The One Belt One Road and AIIB Initiative in China

Table of Contents

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1.0 CHAPTER ONE

Introduction

1.1 Research Background

1.2 Research question

1.3 Literature review

1.4 Realism vs Liberalism

1.4.1 Arguments

1.5 Research Methodology

1.6 Research limitation

1.7 Research structure

2.0 Chapter Two: The One Belt and One Road and AIIB initiative as China’s Major Foreign Policy

Introduction

2.1 The Dimension of the OBOR initiative

2.2 The nature of OBOR Initiative

2.3 The cooperation Priorities of the OBOR Initiative

2.4 The OBOR through a Chinese Perspective and a Western Perspective.

2.5 Security implications of the One Belt One Road Initiative

2.6 Challenge or Complement to the Global Governance

2.7 Is the OBOR initiative a Chinese Version of the Marshall Plan?

2.8 Internal and External Challenges of the One Belt One Road Initiative

Conclusion

3.0 Chapter Three: China’s Economic Development through the OBOR Initiative

Introduction

3.1 Chinese Economic Footprint: Trade

3.2 China’s Going out Policy: Overseas Direct Investment

3.4 Foreign Aid: A tool to persuade Countries.

3.5 Chinese Dream

3.6 New Normal Mode

Conclusion

4.0 Chapter Four: The OBOR impact on the Regional Order

Introduction

4.1 Establishing Regional Stability through Economic Initiatives

4.2 Development of East Asian Multilateralism

4.3 From U.S Hub and Spokes System to a New East Asian Order?

4.4 The Maritime Silk Road: An incentive for a Mutually Bidding code of Conduct

Conclusion

5.0 Chapter Five: Conclusion

What is Behind OBOR Initiative and AIIB

6.0 References

7.0 Appendix A: OBOR Key Principles and Its Land-based and Maritime Routes

1.0 CHAPTER ONE

Introduction

The world war two was the most transforming event in the 20^th century that took place in Europe leading to economic instability among many nations that were well off before. It led to many issues on the world wide scale where different world government forms were scrambling for economic influence. This led to communist and capitalist countries whose economic ideas were far different setting up cold war. Countries of opposite groups that had different economic government type were not trading together making trading be done with countries of own group. Basically, this made first world countries that were friends of U.S to develop economically gaining a lot of power and stability economically through the funding programs that were provided by U.S (Yiwei, W. ,2015). The economic race basically made some countries to thrive while others failing making the world allies advance economically.

Today, however, the world order has a new course by being challenged by different forces from powerful governments whose objectives are to control global economy internationally. The monetary system is being dictated in the market by most these nations such as America. Based on the exchange rates by 2016, China is the most developing country economical with a GDP of about 11.2 trillion USD beating the expectations of many nations with USA ahead of it with Japan, Germany, United Kingdom, India France and Brazil below it in ranks respectively. America has emerged as the most successful national economically making it a sole creditor on which nations look at financially (Stubbs, J. et al, 1996). With the emergency of china, the economic balance has started tilting leading to economic stretches among the two nations.

The relationship that exist between Europe and China has become one of the backbone axis in the economic position of the world. This is due to the cooperation between these nations that came into existence in 1970s where the European Union’s regards China as the most useful and important trading partner (Yiwei, W., 2015). Due to their intact relationship, they are the sole reason for the fall of the Soviet Union leading to the acceleration and broadening of their economies and markets globally as well as attempting to enter multilateral system.

1.1 Research Background

Currently, China is under economic transition based that it has taken a long time of finger’s breadth maturation. In the presence of the economic slowness, the leadership in power has introduced a new policy strategy that is poised at promoting China’s economic and political position globally. One of the objective of these initiative is to fulfill the Chinese dream and vision of uplifting the prosperity and economical stability within the Asia-Pacific perimeter as well as beyond. These mode is also poised at readjusting the domestic consumption of the Chinese economy (Stubbs, J. et al, 1996). The One Belt and One Road initiative (OBOR) is aimed at promoting China’s mutual economic growth, integrating regions as well as enhance global governance through its financial units that intends to establish new economic routes in international level. This initiative was unleashed by the General Secretary of the Chinese Community Party (CCP),XI Jinping including other ambitious economic strategies that are poised at making China have a bigger portion in the economic arena that tend to be grabbed by the super power countries. This initiative was broadcasted in September 2013, which is a four trillion U.S dollars initiative that intends to connect the Europe and Asia continents using the maritime road as well as a land belt running from China to central Europe. After a month, Xi proposed means that Beijing could use to finance this project of connectivity and that is the Asian Infrastructure Investment Bank (AIIB) (Swaine, M. ,2015).

Like any other world bank such as the World Bank,AIIB is a multilateral development bank, that depends on the capital intakes from its and then give out these funds to countries that need financial assistance to promote economic development. Based on the current statistics it is believed that AIIB has about 57 members from Asian regions as well as from other continents beyond. Besides supporting the completion of the OBOR initiative, AIIB has other obligations such as depleting the dependence of Asia on other developed countries for financial assistance (Taylor, J., 2009).AIIB’s presence was felt on January 16, 2016 after the speech of the CPP General secretary Xi at APEC.Suprisingly, in its first year of operation it managed to raise over one billion US dollars capital.

