FEATURED | Economic Expansion Strategy for China's "One Belt One Road"

FEATURED | Economic Expansion Strategy for China's "One Belt One Road"

By Chen Lanjian and Zhang Wei
Yunnan University, China 

FEATURED | Economic Expansion Strategy of China's "One Belt One Road"

Map Attribute: Youtube Screen-grab

Definition of OBOR

The "One Belt One Road" (OBOR) strategy encompasses a kind of economic expansion strategy that China pursues. China has become the world's 2nd largest economic entity with over $10-trillion-dollar GDP [1] and the world’s largest trading entity with imports and exports of $ 4.16 trillion US dollars. [2] The rise of China must undergo the economic expansion strategy for long-term or short-term periods, because only if the growth strategy, by nature, enables China to constantly expand Chinese economies of scale, can China turn out to be a big country from a less competitive one.

China first widely pushes its own OBOR economic expansion strategy that is composed of the Silk Road Economic Belt (SREB) and 21st Century Maritime Silk Road (21ST CMSR) sub-strategies, namely: OBOR = SREB + 21ST CMSR.

Hereinafter referred to as the OBOR economic expansion strategy in this article. Among them, the Silk Road Economic Belt (SREB)strategy is to cover the areas from the Southeast Asia, Central Asia and Middle East countries which they assimilate finally together as a regional economic entity to lead to Europe, forming a trend of Eurasian Economic Integration. Whereas, the 21st Century Maritime Silk Road(21ST CMSR)strategy is to connect China with Asia, Africa and Europe continents in where OBOR can eventually form a closed loop on both land and sea routes that serve as the trading channels and economic corridors. [3]

The SREB refers to the Silk Road Economic Belt. In September of 2013, China President Xi Jinping proposed to jointly construct the Silk Road Economic Belt (SREB) at Nazarbayev University, Kazakhstan, it is a new regional economic development idea derived from the concept of the ancient Silk Road which was ever a land passage on where Envoy Zhang Qian (the Western Han Dynasty, 202 BC to AD 9, viz. 2,217 years ago) went on mission to the western regions from Changan (now Shanxi Xi'an) as starting point, to the Guanzhong Plain, Hexi Corridor, Tarim Basin and Central Asian areas such as Transoxiana and Greater Iran between the Syr Darya River and Oxus River, and finally reached the Mediterranean countries.

The 21st CMSR involves the 21st Century Maritime Silk Road. In October of 2013, While China President Xi Jinping paid a visit to the ASEAN countries and proposed this program. Ever since the Qin and Han Dynasty (221 BC to AD 221, viz. 2,236 years ago) opened the China ancient Maritime Silk Road on where it has always been an important bridge between the East and West economic and cultural exchanges, and since ancient times, in particular, the Southeast Asian regions have always played an important hub role on SREB. The 21st CMSR strategic partners include not only ASEAN, point leading line, line leading plane, but also enhance exchanges in the countries and regions along the lines of OBOR, it will communicate with ASEAN, South Asia, West Asia, North Africa, Europe and other major economic market chains so as to work out the expansion strategy facing the South China sea, Pacific and India Oceans strategically cooperated economic belt as well as to develop a long-term goal of integrating economy and trade into Asia, Europe and Africa.

OBOR TABLE 1

Preliminary estimating, there would be 27 countries (maybe involved in 65 ones around the world) along the ways of OBOR with the total population of about 4.4billion, accounting for 63% of the world's population; the total economy about $21 trillion US dollars, taking up about 29% of the total global economy.

Arthur Thompson Theoretical Framework of Economic Expansion Strategy:

According to Arthur Thompson's strategic concepts, he argues that to acquire the competitive advantages is to take advantage of economic expansion strategy successfully, making it relies on the following strategic actions: cost, differentiation or resources/capacity-oriented ones; any successful action can be divided into 3 phases, viz., the first phase Inception, second phase Benefit and third phase Loss; there are 6 types of successful actions as follows:
  • To take steps to catch up with or surpass the rivalry strengths;
  • To adopt measures to make use of the rivalry weaknesses;
  • To attack the fronts from a multi-access;
  • To conduct summative actions;
  • To engage in guerrilla actions;
  • To pursue preemption actions.

OBOR PHASES

The First Phase-Inception in which China initiates the OBOR economic expansion strategy successfully (e.g., AIIB establishment, that is, the Asia Infrastructure Investment Bank, a regional multilateral bank created and proposed by China in October of 2014);

The Second Phase-Benefit in which China shall benefit from the scope of competitive advantages in infrastructure, energy resources, capacity, foreign exchange reserves, manpower, and so on.
The Third Phase-Loss in which the rivalry shall gobble up the OBOR competitive advantages through simulation, copy or attack.

Based on Arthur Thompson’s theory, China utilizes an economic expansion strategy to obtain the globally competitive advantages via a creative OBOR economic expansion strategy that is hard to be defeated by the competitors. OBOR adopts the multi-way to win the global market, for instance, the multi-channel access to oil/gas resources. OBOR takes actions to catch up with and challenge competitors. At the same time, China can not only provide equal or even better products, but also compete at the low prices, e.g., to help the countries along the ways of OBOR with building high-speed railway, highway, digging the canal, and also to provide them with infrastructure construction investment. The aim of OBOR is to transfer the domestic excess capacity, excess foreign exchange reserves and excess manpower in the following competitive advantages such as capacity, cost, differentiation and resources acquirement/ exploration to the outside world.

