China’s most recent challenge is, arguably, its transformation from a manufacturing-driven and export-led economy to one sustained by services and domestic consumption under the “New Normal”, namely China’s slowing economic growth. According to the economic theory, growth in the long run depends on changes in capital, labor and technology/productivity. The “New Normal”, therefore, has been brought about by three forces. The first one is the global adjustment following the 2008 financial crisis, when the Chinese manufacturing sector had to deal with the slowdown of world demand and investment. The second is China’s demographic transition, which is comprised of two parts: the change of age structure of the whole population, and the movement of labor force from the countryside to cities. The third force is China’s narrowing technological gap with rich countries, which implies that productivity growth will be lower, too. This transformation is a natural and necessary stage for China’s economic development to a higher and more sustainable level.
Yet the serious concern for China is not its slowing economy, but the costs to the government of managing its consequences (real estate bubble, growth of the shadow banking system, local-central government fiscal imbalances) and rising debt (Lee 2015: 124-125). Increase in unemployment and further political repercussions make the matters even more urgent. In order to address these issues China’s 13th five-year plan (2016-2020) have placed an emphasis on finding new drivers of growth by promoting innovation, coordination, green and inclusive development, and opening up. The plan also offers a vision for the OBOR Initiative, a development strategy and framework for regional cooperation, which encompasses 65 countries, highlights China’s economic and strategic objectives as it faces slower growth, and seeks to promote new growth drivers. Its anticipated cumulative investment over an indefinite timescale is evaluated around US$ 900 billion to US$ 4 trillion.
Chinese President Xi Jinping presented the OBOR Initiative to jointly build the “Silk Road Economic Belt and the 21st-Century Maritime Silk Road” during his visits to Central and Southeast Asia back in 2013. However, it was Hillary Clinton, who first referred to the vision of a ‘‘New Silk Road’’ in her speech in India in 2011. The road was supposed to start from Afghanistan to better link the country with its neighbors, increase its economic potential and help with the rebuilding effort after decades of turmoil and war. According to Theresa Fallon, Chinese policymakers felt historic ownership of the Silk Road and were flummoxed to find that Hillary Clinton used the term Silk Road to describe a U.S. policy. Two years after “Clinton’s concept was repurposed, repackaged, and shifted from a north–south axis designed to improve Afghanistan’s economy, to an east–northwest axis, which gave the impression that all silk roads lead to Beijing” (2015, 141).
The OBOR Initiative is also depicted as a countermeasure to then US-led Trans Pacific Partnership (TPP) and pivot to Asia. According to Min Ye, the US administration has operated TPP as a coercive mechanism to pressure China, setting up “rules of the road” that China has to follow later. In 2012 Barack Obama remarked that “the US-led TPP negotiation “deliberately” excludes China, yet includes other economies in the region. By doing so, China will be “compelled” to follow the international rules” (2015, 208). Some of the main obstacles for China’s membership in TPP included state-owned enterprises, transparency, labor regulation, market-based competition and investor state disputes. However, unlike the TPP, OBOR is a rather informal, cooperative and loosely structured framework with a softer approach to rules and boundaries.