During the era of President Obama, the U.S and China relationship deteriorated as AIIB was the main lighting rod behind due to U.S refusal to join it as well as discouraging other nations from entering it.However, on March 12, 2015, one of the allies of the U.S, United Kingdom secede to become a member of AIIB bank. The entrance of UK sparked other nations who also rushed to join before the closure of membership deadline (Taylor, J., 2009). The refusal of US to join AIIB created a lot of questions whether it was unforced error by the president Obama’s administration or AIIB itself is a legitimate threat to what US had built since the end of world war two?

This research focuses on the OBOR and AIIB strategies of meeting Chinese dreams and visions through this project based on realism, liberalism and international relation perspectives.

1.2 Research question

Why is China executing OBOR initiative with AIIB?

1.3 Literature review

The OBOR initiative review is actually broad despite its birth about three years ago. This part is mainly grouped into three main parts that is: the international relation, statistical analysis of the economy of China including the development of infrastructures especially South of Asia, the statements from Chinese government as well as articles on journals published by Authors from China and Western. With scholar articles at hand, they avail background information on the thesis as well as including the numerical analysis of Chinese’s economy and the development of infrastructure evidences, statements about the additional top ups on OBOR initiative (Walsh, J., 1993). These sources are thoroughly analyzed to give a true picture of what is the motivational reasons behind the execution of OBOR initiative by China.

1.4 Realism vs Liberalism

Basically realism is based on anarchical state where countries scramble for power. According to Stephan Waltz It mainly take place within the states that are self-interested making it pessimistic to do away with conflict. Realism is further divided to two parts based on the behavior of the states in anarchical system. The two parts are defensive and offensive realism.

Kenneth Waltz one of the defensive relist argues that the world order is based on anarchical where nations are concerned about their positions in international systems rather than executing their powers. They are mainly concerned about their states rather than international supremacy. However, offensive realist John Mearsheimer argues that states are concerned with security and power with the assumption that international involvement is independent. Here states compare their regional achievements (Walsh, J.,1993).

On the other hand liberalism is based on the interdependence which is believed to result in international cooperation unlike realism. It is considered to promote positive interactions between different nations. Based on Robert Keohane and Joseph Nye they state that interdependence brought in by liberalism affects the behaviors and political positions of different nations as these nations operates under stipulated procedures and rules that are in place to control the interstate relationship. The assumption is that these states’ interaction increases the mutual growth as well as the international cooperation.

China’s interest to safeguard its natural resources, need to man its military position as well as its ambitions to be among the top challengers of international order is one of the realist’ evidence, but on the other hand, liberalists goes ahead to give supportive evidence based on China’s noted growth in association with its neighboring states including its role it plays in the international community.

1.4.1 Arguments

Based on the literature at hand, this thesis draws two different means of analyzing the China’s motives behind the OBOR initiative. From the side of relists they argue that the OBOR initiative is in place to increase the mighty of China across Asia so as to bring other nations within the Asia continent under its command. But on the other hand, the liberal arguments is that the OBOR’s initiative objectives is to contribute to the economic growth of all of the South Asia region and therefore it is not limited to China state only.

The realist scholars stresses that the China’s progress in infrastructural development is a means of creating its presence in the international arena along China’s geostrategic economical means,wheras the liberals  theorists argues that it is China’s initiative to uplift and strengthen  its regional relations with neighboring nations.

Globally, the realist suspects that the OBOR initiative with AIIB institution is likely to affect China’s peace based on its rise in the international order regarding it as a challenge to BrettonWoods International system. But on the other hand, the liberals’ supports that the Commitment of China to this initiative will lead to the rise of peace in the international order as it will be regarded as a stakeholder in the global order (Yiwei, W., 2015).

Based on evidences that are legit, it is believed that the liberal arguments tends to be more coherent based on its approach of assessing the main motivations behind China’s objectives in executing the OBOR initiative. By the grounds of liberal perspectives, our research concludes that there are three main reasons to why China is adopting the OBOR initiative as follows:

The first reason is due to the shift of China from a production based market to a service based market structure where it will generally major in the provision of services and therefore a need to add additional economic routes that will be useful for connecting China to the neighboring states including the coastal and western provinces of China so as to make the distribution of services and goods.

The second reason is the need for China to chase and strengthen the regional involvement by its involvement in the infrastructural development that will be poised at improving as well as increase the supply and value chains mainly of the South East Asian countries.

The third reason is believed to target the financial statistics in the international order which is poised to be added that is objected to improve and control the regional multilateralism without excluding political stability that will be realized through the development of infrastructures OBOR initiative being one of them.

