The ‘Belt and Road’ initiative was launched in 2013 by China, with the aim to establish two trade routes linking China to Europe, Central Asia and South Asia. These trade routes, the Silk Road Economic Belt and the Maritime Silk Road provide the name of the initiative.
The Silk Road Economic Belt will look tolink China to Europe through Central Asia and Russia, link China with the Middle East through Central Asia, and link China with Southeast Asia and South Asia. At the same time the Maritime Silk Road will link China with Europe through the South China Sea and Indian Ocean, and link China with the South Pacific Ocean through the South China Sea.
Since its inception in 2013, 71 Countries have signed up to be part of the initiative, including New Zealand. As of the end of 2017, New Zealand’s participation in the initiative has been a signed memorandum of understanding with China, and the establishment of the Belt and Road Initiative Business Forum in New Zealand that will discuss and look to identify opportunities for New Zealand within the Belt and Road initiative.
In addition to the 71 countries that have signed up to be a part of the initiative, China has agreed deals with five Central Asian nations, Pakistan, Bangladesh, India, Russia, Mongolia, and Myanmar, to begin infrastructure projects within these countries to establish the infrastructure (road, rail and sea) needed for the trade links. The Chinese Government has set up a US$40 billion fund to finance the initiative, most of the fund will go on new infrastructure projects (road, rail and ports), and Chinese banks along with the Asian Development Bank will provide loans and financing for the projects.
The Belt and Road initiative, along with any large trade agreement, is not without issues. The first initiative is China-centric, linking China to its trading partners to increase China’s ability to export and import goods with its trade partners. In addition most of the large ‘confirmed’ proposed projects are still very much in the development phase, with plans not yet finalised (such as high-speed rail in Indonesia, Industrial Parks in Cambodia, and a Port in Sri Lanka).
With China providing the funds for these projects, Chinese firms will in all probability be employed to build these projects, limiting the economic impact of these projects on the host nation. The initiative will likely strengthen the reliance of some countries on China for trade and money to repay loans, turning them into economic vassals of China.
Overall the Belt and Road initiative has the potential to unlock the economic potential of countries in Central and South Asia, enabling them to freely export and import goods, but the risks and potential issues of the initiative need to be carefully examined and managed.
For New Zealand, with China one of our largest trading partners, it will be important to see how we can grow our trading relationship with China through this initiative. It will also be important for New Zealand to see how we can use the initiative to increase our trade with other nations that are part of the initiative.