The “One Belt One Road” Initiative

Th is pattern of cooperation was broken by the fi nancial crisis of 2008. Due to unprecedentedly fast economic development, stable economy and signifi cant fi nancial reserves, China has become a valuable partner for crisis-hit European countries.

Th erefore, Beijing’s new sister initiatives: the Silk Road Economic Belt and the 21^st Century Maritime Silk Road should be taken into serious consideration in all European capitals. Th e idea has since been called the “one belt one road” (OBOR) strategy, aiming

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at the construction of land and maritime transport routes (railways, highways), oil and gas pipelines, as well as power grids, Internet networks and maritime links stretched from Beijing to European capitals. Th e 21^st Century Maritime Silk Road is a connection from China to the Mediterranean Sea via the Indian Ocean and the Suez Canal, while the Silk Road Economic Belt will lead through East and Central Asian and Middle Eastern countries to Central and Eastern Europe. Th e project will supposedly infl uence living conditions of up to 3 billion people living in concerned areas.

Th e new idea of Beijing has all the characteristics of a foreign policy strategy with directly entwined domestic goals. In all offi cial speeches, Chinese representatives underline its positive eff ects for all engaged countries, accentuating its win-win characteristics that should boost the annual trade among the involved countries to

$2.5 trillion in a decade (Sui-Lee Wee 2015). Beijing explains this shift in foreign policy as willingness to share its economic success with other countries of the region, and to prove that it is a responsible stakeholder in the international system. When asked what kind of role China hopes to play in the world, the Chinese President Xi Jinping said that China wants to “be more active to uphold world peace, advocate common, comprehensive, cooperative and sustainable security and commit to peacefully resolving disputes through consultation and negotiation”. Beijing hopes to “play a more active role in international aff airs, commit [...] to improving international governance system, and make vigorous eff orts to increase the representation and voice of developing countries in international aff airs”. China will “provide the international community with more public goods [...], actively promote common development, [...] North-South dialogue and South-South cooperation. In particular, [...] help other developing countries achieve self and sustainable development” (Xinhua 2014c).

To assure neighbouring countries of its friendly intentions, China will provide 20,000 places for training “connectivity professionals” over the next fi ve years (Reuters 2014b). Beijing is also trying to address the apprehensions in the region that its economic expansion will change its foreign policy from peaceful development to a more assertive diplomacy. Th e fi rst signs seem to be confi rming those fears, as China is escalating territorial disputes regarding East and South China Sea.

Notwithstanding, the OBOR strategy has numerous advantages for China itself.

It will surely facilitate China’s integration in the global economy, as well as enable reaching economic goals by outputting its industrial overcapacity overseas (Forbes 2015), as in 2015 China faces the slowest economic growth since 1991. Investment associated with the OBOR projects could be a new positive driver for slowing down Chinese economy. By investing in neighbouring countries, China will get access to internal markets, new technologies, secure transportation routes, and access to resources. Regional cooperation will also help to improve the image of China,

185 The European Union and Emerging Markets. China’s New Silk Road Strategy...

a country with a poor human rights record, low labour and environment standards, yet a powerful investor. Despite Beijing’s eff orts in improving its image in the West, China remains unpopular in most European countries. Recent report of Pew Research Center showed that, in Europe, people in Germany and Italy have the highest unfavourable views of China (60% and 57%, respectively), even though Germany is China’s biggest trade partner in the EU. A slight improvement was noticed in France and Poland, where people are almost equally divided. In the UK slightly more respondents have a positive opinion of China (45%) than a negative one (37%) (Wike, Stokes, Poushter 2015). Against such backdrop, Greece is one of Beijing’s strongest supporters, with 59% of positive views (2013) (Pew Research Center 2013).

Yet, Beijing appears to be seriously committed to the OBOR strategy. According to Chinese Foreign Minister Wang Yi, the OBOR initiative will be a “central focus”

of China’s foreign policy in the year 2015 (Ministry of Foreign Aff airs of the People’s Republic of China 2015). In March 2015 the National Development and Reform Commission issued a document entitled “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road”, calling for greater connectivity, policy coordination, unimpeded trade, and strengthening people-to-people bonds so as to create a community with shared interests (National Development and Reform Commission 2015). Th is action plan gives a new impetus to the process of implementation of the project.

Th ere are also some particular initiatives of Chinese governmental agencies.

