Transcript One Belt One Road ----The New Development for China`s

One Belt One Road Initiative
The New Development for China’s International Economic
Cooperation and it’s impact on China EU Relations
BRICs International Seminar
Fudan University, Shanghai
1
April 20-21, 2016
Xavier RICHET
University Sorbonne Nouvelle, Paris
E-mail: [email protected]
Wei WANG
IWEP, Chinese Academy of Social Sciences (CASS)
E-mail: [email protected]
2
Main Points of the Presentation
 Presenting the OBOR Iniitative
 Interpreting the initiative, assessing the risks
 OBOR and Europe
 The Balkans: A Southern Entry?
3
One Belt One Road
4
OBOR : From Past to the Future
 Origins: Two eyes of China toward the
outside World
 Ancient Silk Road:
The ancient transcontinental trade from Han
Dynasty (200 BC) and named by German
geographer Ferdinand von Richthofen,1833—
1905.
1. Route: (see the chart P2)
2. Comedies:
Output: silk, jades, tea, china, traditional medicines……
Input: perfumes, medicines, fruits, vegetables……
3. Exchanges of culture, religion and politics
5
OBOR : From Past to the Future
 Ancient Maritime Silk Road:
The ancient shipping route also from
Han Dynasty (200 BC) with significant
seven trips in Ming dynasty, the fifteenth
century.
1. Route: (see the chart P2)
2. Task: mainly to show the prestige and ambition of China. Many gifts, few
returns. Shipping trade was forbidden at that time.
3. Exchanges of culture, religion and politics
6
OBOR : From Past to the Future
 The new perspective of One Belt One Road (OBOR)
 Launched by the Chinese government as the development strategy
in 2013.
 The conception refers to the New Silk Road Economic Belt, which
will link China with Europe through Central and Western Asia, and
the 21st Century Maritime Silk Road, which will connect China with
Southeast Asian countries, Africa and Europe, known shortly as the
"One Belt and One Road (OBOR)“ .
7
OBOR Economic Dimension
1. Aspects of cooperation:
Transportation
Infrastructure development
Trade and investment
Energy and natural resources
Financial security
8
OBOR Economic Dimension
2. Principles of cooperation:
Mutual trust
Mutual benefits
Mutual learning
Inclusiveness
Equality
9
Acting Plan of OBOR
 OBOR runs through Asia, Europe, and Africa, connecting
the East Asian economic sphere at one end with the
European economies at the other.
 The Silk Road Economic Belt—a series of land-based
infrastructure projects including roads, railways, and
pipelines—focuses on strengthening links between China,
Central Asia, Russia, and Europe (particularly the Baltic).
China will gain improved access to the Persian Gulf and
the Mediterranean Sea through Central Asia and West
Asia, and to the Indian Ocean through Southeast Asia and
South Asia.
 The 21st-Century Maritime Silk Road is designed as two
paths: one from China's coast to Europe through the South
China Sea and the Indian Ocean, and the other from
10
Keys Points to Understand OBOR
1. Preconditions for China to carry out OBOR:
A)
B)
Comparative advantage of infrastructure construction
a)
Experiences;
b)
Materials supply;
c)
Building capacity……
Fund for investment: China’s foreign exchange reserves reached US$
3.8 trillion in December 2014
a) AIID
b) RMB internationalization
11
Keys Points to Understand OBOR
2. The new pattern of China outward investment and the changes
for the industrial structure:
A)
Infrastructure output: high-speed rail, high-way, telecommunication
and related products;
B)
Industrial transferring ----moving of “make in China”: low cost
manufacturing products;
C)
Energy cooperation: China is a huge energy consumer.
12
Milestones of OBOR
1. China has made headway via the ASEAN Ten Plus One
arrangement, the Shanghai Cooperation Organization, the BRICS
countries, and solidified bilateral ties with Russia and countries
in Central Europe, Central Asia the Middle East and South Asia. A
bilateral, regional, and multilateral cooperation mechanism
between China and the countries along the proposed routes has
been established preliminarily in either a fixed or non-fixed
manner.
13
Milestones of OBOR
2. The vision for a 'One Belt and One Road‘ allows the countries
involved to create a three-dimensional and multi-layer transport
network that connects them via land, sea and air. That includes
the New Eurasian Continental Bridge, which is regarded as the
'modern Silk Road', the China-Singapore Economic Corridor that
runs through the Indo-China Peninsula and the BangladeshChina-India-Myammar Economic Corridor that connects China to
South Asia. The prototype of a backbone passage for the One
Belt and One Road vision has emerged.
14
Milestones of OBOR
3. Several financing platforms such as an Asian interconnection and
mutual communication investment bank, the Shanghai
Cooperation Organization development fund and the Shanghai
Cooperation Organization development bank are being planned
to finance these ambitious infrastructure development projects.
15
Milestones of OBOR
4. Different logistics hubs are being built across the region to support
the 'One Belt and One Road' initiatives. Several free-trade
industrial parks have also sprung up that would help to connect
the production, circulation and marketing of goods in the region.
The eventual economic dividends of the 'One Belt and One Road'
vision are expected to bring about shared economic prosperity
that will help promote social progress, political stability and
overall security in the region.
16
Challenges and Risks
1.
Chinese companies lack experience in investing overseas and
sustainability for later enterprise development. Professor
Huang Yiping from Peking University warned last year that
"China has become the third-largest direct investing country,
but more than half of its deals do not provide financial
returns."
2.
Attitudes of the other two giant body: US and Russia.
3.
Coordinating with more than 50 countries with different
culture, social system, or even conflicts.
