_could_boost_chi-
nese_currencys_regional_role_41260.html
7. Chinese scholars are especially interested in and influenced by Alfred
Thayer Mahan’s theory about the importance of sea power in a nation’s
development, mainly presented in The Influence of Sea Power Upon History,
1660–1783, The Influence of Sea Power upon the French Revolution and
Empire, 1783–1812, Sea Power in Its Relations to the War of 1812. For
example, Li Jiacheng and Li Puqian from Liao Ning University argue that
China should pay attention to Mahan’s argument about the causal rela-
tionship between the command over the sea and the status of a great power
(Mahan 1890), and the indispensability of a nation’s revival to be a great
power (Li and Li 2013: 88). Reference is also made to the history of the
USA’s rise and its sea power as the most successful case of Mahan’s theory
(Cao and Li 2006; Li 2006). Besides acknowledging the importance of sea
power pointed out by Mahan, many Chinese scholars believe that Mahan
has overemphasized the deciding factor of a country’s geographical and
natural situation, neglecting the influences of technology development (Li
2004; Jia Zhang 2000).
8. For example, Kevin C. Kennedy has used the case of trade environment
disputes to point out that unilateralism is not at all legitimate in regulating
global issues as national law is only applicable in a given territory.
Multilateralism is the correct way to addressing global issues as it requires
coordination among nations involved to provide legitimate solutions
(Kennedy 2001).
9. It is important to point out here that “One Belt and One Road” is
described as a “project” and a “policy” in the Chinese government’s rheto-
ric. It is not an institution, and, as Prof. Sun Zhuangzhi has pointed out, it
is a completely new concept that cannot be defined yet, and China is in no
hurry to provide a definition to it.
112   F. YUAN

10. On 3 January 2016, Saudi Arabia announced that it would cut off its dip-
lomatic relationship with Iran because Iran had allowed attacks on Saudia
Arabia’s embassy. The attack was due to the anger aroused by the Saudia
Arabia’s execution of Iran’s religious leader as a terrorist (Fitch et al. 2016;
Al Jazeera 2016b).
11. China’s Arab Policy Paper states: “China’s proposed initiatives of jointly
building the “Silk Road Economic Belt” and the “21st Century Maritime
Silk Road”, establishing a “1+2+3” cooperation pattern (to take energy
cooperation as the core, infrastructure construction and trade and invest-
ment facilitation as the two wings, and three high and new tech fields of
nuclear energy, space satellite and new energy as the three breakthroughs),
and industrial capacity cooperation, are well received by Arab countries.
Both sides have broad consensus on safeguarding state sovereignty and
territorial integrity, defending national dignity, seeking political resolution
to hotspot issues, and promoting peace and stability in the Middle East”
(The Ministry of Foreign Affairs of PRC 2016). Also, it is worth mention-
ing that eight countries in the Middle East are founding members of AIIB,
which increases the possibilities of comprehensive collaboration (Jiang
2016).

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CHAPTER 5

The One Belt One Road Initiative


and the Changing Multi-scalar Governance
of Trade in China

Erja Kettunen

Introduction
Although China is the world’s largest trader and one of the largest recipi-
ents of foreign direct investment (FDI), since 2010, it has been facing
slower economic growth, combined with declining foreign trade (World
Bank 2017; WTO 2016a, 2017a).1 To tackle this, the Chinese leadership
is aiming to shift the base of the country’s economy from its reliance on
investments and external trade toward domestic consumption, as well as
from manufacturing toward services. A concurrent challenge has been

The author wishes to thank Claes G. Alvstam and Lucía Gómez for valuable
comments on an earlier version. Research funding from the Foundation for
Economic Education, Finland, and funding for fieldwork in China from the
Centre for International Business Studies, School of Business, Economics and
Law, University of Gothenburg, Sweden, are gratefully acknowledged.
E. Kettunen (*)
Centre for Collaborative Research, Turku School of Economics,
University of Turku, Turku, Finland
e-mail: erja.kettunen-matilainen@utu.fi

© The Author(s) 2019 117


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_5
118   E. KETTUNEN

China’s regional economic imbalance—the overly strong economic


weight of Eastern China’s first-tier cities—that has resulted in rising cost
and congestion in the coastal regions, and sluggish development in the
peripheral inland regions. In recent years, China has strived to balance
regional disparities through a number of policies that affect its provinces,
including rules on inward FDI and various regulations steering different
industries. This is paralleled with China’s changing foreign trade policies
and a geographical shift in its regional trade agreements. All of these poli-
cies aim at actively keeping investment inside China. From the investing
companies’ perspective, moving or expanding operations from China’s
major coastal cities to inland cities has become a viable option due to the
cost advantage of the latter. The majority of multinational firms, however,
are engaged in global production chains, importing components and/or
exporting intermediate or finished products from their bases in China.
Therefore, companies that are located in Western or Central China, for
example, need to transport their exports and imports across the country
to reach the Eastern coast harbors that are the main cross-border points
of China’s international trade.
The aim of this chapter is to assess the prospective effects of China’s
new policy, in particular, the “One Belt One Road” (OBOR) initiative, on
the regional orientation of its foreign trade. The main question is how are
China’s regional development aims related to the OBOR initiative reflected
in the multi-scalar governance of trade in China and beyond? Taking the
perspective of European companies, this question will be discussed by ana-
lyzing the business response to China’s sub-national and foreign trade
policies. The analysis focuses on the current institutional environment for
trade in China, including formal and informal institutions (North 1990;
Holmes et al. 2013), and considers the prospects for the changing multi-­
scalar governance of trade in the future. Multi-scalar indicates governance
on many scales that are not hierarchical but coexist in complex ways
(Jessop 2005), different from multi-level that implies super- and subordi-
nation (Neuman 2007). Therefore, multi-scalar governance of trade refers
to trade policies at different scales—sub-national, national, and interna-
tional—that coevolve in relation to each other (cf. Kettunen 2004, 2016).
It encompasses possible interprovincial trade barriers, national trade poli-
cies affecting the country’s imports and exports, and the international
trade negotiations and agreements in which a country may be engaged.
Trade policies are part of the institutional framework that constrains the
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    119

operations of companies, and informal institutions (i.e., practices and


social codes) impact strongly on firms, especially in emerging economies
(Peng 2003; Peng et al. 2008; Meyer and Peng 2016).
Two underlying aspects motivate the analysis. First, sub-national trade
policies refer to the question of the potential cross-provincial trade barriers
that companies may encounter in transporting goods across Chinese prov-
inces. It has been suggested in prior literature that various restrictions and
costs are introduced at provincial borders because of the economic com-
petition between the provinces. This could be the case even more so with
the debt problem that Chinese provinces currently face. Prior research on
the topic has been conducted mainly using quantitative methods, such as
by Young (2000), Poncet (2003, 2005) and Wong (2012), who studied
domestic trade barriers and market integration in China. Others have esti-
mated, for example, the level of local protectionism (Bai et al. 2004), or
spatial spillovers in China (Bai et al. 2012). In the absence of reliable data
on China’s cross-provincial trade, indirect measures of domestic trade bar-
riers, based on various data sources such as provincial input-output data,
were often applied. The other way to study trade barriers, suggested here,
is to take a qualitative approach and interview company representatives
based in China. This approach has the advantage of getting information
about real-life business experiences on cross-provincial trade policies.
There appears to have been little such research, and a gap can be found as
to firm-level analyses on sub-national trade barriers.
Second, China’s external trade policies are also expected to change
because of OBOR-related developments, such as the New Silk Road link-
ing China with Europe and the Middle East (e.g., Kuester 2017). The
OBOR brings a strategic focus to the Chinese government’s “go out”
initiative that encourages Chinese companies to search for new markets
and investment opportunities abroad (EIU 2015). Led by the highest
levels of the government, this initiative will be facilitated by engaging in
trade and investment agreements with OBOR trade partners. The free
trade agreements (FTAs) would support China’s transboundary projects
that are planned to be financed through the China-initiated Asia
Infrastructure Investment Bank (AIIB). If these FTAs are successfully con-
cluded and put into force, they will further shift the regional balance of
China’s economy from coastal regions toward inland regions, by way of
increasing China’s trade with its Eurasian neighbors.
These two aspects related to OBOR are examined in this chapter,
drawing from different sources of data including the WTO’s trade policy
120   E. KETTUNEN

reviews, the World Bank’s Doing Business indicators, and the European
Chamber of Commerce’s business surveys from China. In addition, the
author conducted seven complementary personal interviews with core
informants on the topic (either on location or over the phone) in
2015–2017, namely the representatives of companies and support orga-
nizations based in Chengdu, Beijing, and Shanghai. The interviewees
are Finns, Swedes, or Chinese, and all are at the management level in
their respective organizations, such as general managers. They are
referred to anonymously in the text, indicating the type of organization
that they represent.
It is argued here that the OBOR-related changes in China’s regional
policies would have marked implications for the regional orientation of its
foreign trade. While nowadays most of China’s exports and imports pass
through the major ports in Eastern and Southern China that are the main
entry and exit points for foreign trade, the OBOR initiative might rather
shift trade flows to pass through the Eurasian continent, transported on
rail or land between China and Europe. This would positively affect com-
panies located in China’s interior—along the Belt—since they would have
an advantage because of shorter transport times.
In the section that follows, China’s trade policies are discussed first by
glancing at the regional development aims of the current five-year plan
(FYP) and the OBOR initiative, and then by analyzing the institutional
trade environment for foreign firms in China, regional differences, and the
case of Chengdu as a host city for foreign investment especially by
European firms. The chapter ends with sketching the prospective changes
in the regional emphases of China’s trade policy that will possibly affect
the geography of Asiawide international trade policies and trade flows.

The OBOR Initiative, Regional Development,


and Trade Facilitation

The OBOR initiative was launched in late 2013 to develop infrastructure


for new trade routes. These include the “Silk Road Economic Belt” con-
necting China through railway with Central Asia, Europe, and the Middle
East, and the “21st Century Maritime Silk Road” to develop marine
routes from coastal China to the Indian Ocean and the Mediterranean
(FBIC 2016). Being part of China’s global economic strategy, the geo-
graphical scope of OBOR is ambitious, with 64 countries taking part in
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    121

the plan in Europe, the Middle East, Central Asia, and South Asia.2
Infrastructure development focuses on railways, roads, ports, and airports
to enhance transport between continents and to speed economic develop-
ment in the region. The initiative is backed by the newly established Asia
Infrastructure Investment Bank to finance the planned large-scale infra-
structure development (AIIB 2017; ECN 2016a, b;  Tang 2015).3 The
OBOR plan is important in China’s national strategy, which intends to
connect China with its major trade partners.
Within China, OBOR is one of the major regional integration plans
that are China’s priorities for regional economic planning in the current
13th Five-Year Plan (2016–2020). The FYP delineates the plans to coor-
dinate regional development to achieve balanced growth by developing
infrastructure in Western China and shifting excess industrial capacity
from coastal cities to the western regions (PwC 2015: 6). Besides the
OBOR initiative, the other two plans are the integration of the Beijing–
Tianjin–Hebei region, and developing the Yangtze River Economic Belt,
all of which are presented in their own sections in the FYP for the first
time (ECN 2016a). The Yangtze River Economic Belt is particularly rel-
evant for the OBOR initiative, as it focuses on industry transfer from
coastal to inland regions, with the idea of enhancing differentiated indus-
trial clustering around key urban centers in 11 provinces: Guizhou,
Yunnan, Sichuan, Chongqing, Hunan, Hubei, Jiangxi, Anhui, Zhejiang,
Jiangsu, and Shanghai. The aim of the plan is to encourage collaboration
in economic development between provinces and a more integrated
approach to infrastructure planning in China (ibid.: 4). This is notewor-
thy, given the long history and the still prevailing state of competition
between the provinces.
These plans are being quickly followed in the provinces. China’s prov-
inces are currently putting forward different kinds of infrastructure and
other project plans “dressed in an OBOR gown” in order to receive
“political blessing” for them, as one of the interviewees put it.4 However,
it can be expected that the plans will be followed more on paper than in
practice. This is based on the earlier experiences of foreign firms on these
kinds of policies: for example, the European business circles in China
anticipate that the provincial bureaucracies will “demonstrate little will-
ingness to enact centrally-planned reforms” (ECCC 2016a: 30). In spite
of the central government aiming to coordinate cross-provincial planning,
the foreseeable availability of subsidies for particular sectors ensures that
local governments will compete with one another for resources, which
122   E. KETTUNEN

potentially leads to overcapacity and “price wars” (ECN 2016a: 15). This
is referred to by the Economist Corporate Network as “persisting local-
ism”, indicating that provinces will continue to compete rather than coop-
erate with each other. Previously, localism has been evident in industries
such as steel or solar panels and can be expected in the future in emerging
industries, such as cloud computing and semiconductors (ibid.).
In addition to developing the inland provinces, China also aims to
reform the foreign trade environment in major coastal cities and provinces
by establishing free trade zones. It launched the first national free trade
zone (FTZ) in Shanghai in 2013, and three others in Tianjin and the
Guangdong and Fujian provinces in 2015, and more are expected in the
future (ECN 2016a: 8). The 13th FYP intends to open up trade and
investment by adopting a “negative list” approach to market access. This
approach means that, if a foreign investment project is not included on the
negative list, it will be granted national treatment, that is, similar to
domestic firms. The reform is piloted in the FTZs until end-2017 with
nationwide implementation expected in January 2018 (ibid.: 9). However,
the response among foreign businesses still seems to be moderate. For
example, according to a survey among companies originating from the
European Union (EU) countries, about 15% of the over 500 respondents
had established a presence in the FTZs by 2016, indicating a somewhat
cautious interest (ECCC 2016a).
Furthermore, in order to overcome China’s regionally diverse practices
in trade facilitation, reforms are ongoing to eliminate regional differences
in customs procedures. China has worked on harmonizing customs clear-
ance across its 42 customs areas since 2012. However, “special customs
supervision areas” still exist, and different customs procedures are applied
in different areas—in some instances this is done on a trial basis to assess if
they work. In 2014, China started to integrate the 42 customs areas into
fewer larger clusters to harmonize the clearance processes. According to
authorities, this integration has taken place, resulting in the creation of five
clusters, including Beijing/Tianjin/Hebei, the Pearl River provinces, and
the Yangtze River Economic Belt (WTO 2016a: 48). The latter should
have implications in harmonizing trade facilitation between the Chengdu
and Shanghai customs points, for example.
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    123

China’s Institutional Environment for Trade:


National Trade Policies
As China remains the world’s biggest trading nation, developments in its
regulatory environment for foreign trade are relevant for the whole global
trade regime. However, China’s foreign trade has been affected by the
recent slowing down of the global economy. Both exports and imports
declined in China in 2015, while the importance of foreign trade in its
overall economy has also somewhat diminished. The share of China’s
exports in its gross domestic product (GDP) was 21% in 2015, after hav-
ing been 27% in 2010 (WTO 2016a: 26). Figure  5.1 below shows the
downward trend of the share of merchandise exports and imports in
China’s GDP. This is partly explained by the decline in import oil prices,
as well as the strengthening of China’s domestic demand (WTO 2016a:
15). China’s main trade partners have remained much the same over the
last few years. The main destinations of China’s exports are the United
States, the EU, Hong Kong, the countries of the Association of Southeast
Asian Nations (ASEAN), Japan, and South Korea. The main sources of
China’s imports, in comparison, are the EU, the ASEAN countries, South
Korea, the United States, Taiwan, and Japan. During the last decade,
China’s trade with its regional neighbors has grown the most rapidly.
Much of China’s foreign trade is foreign investment induced. For sev-
eral years, China has been among the largest recipients of inward FDI

30

25

20

15

10

0
2011 2012 2013 2014 2015
Exports Imports

Fig. 5.1  China’s merchandise trade as a percentage of GDP, 2011–2015.


(Source: WTO 2016a)
124   E. KETTUNEN

globally. It was the third largest destination for FDI inflows in 2015—
behind only the United States and Hong Kong— while it had ranked first
for the two preceding years, in 2014 and 2013 (UNCTAD 2016: 5). It
can be expected that China will retain this position also in the future.
According to an international survey on investment prospects, both mul-
tinational enterprises and investment promotion agencies regard China as
the second most promising destination for FDI for the years 2016–2018,
while in the previous year, it was ranked as the number one destination for
FDI (ibid.: 27–28.). This trend has been complemented by the more
recent rapid growth of outward FDI, China having become one of the
largest sources of foreign investment globally.
Therefore, as China is assumed to remain a leading foreign trader, the
institutional framework governing its trade—and the possible impact of
OBOR—is of key interest for business and policy alike. When analyzing
the institutional environment for trade, attention is paid here both to for-
mal and informal spheres of the trade regime. These refer to the laws and
regulations (i.e., formal institutions) governing foreign trade, as well as to
the everyday practices, norms, and social codes (i.e., informal institutions)
of the authorities in enforcing the regulations (cf. Holmes et al. 2013). To
put it briefly, institutions are “the rules of the game” (North 1990), and
the institutional approach to business studies maintains that the strategic
choices of companies are driven not only by their resources, capacities,
and industrial dynamics but also by the institutional constraints that they
face in a particular business environment (Peng 2003). Especially in
emerging economies, institutions have a strong impact on the perfor-
mance of firms (Peng et al. 2008; Meyer and Peng 2016). Next, formal
institutions are analyzed based on international comparisons of regulatory
environments, and informal institutions are discussed by drawing from
business surveys and interviews regarding business sentiment in China.
The latter refers to the experiences of foreign firms on how host-country
authorities implement laws, regulations, and policies and how local offi-
cials treat foreign firms.

Regulatory Framework
Regarding the formal institutional framework at the national scale, China
does moderately in international comparison, being in between the easiest
and the most difficult global regulatory environments. Since 2004, the
World Bank has assessed changes in national business environments globally
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    125

among a large number of countries, in order to rank them according to the


ease of doing business. The assessments focus on regulations that either
enhance or constrain business activity, and result in quantitative indicators
by comparing the (at present) 190 economies of the world. The rankings
can be seen as indicative of the formal regulatory environment in the respec-
tive economies. In these comparisons, China has performed variably during
the last few years, its position improving to 78 in 2017. Table 5.1 shows the
overall rank and selected sub-categories relevant to firms engaged in foreign
trade in China. Throughout the years, trading across borders has become
relatively more difficult. In the other facets of the regulatory environment,
China performs best in enforcing contracts, while starting a business remains
highly bureaucratic and burdensome for firms.
If we compare China with other economies in the world, such as the
three other BRIC countries (Brazil, Russia, and India), its business envi-
ronment in 2017 appears to be somewhat easier than that of Brazil (rank
123) or India (rank 130), but more difficult than in Russia (rank 40).
Other East Asian economies also seem to perform better, namely Japan
(rank 23) and South Korea (rank 5), not to speak of the Nordic countries
(Denmark 3, Finland 13, Iceland 20, Norway 6, and Sweden 9). However,
it must be noted that the indicators only assess the formal regulations
(e.g., the procedures, time, and cost to complete all formalities for exports
or imports). The informal practices by the authorities in enforcing and
implementing these regulations are not considered.
When it comes to the foreign trade environment, China is relatively
open for a developing economy. China became a member of the World
Trade Organization (WTO) in 2001 and has reportedly improved its
external trade regime since then. As can be seen in Table  5.2, China’s

Table 5.1  Ease of doing business (with selected sub-categories) in China, vari-
ous years
2011 2014 2017
N = 183 N = 189 N = 190

Overall rank 79 96 78
 Starting a business 151 158 127
 Trading across borders 50 74 96
 Enforcing contracts 15 19 5

Source: World Bank (2010, 2013, 2016)


126   E. KETTUNEN

Table 5.2  Import tariffs of China, compared to USA, the EU, Japan, and South
Korea
China USA EU Japan Korea

MFN APTA ASEAN MFN MFN MFN MFN

Simple average tariff (%) 9.5 8.8 0.7 4.8 6.3 6.1 14.1
 Agriculture 14.8 13.8 1.7 9.1 14.1 16.3 60.0
 Non-agriculture 8.6 8.0 0.6 4.0 4.3 3.6 6.6
Duty-free tariff lines (%) 9.7 10.0 94.8 36.8 26.1 40.1 15.9

Note: APTA refers to preferential tariffs for imports under Asia-Pacific Trade Agreement. (Member-­
countries: Bangladesh, China, India, Laos, South Korea, and Sri Lanka.) ASEAN refers to preferential
tariffs for imports under China-ASEAN FTA (Imports from Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand, and Vietnam.)
Source: WTO (2016a, b, c, 2017b, c)

overall tariff level (the so-called Most Favored Nation tariff)5—referring to


the average tariff for all imports from all countries except those with which
China has a free trade agreement—is 9.5%. The tariffs can vary consider-
ably in different product categories, depending on the protection level for
the industry in question. For agricultural products, China’s average import
tariff is notably higher than for non-agricultural ones, that is, all other sec-
tors combined.
Table 5.2 also presents two examples of China’s trade agreements, that
is, the Asia-Pacific Trade Agreement (APTA) and the FTA with ASEAN.
It is noticed that the tariff reductions are quite modest in APTA, reflecting
a loose agreement with less ambition toward trade liberalization. In con-
trast, imports from the ASEAN countries are largely free, the average tar-
iffs being close to zero. This indicates that trade between China and the
ASEAN countries has been notably liberalized, thanks to the free trade
agreement since 2004. Concerning OBOR, the implication is, if China
manages to sign effective FTAs with partner countries, a real liberalization
will occur, and a change in the geographical emphasis of trade is assumed
to follow.
When China’s current tariff levels are compared with its major export
destinations, import protection in China (average tariff at 9.5%) is clearly
at a higher level than in the United States, the EU, or Japan, all of which
are developed economies with average import tariffs of around 5%–6%.
This is opposite for the case of South Korea, which has a distinctly high
tariff protection for agricultural products, 60%, resulting in a total average
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    127

rate of over 14% (Table 5.2). In addition, tariff rates are the lowest in the
United States, and slightly higher in the EU and Japan. The share of duty-­
free tariff lines indicates the percentage of zero-tariff product categories,
which is clearly highest in the China–ASEAN FTA. While China’s tariff
levels reflect it as being an emerging economy, there is an ongoing debate
over how its status is regarded in the WTO. When China joined the WTO
in 2001, it requested to be considered a ‘market economy’ after 15 years,
that is, in December 2016. However, this has been opposed by other
major WTO members, notably the EU and the United States who do not
regard it as feasible. Giving a trading partner market economy status
implies that its economy is based on open competition (e.g., domestic
prices are set by competition, not the government), which is not the case
in heavily subsidized Chinese export industries (FT 2016).
Overall, China seems to have moderate trade barriers when it comes to
formal policies and regulations affecting trade. This is especially so consid-
ering China’s level of economic development, its tariff barriers being nota-
bly lower than those of South Korea, for example. It can be expected that
the level of China’s overall tariff protection will be lowered because of its
newly negotiated FTAs and OBOR-related FTA initiatives that will add to
the volume of zero-tariff trade, and because of the simultaneous multilat-
eral processes in trade liberalization.

Enforcement of the Regulations
As noted above, it is not only the formal legislation but also the informal
practices of authorities in the implementation of regulations that affect
foreign trade. These refer to the social codes and norms of local authori-
ties in enforcing and executing trade policies, including how efficiently
and lawfully customs officials carry out customs clearance, how they
interpret the rules and regulations, whether they treat all companies
­
equally according to the law, and whether arbitrary practices—such as the
favoring of domestic companies, or the demands caused by corruption—
exist. These informal institutions are deeply culturally rooted in everyday
norms and social codes that often affect the business environment more
than the legislation itself, particularly in emerging economies (Peng 2003).
They may also have regional variations, as discussed later in this chapter.
Data on the enforcement of regulations can be acquired from, for
example, business surveys, as well as from directly interviewing representa-
tives of companies that operate in China. According to the latest business
128   E. KETTUNEN

confidence survey of the European Chamber of Commerce in China


(ECCC 2016a), European companies perceive that the business outlook
has become gloomier in China. Altogether, 506 companies responded to
the survey, and over half of them (56%) considered that the Chinese busi-
ness environment had become more difficult in the previous year. The
most significant regulatory obstacles are administrative issues, an unpre-
dictable legislative environment, and the discretionary enforcement of
regulations. Other major problems are the perception of being less wel-
come than ten years ago, the recent tightening of Internet controls, for-
eign companies receiving unfavorable treatment compared to Chinese
companies, environmental regulations being strongly enforced against
foreign firms, and foreign companies being discriminated against through
national-security-related legislation (ibid.: 8). These challenges, as well as
the slower growth of the Chinese economy, have resulted in the expansion
plans of European firms being significantly lower than just three years ago.
In 2013, as many as 86% of firms planned to expand in China, whereas in
2016, only 47% did (ibid.: 52).
Similarly, in a survey conducted among 104 Nordic firms (mainly
Swedish, Finnish, and Danish) in China, the major business challenges
included a perceived preference for domestic companies and unfair pro-
curement practices by Chinese officials (CEMAT 2014). Both of these
were expected to either remain the same or worsen in the near future.
However, the majority of the firms still perceived their five-year business
outlook in China as optimistic (74 out of 104 firms), and more than 90
firms are planning further investments in the country. When asked about
legal and regulatory challenges hindering business, the biggest problems
were in customs delays and trade regulations, heavy bureaucracy, unclear
legislation, and tax administration. All were expected to remain the same
in the next one to two years by the majority of respondents. It is quite
significant that problems related to foreign trade were regarded as the
worst among all regulatory challenges.
Protectionism appears to be a major challenge in the enforcement of
regulations, informally, and is manifest in the favoring of local firms, and
in the discrimination against and unfair treatment of foreign-invested
firms. This was indicated in an earlier study on the protectionism encoun-
tered by foreign companies, based on 14 interviews with Finnish firms in
China (Kettunen 2014). The main forms of protectionism appeared to be
informal practices from the side of the authorities and included:
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    129

–– being monitored more strictly than local companies,


–– Chinese firms being able to circumvent the rules,
–– foreign firms not being treated the same as local ones, for example,
in getting permits or large investment projects,
–– foreign firms’ intellectual property rights (IPR) leaking to Chinese
competitors through the authorities,
–– only Chinese firms receiving the government’s support packages,
–– strict, slow, or unclear procedures in exports and imports.

In exports and imports, the interviewees referred to the unfair practices


by local customs authorities and the generally unpredictable customs
clearance. Problems include the slow clearance times and the loss of value-­
added-­tax (VAT) refund in exports, in spite of formal policies (ibid.: 411).
Therefore, informal institutions seem to pose at least as high a barrier
to trade as formal institutions in China. An additional problem for foreign
firms is that the informal rules appear not to be the same for them as for
local companies. As informal institutions are slow to change—even if the
formal rules are changed—it can be expected that they will remain con-
stant for the foreseeable future. However, there seem to be regional differ-
ences in this respect, as discussed in the next section.

The Case of Chengdu: Sub-national Trade Barriers?


Chengdu is a growing hub, being the capital city of Sichuan province and
the economic and political center of southwest China. It has a population
of over 10 million (estimates varying between 11 and 14 million) and is an
important financial, commercial, and transportation hub of the region.
Chengdu hosts a large number of international companies in its main
industries—automobile, machinery, electronics, information technology
(IT), medicine, as well as finance and logistics. The region of southwest
China is of interest regarding OBOR, particularly as the city of Chengdu
is an OBOR railway hub and one of the centers where China applies its
policy to develop inland regions. Besides hosting huge industrial parks to
attract foreign businesses, such as in the automobile or IT industries,
Chengdu also aims to develop the innovation capacity of the region, which
is still lagging behind that of major coastal cities (Wang and Yuan 2015).
However, recent urban planning for Chengdu’s “new district” ambitiously
combines science, enterprises, housing, and recreation, in order to nurture
innovation (China Daily 2016). The plans reflect the idea of innovation
130   E. KETTUNEN

districts that promote sustainable urban development and simultaneously


upgrade the economy (Katz and Wagner 2014).
The institutional environment, both formal and informal, appears to be
more supportive of foreign businesses in Chengdu than that in the cities
of Eastern China. This regional variation is evident in the company surveys
of the European Chamber of Commerce. Its chapter in Southwest China
has ca. 140 member-companies, of which two-thirds are located in
Chengdu and one-third in Chongqing (ECCC 2016b). Several points in
the survey indicate that European firms in Southwest China observe being
treated more favorably than those located in major coastal cities. In addi-
tion, they consider having less frequently encountered missed business
opportunities due to regulatory difficulties. In contrast to firms in Beijing,
Tianjin, Shanghai, or South China, European firms located in Southwest
China perceive:

–– being more welcome now than ten years ago,


–– receiving favorable treatment more often,
–– having fewer missed business opportunities due to market access
restrictions or regulatory barriers,
–– there being less overcapacity in their sectors,
–– less often that the “golden age” in China is over for multinational
companies (ECCC 2016a).

Similarly, for Nordic firms, Chengdu is a preferred location especially


concerning future operations, whereas existing operations in Southwest
China are still relatively rare (CEMAT 2014). In the survey of 104 com-
panies, the southwest region (mostly Chengdu and Chongqing) hosted
only 17 of the respondents’ units, whereas Shanghai hosted 146 different
kinds of units (e.g., China headquarters, sales offices, or Asia-Pacific head-
quarters). However, it is notable that Chengdu appears to be the most
popular prospective location to open new operations in, or to which to
transfer existing ones when moving to non-first-tier cities. Most of the
respondents were planning to open a sales office in Chengdu, but some
were also planning a China regional office. The foremost factors for
expanding into China’s non-first-tier cities were increasing market reach,
decreasing manufacturing costs, and obtaining distribution channels, as
well as reaching partners or facilities already located there. Apart from
Chengdu, other preferred future locations include Nanjing and Xi’an. A
more recent phenomenon is the moving of operations to a new locality
after being acquired by a Chinese company.6 While Chengdu has been
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    131

increasingly attracting foreign firms, some have also moved to other loca-
tions in China. This may happen not only because of problems in the local
business environment but also because of changes in the organization of a
global production chain.7 In one case, a lead firm in an industrial cluster
was reorganized, which left some of its subcontractors to find new cus-
tomers, and some a new business altogether in another location in China.8
The challenges that foreign firms encounter in Chengdu’s business
environment are partly related to fast economic growth and partly due to
the regulatory environment. The major problems for European firms
include low air quality, a difficult regulatory environment, reduced com-
munication between firms and the local government, procedures in cus-
toms clearance, difficulties in healthcare services and registration processes
for foreigners, restricted government procurement, and slow Internet
speed and poor Internet access (ECCC 2016b). These inhibit the growth
of investments in many respects, such as attracting the necessary work-
force for innovation-driven businesses and research and development
operations. Yet it is noteworthy that, in comparison with other Chinese
regions, firms perceive Chengdu as an easier business environment, as
shown above.
For firms located in Chengdu, engaging in foreign trade involves trans-
porting goods to and from major port cities, such as Shanghai, passing
through several provinces. Most deliveries take place by road, as China has
invested heavily in the construction of highways in the midwestern region
for the last two decades.9 This is also backed by the government subsidies
for road and rail traffic that have resulted in partly concealed transport
costs. Other forms of transport include air and waterways, which are the
opposite ends of the spectrum where price and size of products are con-
cerned. Air transport is suitable for high value-added light and small
goods, whereas inland waterway routes are cost-efficient for bulky and less
expensive goods. Waterway transport along the Yangtze River is consid-
ered reasonably mature with related services, with the Luzhou Port as
Sichuan’s biggest port located between Chengdu and Chongqing.10 It is
also one of the aims of the 13th FYP and the OBOR initiative to connect
the provinces along the Yangtze River more closely to each other, which
would ease the moving of exports and imports across the country.
When it comes to sub-national trade barriers, there appear to be no
specific tariffs, fees, or bureaucracy when crossing provincial borders. The
question of interprovince transport and trade barriers were discussed in
company interviews in Chengdu and other parts of China. According to
132   E. KETTUNEN

informants, the choice of transportation mode depends on the distance,


time limitation, and size and value of the delivery. An engineering com-
pany that transports large semifinished products from factories to delivery
sites, for example, between Shanghai and Chengdu, uses fast delivery
trucks because of the too long lead time by train.11 In general, there are no
difficulties in moving goods between provinces. Some sector-specific reg-
ulations apply, such as special packing for chemical goods. In addition,
transportation requires authorized enterprises, carrier insurance liability,
qualified drivers, and registered special vehicles, which can be quite com-
plicated.12 However, the need for transport varies between industries. For
companies in services, such as IT and software, there is rarely a need to
transport tangible goods—usually only when importing investment goods.
One company, for example, bought the laboratories for its new unit from
abroad, and the foreign supplier took care of the shipments to Chengdu.13
Similar findings that there are no particular trade barriers on China’s pro-
vincial borders were found in Svensson’s (2013) interviews with eight
companies, including Alfa Laval, SKF, and Nissan Motor. None of the
respondents had experienced, or heard of, specific obstacles to cross-­
provincial trade. Many commented that the Chinese market is “unified”,
and there are no formal restrictions for selling across provinces (ibid.:
32–35).14
Regarding customs clearance for foreign trade in Chengdu, there are
three main entry/exit ports in Sichuan province: at Shuangliu International
Airport, the Chengdu International Container Logistic Zone, and at
Luzhou Port. According to the Dutch business support office, Chengdu
Customs provides companies with one-stop clearance services. “Fast
track” procedures allow imported goods to be conveyed to bonded zones
directly after a one-time customs clearance at Shuangliu Airport (CG
2014). This concerns exports and imports from abroad directly to and
from Chengdu. When goods are on their way, there is no customs clear-
ance or quarantine procedure at other provincial borders.15 However,
there may be additional costs due to road maintenance fees and charges
for the use of the maritime harbor.
To sum up, while China formally aims to improve its regulatory envi-
ronment, the realities as seen from the business level give a somewhat
more pessimistic outlook. European firms observe an increasingly difficult
environment with discriminatory policies and practices, as well as deterio-
rated circumstances for foreign trade, especially in major coastal cities. In
comparison, the inland growth hub Chengdu—one of the nodes of the
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    133

OBOR New Silk Road—appears to have a more favorable institutional


environment for firms. This indicates a potentially continuing shift of eco-
nomic activity from coastal regions to China’s interior, one of the aims of
the OBOR.

China’s International Trade and Investment


Agreements
The Chinese government considers FTAs important in integrating the
country into the global economy and, at the same time, speeding up
domestic reforms (MOFCOM 2017). One of China’s earliest FTAs was
signed with ASEAN in 2004, whereas most of its existing 15 preferential
trade agreements were launched in the 2010s. Half of the FTAs are bilat-
eral agreements with Asia-Pacific countries, such as Singapore, South
Korea, Pakistan, Australia, and New Zealand (WTO 2017d). In regional
Asiawide constellations, China has been a member of the Asia-Pacific
Economic Cooperation (APEC) forum since 1991, and a signatory to
APTA since 2001 and to the China-ASEAN FTA since 2004. However,
APEC is essentially a discussion forum, and APTA has not reached signifi-
cant liberalization in trade, as was noted earlier. Only the FTA with
ASEAN appears to have proven results in eliminating formal trade barri-
ers, as was observed concerning tariff protection in China. From this, it is
clear that FTAs with a sound tariff reduction scheme will have a real
impact on trade flows.
Some of the recent developments in China’s FTA front are directly
related to the OBOR initiative. In 2017, China and Russia had negotia-
tions on a China-Eurasian Economic Union trade and economic coopera-
tion agreement and decided to carry out a feasibility study on a Eurasian
Economic Partnership Agreement (MOFCOM 2017). It has been further
reported that China aims to negotiate FTAs with many—if not all—of the
trade partners that are part of the OBOR plan, that is, 64 countries in
Europe, the Middle East, Central Asia, and South Asia (Tekes 2016).
In line with the OBOR initiative, China will pursue new FTAs with
countries related to transboundary projects. The most important negotia-
tions in this respect are for the Regional Comprehensive Economic
Partnership (RCEP) that China aims to accelerate with its regional neigh-
bors. The RCEP is a proposed free trade agreement between the ten
ASEAN countries and the six countries with which ASEAN has FTAs in
134   E. KETTUNEN

force, namely Australia, China, India, Japan, South Korea, and New
Zealand. This agreement would increase China’s reach to markets and
regions within the OBOR initiative, while also strengthening its role in the
Asia-Pacific economy. In contrast, China is not a member of the Trans-­
Pacific Partnership (TPP), and its latest FYP does not mention the
TPP. Instead, China has openly promoted only the RCEP (ECN 2016a).
The prospect for speeding up RCEP talks has since increased due to the
changes in the US administration and the withdrawal of the United States
from the TPP in early 2017.
As a result, several rounds of negotiations have been held for the RCEP
in 2017, with China and Singapore reportedly striving to speed up the
process even further (Reuters 2017). The RCEP would complement
China’s existing 15 preferential trade agreements, many of which were
signed with small economies that are not significant in China’s external
trade (e.g., Jiang 2010). During the last two years, however, China has
signed FTAs with Australia and the Republic of Korea, both important
trade partners (WTO 2016a; MOFCOM 2017). Some of the other FTAs
under negotiation that China might want to push forward with include
the China-Gulf Cooperation Council FTA and the upgrading of the
China-Pakistan FTA, as both are relevant for the OBOR initiative.
Furthermore, in recent years China has been one of the most active
countries in the world in concluding International Investment Agreements
that are highly relevant in light of the infrastructure investment projects
along the OBOR. The purpose of investment agreements is to liberalize
and protect cross-border investments, and to define procedures for dis-
pute resolution if mutual commitments are not met (UNCTAD 2016).
The most common type of these agreements is the Bilateral Investment
Treaty (BIT), which aims to promote and protect investments made by
enterprises or individuals from the respective countries in each other’s ter-
ritory. China has 110 such BITs in force, and several more signed but not
yet in force (UNCTAD 2017). The other type of agreement is called a
Treaty with Investment Provisions (TIP), such as China’s TIP with the
ASEAN countries. They can be treaties with limited investment-related
provisions, treaties that contain framework clauses only, or FTAs and eco-
nomic partnership agreements that encompass investment issues. Recent
examples of the latter are China’s FTAs with Australia and with the
Republic of Korea (UNCTAD 2016: 102).
In addition, China is working to negotiate investment agreements with
two major trade and investment partners, the EU and the United States
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    135

(ECN 2016a). The possible agreement with the EU has the potential to
facilitate and protect investments made under the OBOR initiative for a
railroad connecting the two continents. The EU and China have been
negotiating a bilateral investment agreement since 2014, and they agreed
on the scope of the deal in 2016 (DG Trade 2016). The future agreement
would aim to ease the regulatory environment, including transparency,
licensing, and authorization procedures on FDI. Moreover, China’s activ-
ity in the OBOR initiative has been noted, and has gotten a reaction within
Europe. One such response is the EU’s launching of the EU-China
Connectivity Platform in order to counterbalance the situation so that
China does not “hurry alone with the initiatives”.16 The Connectivity
Platform aims to foster transport connections between the EU and China
based on the Trans-European Transport Network (TEN-T) framework
and OBOR, and to promote green transport with projects based on sus-
tainability (COM 2017).