1.5 Research Methodology

The thesis is based on a descriptive research that is associated with the International Relation (IR) theories. Both the realists and liberal with the IR background to analyze the motivation of China in the execution of the OBOR initiative.

This research is considered to be qualitative as opposed to quantitative research on the basis that it lacks statistics that are relative to the execution of OBOR initiative. Based on various wide range of economic and political views, the OBOR initiative is tend to have national, regional and global implications.

1.6 Research limitation

The main limitation of our research is that the OBOR initiative is long time project that will take that to be fully realized and therefore it approximated to be efficient by the year 2050.

1.7 Research structure

The thesis is divided into 5 chapters where each is made up subchapters and subtopics.

The very first chapter is based on elaborating the issue at hand thus availing information for the thesis for researching further.

Chapter two is based on the theoretical background to thesis concerned to analyzing China’s sole reasons and motivations behind its initiative based on the realists and liberal arguments,

Chapter three is basically split into three main parts where each part is poised at handling different objective. The first part is concerned with the core principles that are involved in the execution of the OBOR action plan. The second part will be based on different approaches that will involve different aspects. We will have the Chinese perspective (which may be subdivided into official and non-official statements) and on the other hand have the United States’ perspective of the same initiative. When considering these two major perspectives that is the Chinese perspective and the American perspective, it happens to bring in the comparison issue that is between the OBOR initiative and the U.S Marshal plan. Last but not least, the last part will handle the challenges that OBOR will be undertaking which will include both external and internal ones.

Chapter four will be sub divided into four main parts in which each will emphasize different issues. The first part will be based on the economic influence that china will have in the international order that will be judged on the basis of trading activities, international direct investigate activities as well as the financial aid records. The second part will emphasize more on the dream that the Chinese nation is building on in relation to the OBOR initiative in place. The third segment will switch its interest to the AIIB bank by accessing its contribution and importance to the OBOR initiative basing on its position as multilateral bank in relative to the international order.

The fifth chapter will have two major parts. The leading part will handle the historical as well as theoretical information that relates to South China Sea based on the sovereignty disputes that is associated with the execution of OBOR initiative which proposes the maritime route. The remaining part will deal with the East Asian Multilateralism on how it will impact OBOR on security related issues.

The last chapter, will be obligated with drawing a conclusion that is relative to the content that is regarded as the body as well as take into consideration of the hypothesis of the research question.

2.0 Chapter Two: The One Belt and One Road and AIIB initiative as China’s Major Foreign Policy

Introduction

China’s economic ambitions in the OBOR initiative is basically poised at having an economic implication on the international order. The initiative is basically based on the recreation of the Silk Road trade routes (Yiwei, W., 2015) .The route existed initially as it was intended for peace, cooperation as well as mutual learning and benefits that were necessary for promoting developments and prosperity in all major civilizations. In comparison, today, these essential concepts are not in place thus main reason for the lack of recovery means of global economy thus leading to deadlocks in major international organizations. Due to this, China had to find a way to cope up with this situation and that is why it launched its new international initiative whose objectives are to promote global economy as well as make peace along the trade routes without excluding security.

It is until 2013, when China turned words into real actions for executing its new Silk Road idea in the form of One Belt One Road intiative.The idea got prioritized for Chinese foreign policy and as a determinant of exposing China to the International system.

Despite the fact that this initiative was inclusive and intrinsically open, some nations such as the United State tried to air the strategic impacts of China’s initiative claiming that China targets to change the international order in a different approach of the creation of new international organizations.However,China has tried to defend herself by arguing that the allegations of changing the international order is not true, but rather it is poised at supporting the international order by the creation of better and new organizations.

Putting into consideration, the perceptions from the realists and the liberals when assessing china’s intentions behind the OBOR initiative, this chapter intends to analyze the two perspectives of two nations that have a common inters this initiative namely China and the United States. For China its perspectives are based on liberal assumptions while the American perspectives are based on the realist assumptions. The perspective of the two states differs in three ways namely; to what point will OBOR have significant security impacts; if the initiative will challenge the global governance system in place and lastly if the OBOR will be the Chinese version of the Marshal Plan .The conclusion is that the perception of the Chinese state is based on the liberal framework which is regarded as the most consistent in the analysis of China’s motivational reasons behind the execution of One Belt One Road initiative.

This chapter is basically segmented in three parts where the first part is concerned with the OBOR’s initiative principles in relative to its action plan. The second part is concerned with the analysis of basic motivations behind this initiative putting into account the perspectives of the two nations China and America. The last part will be concerned with the discussion of the challenges that this initiative is facing in its execution process in the domestic and international levels.