Th e Chinese Ministry of Culture has adopted a programme aimed at improving multilateral cooperation in the fi elds of entertainment business, tourism, protection of cultural heritage and sport. Th e programme will include an annual cultural forum, joint production of TV shows, fi lms and animation, trade centres and exhibitions of cultural products, as well as cultural events (Xinhua 2014a).

Th e Chinese investment in the OBOR cooperation is expected to reach $1.6 trillion (Shaohua Yan 2015). To prepare the grounds for the strategy, China has implemented several measures.

Th e new $40 billion China’s Silk Road Fund was created in December 2014 to

“break the connectivity bottleneck” in Asia, as President Xi Jinping stressed. Recently the fund has announced its fi rst investment in a Karot hydropower in Pakistan worth

$1.65 billion. In order to upgrade power supply and improve Pakistani economic performance there will be other investments in hydropower projects in the region (Xinhua 2015).

An initiative clearly indicating the Chinese aspirations is the Asian Infrastructure Investment Bank (AIIB), established in October 2014 and headquartered in Beijing.

Th e AIIB bank will start operations in late 2015. China invited all interested countries

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to become founding charter members of the bank, and got a positive response from 111 members, out of which 12 came from Europe. Neither the U.S. nor Japan joined the initiative, though their reluctance didn’t discourage the European members, such as France or even the UK. According to the Chinese state news agency Xinhua,

“the world has sensibly voted for more inclusive, balanced and mutually benefi cial international economic order” (Zhang 2015). China’s argument for the creation of a new international fi nancing institution was unequal division of rights in the World Bank or the IMF, due to outdated mechanisms not refl ecting the rising economic strength of emerging Asian countries. Furthermore, China ratifi ed the BRICS New Development Bank (NDB) in June 2015 (Th e Brics Post 2015b). Th e bank will be headquartered in Shanghai and provide fi nancing alternative to the World Bank, just as AIIB. Th anks to both initiatives, China will not only strengthen its position as a regional and global power, but also enable fi nancing of such projects as the OBOR strategy.

Beijing has also continued to direct the fl ow of Chinese foreign direct investment to Europe. China’s enterprises are present in all European countries in diff erent sectors:

clean energy, fi nance, transport, infrastructure, just to mention the Port of Piraeus in Greece, national grids in Portugal, Italy, the airports of Toulouse and Heathrow, as well as the water holding company in London. China holds considerable amount of European national bonds, though the amount remains unknown. Th e government in Beijing consequently works on its vision by investing in road and railway connections between European ports (e.g. Piraeus) and inland European cities. In December 2014 China, Serbia and Hungary signed a memorandum of understanding on the construction of 370 km rail route between Belgrade and Budapest (Reuters 2014a). By further improving the supply chain network in Europe, all engaged European countries will receive investment, jobs and business opportunities they need to recover from the current fi nancial crisis.

Another sign of Chinese determination is the growing activity in relations with the Central and Eastern European countries. Chinese operations in the region lie in the conviction that these countries hold several advantages that can be fruitful in the future. First, these are – in majority – the European Union Member States with full rights of access to the internal market. Second, even non-member countries of the Western Balkans still have good prospects for joining the community. Th ird, the majority of CEE countries comprises a lucrative market for Chinese goods, as well as huge investment possibilities due to low wages (in comparison to Western Europe), access to modern technology, educated and relatively cheap workforce. Th erefore the region is treated as a bridgehead to the rest of the European community and China has escalated its operations there.

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A new “16+1” mechanism enables intensifi cation of the cooperation between the CEE region and China. Among the successes there is a direct railway connection between Łódź in Poland and Chengdu in Sichuan province. In December 2014, during the meeting with the leaders of 16 CEE countries in Belgrade, Prime Minister Li Keqiang announced a new investment fund of $3 billion to facilitate fi nancing investments in the region (Th e Brics Post 2014a). Th is is the second fund created by China aft er having established a $10 billion special credit line to support cooperative projects in 2012. Li Keqiang off ered active participation in the construction of factories and industrial parks in CEE, and added that “China’s high capacity in producing the equipment for high-speed railways, nuclear power and telecommunication, as well as raw materials including steel, cement and plate glass, could satisfy the enormous demands of CEE countries’ large-scale projects” (Xinhua 2014b).

Closer cooperation between China and CEE countries is eagerly accepted in the region, as Western European countries have fewer fi nancial possibilities due to fi nancial problems and Beijing has grown to be an important source of capital, alternative to traditional donors.