Why OBOR can become a Rare Instance of a Chinese Blunder

Antagonizing India & Depending On Pakistan Is Destined To Doom The Project

The ancient glory of Silk Route depended on political stability in the region, and the combined attraction of China and India as trading destinations of the East. Attempting to rejuvenate this ancient glory through the ambitious One Belt One Road (OBOR) Project, China has consciously kept India away from being a major stakeholder, by letting China Pakistan Economic Corridor (CPEC) through disputed territory. Though that may serve Chinese political agenda, it risks making OBOR outcomes negative and converting it into a major Chinese blunder.

“Whenever a man does a thoroughly stupid thing, it is always from the noblest motives.”

When Oscar Wilde wrote these words in The Picture of Dorian Gray, he may not have imagined that they could possibly be used some day to refer to one of the grandest follies of wisdom by an aspiring superpower with a huge surplus of state owned funds and a vision of dominating the whole world. Yet, these words may provide the best description of the ambitious One Belt One Road Initiative or OBOR, being pushed by China, at a cost of between four to eight trillion dollars spread over more than a decade.

OBOR: Chinese Vision of Renewing the Ancient Silk Route

There seem to be two underlying objectives in the conceptualization of OBOR. The first is the revival of China’s glorious past by rejuvenating a trade route through which China connected with the rest of the world since ancient times. The aspiration may be to create a public image of a nation that was always great and which therefore has a legitimate right to lead the world. The second and the more practical purpose of OBOR would be to further bolster China’s trade with the rest of the world by reducing costs of transportation and enabling importing nations to make the best use of surplus Chinese production harnessing large economies of scale.

Both these objectives are reasonable, and though bordering on ‘over-ambitious’, are fully within the means and capacity of the Chinese State, even if the likely economic returns hardly match the investments likely to be required for it. The follies that make it unreasonable are on two accounts.

The first, a minor folly, lies in the failure of recognizing the lessons of history that were associated with the Silk Route. The second, the bigger blunder, lies in mixing it with political objectives of regional dominance, and thereby purposefully leaving India out of the equation. Together, they have the potential of converting OBOR into a huge sunk cost as well as a lost opportunity, not only for China, but for the whole region.

Missing the Lessons of History

Given the objective of OBOR to rejuvenate a glorious chapter in Chinese history, it is all the more surprising as to how those conceptualizing this project have failed to read the lessons of history that relate to the Silk Route and its days of glory. The foremost of these lessons is that the origin and glory of the Silk Route was always a result of synergies between China and India, attracting foreign traders as much in their quest for Indian spices and cotton as they were in the quest for Chinese silk.

In fact, the origin of the Silk Route and the first era of its glory lay in the rise of the Buddhist Indo-Greek Kingdom from 180 BCE to 10 CE, which was spread over the territory of Western part of Indian civilization, connecting India with Tibet and China on one hand and the Western world on the other. The stable polity of that era was instrumental in providing a safe passage to traders, and not only gave rise to the Northern and Southern Silk Routes, but was also instrumental in spreading Buddhism in China and the whole region up to Mongolia. Most traders coming from Central Asia, Persia, Levant and Southern Europe were attracted by the opportunity of trading with India as well and the Orient.

The second golden era of the Silk Route trade began, when following closely on the heels of the Byzantine attempts to extend land routes, the erstwhile Silk Route was reopened by the Tang Empire. With a proactive securitization of the ways, trade again prospered between the West and the East. As was the case in the first century, it was the combined attraction of the riches of the Indies and the Orient that made traders from all over the world flock to these routes. What is important to recall here is the equivalent success of the maritime Silk Route that promoted huge trade between China and India through sea lanes.

The third golden age of Silk Route trading, and perhaps the last period of its glory was witnessed during the Mongol Empire, which extended in the 13th century from Eastern Europe to the Western borders of China, making it the largest ever in terms of contiguous territory. It was due to the political stability from its control that silk routes were again activated.

Thus, history clearly indicates that expansion of trade on the silk route was an outcome of regional peace and stable polity, and not a result of infrastructural development. In fact, the history of Silk Route confirms that it is only when a region is blessed with stable political situation that trade flourishes. Infrastructure is only a supplement and not the main driver of trade. History is also clear in telling us that the trade attractiveness of the Silk Route was always linked to the opportunities for trading with India and China both and not China alone. Lastly, one should also take into account that the term ‘Silk Route’ was coined only in the twentieth century, and many consider it to be a flawed myth that has been given an undeserving hype.