Discussion: The Prospects for Changing


Multi-­scalar Governance of Trade
China is striving to develop its inland provinces, as well as infrastructure
and transportation between major coastal cities and selected regions and
cities in its interior. Its objective is to balance regional differences, and to
shift some of the economic emphasis from congested first-tier cities to
second- and third-tier cities in the provinces. These regional development
goals are included in China’s current FYP and are brought into its inter-
national initiatives, such as OBOR.
This chapter has discussed China’s sub-national and international trade
policies related to OBOR, particularly the regulatory environment for
trade from the perspective of foreign businesses in China. The business
sentiments are understood as reflecting the ease of cross-border invest-
ments, which are at the heart of the OBOR initiative with its international
reach. The institutional framework affecting company-level operations in
China has been explored by analyzing the formal and informal institu-
tional constraints (North 1990; Peng 2003; Holmes et  al. 2013) that
firms encounter in their trade-related activities. It has been found that the
business outlook has recently become somewhat gloomier. Problems
include China’s security-related legislation, burdensome bureaucracy,
arbitrary enforcement of regulations, and worsened Internet access, all of
136   E. KETTUNEN

which make the regulatory environment more difficult for foreign compa-
nies. Business surveys and company interviews indicate that firms perceive
the enforcement of regulations, informal practices, and the treatment of
foreign companies as more unfair than the legislation itself. This points
toward informal institutions being a more relevant constraint than formal
ones for foreign firms in the Chinese business environment. However,
there are distinct regional differences in China as to the firms’ perceived
business confidence. European firms located in southwest China, for
example, observe being “more welcome” than firms in coastal cities. They
perceive less protectionism, unfair treatment, and discrimination by the
local authorities than firms located in first-tier cities. This potentially
enhances regional development in China’s interior, especially in the trans-
portation hubs along the “Belt”, such as Chengdu. Being a significant air,
rail, and highway transportation hub, the physical infrastructure for for-
eign and domestic trade in Chengdu is developing fast.
Furthermore, it is argued that the OBOR-related changes in China’s
regional policies will have marked implications on the regional orientation
of its foreign trade. For the OBOR initiative, there are three specific devel-
opments that can be discerned with regard to the possible changes in the
multi-scalar governance of trade in China. First, economic activities—
including foreign investments—continue to shift from China’s Eastern
coast toward the FDI hubs in its interior, such as Chengdu. This will fur-
ther increase China’s internal transport and cross-provincial trade.
However, the first-tier cities remain important major hubs as well. Second,
cross-provincial trade barriers are at a notably low level, and will be further
reduced along with the development of the inland provinces and the
transportation routes to and from major ports. At the same time, China’s
formal trade environment continues to improve, while informal con-
straints remain. Third, trade flows between China and Europe through
the Eurasian continent are expected to grow because China and the EU
are the two biggest markets in the OBOR initiative. This is an opportunity
for firms in inland provinces as it reduces the transport time for exports
and imports between China and Europe when compared to existing mari-
time routes. However, the eventual operability of the “Belt” route will be
subject to geographical and potentially political challenges.
In addition, in line with the OBOR policy, China is pursuing new FTAs
related to its transboundary projects, which it will facilitate through inter-
national cooperation within the AIIB. These FTAs, if concluded, will pro-
vide a transnational framework for the initiative at both political and
  THE ONE BELT ONE ROAD INITIATIVE AND THE CHANGING…    137

business levels. When it comes to regional development—and improving


the transport infrastructure as part of it—China’s previous priorities have
focused on developing its domestic network of roads and railways. Its
future priorities, in turn, focus on developing the rail and marine routes
abroad, connecting China’s inland hubs to foreign trade hubs in its OBOR
partner-countries.
The findings of this chapter support the idea that the regional develop-
ment aims of the OBOR initiative are reflected in the multi-scalar gover-
nance of trade in China. Striving to develop its interior, China wants to
ease the sub-national trade environments in inland hubs along the railway
routes that cross the mainland and extend into OBOR partner countries.
Inland hubs, such as Chengdu, compete for investments by offering a
more favorable business environment compared to coastal cities where
business is becoming tighter. National trade policy, reflected in the aver-
age tariff levels, remains somewhat protective. Internationally, govern-
ments in Asia and elsewhere seek bilateral FTAs to overcome the slow
multilateral process. China pursues new free trade agreements with
selected priority trade partners—the OBOR partner countries—in order
to liberalize trade and thus facilitate cross-border infrastructure invest-
ments for its OBOR initiative.

Notes
1. The growth rate of China’s real gross domestic product (GDP) was 7.8%
in 2013, 7.3% in 2014, 6.9% in 2015, and 6.7% in 2016 (World Bank
2017). China’s merchandise exports declined by 3% in 2015 and further by
8% in 2016, and, at the same time, merchandise imports declined by 14%
and 5%, respectively (WTO 2017a).
2. For the list of countries, see FBIC (2016).
3. The AIIB was established by China and 20 countries from Asia and the
Middle East in late 2014, and later extended to over 50 member-countries
including those from Europe (AIIB 2017).
4. Interview at a support organization, Beijing, October 19, 2016.
5. MFN is a tariff with Most Favored Nation status, that is, the lowest tariff a
country can apply to imports from another country. WTO members are
required to grant MFN status to other members.
6. Interview at a vehicle manufacturing company, Chengdu, April 9, 2015.
7. Interview at an IT services company, Chengdu, April 7, 2015.
8. Interview at a software company, Beijing, April 27, 2015.
9. Interview at a support organization, Shanghai, October 26, 2016.
138   E. KETTUNEN

10. Interview at a support organization, Shanghai, November 8, 2016.


11. Interview at an engineering and service company, Shanghai, 19 June 2017.
12. Interview at a support organization, Shanghai, 8 November 2016.
13. Interview at an IT services company, Chengdu, 7 April 2015.
14. It remains unclear, however, whether the company representatives were
asked about the concrete procedures at provincial borders, such as any pos-
sible payments collected, burdensome paperwork, or any other practices
that the cross-provincial checkpoints may have when goods are transported
from one province to another. In addition, it may be that the respondents
have no direct experience of the matter if their distributors take care of
cross-provincial transport.
15. Interview at a support organization, Shanghai, 26 October 2016.
16. Interview at a support organization, Beijing, 19 October 2016.

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CHAPTER 6

China’s Momentum: The “One Belt One


Road” Triple’s Securitisation

Paulo Duarte

Introduction
This chapter aims to understand how China is seeking to promote its
economic, political, military and cultural objectives in this new century.
Based on the assumption that the Chinese New Silk Road (called the One
Belt One Road—OBOR) is the instrument par excellence used by Beijing
to achieve such goals, I will analyse the geopolitical and geostrategic con-
tours embraced by the OBOR in both its maritime and land components.
To this end, I have adopted, at the methodological level, the conceptual
lenses of the so-called Copenhagen School, in particular the term securitise.
Thus, through a qualitative analysis, which focuses on understanding rather
than quantification, this chapter approaches the concept of securitisation,
while making clear that according to the Copenhagen School, in this
respect “the securitisation and the criteria for the securitisation are inter-
subjective practices, whereby a securitising agent tries to establish, socially,
the existence of a threat to the survival of a unit” (Duque 2009: 477).

P. Duarte (*)
Centro de Investigação em Ciência Política, The University of Minho,
Braga, Portugal

© The Author(s) 2019 143


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_6
144   P. DUARTE

Marina Duque explains that “when a subject is securitised, it comes out of


the scope of normal policy and moves into the scope of emergency policy,
characterised by the confidentiality and the disregard of the normal institu-
tional mechanisms —which usually legitimates, for example, the use of
force” (2009: 479). On the other hand, according to Buzan, Waever and
de Wilde, “a successful securitisation has three components (or steps):
threats to existence, emergency action and effects on the relations between
the units through the breaking of rules” (1998: 26).
Having said this, what is the conceptual relationship between that
which the School of Copenhagen establishes for the securitisation cases
and the logic inherent to the OBOR? Could one not argue, instead, that
the OBOR is a desecuritisation move? As regards the first question, it is
also important to find answers to the following questions: What is the
perceived threat, what is the securitising agent, what is the audience and
what is its reaction towards the construction of the threat? And, finally,
what are the extraordinary means to securitise? In the case of the OBOR,
the securitising agent is the Chinese government. However, the perceived
threat is not one factor, but a set of factors. In the political sphere, the
threat perceived by the government is that of the beginning of the collapse
of the regime. The fear that the Chinese Communist Party is pursuing the
same dangerous path that led to the sudden and unpredictable end of the
Soviet Union is, in fact, omnipresent in the minds of the Chinese political
leaders. Moreover, we notice when studying both political elites and the
Chinese society that the Party has, to a large extent, lost the mobilising
function it once held; today, it mainly assumes a role of regulation and
distribution, and its nature has become more state-run than partisan
(Duarte 2017). Another factor which is detrimental to the Party’s credi-
bility relates to the sociological change it has undergone. In fact, if the
Party once presented itself as the vanguard of the peasants and the prole-
tariat, it has presently become heterogeneous and strangely ambiguous,
and is now aiming to incorporate the ruling classes, which are often seen
as parasitological and outrageously corrupted groups (Pei 2015). To cir-
cumvent the difficulties that undermine the future of the Party, that is, the
perceived threat according to the Copenhagen School, the government
sees the OBOR as an extraordinary means to overcome the reasons for
internal discontent through an “ideological” effort. The Chinese society
(the audience) seems to comply with the OBOR’s appeal towards China’s
rejuvenation, concentrating the divergence factors not around the Party,
but around “noble” ideals such as the Space race, Taiwan, the Olympic
Games, the Chinese Dream and the win-win philosophy (Chang 2015).
  CHINA’S MOMENTUM: THE “ONE BELT ONE ROAD” TRIPLE’S…    145

At the economic level, the threat perceived by the securitising agent is


clearly the current state of China’s economy, which needs a boost to
resume the growth of recent decades. Everything is indeed connected.
The maintenance of the regime depends on its ability to maintain prosper-
ity, development and access to energy and food resources by a China that
is, in the end, the most populous country in the world. The government
therefore has devised the OBOR as a going abroad, with tacit approval of
the society which sees in this a legitimate and extraordinary means to get
from the world what China needs to achieve the Chinese Dream, imbued
with nostalgia and pragmatism, and, at the same time, to recover growth
(Cohen and Dalton 2016).
At the military level, in turn, China is not a country predisposed to war.
It never was in the past. Above all, China supports a regional peace envi-
ronment (the inevitable issues of Xinjiang and the Central Asian periphery,
or the troubled South China Sea, or even the Koreas), conducive to the
fulfilment of its economic and social goals. The “harmonious society” and
the “Community of Common Destiny” are unlikely to be achieved in war-­
mongering environments. However, being a pacifist does not mean adopt-
ing a laissez faire attitude. The government is aware that the armed forces
are a source of prestige and deterrence, but may also provide a rapid
response to situations potentially triggered by third parties. Thus, the fact
that this article presents the vision of other authors on the militarisation of
railroads or ports (the case of Djibouti, or the String of Pearls) does not
necessarily mean that the OBOR is, in its essence, war-mongering. On the
contrary, this is simply to acknowledge that the OBOR is a multifaceted
strategy by which to respond to threats in the economic, political, cultural
(to promote a better image of China) and military spheres. As this author
conceives it, in this context, militarising means ensuring the security of
supply lines by land and sea, not opening an attack, but knowing how to
defend oneself if attacked. After all, what does the first Chinese anti-­
terrorism Act, approved in late 2015, signify? It recognises that the coun-
try needs to adapt to the new era, providing the armed forces with the
right and duty to act abroad in defence of Chinese interests when and if
threatened by terrorist winds (Annual Report to Congress 2016).
For all these reasons, and thus responding to the second question raised
above, it does not seem plausible to this author to suggest that the OBOR
is an effort of desecuritisation, in so far as desecuritising involves returning
to normality, abandoning the extraordinary means and the legitimacy of
the threat. At least for now, this does not seem credible. Politically, the
146   P. DUARTE

regime is facing several disputes (the case of Hong Kong) and a perception
of vulnerability (as explained above). In the economic sphere, the threat is
as evident, or even more so: the OBOR aims, therefore, at exploring new
markets and maintaining the existing ones to improve the economy (Stone
2016). In the military context, the evolution of the economic situation is
presently uncertain: Taiwan, Xinjiang, the South China Sea, among oth-
ers, require a response ability (never attacking in the first place, it should
be noted), if national interests are compromised. It certainly makes sense
to speak of desecuritisation, but only when the threat disappears or, at
best, is substantially mitigated.
My analysis is structured in four stages. I will start by investigating the
reason for a New Silk Road, and continue by highlighting the soft nature
of the Chinese strategy. In the third and fourth sections, I will seek to
understand the challenges of the land component of the OBOR, studying,
in the final section, the characteristics of its maritime component. In antic-
ipation of the main conclusions, I will try to demonstrate that the OBOR
is a strategy of hybrid securitisation, the fruit of the harmonious interde-
pendence between the land and maritime aspects, as well as of the soft and
hard powers inherent in them. However, it is not unreasonable to specu-
late that this will remain a project for decades, if not generations. The
latter aims at developing a high-speed connection between China and the
other world countries, by land and sea, allowing us perhaps, as in the
famous maxim “all roads lead to Rome”, to predict that, in the future, all
logistical ties will contribute to making China a global mega-hub.
Furthermore, we can anticipate a (re)union of Europe with the heartland,
with all the geoeconomic and geopolitical implications resulting from this,
to the detriment of the long transatlantic supremacy, which may thus be
weakened. This is, in fact, the great contribution of this chapter at a time
when studies on the Chinese New Silk Road are still scarce, since after all,
the Chinese project is itself of a recent date.

Why a New Silk Road?


In order to understand the essence of the concept of the New Silk Road
(which is fundamental in the present chapter), it is important, first of all,
to go back to its historical roots, that is, to return briefly to the glorious
past of the ancient Silk Road. In one sentence, the so-called Silk Road,
whose name derives from the lucrative silk trade during the Han dynasty,
consisted of a series of trade routes—approximately 8000 km long linking,
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more than 2000 years ago, the economies of South, East and West Asia to
the Mediterranean and the European continent, as well as to a part of
North and East Africa (Duiker and Spielvogel 2015). Products such as tea,
porcelain and silk but also philosophies, religions and technologies left
Chang’an (today Xi’an, the capital of China’s Shaanxi province) and trav-
elled across Central and Western Asia to the European continent (Beijing
Review 2014), which explains why the Silk Road was an important eco-
nomic and cultural link between the different civilisations.
By constituting a bridge between East and West where traders, pil-
grims, monks and soldiers travelled, the Silk Road being the largest and
the most prosperous trade route of its time played a key role in the devel-
opment of the Indian, the Chinese, the European, the Egyptian and the
Persian civilisations, among others (Frankopan 2015). In fact, contrary to
the maritime routes, land routes enabled caravans to interact with differ-
ent cultures and communities until they reached their final destination,
thus facilitating the exchange of knowledge, experiences and beliefs
(Chanda 2015). Authors such as Sibal suggest that the ancient Silk Road
evoked “China’s role in world trade [of the past]” and also “China’s eco-
nomic superiority of long ago”, which the country wants to recover in the
current context (2014: para. 5–6). In this regard, Sibal stresses that “the
ancient Silk Road symbolised China’s connectivity to the outside world”,
which, according to the author, is today “the focal point of the current
economic and commercial strategy” of the country (2014: para. 7). In
modern times, trade along the Silk Road would gradually decrease, and
developments related to maritime transport would cause the cost of trans-
port by sea to become lower than that by land. On the other hand, the
political situation in the region was also decisive for the decline of the Silk
Road. All these factors dictated the gradual replacement of camels and
mules by vessels, concomitantly with the preference for sea routes over
land routes through Central Asia (Chanda 2015). Therefore, the Silk
Road crashed as a trade route around the year 1400, although some six
centuries later, as I will discuss below, the concept seems to re-emerge.
In practice, the aim of the revival of the corridors between the East and
the West is to achieve full and multiple securitisation in the political, eco-
nomic, military and soft power spheres. At the same time, Snelder’s
remark is interesting and relevant, stating that “the revival of the Chinese
Silk Road is not only reminiscent of the mythical history, but it also says a
lot about the strategic direction of the country” (2014: para. 2). Beijing
sees it as a way to find new markets (while preserving the existing ones),
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to reduce the imbalance of development between its coastal provinces and


the poor interior regions, and to preserve national stability and that of the
surrounding areas. Besides the focus on the development of China’s
inland provinces, another major goal of the New Silk Road is the issue of
stability, as Snelder noted above; however, these objectives are inseparable
in practice as development is hardly possible without ensuring stability
first. In this respect, the New Silk Road development is largely led by
Xinjiang’s development and stabilisation strategy, which Beijing wants to
protect from any terrorist or separatist aspirations, ensuring that, at the
same time, this province will continue to provide the rest of the country
with the natural and energy resources essential to the growth of its econ-
omy (Zhao 2015).
This Chinese attempt to securitise the western flank is now reaching a
moment that is particularly marked by tensions and maritime disputes in
China’s eastern flank. But unlike what is happening in the South and East
China Seas, where, from a military point of view, the United States is
(more) present, Chinese incursions in Central Asia have quite an open
path, as long as they are not involved in a geostrategic conflict with Russian
interests, since, after all, this is not only China’s near abroad, but also
Moscow’s. This is indeed the understanding of experts such as Sharma,
according to whom “with the U.S. and NATO withdrawal from
Afghanistan underway […], and the Russian economy under sanctions for
its role in the Ukraine crisis, China appears comfortably placed to pursue
its interests in the region” (2015: para. 2).
Alongside the dialogue, high-level meetings and the strategic partner-
ships mentioned above, the New Silk Road diplomacy largely uses eco-
nomic cooperation as an essential tool to build bridges with neighbouring
countries. This implies, among other things, the signing of preferential
agreements, including Free Trade Agreements, but also the granting of
credits and preferential loans, which favour mainly the areas of energy,
infrastructures and cooperation through the construction of “railways,
highways, gas pipelines and oil pipelines” (Future Watch Report 2016:
3). Focusing on an integrated network of regional transport, as in the
case for the high-speed rail projects, the aim is to develop the Chinese
western provinces and also meet the needs of the country in terms of
natural resources.
Another reason that justifies the importance of the New Silk Road as an
instrument for securitisation of Chinese interests, concerns the momen-
tum that this mega-project will bring to the Chinese economy, regarded in
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a holistic way (i.e. not only at the level of remote provinces such as
Xinjiang). In this regard, Esteban and Otero-Iglesias identify four
­economic areas in which the New Silk Road can be decisive: “driving the
internationalisation of its construction industry, encouraging exports,
reducing risks in the supply chain and attracting investments towards the
interior of the country” (2015: 6). Metaphorically, the New Silk Road is a
two-way route, either by means of the inducement to expansion of Chinese
companies around the world, or in the invitation to foreign investors to
privilege the Chinese market. On the other hand, Cohen and Dalton
(2016) predict that the New Silk Road might become an important alter-
native and lever for the economy at a time of a slowdown in the construc-
tion sector in China, in that it may provide Chinese construction companies
with promising profitability opportunities abroad.

A Soft Strategy
The idea—which remains in China—that “[soft power is] an aspect of the
“comprehensive power”, an important indicator of a state’s international
status and influence, and a tool for maintaining advantageous positions in
international competition”, (Sanguanbun 2015: 22) has gained in impor-
tance among Chinese strategic circles. It is in the light of this understand-
ing of soft power as an instrument “inseparable from China’s rise”, and
likely to help to achieve “a peaceful and stable international environment”,
that we understand the importance of this in Xi Jinping’s foreign policy
(Sanguanbun 2015: 22). In fact, it is President Xi Jinping himself who
recognises the soft power potential: “We should increase China’s soft
power, give a good Chinese narrative, and better communicate China’s
message to the world” (Xinhuanet 2014: para. 4). Xi Jinping’s message
assumes a holistic perception of soft power which is likely to include the
aspects of the Chinese foreign and domestic policies in an organic whole,
leading to the idealisation of the concept of a “harmonious society”
(Sayama 2016). This is the opinion of authors such as Sanguanbun,
according to whom “China’s development of soft power is an important
task in its highest development strategy of building comprehensive national
strength while ‘maintaining internal stability’” (2015: 22). Therefore, it is
in this perspective that Beijing has announced its New Silk Road to the
world, that is, in a holistic dimension, according to which the securitisa-
tion of the periphery (e.g. Central Asia) at the same time enables the
ensuring of access of the remote provinces (such as Xinjiang) to a network
150   P. DUARTE

of transport and multimodal services aimed at breaking its isolation


(Clover and Hornby 2015). As a result, the logistics behind the New Silk
Road will encourage economic development and stability at the national
level, as well as at a “more macro” level, that is, extending to other Chinese
provinces, as well as to the countries which are receptive to the spirit of the
New Silk Road (Brown 2015).
That said, Beijing conceives soft power as a tool that can help mitigate,
in the long term, the theory of a “China threat”, quite widespread not
only regionally but also globally (Severson 2012: xix). As Gao says,
“China’s use of soft power abroad is characterised by defensive purposes
such as cultivating a better Chinese image, correct misperceptions of
China and deter Western cultural and political incursions in China” (2015:
10). The Chinese “charm strategy” encompasses diplomacy, cooperation,
and a more active role within the framework of regional organisations, or
at the level of multiplication of multilateral cooperation forums with Asian
partners. In addition, there is a growing interest in reshaping the interna-
tional financial institutions in order to strengthen the global economy and
offer China a more powerful voice in such institutions (Tiezzi 2015). The
goal is clear: “to promote an environment conducive to economic coop-
eration, to the strengthening of political confidence and regional security”
(Zhang 2012: para. 6).1
After all, the New Silk Road provides China with a securitisation model
characterised by a set of interests, ranging from politics to the military
plan, through energy security (inserted into the economic objectives lato
sensu), among others. As Grimm notes: “China made a wise choice in
using the strong appeal and confidence-inspiring symbolism of the Silk
Road as its sole strategy for developing its soft power” (2015: 2). Although
the New Silk Road project is a great means of Chinese soft power (provid-
ing it is successful), another aspect not to be overlooked in what concerns
the effort of the Chinese “charm offensive” has to do with the fact that
“the number of Confucius Institutes established abroad has grown from
more than 40 in the United States, and 260 in 75 countries in 2009, to
896 in 108 countries in 2014” (Sanguanbun 2015: 22). Moreover, since
Hu Jintao, in 2007, recognised the need for a strong focus on soft power,
“China has spent billions of dollars in the years since on ‘soft’ initiatives”
(ICEF Monitor 2016: para. 4). Xie Tao points out here, as examples,
“improving the communication capabilities of [Chinese government’s]
media outlets like CCTV, organizing mega events such as the Olympic
Games and Shanghai Expo, […], hosting summits attended by dozens of
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world leaders (e.g. APEC), and sponsoring forums on regional security


and prosperity (e.g. the Boao Forum)” (2015: para. 6). In addition to
this, initiatives such as the cancellation of external debt, the organisation
of exchanges of students and technicians, the granting of scholarships and
loans often more advantageous than those provided by the “Western
States”, the construction of logistics infrastructures in several countries,
among other aspects, also attest a remarkable effort of soft power (Sárvári
and Szeidovitz 2016).

The Securitisation of Land Routes


The Chinese New Silk Road includes two complementary initiatives: land
corridors and maritime routes. Since there are not only three routes, but a
network of corridors either already in operation or being planned to con-
nect the East and the West, it is therefore not surprising that different
authors envisage different possible itineraries for the Chinese New Silk
Road, whose contours still need a (broader) definition. In addition, it
remains uncertain whether the New Silk Road will be implemented
through a series of bilateral agreements with individual countries or
between China and regional bodies (Preston et al. 2016).
In what concerns the other links within the New Silk Road, the railway
networks are an important logistic alternative likely to help transporting
more effectively Chinese products into European and Central Asian mar-
kets (Lanjian and Wei 2015). It is not accidental, therefore, that Sahbaz
reports that “the Chinese Government has recently made railway connec-
tivity a central feature of its new economic development strategy”, which
focuses on the “development of inland connections to address the conges-
tion in China’s eastern regions (i.e. congested ports and rising labour and
land costs)” (2014: 3). Railways are an important logistic alternative
within the framework of the Chinese New Silk Road since Chinese goods
shipped by train to Western Europe take only 16 days (from Chongqing)
to reach their destination, whereas sea transport requires about five weeks,
with significant delays, in some cases (Stone 2016). The only disadvantage
of transporting a container by rail is that it costs about 7000 dollars, which
is almost three-and-a-half times the cost of sea transportation, although
only a third of the price paid for transportation by air. The rail option
allows more effective economic and logistics securitisation in the handling
of goods “[which are] sensitive to humidity, perishable or of high value
and are not worth transporting by air because of their volume or weight”
(Esteban and Otero-Iglesias 2015: 3).
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Even if it is understandable at first sight that Beijing is seeking to secu-


ritise logistical access to its Central Asian periphery, in which “[high-speed
railways] begin with China Urumqi via Kyrgyzstan, Uzbekistan, Iran and
Turkey to Europe”, the Iron Silk Road does not stop there (Lanjian and
Wei 2015: 317). In fact, this is a global project, likely to (re)draw and
revolutionise the infrastructure of communications and the transportation
of people, goods and capital across the globe, literally speaking. Therefore,
even if it is a priority for China to begin by securitising its access to the
European continent, Beijing is aspiring, in the long term, to more ambi-
tious challenges, such as connecting China to North America2 by rail, or
even joining the Pacific to the Atlantic3 (Lanjian and Wei 2015).
Considering that Chinese engineers have proved repeatedly that they were
able to overcome obstacles often considered as technically and logistically
impossible, we can speculate that the Chinese strategy in the coming
decades (not years) may not be limited just to the securitisation of the
logistical links between East and West. Instead, China’s strategy aims at
making the country a global “mega hub” where all paths/directions will
tend to converge (Colakoğlu and Sakaoğlu 2015).4
In addition to the reasons already given, the railways play an extremely
important role as regards military and logistical securitisation of the
Chinese New Silk Road, insofar as they are part of the defence strategy and
China’s projection of power in Eurasia, protecting supply lines and allow-
ing possible militarisation (Minnick 2015). In the context of the “Great
peripheral strategy”, Pandey and Kusum explain that China is willing to
adopt “proactive military actions along several theatres” (2011: 2). In this
sense, the “militarisation” of railways within the Chinese New Iron Silk
Road aims to ensure rapid mobilisation of troops if necessary. This aspect
of the military securitisation associated with the Chinese land New Silk
Road makes the railways strategic instruments at the disposal of the
People’s Liberation Army (PLA). In this respect, Christina Lin states that
“[the latter] has already used the Shanghai-Nanjing express railway to
transport troops at speeds up to 350 kilometres per hour, touting the
practice as an ideal way to project personnel and light equipment in mili-
tary operations other than war” (2013a: 37).
Although Lin’s contribution is interesting in the securitisation debate,
in practice, it is important to recognise that China seems to be more inter-
ested in the protection of the maritime supply lines (as I will analyse later)
than in the militarisation of the railways. It is certainly possible to provide
in advance some explanations concerning China’s priority focus on the
  CHINA’S MOMENTUM: THE “ONE BELT ONE ROAD” TRIPLE’S…    153

securitisation of sea lanes, to the detriment of the choice of the railroad for
troop transport at the regional level. Among the reasons that seem more
plausible, I emphasise the fact that the overwhelming majority of world
commodities and, therefore, most of the Chinese exports and imports
circulate by sea, which explains why it is crucial for Beijing to maintain an
uninterrupted use of sea lanes. It must be acknowledged that the transpor-
tation of troops by rail (although possibly effective as Lin suggests),
depends on factors such as external authorisation (in particular of the issue
of sovereignty) for the construction of high-speed railway lines, and also
for the transit of troops and war material.

The Securitisation of Maritime Routes


While China is promoting the revitalisation of the trans-Asian land corri-
dors, it is also supporting the promotion of a maritime New Silk Road.5
Authors such as Chaturvedy (2014) suggest that the Chinese maritime
New Silk Road should be understood as an instrument at the service of a
“Grand Strategy”, which, in turn, is based on the defence of Chinese
national interest and on the pursuit of, for instance, strategic access to
natural resources, markets and flow and transport routes. Thus, we under-
stand the importance of developing a logistics network, including sea-
ports, corridors, maritime, land and even air routes. However, the maritime
New Silk Road is facing a significant challenge, in that the process of mod-
ernisation of the Chinese Navy (inherent to the securitisation of maritime
corridors) has aroused the apprehension of neighbouring countries regard-
ing China’s intentions in the regional context (Swaine 2015). Therefore,
despite the emphasis that Beijing is placing on the advantages of the mari-
time New Silk Road for ASEAN countries, the reality is that, paradoxically,
the exacerbation of the maritime disputes in the South China Sea and the
modernisation of the Chinese Navy have made the United States to
approach ASEAN countries, while we are witnessing a race for naval rear-
mament in the region (Thayer 2015).
Similar to what happened with the railways that incorporate the Chinese
New Silk Road, China is also aiming to equip seaport infrastructures with
a military dimension, in addition to their civil utility. In other words (and
according to my assumption), the Chinese New Silk Road assumes com-
plete securitisation, since, in addition to energy-related, cultural, commer-
cial and financial (to expand the renminbi), logistical and political aspects,
it also includes a military securitisation effort. In this regard, Lin explains
154   P. DUARTE

that “Chinese naval vessels have embarked on active diplomacy in the far
seas, with regular port calls and ‘show of flags’ in the Gulf of Aden where
it conducts anti-piracy missions, as well as in the Mediterranean Sea and
the Black Sea, where China has acquired various seaports in the littorals”
(2013b: 12). However, in the context of the Chinese New Silk Road, mili-
tarising ports means equipping them with a set of tools that allow them to
be used for “military operations other than war”. And what are these
tools? As regards the need of mobilisation of Chinese troops for a zone of
instability, as in Africa (where China has concluded, for instance, impor-
tant energy and commercial agreements with local countries), Lin (2011:
20) stresses:

The construction of secure, joint civil military use airfields with associated
support facilities (hangars, terminals, fuel storage, etc.) capable of support-
ing heavy lift aircraft (e.g., C-17, Boeing 777s etc.); modernisation of stra-
tegic port facilities, especially in central regions of both Africa’s eastern and
western coasts. […].

The “military operations other than war” have a double strand: “to
both defend China’s overseas interests and provide public goods to the
international community” (Ghiselli 2015: 14). When speaking of the mar-
itime New Silk Road, it is essential to refer to the “String of Pearls”. Why?
Because this is fundamental in the context of the militarisation of the port
network, as well as of the securitisation of the Chinese New Silk Road
maritime corridors. In the event of a conflict, China fears an oil embargo
by the United States (the action of securitisation),6 and therefore Beijing
has promoted the creation of onshore bases, responsible for the protection
of its supply routes (Holmes 2016). The “String of Pearls” is an “artificial
coastline”, formed by logistic and diplomatic support points along the
main navigation routes (from Myanmar to the Strait of Hormuz), which
allows China to monitor the Indian Ocean (Kleven 2015).
By negotiating such a project with the Indian Ocean states, that is,
ensuring permanent surveillance of the Indian Ocean maritime lines and of
the long distance of Chinese bases, China is, however, entering a sphere
that India considers as its near abroad. It follows that with every Chinese
attempt to securitise the access to key ports of the Indian Ocean, New
Delhi responds, in turn, through a diplomatic counteroffensive of soft
power, which often includes economic support to the states in the region,
in order to contain China’s logistic, energy and military securitisation
  CHINA’S MOMENTUM: THE “ONE BELT ONE ROAD” TRIPLE’S…    155

(Pejsova 2016). In this regard, the “String of Pearls” is a sort of “cat and
mouse” game between China and India in which each power is seeking to
contain the advances of the other in the Indian Ocean. The main beneficia-
ries of this geopolitical and geostrategic competition are states such as
Myanmar, Bangladesh, Maldives, Pakistan, Sri Lanka, Seychelles, which are
seeking to maximise their economic interests (Mullen and Poplin 2015).
Authors such as Singh (2015) argue that Chinese maritime incursions
into the Indian Ocean are not recent, insofar as it has been a while since
China was seeking to expand its strategic presence in the region. However,
the operations to combat maritime piracy in the Gulf of Aden, as well as in
the other sea routes linking the Indian Ocean to the Suez Canal and, more
recently, the impetus for the expansion of economic ties between China and
the rest of the world (as advocated by the Chinese New Silk Road) explain
the increase of Chinese naval activities in the Indian Ocean (Philipp 2015).
Or at least in part, as for experts such as Struye, “this presence hides an issue
that goes beyond the fight against piracy: the domination of communica-
tion channels, because through this deployment, we notice a tacit dispute
between great powers to control the sea routes that go from the Strait of
Bab el-Mandeb to the Strait of Malacca, world trade arteries” (2009: 8).
Blasko believes that “the shift to a more maritime-oriented mindset and
force structure is an evolutionary step necessitated by growth in all aspects
of China’s comprehensive national power” (2015: 6). In fact, the securiti-
sation dynamics inherent in the String of Pearls in the Indian Ocean
reflects, in my view, the economic imperatives described by Blasko. That is
to say, China wants its Navy to be a guarantee that nothing fails at the
economic level, in such a way that the military securitisation of Chinese
incursions on land and at sea are complementary and intrinsic to the eco-
nomic, energy-related, political and cultural7 securitisation that underlie
the Chinese New Silk Road. Thus, any attempt at interpreting what China
wants from the sea, or the purpose of a String of Pearls in the Indian
Ocean or the reasons that lead Beijing to modernise its Navy or the con-
struction of artificial islands in the South China Sea or, in a broad sense,
the securitisation of maritime lines, should take into consideration the
evolution of the Chinese naval doctrine. In fact, we are witnessing today a
physical change, in the sense of an increasing modernisation of military
means, which is accompanied by an evolution of the strategic reflection
(Martinson 2016). This strategic reflection is inspired by, among other
theoretical contributions, the thesis of American Alfred Mahan. For him,
“the domination of the seas must be a priority given the freedom of the
156   P. DUARTE

seas and the exploitation of the commercial maritime routes: trade needs a
merchant marine and a navy to protect it, as well as support points (refuel-
ling and reparation) on the maritime routes” (cited by Struye 2009:
11–12). Within the framework of the securitisation efforts inherent to the
String of Pearls, which is, in turn, an important component of the Chinese
maritime New Silk Road, I consider it pertinent to speak of two “pearls”
which are particularly important: Gwadar and Djibouti.
By analysing the geopolitical and geostrategic contribution of Gwadar,
I expect, in fact, to understand how China is trying to securitise its energy
supply. Gwadar is one of the Indian Ocean ports with overland links to
western and southern China that would help the Middle Kingdom to
avoid the Malacca Dilemma. If, in logistic and energy securitisation, the
China-Pakistan Economic Corridor will include “the construction of high-
ways, railways, and natural gas and oil pipelines” at the geopolitical level,
“China’s participation in Gwadar will also allow it to expand its influence
in the Indian Ocean, a vital route for oil transportation between the
Atlantic and the Pacific” (Foreign Affairs 2015: para. 2). As explained by
Carriço, “Gwadar will be an interesting alternative to the flow of energy
reserves from Central Asian Republics, because the distance from Kusha
(to Turkmenistan) until Gwadar is 1200 km, compared to the 3400 km
which separate it from the nearest port of Odessa, on the Black Sea”
(2011: 497). It should also be noted that Pakistan provides China with a
trade and energy corridor by Gwadar, through which the oil from the
Middle East stored in refineries in Gwadar will travel to China through
pipelines and railroads (Bhattacharjee 2015). This corridor offers a shorter
route between Western Asia and China, allowing “considerable savings in
time and shipping costs”, since, as Ramachandran explains:

The current route for transporting oil and other commodities from western
Asia to Chinese ports, which is via the Straits of Malacca, is roughly 12
000 km long. It is another 3 500 km of overland travel from Chinese ports
to Xinjiang. In comparison, the route from Gwadar Port to Xinjiang is just
3 000 km. (2015: para. 7)

