One Belt, One Road, One Big Challenge

By: Arna M.

China has emerged as a major economic leader in the past few decades, and to this day continues its aim to conquer the world through trade. In 2013, Xi Jinping, General Secretary of the Communist Party of China and then-President of China, introduced The Belt and Road Initiative. The One Belt, One Road framework has two parts. Firstly, the concept builds on ‘one belt’ from Hong Kong to north Scandinavia, which can better be described as a physical road, and potentially going as far as Madrid. Secondly, imperative to its success, it aims to make use of the maritime Silk Road, shipping lanes from Hong Kong to Venice, going as far as Oceania and Northeast Africa.

The core of the strategy is to reestablish a potential trading route throughout Eurasia, encompassing 60 countries, as China seeks its former glory from many years ago. So why can’t they get started?

In the past 4 years, the operation has faced countless amounts of criticisms and challenges for its enormous, unrealistic goals. The first and foremost challenge in the journey to achieve the Belt and Road are its finances.

In October 2013, the Asian Infrastructure Investment Bank (AIIB) was proposed by China as a development bank, requiring a $100 billion dollar investment. The purpose of the bank would be to offer loans for projects regarding infrastructure, and it was formally established in June of 2015. China provided little less than one half of the funding and therefore were granted a large part of its governance. A year later, in November of 2015, Xi Jinping announced further plans to create a $40 billion development fund, later dubbed the Silk Road Fund. It received another $100 billion of investment.

Though these numbers seem big, they are still far from enough to fund the task of beginning the construction of One Belt, One Road infrastructure. Nearly all financial operations are yet to be determined, but we begin to see a pattern of what a whirlwind the diverse funding for such a huge-scale operation would be like. But the undecided finances aren’t the only aspect of the project causing a great amount of skepticism.

One of the problems that can arise with this international trade strategy can be the frequent credit exchange that happens between countries. Currency within the credit card scope can vary dramatically between countries and economies, and creates counter party risks which could impede the success of the One Belt, One Road.

Another inevitable obstacle in the building of the project would be political adjustments and risks, as some discrepancies can appear between countries in various different circumstances. Whether regarding individual management of finances or division of responsibilities, getting all 60 countries to agree to a future program will be a very difficult, if not impossible, task in the next few years.

There are many obstacles to bringing us to a future of active Eurasian trade and new and improved market connections. The question whether The Belt and Road Initiative will become a reality in the future is undoubtedly very exciting, but we know that it won’t be easy.

 

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