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The Political Economy of One Belt, One Road

recent report by the Center for Strategic and International Studies calls into question some of the benefits of China’s One Belt, One Road (OBOR), with the authors expressing concerns while acknowledging the potential the OBOR could offer. Noting that OBOR “risks stirring domestic political competition, fueling networks of graft and rent-seeking, and not fulfilling its transformative potential,” the report argues that it is “critical” to understand “how [OBOR’s] externally funded projects interact with local political agendas, networks, and cleavages.”

China’s OBOR initiative involves Chinese investments of between US$800 billion to US$1 trillion (C$1.08 trillion to C$1.35 trillion) in 890 projects in over 60 countries. China has become a provider of developmental assistance in many of these OBOR partner countries, including extensions of energy agreement loans worth US$8 billion and US$13 billion to Kazakhstan and Turkmenistan respectively during the financial crisis. OBOR investment in infrastructure in Pakistan is US$45 billion, yet the report states that Chinese officials privately forecast losses of 80% of investments’ value in the country, in addition to losses of 50% in Myanmar and 30% in Central Asia.

Citing potential risks surrounding OBOR, the report states that risks to stability should be flagged, as “new high-profile projects may highlight ethnic and social cleavages, increase political competition over rents and income streams, and unleash anti-Chinese populist appeals.” Risks to connectivity are also a factor, as “improved infrastructure without accompanying reforms… will not produce efficiency gains or transformative effects.” The authors conclude by noting that risks to OBOR can also stem from uneven American reactions to the initiative, with US policy being supportive of it in the case of Eurasia, but viewing it competitively in East Asia.

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