Reviving the ancient Silk Road: What's the big deal about China's One Belt One Road project

People take pictures in front of a Golden Bridge on Silk Road installation, set up ahead of the Belt and Road Forum, outside the National Convention Centre in Beijing, China on May 11, 2017.
People take pictures in front of a Golden Bridge on Silk Road installation, set up ahead of the Belt and Road Forum, outside the National Convention Centre in Beijing, China on May 11, 2017.PHOTO: REUTERS

The Chinese capital of Beijing is all decked out for its biggest international summit this year when it hosts the One Belt, One Road (Obor) forum starting on Sunday (May 14).

President Xi Jinping will launch the two-day forum with a keynote speech, followed by a plenary session attended by heads of state and parallel sessions attended by representatives. A policy session will be held on May 15, where a draft communique is expected to be discussed and released at the end of the summit.

Here's why Obor is such a big deal and why the meeting will be closely watched.

1. One Belt One Road, or Obor, is arguably the world's most ambitious project


Managing Director of the International Monetary Fund Christine Lagarde, among others, is set to attend the summit. PHOTO: AFP

Spanning 65 countries representing 60 per cent of the global population and around a third of global Gross Domestic Product (GDP), the Obor initiative has been touted as a powerful vision of a future global economy centred on China.

It aims to redefine the global economy of the 21st century by integrating the economies of Europe, Asia and Africa through an unprecedented and powerful network of transport and communications infrastructure.

"China wants to consolidate its position at the centre of global supply and manufacturing networks," writes Professor Hugh White in a commentary for the East Asia Forum.

No fewer than 130 countries around the world would be represented at the forum, including 29 heads of state and government. They include the leaders of Russia, Turkey, Kazakhstan, Indonesia, Vietnam, Malaysia, Pakistan and the Philippines from Asia, and many others from Europe and Africa.

International organisations will be well-represented too, with UN Secretary General António Guterres, President of the World Bank Jim Yong Kim, and Managing Director of the International Monetary Fund Christine Lagarde all set to attend.

Japan has not signed up to Obor but in a surprise announcement last month, it said it will be sending Mr Toshihiro Nikai, secretary general of Prime Minister Shinzo Abe's Liberal Democratic Party.

Another surprise was North Korea's participation in the forum.

The US and South Korea also announced at the last minute on Friday (May 12) that they will be taking part in the forum.

2. Big money is involved


China is expected to discuss similar agreements with some 20 countries and ind 20 international organisations at the two-day forum. PHOTO: AFP

With a price tag of US$4 trillion (S$5.6 trillion) , the Obor initiative looks set to become the biggest economic development programme in history, far outspending the United States' Marshall Plan which rebuilt Europe after World War II.

Since 2013, China has invested more than US$50 billion in economies along the Belt and Road. A total of 56 economic and trade cooperation zones have been built by Chinese businesses, generating nearly US$1.1 billion in tax revenue and creating 180,000 jobs, reported state media.

The China Development Bank alone has earmarked US$890 billion for some 900 projects.

China is expected to discuss similar agreements with some 20 countries and over 20 international organisations at the two-day forum.

The Asian Infrastructure Investment Bank (AIIB) - with US$100 billion in initial capital -  was set up in 2015 to help finance the building of infrastructure in the economies along the trade routes.  There is an additional US$40 billion in China’s Silk Road infrastructure fund and  US$50 billion in the Shanghai-based New Development Bank (NDB).

President Xi announced on Sunday (May 14) the Silk Road fund will increase funding by 100 billion yuan. Chinese banks will extend 300 billion yuan in overseas capital, the China Development Bank will splash out 250 billion yuan, and the Export and Import Bank of China will add 130 billion yuan in special loans to Belt and Road projects. In all, Xi pledged at least 780 billion  (US$113 billion) in extra funding for Obor.

Many of the participating countries are seeking a piece of this enormous pie when they meet Chinese leaders, policymakers and businessmen this weekend.

