By Joseph W. Ferrigno III, Managing Partner, AMCG Partners

Summary

A. The Belt and Road Initiative (“BnR”) is a comprehensive vision for the development of China and other countries during the 21st Century initiated by China in 2013. The Asian Development Bank has estimated that Asia needs an average US$730 billion a year in infrastructure investment until 2020, including only some of the identified BnR related projects. According to the Peterson Institute for International Economics, “…investment in the Belt and Road is expected to reach $4 trillion”.

B. Asia’s overall national infrastructure investment need is estimated to be US$8 trillion over 2010-20. BnR is attractive to governments and the private sector because of the significant potential economic and political benefits if BnR projects are successfully implemented.

C. Requirements for capital, risk absorption and management capabilities necessary to successfully implement BnR-inspired projects far exceed what governments can provide. Public/private partnerships ("PPP"), via various models, are essential to contribute ideas, capital, risk absorption and project management capabilities. The private sector, working closely with the public sector helps plan and control BnR projects resulting in projects which have the most appropriate designs, the most cost-efficient construction and the most efficient operation.

D. The implementation of PPP projects, which typically involve multiple parties of different nationalities, is highly complex and requires special expertise and experience and is more of an art than a science. The “packaging” for such projects, getting them ready for construction start, is quite difficult and requires dealing with many challenges and problems which must be solved during long project development periods.

E. In my experience with the packaging of PPP projects, in both developed and developing economies, there are effective solutions which require the relentless application of sound project implementation general principles and specific practices. Although each project is unique, and correct timing is a critical factor, such principles and practices can be applied to result in the successful implementation of PPP infrastructure projects.

F. Hong Kong is functioning effectively as a kind of “Super-connector” putting together various parties which are interested participating in BnR-inspired projects so that they have opportunities to meet and consider collaborating. In addition, Hong Kong’s well-developed project services sectors - including its expertise in infrastructure development sectors - are unique in Asia in terms of their international business orientation, depth of service, expertise and professionalism. Moreover, an essential characteristic of Hong Kong is the reliability of the enforcement of contracts. The independence of the Hong Kong Judiciary and the adherence to the Rule of Law are of high importance for international businesses, investors and creditors involved with infrastructure projects.

Please click here to view the full report.

By Vassilis Ntousas, International Relations Policy Advisor at the Foundation for European Progressive Studies

Since its introduction in the fall of 2013, China’s ‘One Belt, One Road’ initiative has been the centre of a plethora of in-depth analyses and policy announcements. Heralded by many as a centrepiece of President Xi Jinping’s foreign policy and domestic economic strategy, this grandiose initiative has certainly captured the attention of many policy-makers, analysts and commentators, marking a significant milestone in the country’s trajectory of engagement in the international milieu. Whether China’s grand design for its new trade routes will ultimately become a game-changer remains to be seen, yet its ‘back-to-the-future’ approach contained in its OBOR policy presents many potential benefits for Beijing, despite the evident risks. …
 
China’s (potential for a) game changer
 
Highly ambitious in its goals and Herculean in its proportions, the OBOR initiative has been characterised as the ‘most significant and far-reaching initiative that China has ever put forward’. If played correctly by China, the initiative has the potential of being much more than its individual parts, elevating China both economically but also politically. For Beijing, OBOR’s added value could be multi-faceted, ranging from creating new markets through economic penetration, widening the trading and commercial horizons to export Chinese surpluses, improving the innovation and competitiveness of Chinese industries, whilst providing the necessary impetus, vision, and know-how for a more coherent regional policy aimed at alleviating internal inequalities amongst provinces and for a more active and better-founded foreign policy that will promote the Chinese interests in a more reliable and efficient manner.
 
