One Belt, One Road (OBOR) is Chinese President Xi Jinping’s plan to connect Asia and Europe by borrowing the concept of the historical Silk Road. The top priority for 2015 and beyond, it has been elevated to “strategy” status. The vision has become so broad that it has been touted as China’s latest growth driver in the “new-normal” environment. This is exaggerated, but does reflect the country’s need to find fresh sources of growth.
The belt on land and the road on sea, with three new funding channels
The Silk Road Economic Belt (One Belt) aims to build infrastructure to ensure a long-term presence for China in Eurasian countries, and the 21st Century Maritime Silk Road (One Road) plans to build ports and maritime facilities from the Pacific Ocean to the Baltic Sea. There are three major financial institutions under OBOR to provide funding for associated infrastructure construction.
De-capacity and energy security
The OBOR plan will have a long-term impact on China and the region. This joint report between CITICS and CLSA provides an in-depth introduction to the plan and how China can effect de-capacity and relieve downward pressure on its economy. OBOR will also help to strengthen the security network for its resources and relationships with its neighbours that will eventually impact its outbound direct foreign investment (ODI).
Big potential for the domestic economy
Domestically, OBOR provides an infrastructure plan that could accelerate and rationalise national development for trade and urbanisation. Each province has its own OBOR plan. The National Development and Reform Commission (NDRC) approved a large list of infrastructure projects to support the economy late last year, at about 2% of GDP, but little has been done. As we head into the 13th Five Year Plan (2016-20), we are likely to see acceleration of fiscal spending in 4Q15.
20 economies will be the first batch of OBOR beneficiaries
Internationally, countries requiring funds for their infrastructure buildout will benefit from OBOR. CITICS and CLSA jointly examine the infrastructure needs for economies at the eastern end of OBOR: Asean, South and Central Asia. We also look at the commercial viability of projects in the 20 economies which will be the first batch of beneficiaries. There are reasons for stronger Sino-relationships in the region but we expect China’s plan to roll out slowly amid strong resistance and geopolitical risks.
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