2.1 The Dimension of the OBOR initiative

This initiative manifest itself in two main segment namely the Silk Road Economic Belt and the 21^st Century Maritime Silk Road. This two projects were from the ideas of President XI Jinping while in his visit to the Central and Southeast Asia between the months of September and October the year 2013 respectively. He basically stressed on the essence of reinstalling the ancient Silk Road and laying room for community of destiny. The maritime was to interconnect land based economic routes that was to cover about fifty five percent of the world GNP (Weisbrot, M. ,2007).Based on further research it is clearly that the OBOR geographic coverage is across more than 65 countries that are emerging as well as developing ones. These statistics are believed to account to about 66 percent and 31 percent of international totals as far as land based and maritime based productions figures are concerned respectively (Yiwei, W.,2015).The statistics goes ahead to declare great potential that is associated with OBOR initiative without excluding the challenge that may likely rise from the most referred initiative that the Chinese government has ever executed (Taylor, J.,2009).The National Development and Reform Commission (NDRC) was the leading group in the implementation of the OBOR initiative who validates China’s ambitions of executing this initiative successfully.

2.2 The nature of OBOR Initiative

The OBOR’s nature is defined by four major principles that are conscious of the UN charter as well as the Five Principles of Peaceful Coexistence (Taylor, J., 2009).The first principle guides to be open to all countries of different economies for both regional and international influence and thus regarded as open for cooperation. The second principles states that any nation is free to participate as long as it owners different modes of developments, promotion and peace related solutions. The third stresses that the market policies should be respected as well as defining the roles of the marketing in regard to resource allocation. And lastly, the mutual benefit thing where the participants seek to share and achieve common development progress as well as share common destiny at the end.

2.3 The cooperation Priorities of the OBOR Initiative

OBOR is based on five cooperation priorities namely; the coordination of policies, which seeks to promote the cooperation of different state governments to have a common communication mechanism, share interests as well as have mutual political trust. To be precise, OBOR’s action plan outlines that there is importance when countries coordinate their economic development strategies, policies, working action plans among others for a joint execution of large projects.

The second principle is on facility connectivity which is the main priority of the OBOR intiative.In regard to the international law, the OBOR is poised at forming a an efficient infrastructure that intends to connect the whole of Asia,  Europe and Africa in stipulated steps. It is trying to improve infrastructures of all ends all the way from the port, aviation to the energy infrastructures without excluding the communication trunk line networks that will facilitate both transportation and exchange of information respectively

The unimpeded trade principle is considered to be the backbone of the OBOR framework. It is mainly concerned with the promotion and improvement of trade related issues as well as integrating the trade areas’ expansion, cooperation including the development of modem service trade. The emphasis is on dealing with the barriers that limits investment by expanding mutual investing areas and encouraging cooperation among the upcoming industries. Besides the above, this principle plays an important role in attracting the private sectors including foreign enterprises to participate in the construction of the infrastructures as well as support investment in the nations that are located along the Silk Road.

Financial Integration principle is essential as well in the success of the OBOR initiative as it emphasizes the importance of financial cooperation which is subject to using a stable currency system .This resulted to the development of the Asian Investment Infrastructure Bank (AIIB) and BICS New Development Bank that will strengthen the financial cooperation between its members and partners for instance the Shanghai Cooperation Organization(SCO) as well as the China ASEAN Interbank Association. Besides the government based financial partners, the private sectors are also free to bring their financial capabilities to take part in the execution of this initiative at hand.

The last principle is the People to people bond which is always a sole determinant as it involves the supply of support that will be handy in the implementation of the project. If at all the project is friend in that it promotes cultural exchange among various people especially students and also expanding the tourism department. This can be easily achieved by simplifying the stipulated procedures of applying visa for nations along the OBOR project.

2.4 The OBOR through a Chinese Perspective and a Western Perspective

The OBOR initiative is associated with economic impact that is expected to lead into economic growth as well as regional cohesion through the development of infrastructurs.However, there exist difference in perception that is behind the execution of this initiative by China. For China its motives is to peaceful rise and create an arena of community mutual from which participants will benefit from; on the other hand the American perception is based on that China is basically using the initiative to challenge international systems and promote its national interests through the creation of new international organizations.

Li Ziguo was able to identify the reasons to why China is executing the OBOR initiative. The first motive is that the initiative is poised at fostering the development of areas that are less developed in the China republic such as the western provinces and thus this will connect the two provinces that is the western province to the wealthy eastern provinces.Li further adds that the eastern provinces will act as frontier to opening up the world thus promoting the development chances in the western regions thus new development milestones will emerge (Yiwei, W.,2015).Similary,Zhong Sheng states that due to lack of economic balance that is evident in various sub regions in Asia as well as economic bonds will benefit from this initiative as it will be tamed to bring connectivity and thus be prioritized of all the projects. The success of this initiative will lead to better distribution of resources and thus some core industries will be distributed to the central and eastern provinces to match the eastern province thus creating uniformity without excluding the neighboring states. The second part Li basically believes that the OBOR initiative is there to seek Asia’s position in the industrial world (Stubbs, R. et al,2010).This will reveal itself by the promotion that will follow up on the Asian nations that are behind in terms of development. Thirdly, the initiative is after promoting the mutual growth among states that will lead to community destiny with its neighboring states. Despite the fact that this initiative has geographical target especially the central, south and Southeast of Asian countries, the initiative is still open and inclusive. President Xi made this statement clear at the Baop Forum in March 2015.