Inherent in the project’s vision and scope, both in its continental and its maritime component, one can also trace the many obstacles that exist and that will largely decide the project’s future success. Although the initiative is still in its early stages, critics point to the its sheer size and ambition as the source of many vexing challenges: from the incredibly varied political, economic, legal and regulatory framework within which OBOR will have to function, to the political uneasiness, if not antipathy, it could create in many areas along its routes. Regardless of the levels of financial firepower that will be employed, building a network of Sino-centric trading routes along a milieu of great diversity and even greater risks will lead China to engage more actively with regional affairs. If the initiative succeeds, whether it is the intention of Beijing or not, this will create both an opening and an additional layer of risk: China’s rise, not least in the economic sphere, will embolden the country’s position internationally, yet, as the eyes of the world focus more on China, there will be a greater degree of scrutiny regarding its praxis in the region. Whether China’s Grand Design for its new trade routes will ultimately become a game-changer remains an open question, yet its ‘back-to-the-future’ approach contained in its OBOR policy presents many potential benefits for Beijing, despite the evident risks.

Please click here for the full article.

By The Economist Corporate Network

The Silk Road Economic Belt and 21st Century Maritime Silk Road - better known by its popular shorthand terms of One Belt, One Road (OBOR) and the Belt-Road initiative - has become one of the most discussed topics about China’s evolving role in the global economy today. The Economist Corporate Network has produced "One Belt, One Road": an economic roadmap to add clarity to the discussion and stimulate more informed consideration about the implications of OBOR. To that end, this report explores seven key regional spheres covered by the Belt-Road initiative: Africa, Central Asia, Eastern Europe, the Middle East, Russia, South Asia and South-east Asia.

As Belt-Road projects heavily emphasise infrastructure development, the regional mapping lists out infrastructure project pipelines. These lists do not aim to provide a complete accounting of projects but rather a varied sampling to show the types of development activities that characterise a region. For the sake of transparent, readily verifiable data, the lists draw from publicly accessible sources such as the World Bank, InfraPPP and CG/LA Infrastructure’s Strategic 100: 2016 Global Infrastructure Report. The information is current as of February-March 2016. The regional analysis sections also give overviews of the infrastructure needs of a region’s constituent countries. The analysis further delves into examining the progress, results and the wider ramifications of prominent OBOR projects.

Please click here to view the full report.

By CGCC Vision

Spring is not only the best time to make a year’s planning, it is also when the “Two Sessions” were held. The development of China raises concerns worldwide. The annual sessions are now an important window for the world to get a glimpse into China. This year, they also symbolize the beginning of the “13th Five-year” Plan. Taking a good look into its contents could help Hong Kong companies gain an early advantage.

Dou Shuhua: consensus favorable to the construction of a moderately prosperous society

Deputy Secretary-General of the NPC Standing Committee Dou Shuhua praises the recently concluded sessions highly, citing that they have made good preparation for the work of 2016, which would help bring the wisdom and strength of the people together.

Outstanding accomplishments achieved

Dou pointed out two main influences that the sessions have on the country and the public. First of all, they established common objectives for the country and promote democratic ideas. Secondly, they are the window to China’s image and help foreign countries gain a comprehensive understanding about China.

First Charity Law demonstrates significance

Dou also talked about the Charity Law, which he considered an important law to drive the development of the charity sector in China. It connects the country’s charitable and poverty alleviation work, and goes deep into helping the poor through charitable efforts. Considering the actual needs of China and benchmarking global experiences, the Charity Law is the first law to govern China’s charity sector and is extremely important to its mechanism and system. Last but not least, the Law also provides reliable legal protection to the development of China’s charitable industry.

Chang Rongjun: CPPCC must actively offer strategic advice and participate in policy discussion

Deputy Secretary-General of CPPCC Chang Rongjun stressed that since the government has been valuing highly of CPPCC members’ opinions, and committee members have confidence on the government’s work, all members have shown much enthusiasm in policy discussion during the sessions.

Quality, constructive proposals

Chang thought that China’s confidence in economic development has come from a comprehensive reform and efforts from every direction have to be converged. He praised the rather high quality of proposals put forward during the current “Two Sessions”.

Resolving responsibility issues from their roots

Regarding how CPPCC should play its role in putting strategic advices forward and in policy discussion, as well as how members perform their duties actively, Chang reckoned that relevant issues must be resolved from their roots, which is why he suggested the tactic called “1420”.

