1. One Belt One Road:
Insights for Finland
Team Finland Future Watch Report
January 2016
Prepared for Tekes
by Enright, Scott & Associates

3. 3
Future Watch Report
The One Belt is planned to connect China to Europe, the Mid-
dle East, Central Asia, and South Asia and will involve existing
and new rail lines, highways, and pipelines. The “One Road”
refers to the“21st Century Maritime Silk Road”(also called the
“Maritime Silk Road”). The One Road is planned to connect
China with Southeast Asia, South Asia, Africa, the Middle East,
and Europe (see Exhibit 3). The main routes of the One Belt
One Road (OBOR) initiative are designed to link up with other
corridors already planned or under construction (see Exhibits
4 and 5).
The Silk Road Economic Belt (One Belt) concept
was introduced by China’s President Xi Jinping in an ad-
dress at Nazarbayev University in Astana, Kazakhstan in
September 2013. President Xi introduced the concept
of the 21st Century Maritime Silk Road (One Road) in
an address in Indonesia in which he also proposed the
establishment of the Asian Infrastructure Investment
Bank (AIIB) to fund some of the infrastructure required.
The two concepts were adopted at the Third Plenum
of the 18th Chinese Communist Party Congress in No-
vember 2013 and in the Government Work Report of
the Chinese Government adopted in March 2014. Plans
for OBOR were further developed in 2014 and 2015 and
international cooperation was sought for several initia-
tives. Several implementing and cooperation arrange-
ments are already being put into place (see Exhibit 6).
In addition, several Chinese state agencies (such as the
General Customs Administration; the Administration
of Quality Supervision, Inspection and Quarantine; the
Ministry of Commerce; and the Ministry of Transport)
have already released implementation plans, as have
several Chinese provinces.
A related initiative that has not received nearly the
attention as the“One Belt”and“One Road”is the“Digital
Silk Road”(DSR) proposed by China in 2015. Introduced
by China’s Cyberspace Administration’s director Lu Wei,
the DSR seeks cooperation in 5G, cloud computing,
the Internet of Things, big data, e-commerce, digital
investment, smart cities, and smart energy. The DSR
was the subject of a high-level meeting in Brussels in
July 2015 at which Chinese and European officials and
representatives of leading digital hardware, software,
and platform companies from both Europe and China
held discussions about cooperation in cyberspace1.
Research is currently underway mapping out the digi-
tal capabilities, companies, and regulations in several of
the OBOR countries in support of the DSR.
What are the goals of the OBOR initiative?
According to Chinese sources, the major goals of the OBOR
initiative are to achieve policy co-ordination across OBOR
nations, to build the infrastructure to enhance connectivity
among OBOR nations, increase trade and investment flows,
promote financial integration, and foster better relations
among the peoples of th e OBOR nations2. Policy co-ordi-
nation will be required in order to develop and then oper-
ate the infrastructure planned as part of the OBOR initiative.
China plans to try to negotiate free trade agreements with
many if not all of the OBOR countries, as well as agreements
to streamline customs, inspection, and approvals. By the end
of 2014, 77 out of China’s 118 bilateral or trilateral free trade
agreements were with nations covered by the OBOR initia-
tive3. Enhancing connectivity will focus initially on removing
bottlenecks and providing missing links in existing transpor-
tation routes, building port facilities, and improving inter-
modal operation. Eventually the goal is to have high quali-
ty rail, highway, air, telecommunications, oil and natural gas
pipeline, and port networks throughout the OBOR regions,
with a goal of fostering much closer economic integration
across Asia and between Asia and Europe.
In order to facilitate unimpeded trade and invest-
ment, steps will be taken to reduce trade and invest-
ment barriers, lower trade and investment costs, and
promote regional economic integration. Financial inte-
gration will be promoted by trying to improve coordi-
1 Liu Jia and Gao Shuang,“China, EU to promote digital Silk Road, China Daily, July 7,
2015.
2 National Development and Reform Commission, Ministry of Foreign Affairs, and
Ministry of Commerce of the People’s Republic of China,Vision and Actions on Jointly
Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road, March
28, 2015.