Conclusion
 The 'One Belt and One Road' vision is not only a strategic conception for the great
rejuvenation of the Chinese nation, but also a beneficial path for the common prosperity of
countries along the proposed route and an organic combination of the Chinese dream with
the global dream.
 There is no clear line geographically refers to OBOR. they serve more as a roadmap for how
China wants to further integrate itself into the world economy and strengthen its influence in
these regions.
17
18
Interpreting the Initiative: Political
and Geopolitical Dimensions
 The end of the unipolar world? Reshaping international relations
 A Growing Regional Power
 Playing different cards?
 Promoting and investing in the BRICS
 Building new institutions, the New Development Bank
 But strong assymetries: Brazil & Russia
 Going Alone?: OBOR: Asia -> Europe
 Rest of the world: Latin America, Africa…
19
Interpreting the Initiative: Political and
Geopolitical Dimensions (2)
 2nd world trading power
 Means of perpetuating the growth model
 Export expertise in fields of infrastrcutures, steel, cement: research
opportunities outside China, modernizing West parts of China,
Xinjiang (highest oil and gas reserves, lowest developement level in
China)
 Lenin and the Theory of Imperialism: low profitabily, overcapacities
at home..: managing vast overcapacity, necessity to finf new markets
20
Interpreting the
initiative:Economic Dimension
 Accumulation of financial reserves
 2nd world trading power. Means of perpetuating the growth
model
 Export expertise in fields of infrastrcutures, steel, cement:
 research opportunities outside China,
 modernizing West parts of China, Xinjiang (highest oil and gas
reserves, lowest developement level in China)
 Lenin and the Theory of Imperialism: low profitabily,
overcapacities at home
 managing vast overcapacity, necessity to find new markets. find
markets outside China:build infrastrcutures, relocate low value
added indsutries (textile)
21
A difficult trade off between
external and domestic-led growth
 End of the growth model founded on investment in
infrastrcutures and exports
 Future growth based on domestic consumption, on development
of services
 Towards the green economy: less energy dependant in the future
 Restrcuturing, swtiching: could cause economic dislocation,
threaten political stability

Looking for external markets
22
Financing: who controls?
23
24
A set of risks
 Too Ambitious?
 Time horizon, Implementation, Resources
 Financing, Returns, Sunk costs
 Optimizing infrastrcutures: not from A to D but between A and B, B and C, C
and D….Creating numerous hubs.
 Which (international, regional) governance?
 Partnerships:
 Weak and risky States…(Pakistan),
 Strong States Reluctants (Vietnam, India)..
 Emerging Powers (Iran)
 Entering the Russia back-yard:
 Eurasian Economic Union and OBOR
 Convergence between different aims?
25
Risks… (1)
26
Risks…(2)
Risks…(3)
27
28
OBOR & the EU: the red carpet?
29
The EU: at the end
of the road..
EU: 1st China trade
partner
China: 2nd trade
partner after the US
End of land
(Duisbourg) and sea
(Pearus) roads
Question : enough
goods in Europe to
fill up train and
boats back to
China?
30
China-EU Trade
EU leading trade partners,
2013
EU-China total trade
31
EU-China Relations
 Asymetric (volumes, contents, Exp, Imp)
 China: not yet recognized as a market economy
 No Global Treaty on Investments
 For China one Europe, 28 states
 Core EU
 New Members States (and others: 16+1..)
 Accession countries (Western Balkans)
 Lowest bidder strategies by some countries
 Differentiated attractiveness: EU-15, CEES, Balkans & SEE
 Individualistic strategies followed by member states: UK, France…Red
carpet policies...
32
China Commitment in Europe
 Chinese investments in the EU: from O, mid-2000 to €14/y in
2014. Stock: €46 billions
 EU Members joining the Asia Infrastructure Investment Bank ,
China joining the EBRD
 EU-China Summit in Brussels (June 2016):
 Looking for synergies between the Juncker Plan and OBOR Initiative
 AIIB adding $100 billion + Silk Road Fund investing $40 billion along
the road
 EU Commission, European Investment Bk, Silk road dund to identify
how china and the Junker Plan could co-operate
33
Threats?
 UK: from a ‘special relationship’ with the US to a ‘golden era’ with China? But up to
now only 1% of total outflow of chinese FDI..
 Germany the main target? Most attractive to FDI, many « hidden Champions »
 OBOR as a reply to Free Trade Agreemment supported by the US?
 TPP: 12 countries, 800 million people
 TTIP: the EU and the US, 820 million people
 OBOR: 65 countries, 4,4 billions people….
 Trying to play one country against another
 Human rights issues: some countries still punished (Norway) other aligned
(Serbia..France)
 Other interest for Europe in Asia (South Korea, Vietnam, Japan..ASEAN)
34
The Balkans: A Southern Entry?
 Geopolitical interests
 Southern Europe: One end of the sea road (Pireas)
 Investing in accessing countries? Not a big deal
 Sensible issues and political instability
 Economic opportunities
 Access to northern markets (train, infrastrcutures)
 Paving the way for other markets (power plant in Bosnia, Serbia, Romania)
 Buiding regional value chains? Car industry in Bulgaria, electronics in Romania)
 Beyond OBOR
 SME, family-run business in the region
35
Conclusion (2)
 Real capacity of the Chinese government to implement this
program?
 Disconnection between growth rate, growth model change,
financial stability
 What priority over other international issues
 Reaction of other players
 A step by step building up, « path dependency » to go forward?
 High risk: what will be the nature, content of trade in one, two
decades?