Hong Kong and Macau must grasp the opportunities

Chang quoted the comments of some Hong Kong and Macau committee members, who said the “13th Five-year” Plan has offered invaluable opportunities for the future development of the two locations. Hong Kong and Macau must put their own competitive edges to full play and actively take part in the “13th Five-year” Plan and the implementation of “One Belt and One Road” initiative, playing the role of “super connector” between the Mainland and the international markets.

Lastly, he commented the sessions must act as a bridge and help achieve consensus among divergences. He also quoted Yu Zhengsheng, Chairman of CPPCC, pointing out that the community of CPPCC members should actively participate in the realization of a moderately prosperous society, doing its best to demonstrate to the public that members always put the public first and are right next to them.

Liu Shijin: reforming supply side; focusing on reducing production capacity

Many people are keen to know which direction the future of the Chinese economy would go under the “13th Five-year” Plan. Former Deputy Director of State Council Development Research Center Liu Shijin believed that China’s economy is still facing rather strong downward pressure at the moment.

The research of Liu shows that, after a long period of economic growth, when the per capita GDP reaches 11,000 international dollars, slowdown in economic growth happens without exception. As such, he deduced that China would also follow the trend and turned from high-speed growth to medium-speed growth around 2013. The deduction has now become the “new constant”.

Unsynchronized supply and demand resulted in over-capacity

So when will the pace of economic growth hit its rock bottom? Liu thought that from the demand side, the Chinese economy is basically stable, and a more accurate estimation is the second half of this year till the first half of the next. On the supply side, export and real estate are both recording negative growth, but industries such as construction materials, steel and petrochemicals are not slowing down as quickly, resulting in serious over-capacity.

Liu commented that the solution is to eliminate over-capacity, so that both the PPI and the corresponding profit can bounce back. China will only be able to align its supply and demand, allowing both to reach their lowest point, by achieving so.

Efficiency enhancement most critical

The core to the reform on the supply side is to increase efficiency. Liu pointed out that there is a lack of market-oriented adjustment mechanism in the Mainland. As such, an environment favorable for competition should be created for the market to regulate and to lower prices on its own.

He also suggested that the Mainland should speed up industrial transformation and upgrading; it should also reduce and eliminate different kinds of economic bubbles. He thought that an innovative environment should be nurtured based on a respect on the laws of innovation. The government should not interfere too much, but it must work hard to protect property rights, in particular intellectual property rights.

Growth trend to appear as “big L and small W” after all time low

Liu believed that it would be more likely for the growth trend to take the shape of an “L” after hitting the rock bottom. In other words, the pace of growth will stop going down. However, some smaller fluctuations will take place during this time, which will form a new growth platform in the shape of a big L with small Ws. He estimated that the situation would last for 10 years or longer. Liu stressed that “the reform on the supply side would be a long-term battle. Changes must be made in state-owned businesses, land, tax, finance, social security and government functions in order to obtain actual progress and to lay a strong foundation for quality, effective, undiluted and sustainable growth.”

Wang Tongsan: distinguished progress with emerging conflicts

Academician of Chinese Academy of Social Sciences Wang Tongsan analyzed this year’s Government Work Report and said that the Mainland had achieved the goals set out in the “12th Five-year” Plan in multiple aspects. Yet, there are a number of threats as the country made progress.

Development milestones of the “12th Five-year” Plan

According to Wang, China’s GDP is now twice as much as that of Japan’s and standing strong as the world’s second largest economy. He estimated that China will surpass the US and becomes the world’s number one within 10 years’ time.

Wang pointed out that the “12th Five-year” Plan made significant progress in structural adjustment. The service industry is now the biggest sector in China, while consumer spending is a major drive to support economic growth. The urbanization rate in China is now over 50%, with evident improvement in people’s standard of living.

Decelerating growth

But he pointed out directly that a number of domestic and external issues are gradually surfacing. At present, the global economy is recovering weakly. Wang estimated that the global economic growth of 2015 would not exceed 3%. Growth in international trade is just as lackluster, which poses a great impact to China. Diverging monetary policies among advanced economies have also added many external uncertainties for the country.

At home, Wang saw downward pressure for the economy. The quarter-on-quarter growth for GDP over the past four quarters has been continuously slowing down. Growth in investment was also weak during the past year. Wang was also concerned about the drop in import and export trade volume saying that “Whether it was calculated in RMB or USD, the total volume in both import and export in the Mainland dropped last year.”