In terms of “Military Operations Other than War”, the logistics inher-


ent to the China-Pakistan Economic Corridor can help China securitise its
interests through quick mobilisation of troops and military equipment
from sea ports to the interior, or from the railroads towards ports for ships
which will then displace to a theatre of war offshore (Sakhuja and Khurana
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2016). Still in the field of military securitisation, Gwadar can provide an


observation post (and even a support station) for the Chinese People’s
Liberation Army, as this is “strategically located just outside the Strait of
Hormuz, through which 40% of the world’s oil traffic circulates”
(Vandewalle 2015: 6).
Now, let us analyse the importance of Djibouti in the context of the
logic of securitisation inherent to the Chinese maritime New Silk Road.
The choice of Djibouti for hosting the first Chinese naval base abroad was
based on a technical, economic, political, military and soft power logic.
First of all, the choice of the location, in the Horn of Africa, fits geostrate-
gically in the operations of fight against maritime piracy and, therefore, in
the securitisation of maritime lines. In fact, the geographic location of
Djibouti with its maritime borders with the Red Sea and the Gulf of Aden
makes this country a crucial traffic artery for ships passing through on
their way to Africa, Asia and Europe (Orion 2016).
From logistical and technical points of view, the first Chinese military
base abroad will be built in a country (Djibouti8) that houses other foreign
military forces simultaneously, that is, French, Japanese, German, Italian
and American. In my opinion, the construction of China’s first military
base abroad certainly provides various geopolitical interpretations, which,
in turn, are still influenced by certain prisms of values and/or schools of
thought (e.g. realist, liberal, constructivist, among others). However, if we
look at the evolution of the Chinese naval doctrine towards greater prag-
matism and the defence of China’s interests abroad, we may conclude that
ultimately, the rationale inherent in the construction of the first Chinese
base in Djibouti fits into a continuing effort to promote and ensure secu-
rity. Indeed, if yesterday’s China had built its first aircraft carrier, Liaoning,
or if Beijing had decided, although in operations coordinated with other
superpowers, to send its Navy into waters affected by piracy, it is relatively
likely that today’s China would maintain its pragmatism, adopting new
measures. In this regard, Djibouti and, likewise, the essence of China’s
New Silk Road must be understood in the light of the interests of a power
which are inspired in Mahan’s thesis, by noting, as I have explained, that
the trade needs a Navy to protect it.
To find more elements that attest to the securitisation of naval interests
and that help us understand the raison d’être of a Chinese naval base, as
well as the reason for a Chinese aircraft carrier, we may study in particular
the content of the 13th Five-Year Plan. Although the previous five-year
plans recognise the ocean as a source of resources which are likely to stim-
158   P. DUARTE

ulate China’s economic development, it is the 13th Five-Year Plan that


introduces a new Chinese perspective on the sea (Martinson 2016). China,
which until the emergence of the 13th Five-Year Plan had prioritised land
over the sea, would become “a land sea hybrid State”, recognising, through
“land-sea coordination”, introduced by this plan, that land and sea are
complementary and part of an “organic whole” (Martinson 2016: 16).
In operational terms, Beijing is increasingly investing in a sea denial9
strategy and therefore gradually moving away from the simple defence of
the Chinese coasts. However, in order to carry out military operations in
the open ocean (which requires a blue-water navy10), some quantitative,
qualitative, spatial, and temporal stages must be gradually overcome.
Although “the growth of China’s shipbuilding industry [is] more rapid
than any other in modern history”, as acknowledged by Erickson, among
others, this expert believes that “around 2030, the Chinese Navy would
still be in the early stages of increasing operational proficiency and its abil-
ity to engage in high-intensity operations in distant waters” (2015: 2).
According to Erickson’s projection, however, this does not prevent the
People’s Liberation Army (PLA) from introducing, in 15 years, conditions
to “actively oppose U.S. Navy operations in a zone of contestation for sea
control in the Yellow, East China, and South China Seas, while extending
layers of influence and reach far beyond” (2015: 2).
Although the PLA modernisation occurs in a quantitative, qualitative
and temporal way, the military securitisation of China’s maritime interests
also requires progressive space overcoming. Therefore, even though
Beijing’s military interests are concentrated in the South China Sea, the
South Pacific, although distant, is important in the context of the securiti-
sation of maritime routes and the so-called projection of power. Indeed, in
a context in which the Chinese Navy has already indicated its intention to
operate regularly beyond the first chain of islands, which separates the
South and the East China Seas, and the Yellow Sea, from the Pacific Ocean,
Yu reports that “the Pacific Islands serve as a second chain of islands, as
the United States call it, to restrict the global freedom of manoeuvre of
the Chinese People’s Liberation Army navy” (2015: 1). Therefore, from
the point of view of geostrategy and the securitisation of military interests,
overcoming the second chain of islands is essential for China. Because in a
potential scenario of hostility that will allow Beijing to prevent any attempt
to contain its Navy (by a rival power) and, then, because the control of the
second chain of islands is essential for the transformation of the PLA’s
Navy in a “blue-water navy” (Yu 2015).
  CHINA’S MOMENTUM: THE “ONE BELT ONE ROAD” TRIPLE’S…    159

Final Remarks
Despite India’s apprehension regarding the so-called String of Pearls, I do
not consider this to be an “unusual” behaviour for a great power like
China. In fact, if we take into account the Chinese (re)emergence and the
strong nationalism that characterises today’s China, it can be expected that
the country conceives the ocean not only as an instrument of securitiza-
tion, since the great majority of the oil it imports crosses it, but also as a
means of power projection. And, in this sense, China adopts a behaviour
similar to that of other maritime powers in the past. Much has been specu-
lated about the nature of Chinese interests in the port of Gwadar and in
what will be the first Chinese naval base abroad (Djibouti). However, the
great “surprise effect” that this causes, in my opinion, lies not so much in
the desire to build overseas bases, but in the fact that the Chinese foreign
policy is, in essence, a non-interference policy. But, even in this context,
we must be prudent. Indeed, although the “new” Xi Jinping’s China has
already given evidence that its conception of International Relations is
dynamic and pragmatic, is it not acceptable for the country to worry about
protecting the diaspora and the Chinese interests worldwide? In this sense,
I consider Djibouti not as a real military base, or as a sort of war-­mongering
provocation to military dominion of powers like the United States, but
rather as a logistics facility likely to serve military operations other than
war, and as a symbol of the legitimate interest of a power that is concerned
with securitising the energy flows in a region mined by maritime piracy.
Ultimately, the Chinese New Silk Road aims at the peaceful (re)emergence
of a China nostalgic of its past of glorious feats, though imbued with exac-
erbated nationalism and the pursuit for legitimacy of a regime whose con-
tinuity and credibility are worrisome. In this sense, the New Silk Road is
made not only of infrastructures and investments, connectivity and “thirst”
for resources but also of a narrative that the government is constructing
for “internal consumption” and in order to allay the fears of the interna-
tional community regarding China’s real intentions in this century.
It is essential that we begin by overcoming the bureaucratic obstacles
and mistrust between states, in addition to China, which are involved in
the revitalisation of all this network of logistic corridors so that this
extraordinary venture may result in more intense accomplishments. The
evolvement of the visions of the different actors towards Central Asia, and
the initiatives associated with this, may (or may not) dictate the inversion
of conventional theories that tend to consider the region as an “isolated
160   P. DUARTE

island” in the world map. In fact, I believe that, in the context of the
reconfiguration of the regional and world powers, the Eurasian heartland
will gradually emerge from its isolation, which is quite telling about
America’s future position in a world where more people may be travelling
across Eurasia by rail than flying across the Atlantic to the United States.
This may in fact be the beginning of an extraordinary geopolitical, geo-
strategic and geoeconomic world reconfiguration.
I encourage other works and researchers to investigate to what extent
Gwadar and the China-Pakistan Economic Corridor will help Beijing miti-
gate its dependence towards Malacca by operating a corridor which allows
Xinjiang’s logistic and energy access to the Indian Ocean. Moreover, it will
be interesting to understand what role the PLA can have within the
Chinese New Silk Road, as well as to know whether Djibouti will be an
“irreversible” precedent in the construction of several support bases for
the securitisation of Chinese shipping supply lines.

Notes
1. More recently, China has sought to expand its soft power through a series
of initiatives. Morrison, recalls, for example, that in July 2014 “China,
along with Brazil, Russia, India, and South Africa, announced the creation
of a $100 billion ‘New Development Bank’”, or that “in October 2014,
China launched the creation of a new $100 billion Asian Infrastructure
Development Bank”, or even that “in November 2014, China announced
that it would contribute $40 billion to a new Silk Road Fund designed to
improve trade and transport links in Asia”, and, that “in April 2015, China
announced that it would invest $46 billion in infrastructure development
in Pakistan” (2015: 42).
2. By building for this purpose an underwater tunnel of a length of about
200 km at the Bering Strait. According to Lanjian and Wei, “the whole line
shall total about 13,000  km, if built, it will eventually connect Beijing,
New York and even Washington D.C.” (2015: 318).
3. The Two Oceans Railway refers to a railway construction project of about
5000 km that passes through the South American continent, connecting
the Pacific and Atlantic coasts (Lanjian and Wei 2015).
4. I am obviously in an area of pure speculation, but in geopolitics, I believe
it is not inappropriate to exclude prospective scenarios, especially consider-
ing that the time scale for the implementation of global securitisation
would be generations or decades, and that China has been able, as an
ancestral power, to wait for its time.
  CHINA’S MOMENTUM: THE “ONE BELT ONE ROAD” TRIPLE’S…    161

5. For this purpose, President Xi Jinping has focused, among ASEAN mem-
bers, his speech on a “win-win” strategy, on the apology of a “shared des-
tiny between China and ASEAN members”, explaining that “China is
ready to open itself wider to ASEAN countries” and to enable them to
“profit more from China’s development” (Wu and Zhang 2013: para. 11).
6. The perception of the threat, according to the theory of the Copenhagen
School.
7. At the cultural level, I underline the aspiration to China’s rejuvenation, as
advocated by Xi Jinping.
8. Whose area is less than that of the city of Chicago.
9. Sea denial is a military term that describes the attempt to deny, to the
enemy, the use of the sea (usually through maritime and/or port
blockades).
10. The term “blue-water navy” means a naval force capable of operating in
deep waters of open oceans.

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CHAPTER 7

Unpacking Economic Motivations and Non-


economic Consequences of Connectivity
Infrastructure Under OBOR

Ritika Passi

Introduction
With the introduction of the One Belt One Road Initiative (OBOR),
Chinese President Xi Jinping heralded a new era of Chinese integration
into the global economy. The twin strands of the project, the overland Silk
Road Economic Belt (SREB) and the twenty-first century Maritime Silk
Road (MSR), beckon better connectivity across the Eurasian continent as
well as outreach to Africa. Together, they cover 65 countries that account
for 70% of the world’s GDP, are home to 60% of the world’s population,
and lay claim to 75% of the worlds’ energy resources. From its public dec-
laration in 2013, OBOR has seen ready traction: from the signing of the
first original OBOR project in April 2015, 900 (and counting) infrastruc-
ture projects are stated to be underway, valued anywhere from $890 bil-
lion to $1.3 trillion; more than 200 enterprises have committed to

R. Passi (*)
Observer Research Foundation, New Delhi, India
e-mail: ritikapassi@orfonline.org

© The Author(s) 2019 167


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_7
168   R. PASSI

participating; China already has or is in talks with 25 countries to establish


free trade agreements; and Beijing signed the first memorandum of under-
standing (MoU) to cooperate on OBOR with an international organiza-
tion in 2016.
The intent behind the rolling out of a vast network of hard, physical
infrastructure and soft, policy infrastructure remains an ever-present ques-
tion. Existing literature assigns, broadly, either political/strategic or eco-
nomic motivations to OBOR.  By turn, geopolitical, domestic
political-economic, and hegemonic objectives are prioritized (Clarke
2017). This chapter does not ascribe to any one intent or interpretation.
Instead, recognizing that there exists insufficient deconstruction of the
economic objectives underpinning OBOR and an insufficient exploration
of just how the economics result in non-economic consequences, this chap-
ter responds to both needs. It shows how OBOR’s foundational and most
visible element, infrastructure connectivity, itself a response to China’s
domestic economic needs, is resulting in a number of non-economic con-
sequences. These consequences are actually the very motivations regularly
cited—OBOR as a bid to no longer hide and bide, but to grab greater
regional power and claim greater space in global economic architecture, to
secure energy supplies, to achieve geopolitical and strategic objectives, and
to represent itself as an alternative to the US power in Asia-Pacific.
This result—arrived at independently by unpacking the real economic
underpinnings of the Chinese initiative and showing how infrastructure
development, OBOR’s key calling card, answers these economic needs—
underscores that, political intent, and desires notwithstanding, the politi-
cal and strategic consequences of OBOR are functionally pegged onto the
economics.
Section 1 of this chapter delves into the economic motivations buttress-
ing OBOR. Section 2 lays out how a key element of OBOR, infrastructure
connectivity, is supposed to answer these motivations. Exploring the eco-
nomics is aimed at allowing greater appreciation of the extent and scope
of the economic underpinnings of the Chinese initiative. Section 3 finishes
the equation by describing what kinds of non-economic gains China
accrues due to infrastructure investment and connectivity. Looking closely
at how a key component of the OBOR vision is affording China political
and strategic gains makes this section  a timely addition to the growing
literature that is looking at just such causalities, as progress on OBOR
projects is tracked and report cards pour in. The conclusion in Section 4
identifies areas for further analysis.
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    169

What Are China’s Economic Motivations


Behind OBOR?
When identifying economic drivers of China’s OBOR, the following are
reiterated: restructuring its domestic economy from export-led, labor- and
investment-intensive to one led by services, domestic consumption, and
technology; offloading industrial overcapacity abroad; developing its
underdeveloped provinces, such as the landlocked central and western
regions; internationalizing its currency; and seeking to reform and shape
the global economic and financial architecture to one that is more condu-
cive to Chinese interests. The analysis largely stops here.
Yet these are Chinese economic objectives that OBOR is pursuing. A
deeper analysis of the Chinese domestic economy reveals the actual rea-
sons behind these objectives.
Before the global economic and financial crisis hit in 2007–2008, rapid
trade growth and general economic liberalization characterized global
interaction. It was in this heyday of hyper-globalization that China saw
decades of phenomenal growth (Fig. 7.1).
China began economic reforms toward a market-oriented economy in
1978 under Deng Xiaoping. Successive governments have continued
China’s opening up and integration into the world’s global value chains—
in the 1980s, China invited the world in; the coastal development strategy
of 1988 built up coastal provinces as major export platforms; in the early
1990s, the government pushed Chinese (nationalized) companies to “go

16

14

12

10

4
2
1990 1995 2000 2005 2010 2015

Fig. 7.1  China’s annual  GDP growth rate  (%). (Source: National Bureau of
Statistics, China. Available at tradingeconomics.com)
170   R. PASSI

global”; and the beginning of the twenty-first century saw Chinese invest-
ments abroad dramatically increase. With an ample labor force, the result
was that China became the world’s workshop—from producing less than
3% of global manufacturing output by value in 1990 (Economist 2015), it
today accounts for almost an entire fifth of global manufacturing—predi-
cating its growth on this manufacturing-, labor-, and export-led economic
growth model. (It is, for instance, the world’s largest producer of Christmas
decorations, computers, shoes, and cement; plastics, stainless steel, solar
cells, and lubricant oils.) Its year-on-year growth reached double-digits.
Trade boomed—from its volume of trade contributing a mere 7% of its
national income in 1978 (Chow 2004) to accounting for 62.9% of the
country’s GDP in 2005 (Thakuri 2015)—and China became the world’s
largest exporter in 2009, and subsequently the world’s largest trading
nation in 2013, overtaking the United States for top spot. China increased
its investments abroad, and is today the second-largest cross-border inves-
tor, set to become the largest by 2020.
Following a spectacular GDP growth rate high of over 14% in 2007,
China’s economic growth dropped to 9.6% and started slowing down
from 2012 onwards, reaching what China’s president Xi Jinping called the
“new normal” in 2014: from averaging a 10% annual growth rate for three
decades, it fell from 7.7% in 2012 to 6.7% in 2016, with forecasts set at
near the same levels for 2017. Despite a slower growth rate, China became
the largest contributor to world growth post the financial crisis (in 2016,
it contributed to over 30%), as it and other emerging economies were
instrumental in drawing the global economy out of the post-crisis
downturn.
To note is the extent to which China’s economy is integrated with that
of the world’s. Flipped on its head, this means that Chinese growth is criti-
cally dependent on an open system of trade and investment.
China’s economic slowdown is not only a function of the protectionism
and low investor sentiment post-2008 that have resulted in slower global
trade growth relative to global GDP growth (WTO 2016) and the lowest
levels of cross-border financial flows seen in the past three decades. It is
also a function of the growth pattern China adopted, based on energy-
and resource-intensive investment, manufacturing, and exports (WEF
2016). It is in this context that Chinese Premier Wen Jiabao’s statement
made at the National People’s Congress in March 2017 must be under-
stood:  “[t]he biggest problem with China’s economy is that growth is
unstable, unbalanced, uncoordinated, and unsustainable” (Saran 2016).
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    171

Effectively, the investment-, manufacturing-, and export-led growth


model led to economic, environmental, and social imbalances that accu-
mulated over time. The repercussions and the aftermath of the global
financial crisis only exacerbated and precipitated an eventual economic
restructuring, also given what many would argue were an unsound eco-
nomic platform and policies to begin with. For instance, China’s over-
accumulation of foreign reserves to keep the value of its currency low, and
thus promote an export-driven economy, is a problem in these times of a
slowing economy. As capital outflows increase, China has been looking to
shrink its foreign reserves, among other policy efforts, to retain its cur-
rency competitiveness, since the Chinese economy still depends heavily on
a trade surplus. Another example is capital misallocation through a doubt-
ful government strategy of pumping in money over the years to grease the
wheels of manufacturing, which has led to overcapacity in the Chinese
economy—in coal, steel, cement, construction, labor—and the propping
up of what have now become debt-ridden, inefficient state-owned enter-
prises, and ghost cities. Overcapacity may not have been an issue perhaps
as early as 2007 if the financial crisis had not occurred: it was only in
2016  that industrial capacity outstripped actual industrial production
given the slowdown in demand (Fulco 2016).
Indeed, China’s response to the 2007–2008 economic and financial
crisis has only led it to further “[kick] the can down the road” (Saran
2016). Its $600 billion stimulus package furthered the instability and
unsustainability of the Chinese economy, seeing as it made available abun-
dant and cheap credit to domestic entities who invested further in land,
infrastructure, and manufacturing capacities: in short, it only served to
increase overcapacity in the Chinese economy.
Adding further stress to the Chinese economy are the effects of global-
ization on the Chinese economy itself. The very phenomenon that provided
China an environment to grow and develop is now taking away from the
Chinese economic miracle. Take, for example, rising labor costs in China as
this particular comparative advantage moves to other countries around the
world. Hourly wages in China have increased by 12% per year on average in
the past 10 years; indeed, it is only 5% more expensive to produce in the
United States than in China (Saxer 2017). As the Economist printed:

Joerg Wuttke, a veteran industrialist with the EU Chamber of Commerce in


China, predicts that the cost to manufacture in China could soar twofold or
even threefold by 2020. Alix Partners, a consultancy, offers this intriguing
172   R. PASSI

extrapolation: if China’s currency and shipping costs were to rise by 5%


annually and wages were to go up by 30% a year, by 2015 it would be just
as cheap to make things in North America as to make them in China and
ship them there… In reality, the convergence will probably be slower. But
the trend is clear. (2012, March 10)

As manufacturing costs increase, this is compounded by the lower


employment levels in the manufacturing industry that China is already see-
ing, which are strengthening concerns of premature de-industrialization—
manufacturing output and employment that peaks at lower levels of income
that has been the case traditionally. The International Monetary Fund’s
Deputy Director of Asia and Pacific Markus Rodlauer has in fact declared:
“That model that Asia had of relying on the trade channel – that’s gone”
(Arnold 2014). This remains to be seen, as China is clearly vested in a con-
tinued pattern of growth via continued trade and globalization for itself
and the world, albeit with course-correction, both internal and external:
China is now promoting OBOR as the “China solution”1 for global eco-
nomic revival, or, as per newer jargon, as “Globalization 2.0,” a more
inclusive and equitable model than the heretofore West-led one.
This approach to a new globalization is particularly pertinent, since the
post-financial crisis period has been fraught with backlash against global-
ization and trade among the part of the world that has been the traditional
torch-bearer of the phenomenon. Brexit and Trump’s election to the
highest office in the country are testament to the anti-globalization senti-
ment, as is the fact that 27 countries and regions took out 119 trade rem-
edies against China versus 21 countries and regions and 49 trade remedies
in 2015. The total value of these remedies increased by 76% from 2015 to
2016 (East Day 2017). Protectionist attitudes are particularly worrisome
given, as noted earlier, the co-dependency between China’s economy and
the global economy. Moreover, it bears mentioning that there are ill senti-
ments even among China’s citizenry—an op-ed in the Global Times at the
end of 2016 blamed globalization for China’s income inequality, housing
and other asset bubbles, and deteriorating environment. What is more,
automation and technical transformation of production processes threaten
what are already diminishing levels of employment in the manufacturing
industry, a fact made more sensitive by a social contract between the
Chinese Political Party and Chinese citizens that rests firmly on promises
of rosy growth. (Along with a “new normal,” talk of the “Chinese dream”
and the “great Chinese rejuvenation” is to capture people’s imaginations
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    173

of a yet again bright period in China’s future just around the corner.) The
costs to social stability indicate the strong domestic political economy
(state-building) rationale for pursuing OBOR that is beyond the scope of
this chapter, but it suffices to conclude that, as China’s economy slows
down, it cannot afford to abandon the trade rationale that is meant to
nurture slower but stable growth, support faster reform, and eventually
engender a healthier economic structure that will buttress long-term
Chinese development and keep the Chinese population less inclined to
agitate against the ruling Communist Party.
In sum, the key economic driver behind Beijing’s pursuit of OBOR is
effectively its model of growth—the implementation of which has engen-
dered several problems which have worsened as the Chinese economy
slows down, and as it faces adverse globalization effects and anti-globaliza-
tion sentiment. Economically, therefore, OBOR is the second act in
China’s opening up and reform process;2 a contemporary tool to revitalize
its economy in the face of slowing growth; a policy prescription to foster a
continued open global environment conducive to its growth; and an
instrument through which to course-correct and restructure its economy.

How Does OBOR Address the Concerns


of the Chinese Domestic Economy?

Summing up, China needs to (1) maintain economic growth through


continued economic globalization—increased trade and cross-border
investment, further integration in regional and global value chains—and
(2) course-correct and restructure its economy to sustain its development.
It needs to do so while trying to resolve the consequences of both the
brewing antipathy to globalization that could result in a more protection-
ist and inward-looking West, and globalization’s adverse effects that are
becoming glaringly obvious in its own backyard. Sections 2.1  and  2.2
analyse how OBOR’s infrastructure connectivity, especially transport con-
nectivity, is supposed to advance China’s domestic economic needs and
raise questions along the way.
To note is the starring role manufacturing, and manufacturing-led eco-
nomic growth—that is, rising productivity—will still play, even as services
became the largest contributor to Chinese growth instead of manufactur-
ing in 2012 and even as China seeks to shift the manufacturing in question
up the value chain.
174   R. PASSI

OBOR as a Vehicle for Continued Economic Globalisation:


China’s Opening Up, Increased Trade, and Investment
Opportunities
OBOR hopes to address the push and pull between globalization and
protectionism in the former’s favor—that is, further develop economic
globalization—in order to allow China’s opening up to the world to con-
tinue. This sentiment has formed the crux of Xi’s recent messages at global
platforms, such as at the Asia-Pacific Economic Cooperation summit in
Lima in November 2016 and at the Belt and Road Forum in May 2017.
The lone official vision document, too, repeats the sentiment of the deeper
integration of China into the world economic system, and recognizes
investment and trade cooperation as key “major task in building the Belt
and Road”  (National Development and Reform Commission, People’s
Republic of China 2015).
The SREB and MSR represent the development of an ever-increasing
trade and investment network that integrates China and an ever-broaden-
ing surrounding region into supply chains, and allow Chinese companies
access to investment opportunities. As per the Chinese Ministry of
Commerce, between 2014 and 2016 Chinese companies invested $50 bil-
lion in non-financial sectors, and signed projects worth over $300 billion
in countries and regions along OBOR (Zhong 2017a).
A key layer of OBOR, infrastructure connectivity and investment, that
at minimum spans Eurasia (through the SREB) and the Indian Ocean and
Western Pacific Region (by way of the MSR), is fundamentally a manifes-
tation of economic globalization and regional economic integration.
First, the cross-border initiative allows China increased access to markets
and consumers. As one statistic notes, OBOR will add up to three billion new
consumers in the next 30 years. Supply chains are being created that feed into
a “consumer–producer network” (Netzley 2016) that primarily facilitates the
movement of goods from China to the European Union, its largest trading
partner. Under the SREB, there are now more than 20 Chinese cities that
have regular cargo trains plying directly to 29 cities in 11 European coun-
tries (State Council, People’s Republic of China 2017). They carry goods
such as light industrial products, IT and telecommunication equipment,
retail and garments, automobiles, pharmaceuticals, wine, and spirits.
More broadly, transportation connectivity is also linking up potential
markets in developing countries across Eurasia, like Pakistan and Central
Asian and Southeast Asian nations, with China’s production centres. (This
will prove particularly advantageous for China if the future sees a continuing
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    175

tepid global economic recovery and the West continues to shy away from
globalization, strengthening the argument that Asian countries can no lon-
ger depend on traditional producer–consumer networks that peg the West
as the consumer of the last resort. As it is, post-2008 data show more trade
and investment among Asian economies than between Asia and the West.)
Second, overland transport infrastructure offers China the advantages
of shorter distances to these markets, faster transit times, quicker deliver-
ies, and increasingly lower costs. As other countries begin to experience
lower manufacturing costs, and as China is edged out as the most com-
petitive manufacturing nation,3 logistics and trade routes that reduce dis-
tances between consumption and production centres via improved
connectivity, such as through the China–Europe railways, allow Chinese-
made goods one means by which to retain manufacturing competitive-
ness. Rail freight between China and Europe takes on average 14  days,
one-third the time it would take to transport the goods by sea, and one-
fifth the cost of sending goods by air (Xinhua 2016a). Some lines boast of
four times the reduction in time taken for products to be shipped from
China to Europe, at a cost more than 65% cheaper than shipping by air
(Shepard 2016c) (Fig. 7.2).
But can these transcontinental rail lines be sustained on their economic
merit? Maritime shipping still accounts for 90% of all trade worldwide and
almost 60% of China’s trade by transportation mode (Garcia-Herrero and
Xu 2016: 4). It is still currently about five times cheaper to ship via oceans
than by railroads (JOC 2016). It has been estimated that the entire SREB,
with its gamut of transport corridors and rail routes, will only account for
1–2% of overall maritime traffic, although it may snag market share from
air cargo. For the moment, given advantages of higher frequencies and

Fig. 7.2  One container shipping cost and time from Chongqing in Western
China  to Western Europe. (Source: Image reproduced from Kapan, Zeynep
(2016) “EATL: The Trade Prospects for EU and China.” Available at https://
www.unece.org/fileadmin/DAM/trans/doc/2016/wp5-eatl/WP5_GE2_2nd_
informal_session_Ms_Kaplan_1.pdf)
176   R. PASSI

better services, various logistics companies attest to cargo volume increases


and thus further decreasing transportation costs. The China–Europe route
via Kazakhstan handled goods worth more than $8 billion in 2016: the
Khorgos Gateway dry port, a special economic zone (SEZ) dubbed “mini-
Dubai,” processed just under 50,000 twenty-foot equivalent units (TEU)
in 2015 and is expected to process a million TEU worth of cargo per year
within five years, far more than what many seaports in the world process
(JOC 2016).
Third, given access to more markets and cost savings, Chinese export
volumes are expected to increase. China is already the largest or second-
largest trading partner of 78 countries; “[b]y some measures, China is
now the first-, second-, or third-largest trading partner of nearly every
nation on earth” (Auslin 2017: 9).
China–EU trade is currently at $600 billion per year and expected to
cross $1 trillion by 2020 (Shepard 2016c), meaning a third of what China
currently produces is exported to the EU.  There has been a dedicated
effort to increase traffic on the iron silk roads: between 2014 and 2015,
the number of Europe-bound trains from China increased 165% (Xinhua
2016a); by April 2017, almost 2000 trains had crossed the Eurasian land-
scape (Shepard 2017). The Chongqing-Xinjiang-Europe railway line, for
instance, began as a weekly service from Chongqing to Duisburg in 2011,
but now makes the trip eight times a week. Forty thousand TEU were
transported from China to Germany—top destination of Chinese exports
in the EU— in 2016, and this record is set to increase to 100,000 TEU by
the end of this decade (Smith 2017).
But have the overland iron silk roads had an impact on Chinese exports
to the EU? While China–EU trade volumes since the launching of OBOR
have not shown any trends of commensurate increases, a recent study
(Garcia-Herrero and Xu 2016) finds that a 10% decrease in transportation
costs will increase China–EU trade by 1.3%. Furthermore, China has
healthy trade ties with the Silk Road countries in toto—the past decade has
seen a 19% annual growth in trade (Woods 2016)—and the expectation is
thus that the infrastructure being built will happily sustain China’s increas-
ing weight in international trade. Indeed, it is anticipated that from 2015’s
value of $1 trillion, OBOR will result in $2.5 trillion of additional annual
trade between China and other Belt and Road countries in a decade or so
(Miles 2016). Effectively, a rewarding cycle of inducement is created: ever-
robust trade ties provide impetus to creating an infrastructure that facili-
tates further increases in China’s trade with other countries and regions.
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    177

What is more, Garcia-Herrero and Xu (2016) concluded that trade


increases due to transportation efficacy will be greater than the impact on
trade due to tariff reductions. Any free trade agreements (FTAs) China
signs with economies along the Belt and Road could, therefore, piggyback
on transport infrastructure and multiply gains. China has entered into
FTA deals with 11 countries and is pursuing talks with more than 20 Belt
and Road countries (Zhong 2017b).
The question to be raised here is what export opportunities partner
countries can look forward to. There is, for instance, a significant problem
of as-of-yet inadequate volumes of returning cargo on the China–Europe
railways.
Fourth, overland trade routes allow China to develop its hinterland,
inland cities, and lesser-developed regions and integrate them into regional
supply chains. (The vision document devotes an entire section to this.)
Addressing chronic uneven development across China is a key objective of
OBOR, and the connectivity initiative was officially adopted as one of the
three regional development plans and thus incorporated into China’s
national economic development strategy in 2014 (Cai 2017). A key
OBOR connectivity project that relates to the development of China’s
underdeveloped and restive northwestern region of Xinjiang is the China–
Pakistan Economic Corridor (CPEC). As manufacturing epicentres move
westward (an estimated one trillion renminbi has been earmarked by
Chinese provinces for OBOR-related infrastructure projects [Cai 2017]),
the SREB effectively reduces the redundancy of having to transport goods
from the central and western regions east to the coastal areas where they
would be shipped back westward to Europe. Xinjiang, for instance, is
linked to the Port of Gwadar, 2000 km away at the end of CPEC; it is
otherwise more than double that distance away from the Chinese coast.

OBOR as a Vehicle for Course-Correcting and Advancing


China’s Economic Restructuring
Developing infrastructure—of which there is a need in the Asia-Pacific to
the tune of $1.7 trillion per year through to 2030 (ADB 2017)—and
investing in industrial projects in countries along the Belt and Road allows
China an immediate outlet to ease its domestic overcapacity in construc-
tion, heavy, and other infrastructure-related industries. (The bilateral
nature of implementing OBOR makes such a process more feasible.) For
some context: China’s production of steel is more than double of that of
178   R. PASSI

the next four leading producers combined; its aluminium and cement pro-
duction accounts for over half of the global supply. Indeed, “the 20,000 km
of new railways…could create demand for as much as 85 million tons of
steel,” diversifying such exports to not just Southeast Asian countries,
Central Asia, and Europe, but also to Middle Eastern countries like Turkey,
Iran, and Saudi Arabia (Holslag 2017).
Yet there may be limits to the extent to which the vast trans-regional
effort can diversify export channels that can absorb China’s excess capacity:
David Dollar (2015) writes that OBOR, ironically enough, may not be
large enough to make much of a macroeconomic difference: “In steel alone,
China would need $60 billion per year of extra demand to absorb excess
capacity…However, the economies of Central Asia are not that large.”
Indeed, fears abound of “white elephant” infrastructure projects under
OBOR that see frenzied construction often left uncompleted or which
drum up no demand and thus reap no benefit. Sri Lanka’s Hambantota
that China has been developing shows particularly bleak prospects: the
deep sea port is running at severe under-capacity, and the nearby interna-
tional airport is the world’s emptiest. Some observers like Shepard (2016a)
believe that such “too big to fail” projects continue receiving government
support and funding “until they eventually come to fruition.” While the
situation in Sri Lanka is compounded by other factors, it bears contem-
plating whether “political exigency and investment hysteria [has] trumped
economic calculus” (Mallone 2016), or whether China’s offloading of its
industrial overcapacity in logistics and transport networks through OBOR
eventually pays off.
However, Cai (2017) offers a deeper insight into China dumping this
overcapacity:

OBOR is less about boosting exports of products such as steel and more
about moving the excess production capacity out of China. OBOR projects
are currently too small to absorb China’s vast glut of steel and other prod-
ucts. Instead, Beijing wants to use OBOR to migrate whole production
facilities. Beijing wants to use OBOR to migrate whole production
facilities.

This, then, becomes a manner in which China can move up the value
chain and help fulfil the aim of restructuring its domestic economy. With
China investing in countries like Poland and regions like Southeast Asia that
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    179

offer more competitive labor costs, China itself can focus on transitioning
from being the world’s hub of low-cost manufacturing to producing higher
value-added products. Better infrastructure connectivity to such places, like
Southeast Asia, could allow Chinese businesses to more efficiently offshore
manufacturing. Cai’s analysis, however, warns of pitfalls that echo the ear-
lier-mentioned concern of a lack of capacity to absorb China’s excess capac-
ity, adding a lack of desire to do so as another loophole.
Another major obstacle is the impact on Chinese labor. Along with jobs
cuts (including 1.3 million coal jobs and 550,000 steel jobs), employment
levels have already declined due to globalization effects (to say nothing of
technology effects). Several factories in Datang, China’s so-called sock city
that produced 26 million pairs of socks in 2014, have closed down as
garment-making has shifted to more cost-effective countries in Asia
(Economist 2016). Some low-technology, labor-intensive industries such
as T-shirts and cheap footwear have already left China (Economist 2012).
Pursuing a strategy of shifting labor-intensive manufacturing centres to
cheaper locations externally will exacerbate unemployment levels domesti-
cally. Moreover, numbers of Chinese exported labor at infrastructure sites
is nowhere near the number of jobs currently and eventually to be needed.
Transport infrastructure also provides momentum to Chinese eco-
nomic restructuring. The China–Europe iron silk roads, for instance,
could help foster domestic consumption in the longer run by providing
the means for the movement of goods from the West back to the East as
consumption patterns interchange. There is already “a growing hunger”
for European luxury goods among Chinese middle- and upper-class con-
sumers (Shepard 2016b)—the luxury market in China saw steady demand
in 2016, even amid falling consumption that is being driven by “rising
disposable incomes and consumers’ pursuit of luxury products, desire for
better quality and also the ability to showcase one’s social status”
(Euromonitor International 2016). By 2030, the Asia-Pacific will account
for 66% of the world’s middle class, a key driver of growth, with the
region’s middle-class consumption accordingly accounting for 59% of
total global middle-class consumption. China will account for a large share
of this boom: by 2030, over 70% of its population is expected to join the
middle class (from a mere 12% today), with consumption estimated at $10
trillion in goods and services. Not only will Chinese urban working-age
consumers with middle-class levels of disposable monthly incomes rise
from 4% in 2010 to more than 50% by 2030, these individuals between
the ages of 15 and 59 will also have larger shares disposable incomes to
180   R. PASSI

spend than their parents did (Kharas 2011). McKinsey estimates that
Chinese will account for 12 cents of every dollar spent by urban consum-
ers by 2030 (ICEF Monitor 2016). Development of Asia as a strong con-
sumer market may take time to gain a strong global foothold—currently,
only a few China–Europe routes operate in both directions, and on such
routes trains are currently returning from European cities with signifi-
cantly lighter loads; in fact, the Yuxinou train only began bringing back
goods two years into its service (Luo 2015). Indeed, as Shepard (2017)
notes, the first China–Europe trains returned with more than 90% of their
containers empty—not unsurprising, given China-favoring trade balances.
But the situation is slowly changing; with China now Europe’s fastest
growing export market (Smith 2017). Data reveal an increase in the num-
ber of returning trains bringing back goods to China—from 28 in 2014 to
264 in 2015 (Xinhua 2016a). Greater participation by European freight
forwarders, manufacturers, industries, and governments is expected in the
coming year and beyond as they begin to discern the trade potential:
“European pharmaceutical, chemical, automative [sic], luxury, and food
companies started jumping in throughout 2016—a movement that’s
expected to grow in the coming year” (Shepard 2016a). The problem
noted earlier of unsubstantial volumes on return journeys to China remains
valid; it remains to be seen which way and how much trade flows.
Second, the time advantage of overland transport can be taken advan-
tage of. Officials running various Europe–China train services recognize
the opportunity of becoming part of the “modern supply chain…charac-
terised by smaller orders, multiple dispatches and high-delivery frequen-
cies” (Chu 2016). Time-sensitive products like perishables are one answer.
More importantly, modern supply chains are also distinguished by higher-
end technology or high value-added industries, such as high-end fashion,
that value “speed over price when it comes to logistics.”
Thus, items like smartphones, ATMs, industrial printers, 3D printers,
robotic assembly arms, medical instruments, telecommunications, and air-
craft equipment all make for viable cargo on both counts of (a) goods that
can take advantage of the shorter distances, thus boosting economic via-
bility and longevity of trans-Eurasian transport corridors, and (b) China
climbing up the global industrial chain in terms of value. China has already
overtaken Japan to become Asia’s biggest exporter of high-tech goods in
2014, from a share under 10% to over 40% during 2000–2014 (LiveMint
2015). Even as it remains a key exporter of many lower-technology prod-
ucts, it can pursue an increased share of high-technology products in its
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    181

export basket by using cross-border transport connectivity. A case in point:


traditionally, ATMs take six to eight weeks to arrive in Europe if being
shipped by an ATM maker in China. But, as the CEO of East Asian opera-
tions for DHL, which is now able to rent out space in China–Europe train
containers as well as shipping entire containers, stated:

If you have an ATM out of order the customers start to complain and you
have to replace it as soon as possible, so you can only fly it. One ATM
machine is 800 kilos, so that’s going to cost you a lot of money. Now, you
can ship by our service and in three to four weeks you can have the ATM
machine ordered and installed. They don’t have to wait for a whole con-
tainer load, they can ship just one ATM machine. (Shepard 2016c)

Furthermore, China’s high-speed railway technology is in itself a key


product that Beijing is looking to export across the continent. It is build-
ing up its domestic high-speed railway network in a bid to promote inter-
nal connectivity—the world’s longest bullet train line recently commenced
operation, connecting China’s wealthy east coast to its less-developed
Yunnan province in the southwest—but also to market its high-speed rail
technology and compete with Japan in the field, whether domestically in
India or in cross-border projects with OBOR partner countries in
Southeast Asia.
There is also the interesting prospect of expanding e-commerce deliv-
ery through railways, something China is beginning to experiment with.
While global trade growth has been slow to pick up, cross-border e-com-
merce is flourishing: China’s total transactions were valued at $810 billion
in 2015 (Xinhua 2016b). This presents opportunities for Chinese entre-
preneurs and small and medium businesses, as well as scope for automa-
tion, both of which aid and abet a restructuring of the domestic economy.
A case in point of automation: the highly automated warehouse by e-com-
merce giant Suning that stores 20 million pieces of goods and dispatches
1.81 million packages every day (as shown on New China TV).
Digital connectivity needs to be added to this point. This component of
infrastructure connectivity is increasingly being studied,4 particularly as
plans to implement digital corridors materialize.5 Not only will the
Information Silk Road complement other regional connectivity compo-
nents—China’s new satellite-navigation network, Beidou-2, will be made
available to countries along OBOR to use (Moss 2016)—but China’s roll-
ing out of Information and communications technology (ICT) infrastructure
182   R. PASSI

in partner countries will also expand China’s foray and export of higher-
technology products in the field of telecommunications, such as fibre optics
and satellites. Just the satellite services market will be worth $60 billion in
the coming years, as per China’s Satellite Navigation Management System.

