China has committed to spending $124 billion to restore its former glory in trading.
On Sunday, Chinese President Xi Jinping pledged to put the sum toward his One Belt, One Road trade initiative designed to expand trade links between Asia, Africa and Europe. The funds will help rebuild roads, ports and rail networks for more effective linkages.
“In advancing the Belt and Road, we will not re-tread the old path of games between foes. Instead we will create a new model of cooperation and mutual benefit,” Xi, who has been accused of creating the initiative to exert Chinese influence globally, said during a speech at the Belt and Road Forum in Beijing, according to Reuters. On the contrary, Xi said the program is designed by China, but for the benefit of all. “We should build an open platform of cooperation and uphold and grow an open world economy.”
What is the Belt and what’s the Road anyway?
In a podcast last summer, McKinsey & Company said the future of Asian trade could depend a lot on what becomes of China’s One Belt, One Road initiative.
The initiative is focused on restoring the success of a road that leads from Asia through Europe into Scandinavia (the belt), and the maritime Silk Road comprised of shipping lanes running from Asia to Venice (the road).
“It’s very ambitious—potentially ambitious—covering about 65 percent of the world’s population, about one-third of the world’s GDP, and about a quarter of all the goods and services the world moves,” Kevin Sneader, McKinsey’s chairman in Asia, said in the podcast. “That is what’s at the core of this—at least a potential trade route. The belt, the physical road, and the maritime Silk Road would re-create the shipping routes that made China one of the world’s foremost powers many, many years ago.”
Xi launched the initiative in 2013, and many have said the move is part of China’s next growth wave in the wake of recent—and current—slowing growth.
What could this new investment into One Belt, One Road mean for trade?
The idea, according to Sneader, is that China will build out infrastructure in many countries along the route, namely the emerging markets. The question regarding the initiative’s success, however, is one of scale.
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“The ambition is enormous, and the sums of money are equally enormous,” Sneader said. “That is why I think whether this initiative is successful will have two parts to it. One will be that the funds are indeed available and that governments are willing to deploy them.” The other, he added, is that the money gets used wisely, as there’s a “real risk” it gets “misdeployed” and doesn’t contribute to greater trade or greater economic cooperation at all.
As Xi explained during the weekend’s summit, the Silk Road would be open to all, including Africa and the Americas, even though they are not plotted along the route.
At the close of the summit, which took place over the last two days and drew leaders and officials from all over the world, including the United States and Russia, Xi said the Belt and Road initiative will work to ensure an open world economy, rebalance globalization, facilitate trade liberalization and increase support for green and low-carbon development, Reuters reported.