Certain companies facing difficulties

Another domestic issue is the diverging trends in the regions and sectors. Wang said that there are obvious differences in the growth of regional GDP. Growth in fixed asset investment in different areas also saw evident variances. New and high-technology industries are growing stronger in the Mainland and they also yield higher profit. Resource industries such as coals and steel, etc. have shown clear profit decline.

The operational difficulties of companies are also reflected on the total profit of state-owned businesses, which fell 6.7% year-on-year in 2015. Compared to the 5.6% decline among central state-owned enterprises, regional ones recorded bigger drops. Wang explained that, economic slowdown led to decelerated growth in the salary guidelines of various locations.

Conflict in fiscal balance

He also pointed out that the National General Public Budget income of last year was 15.2217 trillion dollars, while the expenditure was 17.5768 trillion; the lever effect resulted in a contradicting fiscal balance.
 
Wang saw risks and threats in the Mainland’s financial industry. He said, “Fluctuations in the stock and foreign exchange market are quite obvious. Property prices are also polarized between first-tier cities and other cities, in particular, third and fourth-tier cities. Property prices of first-tier cities are increasing quickly, but third and fourth-tier ones find it rather difficult to destock.” Last year, foreign reserves dropped 13%, that is a few hundreds of billions of US dollars less. The amount shrank more than US$ 100 billion within one month in February alone and that reflects instability.

Lau Siu-kai: Hong Kong’s participation in “One Belt and One Road” an irresistible trend

Vice-President of the Chinese Association of Hong Kong & Macao Studies Lau Siu-kai analyzed the importance of “One Belt and One Road” for Hong Kong. He reckoned that “in the long run, it will be related to the pace, method and direction of Hong Kong’s development in the future; it also connects to Hong Kong’s position, role and function at the national and the international levels.”

Lau pointed out that “One Belt and One Road” is on one hand an active and positive response made by the country to address the changes in the international setting and its own development needs; and on the other, a move to change the prevalent international setting. If it turns out to be successful, significant changes will happen in the international setting and global relations. Under such circumstances, the global importance of Asia will be lifted, and China will become Asia’s most influential country. He also described “One Belt and One Road” as a “westward strategy” that China puts forward in response to the “Rebalancing toward Asia’’ strategy of the US, aiming to further expand and widen strategic space for China.

Hong Kong will rely less on Western economies

Lau analyzed that, if “One Belt and One Road” is successful, Asia will become the center of gravity of the global economy and the locomotive for economic growth. Much of Hong Kong’s progress will come from Asia, in particular, eastern Asia and Southeast Asia. As a result, Hong Kong’s reliance on Western economies will constantly reduce.

Lau added that, with the European-Asian- African free trade zone made possible by “One Belt and One Road”, Hong Kong will gain more new development opportunities, service targets, job opportunities, and more importantly, international position or role. These will help strengthen and develop “one country, two systems”, and will be favorable to tighten the relationship between Hong Kong people and Mainland Chinese.

Hong Kong people should adjust their mindsets according to changes

According to Lau, “Hong Kong people must understand that big changes are taking place in the mainland environment and international setting, and that keeping the existing status is impossible. The past attitude that put little emphasis on Asia and the tendency to over-rely on the West have to be appropriately adjusted and balanced.” He stressed that while “One Belt and One Road” would have limited influence and impact on Hong Kong in the short run, it has long-term connection to whether Hong Kong can continue to develop prosperously, its value to the country, as well as its international standing.

As for the challenges faced by Hong Kong in taking part in the “One Belt and One Road” initiative, Lau reckoned that while “opposing powers’’ and “nativists” have raised their doubts and are setting up hurdles, we must understand that shutting our doors and exclusivism do no good to Hong Kong; they also go against the greater global trend. He suggested that the SAR government and all sectors of the society should work on explaining to the people of Hong Kong about the significance of “one country, two systems” for our territory, as well as to overcome the hindrance created by opponents.

This article was firstly published in the magazine CGCC Vision 2016 May issue. Please click here to view the full article.
(Remark: This is a free translation. For the exact meaning of the article, please refer to the Chinese version.)