The OBOR: Where the Economics End and the


Non-Economics Begin
To finish the equation: what non-economic effects are infrastructure con-
nectivities and investments under OBOR across the Eurasian space trans-
lating into?

A Sino-Centric Global Economic Order


Infrastructure investment and development is advancing the ‘Sinicization’
of globalization, and thus a Sino-centric global economic order, on the
ground.
OBOR is understood to be a crucial component within the “multipolar
system of globalization” which is in the process of being created (Perraton
2017). China has become the prime champion of free trade, it remains the
world’s workshop and the engine of global growth, and is now looking to
be its primary bankroller too. Indeed, the formal vision document states
that China is “committed to shouldering more responsibilities and obliga-
tions” and “making greater contributions” to global economic processes
through OBOR.
The logistics and transport infrastructure being created affirms Chinese
centrality in regional and global flows and value chains. Most countries are
in China’s economic sphere; physical linkages like roads, highways, and
railways are geographically pulling an increasingly larger region toward
China. In other words, China is becoming the hub of a hub-and-spoke
system, literally reclaiming reins of power as the “Middle Kingdom.” The
increasing physical linkages between China and Europe are furthermore
diluting the transatlantic relationship, the traditional centre of the global-
ization, giving a fillip to China emerging as the beacon of economic
globalization.
Reinforcing the expression “all roads are leading to China,” and thus a
Sino-centric economic order, is the alignment and synergy between the
infrastructure network being created under OBOR and other trans-
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    183

regional connectivity projects. Take, for instance, the Trans-Asian Railway


network; the Bangladesh–China–India–Myanmar Forum for Regional
Cooperation; a potential China–Nepal–India corridor; the Eurasian
Economic Union, with which an MoU was signed to cooperate in coordi-
nating the development of the Eurasian Economic Union and the
SREB  (Fu  2016). At the recent Belt and Road Forum, Xi Jinping
announced a number of infrastructure connectivity-related initiatives of
other countries with which China has enhanced cooperation under
OBOR, including Turkey’s Middle Corridor initiative, Mongolia’s
Development Road initiative, Vietnam’s Two Corridors, and One
Economic Circle initiative (Xinhua 2017b). Moreover, the linking of
OBOR with the national economic plans of partner countries is further
allowing China to bring them into its sphere of economic influence. Case
in point: the linking of SREB and Kazakhstan’s Nurly Zhol (Bright Path)
economic plan, which targets seven areas of infrastructure development,
has resulted in joint work to integrate China and Kazakhstan into several
transportation corridors as well as logistics infrastructure, such as the
Khorgos SEZ.
Strengthening a China-led economic order is the increased presence of
Chinese companies across Eurasia that are put to work as part of infrastruc-
ture investments and loans, to say nothing of their acquisition spree abroad
in recent years, which are “predominantly” in energy and infrastructure
sectors (Wu and Chatterjee 2017). The accompanying funding infrastruc-
ture established by China—such as the Asian Investment Infrastructure
Bank (AIIB), which has thus far given $1.7 billion in financing to nine
projects in OBOR countries; the $40 billion Silk Road Fund, of which
over $4 billion has been invested (Weimin 2017)—“demonstrate Beijing’s
desire to harness surplus capital to support infrastructure projects and
enhance China’s financial influence” (Clarke 2017), in short helping insti-
tutionalize Chinese centrality in global economic and financial processes.
China has been clear in enunciating that AIIB is not an institution that
is an alternate to the Bretton Woods system, but complements it; indeed,
it has been the slow pace of reforms of the twentieth century financial
governance architecture that reflects the twentieth century international
order which prompted China and other countries to create options that
will better and faster fulfill their needs. The BRICS’ New Development
Bank (NDB) is another example of the parallel economic and financial
infrastructure that is being created, which may also become involved in
funding infrastructure projects under the OBOR umbrella. Even if these
184   R. PASSI

institutions do not directly challenge a Western-led order quite yet, there


is little denying that the Bretton Woods system is losing its centrality in
global economic governance.
What is more, these institutions for addressing infrastructure invest-
ment and development needs are in turn offering China one more sub-
stantial manner in which to pursue the internationalization of its
currency—increasingly more outbound OBOR investments are to be
undertaken in yuan. (By the end of 2016, China had signed swap agree-
ments with more than 30 countries and regions.)

China-Advanced Norms and Rules of Engagement


Implementation of infrastructure connectivity projects by Chinese state-
owned and private enterprises is also advancing certain norms and princi-
ples that could influence global conduct. For instance, the mechanism of
“International Capacity Cooperation” that fosters local economic activity
through the relocation of manufacturing capacity is a departure from the
traditional development cooperation mode that hinges on aid (Sanwal
2016). Already the term “Beijing Consensus” has been widely used and
interpreted as a contrast to the neoliberal, market-oriented, and condi-
tionality-based “Washington Consensus”; China’s state-owned enterprise-
led infrastructure connectivity projects, seemingly conducted as
equal-opportunity “win-win cooperation” irrespective of political and
economic systems in place in partner countries, buttress the potential of
China formulating an alternative value system in the area of economic
development through what could turn out to be the biggest-ever global
infrastructure initiative. “Chinese characteristics” could also become insti-
tutionalized and promoted through the four other connectivity layers
(policy, trade and investment, finance, people-to-people) that are to be
laid atop the physical infrastructure layer.
At present, the “Chinese way” of working—that is, the day-to-day
implementation—is receiving criticism as evidence comes to light. A 2017
United Nations Economic and Social Commission for Asia and the Pacific
(UNESCAP) study has warned of economic, financial, social, and environ-
mental risks triggered and exacerbated by OBOR infrastructure projects in
partner countries (Chaudhury 2017). Operational non-transparency com-
pounds the situation. Even as there is a narrative of Chinese companies,
through OBOR, going abroad to gain international experience, learn qual-
ity and management techniques, and adopt best practices to become global
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    185

brands, it remains to be seen who conforms to which vision and what rules
of economic engagement become commonplace in the coming years.

Political/Strategic Gains
Another non-economic consequence is the political and strategic leverage
China gains from its infrastructure investments. China has been known to
leverage economic tools, such as trade, aid, and investments, to secure its
“core interests”  (Blackwill and Harris  2016). Coming to OBOR, while
details of loans and rates of interests in the various projects remain largely
opaque, the UNESCAP report cited above has thrown light on the fact
that Chinese infrastructure investments in relatively poorer Central and
South Asian countries along the Belt and Road are creating unsustainable
debt situations in the recipient countries. This is leading to China holding
significant amounts of government debt: for instance, the Export–Import
Bank of China holds 49 and 36% of Kyrgyz and Tajik government debt,
respectively (Cooley 2016: 4). Worsening the likelihood of debt traps are
high-interest rates on Chinese loans or white elephant projects not gener-
ating sufficient income to help pay back debt. For instance, China spent
nearly $2 billion building the Sri Lankan Hambantota port, which has
already hemorrhaged more than $200 million; Sri Lanka owes over 10% of
its more than $60 billion debt—more than $8 billion at an interest rate of
more than 6%—to China, which will take the island nation “at least a
couple of generations” to repay (Meyers 2017; Sala 2017).
The consequence of poorer countries binding themselves tighter in a
relationship of economic dependency on China is Beijing potentially using
its economic capacity to continue funding projects, to forgive debts, or
renegotiate terms as leverage for political or strategic ends. These are
increasingly being appreciated as OBOR implementation continues full
force. Instances of gaining access and rights to resources, such as land and
minerals—“unofficial debt writing-off agreements” (Lain 2016); getting a
controlling stake of infrastructure placed in strategic geographies like the
Indian Ocean (note, for instance, claims of China being in the “driving
seat” in the negotiations to develop Myanmar’s Kyauk Pyu port in the Bay
of Bengal; Lee and Myint 2017); or large recipients of Chinese investment
taking courses of action in Chinese political interests—these have all been
noted in OBOR countries, patterns that have been long witnessed in other
parts of the world like Latin America and Africa. Case in point: land being
rented or sold by Central Asian countries; debt-equity deals like the one
186   R. PASSI

that has given China a controlling stake in Sri Lanka’s Hambantota port;
Greece and Hungary have blocked EU statements criticizing China’s
human rights record, actions Chinese representatives have openly appreci-
ated. (To note: this last example links back to the above-discussed conse-
quence of perpetuation of normative values in broader global conduct.)
In fact, China’s efforts to puppeteer events and decisions to suit its own
political and strategic interests are likely to become more hands-on.
Infrastructure investments have in the past been fed into the home grounds
of politicians China backs (as in Malaysia); it has been noted that in the
event infrastructure projects fail to procure expected returns, China may
begin to interfere in local politics more aggressively:

…when messy local politics begin to interfere with their construction and
operation, then how will China’s companies and governments respond? Will
they not blame the problems on failed local systems and attempt to correct
those systems, to bring them into greater harmony with the successful sys-
tem China has developed back home? (Sharma 2017)

Chinese-Led Security Architecture


Another corollary of Chinese big-ticket infrastructure investments is
greater Chinese security engagement. As China makes billions of dollars’
worth of investments in infrastructure and sends thousands of Chinese
workers to these sites, Beijing will have a stake in securing them, particu-
larly across unstable regions. CPEC makes for an illustrative case. A wors-
ening law and order situation, aggravated by the presence of extremist
elements, resulting in drive-by shootings and bomb attacks in Pakistan’s
restive Baluchistan province is posing a security threat to Chinese labor,
Pakistani labor working on CPEC projects, and CPEC infrastructure itself.
Pakistan’s government raised special forces, the Special Security Division
and the Maritime Security Force, to secure CPEC projects (Raza 2017).
China and Pakistan are also boosting their military relationship to protect
CPEC (Aneja 2017). While Pakistan has a strong military structure that is
ready to provide troops to the cause, and is happy with any Chinese
involvement on this front; where Belt and Road countries do not have the
capacity to raise such forces, or are hesitant to do so, could it mean sta-
tioning of Chinese troops?
One commentator pithily sums it up: “Infrastructure is vulnerable to
local security threats. Forts – or more modern forms of power projection –
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    187

are built to respond to those threats. Political interference follows power


projection, and boots on the ground follow that” (Sharma 2017).
The case for political interference has been made above; whether, as the
above quote suggests, actual Chinese boots on the ground are likely in the
future remains to be seen. What is certain is that, as China expands its
reach through infrastructure projects across insecure regions like the
Middle East and Central Asia, and in unstable countries like Afghanistan
and Pakistan, it will face the necessity of creating deepening security rela-
tionships and regional security architectures. Building infrastructure that
is dual-use becomes part of this security architecture, as discussed below.
To note here is that Chinese-led bilateral and regional security architec-
ture, coupled with China’s centrality to economic flows across Asia-Pacific
(as explained above), leads to greater Chinese influence and dominance
power in the region,6 one more cited objective of OBOR.

Counter to US Hegemony/Encirclement in Maritime Asia


Lastly, infrastructure connectivity can potentially result in China counter-
ing US hegemony and encirclement in maritime Asia-Pacific in two ways.
First, energy infrastructure—oil and gas pipelines, such as the Central
Asia natural gas pipeline—across Central Asia could diversify energy
sources and limit Chinese vulnerability in the maritime sphere: 75% of its
energy imports pass through the Malacca Straits in the South China Sea,
vulnerable to US Navy intervention and blockade. China is also tapping
Pakistan and Myanmar to build alternate routes from where to import its
energy supplies. CPEC goes from Kashgar, Xinjiang, to the Gwadar port
in the Arabian Sea; the port is supposed to act as a transit terminal, and an
oil pipeline from Gwadar to Kashgar is to be completed by 2021, which is
expected to deliver around 17% of its oil imports (Yousafzai 2016). In
Myanmar, the Kyaukpyu port is now to be linked to the long-delayed
cross-border oil pipeline that could supply near 6% of China’s crude oil
imports (Hornby 2017). Infrastructure connectivity is thus responding to
the oft-cited objective of OBOR—resolving China’s Malacca Dilemma.
Second, China is building port infrastructure that could become dual-
purpose and host Chinese military ships and submarines, and surveillance
infrastructure. Not only could this serve aims to secure MSR infrastruc-
ture and routes, it is also breaking US hegemony as the security provider
in maritime Asia, particularly as these commercial ports could provide the
Chinese Navy with platforms to further its blue-water navy ambitions of
188   R. PASSI

securing presence and expeditionary capacity further afield—in the Arabian


Sea and the larger Indian Ocean, for instance.
China’s Doraleh Multi-Purpose Port at Djibouti opened in May
2017 and is described by Xinhua as “an important link in the Asian, African
and European markets, as well as a transport hub on the west line of the
[MSR]” (Xinhua 2017a). The Chinese Defence Ministry describes it as a
“support facility” that “will be mainly used to provide rest and rehabilita-
tion for the Chinese troops taking part in escort missions in the Gulf of
Aden and waters off Somalia, U.N. peacekeeping and humanitarian rescue”
(Jacobs and Perlez 2017). But it is readily recognized as an eventual base
for the People’s Liberation Army Navy one day by observers around the
world. In 2015, the United States confirmed that Chinese attack and bal-
listic missile submarines had begun to conduct regular patrols in the Indian
Ocean; thus the idea is not farfetched (Panda 2017). Another example is
Gwadar port, where a Chinese submarine surfaced at the end of 2016,
and in early 2017, China handed over two warships “equipped with state-
of-the-art guns” to the Pakistan Navy to safeguard the port (PTI 2017).
Limited gains to China from the port (Li 2016) underscore an understand-
ing of Gwadar as a naval base that provides ready access to the Arabian Sea.

Conclusion
This chapter shows that it is the Chinese economic model of growth that
is at the root of China’s economic problems. A slowing economy, global-
ization effects, and anti-globalization sentiment have aggravated the
degree of concern. Chinese economic motivations thus boil down to two
axes of action: further integration with the global economy, and course-
correction and economic restructuring. How OBOR is supposed to
address these motivations through its foundational layer—infrastructure
connectivity—has been demonstrated. Said infrastructure development’s
non-economic consequences have been explored, which turn out to be, or
respond to, specific political and strategic motivations cited independently.
Working backwards, this gives credence to the argument that the non-
economics are functionally pegged onto the economics.
There is ample scope to explore this argument further, particularly as
OBOR expands, evolves, and institutionalizes. First, other aspects of
OBOR economics need to be explored: namely, Chinese ability to finance
the venture. It is effectively Chinese deep pockets that are seeing OBOR
projects through, but the first section identified a number of concerns
  UNPACKING ECONOMIC MOTIVATIONS AND NON-ECONOMIC…    189

(such as a slowing economy) that could adversely influence Chinese capac-


ity to roll out OBOR in the longer term. The second section raised red
flags over the extent to which OBOR groundwork answers to the needs of
the Chinese economy; if infrastructure projects are unviable or unsustain-
able, how will that again impact the Chinese capacity to finance OBOR? If
the economics are not foolproof, what will this mean for the political and
strategic effects?
A second avenue for further research is to look at other layers of OBOR
and how they come into play, both in the context of whether and how
they relate to economic motivations and the consequences they engender.
OBOR’s ever-expanding scale and scope mean that there is a necessity to
continuously gauge and extrapolate causes and effects.
Lastly, this chapter has presented motivations and gains from a Chinese
perspective. Seeing as the initiative is characterized as “win-win,” and
requires buy-in from other countries to succeed, the economics and resul-
tant non-economic effects from the perspective of participating countries
also need to be delved into, to fully understand the prospects and conse-
quences of OBOR.

Notes
1. An expression that began doing the rounds in 2016, after Xi Jinping 2016s
New Year message, and particularly after Xi’s remarks at the G20 Huangzhou
summit.
2. As expressed by several Chinese scholars during discussions.
3. As per Deloitte’s Global Manufacturing Index 2016, China remains the
most competitive manufacturing nation, but is expected to lose its edge in
the next five years. See: https://www2.deloitte.com/in/en/pages/manu-
facturing/articles/global-manufacturing-competitiveness-index.html
4. See, for instance: UNESCAP (2017) “A Study of ICT Connectivity for the
Belt and Road Initiative (BRI): Enhancing the Collaboration in China-
Central Asia Corridor.” Available at http://www.unescap.org/sites/
default/files/ICT-Connectivity-for-Belt-and-Road-Initiative-in-China-
Central-Asia-Corridor.pdf
5. See, for instance: Siddiqui, Quratain and Jahanzaib Haque (2017) “The
CPEC plan for Pakistan’s digital future.” The Dawn, October 3. Available
at https://www.dawn.com/news/1361176
6. In fact, Tom Miller argues just this: through OBOR, China wants to restore
what it considers “its natural, rightful and historic position as the greatest
power in Asia” (2017). China’s Asia Dream. London: Zed Books.
190   R. PASSI

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htm
CHAPTER 8

The One Belt One Road Initiative:


Reintegrating Africa and the Middle East into
China’s System of Accumulation

Justin van der Merwe

Introduction
Adopting a historical-geographical materialist approach, this chapter illus-
trates how China’s One Belt One Road (OBOR) initiative can be under-
stood as part of a broader system of accumulation based on what may be
called the government–business–media (GBM) complex. The analysis fol-
lows a critical rewriting of China’s regional and transnational relations as
seen through the lens of the GBM complex, with special attention given
to its involvement in Africa and the Middle East. By so doing, this chapter
seeks to lay the foundations for an alternative understanding of China’s
political economy. This chapter argues that China’s OBOR initiative, as an
outward extension of the Chinese political economy, aims to reintegrate
Africa and the Middle East into a system of accumulation “with Chinese
characteristics”.

J. van der Merwe (*)


Centre for Military Studies, University of Stellenbosch,
Stellenbosch, South Africa
e-mail: justinv@ma2.sun.ac.za

© The Author(s) 2019 197


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_8
198   J. VAN DER MERWE

Yet, whether this system represents anything different from a


Washington Consensus remains doubtful, as a supposed “Beijing
­consensus” seems stymied by accommodations and integrationist tenden-
cies, and, like the other Brazil, Russia, India, China, and South Africa
(BRICS) countries have done throughout their broader regions, is likely
to merely reinforce the dominant Western-led system of accumulation,
just on a larger scale.
The analysis is informed by an understanding of the global political
economy as a series of competing yet interconnected systems of accumula-
tion. It is centred and builds on the notion of a “complex”, which is often
said to embody a system or theory of accumulation. The analysis employs
a two-level systemic understanding of global accumulation centred on the
GBM complex. Synthesising Harvey and Gramsci, it will be argued that
complexes, including state, capital, and information and knowledge sys-
tems, operate through hegemonic and transactional activities designed to
facilitate capital accumulation across space and time.
After an assessment of the global structure of accumulation and China’s
role therein, China’s involvement in Africa and the Middle East will be
discussed. But first, it will be necessary to describe what the GBM complex
is and how it can be applied in descriptive and structural level analyses,
along with a brief introduction as to why the Middle East and Africa were
included in OBOR and their envisioned roles.

Integrated and Competing Systems of Accumulation:


The GBM Complex as Unified “Complex” Theory?
The GBM “complex” is effectively a network of elites based in the sectors
of government, business, and media who support each other, collaborate,
and collude for purposes of capital accumulation within a fixed space (Van
der Merwe 2016a, b). These patterns of accumulation perpetuate the
interests of the dominant class, achieving this through “infrastructural”
and “affective” labour. Infrastructural labour is used to fix extractive and
transactional arrangements within a particular space, whereas affective
labour is used to buttress accumulation practices within target spaces.
Infrastructural labour rests on formalizing exchanges through contractual
arrangements—largely through the building of physical infrastructure,
financial arrangements, and trade agreements, not to mention the threat
of litigation linked to intellectual property rights.
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    199

Affective labour is used to shore up consent for accumulation through


processes of cultural imperialism or hegemonic practices. Generally, the
media component of the GBM refers not only to the conventional media
(as a collective noun for state-linked or commercially oriented print, broad-
cast, and other digital media) but also refers to think tanks, commercial
research, academia, government platforms such as summits, foreign affairs
divisions, or even Corporate Social Responsibility (CSR) initiatives.
There are two heuristic applications of the GBM concept: in structural
and descriptive analyses. Structural analysis is more suited to sectoral or
systemic analysis of accumulation processes operating at the global and
regional scales, whilst descriptive analysis is more focused on a bloc or the
interaction between blocs (such as in the case of a particular country but
not necessarily fixed to the borders of that country). Accordingly, one
could say that countries have their own unique or dominant GBM com-
plexes, such as in the case of South Africa (Van der Merwe 2014, 2016b),
India (Taylor et al. 2016), and Russia (Arkhangelskaya and Dodd 2016).
Thinking about the Chinese political economy as operating through a
GBM complex has instinctive or intuitive appeal. Domestically, the strong
connectedness between the Chinese state and capital stemming from the
Chinese Communist Party’s control of society is well documented. For
example, Taylor (2017: 10), drawing from Hart-Landsberg (2010: 27),
avers, “more than 90 percent of China’s richest 20,000 people are reported
to be ‘related to senior government or Communist Party officials’”. These
strong and exclusive relationships between government and business also
translate into an opaqueness or obscuring when viewed from the outside,
and in relation to its relationship with the outside world. Hong Yu (2017:
355) notes: “As China is a one-party ruled country, the process of foreign
policy formulation lacks transparency and is hidden from the outside
world, although the other political Parties, academia and the business
community may play a consultative role”.
Because of these relationships, the Chinese political economy has been
variously described as embracing or being the epitome of “state capitalism”
similar to other strong Asian economies, or “Asian Tigers”. State capital-
ism was also said to be a potential rival to the existing neoliberal system
(Bremmer 2009). It has also been suggested that the Asian Infrastructure
Investment Bank (AIIB), which is a key component of OBOR (see discus-
sion below), would advance some kind of maligned strategic intent by
“promot[ing] a version of China’s state capitalism, not transparent mar-
kets” among its lenders (Wall Street Journal 2015). Other terms such as
200   J. VAN DER MERWE

“network capitalism” expressed a similar focus on the ­state-­capital nexus at


the heart of China’s system of accumulation (Boisot and Child 1996).
These terms or similar ones have also been embraced in referring to other
strong emerging powers such as Brazil, Russia, and South Africa.
This chapter suggests that this is not necessarily the most useful way of
observing these societies, or thinking about their unique state-capital con-
figurations. Instead, to view countries as having greater or lesser mixtures
of government, business, and media involvement may be more useful.
Although it is sensible to talk about capitalisms that are driven or influ-
enced by state-owned entities in a descriptive sense, the concept of the state
itself is sprawling and ambiguous. Contained within the state are a multi-
tude of actors with private or non-state interests. The notion of the “state”
is also problematic in the sense that it is linked to a sovereign territory,
perhaps indicating an implied territorial logic in its engagement with other
countries. However, this is not necessarily the case today, as countries are
increasingly able to overcome these physical limitations in a networked and
technological environment of instant space-time compressions. As an agent
in collaboration with business, it makes more sense to speak of the organ of
governance — “government” — and how it is “postured” to facilitate and
enable accumulation over space, through its networked interaction with
the private sector and information spheres. More to the point, the common
factor between analyses of state capitalism and those involving the GBM
complex is their reliance on networks. This concurs with the work of
Summers (2016: 1639) who, in relation to OBOR, argues that: “the spatial
relations of Silk Road political economy reflect networks which have
increasingly become a feature of contemporary global political economy”.
Although the basic ideas are nothing new, what commentators and aca-
demics are attempting to describe is the type of capitalism propagated by
emerging powers who have a keen awareness of the nature and power of
networks, and exploit them to their advantage. OBOR merely represents
the most overt form of this. In order to illustrate this point, one could say
that the US-led system of accumulation was enabled and facilitated
through the discourse of individual rights and freedom via globalization,
whilst really seeking to promote the spread of neoliberalism (Harvey
2007). By contrast, what we may think of as “Chinese characteristics”
within this Western-led system (a globalization 2.0) is a network-centric
reliance on geo-economics to promote wealth accumulation and power
through the system. The openness of the network could be said to
­represent a more straightforward and “honest” portrayal of geopolitical
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    201

concerns and factors. However, attempts to argue that China’s model of


capitalism represents a more “inclusive globalisation” seems flawed or
naïve at best and propagandistic at worst. Speaking romantically about the
state as the guiding hand and being insistent that, unlike Western-led neo-
liberalism, the Chinese way enacts “win-win” situations seems fallacious
(Liu and Dunford 2016: 325).
The debates concerning economic ideologies seldom offer clear answers
as to what may work in practice, or what combination of macroeconomic
elements developing countries should adopt. Perhaps a better framing of
the debate would suggest that network economies that capitalize on their
GBM linkages remain more open to leveraging overlooked players, sec-
tors, and resources. Regrettably, the likelihood of actors exploiting and
leveraging these resources for purposes of gain or accumulation by dispos-
session via these networks is also increased (see discussion below).
What is certain is that government, business, and the media, and the
elites within these sectors, are key to making influential decisions over
resources, policy, and strategy. In its outwards expression (as a descriptive
process of accumulation over space), understanding the Chinese political
economy as operating through a GBM network is also useful. The manner
in which information channels (affective labour) are mobilized to facilitate
capital accumulation is a key characteristic of this system. An understand-
ing of this is particularly important in the Middle East and Africa, where
Chinese insertion into these spaces is blatantly extractive, using the cut-­
and-­thrust of government and corporate channels (infrastructural labour)
to facilitate accumulation over space.
As territorial blocs manoeuvre to form alliances and protect their inter-
ests, Africa and the Middle East emerge as particularly rich sites of analy-
ses. This is particularly true now that the Chinese “gaze”, transfixed
through OBOR, concentrates its capital accumulation efforts and crises of
over-accumulation within this space. In order to provide context for these
assertions, the following section describes the envisioned roles of Africa
and the Middle East within OBOR.

Africa and the Middle East Within Belt and Road


China’s OBOR initiative was devised to repurpose some of China’s accu-
mulated capital and to harness its surplus of construction materials based
in its state-owned enterprises (SOEs) to increase exports and to further
internationalize the renminbi. OBOR is, therefore, a more forceful con-
202   J. VAN DER MERWE

tinuation of China’s “going out” policy launched at the start of the cen-
tury to increase outbound capital and enhance the global footprint of
Chinese companies. Whether it will be able to achieve this is another ques-
tion, however (Rolland 2017: 130).
The land and maritime routes comprise a series of corresponding fea-
tures including the development and expansion of inter-continental rail-
way routes, freeways, ports, and energy pipelines. OBOR potentially
involves over 60 countries with a total population of more than 4 billion,
whose market share is approximately one-third of global GDP (Ferdinand
2016: 950). The underlying spatial and economic logic is that China will
work with member states to build industrial parks in which Chinese com-
panies can invest, especially as labour costs have risen in China (Du 2016:
31). These parks will then provide manufacturing “hubs” in areas closer to
target markets, with OBOR’s infrastructure facilitating easy onwards dis-
tribution along its many transport connections and pathways. OBOR
projects will largely be driven through Public Private Partnerships (PPPs),
with the standard financing model being the provision of Chinese credit
for Chinese contractors (Hayes 2017: 1). China’s GBM is, therefore,
attempting to position OBOR as a proverbial “conveyor belt” for goods,
services, and infrastructure said to boost economic development through-
out designated land and maritime trading routes, whilst the real intention
is to lock these countries and regions together into one big trade and
investment network or spatio-temporal fix (see Harvey’s definition below).
Africa and the Middle East were included in OBOR due to their natural
resources and, to some extent, to provide cheap labour for manufacturing
hubs along the OBOR circuit. The Middle East is also effectively the region
where the maritime and land routes connect. For example, the Arab States in
the Gulf region could be seen as a “crossing point” for the Economic Belt
and the Maritime Road (Wang 2016: 183–185). OBOR spans the Middle
Eastern countries via the Middle Corridor and through the Sea Route that
passes through the Suez Canal, thereby involving several regional actors
(Küçükcan 2017: 88). The Middle Eastern and North African interstices are,
therefore, of geostrategic importance to OBOR in respect of providing safe
passage for vital resources, ultimately over the Indian Ocean or the Arabian
Sea, or as a “crossing point” to European and central Asian markets via land.
In the instance of the maritime route, the major strategic chokepoints
relating to Africa and the Middle East are the Suez Canal and the Gulf of
Aden, with substantial levels of oil and gas moving through this route.
The international energy transport system is susceptible to interference at
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    203

crucial maritime chokepoints, and such occurrences could substantially


increase energy prices and result in supply scarcities. The African states of
Egypt and Djibouti are key to the maritime route, with Egypt being
“indispensable” to the initiative. Djibouti hosts the first ever Chinese
overseas military base (with the US and France already based there), act-
ing as a strategic location to load cargo, refuel ships, and as a staging post
for anti-piracy initiatives (ZiroMwatela and Changfeng 2016: 12, 14). In
2011, during the Libyan civil war, the Chinese navy evacuated 35,000
Chinese nationals from this strategic point (Len 2015: 5–6).
The other key geostrategic area relates to China’s Xinjiang province
and the opening of western territories in China to trade from the Middle
East and Africa, notably through its Pakistan-China Corridor, which is
linked to the construction of the deep-water port of Gwadar in Pakistan,
not to mention the renewed interest in the Bangladesh–China–India–
Myanmar Economic Corridor linking the Bay of Bengal and China’s
Yunnan province. The Middle East is also considered the far western sec-
tion of the so-called China–Central Asia–West Asia Economic Corridor,
which stretches from China’s Xinjiang province through Central Asia, and
to some extent, touches Iran and Turkey.
The port of Gwadar, located on the Arabian Sea at the mouth of the
Persian Gulf, is not far from another important supply chokepoint namely,
the Strait of Hormuz. Although the port lies in the unstable Pakistani
Province of Baluchistan, it remains a lucrative, albeit risky, development. If
successfully developed, it would enable western China access to the Middle
East and would presumably present the most direct route for overland oil
imports into China, if a pipeline can be built and secured (Len 2015: 7).
The Gwadar port in Pakistan is, therefore, seen as important for providing
a connection between the railways and highways connecting Central Asia,
Europe, and Xinjiang, and the resources flowing from the Middle East and
Africa over the Indian Ocean and Arabian Sea (Chaturvedy 2017; Toops
2016: 354). Pakistan can, therefore, be said to play a pivotal role in OBOR
relating to this transit route (Haiquan 2017: 143–14), whilst Xinjiang
remains an important “bridegehead” for the opening of China in a west-
ern direction (Summers 2016: 1632). Similarly, in Southeast Asia, the
China-financed US$2.5 billion deep-water port and pipeline project in
Kyaukphyuon Myanmar’s west coast opened in early 2015. This “energy
corridor” allows China to be less reliant on the problematic Strait of
Malacca as it moves some of its Middle Eastern oil imports via a 771 km
pipe running from the Bay of Bengal into Yunnan Province (Len 2015: 7).
204   J. VAN DER MERWE

However, security concerns are rampant in these parts of the world as


cultural and political divides in Xinjiang may well hamper the success of
the initiative (Toops 2016: 354–356), not to mention the fact that insta-
bility at the Pakistan and Afghanistan border could also put a hold on the
free movement of goods flowing to and from the ocean and Central Asia
(Clarke 2016).
OBOR travels through some of the most volatile regions on the planet,
many of which are in Africa and the Middle East. As a result, there are
significant risks associated with the strategy, which can potentially under-
mine its feasibility. The Middle East and Africa, in particular, are plagued
by civil war and organized criminal syndicates. The land route travels
through areas where the Islamic State (IS) was involved and through the
war-torn Iraq and Afghanistan. The success of OBOR is also contingent
on security in the waters around the Horn of Africa and in “fragile” states
such as Somalia in East Africa and Yemen in the Middle East where groups
such as Al Shabaab have a growing footprint. Furthermore, piracy poses a
threat to trade, which can affect those territories well beyond the immedi-
ate seas in which these crimes occur. Therefore, securing access to these
resources has an overt military and security dimension, not only invoking
non-traditional security elements. However, Chinese experts and policy-
makers appear to be divided on how to deal with this (Swaine 2015: 9).
One of the responses has been to seek to become a major naval power.
Some have suggested that the Chinese have tied the Maritime Silk Road
to China’s national revival and rejuvenation as a maritime power. As Liang
(2015, in Sidaway and Woon 2017: 596) noted, in the minds of some
analysts the intention is to turn the People’s Liberation Army Navy
(PLAN) into “a robust blue water naval capability dedicated to sea lines of
communication defense”. Some have argued that it is imperative for China
to make arrangements for “friendly ports” and “turnaround facilities” in
other nations that will help to increase the range of Chinese maritime
endeavours (Chaturvedy 2017). This outlook roughly correlates with the
“String of Pearls” plan that suggests that China is trying to build a series
of ports that are linked to its quest for the maritime dominance of the
South China Sea, also stretching into the Indian Ocean on the east coast
of Africa. Along with the ports mentioned above, China is also involved in
building several others spanning Cambodia, Bangladesh, Sri Lanka,
Tanzania, Mozambique, and in the northern part of the Mediterranean
close to the Suez Canal (Aoyama 2016: 18–19; Mustafic 2017: 117–118).
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    205

Based on this, it would appear that China may be reconsidering its stance
on non-interference and non-intervention (Mustafic 2017: 117).
Without dismissing the potential benefits, a critical reading of OBOR
raises certain questions. Is OBOR an extension of China’s espoused neu-
trality, as some have suggested? Is it a bold attempt at inserting “Chinese
characteristics” into global public goods and broader capitalist develop-
ment vis-a-vis a challenge to the Washington Consensus? China has not
been the only country to suggest a revival of the Silk Road. A similar initia-
tive was launched under Hillary Clinton in 2011 as a way to reintegrate
post-war Afghanistan into trade networks. Comparing the aborted US
version of the Silk Road and the Chinese version, one paper suggests that
(Habova 2015: 66):

Even if there are some similarities in strategies aimed at expanding political


and economic influence in the region, the approaches applied by the United
States and China are completely different. The former – relying on its soft
power solidly backed by its hard power has tried to impose its influence and
control as well as its values. The latter does not impose conditions and does
not bind the participation in the initiative to any political criteria. It is aimed
rather at gaining influence relying on the attractiveness of its own model of
development.

More official Chinese sources have attempted to argue that OBOR pro-
vides a “public product provided by China to the world” (Zhu 2016:
111), and generally, this seems to be a line of argumentation adopted by
Chinese state elites. Critics might argue that this is potentially a form of
affective labour. “Public goods” are goods which are consumed publically
or freely, and in a non-competitive and non-exclusionary manner, that is,
consumption by party X does not impact upon party Y directly, and both
parties have an equal opportunity to benefit (Kaul et  al. 1999: xii).
Infrastructure such as bridge building, the building of roads and ports, and
other key transport links, as well as the provision of security, especially
where there is a history of its non-intervention, become decisive in allow-
ing and welcoming countries into foreign territories. However, China’s
systematized insertion into countries along the OBOR route will give rise
to exchange values and functional values, which are clearly not neutral and
not value-free—as exchanges in the international community are not with-
out consequences. OBOR may yield direct and indirect benefits for affected
countries. Who gets to consume the benefits accruing from security and
206   J. VAN DER MERWE

stability, or enhanced infrastructure and economic development? Who gets


to take the credit? Paradoxically, these public goods are effectively laying
down infrastructural labour within these spaces. In effect, the infrastruc-
tural initiatives and financing are embedding China’s means of extraction
within these states whilst operating under the magnanimous guise of pro-
viding public goods within these spaces.
Furthermore, China’s involvement in Africa represents problems as
well as opportunities: what Africa and the Middle East gain in technical
expertise and infrastructure they may lose in human rights observance or
financial accountability (Mustafic 2017: 120). There may also be a back-
lash from locals due to the growing presence of Chinese private security
and military companies.
African and Middle Eastern leaders would, therefore, need to think
carefully about the supposed unconditionally of “public goods” within
their spaces, if they are to protect their sovereignty and resources. The
argument for a clinical insertion of public goods appears naïve in many
respects, and is too heavily reliant on rhetoric or stated intentions of elites.
Other attempts to argue that OBOR is actually an attempt to change
the existing Western-led system of accumulation seem equally misguided.
This argument follows the logic that the emerging powers led by China,
and vis-à-vis the BRICS alliance, are attempting to challenge neoliberal-
ism. In a column titled “China’s Silk Road challenges U.S. dominance in
Asia”, Kemp (2014) argues that:

The major financial and economic institutions, which experts sometimes call
the ‘international financial architecture’, no longer correspond to the bal-
ance of power and the shifting centre of gravity in the world economy…
Some western foreign policy specialists have naively assumed that emerging
markets would become integrated into…western-dominated structures of
power and governance.