Similarly, the foreign minister Wang Yi elaborates that China respect other countries ways of their governance and therefore will not interfere to their ways of decision making. Therefore this initiative is based on transparency as well as openness which will be an additional layer of the in place regional cooperation. Above all, Zhong makes it clear that China is not after creating a rigid or anti foreign initiative in order to dominate in the regional affairs while establishing its sphere of influence. Therefore to him the Silk Road Economic Belt is not limited to China but to all the states that have interest in it, thus nations can share their economic interest through this initiative (Small, A., 2015).

According to Wu Jianmin for China to realize the openness and inclusiveness idea, the participants ought to identify projects of cooperation the will lead to mutual benefits among them. These project should be realized on the basis of common interest and lastly the resulting benefits should be allocated using equality approach of allocation among the beneficiaries (Small, A., 2015).

In summary, the China’s perspective has been able to consider the OBOR’s initiative to mainly after promoting the economic growth of states that are still under developed to bring uniformity in terms of development by connecting them to wealthy provinces such as the eastern provinces and thus lead to integration among the Asian region economically as well as the desire of China to attain shared interest idea.

The Chines and Western perspective on the other hand fails to asses OBOR initiative from a different position such as the security impacts that the initiative will bring about. Will the initiative challenge the existing global governance system structures and whether the Chinese version of Marshal Plan will?

2.5 Security implications of the One Belt One Road Initiative

The OBOR initiative is mainly focused on the infrastructural development but then unavailingly it will involves the security affairs as well. However, based on the Chinese perspective, they argue that the OBOR initiative will be limited to the maritime routes and thus the safety environment is guaranteed, but the American perspective puts it clear that it is a tool for China to promote and increase its influence in the global community.

The success of OBOR internationally will adequately directly affect the Chinese military ability that will be along the maritime routes. Based on Liang Fang, it will be necessary for China to have a significant military capability to be able to handle the OBOR initiative inevitably.

For the Americans, they take the OBOR initiative as one of the Chinese tool to grow its sphere of influence and that bring small states under their control. This idea is stressed by Booz Allen who further says that China may even go ahead to turn maritime infrastructures into military bases based on its strategic position which will lead to the expansion of China’s sphere of influences.

In contrast to the American perspective, the Chinese claim in the basis of liberal assumption that the presence of military is to provide security for the construction of the maritime facilities unlike hoe it is tamed to be. With support from the National Defense University studies, they demonstrate that the Chinese based military facilities along the maritime routes are not capable of even supporting combat operations and therefor are strictly for commercial support and use (Nazarko, J.et al,2016).).Therefore it is possible unless China pour money into it so as to expand its abilities and capabilities.

In relation to the Chinese perspective, it is of great boost if good relation is established among the neighboring states that are long the key routes of the OBOR initiative and thus important to the success of the initiative. In general, the OBOR initiative will not achieve success if it is not supported by the neighbor countries and thus limiting China from expanding its military bases.

2.6 Challenge or Complement to the Global Governance

For the westerners, China is trying to change the international order by the creation of these new organization and more specifically the Asian Infrastructure Investment Bank (AIIB) that is regarded as the main financial supporter of OBOR initiative that has raised a lot of questions in the international community. The western perception further argues that the AIIB is in place to challenge the existing Bretton Woods system as well as other mains institutions such as the World Bank (WB), the International Monetary Fund (IMF) and including the Asian Development Bank (ADB).

Based on the Chinese, they argue that all the criticism against AIIB are in place to just to oppose all the strategic plans behind the support that AIIB is to offer to OBOR initiative so as to stop other nations with developed economies from joining it (Li, J. ,2014).Professor Lu Feng further argues that it is only the United State that is the major power country from the western power that is questioning the establishment of AIIB and therefore the entrance of other countries into it implies that China is not seeking to change the global system but then it should be not overlooked because it is in place to supplement multilateral development institutions and therefore it will operate under stipulated international rule and regulations. Feng argues further by saying this initiative is not programmed even near to geopolitical theories and thus cannot challenge US role in Asia .Besides that, the western countries are free to join the bank in order to reduce China’s decision making influence in it (Lau, Y.et al, 2017).

Moreover, till on the Chinese lens, basically AIIB is a complement and at the same time a competitor to the preexisting Bretton Wood System majorly the World Bank and the Asian Development Bank. On the other hand it is considered a complement due to its designation to cooperate and integrate with the already existing development banks to provide financial support to Asian nations. However, the World Bank and Asian Development Bank are majorly concerned in financing poverty eradicating programs whereas the AIIB is majorly poised at financing for infrastructural projects.Besed to some extend AIIB is also a competitor as it is encouraging reforms in the stalemating of voting shares.

