China's strategic objectives with OBOR RMB and their impact on its foreign policy

Liao on How OBOR Shapes China’s Foreign Policy

Rebecca Liao is VP of Business Development and Strategy at Skuchain, a Silicon Valley startup that provides blockchain technology for the supply chain. She is also a writer and China analyst. Previously, she was the Director of Business Development and head of Asia at Globality, Inc., a B2B platform for Artificial Intelligence-powered procurement of professional services.

Ms. Liao was also a member of Secretary Clinton’s foreign policy team for her 2016 presidential campaign, responsible for Asia trade and economic policy. She began her career as an international corporate attorney at Fenwick & West and Skadden Arps. Her writings have appeared in leading Western and global publications such as the New York Times, Financial Times, Foreign Affairs, The Atlantic, and The National Interest. A graduate of Stanford University, where she studied Economics, and Harvard Law School, Ms. Liao serves as Co-Chair of the Brookings Society and is a member of the Board of Directors of several arts organizations. She is also a member of the National Committee on US-China Relations. Ms. Liao spoke to Foreign Policy Concepts about OBOR and its role in shaping China’s foreign policy.
_______________________________________________________

What makes One Belt One Road (OBOR) a strategic imperative for China? Does China’s building of parallel global institutions (i.e. AIIB, NDP, SCO, CIPS) partly have to do with achieving its OBOR vision?

OBOR represents many key strategic goals for China. First, China wants to secure its trade and supply lines through continental Asia. Second, it is trying to relieve its manufacturers of excess capacity. Third, and probably most important, it wants to establish itself as a global economic leader, willing to work for the development of other countries without concerns about their political ideology. The other global institutions it has founded, such as AIIB and SCO, are in service of these goals as well.

China’s resolve to internationalize its currency, the renminbi, and develop an alternative international payment system not dependent on U.S dollar culminated in the renminbi’s inclusion in the IMF’s basket of currencies known as the Special Drawing Rights (SDR). Can renminbi’s inclusion in the SDR basket of currencies help Beijing achieve its OBOR vision?

Yes, the internationalization of the RMB gives the country meaningful credibility in the financial markets. At the same time, China is restricting capital flows out of the country, so the RMB is not as readily usable as one might think based on its inclusion in the SDR basket. Since OBOR projects tend to be especially favoured in Chinese policy circles, they should not be subject to the same scrutiny as other outbound investment projects, but the obstacles still apply.

OBOR RMB

You’ve argued before that “America’s prime responsibility and contribution is no longer the world’s chief idealist, but its most influential pragmatist, and that it should embrace its unique position to facilitate cooperation in a multipolar economic order”. Does this mean that the U.S should join the AIIB and participate in Chinese-led infrastructure projects?

Absolutely. Other than misguided pride and fear of showing strategic weakness, there is no good reason to stay out of the AIIB and other Chinese-led infrastructure projects. Now that the US already declined joining the AIIB, it probably will amount to real strategic weaknesses if it admits its fault and then joins. Having said that, OBOR initiatives are always open to additional funding.

Chinese officials have stated that Iran is a critical node in the OBOR. How does Iran play out in China’s Middle East policy vis-à-vis the Arab world and OBOR?  

China’s relationship with Iran and the wider Middle East is a tricky one to negotiate. While still navigating the intraregional dynamics, China understands enough to know that Iran is a bit isolated in the Middle East, so fostering a friendship with it might negatively impact China’s other partnerships in the area. On the other hand, China has also fostered relations with Iraq, the UAE, and Saudi Arabia to a lesser extent. The ultimate goal is to maintain its alliance with Iran through the oil trade and arms sales without alienating the regional powers in the Arab world.

How is OBOR shaping the dynamics of China—EU relations?

Unlike the U.S, the EU has been enthusiastic about participating in China’s infrastructure initiatives overseas. In the same way that EU nations such as Germany, France, Italy and the United Kingdom (part of the EU at the time) joined AIIB, they are also going to take advantage of the opportunity to co-invest in OBOR projects.

You might also like More from author

Share This