From this perspective, OBOR is calibrated as a broader geopolitical


gambit designed to challenge the “Washington Consensus”, especially
with the help of the newly created AIIB and Silk Road Fund. Other reports
reflect a similar perspective.
Although OBOR would signal a substantial overture by a growing
global power, what is overwhelmingly more likely is that OBOR will fit
into the Western-led system of accumulation, particularly when assessed
against the broader trends concerning the BRICS reinforcement of this
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    207

system and their track record in places like Africa (Van der Merwe et al.
2016). The chances that OBOR will do anything other than reinforce the
status quo concerning the broader systemic level and its preferred means
of accumulation are unlikely. The BRICS generally have risen to promi-
nence as supposed subverters of the prevailing global order, yet, in reality,
have been subsumed into it (Van der Merwe 2016a). The reality is that the
BRICS are positioned to support the system as agents of continued global
uneven development, much like their Western counterparts before them,
and the changes being rung in by OBOR are effectively style over sub-
stance, or just more of the same.

Emerging Powers Within the Global Structure


of Accumulation

As described above, we can speak about the GBM in structural analysis,


which is more suited to a systemic global analysis focusing on “big pic-
ture” involvement between government, business, and media actors and
sectors, and how their involvement is representative or an embodiment of
transnational bourgeoisie interests. This draws inspiration from the resto-
ration of class power, as captured in the turn to neoliberalism in the 1970s
and strongly linked to the fortunes of Western economies. As Harvey
asserts, if the neoliberal project had, at its heart, the restoration of class
power globally (2007), then it certainly follows that the Chinese elites
have subscribed very firmly to this way of life, following the opening of
their economy in 1978. Thus, what appears to be a “new” way of doing
business becomes very much part of, and is integrated into, the traditional
system (see Taylor 2017 for an exposition of the restoration of class power
in China).
The ideas of competing yet interconnected systems of accumulation
also echo Wallerstein’s (1979) world systems theory. World systems theory
attempts to explain that nation-states have quite different positions within
the global capitalist system, and more importantly, the system has been
historically embedded with a series of cyclical rhythms. These cyclical
rhythms are defined by the rise and decline of new global powers (new
system guarantors) of world order, and each one has its own unique pat-
tern of control and governance. Although it is not strictly the mandate of
this chapter, theorizing the GBM complex is also an attempt to revisit
some of the long-standing debates relating to the grand theories of capi-
talist development.
208   J. VAN DER MERWE

Although China is a substantial power to all intents and purposes, and


its reach has often been overtly global in scope, one thing that has been
lacking in analyses of China at the regional scale is a focus on a concerted,
and easily demarcated “spatial fix” for its capitalist crises. This sometimes
gave the impression of a shotgun approach to its spatially expanded rounds
of accumulation. Harvey’s (2007) idea of a “spatio-temporal fix” whereby
imperialist states locate their geographical expansion and capitalist crises
within a particular space, however, defined, is particularly useful in relating
China’s involvement at the regional scale. Indeed, the assumption that
Beijing would somehow act differently now that it has given its expansion
a name and geographical location seems strange and illogical, as the initia-
tive was designed precisely to give further focus to and help concentrate its
already growing reach since adopting its “going out” policy in 1999.
The OBOR initiative, viewed from this perspective, moves China closer
to fit the criteria of an inter-imperialist power or sub-imperialist power
(very broadly) because of its decisive moves within the middle tier of global
capital accumulation and the ensuing uneven development within its
extended neighbourhood and chosen spatio-temporal fix. The reason why
China has always sat uncomfortably within this framework is, of course, its
size and dominance on the global stage. Analysts and commentators were
confused and not sure what to label such a power—giving rise to an
assumption of China as carrying the same substance as an out-and-­out
global hegemon. Given its communist leanings and the sheer scale of
China’s rise, China was clearly not seen as even being part of the neoliberal
Western-led system of accumulation, something which has been steadily
revised with its inclusion into the World Trade Organization (WTO) in
2001, not to mention, by comparison, the current retreating of Western
economies through more protectionist policies setting up China as a “new”
globalization enforcer or system stabilizer. The abiding argument through-
out this chapter is, therefore, that close and careful inspection of this strat-
egy is needed, as what appears to represent a rival system, does not.
A straightforward assessment of the situation suggests that much of this
is semantics, and that what is operative is a clear-eyed assessment of move-
ments within the middle tier of capital accumulation broadly, and what, if
anything, we can learn from that level of accumulation. One could spend
years attempting to “corner” an argument on the nature of recent power
shifts in the international community, only to discover that these concepts
are ultimately fluid. What is useful from the perspective of states involved
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    209

in OBOR is to depart from a critical pragmatic point towards China’s


involvement within their territories.
What is certain is that China follows the typical model of facilitator and
interlocutor for capital accumulation at the intermediary level, much like
the other BRICS states, just on a much more substantial scale. This chap-
ter argues that China’s system of accumulation is, therefore, not unlike
other substantial powers at the intermediary level of global capital accu-
mulation, in the sense that its outwards “gaze” and networked GBM are
now well and truly immersed within a particular region which forms the
primary site for its crises of over-accumulation, as well as a site through
which regional extraction and accumulation is centred and focused. This
“project” has been given new vigour and political importance as a set of
policies and plans destined to move China’s system of accumulation out-
wards, and in an era of China as a major regional and global power. The
workings and dynamics of China’s GBM complex, therefore, helps to shed
light on the geopolitics of capital accumulation relating to this strategy
and it is to this aspect which we now turn.

Accumulation Dynamics Over Space and Time:


China’s Westward Gaze
Having discussed the OBOR initiative in systemic global accumulation,
the GBM complex will now briefly be explored as an analytical tool in
describing accumulation practices over the African and Middle Eastern
spaces. However, in order to grasp how this operates, it is important to
understand that China (and the BRICS) have become some of worst per-
petrators of actions which are roughly consistent with what Harvey would
call “accumulation by dispossession”. This is the process whereby a GBM
network operating within a spatio-temporal fix (defined by region or by
no territorial logic other than the brazen opportunism leveraged by tech-
nologies of the GBM) is able to lift off or siphon wealth. This is perpe-
trated not only via government-to-government flows, but also through
variations in government-to-business exchanges. China is, therefore, able
to leverage its relative financial and manufacturing asymmetries in order to
maximize returns in African and Middle Eastern markets. This is premised
on the assumption that China will exploit the uneven development that
inevitably arises from spatial exchange. Furthermore, an implicit assump-
tion made in this chapter is that OBOR is an outward expansion of China’s
210   J. VAN DER MERWE

internal mode of capital accumulation characterized by the GBM mode. It


follows that such outward expansion is thus a synthesizing and replication
of this internal success with “Chinese characteristics” (see, e.g., Li 2016).
This section is an attempt to understand how China’s GBM complex is
writ large across the African and the Middle Eastern spaces.
The spatial-temporal impulses giving rise to and facilitating expanded
rounds of capital accumulation usually follow a similar modus operandi. A
crisis in the global economy and personal ambition collide to provide the
necessary agency and a solution to a set of economic problems. In this
case, President Xi Jinping adopted OBOR as his signature foreign policy,
personally supervising the infrastructure plans, and making policy state-
ments on OBOR. The initiative presented an opportunity to revive a slug-
gish global economy whilst allowing China the opportunity to “rebalance”
its economy. Along with close supervision by Xi Jinping, the Central
Planning Committee, China’s highest political body, is implementing the
plans, which given the centralization of the party, should not struggle to
maximize the party-state’s business opportunities along the route. The
stature and backgrounds of the members of the committee confirm the
importance of the initiative in the imagination of the Chinese elite, who
were seemingly chosen because of their ability to connect Chinese inves-
tors and business with opportunities abroad.
The plan will, as suggested, operate mainly through PPPs seeking to
literally “fix” the infrastructure within Africa and the Middle East, adher-
ing themselves to the organic processes of capital accumulation in these
territories through manufacturing and industrial complexes, special eco-
nomic zones, and various spatial development initiatives. The infrastruc-
ture plans expose the initiative as unashamedly colonial, as it reinforces the
legacy of transporting resources towards ports—and not between neigh-
bouring states. Even in the case where transport infrastructure is created
between states, the assumption is still that this would facilitate the move-
ment of Chinese remotely manufactured goods onto markets.
Banks and special funds like the Silk Road Fund, the AIIB, and the New
Development Bank would channel finances to Chinese ventures in these
territories, and along with improved infrastructural development, hope to
stimulate existing or create new markets. Chinese companies are well
known for using their own labour in foreign territories, although there
will be some input from locals as a low cost and largely unskilled or
­semi-­skilled workforce. Loans will also be extended to local service provid-
ers to be repaid over time, thereby introducing a temporal element.
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    211

Although the rewards are to be reaped by Chinese elites, by providing


interest-­bearing capital to local contractors, African and Middle Eastern
citizens and governments will carry the majority of the risk. Moreover, as
mentioned, the risks are significant given the security threats.
The so-called geopolitical “God tricks” of the plan are demonstrated
through the vague spatial markers used when outlining the plan and the
numerous maps involved. The maps are of course purposefully vague, as
they try to embrace a “catch all” along the routes and allow for revision-
ism along the way. By attempting to invoke the history of the old Silk
Road in its landwards and seawards manifestations, the idea is that the
borders of states and state sovereignty will sweep away in a grand gesture
of the “Belt and Road”, as the deep differences between countries along
the route are glossed over. Coupling China’s rise with the ancient Silk
Road is intended to give OBOR a sense of inevitability and deeper histori-
cal significance.
Three African countries are regularly discussed as involved in OBOR:
Kenya because it is where the maritime route connects with Africa;
Djibouti because it is where the Chinese military base is located; and
Egypt because of the Suez Canal. Beyond that, it is generally difficult to
know which other countries are explicitly included. None of China’s top
trade partners in Africa are included. In fact, Africa was not originally
included in the plan and its inclusion seemed to have been an easy way for
the Chinese to retroactively tie a series of divergent bilateral initiatives
together to make it look like that was their plan all along. OBOR was
hardly mentioned at the last Forum for China–Africa Cooperation
(FOCAC) meeting in 2015, if at all. The Middle Eastern routes are simi-
larly vague, especially as they relate to the China–Central Asia–Western
Asia route and its potential linkages. The terrain through which these
goods would have to travel is prohibitive to modern travel and seems
improbable. Such is the “God trick” of OBOR.
Locally, in China, the OBOR vision undoubtedly found resonance with
the rising middle class eager to continue, to consume, and to enjoy their
lifestyles. Clearly, similar ambitions are harboured in Africa and the Middle
East. Yet, whether these interventions are likely to do anything for the
spurious “Africa Rising” is doubtful and would require greater detail and
clearer plans.
China’s GBM has also been effective in selling the idea. For a detailed
unfolding of the idea and how it led to its being adopted both internally
and externally, Min Ye describes how this process took place over four
212   J. VAN DER MERWE

phases: leadership vision (September–October 2013); government con-


sensus (October 2013–January 2014); publicity and mobilization (April
2014–November 2014); and implementation (November 2014–May
2015) (Min Ye 2015: 217–218).
The plan was rolled out and aggressively marketed to foreign audi-
ences, especially those who would play a key role but who are compara-
tively too underdeveloped to object. Through a succession of government
reports, speeches, summits, diplomatic and state visits, the creation of the
AIIB and Silk Road Fund, and engagements with local government, busi-
ness and media, Xi Jinping, in particular, was able to drive the initiative,
and concentrate and focus China’s spatial fix. The state broadcaster,
Xinhua News Agency, which takes its lead from the Chinese party-state,
was the first news organization to present an actual map for OBOR, help-
ing to clarify and communicate the objectives of the initiative to foreign
audiences. In this sense, OBOR becomes a carefully executed plan.
Think tanks and the commercial research environment also played their
role in mobilizing the elite and society, and helping to shape some of the
initiative. For example, the idea of the AIIB was first mooted in 2009 by
the China Centre for International Economic Exchanges, and then later
adopted as policy. A slew of Silk Road events and fora were organized in
key areas along the route to garner support and quell potential resistance.
Several dedicated OBOR research institutes and centres have been
founded, such as the International Silk Road Think Tank Association.
Funding for students and research investigating aspects of OBOR will no
doubt be provided, as African and Middle Eastern scholars and intellectu-
als will follow state discourses and donor interest. A similar mimicry of
interest within the commercial research environment and think tanks has
followed in Africa and the Middle East, signalling the beginning of many
multiyear projects looking into the initiative.
Taking the three channels of engagement via OBOR (government,
business, and media) into account, it becomes clear how attempts are
made to integrate the countries and regions into China’s GBM mode of
networked capital accumulation. For example, the ports in Kenya have
become a regional gateway to the Horn of Africa region. The OBOR
financial institutions have financed pipeline construction, opening access
for South Sudan, and Uganda to the Kenyan port of Lamu. This will
­facilitate the optimal exploitation of the oil-rich South Sudan as it bypasses
conflict-prone regions to the north. Having secured maritime access to
Kenya, China has also optimized the opportunity for OBOR expansion
  THE ONE BELT ONE ROAD INITIATIVE: REINTEGRATING AFRICA…    213

into the African hinterland via rail or roads (ZiroMwatela and Changfeng
2016: 12–14). A possible Eastern–Central–Western African Corridor or a
“great equatorial land bridge” could just about connect Sudan, the two
Congos, and Angola, an important oil partner to China, helping to move
goods laterally across the continent (ZiroMwatela and Changfeng 2016:
17). The ports in Kenya could also function as security installations, scan-
ning for potential threats along the Horn of Africa region.
As one of Africa’s most technologically advanced countries, the reach of
Kenya’s communications and the syndication of its media throughout the
region might help to “grease the wheels” through the spreading of pro-­
OBOR stories, sometimes facilitated by engagement with, or events
hosted by, Chinese state-linked media. Similarly, the shaping of a pro-­
OBOR outlook in Kenya would presumably be important, given its role in
shaping and setting agendas for regional discourses in academia and com-
mercial research.
Generally speaking, China’s GBM has focused much of its diplomatic
and financial resources within the East African space, further signalling its
attempted encirclement of Africa’s Horn (Kenya to the South, with the
Djibouti military base on the northern side). As the geostrategic impor-
tance of this region has grown, so has China’s troop contributions to
African Union and United Nations peacekeeping missions.
The bogus “Africa Rising” trope appeared to be closely related to the
rise of this region, with a country such as Rwanda regularly registering
growth in excess of 7 per cent. Ethiopia, with its large population and
widespread poverty, was a particularly willing recipient of Chinese capital
and infrastructure development.
To sum up, as China’s GBM engages with Africa and the Middle East,
we can expect the increase of information and official statements regard-
ing the plan. However, a critical pragmatic stance towards the initiative
should be adopted now, so that African and Middle Eastern citizens can
weigh up critically if they are to truly benefit. African and Middle Eastern
countries have cause for scepticism, as it appears that the initiative is a
“broad sweep” under which anything vaguely relevant can be placed,
exemplified by the iterative versions of the Action Plan, which grow in
mandate and scope from previous editions.
The overwhelming evidence suggests that the Middle East and Africa
were included in the initiative more as an afterthought and following the
logic of securing future energy supplies. Africa and the Middle East are
also attractive to Chinese companies seeking to relocate labour-intensive
214   J. VAN DER MERWE

industries. But, as was already alluded to, whether this leads to anything
resembling meaningful employment opportunities remains questionable.
The opportunities for countries to move higher up the global value chain
also remain limited (at best getting them stuck in a so-called middle-­
income trap). Whilst in some places along the OBOR route countries may
be able to resist the power of Chinese capital and manufacturing, African
and Middle Eastern countries remain weak in their governance structures,
rendering them vulnerable to exploitation.
As argued, the relationship between China and Africa is deeply prob-
lematic for a number of reasons. Importantly, the OBOR initiative does
nothing to address the valid concerns surrounding the contentious link
between China’s infrastructure investment, on the one hand, and its inter-
est in African natural resources, on the other. Nor does the initiative deal
with Chinese companies’ socially and environmentally irresponsible con-
duct in Africa. Similarly, in the Middle East, involvement is likely to mirror
that of the more established patterns in Africa.

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CHAPTER 9

Changing Regional Order and Railway


Diplomacy in Southeast Asia with a Case
Study of Thailand

Laurids S. Lauridsen

Introduction
An old Chinese proverb tells us that “two tigers cannot occupy the same
mountain.” This should be borne in mind when it comes to the growing
participation of China in the evolving regional order. For more than half a
century, American hegemony in East and Southeast Asia has been unchal-
lengeable, and Japan has played a leading role as investor, aid provider,
and promoter of regional cooperation. In the 2000s, particularly under Xi
Jinping’s leadership, China has been seeking to expand its regional influ-
ence by engaging in regional rule-making and institution building. The
two-pronged strategy of setting up new multilateral investment banks and
overseas infrastructure projects under the OBOR initiative has lifted
regional competition and infrastructure diplomacy to a higher level.

L. S. Lauridsen (*)
Department of Social Sciences and Business, Roskilde University,
Roskilde, Denmark
e-mail: lsl@ruc.dk

© The Author(s) 2019 219


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_9
220   L. S. LAURIDSEN

This chapter seeks to analyse regional rivalry and the evolving alterna-
tive regional order in terms of tangible forms of infrastructure develop-
ment, focusing on a case involving high-speed railway (HSR) projects in
Thailand. China and Japan often compete to secure overseas infrastructure
projects in Asia and deploy considerable financial resources to win orders.
Railways, and especially HSR, are a key element, and the rivalry plays out
in the regional backyard of both countries. On the one hand, it is just
commercial competition between Chinese and Japanese firms that are
increasingly forced to look overseas for new markets. On the other hand,
political involvement is unavoidable in such big deals, and building rail-
road facilities abroad also serves as a way of extending strategic influence.
In recent years, the political leaders of both countries have travelled around
Southeast and Central Asia as “HSR salesmen” and entered high-speed
rail diplomacy. This Sino-Japanese competition leads to the question: can
these two tigers occupy the same mountain—and will they?
Rail is a major industry in Japan, and the country is famous for its net-
work of high-speed bullet train lines—the Shinkansen. The construction
of the Shinkansen started in 1964. Japan’s railroad industry is known for
its first-rate safety record, its original technology, and its high reliability, as
well as its comprehensive and integrated infrastructure solutions. China
entered HSR in 2004 and, seven years later, launched a campaign to build
HSR systems around the world. This involved overseas loan commitments
made by the China Development Bank and the China Exim Bank. China’s
competitive advantages are the low cost and fast construction of its railway
systems.
In Asia and Central Europe, Chinese infrastructure diplomacy became
a critical part of the OBOR initiative, which comprises a land-based Silk
Road Belt (SREB) and a sea-based “21st Century Maritime Silk Road”
(MSR). HSR is a cornerstone of the former and has, therefore, become a
central part of China’s infrastructure diplomacy. During the second Abe
administration, Japan used railway projects to counter China’s commercial
and geopolitical expansion and increasingly offered financial support
under its huge “Partnership for Quality Infrastructure” (PQI) programme.
Both China and Japan have economic and broader strategic interests in
infrastructure development in Indochina. Both bilaterally and through the
Asian Development Bank (ADB), Japan is engaged in improving infra-
structure in the Greater Mekong Subregion (GMS), while China, besides
being part of that sub-region, has also set up a new mechanism for sub-
regional cooperation, including infrastructure development.
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    221

Thailand is one of the front-runners in negotiating HSR with Beijing,


and Japan has intensified its involvement in railway infrastructure upgrad-
ing and HSR construction. China and Thailand have reached an agree-
ment on an 873 km HSR line from the eastern deep port Laem Chabang
via Bangkok to Nong Khai (on the Laos border). Concurrently, Japan is
involved in upgrading projects, and the Thai government has called on
Japan to intensify and speed up the work on a 682 km HSR project con-
necting the country’s two biggest cities Bangkok and Chiang Mai
(Theparat 2016).
The aim of this chapter is to analyse the changing regional competition
and order through the lens of overseas infrastructure export at the regional,
sub-regional and national levels. The latter level is explored through a case
study of the Sino-Thai and Japanese-Thai HSR projects. The analysis is
guided by the following research question: what are the rationales behind
the Chinese and Japanese HSR diplomacy in the region, and to what
extent and in which ways is regional competition expressed in the case of
Thailand? More specifically, this chapter addresses a number of sub-
questions: what is the nature of Sino-Japanese regional competition in the
field of transport infrastructure in general? How are economic and security
concerns linked, and how does the relation to the United States affect
regional cooperation, competition, and order? What are the drivers behind
Chinese and Japanese railway diplomacy in Indochina? How did Sino-
Japanese competition play itself out in the HSR field in Thailand?
The rest of this chapter is organized in the following manner. Section 2
presents the analytical framework. Section 3 analyses the regional and sub-
regional rivalry between China, Japan and the United States. Section 4
investigates Sino-Japanese competition in Thai HSR projects. Section 5
offers concluding remarks.

Understanding and Conceptualising Regional


Competition in Asia
Although this chapter focuses on the overseas infrastructure projects of
China and Japan, it also addresses the extent to which we are witnessing
an evolving change in the regional order. The literature on the rise of
China is mostly preoccupied with the role of China as an upcoming global
power. This chapter concentrates on more concrete processes at the
regional level: regional competition, regional rivalry, and regional order.
222   L. S. LAURIDSEN

These notions all refer to “the region,” which here refers to a suprana-
tional subsystem. We follow Hettne (2005: 544) in stressing “that there
are no ‘natural’ regions: definitions of a ‘region’ vary per the particular
problem or question under investigation” and “that all regions are socially
constructed and hence politically contested.” We are more preoccupied
with regionalism than with regionalization. Regionalism is a top-down,
macro-level political process driven by a body of ideas and a cooperation
that promotes an identified geographical (or social) space as a regional
project (Mansfield and Solingen 2010: 146–47). Regional cooperation
may include some commercial preferences, as in Free Trade Agreements
(FTAs), but they may just involve functional cooperation in an issue area,
such as transport infrastructure and connectivity. East and Southeast Asia
has experienced a proliferation of FTAs, leading to “competitive regional-
ism” through a complex “noodle bowl” of trade and investment agree-
ments and a surge in the interest of regional powers in transport
infrastructure. Infrastructure projects are a way to develop market oppor-
tunities for indigenous construction and transport companies, but they are
also a way of becoming involved in linked economic corridors and expand-
ing regional production networks.
As Breslin has suggested (2010: 729), regionalism in East Asia is glob-
ally contingent, so the dynamics of the changing regional order must be
seen in the context of bargains that involve the United States as global
hegemon. Japan has explicitly subordinated itself to the imperatives of US
hegemony and is a crucial node in US-sponsored regional security.
Regional initiatives are tied to a dollar-based global financial order, and
Japan is “the leading goose” in a regional foreign direct investment order
and a core provider of advanced technology to regional production net-
works. Goh (2013: 16) emphasises the resilience of US hegemony and the
complicity of regional powers (China and Japan) in sustaining it, but other
scholars argue that Goh underestimates the resistance of China to a US-led
regional order. Thus, Oba (2016: 571) states that the OBOR and AIIB
initiatives “show China’s intentions to construct a new regional order that
would at least weaken, if not replace, US hegemony.” Finally, Beeson and
Li (2016: 495) argue that OBOR and AIIB initiatives together “amount
to a sophisticated strategy that capitalizes on China’s economic strength in
ways that may permanently transform the region and China’s place in it.”
This is particularly the case because China’s ideational and institutional
efforts are underpinned by “very tangible forms of investment and infra-
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    223

structure development that are likely to make its policy influence and
objectives more difficult to resist” (ibid: 497).
In this chapter, we briefly touch upon the issue of FTAs in the region but
the main focus is on overseas infrastructure export and regional competi-
tion between China and Japan for rail-infrastructure development in land-
based Southeast Asia. How are we to understand these regional powers
when commercial and security interests intersect? Competitive regionalism
between Japan and China is undoubtedly in a state of zero-sum rivalry in
the East China Sea disputes over the Senkaku/Diaoyu islands, but is this
also the case when it comes to overseas infrastructure export?
Economic and security aspects of regionalism are often tightly linked
and tend to be under-researched (Mansfield and Solingen 2010: 153). As
Jayasuriya has suggested (2003: 205), regional dynamics cannot just “be
located in the changing dynamics of inter-governmental relations”; they
are also rooted in the dynamics of the domestic political economy. This
implies that the huge competing infrastructure initiatives of China
(OBOR) and Japan (PQI) must be understood in relation to processes of
economic transformation and crisis in the domestic political economies as
well as in the different modes of internationalisation of capital.
In looking at the infrastructure diplomacy of China and Japan, we
might usefully distinguish between economic diplomacy and economic
statecraft. The former can be defined as decision-making, policymaking,
and the advocacy of broader nationally-defined economic strategies.
During the age of globalization, economic diplomacy has turned diplo-
mats into “agents of globalisation” and they are directly involved in the
creation and regulation of markets and capital as well as in trade and
finance diplomacy (Lee and Hocking 2010).
As opposed to the use of state power to develop market opportunities
and to support the global outreach of indigenous companies, economic
statecraft is the use of economic tools to achieve foreign policy objectives,
which in turn cover not just military security but also national strategic
goals, such as energy security, guaranteed supply lines, access to cutting-
edge technology, etc. (Norris 2016). Economic statecraft may take many
forms. In overseas infrastructure investment, regional powers may try to
outbid each other to obtain regional influence, regional stability, or a spe-
cial regional order—by economic means. Using economic leverage to pre-
serve and realize their national interests in the region may also involve the
provision of regional public goods (e.g., economic assistance and infra-
structure), where the regional power takes the lion’s share of the costs
224   L. S. LAURIDSEN

involved and commercial profitability is compromised. That is what Dent


(2008) refers to as regional developmentalism.
Regional competition and competitive regionalism are complicated
matters for subordinate regional states, such as Thailand. They are compli-
cated because the re-emergence of China as a central regional economic
power is increasingly bifurcating security and economic dynamics, forcing
subordinate states to find ways to balance the regional dualism and avoid
being “forced to choose” between China and the United States, or
between Japan and China (Wesley 2015: 480–82). For those caught
between China and the United States, it is increasingly costly not to
accommodate China but also costly not to follow the global hegemon. By
way of comparison, Sino-Japanese competition is easier to handle and
presents a wider range of choices.
In short, overseas infrastructure export and related regional competi-
tion entail complex processes of interpretation, negotiation, and contesta-
tion. In this case, China, Japan, and United States are the key players. The
analysis must cut across economic and security logics, just as it must reveal
how regional rationales interact with global rationales. The study of
OBOR/PQI and overseas infrastructure export must deal with aspects of
economic diplomacy as well as economic statecraft. With this as the point
of departure, Section 3 will explore the regional Sino-Japanese competi-
tion and, to some extent, the global competition between the United
States and China.

Competing Orders and Physical Connectivity: China,


the United States, and Japan

In the following, we explore the competing regional orders, starting with


Sino-American competition in trade and transport. Next, we examine
Sino-Japanese competition in relation to transport infrastructure in
Southeast Asia and GMS.

Sino-American Rivalry: Trade Versus Transport


The United States have made sustained efforts to advance trans-pacific eco-
nomic integration (e.g., through APEC), and since 2010, they have attempted
to counterbalance the increasing Chinese influence in East and Southeast
Asia. In the wake of the Asian Financial Crisis (AFC), the United States
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    225

began to lose influence in the area, and the “War on Terror” reinforced this
tendency in Muslim states. Following these two events, China promoted its
own agenda and advanced or joined more closed forms of regionalism cen-
tred on ASEAN and East Asia and excluding the United States where possi-
ble. To lessen worries among ASEAN countries about China’s WTO
membership, China had already entered a “Framework Agreement on
ASEAN-China Comprehensive Economic Cooperation” (2002), leading to
the formation of the ASEAN-China Free Trade Area (ACFTA), which came
into effect in 2010 (Breslin 2010: 719ff; Beeson and Li 2014: 97).
Obama officially announced the “pivot” to Asia in November 2011,
and the Trans-Pacific Partnership (TPP) became a major component in
the rebalancing efforts. In his State of the Union address to Congress in
January 2015, Barack Obama emphasised that it was crucial that the
United States rather than China should “write the rules” (Obama 2015).
Besides shaping integration through the TPP in terms favourable to the
United States, Obama also tried to counter the Chinese model of capital-
ism by introducing advanced standards to suit highly developed countries
and by setting up rules that restrained subsidies to Chinese state-owned
enterprises—SOEs (Tow 2016: 37; Lin 2015: 589).
The Chinese reaction to Obama’s pivot was to make its own pivot to
the West (in China and beyond); just as China decided to set up the AIIB
partly because the US Congress had delayed even modest voting reforms
of the Bretton Woods institutions for years. With regard to mega-FTAs,
China eventually decided to support the ASEAN-driven Regional
Comprehensive Economic Partnership of East Asia (RCEP), which
excluded the United States. However, it is not the RCEP but the OBOR
initiative that constitutes the main Chinese template for a regional order.
The OBOR is linked to Xi Jinping’s vision of a China-centred regional
community. Xi Jinping became general secretary of the Chinese Communist
Party (CCP) in November 2012 and state president in March 2013. In
September 2013, he launched SREB, with the aim of building land-based
economic corridors connecting China to Europe as well as to Central Asia,
Southeast Asia, and South Asia. The following month, he launched
MSR. Together they constitute the OBOR initiative.
Embracing new forms of diplomacy, Xi Jinping’s new comprehensive
foreign policy was debated at two CCP meetings—the October 2013
Work Forum on Peripheral Diplomacy and the November 2014 Central
Conference on Foreign Affairs. Xi’s Chinese dream of a “the great reju-
venation of the Chinese nation” aimed to restore China traditional place
226   L. S. LAURIDSEN

in world affairs and in these debates, it was tightly connected to a


Chinese-Asian dream of a regional “community of common destiny,”
enabled by a range of infrastructure and socioeconomic connectivity ini-
tiatives with neighbouring countries. In relation to road and railway
connections, Yunnan would serve as a bridgehead from China to
Southeast Asia, with Kunming acting as the urban node (Xi 2015;
NRDC 2015; Arase 2015: 37; Swaine 2015; Callahan 2016; Summers
2016; Ferdinand 2016).
The OBOR initiative integrates a complex set of domestic and interna-
tional goals and officially brings together economic, political, security, and
cultural elements (NRDC 2015). The drivers are a mixture of foreign and
domestic concerns and of strategic and economic motives. Besides the
reaction to US containment, important strategic motives include OBOR
as a gateway to neighbouring regions, allowing the country to protect
energy and natural resource supplies originating in the region and beyond.
Further, OBOR gives China the possibility of bypassing sea lanes in the
South China Sea area that are subject to US naval dominance and prone
to conflicting claims. In addition, OBOR introduces a friendship strategy
to widen China’s manoeuvrability, to build trust and to safeguard regional
stability; by entangling neighbours in an economic-infrastructural web, it
may also raise the costs of any future confrontation with China (Wang
2016: 459–460; Rolland 2015: 3; Callahan 2016: 228).
Even though the OBOR encompasses security agendas and has geopo-
litical consequences, the main drivers are undoubtedly economic; in other
words, the OBOR is more about economic diplomacy than about economic
statecraft. First, the deployment of the infrastructure project is part of the
internationalisation of Chinese capitalism and a way to provide new busi-
ness opportunities for SOEs. Next, due to its intense focus on investment-
driven economic growth, China has run into problems of overcapacity and
low profitability. OBOR may be considered a way of exporting this over-
capacity in areas, such as construction and steel industries and of enhanc-
ing the investment returns. Furthermore, OBOR is a way of tackling the
problem of excessive foreign exchange reserves that are currently sent
back to the United States and invested in American treasury bonds. The
OBOR initiative is also linked to the gradual erosion of China’s compara-
tive advantages in cheap labour and to the need to upgrade its production
structure. OBOR makes it possible to relocate low value-added manufac-
turing facilities to neighbouring countries, to which China can then export
higher value-added goods and services Finally, there is also an important
internal developmental logic: the SREB can be used to develop the interior
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    227

and western provinces of China (Lin 2015: 589; Minjiang 2015, Arase
2015: 31; Rolland 2015: 3).
In a comparison of the United States and China between 2012 and
2016, two different templates of regional order emerge. First, whereas
China was oriented towards its neighbours in Asia and argued that Asians
should take care of Asian problems, the United States advanced a Trans-
Pacific template whereby it could shape the rules of economic interaction.
Second, in contrast to the Western emphasis on regional/global integra-
tion through free markets, private entrepreneurship and financial liberali-
sation, China advanced state-driven initiatives, which used state-owned
enterprises and financial institutions and which followed the principle of
“seeking harmony but not uniformity”; they were concerned with dia-
logue and connectivity between distinct national societal models on the
basis of respect for national sovereignty, diversity, and Sino-centrism.
Third, while the United States preferred deep economic liberalisation and
gave priority to services and investments via the TPP, China focused on
physical infrastructure linkages and policy-led trade facilitation with its
OBOR partners. Fourth, rather than seeking uniform and legal binding
trade and investment rules, China sought to deepen interdependence and
shape the preferences of its Eurasian neighbours through mutual respect,
mutual interests, and negotiated, flexible rules. This was to be done
through a mixture of regional institutions and individual case-by-case
negotiations in which China could demonstrate its leadership (Larkin
2015: 8; Arase 2015: 33–34; Ba 2016; Ferdinand 2016: 946–48; Min
2015; Dian 2016; Wilson 2015).
In early 2017, President Donald Trump decided not to seek ratification
of the signed TPP agreement, thereby indicating that the United States
would not take a leadership role in liberal trade and investment rule-making
but would instead negotiate so-called fair bilateral trade deals  (Borger
2016). On the one hand, this gives China more space to advance its pre-
ferred version of regional order, but on the other hand, it is leading to a
more aggressive US stance on Chinese trade surpluses (Panda 2016).

Sino-Japanese Competition: Infrastructure Diplomacy


When it comes to trade, Japan has chosen to follow its main ally, the
United States, and has joined the TPP. Regarding infrastructure develop-
ment in Southeast Asia, the ADB has pushed for further investments. In
its “Infrastructure for a Seamless Asia” report, the ADB (2009: 167, 169)
228   L. S. LAURIDSEN

estimated a need for investments in transport in Asia between 2010 and


2020 amounting to US$2.5 trillion, of which US$38.6 billion would be
invested in railways. In addition, funds of US$82.8 billion were needed
for regional projects along the Trans-Asian railways. This adds up to rail-
way infrastructure investments of about US$11 billion (national and inter-
national) per year.
In the first year of his second term in office, Prime Minister Shinzo Abe
launched a “proactive turn” with regard to Southeast Asia, marked by the
decision to visit all ten ASEAN countries in 2013. John Lee (2015: 14)
calls this an “unprecedented move by a Japanese leader” seeking “to play
a much more proactive role in regional strategic affairs.” The main strate-
gic aim here was to uphold and protect a regional liberal order with a
significant American input.
However, Japan also needs to boost its economy and protect its “turf”
in Southeast Asia. In May 2015, attempting to reinvigorate its industry and
counter China’s OBOR initiative, the Abe administration created a new
development programme called “The Partnership for Quality Infrastruc­
ture” (PQI). The programme was based on collaboration between Japan
and the ADB and would increase their combined infrastructure funding to
Southeast Asian countries by around 25% to US$110 billion for the next
five years. Prior to the G7 ISE-Shima Summit the following year, Abe
announced the “Expanded PQI,” which raised the provision of financing
to US$ 200 billion (US$40 billion per year), just as he won G7 support for
his proposed Principles for Promoting Quality Infrastructure Investment. In
this way, Japan tried to match Chinese infrastructure diplomacy with a
funding pledge well beyond the founding capital of the AIIB. HSR proj-
ects are an important element in this infrastructural offensive. In 2015,
these projects encompassed Indonesia (Jakarta–Bandung), Malaysia/
Singapore (Kuala Lumpur–Singapore), the Philippines, Thailand, Vietnam,
and India. In May 2016, in the wake of the Indonesia case, in which Japan
was outbid by China, the Japanese parliament softened regulations govern-
ing the Japan Bank for International Cooperation (JBIC), allowing it to
make riskier investments by means of a special account through which it
could compete more aggressively with China (Abe 2015; Koga 2016:
72–73; Hong 2016: 5; METI 2016; BMI 2016: 22).
In brief, as the major source of foreign direct investments in Southeast
Asia, Japan has tried to combine its interest in a stable and open regional
order with its narrower commercial interests, and it has sought to match
China’s infrastructural diplomacy. As explained by Yoshimatsu (2017: 14),
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    229

there is a twin-goal orientation behind the overseas infrastructure export:


“The export of integrated infrastructure systems was located as a main pil-
lar to achieve an economic objective to reinvigorate the Japanese industrial
sector. At the same time, geopolitical objectives to counter China’s grow-
ing influence in Asia and maintain Japan’s regional presence were pursued
by forging closer ties with countries surrounding China and advancing
original standards for infrastructure-building in rivalry with China’s insti-
tutional initiatives.” In short, the Japanese government has combined
economic statecraft with economic diplomacy.

