China’s Objectives behind the Belt and Road Initiative

Xi Jinping has launched a very aggressive plan to become a major player in the international market. The program includes building transcontinental routes between different markets. At the present moment, most of China’s exports to Europe are routed through the sea.

President Xi wants to change that. He wants to ensure that exports also happen via a transcontinental link built through the landlocked regions of Central Asia. As a result, China has been aggressively pursuing its Belt and Road initiatives in its foreign policy.

The planned route is expected to have an economic impact on more than 40% of the world’s population.

Analysts and commentators all over the world are of the opinion that the Belt and Road Initiative is more about geopolitics and less about economics. However, it is also possible that China is pursuing this objective for purely economic reasons.

In this article, we will have a closer look at some of the economic benefits that are likely to accrue to China as a result of the Belt and Road Program.

Balanced Regional Development In China:

China has developed as a nation. However, the divide between the rich states and the poor states in the nation is staggering. All the wealth in China is concentrated near the Eastern coast.

For instance, the GDP of the city of Shanghai is far greater than the GDP of the entire state of Xinxiang. The east coast is where cities like Shanghai, Beijing, and Shenzhen are. The region behind their rapid development is the fact that the Chinese economy is dependent upon exports.

Exporters want to be located close to a shipping point. China has made several attempts to increase economic development in its far western regions. However, at the present moment, only government companies have relocated to these locations and that too because of the pressure applied by the government.

The fact of the matter remains that this region does not offer any significant economic advantages and hence is not preferred by private entrepreneurs.

At the moment, there is no shipping point near western China. However, China’s belt and road initiative are set to change that. One of the trademark projects of this initiative is the China Pakistan Economic Corridor (CPEC).

This corridor passes from Kashgar in the Xinjiang province in China and connects it to the coastal city of Gwadar in Baluchistan. The Chinese government believes that once this trade route sets up, the disparity between the eastern and western states will disappear.

China wants to develop its western provinces as a major exporter to the landlocked regions of Central Asia. Also, the maritime route along Gwadar can be developed for both economic as well as industrial purposes.

The Belt and Road Initiative is, therefore, an economic device meant to spread out the development and get rid of the unrest and discontentment that is currently present in China’s western provinces.

An Outlet for Excessive Capacity:

The 2008 crisis was a major setback for China like it was for the rest of the world. However, the Chinese government was quick to bailout it’s industries by injecting massive sums of money. At that point in time, this was the best available solution and it created a boom in the commodity markets which saved the day for China as well it’s key trade allies like Australia.

However, massive investments have led to the creation of excess capacity. This excess capacity has been largely created in the infrastructure sector. Hence, China can afford to produce commodities like steel and cement at very little additional cost.

The Belt and Road Project is the perfect outlet for this excess capacity. China lends money to other nations who buy Chinese products with the borrowed money. This results in the proper utilization of China’s excess capacity and also leads to the development of neighboring nations. China plans to increase its regional power manifold by using this strategy.

In the absence of the Belt and Road Initiative, the excess capacity created might end up becoming a drain of China’s resources.

Creating a Regional Economic Structure:

China’s political and economic tensions with America are well known. China is aware of the fact that its business with America might be negatively impacted very soon. As such, it needs to find new markets in order to continue to remain prosperous. The Belt and Road Initiative is being driven by the Chinese in order to bring development in their bordering nations.

China wants its neighbors to be prosperous. This is because prosperous neighbors mean more trading opportunities. These trading opportunities are the fuel that China requires in order to maintain its economic dominance. At the present moment, China is completely reliant on the United States, and that is not a good situation to be in.

Also, by undertaking big projects under the aegis of the Belt and Road Initiative, China plans to improve its technological capabilities. The Belt and Road Initiative is being undertaken with the objective of transforming China from a low-cost manufacturer to a technologically advanced manufacturer.

To sum it up, the Belt and Road Initiative also has significant economic potential. China is not simply chasing an economic pipedream for political benefits.

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