2.7 Is the OBOR initiative a Chinese Version of the Marshall Plan?

The western perspective has brought in argument and seeks to prove whether the OBOR initiative is comparable to the U.S funded Marshal Plan due to the conclusion that the One Belt One Road initiative was considers a Marshal Plan during its creation.

With the Marshal Plan, U.S was successfully in forming a cooperation between United States and the West European countries after the world war two creating a foundation for the Bretton Woods system.Opposingly, China is trying to use the OBOR initiative to tilt the global image as well as expand its influence in the international order the same way United States did using the Marshal Plan besides that there are several differences between the two in terms of background, content and objectives.

Beginning with background information, it is the idea of Marshal Plan that led to the confrontation of the United State with the Communist thus limiting states from west Europe into getting power after world war two. However, with the OBOR initiative is originating with the need to promote the growth and establishment of peace and security.

With the content, Marshal Plan mainly started as a recovery program whose main ideology was to help the West European economies with financial aid .Differently, the OBOR initiative is poised at sharing production ability that is quality among the nations that will be participants in the project. Basically, OBOR is a joint project unlike Marshal Plan which was a one way thing.

Based on the goals of both initiatives, the main aim of marshal plan was to be used as a strategic tool for keeping European market under the influence of United States. It worked by strictly targeting nations that were under the Soviet Union by making their operations strict and thus the other nations too had to respect US to enjoy some of its recovery program advantages leading to division in Europe creating a bipolar system at the end. On the other hand OBOR is open and does not intend to place any economic or political condition on any nation in taking part in this intiative.Therefore with it China seeks to share its development opportunities.

In general, the Marshal Plan and the OBOR initiative differs in several ways namely; The OBOR is an open initiative that welcomes all willing states to take part, sides that it does not impose any condition to its members .Secondly, with this initiative, China is not seeking to challenge international system structure as the U.S did but then it is for multipolarization.Lastly, the OBOR initiative was designed to serve as a long term project unlike the Marshal Plan.

2.8 Internal and External Challenges of the One Belt One Road Initiative

The OBOR is very ambitious project that has a very huge impact and has an associated economic and political potential. Due to this, internal and external challenges that may lead to blind development and instability politically.

To begin with, internal challenges are subdivide into three segments that relate to project management, financial support and policy implications. The first internal challenge is associated with lack of coordination of the project. It is considered risky as the locals in China and the provincial government will start giving financial support without them coordination among themselves. This rush in giving support may end up becoming a waste at the long run. Based on the statistics, it is clear that subsidies from provincial government to support international railway projects ended in failure as it was not economically viable. The fact is that, the locals and provincial government are mostly focused at narrowing to their interests than helping the nation achieve its strategic plan.

The other challenge is dealing with private financial organizations in funding the project because they are exposed to financial distress to some extent.

The third challenge will be related to the policies passed by China herself at the domestic level on the less developed provinces in the west of China. The OBOR may focus its attention to the wealthier eastern and coastal provinces leaving the western provinces on its on thus undermining interdependence as well as global economy.

As far as external challenges associated with the OBOR initiative is the political impact that may broke up due to the initiative against the Chinese neighborhood. Besides that OBOR initiative is as per the UN charter policies, OBOR is like to promote the Chinese presence regionally and therefore affecting the economic status of the neighboring nations and thus may stir up political opposition in these respective nations.

Generally, the OBOR initiative need assessment to avoid negative impact on the Chinese economy and foreign policy before it gets implemented. For the economic field, investing huge amounts of finance in low returning project will be an economic calamity and thus can lead to protest which may interfere with the Chinese domestic affairs.

Conclusion

The OBOR initiative is a long term project that is intended to bring infrastructural development to China. Based on the explanation at chapter one, the initiative is based on openness and inclusiveness and therefore the initiative seeks to promote connectivity, trade as well as improve the bond between people.

For the Chinese government, the OBOR is mainly to promote mutual economic wise growth as well as bring reforms in the international order.

In contrast, the American perception considers the OBOR initiative to be a Chinese tool to challenge and expand China globally in the international order. To them the initiative is concerned on the China’s national interest and therefore they are making efforts to expand their influence to international arena too.

Considering the Chinese perspective with liberal assumptions is that the motivations behind the support of the initiative are; China objects to connect western provinces to the neighboring nations. Secondly, the maritime infrastructure are for commercial use and not a target for military expansion base. Lastly, with the financial support from multilateral institutions reforms will be made thus earning influence in the international order.

3.0 Chapter Three: China’s Economic Development through the OBOR Initiative

Introduction

OBOR initiative is the biggest that China government has ever engaged in making it have a place in the international investment and trade. With its Silk Road Economic Belt and the 21^st century Maritime Silk Road alongside the financial pillar such as the Asian Infrastructure Investment Bank (AIIB) that has brought in a great impact on the international order (Lau, Y.et al, 2017).

This chapter is fully interested in analyzing the presence of China in the international community as a global economic determinant with its direct investment as well as financial aid from financial institutions. Second part is briefing about the Chinese Dream and the new Normal mode in association to the OBOR intiative.Thirdly, the chapter will handle AIIB position in promoting the infrastructure development.