Written by Christopher K. Johnson, Senior Adviser and Freeman Chair in China Studies, CSIS

In the fall of 2013, Chinese President Xi Jinping put forward the strategic framework of building the “Silk Road Economic Belt” and a counterpart “21st Century Maritime Silk Road”, collectively referred to in abbreviated form in Chinese parlance as the “One Belt, One Road” (OBOR) initiative. …

As such, the new U.S. administration that takes office in January 2017 would be well served in thinking about new approaches to interact with and manage a process that, if President Xi gets his way, will be a force to be reckoned with for the next decade and beyond.

This report was firstly published by CSIS in March 2016.

Please click here for the full report.

Written by Irina Ionela Pop, Centre for Geopolitics & Security in Realism Studies (CGSRS)

China’s “One Belt, One Road” (OBOR) initiative, formally presented on 28 March 2015, is not just another “new Silk Road project”. Rather it is a consistent and ambitious Eurasian strategy of an emergent power. The OBOR initiative is based on existing and planned linkages from various regions of China towards the outside world. Supported by large financial contributions, it seems to be better articulated than other similar projects. Therefore, this paper aims to present the strengths and implementation challenges of China’s OBOR initiative. We took into account several levels on analysis: national, regional and international. In this sense, we focused on domestic constraints, tensions in China's neighbourhood, and great power rivalries. Finally, we tried to offer several suggestions regarding the improvement of China’s initiative. The suggestions concern the initiative’s planning and implementation, the means to improve its bilateral relations with neighbours and great powers, in order to be perceived as a responsible power on the international arena.

Please click here for the full report.

By Ernst & Young

2015 was special for Chinese investors. Due to the unrest in the global market, China’s economic growth rate has been slowing. China’s economy grew by 6.9% in 2015, the lowest in the last five years. However, China’s outward FDI grew by 13.3% in 2015, hitting a historical high of USD 139.5 billion. Over the past five years, China’s average annual economic growth has been 7.4%, but its outward FDI CAGR reached as high as 16.9%. Ernst & Young predicts China’s growing outbound investment would become the kErnst & Young driver of future domestic economic growth and acceleration of the globalization. In 2016, the global economic recovery remains uncertain. However, China’s outbound investment was strong in the first quarter of 2016. One of the announced key deals was ChemChina’s acquisition of the Swiss giant Syngenta for more than USD 43 billion, the biggest-ever overseas acquisition by a Chinese enterprise. Ernst & Young expects the imperative need to upgrade, transform and improve Chinese enterprises’ international competitiveness is propelling them to “Go Global”…

With national strategies being carried forward, Chinese enterprises are being presented with new opportunities to expand overseas. However, risks always exist. The economic and geopolitical risks in the target countries and fierce competition in the global market will bring uncertainties to overseas investment. To realize the dream of a global manufacturing power, Chinese enterprises need wisdom and courage, on their way to the globe.

Please click here for the full report.

Other related reports:
Riding the Silk Road: China Sees Outbound Investment Boom
Navigating the Belt and Road: Financial Sector Paves The Way for Infrastructure

By Fung Business Intelligence Centre

It has been a year since the Chinese government unveiled the official action plan for the Belt and Road Initiative. With new developments emerging all the time and more information available, it is necessary to have an up-to-date wrap-up on how the Initiative has progressed. One common confusion is which countries are exactly included in the Initiative as the Chinese government has never announced an official list. A Chinese report, released by the China International Trade Institute in August 2015, identified 65 countries along the Belt and Road that will be participating in the Initiative. Together, the countries along the Belt and Road will create an "economic cooperation area" that stretches from the Western Pacific to the Baltic Sea. According to our computation, these 65 countries jointly account for 62.3%, 30.0% and 24.0% of the world’s population, GDP and household consumption, respectively, today.

