On a visit to Kazakhstan in 2013, Xi Jinping reminded his hosts of their shared commercial ties along the Silk Road, stretching back millennia. The Chinese president went on to propose the establishment of a Silk Road Economic Belt to bring new prosperity to Asia. The speech barely registered in the international media but less than two years later, the so-called One Belt, One Road plan — incorporating a Maritime Silk Road — has become the centrepiece of the president’s foreign policy and international economic strategy. Important commercial consequences for the region and global companies will go hand-in-hand with unpredictable geopolitical implications in parts of the world where the US, Japan, India and Russia all have material and competing interests.
Beijing’s need of a new approach to doing business at home and abroad has been apparent for some time. Many of China’s past bilateral investment deals in Africa and Asia based around access to commodity resources were uncommercial, poorly implemented and, in some cases, unpopular locally. The property and investment boom at home that they served has now ended, leaving China with significant overcapacity in industry and construction, deflation and rising debt management problems.
Moreover, the country has tired of accumulating endless volumes of US Treasury and other government bonds, and now prefers more direct investment overseas. Beijing has also long expressed opposition to the dominance of the US and the dollar in the global financial institutions, most notably the International Monetary Fund and World Bank.