3.1 Chinese Economic Footprint: Trade

Based on crucial decisions in investing in the OBOR initiative, China’s trade has been heavily affected positively. In 1980,trade in China accounted only about 1%, but by now it is about 8% making it to be ahead of Germany which is the world’s leading exporter by 2009.For now China is among United States and the European Union that are enjoy bigger stakes in the trade (Li, J.,2014).

Over the last decades, the Chinese trading partners have been the same but are now likely to change due to the OBOR initiative this due to the statistics that China will target developed countries for its exports and thus declaring United States as their main trading partner with $390 billion trading value, followed by Japan $300 billion and Hong Kong $230 respectively (Kang, D.,2008).

With the increase in the numbers of Free Trade Agreement (FTAs) as well as the bilateral investment in 2010, Hina ASEAN increased from 38% to $293 billion. So as we talk now the China Market Economy is widely recognized internationally thus promoting trade further.

Another instance that promoted is the subsidizing of the trade as well as the exports and imports through the State Owned Enterprise(SEOs) .It is done where the Chinese government gives out incentives in form of loans that is accompanied with low interest rate.

The renminbi (RMB) on the other hand has played a fundamental in advancing the trading influence where it made China not to have market based floating exchange. On top of that China has added the number of firms allowed to transact trade activities internationally.

Besides China enjoying significant volumes it transacts with its trading partners, Chine is also one of the main providers of the Overseas Direct Investment .It is some years back that China was a recipient of the same funds but today it holds about $3.2 trillion in the foreign market and thus private and public Chinese companies are encouraged to invest overseas.

3.2 China’s Going out Policy: Overseas Direct Investment

It is with Jiang Zemin who suggested the idea of letting companies and organizations into being allowed to participate in foreign operations so as to make them invest in foreign nations. With OBOR initiative in place then it will boost the international economy. With the report that was written to the National Congress in 2001, Premier Zhu Rongji officially allowed the policy of countries going abroad to invest but under stipulated rules to regulate all the Chinese Enterprises who are interested in investing in foreign nations. Approvals are made by the Ministry of Commerce(MOFCOM) as well as the State Council’s National Development and Reform Commission (NDRC).

It is believed that it is the coastal provinces that are largely contributing in investing abroad but then based on the report by MOFCO shows that most of the Chinese foreign investment are carried out by state owned companies that are accounting to about $42.8 billion out of the $8.91 billion. According to the statistics China is still behind nations like the United States and other developed countries but then by 2020 it will have invested between 2 and 3 trillion overseas levelling it up with developed countries (Kang, D., 2008). The best thing with the Chines investment is that it is well distributed in all fields ranging from finance via mergers and acquisition all the way to the energy sectors. If this trend exists for long, then china will establish production industries abroad promoting labor mobility. Statistics shows that so far China has dispatched approximately 5.01 million workers abroad since its going out policy was established. With the IBOR in place reginal economic integration will be boosted through the improved supply chain thus increasing flow of ODI to foreign Asian nations. Shambagh gives a prediction that he main recipients of Chinese ODI will be the Asian nations for the next decade, then followed by United States and Europe respectively (Fallon, T.,2015).

3.4 Foreign Aid: A tool to persuade Countries

Initially China was one of the beneficiaries of financial aid itself by now despite being a developing country it has started to provide financial aid. It took it until 2011 when it official launched its White Paper in regard to foreign aid listing its aid schemes. Although some unions have come to disagree with China on the basis of transparency that is involved in the allocation of aids to be in with the overseas investment. Organization of Economic Cooperation and Development (OCCD) further claims that Chines government is giving aid to countries that do not have god governance thus going against rules in place t restrict financial aids. Despite the allegations, its financial aids have contributed a lot to global governance and because of that China is considered to be among the greatest financial aid contributors for years. It is using this as a tool to create smooth relationship with different nations along the OBOR economic routes.

In general, this approach is aimed at addressing the market saturation setback by encouraging enterprises to invest abroad thus promoting regional value through the creation of Chinese led infrastructures in foreign countries as well as introducing financial institutions such as AIIB to grant loans to such projects.

3.5 Chinese Dream

The Chinese dream is in two versions of interpretations one, it is based on the promises made to the Chinese people on the improvement of the living standards which will be realized through economic prosperity. From this generation are striving to build well off societies to achieve this dream.

The second interpretation handles Chinese dream as a principle to guide Chinese economic development and its role in the international community. The president of China Xi Jinping turned the Chinese dream into an Asia Pacific dream urging leaders to strive and fulfill this dream. But this dream has not received any support from the western powers who are the most dominants in the global economic governance. The best example is when IMF voting reform declined in the U.S Congress. Despite this negative milestones, China is still gaining support abroad.

3.6 New Normal Mode

China is now committed to its economic policy and try to act by it to improve its economic structure by its involvement in promoting tertiary industries and consumption without leaving technology innovation behind. Basically the new normal mode is poised at establishing a balanced economic growth with the management of society and domestic market.