Sino-Japanese Competition: Vertical Versus Horizontal


Connectivity in GMS
Japan’s engagement in infrastructure development in Southeast Asia has a
long history. In 1992, the ADB started its “Greater Mekong Subregion”
(GMS) Economic Cooperation Programme (ECP) involving the six GMS
countries (Cambodia, China, Laos, Myanmar, Thailand, and Vietnam).
The GMS-ECP was further developed in 1998, when the concept of three
economic corridors was introduced: the East-West Economic Corridor
(EWEC); the Southern Economic Corridor (SEC) and the North-South
Economic Corridor (NSEC). The three economic corridors that were
linked to transportation initiatives were formally launched in 2000. The
corridors became a core part of the GMS-ECP 10-year Strategic
Programme for 2002–2011 and were supposed to turn the former “bat-
tlefield” of Indochina into a dynamic market place (Ishida 2008: 121–25;
Pham 2015: 88–89).1
Japan has prioritised the EWEC and the SEC, while China is concen-
trating on the NSEC. In other words, Japan is engaged in two horizontal
connectivity projects. Japan has a strong interest in the EWEC, which is a
1450 km highway along the shortest link between the Pacific Ocean (Da
Nang and Vietnam) and the Indian Ocean (Mawlamyaing and Myanmar).
With an EWEC link, the time of coast-to-coast travel will be lowered from
five to two days. The SEC links Ho Chi Minh in Vietnam with Dawei in
Myanmar and passes through both Phnom Penh (Cambodia) and Bangkok
(Thailand). In Thailand, it links up with two deep sea ports in Southeastern
Thailand—the Laem Chabang and Map ta Phut—which have also received
construction loans from Japan, as has the Cap Mep-Thi Vai Port in
Vietnam. Moreover, the SEC covers the areas where Japanese TNCs in
Thailand are located. Vietnam is increasingly a favoured destination for
230   L. S. LAURIDSEN

TNCs seeking to avoid too much dependence on locations in China


(Pham 2015: 87–89; Singh et al. 2017: 110–111; JICA 2012: 3–4). The
Japan International Cooperation Agency (JICA) has developed a compre-
hensive corridor development approach that combines an infrastructure
development plan (hard plus soft infrastructure) with an industrial devel-
opment strategy as well as a strategy that deals with environmental and
social development (JICA 2016).
In contrast to Japan, China has direct access to mainland Southeast Asia
and sees its GMS involvement as a natural complement to its sub-national
“going west” strategy. China’s engagement in the GMS has been along
the NSEC that runs from Kunming via Chiang Mai to Bangkok. This
vertical connectivity made Yunnan the land-based “Gateway to the South”
and brought Laos and Cambodia closer into China’s sphere of influence
(Singh et al. 2017: 110).
China has decided to complement ADB by setting up the Lancang-
Mekong Cooperation (LMC) project as a focal point for a new mechanism
for sub-regional cooperation under the ASEAN-China framework (Li
2015, 2016). One suggested area of cooperation is inter-connectivity,
including upgrading of the China–Thailand and China–Laos railways. The
latter was agreed upon in November 2015 and involves a 427 km railway
entering Laos at the Mohan/Boten border cities and connecting to
Vientiane to the south. China has promised to devote US$1bn to such
sub-regional inter-connectivity projects. Another field of cooperation is
the formation of cross-border economic cooperation zones under the
framework provided by the ACFTA. The China Development Bank has
set aside US$10 billion to support enterprises and industrial development
in the sub-region (Lu 2016: 10–13).
To match this, Japan has launched the new Tokyo Strategy for Mekong-
Japan Cooperation (MJC2015), introducing four “pillars” to ensure
regional stability and achieve “quality” growth. The first pillar deals with
“hard” infrastructure development and its contribution to “quality
growth.” It emphasises the “active participation of the private sector” and
the promotion of public–private partnerships just as it explicitly refers to
PQI, EWEC, SEC, and the Dawei development project (MOFA 2015).
Further, in contrast to the Chinese version, the Japanese emphasis on the
promotion of democracy and the rule of law highlights a Western regional
order. In short, there seems to be a clear pattern of intensified Sino-
Japanese competition in relation to the planning, provision, and funding
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    231

of physical infrastructure. This is linked to competing interests in eco-


nomic zones/corridors and diverging views on the role of private and
state-owned enterprises.

Regional Competition and Ordering


While China and the United States are clearly maritime rivals in the South
China Sea and have conflicting views on the nature of twenty-first century
mega-FTAs in the region (Pacific versus Asian), they are not yet rivals in
relation to infrastructure. Japan and China have a long history of regional
rivalry in the East China Sea, and Japan’s security policy is still closely linked
to that of the United States. Japan has followed the United States by joining
the TPP initiative. Southeast Asia has long been a natural destination for
Japanese investments and for two-way trade. Japan has been the dominant
economic power in the region for decades. Moreover, Japan has conducted
developmental regionalism through the ADB and through bilateral ODA
to the GMS sub-region by actively promoting a regional cooperation/inte-
gration process that sets out to close the developmental gap and bring sta-
bility as well as more cohesiveness to the region. In this endeavour, Japanese
agents meet increasing competition from China. Japan is, therefore, eager
to preserve its regional presence and counter China’s growing influence.
This is also the case when it comes to regional infrastructure and devel-
opment along the economic corridors. For China, its connectivity in
Indochina involves access to resources, to trade, and to investment oppor-
tunities, as well as “good neighbourliness,” leading to favourable diplo-
matic outcomes. China supports the internationalisation of SOEs and uses
OBOR, AIIB, and LMC to further a China-centred regional order. For
Japan, the “pivot” to Southeast Asia involves the rejuvenation of domestic
industries through further outsourcing and the protection of its economic
interests in mainland Southeast Asia. Japan deepens its bilateral ties and uses
PQI and MJC2015 to match China and protect the existing regional order,
including private capital accumulation and the liberal order. While both
regional powers are primarily driven by commercial interest and broader
economic concern, an element of economic statecraft also plays a role.
Finally, in terms of infrastructure expansion, this is not a cut-throat
regional rivalry. There is a huge market and some complementarity, where
Japan focuses on horizontal connectivity (EWEC and SEC) and China on
vertical connectivity (NSEC). With that in mind, we will now leave the
regional level and move to a national case which involves exploring China’s
and Japan’s railway diplomacy in Thailand.
232   L. S. LAURIDSEN

Sino-Japanese Competition and Railway Upgrading


in Thailand

Improvement of the Thai railway network has been high on the policy
agenda for many years and plays an important role in the country’s infra-
structure plans. Expansion to a double-track rail network is an important
priority, but another priority project is standard rail development, which,
in contrast to the existing meter gauge, has a so-called standard gauge of
1.435 m and will allow HSR transport. The Sino-Thai HSR project goes
from the Gulf of Thailand (the Map Ta Phut deep harbour) via Bangkok
to Nong Khai on the border to Laos and is linked to similar projects in
Laos and China. The Japanese HSR project will connect Thailand’s two
main cities, Bangkok and Chiang Mai, and Japan is also involved in two
East-West railways upgrading projects (see Figs. 9.1 and 9.2).

Fig. 9.1  Railway lines negotiated with China. (Source: Kunapdamraks 2016,
OTP/MoT)
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    233

The Railway Cooperation between


Chiangmai Thailand and Japan
1
Tak Mukdahan Distance
Route
(km.)
3
1 Development of Bangkok-
Chiangmai High Speed Rail 715
Kanchanaburi (BCHSR) (using Shinkansen
Aranyaprathet
2 Technology)
Bangkok 2 Improvement of
Laem Chabang Kanchanaburi-Bangkok-
Chachoengsao-Laem Chabang 574
and
Bangkok-Chachoengsao-
Aranyaprathet
3 F/S for the railway project -
from Tak to Mukdahan
Total 1,289

Fig. 9.2  Railway lines negotiated with Japan (Source: Attananda 2015: 71).

Sino-Thai HSR Negotiations


The Sino-Thai negotiations on a possible HSR line started during the
Abhisit government (2008–2011) and continued slowly during the gov-
ernment of Yingluck Shinawatra (2011–2014). However, it was after the
May 2014 coup brought General Prayuth Chan-Ocha to power that the
negotiations accelerated. Premier Li Keqiang had visited Thailand the year
before and addressed the Thai parliament, where he presented the HSR
plan. He also promised to import one million tons of rice and stated that
he would consider importing more natural rubber (China Daily 2013).
In late July 2014, the Junta decided to go forward with the two HSR
projects, including the Bangkok—Nong Khai connection. This project
would adopt Chinese technical railway standards with a standard gauge of
1.435 m, and the rolling stock was meant for a mixture of passengers and
freight. The trains were presented as medium speed train (160–180 km/
hr), but they would be designed for a maximum speed of 250  km/hr,
which would mean that they were high-speed trains.2 This agreement
would involve three SOEs on the Chinese side. Two of these were con-
234   L. S. LAURIDSEN

struction companies: the China Railway Group Ltd. (CREC) and China
Railway Construction Corporation Ltd. (CRCC). The third SOE was the
China Railway Rolling Stock Corporation (CRRC). The mode of coop-
eration would be based on the EPC (engineering, procurement, and con-
struction) system. China was generally in charge of high-tech complex
tasks, while the simpler low-medium tech jobs were left to the Thai side
(Attananda 2015: 67–68; Interview C).
The Sino-Thai project was a government-to-government (G2G) proj-
ect, and the negotiations took place in a joint committee on railway coop-
eration (hereafter the Joint Committee). During 2015, no less than nine
meetings were held, but there was little progress. The following spring,
Thailand started to backtrack, and at a meeting in China in March 2016,
the Thai Prime Minister Prayuth stated that Thailand would stop the joint
venture talks and go ahead alone in building the 253 km Bangkok–Nakhon
Ratchasima part of the line with full Thai funding (the red line 1 and the
blue line 3), while the remainder of the HSR line (green line 2 and line 4)
would be suspended (Nopparat 2016; Yoon 2016). To soften the Chinese
by showing less interest, the Thai government accelerated the negotiations
with Japan (see below) and decided to speed up two other planned HSR
lines—the Bangkok–Hua Hin line (211  km) and the Bangkok–Rayong
line (193 km). The Bangkok–Nakhon Ratchasima line (line 1 plus line 3)
was now split into four parts with different starting dates. The Sino-Thai
negotiations continued, and at the 14th meeting of the Joint Committee
in September 2016, an agreement was reached on the Bangkok–Nakhon
Ratchasima track at a total cost of Bt179bn (US$5.15bn). The construc-
tion of the first 3.5 km section did not start in 2016 as planned, but fund-
ing was included in the budget for FY 2017 (TN, July 30, 2016; TN,
August 24, 2016; TN, September 21, 2016; Parameswaran 2016,
Amornrat 2016a; TN, November 1, 2016).
The Sino-Thai negotiations were difficult, and they focused on several
issues: construction costs, burden sharing, financing costs, development
rights to land, rice-for-rail, and technology transfer. The Chinese were
reported to have suggested constructions costs well beyond the estimated
Bt400bn (US$ 11.7 billion) and closer to Bt500 billion. When it came to
burden sharing, the financing structure and shareholding structure were
repeatedly changed during the meetings. In the end, Thailand decided to
bear the total construction costs, but China would provide funds for the
technical systems (trains, signals, etc.). There was also disagreement on the
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    235

financing costs: whereas the Thai side wanted a “friendly rate” of 2% or


lower on a Chinese loan from the Chinese Exim Bank, the Chinese nego-
tiators argued for a 2.5% interest rate, which was close to a commercial rate.
Development rights to land are normally a sticking point in rail projects
because they give rights to profitable ancillary development projects along
the line. This was the case in Thailand, but it turned out that the Chinese
had overlooked the fact that the King had long since given the land to the
State Railway of Thailand (SRT). In a political situation involving hyper-
royalist sentiments and a royalist junta, it was neither possible nor desirable
for the Thai negotiators to include land rights in the negotiations. The
rice-for-rail agreement was also negotiated, and it was agreed that China
would import 1 million tons of rice and 200,000 tons of natural rubber
from the huge stocks of these commodities. Finally, technology transfer
was taken up several times by Thai negotiators because the Chinese SOEs
were responsible for the high-technology aspects of the project, because
they came with a full technology package, and because they were planning
to use their own engineers and supply most of the workers (Interview A;
Interview B; Pratruangkrai and Prasertpolkrung 2015; EiU 2016a).
The unstable and unpredictable nature of the negotiations and the
seemingly ever-changing conditions must have annoyed the Chinese, who
see this project as a cornerstone in their land-based SREB. Thailand is of
particular interest to China because the country is an important player in
the fast-growing Mekong area and in relation to ASEAN. On the Thai
side, however, public officials have had difficulty in negotiating with the
Chinese, who have been less generous and less risk-willing than expected
(Interview A).
From the Thai point of view, this was a political project, a part of the
economic stimulation packages, and not least a signal to a powerful friend.
The HSR line will run through the Northeast of Thailand, which is one of
the poorest regions in the country and the region where the Shinawatra
and “the red shirts” have an electoral stronghold. Moreover, railways play
a major role in the infrastructure-oriented economic stimulus package
which is aimed at giving the junta output legitimacy. As the project
bypasses most of the country’s population centres, its financial feasibility is
insecure, but it is nevertheless a top priority for the military regime.
Besides the issue of political legitimacy, this may also be because the
incoming junta wanted to forge ties with China.
Thailand is the United States’ oldest ally in the region and one of five
formal US treaty allies in the Asia-Pacific region. Thailand has generally
236   L. S. LAURIDSEN

followed a strategy of balancing its relations with the United States and
China and of adopting a pragmatic approach to suit specific circumstances.
However, this has become more difficult in the new millennium—and
with China’s increasing power. Thailand has clearly tilted towards China
in the aftermath of the military coup. Whereas the Western countries con-
demned the military coup, downgraded its political ties, and slashed mili-
tary aid, China welcomed the military junta, declared it would not interfere
in Thailand’s internal affairs, and even intensified its collaboration with the
junta. As well as cooperation on the HSR project, Sino-Thai defence col-
laboration developed, and Thailand decided to buy three Chinese subma-
rines. In relation to mega-FTAs, Thailand prioritised the RCEP. Thailand
did not join the TPP when the United States did, and the country had no
interest in participating in the United States’ containment of China (Storey
2015; Busbarat 2016).
China has gradually become a favoured and reliable partner that can be
trusted during crises. The military could remember the strong support
from China during the Cambodian Crises, and they have become increas-
ingly pro-China. By 2014, the senior civil bureaucrats were those who had
occupied junior positions during the AFC and had experienced how China
did not devalue the RMB, instead it provided the financial support. This
contrasted with the US, which had contributed little and had backed the
unpopular IMF austerity policy. Further, Thailand has no overlapping ter-
ritorial claims or maritime boundary disputes with China, and in China-
ASEAN matters, Thailand and Indonesia normally share the role of “the
middleman.” In short, Thailand considers China an important security
partner and a source of strategic stability (Storey 2015; Busbarat 2016;
Interview D and E).
The Sino-Thai HSR project can be seen as part of Thailand’s broader
move towards China as a reliable partner in terms of economy and secu-
rity. Against this background, the Thai junta had expected the Chinese to
be more concerned about security than profit in their approach to the
railway project, and thus to be willing to sacrifice profit to the achievement
of foreign policy objectives. During the negotiation process, however, it
turned out that the Chinese were much more business oriented than
anticipated. The 2016-agreement is not necessarily a bad business deal for
China. So far, it seems that the Sino-Thai HSR project will move forward
step-by-step and will involve minimal risk should the project prove not to
be financially viable. China faces no competition on the delivery of tech-
nology and rolling stock. Furthermore, Prayuth has promised that China
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    237

will be invited to become involved in the coming phases of the HSR line.3
Although Thailand increasingly favours China, residual fragility in Sino-
Thai relations led to the non-invitation of Thailand to the Belt and Road
Summit in Beijing in May 2017 (TN 2017).

Japanese-Thai Collaboration on Railway Infrastructure


China is Thailand’s number one trading partner, accounting for 11.1% of
Thailand’s 2015 export and 20.3% of its 2015 import (against Japan’s 9.4
and 15.4%). Nevertheless, Japan dwarfs China as an investor. In 2015,
Japan accounted for 33.6% of all inward FDIs (China’s share was 2.7%)
and Japan has a much larger stock of FDI than China (EiU 2016b: 13;
BoT 2016). Consequently, Japan has a much greater commercial interest
than China in infrastructure development and especially in infrastructure
development that involves the greater Bangkok Area, the Eastern Seaboard,
and other Japanese economic strongholds in Thailand. In contrast to
Chinese involvement, Japanese involvement differentiates between pas-
senger and freight transport. The Thai-Japanese HSR project from
Bangkok to Chiang Mai is for passengers only and intends to out-compete
domestic flights—as was the case in Europe after the introduction of
HSR.  As shown in Fig.  9.2, Japanese involvement in the upgrading of
freight lines is in East-West projects, more precisely along the lower E-W
corridor (Kanchanaburi to Bangkok to Chachoengsao to Aranyaprathet
bordering Cambodia) and the upper E-W corridor (Tak/Maesot to
Mukdahan). In the upper E-W corridor (green line 3), most of the line
starts from the ground. No plan or design has been made, so realization
of the project will take a long time.
Negotiations on the Japanese involvement in railway upgrading started
in February 2015. Prime Minister Abe had previously followed the
American practice of minimizing diplomatic exchanges with the military
junta, but now he invited Prayuth to Japan on a three-day visit. During the
meeting, Thailand suggested a J/V model, and the two leaders signed a
memorandum of intent concerning the three railway routes mentioned
above. In May 2015, this led to a “Memorandum of Cooperation” on the
three routes, which was followed in September 2015 by a meeting between
the state-owned Thai railway company and JICA about the lower E-W
projects (red line 2 in Fig. 9.2). The project involves the improvement of
a meter double-track rail link from Chachoengsao to Laem Chabang (deep
sea port on the Eastern Seaboard) and has a total length of 574  km
238   L. S. LAURIDSEN

(Attananda 2015: 72; TN, February 11, 2015; EiU 2015; TN, May 26,
2015; EiU 2016a; interview A).
The lower E-W project is of great importance for both Thailand and
Japan. To the West, it can be extended to Dawei in Myanmar, where, in
collaboration with Thai and Myanmar authorities, the Japanese are plan-
ning to establish a huge special economic zone with a deep seaport. To the
East, it will link Thailand (and Japanese companies) with Cambodia and
with Vietnam’s coast, and, to the South; it will give better access for cargo
from the Bangkok area to be shipped out of Thailand’s main container
port Laem Chabang (see the red line 2 in Fig. 9.2).
In addition, ongoing negotiations at the bureaucratic level during
2015–2017 addressed the HSR line between Bangkok and Chiang Mai
(blue line 1 on Fig. 9.2). The trains are expected to run 300 km/hr on this
682-km long track and will use high-standard Shinkansen technology. In
contrast to the Chinese G2G approach, Japan prefers strong private sector
involvement (including private Thai capital, too), so the project uses PPP
financing and J/V company models. This HSR project was included in a
MoU between the two countries that was signed during the visit by Japan’s
foreign minister Fumio Kishida in May 2016. When the feasibility study
was presented in June 2016, Japan recommended that the line be divided
into two parts, so that the first phase would be a 386 km rail line from
Bangkok to Phitsanulok with a detailed construction plan ready by 2017
and with construction scheduled to start in 2018. By June 2016, there was
no agreement on who should operate the HSR service. As with the Sino-
Thai project, this HSR was included in the four HSR projects that Deputy
Prime Minister Somkid announced for accelerated planning and imple-
mentation in August 2016. The first phase, which will cost Bt224bn, was
also included in the government’s FY 2017 investment plan (Attananda
2015: 71, 76–78; BP, May 3, 2016; Amornrat 2016b; TN, August 2,
2016; TN, November 1; interview A).
It appears that the negotiations with Japan on HSR development and
railway upgrading in Thailand have moved smoothly, and that the final
extent of Japanese involvement will be larger than China’s. This is due to
several factors. First, according to Thai officials, negotiation with the
Japanese is easier because they are more flexible when it comes to solu-
tions. Second, it is easier to justify because the Japan-Thai HSR project
makes economic sense: the expected 2 hr and 46 min from the centre of
Bangkok to the centre of Chiang Mai can compete in speed and costs with
domestic flights. Third, the Japanese had already made a preliminary fea-
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    239

sibility study of the Bangkok–Chiang Mai line several years earlier. Fourth,
the lower E-W project is easier to construct because it can run on tracks
that are already in place. Fifth, Japan has a competitive advantage in main-
taining and upgrading railway lines. Finally, the two countries had already
agreed to use a J/V model and to rely on private sector involvement
(Attananda 2015: 78; interview A, interview B).
However, Japan’s involvement in Thai HSR infrastructure is still being
negotiated. On the one hand, the Thai government has decided to press
ahead with the Eastern Economic Corridor to stimulate the stagnating
economy. This will encompass huge infrastructure development projects,
including the Bangkok–Rayong HSR project and the further improve-
ment of existing rail lines. On the other hand, there are still obstacles to
the Bangkok–Chiangmai HSR project. By early 2017, Thailand’s trans-
port minister had announced that he wanted Japan to shoulder part of the
investment in the JV and to lower the price (around Bt500 bn) by com-
promising on non-safety standards (Ono and Kotani 2017).

Sino-Japanese Competition in Thai Railway Upgrading


When it comes to regional competition, there is no doubt that Japan has
increased its involvement in Thai railway upgrading and HSR to avoid being
further side-lined in regional rail construction by China, to breathe new life
into its HSR industry, and to take advantage of its superior railway upgrad-
ing technology. For China, Thailand is also important in its endeavour to
internationalise its HSR SOEs and to stimulate the domestic economy.
It should be noticed that in the Thai case, China and Japan are not in a
state of strong rivalry. When it comes to railway infrastructure, they do not
have mutually exclusive economic interests because they (mostly) compete
along different lines and corridors in Thailand, and because of the infra-
structure deficit and huge spending in this field.
For Japan, there is a clear commercial logic, so the emphasis is on the
two East-West corridors plus the Southern coast corridor. These are the
corridors which are relevant for the logistics of Japanese companies in
Thailand and/or regional connectivity to deep sea ports in the Bay of
Bengal, the Andaman Sea, the Gulf of Thailand, and the South China Sea.
Moreover, the Bangkok–Chiang Mai HSR project may well be commer-
cially viable and turn out to be a clear yet complementary response to
Chinese HSR diplomacy.
For China, there is also a clear economic logic. The HSR project is of
particular importance because it fits the NSEC, because it is a way to
240   L. S. LAURIDSEN

strengthen links to the Mekong countries (in particular Laos), and because
it is part of the prestigious Singapore–Kunming Rail Link (SKRL) within
the OBOR initiative. Of course, it is also a way of diversifying trade routes,
in that it is both a means of gaining access to the Gulf of Thailand for the
export of goods produced in Southwest China and an access point for the
import of food and natural resources from Indochina or elsewhere. This
gives China an interest in the future Bangkok–Kuala Lumpur section of
the SKRL.
The high degree of complementarity between Japan’s and China’s
involvement in the improvement of Thai railways is thus partly due to a
division of labour along different economic corridors. In turn, this reflects
structural differences in the investment patterns of the two countries.
Japan and China have invested in different sectors, often located in differ-
ent places. Japan has invested in the auto industry and in the electronics
industry, while Chinese investments so far have been directed into more
resource-seeking industries (e.g., natural rubber). Moreover, China has
focused exclusively on constructing new HSR lines, whereas Japan is also
involved in upgrading existing lines to double-track. Finally, the comple-
mentarity reflects the priority that Thai leaders have given to balancing
and leveraging the two regional economic giants.

Concluding Remarks
To find out whether “two tigers can occupy the same mountain,” we
asked two main questions: what are the rationales behind the Chinese and
Japanese HSR diplomacy in the region and to what extent and in which
ways is regional competition expressed in the case of Thailand?
Partly as a reaction to Obama’s pivot to Asia, but mainly to obtain more
flexible arrangements to accommodate its expanding economic interests,
Beijing decided to prioritise its relations to its Southeast Asian neighbours
and integrate them into the OBOR initiative. China’s use of economic
statecraft has also led to stronger regional rivalry concerning the future
regional order and in particular to rivalry with the United States about the
regional rules of the game.
Beijing’s growing economic and political influence has forced Japan to
match Chinese offers and to defend its position as the dominant regional
economic power. Both countries have intensified their infrastructure
diplomacy, and both utilise overseas infrastructure projects to serve for-
eign policy goals and to support and rejuvenate their own industries goals.
  CHANGING REGIONAL ORDER AND RAILWAY DIPLOMACY IN SOUTHEAST…    241

Regional competition affects the GMS, where China has lost influence
in Myanmar to Japan (and to Western countries) but has retained
Cambodia and Laos as loyal allies. Competing regionalism is growing in
this sub-region, as China has established an alternative regional institution
(LMC) and Japan has followed-up by launching its MJC2015 strategy. At
the same time, however, we have identified a certain complementary in
infrastructure strategies along the different economic corridors, making it
easier for the “two tigers” to find a place on the “same mountain.”
The leaders of Japan and China are personally committed to securing
HSR projects abroad and have devoted significant financial and diplomatic
resources to support the internationalisation of their local state-owned or
private companies. The analysis of the Thai case undertaken here has
revealed some complementarity between projects from the two countries.
The case study demonstrated that it was economic diplomacy rather than
economic statecraft that prevailed. Thus, there were limits to Beijing’s
willingness to forego profit in the pursuit of its foreign policy objectives,
and the negotiations with Japan were also commercially oriented.
Conversely, we saw that security matters were important for the Thai
junta, but also that Thailand has been trying to turn Sino-Japanese com-
petition to its advantage.
Thailand is a front runner in China’s SREB-HSR strategy, but it is
probably not typical of the Sino-Japanese race for HSR rail-projects. Even
though the HSR competition is somewhat mitigated by the huge infra-
structure deficit in the region, HSR companies from the two countries
have been involved in cut-throat competition in other cases. The Japanese
lost out in Indonesia, and the Jakarta–Bandung HSR project was awarded
to Chinese (state-owned) enterprises. This setback led to an adjustment of
Japan’s infrastructure strategy, and both countries are using their rail
diplomacy in the attempt to win the Singapore–Kuala Lumpur HSR line.
Sino-Japanese competition in rail-infrastructure is not inevitable, and
under certain conditions, cooperation may even become possible. The
election of Donald Trump as US President has not just changed the mega-
FTA landscape; it has also created uncertainty about the broader regional
role of the United States. In this context of disorder, Japan has opened up
to the possibility of cooperation with China’s OBOR. On June 5, 2017,
Shinzo Abe gave a speech in Tokyo in which he declared that the OBOR
“initiative holds the potential to connect East and West as well as the
diverse regions found in between” and that under certain conditions
(open access, transparency, economic viability, and financial soundness),
242   L. S. LAURIDSEN

Japan “is ready to extend cooperation from this perspective” (Abe 2017).
Thus, it appears to be too soon to draw conclusions about the future
nature of high-speed railway competition with any degree of certainty, just
as it is difficult to predict the precise character of the competition between
China and the United States. Despite intensified Sino-Japanese competi-
tion in HSR, the two tigers may be able to occupy the same mountain—
not just in Thailand, but throughout the region.

Notes
1. In 2007, new economic corridors were added and special economic zones at
border areas were programmed. Of relevance for this paper was a new
Southern Coastal Corridor linking the Gulf of Thailand with the Andaman
Sea (JICA 2016; Mazza 2015).
2. This strange procedure was due public concern about high-speed (Interview
C). The following interviews were made during fieldwork in late February
2016: A: Dr. Pichet Kunadhamraks, Office of Transport Planning (OTP),
Ministry of Transport (MoT); B: Danucha Pichayanan, Senior Advisor for
Policy and Plan, Infrastructure project office, the National Economic and
Social Planning Board (NESDB). C: Former MoT public official; D:
Consultant George Abonyi; E: Professor Chulacheeb Chinwanno,
Department of Political Science, Thammasat University.
3. On the other hand, by having Nakhon Ratchasima as the terminus, the Thai
side still have some leverage in relation to China for whom the HSR line
makes little sense OBOR-wise if the Nakhon Ratchasima – Nong Khai HSR
route (yellow line 4 in Fig. 9.1) is not constructed.

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CHAPTER 10

A Power Shift Underway in Europe? China’s


Relationship with Central and Eastern
Europe Under the Belt and Road Initiative

Dragan Pavlićević

Introduction
The relationship between China and Central and Eastern Europe (CEE)1
has made great strides forward following the establishment of the China–
CEE Cooperation Framework, a China-initiated multilateral platform also
known and referred to hereafter as 16+1 in 2012, and the launch of the
One Belt One Road (OBOR) initiative in 2013.
The CEE region and 16+1 occupy an important place within
OBOR.  OBOR rests on five pillars, namely infrastructure development,
policy coordination, trade facilitation, financial integration, and people-
to-people exchanges between China and the countries within the geo-
graphical space covered by OBOR.2 These same objectives have been
pursued through various corresponding measures, initiatives, and priority
areas defined under 16+1.3 Furthermore, at the time of writing, 13 out of

D. Pavlićević (*)
Department of China Studies, Xi’an Jiaotong-Liverpool University,
Suzhou, PR China
e-mail: Dragan.Pavlicevic@xjtlu.edu.cn

© The Author(s) 2019 249


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_10
250   D. PAVLIĆEVIĆ

the 16 CEE participants of 16+1 had signed a declaration or another type


of official document announcing their support for OBOR.4
The CEE region is a geographical point of entry of OBOR’s two
broadly defined corridors stretching from China to Europe, propped up
by the proposed large-scale development of transportation and energy
infrastructure. Both land-based and maritime corridors stretch over parts
of CEE, once they reach the geographical borders of Europe. Various
related projects have been delivered or are under discussion between
China and several CEE countries, including cross-border initiatives for-
mulated in the context of 16+1—such as the “China Europe Land-Sea
Express Corridor” (CELSEC) and “Three Areas Seaport Cooperation”—
and the establishment of various cargo rail links connecting Europe and
China.
Accordingly, Beijing has extended loans for a dozen infrastructure proj-
ects in CEE and expressed interest in many more.5 Together with the
growing volume of trade and investments from China in the CEE coun-
tries, these projects illustrate substantially deepening economic ties
between China and the region. This trend is expected to further intensify
under the trade and finance-related pillars of OBOR.
Official declarations of support for OBOR by the CEE countries, in
stark contrast with the refusal of the European Union (EU) to fully and
officially embrace the initiative (The Guardian 2017), illustrate the early
achievements under the “policy coordination” pillar of OBOR.  Various
mechanisms for exchange between the media, businesses, higher educa-
tion, and research institutions, to name just a few, now also provide venues
for substantive people-to-people exchange.6
These developments have been met with widespread concern.
Numerous influential research and media reports have predominantly
understood them as having two inter-connected and reinforcing implica-
tions: First, that growing engagement between China and CEE states
under 16+1 and now OBOR policy frameworks translates into China’s
growing influence over their domestic and foreign relations policies and
behaviour; and second, that it increasingly results in an erosion of the
EU-centred regional order.
This chapter provides an initial assessment of these viewpoints. The
next section presents related assumptions and arguments to illustrate the
main currents in the debate about the present and future of China’s rela-
tionship with CEE. In the subsequent section, I will lay out the analytical
resources that will be used to evaluate these views. In the second part of
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    251

the chapter, I will draw on the available evidence to critically assess them.
I will look into economic, political, security, and normative aspects of the
relationship to evaluate whether China has accumulated leverage over the
CEE countries, in the process also drawing on comparisons to the region’s
relationship with the EU—the dominant power in the region. The study
then turns to the contextual analysis of the China–CEE relationship under
the OBOR framework. This entails discussing the drivers of OBOR and
assessing the China–CEE relationship specifically within the triangular
relationship with the EU. For the empirical aspects of this study, I rely on
the existing body of research and media reports on the topic.

China, CEE, and OBOR: A Quest for Influence?


Observers have predominantly understood Beijing’s interest in developing
relations with the CEE countries exclusively in the context of China’s
grand strategy, in recent years spearheaded by OBOR. OBOR has been
widely understood as a vehicle for a power-thirsty and influence-seeking
China to assert itself globally. It has been referred to as a “Great Game”,
a Chinese “Marshall Plan”, and a “Debt trap diplomacy” advancing
China’s “neocolonial designs”, with the goal of “fashioning a hegemonic
sphere of trade, communication, transportation, and security links”
(Bloomberg 2016; The Economist 2016; Chellaney 2017). Moreover,
China is understood as  deliberately creating and then “weaponising”
interdependence through OBOR: “if others respect China, China will
reciprocate with material benefits; but if they do not, China will find ways
to punish them” (Leonard 2016). According to these views, OBOR aims
to change the global geopolitical context at the expense of the established
powers and the existing global order.
Dominant interpretations of the China–CEE relationship within aca-
demic, policy, and media circles follow this line of thinking to a great
extent, viewing the implications of China’s engagement with CEE in
starkly negative terms. China is understood to be seeking influence over
the CEE countries, which in turn results in a wide range of unwelcomed
and damaging consequences not only for CEE, but also the EU. Overall,
these perceptions view China as pursuing a “money for influence” and
“divide and conquer” strategy.7
That is not to say that these are the only perceptions of the China–CEE
relationship. Overall, the governmental discourse towards China in the
252   D. PAVLIĆEVIĆ

CEE region is positive, hailing opportunities that may arise from closer
ties with Beijing. There are media reports and analyses that view develop-
ing relations with China as beneficial for CEE countries and wider Europe.
However, as the following paragraphs intend to illustrate, it is these “neg-
ative” perceptions that have established themselves as influential para-
digms for understanding China–CEE relations. By prioritizing questions
and issues that are discussed and providing the parameters within which
the interpretations take place, these paradigms provide the context for
thinking about China, shape the understanding of the China–CEE rela-
tionship, and influence the outcomes of policymaking. The authoritative
semi-official publications from China (Liu 2016a), and the notable adjust-
ments in China’s and the EU’s official rhetoric and policies over the time
(Reilly 2017), offer tangible examples of how these paradigms influence
the China–CEE relations.
Within “money for influence” and “divide and conquer” paradigms,
China is understood to be accumulating leverage over the CEE countries
by making them to a high degree dependent on the Chinese economy
through the financing of strategic projects, the extension of loans for
these, and growing trade and investment. In return for such economic
benefits, CEE countries are feared to be prone to “repay” them by follow-
ing China’s line on issues of concern to Beijing (Die Zeit 2017). Numerous
commentaries on China’s approach to CEE understand it as designed to
ensure and result in the CEE countries’ alignment with and support for
China’s policies and values.
Furthermore, China’s success in developing its economy while main-
taining the central role of the state and national interest in the formulation
of economic and political agenda has been seen as facilitating anti-liberal
and anti-democratic norms and practices within CEE. These span the re-
evaluation of the communist past, advocacy for the primacy of national
over EU-level interests, reliance on state-level instruments for both mak-
ing and implementing economic policies, and a disregard for clean and
transparent governance (Grgić 2017; Makocki 2017). All of these stand in
conflict with what is commonly perceived as the desired normative and
organizing principles these countries should adhere to, often referred to in
the relevant literature as “European values and norms”.
In the context of the China–CEE–EU triangle, CEE is understood as
space within which a geo-economic competition is played out between
EU and China. China is said to be “financially meddling” in Europe’s
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    253

“backyard” (de Jong 2017). It is also feared and that CEE is turning into
“a contested geo-economic space between German and Chinese compa-
nies” (Pepe 2017).
Moreover, it is widely assumed that “China’s political and security
engagement in the 21st century is disguised in economic terms” (de Jong
et  al. 2017). China is seen as having “dark motives” to “breach into
Europe” by establishing “inroads” and a “backdoor” to the CEE coun-
tries to exercise political influence in the EU (RTS 2017; Deutsche Welle
2017). Seduced by Beijing, and increasingly dependent on economic
exchange with China, CEE countries will take on lobbying for and pursue
policies that are beneficial for China, but oppose the interests of the EU as
a whole (Reuters 2016). Hence, CEE countries, whether current EU
members or those expected to become so in the future, are seen as provid-
ing a platform to Beijing to access the inner workings of the EU and influ-
ence the EU’s policymaking, in the process undermining the interests of
the EU as a whole, and its coherence and credibility (AlJazeera 2013).
Accordingly, the European “project” is under threat from China. A
German diplomat is on record saying that the “16+1 is a direct attack on
European sovereignty” (Reilly 2017), a sentiment that is widespread in
policy circles.8 Furthermore, China’s OBOR and engagement with CEE
are feared to be causing deep frictions among European countries. For
some, Beijing’s growing involvement “pits EU north against south”
(Euractiv 2017), while others worry that “China’s inroads into CEE could
become a dividing factor, one that may move the ‘German-Central Eastern
European manufacturing core’ away from the rest of the EU” (Pepe 2017).
At the same time, there are fears that some countries in CEE might use
China as a “balancer” against the EU, or more broadly a strategic alterna-
tive to the EU (Pepe 2017). As such, China’s engagement with the CEE is
feared to be a centrifugal force eroding the EU’s unity and integrity.
As of recently, it has been increasingly suggested that China is challeng-
ing the normative foundations of the region and the EU. For example,
Chinese projects in the Balkans—a part of the CEE region that has not yet
been integrated into the EU—are perceived as serving as “a conduit for
China’s political and normative influence” and as a vehicle for the “battle
of principles” between the EU and China (Makocki and Nechev 2017: 2).
China is “undermining the EU’s reformist agenda” while tilting “the bal-
ance between the market-oriented and the state-led model to the latter’s
favor” (Makocki 2017). Here, clearly, the China–CEE relationship is
understood as a battlefield for the ongoing “strategic competition of
254   D. PAVLIĆEVIĆ

development models” brought about by OBOR (Fukuyama 2016).


Overall, the EU’s normative appeal and dominance are perceived as being
at risk due to the region’s improving relationship with Beijing and strength
of China’s soft power.
Specific examples of China’s influence on the CEE countries and the
EU’s internal and foreign affairs featuring in these discussions include the
case of the detention and deportation of Falungong activists during the
China–CEE Leaders Meeting in 2014 in Belgrade; the “Sinification” of
politics in Hungary; the corruption scandal surrounding a highway project
awarded to a Chinese consortium in Macedonia; the support voiced for
OBOR in the absence of the EU’s endorsement; the lack of support from
Croatia, Slovenia, and Hungary for a strong critical statement on the issue
of China’s territorial dispute with the Philippines in South China Sea, and
the referencing of China as a positive example in various speeches made by
the CEE political leaders (e.g., Pavlićević 2014; Nyíri 2013; Fallon 2016).

