A spate of foreign officials and business leaders have gathered in Beijing this weekend to discuss Xi’s investment initiative, first announced in 2013. The plan aims to connect Asia, Europe, the Middle East and Africa with a vast logistics and transport network, and involves 65 countries. Together, they account for one-third of global GDP and 60 percent of the world’s population, according to Oxford Economics.
In the long run, China’s big pledge could “help boost global trade, investment, and financial cooperation,” said the International Monetary Fund’s Christine Lagarde. “By sharing the benefits of investment and knowledge more broadly, growth will be stronger, more durable and more inclusive.”
Institutions like the World Bank are also eyeing OBOR as an opportunity to seek greater investment rewards, the organization’s president, Jim Yong Kim, said at the forum. He pointed to the $40 trillion in investments earning less than one percent in returns, and another half a trillion in bonds with negative interest rates.
For China, it’s a move to increase global clout, shore up access to energy resources, and seek growth abroad as the domestic economy slows. The government has continually touted success stories of the initiative, with plenty of state media coverage over the years and big advertisements dotting Beijing in the days leading up to the weekend forum.
Total trade between China and other “One Belt, One Road” countries has already hit more than $3 trillion from 2014 to 2016, and China’s investment in those countries has surpassed $50 billion, Xi said. Under the strategy, China has also set up 56 economic cooperation zones in 20 countries, which it claims have yielded $1.1 billion in tax revenues and have created 180,000 jobs in those nations.
Critics have raised concerns that China is simply exporting abroad its model of growth — ordering credit lines open and building massively — an action plan that has created a giant debt load for the country.
A big unknown is what the rewards look like — whether these countries will be able to pay China back, and if lenders have the know-how to manage credit risk. If those projects fail to deliver as expected, bad debts could create a strain.
But none of this has prevented domestic and foreign firms from piling in, hoping to reap some benefits as Beijing has given its blessing. That’s a welcome move for some companies looking abroad as tighter capital controls have scuttled some recent international investments.