3 “China Economic andTrade Cooperation Zones Overseas Have Reached 118‘Underway’
in Addition to 77 Others”[in Chinese], People, December 31, 2014.
The One Belt One Road Initiative: What is it?
“One Belt One Road”is a Chinese initiative to connect more than 60 countries (64 at present) with physical,
commercial, cultural, and other links (see Exhibit 1 for a list of the countries and Exhibit 2 for a map of the
countries). These countries have a combined population on the order of 4.4 billion. The“One Belt”refers to
the“Silk Road Economic Belt,”a recreation of the old land-based Silk Road trade routes from China through
Central Asia and on to the Middle East and Europe. This is also called the“Modern Silk Road.”

4. 4
nation in monetary policy, expand the use of local cur-
rencies (i.e. not the US dollar) for trade and investment
among OBOR nations, deepen financial cooperation,
create regional financial institutions focused on devel-
opment, strengthen cooperation on risk monitoring
and management, and develop regional mechanisms
to manage financial risks. People-to-people bonds
are to be enhanced through cultural exchanges and
dialogues, fostering more interactions among people
in the OBOR nations, and heightening mutual under-
standing.
One specific goal of the OBOR initiative is to fos-
ter greater economic cooperation and integration
between China and Europe. In a 2014 visit to Europe,
President Xi Jinping indicated that one goal of OBOR
was to cooperate to integrate European and Asian mar-
kets and to make China and the EU the twin engines
for global economic growth. In this regard, the OBOR
initiative could be viewed as a much larger counter-
part and potential partner for the EU’s own investment
program, which hopes to mobilize public and private
investment of at least €315 billion from 2015-2017. We
will have more to say about China-Europe interaction
below.
While we do not dispute the stated objectives of
the OBOR initiative, there are many other unstated (or
even denied) objectives we view as equally or even
more important to China. These include enhancing
China’s energy security, expanding markets for Chinese
industries (including those with domestic overcapac-
ity), increasing the competitiveness of Chinese compa-
nies, enhancing China’s hard and soft power, extending
China’s economic and geopolitical influence, shifting
the balance of power within Asia, enhancing China’s
status as a great power, recycling some of China’s in-
ternational reserves, and enhancing the development
of China’s peripheral regions. As we will explain below,
we see the OBOR initiative as an attempt to re-assert
the notion of the Middle Kingdom in which all roads
(railways, shipping lines, and air traffic as well) lead to
Beijing.
How is the OBOR initiative being
organized?
Major OBOR pronouncements have been made directly by
China’s President and Communist Party Chairman Xi Jinping.
This indicates the OBOR initiative is one of the highest priori-
ties of the Chinese leadership.The initiative is being managed
by a small working group under Vice-Premier Zhang Gaoli,
who holds the day-to-day economic portfolio in the Chinese
Government and is also one of the seven members of the
Standing Committee of the Politburo of the Chinese Commu-
nist Party. The national OBOR plans that do exist have been
developed and issued jointly by the National Development
and Reform Commission, the Ministry of Foreign Affairs, and
the Ministry of Commerce, with the authorization of the State
Council, the highest echelon of the Chinese Government4.
Other agencies and ministries will participate as appropriate.
The Digital Silk Road initiative, for example, is spearheaded by
the Cyberspace Administration of China.
Geographically, there are several focal points within
China. Xinjiang has been designated as the “Core Area”
for the “One Belt” due to its geographic location in the
extreme west of China, and Fujian has been designated
the “Core Area” for the “One Road” due to its historical
position as the home of the ports for the original Mari-
time Silk Road. Xinjiang, Qinghai, Gansu, Ningxia, and
Shaanxi are supposed to focus on connections and
links with Central Asia along the One Belt. Sichuan,
Chongqing, and Yunnan are supposed to focus on links
with Central, South, and Southeast Asia along the One
Belt. Fujian, Jiangsu, Zhejiang, Guangdong, and Hainan
are supposed to focus on links with Southeast Asia,
South Asia, the Middle East, and Africa through the One
Road (see Exhibit 7).