China’s Leverage: Analytical and Methodological


Concerns
Central to this assessment, albeit often implicitly, is the notion of leverage.
China is assumed to be accumulating leverage by shaping relations with
CEE in certain ways, in the process accruing forms of economic, political,
and normative capital which are then employed to shape the CEE coun-
tries’ behaviour. However, what exactly constitutes leverage and would
amount to sufficient leverage to enable China to alter the strategic and
policy choices of the CEE states and erode the EU’s dominant position in
the region is, by rule, left unaddressed.
Rather, the existence of leverage is taken for granted, without structured
and systematic attempts made to uncover its sources and the mechanisms
through which it may be utilized. The evidence offered is often anecdotal
or based on a limited number of high-profile cases that mostly assume, but
not confirm, causal links. While a full-scope, detailed inquiry is beyond the
scope of this study, this chapter attempts to close this gap by providing an
analytical framework to investigate the potential sources and application, as
well as conducting a preliminary assessment, of China’s leverage in CEE.
While often-used, leverage has been a rarely defined concept. In the
international relations literature, leverage tends to be “less explicitly refer-
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    255

enced”, and used interchangeably with influence or discussed as a means


to generate influence (Friman 2015: 202). Operationalizing the concept
is therefore necessary for the purpose of this study.
Shell (2006) refers to leverage as the power to reach agreement “on
your terms”.9 For Kirgiz, leverage can be best understood as a subset of
power—in Dahlian terms, an ability to influence behaviours of others—as
“power rooted in consequences” (Kirgiz 2014). Accordingly, leverage is
an “ability to influence another party through the threat of or the imposi-
tion of consequences on that party”. As such, leverage can be positive,
deriving from a party’s ability to satisfy the counterparty’s interests, or
negative, referring to a party’s ability to impose costs on the counterparty
if the counterparty refuses to agree to a set of terms.
Friman (2015) notes rich literature on how military capabilities and
economic resources can be used as leverage for achieving political goals.
However, drawing on Nye’s distinction between “hard” and “soft” power,
Anderson (2010) recognizes that resources that can be used for achieving
an objective in international politics go beyond military and economic
means. Anderson suggests that China has deftly deployed soft power strat-
egies and was very effective at leveraging its cultural resources throughout
Southeast Asia, Africa, and Latin America to grow its economy and its
stature in global politics.
Friman (2015: 203) also recognizes the limitation of focusing on mate-
rial capabilities and military and economic instruments as the sources of
leverage. Even when held in relative abundance, these “do not automati-
cally or necessarily influence the behaviour of others”. Along similar lines,
Levitsky and Way (2005) argue that leverage—which they define as vul-
nerability to external demands—is dependent on the strength of the eco-
nomic, geopolitical, communication, social, and civil society linkages that
exist between parties. Tolstrup (2010) highlights the importance of gate-
keeping elites for facilitating the depth and breadth of these linkages.
Hence, a broader constellation of factors—related to the domestic context
in countries which may pursue or have these capabilities, as well as in the
target countries—must be taken into account when investigating the
occurrence and use of leverage in international relations.
Furthermore, the relationships do not exist in vacuum, but are a part of
a broader set of relationships. Hence, it is necessary to assess a party’s
leverage not only in the context of the relationship with the assumed tar-
get of the leverage, but also within the wider context involving other rel-
256   D. PAVLIĆEVIĆ

evant actors and factors. Anderson (2010) also illuminates another


important aspect by understanding leverage as “using resources and/or
relationships in a creative way to bring about certain effects in the world”.
Leveraging takes place only when there is a desire to do so, and in relation
to specific objectives. Hence, a strategic intent to translate resources at
one’s disposal into influence, in order to achieve set outcomes, therefore,
is sine qua non for the exercise of leverage.
What transpires from this discussion above is that sources of potential
leverage in international relations are multidimensional, encompassing
both “hard” and “soft” power elements. Furthermore, having resources is
not enough to realize leverage—the broader context of the relationship
must be taken into account as it may facilitate or prevent leveraging from
taking place. Furthermore, a part of the broader context relates to whether
there is a strategic intent of a party to leverage the resources it has on its
disposal for achieving certain goals, and whether the existence of a causal
link between resources and the ends to which they are utilized can be
established.
Hence, for China to possess and exercise leverage over CEE countries,
China must have an ability to provide or withdraw things that other parties
want, a strategic and goal-driven intent to do so, as well as operate in a
context that would be conducive for leveraging to take place. For the
assumptions and arguments of the above-discussed perspectives on China–
CEE relations, including in the context of OBOR, to be well-grounded, I
propose that four conditions need to be satisfied: In terms of capabilities,
China has to have the capacity to be a vital provider of economic, political,
and security benefits to the CEE states; and, it must have a developed
“soft” power—the appeal of its ideas, institutions, and policies.
To exercise leverage, and particularly for the ends envisioned in the
literature reviewed above, two further contextual preconditions need to
be in place: First, China has to outscore the EU on these accounts to be
able to influence developments in the region more than the EU and
against the EU’s preferences; Second, China has to have the intention to
use its capabilities to the ends envisioned in the literature reviewed here.
The following sections will investigate China’s engagement of CEE in
the context of OBOR within an analytical framework based on these
premises (Table 10.1).
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    257

Table 10.1  The leverage framework


Source of leverage Indicators

Economy
An ability to provide or withdrew –S
 ubstantial dependence of CEE on China as a
economic benefits, such as source of finance, investment, and trade
financing, investment, and trade
Politics/diplomacy
An ability to provide beneficial –S
 ubstantive integration of CEE into China-
political arrangements and favoured organizations and mechanisms
diplomatic support –C
 onsequential support from China on key
domestic and international issues
Security
An ability to provide beneficial –S
 ubstantive integration into China-favoured
security arrangements and affect security organizations and mechanisms
counterpart’s security –M
 ilitary capabilities and security presence sufficient
to increase or decrease CEE countries’ security or
alter related perceptions
Soft Power Resources
An ability to shape behaviour of –P ositive domestic perceptions of China
others through attraction of ideas, – A
 pplication of norms and practices associated with
institutions, and policies China
Context
China’s capabilities are greater –C
 hina outscores the EU on the above indicators
than the EU’s
Intention
China aims to establish itself as a – China’s objectives are to influence internal and
regional power external affairs of the CEE countries and weaken the
EU’s position in the region and the EU as a whole

China’s Economic Leverage


The following sections will assess whether the state of the China–CEE
economic relationship results in a high degree of dependence of the CEE
economies on China. Loan-based financing of capital projects in the
region, foreign direct investment inflows, and growing trade relations are
widely assumed to serve as the three instruments China relies on to build
up and exercise leverage in CEE.

Capital Projects and Loans


Table 10.2 presents the current scope of China’s loan-and-build capital proj-
ects in the CEE region. The model of implementation of these projects rests
258   D. PAVLIĆEVIĆ

Table 10.2  Capital projects in the CEE region supported by China’s loans
Country Project Value %GDP

Albania European Motorway VIII: Arber €200mn 2


motorway to FYRoM
B&H Banja Luka–Split motorway €600mn 16
B&H 450 MW unit at Tuzla thermal €786mn
power plant
B&H 350 MW Banovici thermal power €400mn
plant
B&H 300 MW Stanari thermal power plant €350mn
Hungary Belgrade–Budapest high-speed €1.5bn 1
railway link
Montenegro Section of the European motorway €809mn 27
XI
Montenegro Renewal of the ship fleet €100mn
Romania 500 MW unit at Rovinari thermal €1bn 4
power plant
Romania Mintia-Deva thermal power plant €250mn
modernization
Romania Tarnita-Lapustesti hydropower plant €1bn
expansion
Romania Units 3 and 4 at Cernavoda nuclear €2bn
power plant
Serbia Danube bridge €170mn 8
Serbia Kostolac Phase I €130.5mn
Serbia 350 MW unit at the Kostolac €700mn
thermal power plant
Serbia Belgrade–Budapest high-speed €800mn in Serbia (out of
railway link the total €1.5bn)
Serbia Sections of the European motorway €900mn
XI (to Montenegro)
FYRoM Motorways construction €580mn 7

Source: European Bank for Reconstruction and Development (2016), based on Intellinews, 2016 with
additional research by author based on various media reports.

on Chinese policy banks financing large majority of up to 85% of the projects’


values, and low interest rates, estimated for CEE at approximately 2.5–3%
annually on average, with a few years’ grace period (Jakóbowski and Kaczmarski
2017). A minority of the projects listed here have been completed, while a
majority are either in the discussion stage or a preliminary agreement has been
reached. Others have been reported to be in early stages of discussion.
This makes accounting for and analysing capital projects and the related
loan arrangement a tricky task. Whether and when all or any of the projects
still in the pipeline will be realized is unknown at this stage, as well as their
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    259

final costs. Not everything reported is eventually delivered; parts of the


larger projects are occasionally reported separately; and the costs can
change dramatically over the course of negotiations or during the imple-
mentation of the project. For the purpose of the study, I select only proj-
ects reported to be in the pipeline by the end of 2016, and with an
announced estimated or agreed value. It is assumed that all of the projects
listed here will go ahead and be completed.
Undoubtedly, both the price tag and significance for the developmental
prospects of the CEE countries of these projects are very high. However,
these projects overall still do not significantly increase the CEE economies’
exposure to China, nor do they occupy a disproportionally important place
within the host countries’ economies, as measured by their value of the per-
centage of the host countries’ gross domestic product. Moreover, these proj-
ects are delivered over multiple years and repaid over longer periods, which
moderate their impact on the balance sheet of the host countries. As such,
even countries like Montenegro and Bosnia and Herzegovina are much less
exposed to China’s loans than the figures might suggest at first glance.
While further research based on comprehensive datasets is necessary to
understand the implications of China’s loans for recipient countries, some
available evidence suggests that at least some of the CEE countries own a
much larger portion of their debt than in arrangements with traditional
donors.10 In other words, at worst, Chinese loans can only be of secondary
importance for CEE countries’ levels of indebtedness and for their ability
to service their debts.
It should be noted as well that the loan-backed infrastructure projects are,
with exception of the Hungarian section of the Belgrade–Budapest high-
speed railway, confined to the Balkan sub-region of CEE.  This is a likely
consequence of the greater infrastructure needs in this part of CEE compared
to the region as whole, as well as a higher likelihood that the non-EU mem-
ber countries deliver public procurement projects without an open bidding
process, as is required by the rules of the EU. Additionally, the EU member
states do have access to financing on better terms through EU-mechanisms
(Jakóbowski and Kaczmarski 2017). Hence, China’s “infrastructure diplo-
macy” in CEE does not amount to a source of leverage for China.

Investments
Table 10.3 provides an overview of the investment trend between 2009
and 2015 for all CEE countries. It should be acknowledged that some of
the recent investment deals do not appear in the numbers, as well as that
260   D. PAVLIĆEVIĆ

Table 10.3  China’s investments in CEE, USD million


Country 2009 2015 2009–2015 growth (%)

Hungary 97.4 571.1 486


Romania 93.3 364.8 291
Poland 120.3 352.1 193
Bulgaria 2.3 236.0 10,115
Czech Republic 49.3 224.3 355
Slovakia 9.4 127.8 1265
Serbia 2.7 49.8 1758
Lithuania 3.9 12.5 218
Croatia 8.1 11.8 46
Bosnia–Herzegovina 5.9 7.8 31
Albania 4.4 7.0 60
Slovenia 5.0 5.0 0
Estonia 7.5 3.5 −53
Macedonia 0.2 2.1 955
Latvia 0.5 0.9 74
Montenegro 0.3 0.3 0
Total 411 1977 381

Source: Author’s research, based on UNCTAD.

the numbers alone may not capture the importance that some these invest-
ments may have for the recipient countries, as they are taking place at a
time of sluggish economic performance and widespread concerns that
EU-based investments are falling short of desired levels.
To illustrate, in 2016 China’s state-owned Hesteel acquired the Serbian
steel mill Smederevo, one of the major industrial assets in Serbia. When at
its full capacity, the steel mill is the second biggest exporter in the country,
making up 14% of Serbia’s exports, and is an important contributor to the
state budget. It was sold back to the Serbian state by its previous owner,
US Steel, for 1 US dollar in the aftermath of the Global Financial Crisis
and as the global demand for steel plummeted. Because of concerns about
the social instability, political consequences, and long-term economic loss
that may have resulted if the mill was closed, the Serbian government had
been subsidizing it with over 200 million US dollars annually in the years
which followed. In June 2016, Hesteel acquired it for 46 million Euros,
committing to invest around 300 million US dollars and significantly
increase its capacity in the coming years.
Among others, Chinese enterprises also secured airport operations and
oil exploration and production in Albania (2016), acquired an oil refinery
in Romania (2016), and announced ambitious investment plans for the
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    261

region (e.g., Huawei reportedly intends to invest 100 million US dollars


in Romania by 2018). Of note, the China–CEE Investment Fund, backed
by China’s EXIM bank—armed with a capital of 500 million US dollars
and set up under the auspices of the 16+1 framework to facilitate Chinese
investment in the CEE region—made its first investment in the region in
2015. The establishment of the Sino-CEE Financial Holding, which
makes additional 3 billion US dollars, mostly from China, available for
investment in CEE was also announced in 2016.11 There are expectations
that a further investment influx in the region will follow.
However, while the growth has been phenomenal when expressed in per-
centage points, and notwithstanding the limitation of available data in the
light of recent developments, China’s investment inflows are still moderate,
especially as, once these numbers are put in perspective by looking at China’s
investment inflows into the non-CEE EU countries, it becomes clear that
China is not pursuing a targeted “cash for influence” strategy in the CEE, as
these are generally minuscule in comparison (Oehler-Sincai 2017).
Overall, there is a strong correlation between the preferred destinations
in CEE for investment from both the EU and China, suggesting that
rather than these countries being targeted by China within such a strategy,
other factors determine which destinations are most attractive for foreign
directed investment (FDI) in CEE. Importantly, China’s FDI in CEE is
dwarfed by the FDI inflows from the EU.  As an illustration, EU’s FDI
accounts for 92% of all FDI stock in Poland, 91% in the Slovak Republic,
90% in Romania, 89% in the Czech Republic, 82% in Serbia, approximately
75% in Bulgaria, and close to 70% in Hungary. Hence, China’s growing
investment flows are not providing China with leverage over CEE.

Trade
Table 10.4 presents trade volume between China and CEE for the period
2009–2015. Overall, there is a sharp increase in trade volume, with a con-
tinuous increase of imports from China relative to exports from CEE.
However, the degree of China’s participation in the trade mix of the
CEE states also suggests that China is still a minor player in the region,
especially as compared to the EU, despite the substantial growth in trade
volume in recent years. For example, trade with the EU still accounts for
63.8% of Serbia’s total, while trade with China amounted to only 4.4% of
the total. Albania is among the three countries with the highest ratio of
trade with China in CEE, standing at 7%, yet her trade with the EU
accounts for over 67% of the total (European Western Balkans 2017). A
262   D. PAVLIĆEVIĆ

Table 10.4  China-CEE trade volume (USD billion)


Country 2009 Total 2015 Total 2009–2015 growth (%)

Poland 15.38 24.63 60


Czech Republic 11.39 20.46 80
Slovakia 3.89 8.05 107
Hungary 6.16 7.36 19
Romania 0.63 3.96 533
Slovenia 1.28 1.86 45
Bulgaria 1.43 1.78 25
Serbia 1.14 1.55 36
Estonia 0.50 1.17 134
Lithuania 0.48 0.94 95
Croatia 1.48 0.65 −56
Latvia 0.22 0.60 174
Albania 0.37 0.53 45
Macedonia 0.29 0.48 65
Montenegro 0.13 0.21 70
Bosnia and Herzegovina 0.08 0.15 81
Total 44.86 74.38 66

Source: Vangeli (2017) based on UNCTAD.

similar ratio is seen in the case of other CEE countries, where the EU’s
participation in the trade mix averages 64% in 2016 (Oehler-Sincai 2017).
In summary, contrary to widely held assumptions, the initial analysis
above suggests that the state of the economic relationship between China
and CEE is insufficient to provide Beijing with a structural leverage over
CEE, nor is it likely to do so in the short to medium term.

China’s Political and Security Leverage


While beneficial political and security arrangements are generally less
prominent in the debates about the China–CEE relationship and the
implications of OBOR in the region, it must be acknowledged that they
can serve as important sources of leverage. It is widely acknowledged that
the United States and Russia, while falling far behind the EU in terms of
its economic importance for the CEE, remain the major actors in the
region due to their diplomatic and security clout.
While a long-standing friendship is often emphasized as the basis of the
relationship in official communications, China and CEE have not histori-
cally had close ties since the founding of the People’s Republic of China
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    263

in 1949. With the exception of Albania, CEE countries did not have sub-
stantial relations with China during most of the Cold War era, as they
belonged to either the so-called Eastern Bloc or the non-aligned
Yugoslavia. This was followed by the almost complete absence of CEE
from China’s foreign policy during the 1990s and the early years of the
twenty-first century, as China focused on developing relationships with
developed European countries in search of the capital and resources nec-
essary for its economic development at home. At the same time, the CEE
region was occupied by political and economic challenges brought about
by the transition, and the integration with the EU: 11 out of 16 countries
have since become members of the EU, and five are expected to gain
membership in the coming years.12
However, the context of the China–CEE relationship has indeed dra-
matically changed since. Three CEE countries—namely, Serbia, Poland,
and Hungary—currently have a Comprehensive Strategic Partnership
with China in place, while the others have all intensified their diplomatic
exchanges with China, mostly due to the establishment and subsequent
proceedings under the 16+1 framework, followed by OBOR. As discussed,
13 countries have officially declared participation in and support for
OBOR, which established policy coordination among its main objectives,
and which appears to be developing in the direction of more formal insti-
tutionalization characteristic for other China-backed multilateral plat-
forms, including 16+1. Party-to-party dialogues between the Communist
Party of China and the political parties in CEE have also been intensifying
in recent years.
Notwithstanding these current developments, the mutual neglect over
the previous decades resulted in relatively weak political and diplomatic
links between China and the CEE countries. A shortage of personnel with
competencies and knowledge relevant to the CEE countries, and the
absence of developed networks in the CEE countries have a negative effect
on the ability of China’s diplomats and enterprises to push forward with
their desired policies and plans in CEE.13 In contrast, the EU and EU
member states have forged wide variety of links in CEE since the 1990s,
and particularly in the context of the process of the CEE countries’ inte-
gration into the EU, even if the historically deep and abundant intra-
European links were, in some instances, cut off during the Cold War.
More importantly, China’s ability to integrate the CEE states into ben-
eficial political and security arrangements, provide diplomatic coverage,
and act as a major political stakeholder in the region is limited by the
264   D. PAVLIĆEVIĆ

region’s continuous integration in existing Europe-centric political and


security frameworks. All CEE countries are members of the EU or are
aspiring to EU membership, and, as such, their important policies and
legislation are aligned with that of the EU.
While foreign policy remains, to a great extent, delivered on the level of
individual member states, the case of the relationship with Russia in the
aftermath of the Ukrainian crisis testifies to Brussels’ ability to leverage
EU membership, even over prospective candidates, for its own goals. The
Moscow-backed “South Stream” project to establish a network of gas
pipelines across the eastern and southern parts of CEE was abandoned
under the pressure from Brussels, despite the expected benefits it would
have brought to the CEE countries involved. While China’s growing par-
ticipation in international organizations of various kinds, in addition to
China-initiated multilateral initiatives like 16+1 and OBOR, does make
China a more relevant player in international affairs, the structural factor
of the CEE countries’ integration in the EU’s political and legislative
mechanisms and frameworks places limits on how much influence China
can hope to have over the CEE countries.
Moreover, China does not have a military presence or security role in
the region. There is not any evidence that Beijing has any intention of scal-
ing up its regional involvement in this regard, as it has not integrated the
CEE states into security arrangements, and security-level cooperation is
not listed among the goals of either OBOR or 16+1. On the other hand,
China also does not pose a credible military threat to the region to gain
any leverage through deterrence. Most importantly, all CEE states are
members of NATO or participate in NATO’s Partnership for Peace pro-
gramme. Within the current geopolitical context, this makes it extremely
unlikely that any of the CEE countries could potentially engage in sub-
stantive security cooperation with China if it were deemed inappropriate
by major stakeholders in NATO.

China’s Soft Power


China also lacks “soft” power capabilities in the region. While praise is
occasionally directed at the success of the “China model”, and CEE gov-
ernments refrain from criticizing China’s official ideology or political and
economic system, this remains purely on a rhetorical level, without feeding
back to the internal policies of CEE countries. As an example, Serbia,
which is commonly understood as having the best relationship with China
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    265

among the CEE countries—and whose leaders have repeatedly lavished


praise on China’s achievements—has, at the same time, been aggressively
pursuing neoliberal policies, such as divesting from the state-owned sec-
tor, cutting down public expenditure on social welfare, and maintaining
and furthering its pro-business policies and environment.
There is also no evidence that there are causal links between Hungary’s—
seen to be at the danger of “Sinification”—and other CEE countries’ tilt
towards “strongmen” and “illiberal” governing practices as inspired by or
modelled on China. The official-level praise and positive rhetoric directed
towards China is, by rule, balanced by the rhetoric and deeds reconfirming
CEE countries’ commitment to the EU and its norms and polices.14
Overall, working with China is seen as compatible with EU membership
and norms, not as an alternative to it, and cooperation with China is often
specifically referenced as serving the wider EU-related agenda of the CEE
countries.15 As such, engaging China should be understood as utilitarian—
CEE leaders are rationally adapting to the emergence of China as a power
with a global outreach and an interest in the region. By engaging Beijing,
they aim to diversify their foreign relations and seek new sources of eco-
nomic support while accepting the EU-centric normative and political order.
Another structural factor that severely limits China’s soft power across
much of the CEE is a strong resentment towards the communist past of the
region. Mainstream contemporary interpretations of the region’s commu-
nist past perceive communism as forced upon the region by the Soviet
Union or the iron fist of the local communist forces, as well as being
responsible for low living standards, disregard for individual freedoms and
rights, and the backwardness of the region during the Cold War period and
since. In fact, communist symbols and ideology have been outlawed and
even equated to Nazism in some CEE countries. Hence, the one-party
system, communist ideology, state-controlled economy, and other practices
associated with both historical communism and contemporary China are
perceived negatively, and work against China’s “soft” power in the region.
Accordingly, perceptions of China as a threat to the region are much
more widely present than optimistic assessments of the relationship with
China,16 also testifying to the limits of Chinese soft power. The data on
public perception of the EU and China in the CEE countries shows a sig-
nificant gap in the percentage of positive views, in favour of the former
(Oehler-Sincai 2017).
The multiplying number of Confucius Institutes around the region—
coupled with the variety of people-to-people exchange programmes that,
266   D. PAVLIĆEVIĆ

among others, create links between the media, higher education and
research institutions, and businesses from China and CEE—may lead to
the emergence of a more positive, or at least more evenly divided, view of
China in long term.
However, there is nothing at the moment to suggest that China will
reach the point where its ideas, institutions, and diplomacy can become
sources of leverage. On the contrary, the existing literature on China’s
other asymmetric relationships suggests that more engagement with China
may result in the “securitisation” of the relationship, diminishing China’s
soft power and complicating the overall prospects of the relationship in
the process (Reeves 2014). The perceptions of the China–CEE relation-
ship addressed in this article suggest that such a process may already be
underway.

OBOR and China’s Strategic Intentions in CEE


While the preceding analysis suggests that China does not have “hard”
and “soft” power resources sufficient to gain structural leverage over CEE,
it is reasonable to suggest that intensifying ties under OBOR may result in
China acquiring more capabilities in the future. However, will China want
to and be able to leverage them for the ends feared by the critics? The
chapter turns now to a contextual analysis of OBOR and China–CEE rela-
tions, to provide a perspective on this question. The goals of OBOR and
China’s foreign policy towards CEE determine to what ends China might
want to leverage its present and future resources. In contrast to the views
presented at the beginning of the chapter, my analysis suggests that the
drivers of China’s OBOR, as well as its policy towards CEE, are found
among China’s domestic priorities, and that their success hinges upon a
cooperative, rather than conflictual, relationship with the EU.
For one thing, the long-standing “Go Global” policy reinforced
through OBOR encourages Chinese enterprises to participate in the
global market to grow their businesses and improve their competitive edge
(The State Council 2016a). OBOR and 16+1 aim to create opportunities
for Chinese enterprises, including the state-owned enterprises (SOEs)
dominating strategic industries, to diversify portfolios and gain a foothold
in Europe, as such establishing new foundations for their growth and
development.
Additionally, infrastructure projects allow SOEs to test their technol-
ogy and know-how in less-developed European countries, as well as famil-
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    267

iarize themselves with the European business environment and practices,


while getting closer to the lucrative markets in Western Europe in the
process. At the same time, they offer an entry point for a diverse group of
economic actors, including policy banks, various SOEs, and private enter-
prises, to also gain access to these markets.
The importance of overseas infrastructure projects for the Chinese
domestic economy is magnified when one takes into account the overca-
pacity issues China faces in several sectors, including steel and aluminium,
and associated industries, such as construction. Railway and shipping
industries also face grave overcapacity challenges, with existing production
capacities by far outstripping current market demand. As an illustration,
the internal demand for cargo rolling stock dropped 87.5% from 40,000 to
5000 units between 2012 and 2015. For ordinary passenger wagons, the
demand fell approximately 68% from 2700 to 1143 units over the same
period. A similar trend is expected to take place from 2017 for high-speed
rail rolling stock (Caixin 2015). At the time of writing, the combined pro-
duction capacity of CRRC—China and the world’s largest rolling stock
manufacturer—is over half the level of demand (Caixin 2017).
Hence, industrial overcapacity has been deemed a major threat for both
the immediate and medium-term health of the Chinese economy and has
been a top priority for economic policymakers in recent years. Chinese
policymakers hope that the overseas infrastructure projects advocated
under OBOR, including those related to seaborne logistic corridors and
railways, can absorb some of this industrial overcapacity and maintain and
expand the profits of related industries by creating demand for their prod-
ucts, equipment, and services.
The improved transportation links envisioned under the OBOR scheme
also aim to keep Chinese imports competitive in the European market, as
reduced shipping times and lower costs of shipping will, at least to an
extent, offset the rising costs of production in China.
Finally, escaping the “middle-income trap” and restructuring its econ-
omy from one mainly based on low-added value products towards one
which to a greater extent relies on the higher-added value products has
been one of the main objectives of current government’s economic policy.
Participation in overseas markets, as well as the export of technologically
advanced equipment and related services already owned by China, such as
those related to high-speed railway and energy technology, is meant to
facilitate such a transition, as well as create a healthy long-term demand
from overseas for related Chinese industries. All of the above is of para-
mount importance for the legitimacy of the ruling party in China which,
268   D. PAVLIĆEVIĆ

to a substantial extent, rests on its ability to deliver economic development


and better living standards at home.
In summary, OBOR’s goals are primarily economic in nature.17 Within
such a context, stable and cooperative foreign relations conducive to the
uninterrupted development of economic ties are required. Hence, power-
seeking in OBOR countries within a geopolitical competition with the
established powers, as envisioned by the paradigmatic “money for influ-
ence” and “divide and conquer” perceptions of the China–CEE relation-
ship, is not in the cards, as it would destabilize the environment and cause
a backlash against China, complicating its efforts to achieve Beijing’s objec-
tives. On the contrary, the political goals inherent to OBOR are to develop
relationships that facilitate positive trends in the volume and quality of eco-
nomic exchange. China hopes to leverage favourable political relationships
to which, it is hoped, OBOR will contribute, to achieve economic goals,
and not, as widely assumed, economic relationships to achieve political
ends such as changing the balance of power in Europe and globally.

The Dynamics of China–CEE-EU Triangle:


Adaptation and Contention
Ironically, at least in part due to the “self-fulfilling” quality of the domi-
nant narratives discussed earlier, the backlash is already taking place, pro-
ducing confrontational attitudes and policies. On the back of these
narratives, the EU has resorted to using behind-the-door pressures on the
CEE countries, hostile rhetoric, and legislative instruments to slow down
development of China–CEE ties (Reilly 2017). On an official level, it has
mostly ignored the 16+1 initiative, while it has simultaneously withheld
official support for the OBOR initiative.
It is, therefore, sound to examine the possibility that China might deem
it necessary to change the international political environment, including in
CEE, to overcome obstacles such as these put in the way of its implemen-
tation of OBOR.  The forthcoming analysis in this section argues that,
rather than wanting to acquire the position of a regional power at the
expense of the EU, China is interested in harnessing its relationship with
the EU to advance OBOR in CEE.
For one, China has sought to soothe the EU’s concerns, repeatedly
emphasizing that 16+1 is “part and parcel” of China–Eu relationship in its
official documents, the speeches of its top-level officials and diplomats,
and “second track” diplomatic mechanisms. On a strategic level, Premier
Li explicitly called for the 17 countries participating in the 16+1 format to
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    269

“align our respective mid- and long-term development goals and the
China-EU 2020 Strategic Agenda for Cooperation” (Pavlićević 2014).
On an operational level, there are calls for the Chinese entities pursuing
opportunities in the CEE region to abide by the EU’s regulations, enlist
the cooperation of EU companies, and pursue a strategic three-party
framework, while addressing the EU’s “doubts” and “concerns” and seek-
ing cooperation. New rules should be put forward only if they are “accept-
able to both sides” and if they “satisfy the needs of Europe”. On the
project level, China has been promoting a tri-partite cooperation with the
EU and CEE, advocating that China and the EU should jointly and stra-
tegically identify and deliver projects in the CEE region (e.g., Zhen 2016;
Liu 2016b: 88–95). That China adjusted its approach to a couple of flag-
ship projects under 16+1 initiative in order to comply with the EU’s regu-
lations and preferences, testify that Beijing seeks engagement and
accommodation, not conflict (e.g., SeeNews 2017).
The EU and China’s agendas towards the region overlap to a signifi-
cant extent in their intentions to improve the region’s infrastructure and
exert a positive impact on local economies. On both the policy and project
levels, China’s plans also fit well with the EU’s. The pillars and objectives
of the so-called Juncker Plan and OBOR both prioritize investment in
transportation and energy infrastructure, among others (Pavlićević 2015).
For example, a recent study by the European Bank for Reconstruction and
Development (EBRD), one of the main actors and stakeholders in the
EU’s development agenda, has proposed six projects in the Balkans region
that could be co-delivered by the EU and China (EBRD 2016).
Furthermore, a joint loan programme between the EBRD and Intensa
Bank has been launched to support small and medium enterprises’ partici-
pation in China-financed projects in the Balkans (ANSAmed 2016).
Further illustration is offered by CELSEC (People’s Daily 2014), a
plan envisioned to establish a logistics corridor stretching from the port of
Piraeus to Budapest in Hungary. CELSEC corresponds to the route of
Corridor X of the Pan-European Transportation Network Plan (Politika
2013) which, in turn, aims to enhance connectivity across the European
continent through an improved network of railways and roads. In fact, the
transportation infrastructure projects that China is involved with, by rule,
correspond to the various links envisioned under this master plan, or to
the plans of the individual states put in place long before China expressed
an interest in the infrastructure works in the region.
Of note, 14 European countries joined the Asian Infrastructure
Investment Bank, while China almost simultaneously gained membership
270   D. PAVLIĆEVIĆ

in the EBRD.  Furthermore, the contribution of Chinese funds to the


Juncker Plan, the establishment of the so-called Connectivity Platforms
between some EU countries and China, as well as other cooperative
arrangements, testify that important stakeholders within the EU recog-
nize the commonalities and space for constructive engagement between
China and the EU (Reilly 2017), as well as that China seeks cooperation
rather than competition with the EU in the CEE region. This viewpoint is
often articulated in the official documents and statements on both sides,
as well as in authoritative and influential policy briefs, reports, and com-
mentaries in the EU (e.g., Grieger 2016; Bastian 2017).
Hence, evidence points that China is interested in leveraging its rela-
tionship with the EU to achieve success with OBOR, rather than leverag-
ing OBOR to weaken Brussels’ position in the region.

Conclusion: Is Power Shift Underway in Europe?


Engagement between China and the CEE states is rapidly deepening, and
that trend is likely to continue in the short term. However, the initial
assessment in this chapter suggests that the fears that this would result in
China’s leverage over CEE are not backed by available evidence. China
not only lacks the capacity to alter the strategic and policy choices of the
Balkan states, particularly at the expense of the EU, but also an intention
to do so.
For one, China lacks the depth and breadth of the EU’s relationship
with the region in all of economic, political, and security domains.
Economic interactions have not, as of yet, produced the dependence of
the CEE countries on China, as China’s participation in the CEE econo-
mies, whether looked at on the regional level or the level of individual
CEE states, is still at best moderate. Furthermore, notwithstanding the
institutionalization of the 16+1 framework and the possibility that OBOR
will also take an institutionalized form in the future (Xinhua 2017),
China’s ability to integrate the CEE countries into beneficial political and
security arrangements, and extend related benefits or impose costs, remains
non-existent to limited. China is also found to lack the “soft” power
resources. On all of these accounts, the CEE region remains firmly depen-
dent on the European and EU-centred sources, frameworks, and
structures.
Given the lack of resources to effectively shape development in the
CEE and the primacy of China–EU relations over China–CEE relations,
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    271

there is no incentive for China to purposely seek to undermine the EU and


seek to influence the region against the EU’s preferences. To be sure,
China will seek to enlist the support of CEE countries for its policies and
mobilize support on the issues that matter to China. But, it is clear that
the overall context of the China–CEE relationship places clear limitations
on what China might want and can expect to achieve in the region.
As recent trends suggest, China has not only repeatedly reiterated its
support for a unified Europe, but Beijing has been increasingly seeking
compliance with such a “European order” rather than contending it with
an alternative set of norms and practices. The EU remains, by far, a more
important partner to China on all vectors of its foreign policy than CEE,
and hence China would be careful not to “trade a horse for a donkey” by
courting CEE with policies that are granted to weaken its relationship
with the EU. Overall, the content and trends in the China–CEE relation-
ship will hence remain greatly dependent on the priorities defined under
the China–EU relationship.
As the legitimacy of the ruling party in China rests and will continue
to rest on its ability to navigate the treacherous waters of economic
reforms back home, keep the economy growing, and provide continuous
improvement in the standards of living for the Chinese people, China will
seek to develop its diplomatic relationship with CEE under the OBOR
framework to create the conditions to realize such goals. Confrontational
and dominance-seeking policies towards the EU and CEE respectively, so
feared by many, cannot serve such an agenda and hence are unlikely to be
pursued.
If China does not have a structural leverage over the CEE nor intention
to pursue an influence over region affairs, how should the often-touted
examples of its influence be accounted for? In many cases, the existing
explanations are lacking in nuance and/or do not adequately interpret the
domestic context in the CEE.  For example, Slovenia and Croatia were
reluctant to support the international arbitration in South China Sea as
they have a maritime territorial dispute between themselves that they do
not wish to be resolved through international arbitration. Serbia’s support
for China’s stance on Falungong and South China Sea should be seen as
the expression of the country’s commitment to principles of “territorial
sovereignty and integrity” and distaste for international-level mediation in
its own domestic affairs. In the context of the secessionist and interven-
tionist issues related to the status of its runaway province of Kosovo, it is
also a way of saying “thank you” to China for supporting Serbia on these
272   D. PAVLIĆEVIĆ

issues, with Beijing’s behaviour driven by domestically driven commit-


ment to the same principles in relation to the sovereignty over Tibet,
Xinjiang, and Taiwan, rather than influence-seeking in relation to Serbia.
While Chinese companies might engage in corrupt practices, so do
European ones—there is no evidence that Chinese enterprises are more
likely to be involved in corrupt practices than those from other countries.
There is a lack of evidence that China has anything to do with “illiberal
tendencies” in Europe—references to China in speeches and statements
are more likely to be cases of positive diplomacy towards China calculated
to improve the relationship with Beijing and possibly send signals to both
the EU and the domestic electorate, but not to “trade” China for the EU.
However, the limits of this study should be recognized. Further devel-
opments in the relationship between China and the CEE, the state of
affairs within the EU, and various other factors may dramatically change
the context in the future. After all, OBOR is touted as multi-decade initia-
tive and, should it be able to deliver, China’s capabilities will certainly be
substantially improved in the long term. On the other hand, the EU is
facing grave challenges, including those related to the emergence of right-
wing and anti-European parties and the growing Euroscepticism across
the continent. These may indeed in the long-term erode the EU’s coher-
ence and attractiveness to member and potential member countries.
In that context, the impact of the burgeoning economic relationship
between China needs further study. Not only may its effects take years to
show, but more comprehensive and systematic efforts are needed to under-
stand the implications of the related trends, especially as this aspect of the
relationship is expected to experience a most rapid development in the short
term. The lack of comprehensive data and the very brief treatment of the
available data on the economic ties between China and CEE found in this
chapter can only serve the goal of this study to provide an initial evaluation
of China’s economic presence in CEE.  Further research should not only
uncover new data, such as those related to the debt structure and prospects
of CEE countries, and rely on comprehensive datasets of higher quality, but
also give them a more systematic and context-aware treatment.
Furthermore, this study treated the CEE region uniformly, without
analytically acknowledging that different CEE countries develop their
relationships with China at different speeds, with different levels of com-
mitment, and with different outcomes. Critics of the China–CEE relation-
ship also tend to conflate what happens on certain issues, or within certain
bilateral relationships, with the trends relevant to all of the 16 CEE coun-
tries. However, it is clear that some of the CEE states might be building
  A POWER SHIFT UNDERWAY IN EUROPE? CHINA’S RELATIONSHIP…    273

metaphorical bridges with China more quickly. In China, there are also
influential proposals to focus on building relationships with a number of
selected countries as a springboard for a better relationship with the entire
region (Liu 2013). Studying developments between these countries and
China closely might provide clues as to where China’s regional policies
towards CEE are heading.
Finally, more methodological rigour is required to isolate the “China
effect” on the developments in the region and establish causal links
between China, OBOR, and China’s other policies on the one side, and
developments and trends in CEE on the other. Approaching related
research questions based on sound methodological tools is a challenging,
but certainly necessary, task for taking the research agenda on the subject
forward.

