From follower to leader: China and the “One Belt, One Road” initiative

Dr. Bo Chen, Professor of Finance and Economics at Shanghai University, discussed the “One Belt, One Road” initiative at a special event hosted by the Jack Austin Centre for Asia Pacific Business Studies.

Introduced in May 2013 by China’s President Xi Jinping, the “One Belt, One Road” (OBOR) initiative is an ambitious economic strategy focusing on connectivity and cooperation among countries primarily in Eurasia and involving over 60 countries. But for it to gain greater traction China will need influential supporters.

This was one of several issues discussed by Dr. Bo Chen, Professor of Finance and Economics at Shanghai University, at a special presentation hosted by the Jack Austin Centre for Asia Pacific Business Studies at the Beedie School of Business on July 17.

Throughout the event Chen, who also serves as a government consultant for several portfolio reform initiatives, including OBOR, shared his perspectives on the background, opportunities, and challenges of this initiative.

The session opened with Chen speaking about China’s desire to emerge from their follower status and become a leader in international projects as the inspiration behind OBOR. To pursue initiatives a part of OBOR, China established the Asian Infrastructure Investment Bank (AIIB), which is responsible for lending to the organization. After being introduced in 2013, however, only 27 countries signed the agreement to join, and of those only two were developed nations.

Chen attributes the lack of participation to the United States’ opposition to OBOR and AIIB, subsequently influencing other nations’ willingness to join. Yet, following the United Kingdom’s agreement, many other nations followed suit, and now AIIB boasts 57 members. This exemplifies Dr. Chen’s point that China isn’t internationally strong enough and requires support from powerful countries in order to push these initiatives.

Along with this challenge, China is facing problems surrounding cheap labor. Since they built their market using cheap labor that is no longer available, Chen argues they will have to find an alternate competitive advantage to maintain economic growth. Furthermore, as their citizens become wealthier they have greater concerns towards health, which threatens China’s relaxed environmental protection and enforcement laws. “Starvation isn’t the only threat anymore, they are demanding more than just food,” said Chen.

Given these issues, OBOR and AIIB are designed to help China overcome these challenges according to Chen, where instead of China receiving investment they are looking to invest in countries. OBOR will provide them with opportunities to invest in countries that need their funds and technology.

Chen also voiced some concerns regarding the rules – or lack thereof – surrounding OBOR, and stated a more comprehensive list of rules is required rather than just a tariff lowering strategy. “To secure the safety of China’s business, we require a transparent legal system and government neutrality in market competition,” he said.

The presentation concluded with Dr. Chen posing several questions to be considered as OBOR progresses, such as how the United States and Japan will react as the initiative continues, and the speed at which rules can be set up and how to effectively implement them – all of which will determine the success of the initiative.

For more information on the Jack Austin Centre for Asian Pacific Studies visit, beedie.sfu.ca/jack-austin-centre/