What is the background of the OBOR
initiative?
OBOR represents the extension, enhancement, combination,
and in some ways culmination of several important Chinese
initiatives. It has national security, geostrategic, international
relations, economic, and business facets. Thus the OBOR ini-
tiative should be viewed as having an extensive set of back-
ground features that need to be understood in order to un-
derstand the OBOR initiative.
The first is the need for infrastructure in Asia. PWC
estimates that the OBOR countries need USD 5 trillion
in infrastructure from 2016 to 2020. The Asian Devel-
opment Bank estimated that Asia would need USD 8
trillion in infrastructure investment from 2010 to 2020,
and nowhere near that amount has been invested. One
of the reasons for this underinvestment is that most of
the countries covered under the OBOR initiative are
developing countries with modest resources. Several of
the countries also have weak systems and institutions.
China sees this lack of investment as holding back the
development of the region, and in some senses hold-
ing back China’s own development. It also sees infra-
structure as an area in which it can make substantial
contributions given its own experience with rapid
infrastructure development in recent years.
4 For example, National Development and Reform Commission, Ministry of Foreign
Affairs, and Ministry of Commerce of the People’s Republic of China,Vision and Actions
on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk
Road, March 28, 2015.

5. 5
Future Watch Report
A second is that China is seeking to take on a more prominent
role globally. China does not believe that it has been accord-
ed the respect and position in international forums that it de-
serves. It also sees initiatives like the US-backed Trans-Pacific
Partnership (TPP) that explicitly exclude it. OBOR is a way to
deftly counter TPP, and from China’s standpoint make TPP ob-
solete, without confronting it directly. OBOR is one manifes-
tation of a China much more engaged and assertive in inter-
national affairs. China has built up substantial economic and
political relationships around the world. Most relevant to the
OBOR initiative are the relationships with Southeast Asia, Cen-
tral Asia, South Asia, Africa, and Central and Eastern Europe.
Chinese officials have promoted the OBOR initiative in sev-
eral international forums involving these regions, including
the Asia–Europe Meeting (ASEM), the Shanghai Cooperation
Organization (SCO), ASEAN+1, the China–Arab States Coop-
eration Forum (22 members of the Arab League plus China),
the Forum on China–African Cooperation (50 African coun-
tries plus China), and China–CEE 16+1 (the sixteen Central
and Eastern European Countries plus China).
Southeast Asia is an important region for the OBOR
initiative for several reasons. Southeast Asia is close to
China and its countries are already well-linked to China
by trade, financial, and business ties. Southeast Asia is
a key part of the “One Road” portion of OBOR. There
are excellent ports in Singapore and Malaysia, but else-
where in the region port infrastructure is lacking and
the countries do not necessarily have the resources to
improve the situation. Historically, the Asian Develop-
ment Bank has been active trying to build economic
corridors in the Greater Mekong Sub region with limited
success. Southeast Asia is also a key target for Chinese
investments to improve land links. Southeast Asia is
also the home of a number of countries friendly to the
United States and several members of the Trans-Pacific
Partnership. Southeast Asia is a region in which China
on the one hand, and Japan and the US on the other,
are contending for influence. Southeast Asia is also the
home of countries, such as Vietnam and the Philip-
pines, with which China has territorial disputes. ASEAN
has signed a number of cooperative agreements with
China. The ASEAN-China Free Trade Agreement, for ex-
ample, came into force in 2010.
Central Asia is also crucial to the OBOR initiative.
The Shanghai Cooperation Organization (SCO), which
includes China, Kazakhstan, Kyrgyzstan, Russia, Tajik-
istan, and Uzbekistan was founded in 2001 to promote
cooperation and to limit Western influence in the re-
gion. It was a formalization of the pre-existing (since
1996) “Shanghai Five” (which did not include Uzbeki-
stan). The Shanghai Five initially focused on reducing
tensions and military forces along their mutual borders.
