China’s Belt & Road Initiative – Blog #3

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(Image credit: srilankabrief.org)

This is the third RAAD blog in a series based on The Geopolitical Significance of the Chinese Belt and Road Initiative and What it may Mean for Supply Chain Operations Worldwide, a Whitepaper (27 pg., 128 endnotes) researched and written for RAAD360 LLC (raad360.com). The goal is to alert supply chain managers worldwide to the complex risks inherent in BRI.

Worldwide Supply Chain Risk Series

China’s Belt & Road Initiative

Blog #3 – Develop Robust Economic Corridors

The China Strategy – Part 2

Develop robust economic corridors that rely on the “Belt and Road” transportation network. Create or purchase businesses throughout these economic corridors that will generate greater commerce using “Belt and Road” in addition to exporting businesses in China and Chinese suppliers abroad.  Simultaneously build or buy the infrastructure necessary to accommodate robust economic corridors.  China is the driving force behind this global initiative and the overall benefit is to China, politically and economically.

Source: ESCAP (From Presentation by Binyam Reja, Ph.D., The World Bank at the 2018 Annual Meeting of the Transportation Research Board, Washington, D.C.)

China has designated six land-based ‘Economic Corridors’ in which infrastructure investments will be made to promote trade and economic development along the routes. The map above shows these six Economic Corridors but does not show similar corridors within Latin America, Africa or the Arctic Circle. There have been substantial Chinese projects in all three of these regions, along the ‘Road’, especially in Africa and increasingly in the Arctic Circle, but no formal Economic Corridors have been designated yet.

The plans and investments throughout “Belt and Road Initiative” to date raise a nagging question:  Who is/are the intended beneficiary/beneficiaries?  China is one.  Who are the others and in what order of magnitude?  That is not yet clear.

The ostensible purposes of the grand vision for the “Belt and Road Initiative” are to enhance five key areas of cooperation between China and the partner countries:

  • coordinating development policies
  • forging infrastructure and facilities networks
  • strengthening investment and trade relations
  • enhancing financial cooperation, and
  • deepening social and cultural exchanges[1]

The real Chinese motivations behind the “Belt and Road Initiative” often don’t follow  the lofty aims cited above.  In essence, the “Belt and Road Initiative”  is intended to foster “global commerce on China’s terms (emphasis added).”[2]  Projects within the Economic Corridors are meant to enhance the operation of the Belt—the land-based transportation within the corridors and the Road—the  maritime routes, and to generate commerce that will use this network.  This means the development of roads, railroads, distribution and warehousing centers, and ports, and whatever supporting facilities that are required, but also the development of resources and the production of goods to be transported on the “Belt and Road”.

An underlying driver of the “Belt and Road Initiative” is the use of the initiative for “exporting Chinese equipment, materials, management and labour to the recipient country.”  This means “minimal local content, job creation, training and supplier linkages,” and it “adds to the perception that [“Belt and Road”] projects are for China’s rather than the host countries’ benefit.”[3]

China also sees opportunities to use “Belt and Road” projects to infuse Chinese technology, leading to the adoption of Chinese standards and practices, to spread the use of Chinese currency, to early and exclusive access to raw materials, and to economic strength that increases Chinese political influence.   Examples will be described in subsequent Blogs.

It should be remembered that China has a command, not a free market, economy and an authoritarian government.  The “Belt and Road Initiative” is a program developed by the Chinese government.  In the most recent Communist Party Congress, held October 18-24, 2017, the “Belt and Road Initiative” was embedded in the Communist Party Constitution.[4]  This is more than a mere endorsement—it puts the full force of the state behind the “Belt and Road Initiative.”.

This may include the People’s Liberation Army.  There have been numerous official allusions to invoking a ‘soft’ military presence, “to both defend China’s overseas interests and provide public goods to the international community.  Such operations and, importantly, presence, may pave the way for the PLA’s involvement in one of the biggest economic and political policies of Xi Jinping’s administration: the “Belt and Road initiative.”[5]  This position causes more than a little international discomfort, especially in light of aggressive Chinese military actions in the South China Sea and most recently around Djibouti.[6]

Questions –

Where does my supply chain intersect with China’s “Belt and Road” transportation network?

What about my supplier’s supply chain?

Can China’s monopoly power increase transportation times in my supply chain?

Can China’s monopoly power increase transportation costs in my supply chain?

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There is a wealth of information in the end notes to each Blog article.  Follow the URLs to explore independently.

[1] Wade,Geoff, Foreign Affairs, Defence and Security, Commonwealth of Australia,  Parliamentary Briefing Book“China’s ‘One Belt, One Road’ Initiative.  August 2016. https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/ChinasRoad

[2] Perlez, Jane and Yufan Huang. “Behind China’s $1 Trillion Plan to Shake Up the Economic Order.”  The New York Times.  13 MY 2017.  https://nyti.ms/2rc1mKd.

[3] Lim, Linda.  RSIS. “China’s Belt-and-Road Initiative:  Future Bonanza Or Nightmare? – Analysis. Eurasia Review.  30 March 2018.  http://www.eurasiareview.com/30032018-chinas-belt-and-road-initiative-future-bonanza-or-nightmare-analysis/

[4] The Straits Times (Reuters).  “19th Party Congress: Belt and Road in CCP charter shows China’s desire to take global leadership role.”  24 October 2017.  https://www.straitstimes.com/asia/east-asia/19th-party-congress-belt-and-road-in-ccp-charter-shows-chinas-desire-to-take-global

[5] Ghiselli, Andrea. (The Jamestown Foundation).  “The Belt, the Road and the PLA.”  China Brief,  Volume 15, Issue 20. 19 October 2015. https://jamestown.org/program/the-belt-the-road-and-the-pla/#.V5olHNIQbal

[6] Myers, Steven Lee.  “Laser User Heightens U.S.-China Military Tensions.” The New York Times.  4 May 2018. https://www.nytimes.com/2018/05/04/world/asia/china-united-states-lasers-pilots.html

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BRI Blog next Monday will be:

Develop Outside Economic Corridors – THE ARCTIC

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© Shirley M. Loveless, Ph.D. 2018

Dr. Loveless is a consultant, author, and educator in transportation systems, supply chain risk analysis, emergency management, and economic development.  She is a Member of the Transportation Research Board of the National Academies of Sciences, Engineering and Medicine, and an appointed member of several TRB Standing Committees.  She works with RAAD360 LLC as a supply chain transportation consultant.