China has portrayed its One Belt, One Road initiative as a strategically integrated vision for developing regional and global supply chains. To what degree is that realistic?
Regional integration is certainly the goal, even if it may not be a very realistic goal. Back in 1904, the British geographer Halford Mackinder prophesied that railroads would one day crisscross Eurasia just as, in his day, they crisscrossed the American Midwest. Mackinder was the president of the Geographical Association and the director of the London School of Economics, but strangely he seems not to have consulted a map. The rail distance from Chongqing in western China to Duisburg, Germany, the main western terminus of China’s One Belt, One Road rail services, is 11,000 kilometers, or 7,000 miles. That’s two-and-a-half times the distance from New York to Los Angeles.
Unlike in the United States, most of that trans-Eurasian journey really is “flyover country,” with little world-class economic activity. Throw in two changes of rail car, since the former Soviet republics that lie between China and Europe use a distinctive rail gauge; the relative limited capacity of rail compared to sea transport; extreme weather conditions; and the political risk that is endemic to the region, and it becomes clear that Eurasia will never be integrated like North America. At best China’s Central Asian rail routes to Europe will offer occasionally useful alternative export channels for niche products. So much for the New Silk Road Economic Belt.
China’s 21st Century Maritime Silk Road connecting China to Southeast Asia, Africa, the Middle East and Southern Europe is an even more quixotic effort. The low cost of sea transport means that once freight is afloat, it doesn’t have to follow any fixed route. Container shipping routes follow the demand for connectivity between sites in the global economy. They don’t determine the sites.
The Chinese leadership seems to genuinely believe in the power of One Belt, One Road to create integrated Afro-Eurasian supply chains centered on China. Some Western business school experts have even bought into this vision, predicting the emergence of China-centered value chains that will replace today’s U.S.-centered value chains. In both cases the fantasy—whether hope or fear—rests on a false understanding of economic geography. Like Mackinder a century before, the Chinese leadership believes in “build it and they will come.” The reality of today’s global economy is exactly the opposite: develop the business rationale, and someone will build the infrastructure. Right now and for the foreseeable future, the business rationale for integrated Eurasian supply chains just isn’t there.
How might One Belt, One Road advance China’s diplomatic and security agendas in Southeast Asia, including with respect to South China Sea disputes, and what is the potential for it to enhance China’s standing as a global power?
China is using Maritime Silk Road projects to buy friendships in Southeast Asia. There’s no doubt about that. But you can’t buy friends with money. You can only rent them. As soon as the money dries up, the friendships will too. For example, the current government of the Philippines has stopped pressing its case against China’s expansive claims in the South China Sea. In exchange, China has pledged $24 billion in public and private investment in the country. But what about the next government of the Philippines? China’s leverage will disappear as soon as its funding stops, but the Philippines will keep the infrastructure that was built to buy its support.
The stalled Myitsone Dam project in Myanmar illustrates the challenges China will face in converting its One Belt, One Road spending into tangible benefits for China. Conceived well before One Belt, One Road, the Myitsone Dam on the Irrawaddy River would have been Myanmar’s largest infrastructure project. When the controversy over the dam was “just” a matter of environmental devastation and massive human dislocation, it looked likely to go forward. But once it became clear that most of the electricity produced by the dam would be bound for China, nationalist outrage exploded.
As China attempts to roll out even more and even bigger infrastructure projects across the region, people and the environment are bound to suffer. But that’s not a problem for China. The problem for China is that when it tries to extract economic and political advantages from its spending, its partners are likely to balk.
How successful has the initiative been so far, what challenges has it run into at this stage, and what are the most significant obstacles to its future implementation?
One Belt, One Road has been hugely successful as a public relations campaign. The whole world is talking about it; business and government leaders are organizing their agendas around it; and even Donald Trump has acquiesced to it. But only a party-state like China running a highly politicized command economy can afford that kind of public relations success. China is no stranger to expensive public relations. To put things in perspective, China’s entire One Belt, One Road funding is roughly on a par with the 2008 hosting of the Beijing Olympics.
Simple geography dictates that One Belt, One Road will fail in its goal of developing China-centered Eurasian supply chains. High value-added producers in eastern China can much more easily move production to western China than to Tajikistan, Laos or Ethiopia. It also won’t facilitate the extension of German and British supply chains to China. Poland has similar wages, is much better governed, and is much closer. There is no economic rationale for One Belt, One Road. If there were, the involvement of the Chinese government wouldn’t be necessary.
But that doesn’t mean that One Belt, One Road is unimportant. It is likely to lead to improved infrastructure in countries that are desperately in need of outside capital and expertise. Chinese companies, most of them state-owned, will benefit from Chinese government contracts to build this infrastructure. The contracts may even be vital to keeping them in business. Along the way, Chinese companies will gain experience working in diverse countries with legal and commercial environments that are very different from China.
One Belt, One Road won’t meet its goals, but it won’t be a complete waste of time and money. China’s Olympic show left Beijing with eight new subway lines. One Belt, One Road is likely to leave a similar legacy of infrastructure improvements throughout the region. Ten or 20 years from now a large swathe of the developing world will be left with Chinese infrastructure but no lasting Chinese influence. What’s not to like?