Subsequently, the SCO has focused on security, mili-
tary, economic, cultural, and financial affairs, and has
sponsored transportation, energy, and communica-
tions infrastructure projects. Afghanistan, Belarus, India,
Iran, Mongolia, and Pakistan have observer status at
the SCO. For these countries, OBOR is a way for China
to cement political and economic relationships. It is
interesting that the “Silk Road Economic Belt” was first
announced during President Xi’s tours of four Central
Asian countries in 2013.
In South Asia, China has had a close relationship
with Pakistan for decades, initially due to their rivalries
with India, and subsequently evolving into diplomatic,
nuclear, and economic relations. Chinese investments
in the port of Gwadar, along with related pipeline and
land transport investments, are designed to provide a
mostly land route for Middle East oil to China. Myanmar
was actually the first nation to recognize the People’s
Republic of China in 1949. Support from China helped
Myanmar survive international sanctions in the 1980s
and 1990s and helped the State Law and Order Restora-
tion Council (SLORC) solidify its control of the country in
that period. More recently, China has invested substan-
tial amounts in ports, oil and gas pipelines, dams, and
other infrastructure in the country. From 1988 to 2013,
China accounted for 42% of the foreign investment into
Myanmar. While China’s relations with India have long
been strained, largely due to unresolved border issues
and the memory of war in the 1960s, more recently
there are signs that the two countries have been seek-
ing a rapprochement. Visits by Prime Minister Modi to
China and President Xi to India were supposed to set
China-India relations on a new path but new border in-
cidents and mutual suspicion may make that different.
China has long cultivated economic and political
ties with Africa. China is Africa’s largest trading partner
and external investor. More than one million Chinese
citizens are said to live in Sub-Saharan Africa. Much of
China’s attention on Africa is focused on resource-rich
countries. China interacts with African nations on a
bilateral basis and also through the Forum on China-Af-
rica Cooperation (FOCAC), which was founded in 2000.
More than half of China’s investment in Africa has been
in oil resources, and 90% of this by state-owned com-
panies. In a given year, China sources between 20% and
25% of its oil imports from African nations, notably An-
gola, Equatorial Guinea, Nigeria, the Republic of Congo,
and Sudan. China has funded resource development
and infrastructure projects in Africa largely through the
China Development Bank and the China Export-Import
Bank. Generally the loans are tied to the use of Chinese
contractors (who tend to import Chinese workers) and
equipment suppliers and in many cases are to be paid
back with long-term supplies of resources. Chinese

6. 6
interests have also set up economic development
cooperation zones in Nigeria, Ethiopia, and Zambia.
While these investments have added considerably to
growth potential in the African nations, there has been
some pushback due to labor practices, environmental
issues, legal problems, and the use of Chinese workers
and inputs. In any case, OBOR activities are likely to add
substantially to China’s already substantial interests in
Africa.
China’s relations with the Middle East have also
been growing. In 2013, China passed the European Un-
ion to become the Middle East’s largest trading partner.
China’s main interest in the Middle East also involves
energy. China sources nearly half of its oil imports from
the Middle East. China has made substantial invest-
ments in the region, for example, China is the largest
foreign investor in Iraq. Qatar, in turn, has invested in
natural gas facilities in China. China’s reliance on Middle
Eastern oil, and requests from some Middle Eastern na-
tions for China to become more involved in the region
as a potential counterweight to the US, have drawn it
more and more into Middle Eastern affairs. Even so, the
Middle East is a region in which it has far less influence
than the United States.The uprisings of the Arab Spring
proved particularly unsettling to China’s leaders, as
has the emerging tensions between Saudi Arabia and
Iran. In addition to sourcing oil from the Middle East,
Chinese companies are also active in ports and related
land-based infrastructure in the Middle East, including
rail and port development in Israel, and participation
in the port at Suez. China has also made a number of
overtures to countries in the region for cooperation on
infrastructure and trade5.
Central and Eastern Europe represent the point of
entry for land routes from China to Europe. In recent
years, China has been working in what is called the
CEE16+1 arrangement which was first launched in
2011, had its first heads of state meeting in 2012, and
has proceeded with annual leader meetings and nu-
merous working level meetings ever since. Much of the
focus has been on infrastructure development, with
Chinese-funded initiatives to improve infrastructure in
the CEE region, including the construction of a China-
funded railroad between Belgrade and Budapest.