It is worth noting that, the Initiative should be taken as an open platform for all parties that are willing to contribute to global connectivity. As the official action plan for the Belt and Road puts it, "The Initiative is open for cooperation. It covers, but is not limited to, the area of the ancient Silk Road. It is open to all countries, and international and regional organizations for engagement…"

And Chinese President Xi Jinping has reiterated in many official occasions that the Initiative is an open, diversified and win-win project poised to bring huge opportunities for the development ofChina and many other countries. The Fung Business Intelligence Centre has in the past year collected a list of those other countries that have participated or have showed interest in the Initiative, through joining the Asian Infrastructure Investment Bank (AIIB), developing transport infrastructure in collaboration with China, or through many other forms of cooperation. In this way, we have identified 48 such countries which are not covered in the 65-country list above but are likely to become active participants in the Belt and Road in the future.

Please visit the Fung Business Intelligence Centre website for the full report.

By Norton Rose Fulbright

Introduction

The Belt & Road Initiative (B&R) is without a doubt the most ambitious, strategic interconnected infrastructure initiative devised in recent memory.

What?

Launched by Chinese President Xi Jinping in 2013, the initiative aims to connect major Eurasian economies through infrastructure, trade and investment. It will see a RMB1.5 trillion infrastructure investment pipeline¹ stretching over 10,000 km over more than 60 countries with a total population of 4.4 billion² and 40% of global GDP³ across Asia, Europe, the Middle East and Africa, and cover projects across the infrastructure and energy sectors from small scale renewables to large scale integrated mining, power and transport projects. After its announcement in 2015, over 1400 contracts worth over US$37 billion were signed by Chinese companies in the first half of 2015.⁴

Full details of both the project pipeline and the specific requirements for a project to qualify as a B&R project are still not fully certain. What is clear is that the potential opportunities for infrastructure investment are immense.

For any host country or investor interested in infrastructure in B&R regions, Chinese capital cannot be ignored. Tapping it can be difficult but a foreign investor who can navigate the issues involved is potentially unlocking the key source of capital and equipment for the B&R regions’ major projects over the next fifteen years.

Where?

The Belt & Road Initiative has two main elements: the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

The Silk Road Economic Belt will be an overland network of road, rail and pipelines roughly following the old Silk Road trading route that will connect China’s east coast with Europe via a new Eurasian land bridge. 5 regional corridors will branch off the land bridge, with Mongolia and Russia to the North, South East Asia, India, Pakistan and Bangladesh to the South, and central Asia, West Asia and Europe to the West.

The 21st Century Maritime Silk Road is a planned sea route with integrated port and coastal infrastructure projects running from China’s east coast to Europe, India, Africa and the Pacific through the South China Sea and the Indian Ocean.

The geographic scope of the Belt & Road Initiative is fairly fluid and on some interpretations has also been extended to Australia and the UK.

A snapshot of the land corridors and a map showing both the Belt and the Road is set out……

This article was first published by Norton Rose Fulbright and is reprinted here with their full permission.

Please click here for the full article and related information.

By Pathfinder Foundation/EconomyNext.com

The Maritime Silk Road (MSR) and Economic Belt policy initiatives unveiled by President Xi Jinping in 2013 were identified as significant elements of an overall Chinese attempt to leverage China’s growing economic power and influence along its geographic boundaries.

The objectives of this enormous development initiative is to strengthen and expand co-operative interactions, create an integrated web of mutually beneficial economic, social and political ties, and ultimately lower distrust and enhance a sense of common security.

MSR : Concept and Direction

MSR and Economic Belt, also known as One Belt, one Road initiative, has envisioned the creation of a highly integrated, co-operative, and mutually beneficial set of maritime and land-based economic corridors linking European and Asian markets. The Belt and road run through the continents of Asia, Europe, and Africa, connecting the vibrant East Asia Economic circle at one end to a developed European economic circle at the other and encompassing countries with huge potential for economic development. The Silk Road Economic Belt focuses on bringing together China, Central Asia, and West Asia. The “Maritime Road” which is designed to extend from the China’s coasts through the South China sea, the Indian Ocean, the Red Sea, the Mediterranean Sea (through the Suez Canal), with stops in Africa along the way. After the official announcement by President Xi Jinping, the funding for the implementation of MSR and Economic Belt is to be modified through the Asian Infrastructure Investment Bank (AIIB) amounting to $50 billion, $40 billion from the New Silk Road Fund, and the New Development Bank initiative between BRICS nations.

