Economics & Finance
• 5 minute read

How Real is ’One Belt, One Road’?

The ‘One Belt, One Road’ initiative has been attracting a lot of excitement and speculation about what it is and what it actually covers. Likewise, expectations abound on how far-reaching its impact will be

By Vincent Li, CEO, Shanghai International Airport Services Company Limited and EMBA graduate, CUHK Business School

As an action plan with key details drafted by China’s top economic planning agency, the National Development and Reform Commission (NDRC), “One Belt, One Road” has got to be real. More importantly, it is clearly a follow-up on the “Silk Road Economic Belt” and “21st Century Maritime Silk Road” initiatives, first introduced by Xi Jinping in the fall of 2013 during his visits to Kazakhstan and Indonesia, respectively. Xi was apparently making references of the historical trade link between the East and the West, referring to the land and sea dimensions of the present-day strategy that builds on the Silk Road heritage. Words coming from the country’s chairman during his foreign visits must mean real business, right?

In fact, the latest press release from NDRC indicates that the initiative has expanded from a network of regional infrastructural projects, as originally intended, to include financial integration, trade liberalization and social connectivity across the entire Asian continent–stretching from Xian in Central China, through Central Asia and ultimately reaching as far as Moscow, Rotterdam and Venice. The grand plan also encompasses an “Information Silk Road” linking regional information and communication technology networks. New regional institutions, notably the Asian Infrastructure Investment Bank (AIIB) and New Silk Road Fund (NSRF), are also designed in part to complement and support the Belt and Road’s development.

So far there is no shortage of media coverage on this seemingly promising initiative, with detailed analysis about its potential advantages and risks for China and its neighboring countries, as well as its strategic implications for the United States and other major economic powers. But, perhaps what is missing is an internal assessment of how well-prepared the nation itself is for this grand contemporary equivalent of the “Great Leap Forward.”

Anyone who has worked long enough in China would readily understand that there are two fundamental questions of internal coordination to address.

Top-Down Coordination

When central policies reach down from Beijing to the local governments, there are multiple layers of provincial and municipal bureaucracy. More often than not, initiatives from the capital are hardly ever aligned at the local level as planned. Besides, local agendas may overshadow national interests. For example, land grabbing by local governments for the purpose of commercial development at the expense of villagers has been a primary source of local revenue for a long time. In addition, we have witnessed the growth of shadow banking on the regional level–to the magnitude of RMB 25 trillion, or about 43 percent of the country’s GDP by 2013. This phenomenon has arguably resulted from the local authorities’ ingenious initiatives to circumvent centralized monetary control in an attempt to facilitate enterprises’ capital funding-raising activities.

Cross-Functional Coordination

According to the World Bank, China ranked 90 out of 189 countries on “ease of doing business’ in 2014. In terms of the specific indicators of “starting a new business” and “dealing with construction permits,” it ranked 128 and 179, respectively. No doubt, the number of authorities and consequently, the bureaucratic procedures involved, as well as the lack of coordination among them, are the primary obstacles for enterprises–both private and state-owned.

The fact that China’s major airports in Beijing and Shanghai are among the worst in the world in terms of on-time performance is testament to the fiasco of incoordination. With the military being the primary gatekeeper of airspace, leaving the Civil Aviation Administration of China with hardly any say, let alone all weather-related air-traffic-control delays, it would be hard pressed for the potential capacity of aircraft take-offs and landings on the four runways–with the 5th one being planned–at Shanghai’s Pudong International Airport to ever be fully utilized.

Throughout the contemporary history of the Communist Party’s rule, there has been no shortage of invigorating slogans of various kinds in China. It may take a PhD thesis to trace all the “made in China” slogans and assess their real impact in specific terms. For the grand scheme of “One Belt, One Road” to take shape, however, there are two broad conditions that need to be fulfilled.

Firstly, the right conditions, particularly in terms of policies and incentives, have to be created to unleash the entrepreneurial forces in the market so that economic resources can be distributed efficiently in the creation of value. However, this is a tall order—not just for China, but its partnering countries too.

Secondly, as the champion of this historic initiative, China needs to clearly depict the picture of success beyond what the original planning documents have described. Most importantly, for all the zest and efforts to be sustainable beyond the current generation, convincing success stories must begin to be told now and inherited beyond the current reign of Xi. Otherwise, chances are, “One Belt, One Road” will go down in history as just another gimmicky slogan.

Although selective stocks–notably China South Locomotive Corporation, China Northern Locomotive and Rolling Stock Corporation and the like–have had their brief moments of triumph while benefitting from the novelty of “One Belt, One Road” since its announcement, for now, its promising implications for the future are having little effect in halting the recent A-share landslide.


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