The Blunder of Antagonizing India and Depending on Pakistan

Among the regions that China plans to access through OBOR are Eastern Russia, Central Asia, South Asia, Northern Africa and ASEAN. While Eastern Russia is not a thickly populated region, the total population of Central Asia is only around 71 million. Compare it to the population of South Asian countries of India, Pakistan and Bangladesh, which amount to a total of 1891 million or more than 25 times that of Central Asia. Given the fact that Euro zone lies too far, any country looking for trading opportunities in the region would be interested in South Asia, even more so since demographically, it constitutes one of the youngest populations in the world, and expected to enjoy relatively high rates of economic growth in the coming decades.

With a population that is likely to surpass China within a decade and income levels that are set to rise faster than they would do in China, India is already a very big source of trade surplus for China, which rose to a whopping US $ 51 Billion in 2017. It seems that China has either miscalculated the potential of Indian participation, or equally erroneously, may have taken it for granted that in spite of all its designs to exclude India from a stakeholdership, it will still be able to ensure optimum benefits to OBOR from India’s participation.

Given the fact that India constitutes one of the largest markets of the world and the Chinese economy is already its biggest trading beneficiary, one would have expected that China will sensitively harbor this precious source of trading revenue and protect its trading dominance with a lot of effort. Moreover, with history telling us that Silk Route’s attractions lay in creating access to India as much as it was for the access to China, one would be clearly forgiven to expect that economic wisdom would lie in China seeking a partnership with India in promoting OBOR, particularly so when without any doubt, the largest chunk of Chinese trade in the region is destined to be with India in coming decades, OBOR or no OBOR.

Yet, Chinese leadership has adopted the policy of keeping India largely out of it. What is worse, it seems to have consciously mixed its economic ambitions with political ones, by opting for the China Pakistan Economic Corridor (CPEC) through disputed territory between India and Pakistan. While China may seek solace in the unfortunate situation of Pakistan today, trapped in its own prison of self perpetuated conflict with India and Afghanistan, and begin to be shunned by the rest of the World including the United States, and hope that Pakistan’s miseries will make that country a virtual pawn in its plans, it is still not clear as to how it will make OBOR successful.

On the contrary, by risking its trade relations with India, OBOR may create a risk of negative outcomes for Chinese trade.

Abortive Back Rolls

Wikipedia already provides details of several derailed projects relating to OBOR in several countries. Such back rolling in the CPEC planned in Pakistan already amounted to $ 22.5 billion, and is also witnessed in other countries including Tanzania ($ 11 billion), Thailand ($ 15 billion), Myanmar ($ 3 billion), Nepal ($2.5 billion) and Sri Lanka ($ 1.5 billion). There could be many more in trouble. However, these sunk costs of these projects are not the only problem that is likely to be faced by OBOR.

Real Problem: Mixing Political Agenda with Promoting Trade

The real risk in OBOR is that it mixes two completely divergent objectives and thereby risks the failure of both. The apparent objective of promoting regional trade fails to look credible by the exclusion of India as a stakeholder, which is clearly the result of its second object of politically dominating the region. What makes this exercise a blunder is the fact that China may have the ability to achieve each of these objectives by pursuing them separately, instead of mixing them together, which is likely to result in the failure of the project itself and thereby lead to the failure of both its objectives.

Cheaper Alternatives that can Work

If recent economic history is any indication, Chinese policy makers are not known to indulge in such blunders. This gives one hope that better sense will still prevail and the recent warming up of Chinese establishment to Indian leaders may be an indication of this awareness. One can also hope that a timely course correction will prevent this ambitious project from becoming a costly burden. One such alternative could be to convert OBOR into a multilateral regional project, thereby incorporating both India as an important stakeholder. This, however, would require extending to India, a significant stakeholdership, which may not fully gel with the Chinese objective of regional dominance over its South Western neighbor. However, mixing this political objective with trading preferences is more likely than not to doom OBOR as a project, and make it an uncharacteristic and rare failure of Chinese economic policy.

Whether China will still be able to make OBOR work without any negative repercussions will become clear only in a few years from now. Till then, let us hope for the best for the region!