China's 'One Belt One Road': Global Implications

China's ambitious plan to build connections with Europe and the Middle East using overland routes passing through Central Asia will be eventually boost regional connectivity and help reduce the country's over-reliance on sea routes. Overall, the One Belt One Road (OBOR) initiative should be viewed as a general declaration by China of its intentions to enhance trade routes and expand its geopolitical influence much further westwards.

However, the proposed trade routes are subject to alterations based on domestic and external circumstances, and do not represent a firmly established plan. Furthermore, the sheer size of the proposed route, which goes through China's unstable western regions and volatile Central Asian states, suggests that the project will take many years – possibly at least a generation – to implement, owing to to local bureaucratic and security-related obstacles.

What Is 'One Belt One Road'?

China's OBOR initiative was first put forward by President Xi Jinping in 2013, and aims to connect Asia and Europe by re-imagining the concept of the historical Silk Road. The plan entails the establishment of two trade routes: the Silk Road Economic Belt (One Belt) and the 21st Century Maritime Silk Road (One Road). The land-based Silk Road Economic Belt begins in Xi'an, China, linking up Central Asia, Europe, the Middle East, and Russia. Meanwhile, the Maritime Silk Road extends from south-eastern regions of China to Europe across the South China Sea, passing through the Straits of Malacca, the Indian Ocean, and the Red Sea before joining the land route in Venice.

OBOR Reflects China's Rising Outward Investment

The ambitious OBOR plan marks a significant shift in China's economic strategy, being first and foremost a declaration that China now seeks to actively influence global trade flows. In addition, the outward emphasis of OBOR is a move away from the previous Chinese strategy of attracting inward foreign direct investment (FDI) to one where domestic companies are encouraged to invest outwards. Most importantly, the establishment of the overland networks will enable China to increase its economic sphere of influence into Central Asia as well as enable it to secure an alternative route for its energy supplies. With all of China's key industries and shipping routes heavily concentrated on its eastern seaboard, the country is vulnerable to security challenges along the Straits of Malacca. The diversification of its trade routes will therefore enable China to reduce its dependence on shipping lanes, thus enhancing its economic security.

There is also a strong geopolitical imperative to OBOR, namely countries along the route, such as the Central Asian states, Pakistan, Iran, and potentially even Turkey, could eventually align more closely with Beijing. The Central Asian states, except Turkmenistan, have been members of the Shanghai Cooperation Organisation (SCO) security grouping since the 1990s, while Pakistan and Iran are observers. Two other countries along OBOR, namely Sri Lanka and Turkey, are dialogue partners of the SCO. Overall, OBOR represents China's desire to project power westwards across Eurasia, and along the sea lanes of the Indian Ocean, as far as East Africa.

For now, it is unclear how China intends to physically safeguard OBOR, for it lacks military bases outside Chinese territory. Although China has since the 2000s been financing the construction of ports in Myanmar, Bangladesh, Sri Lanka, and Pakistan (which have been dubbed the 'string of pearls' in some Western defence circles), none of them appear likely to be used as full-time Chinese naval bases. However, reports in May 2015 that China is exploring the establishment of a permanent base in Djibouti merit considerable attention. Djibouti sits at the intersection of the Red Sea and Indian Ocean, and is thus part of OBOR. Djibouti already hosts US, French, and Japanese bases. A Chinese base in Djibouti could be the beginning of a more global Chinese military presence.

A special feature on China's One Belt One Road, outlining its challenges and obstacles, is available to subscribers of BMI Research.