Why Central Asia Is Betting on China’s Belt and Road Initiative

The year 2022 will mark the 40th anniversary of China’s reform and opening up. Since then, massive infrastructure projects have transformed the lives of millions across the country.

One of the most intriguing projects is China’s ambitious Belt and Road Initiative, also known as the ‘One Belt, One Road’ (OBOR) plan. The initiative seeks to connect China with other countries across Asia, Europe, and Africa through trade and infrastructure development. China sees the plan as critical to its future economic success, and as a way to create a ‘new silk road’ – one that is genuinely inclusive of less-developed nations.

This month, the People’s Bank of China (PBOC) published its annual report, in which it outlined the plan’s key stages and progress to date. The report shows that, since its launch in April 2017, the initiative has significantly expanded the range of trade goods and opportunities available to Chinese companies and individuals.

The Belt and Road Initiative: A Brief Overview

The Belt and Road Initiative is not a brand new idea. In fact, it is based on an idea that was originally proposed by Chinese Premier Deng Xiaoping in the 1980s. While Deng himself may not have been familiar with the phrase ‘Belt and Road’, his vision for a ‘New Silk Road’ has helped to inspire the current plan.

Deng believed that expanding trade and investment across Asia would contribute to greater Chinese economic integration and prosperity. To achieve this, he proposed that China should invest heavily in infrastructure development throughout the continent.

After Deng, leadership in Beijing has continued to believe in the power of this plan, and in the necessity of expanding China’s economic footprint regionally. In 2015, Chinese President Xi Jinping outlined the next stage of the plan in a speech at the World Economic Forum in Davos. Since then, the Belt and Road Initiative has gone from strength to strength, and it continues to transform Asia in accordance with Deng’s vision.

China’s ambitious initiative will cover a massive range of sectors, from energy to transportation, telecommunications and insurance. The government’s plan is to invest heavily in projects that will benefit not only its own citizens but also the economies and societies in which it operates.

Some critics have questioned whether the plan’s emphasis on infrastructure is a good thing – will it create jobs, and will it be truly beneficial to developing countries? These concerns are valid, but they are outweighed by the plan’s enormous potential to benefit China and the planet as a whole. The infrastructure investments that are a part of the Belt and Road Initiative will be substantial, and they will, undoubtedly, create jobs and boost GDPs in the short term.

What’s more, Chinese investment in emerging markets such as Africa and South America has the potential to provide significant social and economic benefits. In Africa, for example, Chinese investment is helping to build roads, railways, and hospitals, as well as supporting development efforts such as power generation and water purification.

The Belt and Road Initiative in Figures

The following sections provide key statistics relating to the Belt and Road Initiative.

Projects So Far

The Belt and Road Initiative has invested in a range of projects, from new railway lines and ports to roads, railways, and bridges. As of 2022, these projects have been completed or are underway in 29 countries and are valued at a collective total of more than US$25 trillion. In a number of countries, notably Indonesia, Pakistan, and Tanzania, the bulk of the planned investments have not yet been made – more than 30% in Pakistan and 50% in Tanzania.

These figures, however, are somewhat deceptive. For one thing, many of the projects are actually in a state of ‘pending implementation’ in the report. For another, much of the investment has, in fact, taken place, but has not been counted in these figures – most notably, in the form of Chinese state-backed loans. Finally, with the exception of Pakistan, the majority of the projects are in developing countries, where the benefits will be felt most keenly.

Size of the Chinese Economy

The Belt and Road Initiative will significantly impact the economies of the countries in which it operates. According to the Chinese government, the plan is expected to bring in $125 billion per year in economic benefits – $100 billion in investment and $25 billion in trade. Some independent economic evaluations have put the figure even higher – $150 billion per year in economic benefits, with $100 billion in investment and $50 billion in trade.

These figures are significant because, as of 2022, China’s economy was valued at about US$13 trillion. In 2021, investment in the economy as a whole was anticipated to be worth about $125 billion, with total consumption valued at about $95 billion.

The Next Phase of the Plan

The Chinese government has set a target of bringing 30 to 40 million Chinese living abroad – among them business people, students, and tourists – back home for the 60th anniversary of the People’s Republic in October 2021. The plan, therefore, has two phases. In the first phase, which covers the next 12 months, Chinese companies, students, and tourists are expected to bring in about $25 billion in profits. During the second phase, spanning from 2022 to 2024, the plan is expected to contribute to China’s economic growth, promoting employment and business opportunities for hundreds of thousands of Chinese businesses and employees.

The government has set aside about $500 billion for this second phase of the plan. Some estimates put the figure even higher – $1 trillion.

Key Stages of the Plan

The following sections provide a brief overview of the key stages of the Plan, as outlined in the PBOC report.

Planning and Preparations

The first stage of the plan began in mid-2017 and was intended to last about a year. During this phase, the government began to develop the strategy, establish contacts, and identify potential projects.

The plan was, initially, to be implemented in a cautious manner across the country to ensure that all the potential projects were assessed and evaluated in accordance with government guidelines. These projects are often referred to as the ‘New Silk Road’, and are, in effect, a replacement for the old overland Silk Road – a project that linked China with other countries across Asia. The plan now seeks to integrate China with Central Asia and the rest of Europe. It is anticipated that the first trains will roll along the New Silk Road in October 2022.

First Train Ride

The first train ride along the New Silk Road is, therefore, scheduled to take place in October 2022. According to the report, as of June 2022, work has begun on 10 of the 13 proposed railway projects. In addition to railways, the New Silk Road will also see the creation of high-speed rail links, maritime ports, and airports.

Some of the first trains to run on the New Silk Road are scheduled to link Kunming in China’s Yunnan province with the Russian city of Vladivostok, via the Pakistani cities of Peshawar and Islamabad. This 21-day journey is expected to cost about $5,600, including food and lodging.

Establishing Branches

Many companies will benefit from the New Silk Road, including trade groups and businesses – both foreign and domestic. The government has said that Chinese companies will, in particular, benefit from the plan as it opens up new markets and creates new business opportunities. In the past year, Chinese companies have established operations in at least 29 countries as a result of the New Silk Road. Some of the largest companies in China, including Huawei, CITIC, and Hikvision, have, in fact, established joint ventures with local partners across the world. Huawei alone has over 100 subsidiaries and affiliates.

The Chinese government is, therefore, effectively outsourcing much of the planning and preparing of the New Silk Road to the private sector. In the coming months, there will be a significant increase in the number of Chinese businesses that are participating in the initiative. Some expect this figure to reach 700,000 companies.

Progress So Far

The following sections provide a snapshot of the progress of the plan so far.