Chinese officials have described the CEE countries as a
bridge connecting Asia to Europe, the Mediterranean,
and the Baltic.
Another important piece of background concerns
China’s resource security. OBOR also builds off of ear-
lier initiatives to ensure China’s energy and resource
supplies. China is short of natural resources, with the
5 Jon B. Alterman,“China in the Middle East,”CSIS, June 6, 2013.
exception of coal and rare earths. China’s experience
in resource negotiations have its leadership convinced
that China cannot trust markets to provide the quantity
of resources that China needs at what it considers a rea-
sonable price. Central Asia, the Middle East, Africa, and
Southeast Asia are important sources and / or transit
points for resources bound for China. This is one reason
that much of China’s external investment has been in
the resource sector.
China is now the world’s largest importer of oil6.
Chinese entities reportedly spent over USD 70 billion
from 2001 to 2013 to buy oil and gas assets around the
world, and indication that China’s leaders do not trust
markets to provide China with the energy resources
it needs at prices it thinks appropriate. China’s reli-
ance on foreign oil, particularly from the Middle East,
its geographic position, and the relative weakness of
China’s navy compared to that of the US leave China
extremely vulnerable to the interdiction of oil tankers
going through the Straits of Malacca7. China imports
approximately 60% of its oil, most of which comes
from the Middle East. China has taken several steps
over the years to try to obtain energy resources and
create routes for energy transport that do not have to
go through the Straits of Malacca.These include energy
deals with Russia, the construction of a pipeline from
Kazakhstan, port and pipeline construction in Pakistan
and Myanmar, and efforts to build up a blue water navy.
All of these started before, but neatly fall into, the OBOR
initiative.
One good example is China’s investments in Gwa-
dar, Pakistan, a port city just outside of the Straits of Hor-
muz (through which on the order of 20% of the world’s
oil flows). A port, airport, pipeline, railway, and highway
are all part of plans for China to invest USD 46 billion to
develop infrastructure, energy, and transportation pro-
jects according to the China-Pakistan Economic Corri-
dor scheme agreement signed in April 2015. Shipping
oil through Gwadar is expected to reduce the transit
time by 85% compared to shipping through the Straits
of Malacca8. In November 2015, state-owned Chinese
Overseas Ports started a 43-year lease to operate the
free-trade zone at the port of Gwadar in Pakistan.
China is also seeking to extend its position in trade
and to secure its trade routes. China is already the
world’s leading trading nation, and is home of seven
of the world’s ten busiest container ports. The creation
of new trade routes would reduce the risk of disrup-
tions to China’s foreign trade and increase options for
6 Tom Morgan,“China Now theWorld’s Largest Oil Importer; Effect on Global Market,”
Forbes, June 8, 2015.
7 Keith Johnson,“ChinaTops U.S. as Biggest Oil Importer,”Foreign Policy, May 11, 2015.
8 Keith Johnson,“ChinaTops U.S. as Biggest Oil Importer,”Foreign Policy, May 11, 2015.

7. 7
Future Watch Report
China’s trade, potentially increasing China’s influence
and reducing that of others that sit astride individual
trade routes. China also shows signs of wanting to in-
crease its influence over shipping and port operations
throughout the OBOR regions. A 2014 State Council
report called for an increase in the competitiveness
of China’s shipping industry and an extension of its
control of ports. China rejected the planned shipping
alliance between Maersk (Denmark), MSC (Switzer-
land), and CMA (France)9, while promoting a merger
between COSCO and China Shipping Group10, moves
widely seen as attempts to limit the competitiveness
of the foreign players while propping up the position
of Chinese-owned shipping. So too was the blocking
of Vale’s largest ships for transporting iron ore from
Chinese ports, even though most were built in China,
until several of the ships were transferred to Chinese
state-owned enterprise control11.