The scope and content of the One Belt, One Road initiative is breathtaking, and its goals are ambitious. A Chinese authoritative source once declared that the primary goal of this initiative is to promote and achieve five major goals: “policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people contacts” among its constituent nation states. The initiative to jointly build the Belt and Road embraces the trend towards a multipolar world, economic globalization, cultural diversity and greater ICT application. It is also designed to uphold the global free trade regime and open the world economy. It is aimed at promoting orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets. It is also aimed at encouraging the countries along the Belt and Road to achieve economic policy coordination, carry out broader and more in-depth regional co-operation and jointly create an open, inclusive and balanced regional economic co-operation architecture that will benefit all.

The Belt and Road Initiative aims to promote the connectivity of Asian, European and African continents and their adjacent seas. Established and strengthened partnerships among the countries along the Belt and Road, sets up multi-dimensional, multi-tiered and composite connectivity networks, which promote diversified, independent, and sustainable-balanced development among nations. The connectivity projects of the Initiative will help align and coordinate the development strategies of the countries along the Belt and Road, tap market potential in this region, promote investment and consumption, create demand and job opportunities and enhance people-to-people and cultural exchanges.

Perception of the West and the Indians

An article authored by Jacob Stokes, which originally appeared on the Times of India, states that, “the plans have strong financial backing, particularly through China’s vaunted AIIB, and the support of China’s political and economic elites. But huge stumbling blocks still remain, and could challenge China’s ability to realise its ambitions. While efforts to fill Asia’s infrastructure gap - estimated at $8 trillion through 2020 - are welcome, lax lending standards could undermine progress”. If nations use the funding to pursue illogical or unfeasible development projects related to One Belt, One Road, Chinese investments will suffer as debtors struggle to pay back loans. In addition, projects that come with unexpected environmental or human rights scandals could dampen Chinese efforts to upgrade port infrastructure along the route and create free trade zones which add trade capacity for participating nations. He also added that, “it is not yet clear how the maritime road will supplement existing shipping lines”.

Further, although Chinese Foreign Minister Wang Yi has stated that One Belt, One Road is “not a tool of geopolitics,” there is concern that China would attempt to turn economic co-operation into political influence. Doing so will require Beijing to overcome a number of difficult obstacles, primarily, managing great power competition with India, Russia, and the United States within Central Asia, South Asia, and the Middle East. Russia’s efforts to create a Eurasian Union, linking former Soviet states through economic co-operation, poses direct competition to China’s own integration strategy, even though Chinese-Russian relations are on the mend. India would have reservations about Chinese regional aspirations as well, since Beijing’s programs could hinder its own “Act East” and “Connect Central Asia” policies.

Chinese maritime expansion into the Indian Ocean - especially within ports that could serve as staging grounds for Chinese naval operations - only adds to India’s unease. Although the United States involvement in Central Asia is waning as its role in Afghanistan winds down, Chinese involvement across Eurasia, the Indian Ocean, and the Middle East will test Beijing’s ability to balance competition with co-operation - working with, than against, neighbours and global political powers.

Benefits and Pitfalls of Sri Lanka aligning with MSR

MSR itself will have many positive impacts on medium and longer term economic development of Sri Lanka as a country located strategically in the middle of the proposed Maritime Silk Road. Initially, it will attract infrastructure development oriented funding from the Chinese sources, such as Exim Bank, Asian Infrastructure Investment Bank, Silk Road Fund as well as private investors. Such improvements will provide the basis for flow of FDI from a large number of other investors from both the East and the West.

However, the Western and Indian analysts perceive and project the Chinese one-belt-one- road strategy as a security threat to its neighbours specially India, Sri Lanka’s closest neighbour. Historical animosity and suspicion between India and China is now being fueled by the latter’s emerging economic and military power. Issue in question is whether Sri Lanka should be the victim of rivalry between two countries which claim to be genuine friends of us.

Sri Lankan leaders, taking into consideration the complexities that exist in the geopolitical situation need to manoeuvre Sri Lanka - China and Sri Lanka - India relations to achieve a win-win-win situation.

This article was firstly published at EconomyNext.com.