NewsNorth AfricaOne belt, one road to tie Asia to Africa and Europe


Posted on Thursday, 28 January 2016 17:28

One belt, one road to tie Asia to Africa and Europe

By The Africa Report

China's President Xi Jinping is keen to leave a global legacy. In 2013, he launched the One Belt, One Road (OBOR) programme – a reference to the Silk Road responsible for the Middle Kingdom's wealth in centuries past (see map).

It involves lending developing countries money to build ports and roads on the condition that they contract Chinese construction companies to do the work. More than 60 countries are involved, representing a third of the global economy.

The ultimate goal is a seamless road and rail network between China and Europe and improved maritime links with African countries. Africa is already feeling the first wave of investment, with East African rail networks relatively high on the priority list.

This is a three-for-one for Beijing. First, OBOR is a handy way of recycling excess capacity, both in terms of commodities like steel, cement and aluminium, and of China's vast foreign-exchange reserves. Next, it is a means of keeping China's big construction companies busy now that much of the country's heavy infrastructure is complete.

The soft loans-for-contracts deals act as a roundabout subsidy, something French policymakers will recognise from their own use of the Agence Française de Développement.

Finally, OBOR will strengthen growth and demand in targeted countries. The idea is that consumers will then buy the televisions and cars still whizzing off Chinese factory floors.

There are also sceptics. Some point to China's debt-to-gross domestic product ratio of 250%, or argue that OBOR will exacerbate China's existing imbalances and make it harder to push the economy towards a more consumer-driven model, the government's long-term goal.

What OBOR does give Beijing is global heft. The setting up of three institutions – the Silk Road Fund, the New Development Bank and the Asian Infrastructure Investment Bank – all point to a growing role for China in setting the direction for the global economy.

Unsurprisingly, decisions are often influenced in the direction of the guy financing strategic infrastructure, which the West has been benefiting from for decades. ●

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