In 2013, the new General Secretary of the Communist Party in China, President Xi

Question

In 2013, the new General Secretary of the Communist Party in China, President Xi Jinping, unveiled an ambitious initiative designed to connect excess manufacturing capacity within China to Eurasia. His vision for the re-establishment of China as the worlds ‘Middle Kingdom’ had begun as a young CCP member and was to become a reality under his watch. The execution of this multi-Trillion USD plan would be on the back of increased investment by China, both financially and diplomatically, to recreate the ancient land-based silk road and a new maritime network of sea ports, or roads. This plan became known as the One Belt One Road (OBOR) initiative up to 2016 and Belt and Road (B&R) beyond that.

As the plan has rolled out since 2014, to date over $1.8TrillionUSD worth of Chinese money has been leant to over 30 countries, most of whom are either under-developed or developing. These loans, with interest rates as high as 16%, have had few but very strict conditions. Each project, strategically chosen, has included road and rail lines as well as ports. Most recently, 6 of these countries have either defaulted or are near to it. Fiji, Vanuatu, Sri Lanka, Pakistan, Nepal and Bangladesh.

Explore the Historical context of the Chinese populations enthusiasm. Identify key events that led them to drive such an ambitious initiative of debt. What are the main challenges for business’ along the B&R? Identify at least 3 risks associated from a Chinese National perspective providing examples. Finally, considering the vulnerability of those countries listed above, what are some policies you would change to mitigate the risk of economic or diplomatic tension with China? Provide logical illustrations of the most likely outcome of such changes.

Explanation / Answer

Ans. This question is very interesting and I am feeling very happy answering this question.

The project of OBOR under President Xi Jinping is a very ambitious one and is aimed at improving connectivity and reach throughout Asia and some parts of Europe , Africa .

Historically , People of China have faced lots of atrocities . 5 Out of 10 of the most damaging war of the World have been started in China . There have been internal Strifes too , but Who were the real sufferers ? Obviously , Common people of China . After World War 2 , Chinese people faced lot of brutality done by Japanese Army . Those were very horrific Years for Chinese People . Massacres such as Nanking Massacres are heart renching.

But from all these difficulties , Chinese people decided not to give up but to fight and Come Up . And What is the Current Scenario ? China is being seen as the upcoming World Power after USA. This all have been possible because of Hardworking and Smart people of China. Chinese People have worked day and night to achieve this fate.

Some of the Events that led China to drive an ambitious initiative of debt were :

1) Leadership of Xi Jinping - Xi Jinping becoming the President of China had a huge impact on the policies of China . He introduced several reforms and took several actions that righteously led China to Give debt to more countries.

2) China becoming World's Second Largest Economy - This had a huge impact on funds available in China. This helped China in the abitious initiative of Debt.

3) Increased Capacity of Chinese Banks - Chinese banks have increased their capacity of lending loans and this had a majot impact in the initiative of Debt.

Main Challenges for business along B&R are :

1) Business along B&R would face problems related to information security , financial risk etc because of Many countries integrating together .

2) There would be difficulty in the Compliance , Money Laundering Prevention etc.

3) As Chinese people would be working in most of the projects abroad , There would be unemplyemnt in the local place.

4) Small Business may not benefit by this project as this project will induce competitions and small business may not be able to survive in presence of Big Companies .

3 risks associated with it according to Chinese national are :

1) There have been a lot of investment made in this project so all could be lost in Case of a Natural Disaster. As this project may trigger Environmental Unbalance.

2) Some countries who had taken debts from China may not be able to repay the loan which would add financial burden to China.

3) There are various engineering , safety and management issues that are required to be dealt properly.

4) A very very huge amount of Money is Pumped into this Initiative . If any of the Project fails , it would lead to massive economic unrest.

Some policies that I would change to mititgate the risk of economic or diplomatic tentions with China are :

1) Not to take any Debt for infrastrucutal projects . Using banks such as AAIB etc to get infrastructural assistance .Only using debts for Emergency Situations , Good Governance etc.

2) Not allowing Chinese Investment to go beyond the Debt Paying Capacity of the Receiving Country.

3) Negotiations with Chinese Govt on lowering of the interest rates and easing down the regulations and norms.

4) Domestic Checks and Balance System may also help in mitigation of risk of Debt Trap.

I hope this answer was Helpful . Do ask in case of any Doubts.

Your 1Thumsup would keep me motivated to help more students like you.

Best of Luck ! Keep Chegging !

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