Many call it, “global commerce on China’s terms” and believe that the costs might haunt China which is forcing its banks to lend to majority of countries which possess credit rating below investment grade. Disputes have already emerged in several countries from Pakistan to Hungary relating to the costs of the initiative. Several nations also see the initiative as mainly favoring Chinese companies and complained about getting “too little” out of the deal which has even provoked fear of dominance by the most powerful economy in Asia leading to many major political backlashes in some countries. China is huge and the second most populated country in the world. Thus, it serves as a large growing market, as well as the government policies that invested in the manufacturing sector resulted China being a large growing production platform. These characteristics enable the Chinese MNEs to rapidly build scale and preserve the cost advantages even when the wages and other costs rise. These are the country-specific advantages that the Chinese MNEs rest their competitive advantages upon rather than their firm-specific advantages.The initiative would enable the firms shipping their products through Suez Canal outside China to save 20-30 days in every shipment resulting in Chinese products becoming more competitive in the European market and also helping to offset the rising production costs in China. This is also grown the concerns of several European nations towards China exporting and dumping products priced below the production costs to get rid of the overcapacity situation back home. This could result in a huge devastation of the European manufacturing sector.
The Chinese MNEs want to grasp the higher end of the global value chain as the once called “World’s Factory” has begun losing its competitive advantage such as low labor costs. Xu Jing, head of the MIIT-affiliated Smart Manufacturing Institute, says BRI will play a key role in helping Chinese companies to become more internationally competitive. It is anticipated that by 2020, about three fourths of the entire world’s population would be residing in the developing economies most of which, lie along the BRI. It seems that China’s solution to the new changes in the international economic scenarios is to maximize its strategic space and position itself as the middle state acting as a bridge between the developed and the developing economies.
If we analyze BRI with a foreign policy perspective, it seems that the immediate goal of the initiative is to spread China’s influence around Central Asia and Europe which do not lie under the radar of Moscow. Dependence of Eurasian nations on the Chinese infrastructure and resources would make them submissive to China and as we consider that the anti-China sentiment is surprisingly limited as of now due to it being the top trade partner of various nations, the only goal Beijing has to accomplish in order to cement its regional leadership claims is to assure that the other BRI countries see it as a win-win situation. The initiative would deepen the China- Eurasian investment as well as trade cooperation. It would enable the nations to get together towards a new Eurasian land bridge and multiple economic corridors.
This would further result in the trade costs plummeting which would help the Chinese MNEs to carry out their business at reduced costs with further increased effectiveness and efficiency leading to higher economic growth. Although the initiative emphasizes ‘Harmony’, ‘World Peace’ and ‘Co-operation’ multiple times, it faces a vast number of challenges which it would have to overcome to build the trust of its partner nations and turn the initiative to reality. China’s political image could be at risk as the nation has a very bad track record of operating outside its borders including clashes on work ethic and the lack of human rights in labor adjustment.
Clashes can be anticipated among the major players in host regions with the expansion of Chinese culture into Central and Southern Asia. Also there is lack of trust among the Europe and China. The former fears that with the growing influence and support provided by China to the Central Asian countries, it would be challenged on numerous fronts such as international development norms. Some European policy elites argue that the OBOR is China’s own Marshall Plan, and that China intends to leverage the initiative to transform its economic power into geopolitical influence, increase its control over the Eurasian continent, and promote the Chinese version of globalization.