China's Belt and Road initiative – a vast array of promised Chinese investments in transport, energy and communications across Eurasia and Africa – is emerging as one of the key foreign policy priorities of Xi Jinping's presidency.
This grand undertaking is being sold with a steady stream of diplomatic rhetoric. The initiative is said to be an example of 'mutually beneficial win-win cooperation' and a means of realising the common goal of 'shared prosperity.'
Chinese analysts like Da Wei from the China Institutes of Contemporary International Relations regularly highlight the limitations of this stiff style of communication favoured by Beijing. Yet the sheer scale of the hundreds of billions of dollars of slated Chinese investments has meant a warm international welcome for the Belt and Road initiative.
In Australia, the private sector and government are also talking up Belt and Road prospects. The law firm Corrs Chambers Westgarth has claimed that Australia can offset the decline in the commodities cycle by redeploying its construction expertise to the Belt and Road, while DFAT's Business Envoy has predicted that improved infrastructure and greater connectivity could boost demand for Australian exports.
So far, however, the ledger suggests that Australia's returns from the Belt and Road initiative will be modest.
First, it's unclear whether Australia's status as a 'major country at the end of the Maritime Silk Road' is anything more than symbolic.
Yes, as the Chinese ambassador to Australia, Ma Zhaoxu, pointed out in August, there is room to expand Sino-Australian trade in energy, resources, agriculture, services, infrastructure and finance. But with these opportunities already part of the pre-existing plan for deepening Sino-Australian economic relations via the China-Australia Free Trade Agreement (ChAFTA), it's doubtful that rebranding them as part of the Belt and Road initiative is a real win for Australia.
Second, Beijing's use of the Belt and Road initiative to serve domestic Chinese business interests means Australian companies will struggle to reap large rewards. Investments like the US$46 billion devoted to the China-Pakistan Economic Corridor or railway lines in Kenya and Thailand are designed to land lucrative contracts in the hands of Chinese companies.
New infrastructure projects in Pakistan will mean multi-billion dollar injections to the revenue streams of Chinese energy companies like China Three Gorges South Asia Investment and Powerchina Resources, while rail construction in Africa and Asia will mean more work for state-owned enterprises (SOEs) like China Road and Bridge Corporation and China Railway Construction Corporation.
With so much state money funding the overseas operations of Chinese companies, numerous voices in China, such as the liberal economist Liu Shengjun, have raised concerns about the potential for waste and mismanagement. However, it is unlikely these concerns will prompt the Xi administration to significantly revise its Belt and Road strategy. As China moves (haltingly) to undertake difficult SOE reforms and the country's economic growth rate moderates, Xi will come under increasing pressure to compensate vested interests in the SOE sector and boost the prospects of the Chinese private sector through lucrative Belt and Road opportunities.
Meanwhile, influential international relations scholar Wang Jisi's original 2012 call to 'look westwards' and direct China's economic statecraft towards Belt and Road countries is all the more persuasive in the wake of Washington's recent win with the Trans-Pacific Partnership trade pact and toughening US rhetoric surrounding the East and South China seas disputes.
In addition to building infrastructure in Eurasia and Africa, massive slabs of Belt and Road cash look set to be used to finance moves by Chinese companies to acquire foreign assets. Earlier this year, it was revealed that China's US$40 billion Silk Road Fund was financially backing SOE ChemChina's multi-billion dollar bid to take control of Pirelli, the iconic Italian tire manufacturer. Far from providing business opportunities for Australian companies, such use of the Silk Road Fund will not even help bridge the infrastructure shortfalls in Eurasia and Africa, which the Chinese Government has so often cited as a prime rationale for the Belt and Road initiative.
Of course, with the Belt and Road likely to remain a core feature of China's foreign policy for at least the next seven or so years of Xi's presidency, its ultimate form and impact remain to be seen. Nevertheless, the evidence to date suggests that the Belt and Road's benefits to Australian businesses are likely to fall far short of the boon that some analysts anticipate.