Notes
1. Central and Eastern Europe refers to the countries participating in the
16+1 framework: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the
Czech Republic, Estonia, Hungary, Macedonia, Montenegro, Latvia,
Lithuania, Romania, Poland, Serbia, Slovakia, and Slovenia.
2. “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st
Century Maritime Silk Road,” issued by the People’s Republic of China’s
National Development and Reform Commission, Ministry of Foreign
Affairs, and Ministry of Commerce of the People’s Republic of China, with
State Council Authorization, March 2015, Available at: http://en.ndrc.
gov.cn/newsrelease/201503/t20150330_669367.html
3. See, for example: “The Riga Guidelines for Cooperation between China
and Central and Eastern European Countries” (2016), November 2016,
Available at: http://english.gov.cn/news/international_exchanges/
2016/11/06/content_281475484363051.htm
4. As relayed by Prof. Liu Zuokui, October 2017.
5. While some of the infrastructure projects in the region have been discussed
or implemented prior to the launch of OBOR, they have since been inter-
preted both in China and abroad within the context of the initiative.
6. See note 4.
7. Paradigmatic titles and analysis can be seen here: Worldcrunch (2016)
“Divide, Conquer, Aim East: China Has A Sharp New European Trade
Strategy”, November 11, Available at https://www.worldcrunch.com/
world-affairs/divide-conquer-aim-east-china-has-a-sharp-new-european-
trade-strategy; Stanzel, Angela, Kratz Agatha, Szczudlik, Justyna and
Pavlićević, Dragan (2016) ‘China’s investment in influence: the future of
274   D. PAVLIĆEVIĆ

16+1 cooperation”, China Analysis, December, 14, Available at: http://


w w w. e c f r. e u / p u b l i c a t i o n s / s u m m a r y / c h i n a s _ i n v e s t m e n t _
in_influence_the_future_of_161_cooperation7204
8. Personal observation from various 16+1 related events and conversations
with experts from Europe.
9. As quoted in: Kirgiz, Paul F. (2014) “Bargaining with Consequences:
Leverage and Coercion in Negotiation”, Harvard Negotiation Law Review
19(69): 69–128.
10. For the case of Serbia, among the top destinations in CEE for China’s
loans, see: Ministry of Finance of Republic of Serbia (2017).
11. See, for example: “The Riga Guidelines for Cooperation between China
and Central and Eastern European Countries”.
12. The Sino–Serbian relationship is an exception in this regard as it witnessed
a substantial bilateral exchange during this period, and especially in the
period following the 1999 NATO campaign against Serbia during which
the Chinese embassy in Belgrade was bombed by NATO.
13. Numerous conversations with Chinese diplomats and researchers
in-the-know.
14. I am thankful to Dr. Marcin Grabowski for drawing my attention to this
phenomenon, which is in line with the practices across the Europe: For the
latter, see: Reilly (2017).
15. Various formal and semi-formal statements and documents, as well as
media interviews of the officials from CEE.
16. Conversations with scholars and researchers from the CEE countries and
participatory observations from China-CEE events of various kinds.
17. For an authoritative, although poorly translated, semi-official arguments,
see: Liu (2016a, b).

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CHAPTER 11

Conclusion: The One Belt One Road


in the Politics of Fear and Hope

Li Xing and Paulo Duarte

Ever since Napoleon warned the West that it would be better not to wake
the “sleeping giant”, China has been a source of fascination and opportuni-
ties, as well as uncertainties and disturbance, for the existing West-­dominated
world order. The great difficulty facing the West, especially the United
States—the order’s creator and key stakeholder—is how to perceive,
respond, and adjust to the global impact brought about by the rise of China.
The failure in the West, and in the United States in particular, in form-
ing a comprehensive understanding of Chinese development strategy,
motivation, policy, and objectives has been periodically translated into an
ailment—“China syndrome”. The ailment can be characterized by a mix-
ture of psychological anxiety, emotional hysteria, and emphatic demoniza-
tion against China, which has generated a spill-over effect to different

L. Xing (*)
Department of Culture and Global Studies, Aalborg University,
Aalborg, Denmark
e-mail: xing@cgs.aau.dk
P. Duarte
Centro de Investigação em Ciência Política, The University of Minho,
Braga, Portugal

© The Author(s) 2019 279


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0_11
280   L. XING AND P. DUARTE

parts of the world. On the one hand, in the past four decades either fasci-
nation or irritation with China has influenced Western scholarship and
journalism, which often produce abrupt sentiments ranging from exces-
sive approval and unqualified optimism to unwarranted revulsion and
deep pessimism. On the other hand, after four decades of economic inte-
gration into the existing world order, China still finds itself to be a “Middle
Kingdom” surrounded by jealousy, admiration, anxiety, worry, and even
resentment.
The theme of the volume, together with the chapters included in this
volume, covers a whole series of issues and analyses on China’s most recent
grand “One Belt One Belt” initiative, ranging from (geo)economic and
(geo)political competition to security and energy rivalry, and so on, and
from country-based, regional, and global perspectives. The chapters of the
volume display a clear gap between a strong awareness of a rising China
with the outward expansion of its political, economic, and cultural influ-
ences and, subsequently, an unpreparedness to respond to China’s ascen-
dance in general, and Beijing’s One Belt One Road (OBOR) initiative in
particular. Western perceptions of China are largely found in two “funda-
mental images”, a dichotomy between “China [as a] threat” and “China
[as an] opportunity” (Pan 2012). Such a set of “bifocal lenses” provides a
framework through which China is supposed to be conceptualized, and it
functions as a shared paradigm, defining “what should be studied, what
questions should be asked, how they should be asked, and what rules
should be followed in interpreting the answers obtained” (Ritzer 1996:
637 cf.; Pan 2012).
As this collection shows, the “worry/threat” paradigm tends to see that
China’s politics, economic activities, and foreign policies are wrapped with
worrisome and menacing calculations. China’s economic diplomacy (such
as the OBOR initiative) is largely perceived as having negative effects on
all but China. Historically, the “China threat” has been associated with
China’s market size and its integration in the world economy. This is
because the rise of China is seen to have contributed to many worrisome
uncertainties: its currency has been a subject of contention; its global trade
has raised concerns for workers and companies in both developed and
developing countries in connection with mercantilism, dumping, and
trade surplus; its hunger for energy has led to competition and price
increases; its policies on finance, currency, trade, security, environment,
resource management, food security, raw materials, and commodity prices
are increasingly seen as impinging upon the economies of millions of peo-
  CONCLUSION: THE ONE BELT ONE ROAD IN THE POLITICS OF FEAR…    281

ple outside China’s boundaries. China’s intensifying economic expansion


(such as the OBOR initiative) will inevitably translate Chinese economic
weight into political, economic, security, and diplomatic leverage. In addi-
tion, a biased perception of China’s one-party political system, its state-­
governed market economy, its “in-born” nationalism, and even China’s
cultural civilization is perceived as inevitably putting China a collision
course with the norms of the existing world order (Pan 2012).
As for the “China opportunity paradigm”, on the other hand, China
has been seen as the biggest saviour of the capitalist world system since its
economic reform in the 1980s and its gradual integration into the world
economy. There were optimistic writings about China’s post-Mao “sec-
ond revolution” for most of the 1980s. The irony underlining the “China
opportunity paradigm” lies in the fact that “the domination of capitalism
globally depends today on the existence of a Chinese Communist party
that gives de-localised capitalist enterprises cheap labour to lower prices
and deprive workers of the rights of self-organisation” (Jacques Rancière,
cf. The Guardian 2013). Today, the indisputable fact is that the Chinese
market, investment, trade, and purchasing power are an indispensable
“opportunity” for the whole world. Drawing on different literature by
various prominent scholars and analysts, Pan shows how China has been
identified as “an ideal production base, investment destination, export
platform in the global supply chains, and an excellent destination for out-
sourcing”, and by “offshoring to China … Western businesses [have been
enabled] to free up talent, machinery, and capital to higher-value indus-
tries and cutting-edge R&D, thus allowing them to capture even greater
profit margins” (Pan 2012: 33).
“China as opportunity” is self-fulfilling as a political and moral oppor-
tunity to confirm one’s own values. As neoliberalism believes, the reason
why China is currently a winner in the era of globalization is precisely
because its economic growth and wealth accumulation is generated from
within—not from without—the capitalist world system (Ikenberry 2008).
However, what needs to be emphasized is the fact that Chinese economic
success is attributed to the role of the socio-cultural and political “embed-
dedness” reflected by a unique embedded integration of state-market-­
society relations (Li 2016). The power diffusion of Chinese success in this
context perhaps has less to do with the attraction of the Chinese political
system and cultural value, and more to do with China as a metaphor for
“doing it your own way” or an example of what can be achieved. The
underlined values diffused from the “Chinese model” (Ramo 2004), such
282   L. XING AND P. DUARTE

as adherence to national self-determination, a strong role of the party and


state, gradual reform and innovation to achieve economic growth, and
international non-intervention, etc., are normalized as the “Beijing
Consensus”, and it “has begun to remake the whole landscape of interna-
tional development, economics, society and, by extension, politics”
(Ramo 2004: 3).
China’s emergence as an alternative aid donor, investor, and economic
partner seems to be one of the major power sources of attraction for other
developing states. The absence of conditionality in China’s international
aid policy can be seen as a feature of Beijing’s emergence as a norm-­settling
power, because such a norm of unconditionality refuses to build aid poli-
cies upon other countries’ sovereignty, economic model, governance pat-
tern, or political culture (Hubbard 2008).
Heuristically, the phenomenon of a set of persistent “bifocal lenses” of
opportunity-threat in studying the impact and implication of the rise of
China, as reflected in this volume, helps us to develop a multi-dimensional
approach to understanding the multi-facets of China’s “One Belt One
Road” initiative. The OBOR initiative is nothing more than a powerful
and full instrument that China has outlined to project its economic power
far beyond its borders. On the one hand, the initiative is packed with
normative/soft power so as to reduce the fears that the international com-
munity has about China’s intentions in an international context. On the
other hand, Beijing intends to develop its most remote provinces, logisti-
cally placing them at the heart of the major routes that aim to connect
China to Europe, but also to the Indian Ocean, as part of the “China-­
Pakistan Economic Corridor” project. Both of its maritime route and land
routes are, for that purpose, two geopolitical and geostrategic platforms of
extreme importance for China’s ambitions to be fulfilled, making it not
only a maritime power, but also as a land power, the guide of a more effec-
tive connection between East and West (Duarte 2017).
In this sense, the securitization1 that underlies the ambitions of a China
that is nostalgic about its glorious achievements, and is marked by a strong
patriotic nationalism, has a hybrid and holistic essence. That is, the national
interest is likely to be better served if China gets the ingredients for global
security from the sea and the land. The country struggles to overcome its
domestic difficulties, as well as to achieve stable and uninterrupted access
to the mineral and energy resources it urgently needs. The same applies to
the maintenance of the prosperity of the millions of Chinese people who
are ascending to the middle class, but also to the promise that the other
  CONCLUSION: THE ONE BELT ONE ROAD IN THE POLITICS OF FEAR…    283

millions of Chinese who remain underdeveloped will come out of it as


soon as possible. And, finally, curiously and paradoxically, the fate of the
Chinese Communist Party itself—whose credibility and legitimacy is, after
all, intertwined with the fulfilment of the aforementioned goals—also
depends on this (Shambaugh 2015).
Dealing now with the subjects discussed throughout the volume which
ends here, the conclusion intends to echo the introductory words, in par-
ticular, when this book’s introduction speaks of OBOR as the instrument
to shape a “new world order with Chinese characteristics”. This book
predicts that the new order is about to come, an order entailing the grad-
ual outlining of Pax Sinica, where China has achieved the reunion with its
ancient glorious history. In other words, China seeks the essence of its
glorious past, the gravity centre that turned it into the “Middle Kingdom”.
One of the ways to achieve this past status is to shape the geoeconomics
and geopolitics of regional and global integration. That is, to adapt the
logistical land and maritime links to the (re)emergence of a power it needs
to ensure trade with the great world periphery and uninterrupted access to
mineral and energy resources. The keyword is connectivity (Wang 2016).
If once all roads lead to Rome, today Beijing strives to ensure that all
roads lead, in the medium and long term, to China, making the country
a kind of global mega hub. The high-speed railways which aim at connect-
ing East and West, via Central Asia, play a crucial role here. Furthermore,
the sea, the maritime supply and communication lines, the so-called String
of Pearls, the South Pacific, the Arctic and Antarctica and, ultimately,
Space, are not stationary borders: they are susceptible to expansion,
exploitation, and incursion to accommodate China’s national interest.
There are no forbidden borders to China. There cannot be. The country
needs to feed one-fifth of the world’s population and to get resources
wherever they are. This is why, given all these energy, food, and political
circumstances and requirements (the abovementioned maintenance of
the regime), Xi Jinping’s China bets on the OBOR as an instrument
which aims to support the (re)emergence of the country, fighting domes-
tic weaknesses and accommodating—at the same time—the integration of
the world into China and China into the world. It is also an instrument to
promote the Chinese Yuan, because a great plan needs a great currency
(Shen 2016; Kynge 2015). The OBOR initiative is driven by a number of
similar political, economic, and security calculations to those upon which
the US Marshall Plan to Europe was initiated in the aftermath of the
Second World War.
284   L. XING AND P. DUARTE

This book demonstrates that there is nothing new in what China is


doing in retrospect of the history of the international relations and the
history of the capitalist world order. In fact, there is a realpolitik, an impe-
rialist and expansionist logic inherent in OBOR, a logic that was heatedly
debated between Kautsky (1914) and Lenin (1917). China seeks space,
connectivity, access, mineral and energy resources and, in short, an expan-
sion that will enable it to sustain its population growth and the continuity
of its political regime. China is building itself upon its Chinese Dream,
made of nostalgia, but at the same time, of a lot of pragmatism and inno-
vations. The OBOR initiative seemingly looks to the past and is hungry
for the future. After all, a considerable part of Chinese foreign policy is
made up of nostalgia and of the repression of the historical humiliations
inflicted on it by the West and by Japan. The time of the Chinese new
“Silk Road” is a time of déjà vu, of a power that aspires to be, once again,
the “Middle Kingdom” it had been before.
China wisely combines a mixture of bilateralism and multilateralism,
and even a growing regionalism with a more proactive approach in its
foreign policy. In fact, more and more proactive and self-confident,
Chinese foreign policy is characterized by a new attitude vis-à-vis regional
affairs. On the basis of such an attitude, there is a combination of assertive-
ness, pragmatism, nationalism, and urgency in protecting its national
interest. Therefore, China recognizes that to be a still more influential
power in the game of world power, as well as to protect its vital interests,
the country needs to boost and (re)set its diplomacy. At the regional level,
China’s intervention doctrine seems to be endowed with a certain ambiva-
lence. Depending on the subject matter, China adopts different foreign
policy strategies. In fact, when the critical interests of the country are
concerned, Beijing may opt, if necessary, for a more assertive foreign pol-
icy. But with regard to other matters, the Chinese position has often
proved indecisive, although flexible, responding to changing circum-
stances. In these cases, China adopts a passive attitude in terms of foreign
policy (Ekman 2016; Tiezzi 2015).
This book reveals a remarkable change in China’s foreign policy, which
consists of the transition from a purely bilateral conception to the accep-
tance of multilateral relations. In fact, except for the case of the United
Nations, Beijing has always supported bilateral relations, to the detriment
of any multilateral involvement, although it has realized that there are
advantages in its participation in multilateral organizations. That is why
China has approached the Association of Southeast Asian Nations, or rec-
  CONCLUSION: THE ONE BELT ONE ROAD IN THE POLITICS OF FEAR…    285

ognized the growing importance of the Asia–Pacific Economic


Cooperation. The fact that China joined the World Trade Organization
(WTO) in 2001 represented a turning point, as WTO membership implies
an adherence to rules and openness, which, in turn, compels the Chinese
to “search for prejudice” (Romana 2010).
The change in Chinese foreign policy, which came after China’s inte-
gration in the liberal world order three decades before, can be clearly
observed in Beijing’s changing global role from being a passive rule-­
follower (“Tao Guang Yang Hui”)2 to becoming a proactive rule-setter
(“You Suo Zuo Wei”).3 The OBOR initiative is seen as Beijing’s shift
towards a more proactive foreign policy and strategic repositioning. It
signifies that China is moving from being a passive role-player through
joining the regional and global labour division to being a proactive rule-­
setter through capital outward expansion and production outsourced.
Much literature in recent years has already begun to discuss the phenom-
enon in which the rise of emerging powers, particularly China, is leading
the world order towards the diffusion of international norms and is shap-
ing the evolution of international norms and institutions (Pu 2012). Thus,
this book has an explicit premise that the OBOR initiative facilitates a
process in which normative matrices and decisions in the countries involved
in the initiative are influenced, or even shaped to a certain degree, by the
thinking and practice of Chinese policymakers and intellectuals.
China has been actively working on amending the very same liberal
world order it benefited from. Understanding its own fate as being inter-
linked with and interdependent on the rest of the world, but at the same
time insisting on upholding national sovereignty and rejecting Western
“universal values” and “universal blueprints” of development, Beijing is
using multilateral organizations to promote its interests and to bring vari-
ous partners into its hegemonic project under commonly-acceptable
phrases in the discourse, such as “win-win situation”, “South-South coop-
eration”, “common prosperity”, and a “community of common destiny”,
etc. These are not just rhetoric, they represent a strong awareness that it
will only be possible to achieve China’s re-emergence through the sharing
of the fruits of development and progress with its surrounding countries
and regions. There is, in fact, a Chinese proverb that clearly illustrates the
evolution tendency (towards a greater dynamism) of China’s posture vis-­
à-­vis regional affairs: “a near neighbour is better than a distant relative”.
The strengthening of regional cooperation continues, in parallel, with the
Chinese ambition to reinforce multilateralism at the global level.
286   L. XING AND P. DUARTE

Although, as this book suggests, OBOR is an instrument through


which China actively promotes foreign investments in its interior, it makes
sense to relate this looking inside with the Chinese vision regarding “glo-
balization” and “free trade”, something that the Chinese president has
been advocating in various international forums, such as the one that
occurred in Davos last January. China presents itself as a kind of vanguard
of a world without barriers, without protectionism. China defends the
win–win to dispose of its products. In fact, as this book argues, China may
be successful in promoting its own norms and values and in offering a
non-Western alternative that features new thinking and practice to the
pluralistic world. Slowly, a renewed “Beijing Consensus” has a strong
potential to implement several China-centred institutional mechanisms of
global governance that supplement the existing global order (Chan 2016).
This book supports the thesis that the OBOR initiative is the privileged
instrument that China uses to defend its interests and achieve its goals in
the regional and global spheres. In this sense, it may be promising to keep
on monitoring how hard power, normative power, and soft power compo-
nents, including those of Chinese politics, economy, and culture, will tend
to interact within OBOR.  The triple securitizations inherent to the
Chinese grand strategy can be, simultaneously and paradoxically, key roles
in the domestic and regional stabilization, but also in accelerating the
destabilization of the balance of the world power. Reconnecting Europe
with China’s extended great periphery to the Central Asian Heartland
inevitably weakens its long transatlantic momentum. This is perhaps the
reason why the United States has so far been very hostile to Beijing’s
OBOR initiative. One chapter of this book correctly associates the Western
worry with its suspicion that the OBOR initiative aims to reintegrate
Africa and the Middle East into a counter system to the dominant Western-­
led system of accumulation.
Asian powers such as India and Japan, and also the United States, are
staying away from the Chinese OBOR project, seeing it as a Chinese plan
to “encircle the world” (Financial Times, May 4, 2017). Both countries
are together embarking upon multiple infrastructure projects across Africa,
Iran, Sri Lanka, and Southeast Asia in competition with China’s grand and
unilateral infrastructure across the Eurasian continent. Viewing the OBOR
initiative as a Chinese way of seeking geopolitical gains through this eco-
nomic agenda, the recent India–Japan alliance aims to create an alternative
“Asia-Africa Growth Corridor” to counter the OBOR initiative. The situ-
ation ironically echoes an old Chinese proverb: “two tigers cannot occupy
  CONCLUSION: THE ONE BELT ONE ROAD IN THE POLITICS OF FEAR…    287

the same mountain”. This clearly indicates that the OBOR initiative is
identified by the regional rivalries as China’s move to restructure the
­political economy of the regional order. This book acknowledges that the
OBOR initiative, together with its overseas infrastructure projects, has
elevated regional competition and infrastructure diplomacy.
To conclude, the diplomacy of emphasizing infrastructural projects
advocated by the OBOR initiative extends to all continents. There are no
neglected regions and the Chinese invitation is open to everyone. The
new “made-in-China” world order will continue to emerge. Based on the
assumption that the “world reordering with Chinese characteristics” will
be China’s “new normal”, this book invites readers to join the debates
between different international relations schools: Will China be a destruc-
tive or constructive world power? A status quo or a revisionist one? A force
for continuity, or a force for change? Liberal scholars, in general, see China
as a status quo power on the basis of the assumption that China is satisfied
with the existing capitalist world order and China’s economic success is
achieved through its integration in the world market (Ikenberry 2008,
2011), whereas realists firmly anticipate China to be a revisionist power,
and China will unavoidably seek to change, if not overturn, the regional
and the world order, bending and shaping it in line with its interests
(Mearsheimer 2006, 2010). For the time being, the OBOR initiative is
seen as a good test case to judge whether China is a “status quo” or “revi-
sionist” power.
Although there is no clear answer to the above questions, the editor,
Li Xing, is apparently right in his basic postulate, fundamental in this
volume (see Introduction ), namely that the rise of China and its OBOR
project will unavoidably affect and disturb a number of existing “global
relationships” and “global arrangements”, as well as the existing order’s
“structural power”. This book volume, as part of the editor’s series of
books on the rise of China and its emerging powers in recent years,
approaches again a promising topic–the OBOR, although this volume is
only a small contribution to help understand something extraordinary
and revolutionary that is under construction. The new emerging world
order with China as its central gravity is a project for generations.
Therefore, this work coordinated and edited by the editor is, in a sense,
visionary because it attempts to take a pioneering effort to interpret,
explain, and speculate the implications, opportunities, and prospects, as
well as challenges and constraints brought about by such a grand project.
Much new literature will certainly continue to follow this topic or other
288   L. XING AND P. DUARTE

topics related to the emergence of a Chinese century, because the Pax


Sinica has reached the point of no return. It is impossible to stop China
and the signals coming from the East.

Notes
1. According to the Copenhagen School, securitization is a process whereby a
securitizing agent tries to establish, socially, the existence of a threat to the
survival of a unit. When a subject is securitized, it comes out of the scope of
normal policy and moves into the scope of emergency policy, which usually
legitimates the use of force (Buzan et al. 1998).
2. This is a Chinese idiomatic expression which means “to hide brightness, and
to nourish obscurity”. Its underlined notion reflects an implicit strategic
choice, namely to wait for a time when China is ready to assert itself in the
global sphere and is ready to make a challenge.
3. This is also a Chinese idiomatic expression which is semantically connected
with the “Tao Guang Yang Hui” aphorism (see note 2). It stands for “striv-
ing for achievement” and “making a difference” after a period of accumula-
tion of physical and psychological strength.

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Index1

NUMBERS AND SYMBOLS Asian Dream, 94


16+1, 249, 250, 253, 261, 263, 264, Asian Financial Crisis (AFC), 224, 236
266, 268, 270 Asian Infrastructure Investment Bank
16+1 platform, 64 (AIIB), 4, 14, 19, 22, 31, 49,
16+1 Think Tank Network, 68 51n3, 64, 94, 96, 104–106, 108,
112n11, 119, 121, 136, 137n3,
183, 199, 206, 210, 212, 222,
A 225, 228, 231, 269
Accumulation with Chinese Asian Tigers, 199
characteristics, 197 Asia-Pacific Economic Cooperation
Africa Rising, 211, 213 (APEC), 7, 97, 133, 151
Agents of globalization, 223 Asia-Pacific Economic Cooperation
American hegemony, 219 summit, 174
ASEAM-China FTA, 94 Asia-Pacific Trad Agreement (APTA),
ASEAN+3, 101, 104–106, 108 126, 133
ASEAN-China Free Trade Area Association of Southeast Asian
(ACFTA) (2010), 225, 230 Nations (ASEAN), 123,
ASEAN countries, 92 126, 127, 133, 134, 225, 228,
Asia-Africa Growth Corridor, 286 235, 284
Asia-Europe Meeting, 64 Authoritarianism, 77
Asian Development Bank (ADB), 94, Authoritarian state-centric
220, 227–231 capitalism, 15

 Note: Page numbers followed by ‘n’ refer to notes.


1

© The Author(s) 2019 291


L. Xing (ed.), Mapping China’s ‘One Belt One Road’ Initiative,
International Political Economy Series,
https://doi.org/10.1007/978-3-319-92201-0
292   INDEX

B CCTV, 150
Back to Asia, 99 Central Asian periphery, 145, 152
Bangkok-Chiang Mai line, 239 Changyi, 61
Bangkok-Hua Hin line, 234 China-Central and Eastern Europe
Bangkok-Nakhon Ratchasima line, 234 Cooperation Framework (CEE),
Bangkok-Rayong line, 234 249–254, 256–259, 261–273
Bangladesh-China-India-Myanmar China Centre for International
Forum for Regional Economic Exchanges, 212
Cooperation, 183 China collapse theory, 11
Beijing Consensus, 43, 59, 71, 76, China contribution theory, 11
184, 198, 282, 286 China Development Bank, 220, 230
Belt and Road, 4, 7, 17, 22 China dream, 42–43
Belt and Road Forum, 174, 183 China-Eurasian Economic Union, 133
Belt and Road Summit China Europe Land-Sea Express
Beijing 2017, 237 Corridor (CELSEC), 250, 269
Bilateral Investment Treaty China-EU 2020 Strategic Agenda for
(BITs), 134 Cooperation, 269
Bilateral Swap Agreements, 97 China Exim Bank, 220, 261
Boao Forum, 151 China-Gulf Cooperation Council
Bounded rationality, 60, 80, 84n13 FTA, 134
Brazil, Russia, India, China, and South China Model, 59, 70, 71, 73, 264
Africa (BRICS), 4, 11, 31, 50, China-Nepal-India corridor, 183
51n2, 198, 206, 207, 209 China opportunity paradigm, 281
Bretton Woods, 12, 40, 42 China opportunity theory, 11
institutions, 225 China-Pakistan Economic Corridor,
system, 183, 184 156, 160, 177, 186, 187, 282
BRIC, 125 China-Pakistan FTA, 134
BRICS New Development Bank China Railway Construction
(NDB), 4, 11, 96, 183 Corporation Ltd (CRRC), 234
China Railway Group Ltd.
(CREC), 234
C China’s Marshall Plan, 12–13
Capitalism, 2, 3, 8–10, 14, 18 China’s neocolonial designs, 251
Capitalism from above, 73 China’s New World Order, 1–24
Capitalism from below, 73 China solution, 172
Capitalism from the outside, 73 China’s One Belt One road initiative
Capitalist logic, 9 (OBOR), 1–24
Capitalist mode of production, 2 China’s Satellite Navigation
Capitalist world system, 32, 41, 44, Management System, 182
45, 48, 49 China syndrome, 10, 279
Capitalist world system-historical China threat, 280
development phases, 3 China threat theory, 11, 150
 INDEX 
   293

Chinese anti-terrorism Act, 145 Diffusion, 57–83


Chinese-Asian dream, 226 Djibouti, 8, 21
Chinese characteristics, 45, 61, 72, 81 Doha Round, 41
Chinese Communist Party, 69, 144
Chinese dream, 7, 94, 144, 145, 172,
225, 284 E
Chinese maritime New Silk Road, 153, East China Sea disputes, 223
154, 156, 157 Senkaku/Diaoyu islands, 223
Chinese “Marshall Plan,” 251 East-West Economic Corridor
Chinese model, 29, 43, 281 (EWEC), 229–231
Chinese way, 184 Economic Cooperation Programme
Chongqing-Xinjiang-Europe, 176 (ECP), 229
Cold War, 2, 4, 12 Economic power, 8, 17
Common community, 94 Emerging markets, 4
Community of common destiny, Emerging powers, 3–5, 17
42, 43, 145 Emerging societies, 4
Competitive regionalism, 222 Emerging states, 4
Complementary interests, 102 Energy corridor, 203
Comprehensive Strategic Engels, F., 1
Partnership(s), 263 Eurasian Economic Partnership
Connectivity, 283, 284 Agreement, 133
Connectivity Platforms, 270 Eurasian Economic Union, 183
Constructivism, 24 European Bank for Reconstruction
Constructivist, 79 and Development (EBRD),
Conventional power transition 258, 269, 270
theory, 30 European Union (EU), 23
Copenhagen School, 20, 143, ExIm Bank, 64
144, 161n6 Export-oriented growth, 29
Corporate Social Responsibility
(CSR), 199
F
Fate community, 95, 108
D Five pillars
Dawei development project, 230 financial integration, 249
Debt trap diplomacy, 251 infrastructure development, 249
Deep sea ports people-to-people exchanges, 249
Andaman Sea, 239 policy coordination, 249
Bay of Bengal, 239 trade facilitation, 249
Gulf of Thailand, 239 Five-year plan, 38
South China Sea, 239 Flying-geese economic order, 34
Dependency theory, 12, 31, 49 Foreign direct investment (FDI),
Developmental state, 72 117, 118, 123, 124, 135, 136
294   INDEX

Forum for China-Africa Cooperation H


(FOCAC), 211 Han dynasty, 146
Framework Agreement on ASEAN-­ Hard power, 146, 286
China Comprehensive Economic Harmonious society, 145, 149
Cooperation (2002), 225 Hegemony, 3, 4, 16, 22, 102,
Free market, 227 103, 110
Free-rider, 11–12, 30, 42 theory, 39
Free trade agreements (FTAs), 20, High-speed railway (HSR), 220, 221,
119, 126, 127, 133, 134, 136, 228, 232–242
137, 222, 223 Japanese-Thai HSR, 221, 237–239
Free Trade Area of Asia-Pacific Sino-Thai HSR, 232–237
(FTAAP), 94 Historical-geographical materialist
Free trade zones (FTZ), 122 approach, 197
Horn of Africa, 6, 8, 204, 212, 213
Hybrid regimes, 73
G
G20, 7
German-Central Eastern European I
manufacturing core, 253 Illiberal democracies, 73, 77
G7 ISE-Shima Summit, 228 Imperial expansion, 8
Global capitalism, 48 Inclusive globalisation, 201
Global financial crisis, 63 Indian Ocean, 154–156, 160
Global governance, 58, 59, 63, Infrastructure diplomacy, 219, 220,
74, 83 223, 227–229, 259
Globalization, 2, 3, 7, 10, 11, 19, 21, Instrumentalist, 79
22, 41, 48 International aid, 13
Globalization 2.0, 172 International Capacity
Globalization (alternative to), 62 Cooperation, 184
Global mega hub, 283 International Monetary
Government-business-media (GBM) Fund (IMF), 41, 49, 52n10,
complex, 22, 197–202, 207, 78, 94, 236
209–213 International political economy (IPE),
Government-to-government (G2G), 3–7, 17
234, 238 Iron Silk Road, 152
Grand periphery, 110
Great Chinese rejuvenation, 172
Greater Mekong Subregion (GMS), J
220, 224, 229–231, 241 Japan, 22
Great Game, 251 Japan Bank for International
Great peripheral strategy, 152 Cooperation (JBIC), 228
Great powers, 102, 111n7 Japan International Cooperation
Gulf of Aden, 154, 155, 157, 202 Agency (JICA), 230, 237
 INDEX 
   295

K Neo-Gramscian IR theory, 18, 32


Kautsky-Lenin debate, 32, 47–50 Neoliberalism, 71–74, 76, 77, 79,
on capitalism and imperialism, 18 81–83
Neopatrimonialism, 73
Neo-Sinocentric periphery structure, 31
L Network capitalism, 200
Law of value, 5, 9 New Development Bank, 64, 210
Liberalism, 4, 5, 9, 24 Newly Industrialized Economies
Logic of capitalist production, 9 (NICs), 35
New Silk Road, 61, 63, 133, 143,
146–157, 159, 160
M diplomacy, 148
Malacca Dilemma, 105 New Silk Road Foundation, 49
Mandate of heaven, 6 New silk Road Fund, 31, 52n4
Maritime belt, 30 New world order with Chinese
Maritime Silk Road, 92–94, 96, 101, characteristics, 283
106, 112n11 Noble’ ideas, 144
Maritime Silk Road for the 21st Normative power, 15, 23, 282, 286
Century, 61, 84n14 Normative Power China, 59
Market capitalism, 2, 14 North-South dependency, 31
Market-oriented economy, 169 North-South Economic Corridor
Marx, K., 1 (NSEC), 229, 230, 239
Middle-income trap, 267
Middle Kingdom, 11, 182, 280,
283, 284 O
Military power, 8 OBOR International Cooperation
Mini-Dubai, 176 Forum, 58
Minilateralism, 11, 31, 42 One Belt One Road (OBOR), 29,
Model diffusion, 70 143–160
Mongolia’s Development Road geopolitical, 143, 146, 155–157, 160
initiative, 183 geostrategic, 143, 148, 155, 156, 160
Multilateralism, 91–110 One Belt One Road (OBOR)
Multilayered multilateralism, 19, 91–110 initiative, 57–83, 91–110,
Multi-scalar governance, 117–137 117–137, 167–189, 197–214,
Mutual learning, 60, 69 219, 220, 222–228, 231, 240,
241, 242n3, 249–273, 279–288
One Economic Circle initiative, 183
N
National interests (China), 5, 9, 23
National People’s Congress (2017), 170 P
NATO’s Partnership for Peace Pakistan, 8
programme, 264 Pakistan-China Corridor, 203
296   INDEX

Pan-peripheral regions, 93 Regional rivalry, 220, 221, 231, 240


Partnership for Quality Infrastructure Revisionist power, 11, 12, 30, 31
(PQI) (Japan), 220, 228 Rule-by-law, 75–76
Pax Sinica, 283, 288
People’s Liberation Army (PLA), 21,
152, 157, 158, 160 S
Peoples Liberation Army Navy Second World, 3, 4, 12, 13
(PLAN), 204 Second World War, 3, 12, 13
People-to-people exchange, 67 Securitization, 143–160, 282, 286,
Persisting localism, 122 288n1
“Pivot” to Asia (2011), 225 desecuritisation, 144–146
Political blessing, 121 Shanghai Cooperation Organization
Political economy, 197–201 (SCO), 64, 77, 94, 95, 97, 99,
global, 198, 200 101, 104–106, 108
Silk Road, 200 The Shinkansen
Port of Gwadar, 203 (Japanese HSR lines), 220
Power Silk Road, 4, 6, 7, 11, 21, 24n2, 30,
hard, 255, 256, 266 43, 51n1, 58, 61, 68, 83n1
soft, 254–257, 264–266, 270 Silk Road Economic Belt (SREB),
(Neo)prebendalism, 73 61, 84n14, 92–96, 101, 106,
Principle diffusion, 57–83 110n1, 112n11, 120, 167,
Protectionism, 119, 128, 136 174, 175, 177, 183, 220, 225,
Public Private Partnership (PPPs), 226, 235
202, 210 Silk Road Fund, 64
Silk Road Think Tank
Association, 68
R Singapore-Kunming Rail Link
Rationalist, 79 (SKRL), 240
Realism, 4, 9, 24 Sinicization, 182
Realpolitik, 284 Sinified Marxism, 59
Rebalance to Asia policy, 13 Sino-centric global economic order,
Regional competition, 219, 221–224, 182–184
231, 239–241 Sino-Japanese Competition, 220, 221,
Regional Comprehensive Economic 224, 227–242
Partnership (RCEP), 133, 134 Socialism, 72, 73, 81
Regional Comprehensive Economic Sock city, 179
Partnership of East Asia, 225 Soft power, 17, 18, 20, 21, 42–46,
Regional developmentalism, 224 147, 149–151, 154, 157, 160n1,
Regional influence, 219, 223 282, 286
Regionalism, 103, 222–225, 231, South China Sea, 99, 145, 146, 153,
241, 284 155, 158
Regional order, 219–242 crisis, 17
 INDEX 
   297

Southern Economic Corridor (SEC), Trade barriers, 118, 119, 127,


229–231 129–133, 136
South-South Cooperation, 285 sub-national, 119, 129–133
South-South partnership, 31 Trans-Asian Railway network, 183
South-South relations, 4 Trans-Asian railways, 228
South Stream project, 264 Trans-European transport Network
Sovereignty-first, 71, 74–75 (TEN-T), 135
Soviet Union, 4, 12, 13 Trans-Pacific Partnership (TPP),
Spatial spillovers, 119 92, 94, 96, 134, 225, 227,
Special Economic Zones (SEZs), 76, 231, 236
83, 84n9, 176, 183 economic alliance, 13
Stake-holder, 12, 30 Turkey’s Middle Corridor Initiative,
State capitalism, 72, 199, 200 183
State neoliberalism, 19, 71–74, 76, 77, 21st Century Maritime Silk Road,
79, 81–83 6, 24n2, 167, 174, 187,
State-owned enterprise (SOEs), 201, 188, 220
225–227, 231, 233, 234, 239
State Railway of Thailand (SRT), 235
Status quo power, 5, 11, 12, 30, 42 U
Strait of Bab el-Mandeb, 155 Ultracapitalism, 32, 47
Strait of Hormuz, 97 Unequal exchange thesis, 31
Strait of Malacca, 97, 155 UN World Food Program, 13
String of Pearls, 145, 154–156, 159, US Marshall Plan, 12, 13, 18
204, 283 USSR, 2
Structural power, 3, 4, 17, 287
Subsidies, 121, 131
Suez Canal, 30, 155, 202, 204, 211 V
SWAP, 97, 99, 104 Vietnam’s Two Corridors, 183
Vision and Actions on Jointly Building
Silk Road Economic Belt and 21st
T Century Maritime Silk Road, 6
Tao Guang Yang Hui strategy, 34, 41
Tariff, 126, 127, 131, 133,
137, 137n5 W
Territorial logic of power, 9 War on Terror, 225
Thailand, 22, 23 Washington Consensus, 72, 83, 184,
Theory of diffusion, 18 198, 205, 206
13th Five-year Plan, 121, 157–158 World Bank, 41, 78, 117, 120, 124
Three Areas Seaport Cooperation, 250 World Economic Forum,
Tokyo Strategy for Mekong-Japan Davos, 62
Cooperation, 230 World financial crises, 4
Track 1.5 diplomacy, 60, 67 World order, 1–24
298   INDEX

World system theory, 5, 9, 18, 32, 40, Y


44–46 You Suo Zuo Wei strategy,
World Trade Organization (WTO), 41, 32, 33, 35
96, 119, 125, 127, 137n5, 208, 285 Yuan regional currency, 97, 108
China becomes member, 125

Z
X Zero-sum game, 4
Xinjiang, 145, 146, 148, 149, 156, 160 Zero-sum rivalry, 223

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