Has India harmed itself by not participating in the Chinese One Belt One Road (OBOR) event, a two-day global meet on which began in Beijing on 14 May?
There are many in India who will answer "yes". Veteran journalist Prem Shankar Jha, perhaps, represents this school of thought best when he argues that Prime Minister Narendra Modi’s Beijing Policy is like “cutting off India’s nose to spite China’s face”.
However, these enthusiasts for OBOR should perhaps reconsider their stance, because even many Chinese experts are unsure how OBOR will proceed.
Essentially the brainchild of the Chinese president Xi Jinping, OBOR is a collection of interlinking trade deals and infrastructure projects throughout Eurasia and the Pacific, spanning more than 68 countries, encompassing 4.4 billion people and up to 40% of the global GDP.
But, nobody has exact clarity on what projects will constitute parts of the idea. As Christopher Balding, professor of economics at Peking University, says, “It means everything and nothing at the same time."
Chenggang Xu, professor of economics at the Cheung Kong Graduate School of Business, told CNN that it helps to think of OBOR as a "philosophy" or "party line," rather than anything “concrete”.
According to CNN, Jörg Wuttke of the EU Chamber of Commerce in China has warned that the initiative has increasingly "been hijacked by Chinese companies, which have used it as an excuse to evade capital controls, and smuggle money out of the country by disguising it as international investments and partnerships."
All the hype over the Beijing meeting notwithstanding, the fact remains that only 29 heads of the government or states attended the meet, even though OBOR is supposed involve 68 countries.
India’s principled position for skipping the meet is this: OBOR includes the China-Pakistan Economic Corridor (CPEC), which passes through Pakistan-occupied Kashmir, which is part of India, and hence a challenge to India's sovereignty.
That there are strong merits in this position has been admitted by Xi himself. It may sound ironic, but Xi said in his inaugural speech on Sunday that “all countries should respect each other’s sovereignty, dignity, and territorial integrity and each other’s core interests and major concerns.”
China always makes its international dealings dependent on respecting its core interests. The same logic should apply to India in the case of CPEC. It is a question of principle, which cannot be quantified in terms of economic gains and losses.
Even economically speaking, there are more questions than answers that emanate from the OBOR initiative. As it is, Xi has promised to invest $124 billion in the project in the first stage. In subsequent stages, trillions of dollars will be added to the project. But what exactly are going to be the returns?
Remember, the idea of OBOR arose following the global financial meltdown about a decade ago, which badly affected the export-centric Chinese economy. However, to sustain the world’s highest rate of economic growth, the Chinese government thought of outpouring capital, enterprises, and projects to foreign lands so as to create demands for Chinese products.
In the process, the Chinese overproduced many items: Iron, cement, aluminum, glass, coal, shipbuilding and solar panels. OBOR, thus, was, seen as a quick solution to the problem so that excess products could be absorbed in OBOR infrastructure building.
But then things are easier said than done. OBOR, when implemented, will go through politically volatile and economically vulnerable regions of the world. Look at the way CPEC is being attacked in Baluchistan and Gilgit and Baltistan. There is no guarantee that the partner countries are capable of ensuring the project's safety.
China employs Chinese labour in almost all overseas ventures, as seen in Africa and China, which the locals find distasteful. In many developing countries, Chinese products are a source of disgruntlement and resentment, inviting regulatory issues and legal problems.
There are many questions that come to mind about the efficacy of OBOR. Is it commercially viable? Will Chinese companies be able to recoup their money? Are these projects going to be fully funded by Chinese companies or will participating countries fund OBOR? Will international lenders fund the projects? These are all difficult questions. There are no clear answers.
If recent history is any indication, whenever China has made foreign investments through state channels and state-owned enterprises, the results are poor. Returns on investment have been low, which has been the case with about 80 percent of China’s mining ventures overseas.
With regard to the support from international institutions such as Asian Development Bank (ADB) and the newly created Asian Infrastructure Investment Bank (AIIB), there could be serious questions while disbursing loans to the projects that involve disputed territories and sovereignty.
Traditionally, China has always opposed ADB-assistance to projects in India’s North East. The same way India, which has the second largest voting shares in the AIIB after China, could complicate funds to the CPEC project, an important component of OBOR.
As Ravish Bhatia, a Yenching scholar at Peking University rightly points out, “The report on the Articles of Agreement of the AIIB clearly states, ‘A policy on operations in disputed areas would provide that, for financing in a disputed area, member consent is obtained in accordance with paragraph 3, and the Bank does not take a position on territorial claims.’ This is echoed in section IV of the bank’s Operational Policy on International Relations.”
All this reminds one of Chinese expeditions between 1405 and 1435, which touched almost all the significant ports in Southeast Asia: The Bay of Bengal, Sri Lanka, India, Arabia, East Africa, Malindi in northern Kenya.
The Chinese may feel proud of their maritime history, but these voyages were more political than economic in nature. Their main objective was to impress the small and trade-dependent partners through the Chinese concept of “Middle Kingdom”, which espouses that China is chosen by God and is the greatest and most benevolent of countries and others must pay their respects to her.
But as seasoned commentator Philip Bowring rightly says, these voyages were abandoned because of their extraordinarily high cost. Their trade benefits and their contribution to state security were modest.
In many ways, OBOR resembles those 15th century voyages. China wants to be the world’s most preeminent power. But does it have the wherewithal?
Updated Date: May 15, 2017 18:00 PM