One belt, one road, one world

THEY might be called the "odd couple", but German Chancellor Angela Merkel and Chinese President Xi Jinping do have things in common beyond their image as strong and stable world leaders at a time of political turmoil elsewhere. Something less well known is their common vision of a united Eurasian continent.

This is not simply an idea that the two have. Mr Xi is seeking through his ambitious One Belt-One Road project to connect China (plus many other parts of Asia, the Middle East and North Africa) with Europe via a vast nexus of transport links, while Mrs Merkel seems eager to accept China's embrace of Europe.

The German leader has made official visits to China every year since coming to office in 2005, while the Chinese President has returned the compliment by repeated visits to Germany, the latest being in July this year when he proposed closer cooperation between China and Germany in shaping the global order.

Words are easy in diplomacy but words are being translated into action in this case. Both leaders were present at the inauguration of one of the world's longest railways, covering some 11,000 kilometres from the Chinese megacity of Chongqing to Duisburg, a key commercial hub in western Germany.

"I find the Chinese vision of linking the land mass of Asia with high speed trains and other modes of transport and extending operations to the Middle East and Europe exciting," says Kent Calder, an internationally acknowledged expert on North-east Asia and Eurasia. Xi Jinping is "virtually alone among world leaders at present in having a geo-strategic global vision", Mr Calder, who is head of the Raischauer Centre for East Asian Studies at Johns Hopkins University in Washington, commented to The Business Times.

China's policy with regard to OBOR, he says, "has echoes of the Victorians who first linked up Britain, and then proceeded to promote railways all over what was then the Empire and beyond, creating a legacy that helped forge nations and more than 150 years later still lives on.

"The contrast between the sheer banality of much present-day Western policy and ambition led by economists and lawyers with one led by engineers (as in the case of OBOR) could not be more vivid."

Geographic centrality

Mr Calder envisages a scenario in which China and Germany in particular come together across the central Asian steppes and the Ural Mountains to form a new industrial production complex served by "inter-modal" transport networks and logistical systems.

OBOR, he says, "will develop infrastructure across a continent that historically has not been integrated and has lacked infrastructure".

"This is crucial because it is a huge land mass and OBOR capitalises on China's geographic centrality to develop land-based ties."

The fact that Mr Xi, plus a Chinese business delegation and German Economy Minister Sigmar Gabriel, ceremonially welcomed a freight train from Chongqing after it completed a 16-day journey (half the previous rail journey time) from China through Central Asia, Russia, Belarus and Poland is seen as significant.

Even more so is the fact that the train was laden with Chinese laptop computers and other electronic goods.

It symbolised the potential for linking the industrial heartland of Germany with "global factory" China, bringing these massive economies together and creating new market opportunities in the process.

German production chains, as Mr Calder stresses, have been moving East to the Visegrad group (the Czech Republic, Poland, Hungary and Slovakia), while China's economic centre of gravity has been moving to the West.

"Volkswagen has large assembly operations in China and they need to ship parts." Transport border clearance, he adds, has been rapidly improving across the Eurasian Continent, such that production chains across the continent are becoming increasingly economic.

Chancellor Merkel has observed meanwhile that, "parts of German industry are dependent on China". Germany needs to deal with China in a way that "brings harmony and advantages for both sides", she said, after dining with President Xi during the G20 Summit in host country Germany in June this year.

Critical though the Sino-German link is within OBOR, the grandiose scheme is about far more than just restoring the ancient Silk Road that connected the two countries centuries ago. It envisages a massive nexus of land and sea linkages connecting 65 countries across vast areas of land and ocean.

Just as Africa was once known as the "Dark Continent" where relatively few people wanted to go, the same could be said now of the Eurasian continent where Central Asian Republics divide Asia from Europe, with little interest in the largely unknown "interior" between the two.

Free trade leadership

But change is coming. As China assumes the mantle of free trade leadership (while President Donald Trump abandons the Trans-Pacific Partnership), Mr Xi is promoting an alternative Pan-Asia trade agreement and also providing physical linkages across a wide area of the world to make trade possible.

OBOR or the "Belt and Road Initiative" (BRI), as some prefer to call it, is not building on virgin territory. It complements or competes with existing initiatives.

These include the Eurasian Land Bridge, a rail-transport route for moving freight and passengers overland between seaports in the Russian Far East and China and seaports in Europe. There is the Trans-Siberian Railway, which runs through Russia and also the New Eurasian Land Bridge running through China and Kazakhstan.

OBOR also envisages a "necklace" of port infrastructure projects or a "maritime highway" linking China, South Asia, parts of the Middle East and North Africa with European ports and complementing the rail and highway links that it envisages.

Some have likened OBOR to the post-World War II Marshall Plan or European Recovery Programme, a US initiative to aid Western Europe in which the US gave over US$13 billion (US$130 billion in today's values) by way of economic support to help rebuild the shattered continent.

But OBOR is about cementing a new Eurasian continent rather than reviving an old Europe and it will need a concerted multilateral effort to bring the vision to fruition. Countries will need to "buy into" OBOR for its continent-spanning projects to gain approval.

President Xi has anticipated some of these requirements by setting up new financing institutions. One is the Asian Infrastructure Investment Bank (AIIB) which has 77 member government shareholders and an initial capital of US$100 billion.

Another is the Silk Road Fund which is designed to act as a conduit for channelling private capital into OBOR- related projects.

There are also existing financial institutions that can be among the financiers of OBOR. These include the Asian Development Bank (ADB) which is jointly controlled by the US and Japan which is already an active player in Central Asia, plus the European Bank for Reconstruction and Development (EBRD), the World Bank and others.

How countries can buy into OBOR itself is another matter, however. China experts such as Yuqing Xing, professor at Tokyo's National Graduate Institute of Policy Studies (GRIPS), has acknowledged that Beijing may have to find a way to "institutionalise" OBOR and give it some kind of corporate form for this to be achieved.

This would turn the countries along OBOR's routes into shareholders rather than simply passive "takers" of projects, enabling the scheme to gain approval from national governments. It would also avoid having to turn the AIIB and the Silk Road Fund into mere financing vehicles for OBOR.

The OBOR programme has already begun to unfold. Some 50 Chinese state-owned enterprises have invested in nearly 1,700 OBOR projects since 2013. Flagship projects include the US$46 billion China-Pakistan corridor, a 3,000-km high-speed railway connecting China and Singapore, and gas pipelines across central Asia.

OBOR, says AIIB president Jin Liqun, "will highlight the importance of regional connectivity".

"Projects which are good for the borrowing country and with positive spillovers across borders will receive high priority," said Mr Jin.

China has yet to define precisely the scope and size of its vision, as even Mr Jin acknowledges.

"The Chinese government has fine-tuned the programme quite a lot," he told BT. "There do not seem to be geographical limits to OBOR. It is not just an issue of connectivity in Eurasia; it covers the entire world."

btworld@sph.com.sg