China has been actively pushing its expansion policies for rebuilding a modern Silk Road Economic Belt dubbed “One Belt One Road”. China has been reaching out to its neighbours - India, Pakistan, Russia, Mongolia, Kazakhstan, Thailand, Vietnam and North Korea.
China hopes to create a modern Silk Road Economic Belt and a 21st Century Maritime Silk Road with a total foreign investment exceeding USD $500 bn over the next 5 years. The network will include railroads, highways, oil and gas pipelines, power grids and other infrastructure projects to transform global trade routes and boost imports and exports as well as increase its influence in South and Central Asia and beyond.
During a recent visit to Pakistan, The Chinese President Xi Jingping, created the China- Pakistan Economic Corridor(CPEC) spanning 1,800 miles from China to Pakistan’s coastal port of Gwadar and beyond to South and West Asia with a planned investment of USD $46 bn. The impact speaks volumes in countries of the region where foreign direct investment is still low. The Chinese investment is going into more beneficial infrastructure projects that will positively affect Pakistani people unlike US investment which has been going into the Pakistan military development coffers. Energy projects will total up to USD $34 billion and the rest will be assigned to road, rail and transit projects. The projects are contingent upon the areas being stabilized as both governments have been dealing with separatist movements.
President Xi also announced a similar project with Russia on his recent visit there in May 2015 on the occasion of the commemoration of 70th anniversary of the end of the World War II. China confirmed several investment deals to assist Russia’s flailing economy. A combination of economic sanctions imposed by US and Europe, and lower oil prices has been hurting the Russian economy and Kremlin’s foreign reserves have weakened by over USD $120 bn due to attempts to prop up the ruble.
President Putin and President Xi signed joint statements outlining the cooperation on furthering the Eurasian Economic Union and China’s Silk Road Economic Belt across Asia that will expand China’s access to the Middle East and beyond. Putin said that the agreement means “reaching a new level of partnership and actually implies a common economic space on the continent.” In addition, China also offering to finance a USD $5.2 bn high speed rail line between Moscow and the Russian city of Kazan.
PM Modi and India also was not left out of President Xi’s Silk Road plans. On PM Modi’s recent visit to China in April 2015, both the governments were keen to settle boundary disputes and establish stable ties and for China on a broader scale the success of the Silk Road Economic belt would mean a revival of the Chinese economy.
For the Chinese in terms of geo-politics, getting Russia and India on board to participate and not put any roadblocks in its path is crucial to the success of this enormous initiative.
China recently launched a USD $50 bn fund for its Asian Infrastructure Investment Bank, which is partly modeled on the Washington-based World Bank. The development bank will cover some of the world’s biggest emerging markets (China, Brazil, Russia, and South Africa) and has gone ahead with major US allies like UK, France, Italy and Germany joining in despite opposition voiced from the US.
China has been parlaying the International Monetary Fund (IMF) and the World Bank to have its voting shares increased but to no avail. China’s is the world’s largest economy and holds only 5% of the votes at the World Bank and 4% at the IMF compared to the US which has 17 % voting share at each organization. This alienation of China has lead to China’s decision to strike out on its own and garner global participation and cooperation. China is in a strong position and can be extremely shrewd negotiators with its Silk Road venture.
Commenting on China’s infrastructure plans across Central, West and South Asia to as far as Greece, Russia and Oman, increasing China's connections to Europe and Africa, President Xi Jinping said "We hope that the annual trade volume between China and these countries surpasses $2.5 tn in a decade or so."
The world is watching closely and such large initiatives could get entangled in cross border and territorial disputes but China’s efforts will likely have far reaching economic effects on the entire regions involved.