The East Meeting the West in OBOR Economic Growth Strategy:

Tai Ji (The Great Ultimate) Element:

Chinese believe in Tai Ji, an ancient philosophy in China, which argues that "Yin and Yang are the Tao", Tao consists of the heaven Tao, earth Tao and man Tao, which says that all things have two aspects of Yin and Yang, for example, heaven and earth, day and night, mountains and rivers, man and woman, rigid and flexible, etc. and both sides change constantly, possess some ties relevantly between them. Of which the man Tao mainly refers to thought, thought decides behavior and attitude. Tai Ji advocates that people should respect their own ideas, respect the laws of nature and learn to control their emotions.

Thus, Chinese like fuzzy, softness, China does not pursue the American boxing to KO (knockout) anybody, the American boxing focuses on strength style, straightness, strikeout, and so on, the best shot is to KO (knockout) opponents, then everything is clear-cut; but China tries to resolve all the movements of opponents. Therefore, Chinese like Tai Ji boxing, too, and in fact, Tai Ji boxing is indeed cleverer than American boxing. OBOR applies well Tai Ji idea to the present situation and believes Rome was not built in a day. If China thought that the situation is in favor, then China would have won right away, it is out of the question, because OBOR is a process of integrating hearts and minds of the peoples along the countries of OBOR, to integrate peoples is much slower than to build high-speed railway and highway, lay oil/gas pipelines or erect power stations, etc. Only China reins the hearts and minds of peoples, can OBOR move in a right orientation.

Feelings of the World:

The OBOR strategic thinking contains the feelings of the world ‘All serves me, I serve all, too’ rather than definitely taking a country's selfish interests into considerations. After the 30-year-reform, opening up and rapid development, China's economy has become an indispensable link in the global resources and capital markets. Initiating OBOR is not only to more effectively integrate global resources and capital, but also to more effectively give full play in industry and capital advantages so that the countries along the ways of OBOR can achieve common development and prosperity.

Mr. Zbigniew Brzezinski, a famous American geopolitical strategist, restated that Thucydides Trap and said, “China and the United States is about to fall into the trap of Thucydides. This phenomenon derives from the ancient Greek and Roman, since then people began to talk about that all emerging countries finally would inevitably fall into a trap of challenging the old imperial. China provides the countries along the OBOR with money, technology, equipment, etc. to engage in infrastructure construction such as high-speed railway, highway, oil and gas pipelines, power stations, etc.), which enable peoples of the countries along the OBOR to enjoy the convenience and progress of public infrastructure, it can either solve China's excess capacity, foreign exchange reserves and labor or pull the domestic demand of the countries along the OBOR, and also avoid the zero sum game, achieve mutual benefits and smart win-win situations between China and the countries along the OBOR. This means that not all of the rise of great powers must fall into the trap of Thucydides; the zero sum game is no longer necessarily a unique choice among great powers.

Therefore, OBOR is not only beneficial to China, but also conducive to China's strategic choice. OBOR consists of both Arthur Thompson growth strategy and the thinking elements of oriental management; OBOR is a typical combination of the east and west thinking.

Domestic Context of OBOR:

On the basis of Arthur Thompson theory, China overcapacity production means a sort of advantage; in the meantime, its transfer brooks no delay!

China Overcapacity Percentage Distribution


OBOR serves as an important, long-term national development economic expansion strategy which is to solve several strategic problems such as China excess capacity market, resources acquisition, strategic depth, strengthening trade development, national security and trade dominance, etc. China excess capacity causes plenty of problems on economic operations, through the OBOR, it is a very good means to open up new export market. China has both excess capacity and excess foreign exchange assets; whereas, the emerging markets and less developed countries still lack the construction of infrastructure, China makes full use of foreign exchange reserves as driving global growth capital, at the same time, the China capital output drives excess capacity to be digested abroad.

About The Authors:

Chen Lanjian - School of Business and Tourism, Yunnan University, China

Zhang Wei - Department of Financial Management & EDP Training Center, Yunnan University, China

References:

[1] He Ailian, China 2014 GDP Ranked 2nd and Broke through $1Trillion US Dollars, [N], South Daily, http://www.askci.com/finance/2015/01/21/15414dcmh_all.sh tml. 01/21/ 2015.

[2] Qiu Guanshi, Last year, China, Imp. And Exp. Trading Volume Amounted to $4.16 trillion dollars and Became The Largest Trading Nation in the World, [W], http://gb.cri.cn/42071/2014/03/07/4865s4452754.htm, 09:15:20, 03/07/2014.

[3] Gao Jiangbo, 2015 "One Belt and One Road" Track Transportation Development and Cooperation Summit Forum held in Shanghai, http://news.swjtu.edu.cn/ShowNews-1003 2-0-1.shtml, 09/04/2015

This article is an excerpt from a research paper titled - China OBOR in Perspective of High-speed Railway (HSR) —Research on OBOR Economic Expansion Strategy of China, which was pubslished under Creative Commons License. 

Copyright © 2015 by authors, all rights reserved. Authors agree that this article remains permanently open access under the terms of the Creative Commons Attribution License 4.0 International License

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