China announced its one of the most ambitious foreign policy in 2013 by announcing the revival of the old Silk route which is now known as “Belt and Road initiative” in China and One Belt One Road in the west. There might be a question here as to why China chose the word initiative over strategy, the word initiative sound less threatening and its more likely to be accepted.
China’s Belt and road initiative includes as many as 60 countries aiming to contribute as much as 80% of GDP. The Belt and Road initiative would give China direct access to Asia Pacific region connecting it through land and marine which was the prime objective of China.
But why is China ready to bear the expenses and all the trouble to create this corridor? There are many layers to this story but let’s first start with China’s geography. Chinese economic growth has faced unequal development which can be distinguished by the prosperous Eastern region and stagnant West. The reason behind this development is the easts were easy access to the sea were as west landlocked. The Belt and Road initiative would allow the western region to have access to trade via land and marine routes. The Belt will provide cheap and easy access to most parts of Central Asia and the Pacific region.
Another advantage of this initiative is the out flow of excess industrial products in China. China has been producing electronics, goods etc has crowed the Chinese market, this Belt and road project will lead to better export of Chinese production.
The third and most important reason or what China aims to achieve out of this Belt and Road initiative is the internationalisation of Renminbi, also known as “people’s money”. As dollar has always dominated the world market and IMF, China introduced Renminbi as a medium for exchange in the international market. The success of Renminbi would create more capital flow and there could be an end to dollar monopoly in the world market and institutions like IMF, World Bank. The Belt and Road initiative would boost the outflow of Ranminbi which would in fact lead to FDI being exchanged in Ranminbi instead of dollars.
UK has been very supportive in China’s Belt and road initiative. Since BREXIT, China has become a new potential trade partner for UK. If successful this initiative could be a breakthrough for China and the countries participating or accomplishment of China’s policy of expansion.