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Should Europe embrace China’s One Belt One Road policy?

07.11.2016

David Beaves

David Beaves Managing Partner

China’s One Belt One Road policy (“OBOR”) has been described as the biggest economic event of the 21st Century. The US$1.2 trillion project refers to two interlinked concepts: The Silk Road Economic Belt (the “Belt”), an overland transport network connecting China to Europe and the Middle East through Central Asia and Russia; and the 21st Century Maritime Silk Road (the “Road”), a maritime route, connecting ports in Asia, Africa and the Mediterranean.

OBOR encompasses over 60 countries, 60% of the world’s population and a collective GDP equivalent to 33% of the world’s economy. Not surprisingly, some schools of thought refer to it as China’s Marshall Plan. However, China has been at pains to emphasise that it is not politically motivated, but is an all-inclusive strategy, which will benefit all participating nations.

While the US remains wary of OBOR, Europe seems increasingly willing to embrace the initiative. China is the EU’s second largest trading partner and there are already Yuan clearing banks in London, Frankfurt, Paris, Prague, Luxembourg and Zurich. The UK, Germany, France and Italy were also founding members of The Asian Infrastructure Investment Bank (AIIB), established by China to support the building of infrastructure projects in the Asia-Pacific region. Furthermore, with EU funding of major projects due to decline over the coming years, a US$358 billion Investment Plan for Europe (IPE) is currently being negotiated with China. There are significant synergies between the objectives of the IPE and OBOR, including investment in infrastructure, improved connectivity and developments in advanced technology. China’s recent investment in the port of Piraeus in Greece and the Hinkley Point nuclear power station in the UK are but two recent examples of this already happening in practice.

In 2015, George Osborne was quoted as saying, “the future prosperity of the UK depends on us strengthening our relationship with the world’s next super power.” Following the UK’s vote to leave the EU, the importance to the UK of greater cooperation with China has clearly increased.

David Beaves, Managing Partner of Ince & Co’s Hong Kong office, commented:

“Europe should not view OBOR as some giant leap forward, as it is often portrayed, but as one in a series of steps aimed at fostering closer engagement. That is the spirit of the approach so far favoured, at senior levels at least, by the European Commission. Europe, including the UK, has nothing to lose and realistically China’s economy is simply too big and too deeply integrated with the rest of the world for it to be ignored.”

Article authors:

David Beaves