When Australian Prime Minister Malcolm Turnbull meets with US President Donald Trump this week during his official visit to the United States, a proposed plan to offer an alternative to China’s OBOR Initiative would be on the agenda of the bilateral meeting, the Australian Financial Review reported Sunday.
Chinese President Xi Jinping launched the OBOR Initiative in 2013 to boost infrastructure investment, trade and inter-connectivity in over 60 countries in Asia and Europe, as part of his signature plan for the "great revival of China."
China’s rising assertiveness, demonstrated through the OBOR Initiative, caused concerns among major rivals such as Australia, the United States, India and Japan in the Asia-Pacific region. In response, all of the four nations have yet to endorse China’s OBOR Initiative. Indian Prime Minister Narendra Modi went as far as to skip the first international summit to celebrate the OBOR Initiative in Beijing in May 2017.
Chinese Strength in Infrastructure Projects
The proposed alternative to the OBOR Initiative looks to be part of these four nations’ efforts to compete against China’s growing influence in the Asia-Pacific region. However, Chinese companies could also take advantage of this alternative scheme, thanks to their competitiveness and expertise in building major infrastructure projects globally, experts suggested.
"I think the proposed OBOR alternative would also be beneficial to China. The fact of the matter is China is almost No. 1 in terms of big projects, such as the Three Gorges Dam or the high-speed railways. If those four countries launch an alternative to OBOR, they still have to seek global tenders under WTO requirements. For example in India, the Delhi Metro is funded by Japanese aid, but most of the work is done by [Chinese companies] Shanghai Electric and Harbin Electric. Even an alternative to OBOR would be useful for China," Srikanth Kondapalli, a professor in Chinese Studies at Jawaharlal Nehru University in New Delhi, India, who wrote a book on China’s One Belt One Road initiative, told Sputnik.
Chinese experts shared similar views on the prospects for Chinese companies in the proposed alternative to the OBOR Initiative.
"If these four nations work together, they have a competitive edge in terms of financial and technological strength. But when it comes to capabilities of building infrastructure projects, China has its strength. For example, Chinese companies can build the same bridge faster and cheaper than US companies. That’s without a doubt," Jin Canrong, a professor in the School of International Studies of Renmin University in Beijing, told Sputnik.
However, the Beijing-based expert expressed concerns over whether these four nations would introduce restrictions targeting Chinese companies.
"If these four countries are sincere in helping other nations develop their local economy and solve problems for local residents by building roads and improving power or water supplies, they need to give a chance to Chinese companies. If they specifically add political conditions to prohibit Chinese companies, it’s obvious that the alternative carries more political than economic purpose. This could hurt their image in the international community," Jin said.
The proposed regional infrastructure scheme seeks to offer an "alternative" to China’s OBOR Initiative, rather than a "rival," according to a senior US official quoted in the Australian Financial Review report.
"No one is saying China should not build infrastructure. China might build a port which, on its own is not economically viable. We could make it economically viable by building a road or rail line linking that port," the US official was quoted as saying.
Issues for OBOR
Professor Kondapalli, the Indian expert, pointed out that China’s OBOR Initiative caused concerns in smaller nations such as Sri Lanka, where the government failed to repay its debt to China.
Sri Lanka had to hand over the control of the Hambontota port on its southern coast to China in December 2017, after the local government struggled to repay the $1.3 billion given in loans for the port project issued by a Chinese state-owned bank. Through a 99-year lease agreement, Chinese companies obtained a 70 percent stake in the strategic port.
"There’s the process of aid to equity conversion. That takes some time and hard work. In the case of Sri Lanka, 95 percent of the revenues of the government came from debt refinancing from various donors including China. As a result, they were desperate to convert debt into equity. But not all nations are in debts or desperate to convert debt into equity swap. While China has money, it has to be converted into equity. This is a structural constrain that China faces," Kondapalli said.
The Indian scholar explained that market-based funding process could also make investments from countries like Japan less appealing than what Chinese banks can offer.
"Based on the idea that we will provide an alternative to the OBOR in the economic sphere, if these countries come together, they do have some prospects. The Japanese Official Development Assistance (ODA) can provide substantial funds for infrastructure projects in Asia, as we have seen in ASEAN countries, but to what extent? The investment [from ODA] has to be based on market principles. The lending process in Japan, Australia and the United States is based on market principles, which means every project is only cleared after a substantial review and commercial considerations. This is unlike the OBOR, which has the flexibility as the fund comes from China Development Bank," he said.
No Worry for China
Chinese authorities are unlikely to oppose the proposed alternative to the OBOR Initiative and could adapt a pragmatic approach, Professor Kondapalli suggested.
"No. I don’t think China should be worried about this new alternative to OBOR. For example, the strategy community or the military community in China could view this as possible containment of China. They’ll see this as squeezing the OBOR. But I think in policy or decision making [in China], what will prevail is the pragmatic policy, which has been the utmost policy in the last three decades. As Deng Xiaoping once said, keeping a low profile. I think the pragmatic policy will win, which basically would mean: alright, there’s an alternative to the OBOR, but we can do business between the OBOR and the alternative. In the end, China can say: if you want to build a railroad, we can provide you with the labor and technicians. I think the division of labor is possible. This could be a kind of informal win-win strategy," he said.
Professor Jin, the Beijing-based expert, added that participation of the United States could help bring additional capital to infrastructure projects.
"The large majority of the world’s capital in stocks, bonds or futures market continues to be controlled by the United States. The intentions of China’s OBOR Initiative were also to attract more capital and investment from the international financial market with our initial investment in the infrastructure projects," he said.
The Chinese scholar added that capital from the international financial market only started to take part in the projects under the OBOR Initiative last year and US participation could greatly help boost such investments.