Conclusion

For some years, Chinese economy experienced some deceleration leading to an economic transition from a fast speed to medium speed growth. China had to retaliate through different policies such as New Normal mode whose objectives is to readjust the economy to normal through infrastructural development. But after stabilizing its domestic economy, China went ahead to share its economy with the international community through the OBOR initiative which was one of the Chinese Dream idea.

4.0 Chapter Four: The OBOR impact on the Regional Order

Introduction

This Chapter tries to cover the impact the Maritime Silk Road had on the South China region to give analysis whether it improved the economic prosperity or it promoted territorial disputed and how U. S perceives this project in line with the motives behind OBOR initiative. Every assessment is based on the liberal perspective.

4.1 Establishing Regional Stability through Economic Initiatives

Despite the long lasting disputes that were affecting China especially in its natural gas and oil reserves, peace has been realized in the region. According to the liberal scholars they believe peace was realized in these regions through the economic strategies that are targeting good relations among the Asian countries. China being the leading nation with economic capabilities as well as political influence, it has become successfully persuading other Asian countries into the creation of stable environment that will help to promote economic growth.

The potential of Asian countries has been boosted with the OBOR initiative that has successfully by realizing regional stability by interdependence concept that is between trading partners.

4.2 Development of East Asian Multilateralism

The East Asian nations have not yet signed any agreement that will bid them and end their territorial disputes. The decisions to solve this matter has not been successful even in the hands of the international body United Nations s well as regional organization ASEAN.However China and ASEAN have come together to try and promote regional development as well as gain political stability in the region. With the OBOR intuitive especially the Maritime Silk Road is likely to constitute to the eradication of political instability that will end the territorial disputes that is experienced time to time in the South of Asia.

4.3 From U.S Hub and Spokes System to a New East Asian Order?

East Asian countries struggled a lot before becoming successful in creating strong multilateral organization which was intended to promote the intraregional economic togetherness. With the OBOR initiative the shape of East Asian Multilateralism has totally changed.

It is during the post-world war II that the United State took advantage of the gap that was in the East Asian countries to establish the hub and spokes system that had an established alliance between U. S with some East Asian countries directly. This approach isolated many Asia based nations’ is until 1990 when China showed interest in joining multilateral framework specifically the ASEAN with the aim of using these forums to promote its domestic and foreign policies.

Within a short time, China began to notably make progress at regional level leading to its active participation in the APEC of 1991 and in the ARF of 1994 without forgetting the Shanghai Cooperation Organization in 2001 and many others. In conjunction with OBOR initiative along with the AIIB China has manifested its aims in playing greater role in governance in the international arena.

China has even gone further to assure super power nations such as U.S that the OBOR initiative with AIIB do not seek to change the international order but to promote economic prosperity and cooperation in the regional level as well as international level.

4.4 The Maritime Silk Road: An incentive for a Mutually Bidding code of Conduct

Realists holds that the Maritime Silk Road would affect the situation in China negatively as it is perceived to be a tool to enhance China’s influence in the region and international order. But on the other hand the liberals argue that it is in place to promote economic interdependence and therefore the Maritime Silk road is likely to promote a mutually binding code of conduct between the Asian countries.

Conclusion

Basically the Maritime Silk Road possess a great risk to the OBOR initiative implementation due to the territorial dispute as well as the China’s overseas along the maritime line. It is considered by the realist that it is in place to increase China’s influence in the region and at international level.

5.0 Chapter Five: Conclusion

What is Behind OBOR Initiative and AIIB

The thesis has tried to analyze the motivations that are behind China’s aims behind the execution of the OBOR initiative as well as the involvement of AIIB as its financial supporter from two different perspectives that is realist and liberal. The following were the questions that were set up to gain the above coverage. Does the OBOR only likely to benefit China’s international interests? Does China seek regional hegemony through the OBOR initiative? Does China challenge the international order through AIIB?

In account to both political and economic impact of the above questions, the thesis concludes that the liberal perspective is more consistent in the analysis of China’s motivations behind the execution of the OBOR initiative. Both accounts suggest that:

• The infrastructural development under the Chines initiative are impacting the economic growth in Asia positively implying that the success of OBOR initiative will further the development and win cooperation between China and other countries.
• OBOR initiative does not intend to bring smaller nations under its influence but rather promote dependencies along the economic routes.
• The OBOR initiative and the AIIB does not intend to challenge the international order but rather tries to help nations grow to the international order.

Therefore, based on the liberal view the thesis concludes that there are three main reasons behind the execution of the OBOR initiative by China.

In the future China will need to practically show their GDP growth level with its neighboring countries to convince other nations that its leadership growth is being beneficial to other nations thus complementing the Bretton Woods System in the enterprising commitment in the international system of the whole world.

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7.0 Appendix A: OBOR Key Principles and Its Land-based and Maritime Routes