3. Chinese leader Xi Jinping's legacy is at stake


Should the forum be successful, it could prove useful for the 19th party congress of the Chinese Communist Party. PHOTO: AFP

Four months after China's President Xi Jinping made a splash at the World Economic Forum in Davos with his speech on globalisation, this forum will offer the leader a chance to elaborate on his grand global economic vision first outlined in 2013.

At that time he had proposed the revival of the Silk Road, ancient land and sea trade routes that linked China to the rest of Asia, as well as Africa and Europe.

"It (Obor) has the power and prestige of President Xi Jinping behind it. It is at the centre of his vision for China, and of his ambition to transform China's place in the world during his time as its leader. He is determined to make it work, and in China today that counts for a great deal," writes Professor Hugh White.

The success of the forum will bode well for Mr Xi as he looks to consolidate power ahead of the all-important 19th party congress of the Chinese Communist Party.

Last-minute developments reflected the importance Beijing places on the forum. The US and South Korea announced only on Friday that they will be attending the summit.

Seoul's announcement came a day after newly elected South Korean President Moon Jae In had his first phone call with President Xi on Thursday. Mr Moon had proposed to send special envoys to Beijing for talks on the North Korean nuclear issue as well as a row over the deployment of a US missile shield in the South.

The US also announced it will send a delegation led by top White House adviser Matt Pottinger to the Belt and Road summit as part of a trade deal which allows more US exports to enter the Chinese market.

4. It's not just all about trade and economics


President Donald Trump's decision to withdraw from the Trans-Pacific Partnership (TPP) weakens America's strategic-economic position in East Asia. PHOTO: AFP

Obor is about geopolitics too.

"Obor is about the world order and China's place in that order," said analyst Ankit Panda in a podcast for The Diplomat.

It is about expanding China's strategic and political influence at the US' expense, say analysts.

President Donald Trump's decision to withdraw from the Trans-Pacific Partnership (TPP) weakens America's strategic economic position in East Asia, according to analysts Earl Anthony Wayne and Oliver Magnusson. In a piece for The National Interest, they note that the AIIB and the Obor project pose significant challenges to America's economic influence.

"They are testaments to Beijing's ambitions, and the TPP had been America's main means of responding... It seems unlikely that several bilateral trade agreements alone - which have been mentioned by some in the Trump administration - would match the impact of the economic network the TPP offered," they wrote.

If the US does not offer a viable alternative for regional trade and investment, then China will work to fill the void, they warn.

5. It provides much-needed funds to build roads and railways in South-east Asia


Vietnam's President Tran Dai Quang (left) is among the seven top leaders from Asean who will attend the forum in Beijing. PHOTO: AFP

Developing countries in the region need money for infrastructure building, and Obor could help fund it.

China is helping Indonesia build a 142km high-speed rail linking Jakarta with Bandung, and providing 75 per cent of the financing for the US$5.2 billion (S$7.3 billion) project.

Vietnam, one of the fastest-growing nations in South-east Asia with 6.2 per cent growth last year, is also in great need of infrastructure such as power generation, transport and waste treatment, says Mr Winfield Wong, head of wholesale banking at HSBC in Vietnam.

It needs to spend about US$30 billion a year to build up its infrastructure, he adds.

The Asian Development Bank has projected that Asia will need to spend US$1.7 trillion annually from 2016 to 2030 on infrastructure to maintain its growth momentum.

Vietnam's President Tran Dai Quang is among the seven top leaders from Asean who will attend the forum in Beijing. The others are Philippine President Rodrigo Duterte, Indonesian President Joko Widodo, Myanmar State Counsellor Aung San Suu Kyi, Malaysian Prime Minister Najib Razak, Cambodian Prime Minister Hun Sen and Laos President Bounnhang Vorachit.

But some observers have raised concerns that these deals may come with strings attached, raising fears of future Chinese hegemony. A Xinhua commentary published on Saturday (May 13) sought to debunk such worries. 

"The hegemony concern is groundless and unnecessary. China opposes hegemony and has said so countless times. China harbors no intention to control or threaten any other nation. China needs no puppet states. China does not indulge in "regime change" either regionally or globally and is not about to begin to do so,"  said Xinhua in the piece headlined "Is China's B&R initiative just hegemony in disguise?".