Chinese interests have invested in ports in Greece,
the Netherlands, Sri Lanka, Myanmar, Pakistan, Singa-
pore, Israel, Australia, Tanzania, Kenya, Togo, and Dji-
bouti. COSCO has been operating a container terminal
at the port in Piraeus, Greece since 2009. From 2008 (the
year before COSCO’s involvement) to 2014, throughput
increased nine fold to 3.7 million TEUs. In 2013, COSCO
agreed to invest €230 million to raise capacity to 6.2
million TEUs. By the end of 2015, COSCO had emerged
as the only bidder for the 67.7% of the equity of the port
that Greece planned to privatize. COSCO’s operations
had changed shipping in Europe. Taking advantage of
its position as the closest major European port to the
Suez Canal and links to Chinese shipping companies,
Piraeus has attracted China-EU traffic as well as distri-
bution centers for companies like HP, Huawei, ZTE, and
Sony. Chinese interests are also involved in investments
in railways from Piraeus to Central Europe and the Bal-
kans. This mirrors investments in Africa, where Chinese
interests have built land infrastructure to connect the
ports to their hinterlands.
The OBOR initiative will add to existing land
routes connecting China to its neighbors. A train has
been running between Chongqing and Duisburg,
Germany since 2011. This train crosses Western China,
Kazakhstan, Russia, Belarus, and Poland before reach-
ing Germany. Subsequent connections have included
Wuhan to Pardubice (Czech Republic, 2012), Chengdu
to Lodz (2013), Zhengzhou to Hamburg (2013), Suzhou
to Warsaw (2013), Yiwu to Madrid (2014), and Wuhan
9 Richard Milne,“China Blocks ProposedThree-way Shipping Alliance,”FinancialTimes,
June 17, 2014.
10 Costas Paris,“Cosco, China Shipping Group in Advanced MergerTalks,”theWall Street
Journal, October 15, 2015.
11 Cecilia Jasmine,“Valemax Finally Allowed at Chinese Port,”Mining.com, October 10,
2014.
to Hamburg (2015). These routes can be extended
through the existing rail system in Europe, and they can
cut two to three weeks off of the time it would take by
sea. One OBOR project is expected to be a train that
offers an alternate route from China to Western Europe
that bypasses Russia, instead going from China through
Kazakhstan, Uzbekistan, Turkmenistan, Iran, Turkey, Bul-
garia, Romania, Hungary, Austria, Germany, Belgium,
and France before reaching the UK. This would be a
USD 150 billion project, to be finished between 2020
and 2025. Other projects could potentially expand
China’s high-speed rail network to most of Asia.
The OBOR initiative also builds off the decade old
“Go Global” initiative that was first announced in 1999
that has sought to help internationalize Chinese enter-
prises.“Going Global”is supposed to help Chinese com-
panies become more competitive at home and abroad
and to project China’s soft power and build economic
and diplomatic relationships around the world. China’s
outbound foreign direct investment went from USD 12
billion in 2005 to USD 108 billion in 2013 and to more
than USD 120 billion in 2014, making China one of the
world’s leading foreign investors. China views the inter-
nationalization and international competitiveness of
Chinese firms as a matter of high priority. In addition to
state support for the internationalization process, many
analysts believe that China has been using market re-
strictions, its legal system, and its control of the press
to hinder foreign companies and to favor Chinese com-
panies. It is clear that the OBOR initiative will be used to
further the“Go Global”process.
The OBOR initiative also builds off China’s“Go West”
strategy launched in 2001. Since then, China has been
using infrastructure investment, foreign investment
promotion programs, and preferential policies to sup-
port development of its western and southwestern
provinces. While the “Go West” strategy has had some
success, the economic disparities between the coastal
and western provinces remain large. It is the western
and southwestern provinces that are precisely the ar-
eas that are likely to benefit the most from the One Belt
portion of the OBOR initiative.
What institutions are related to OBOR?
The highest profile institutions related to OBOR are the new
financial institutions that have been set up to further OBOR
and OBOR-related objectives, most notably the Asian Infra-
structure Investment Bank (AIIB), the New Development Bank
(formerly“BRICS”Development Bank), and the Silk Road Fund.

8. 8
The Asian Infrastructure Investment Bank (AIIB) was proposed
by China to help fund the infrastructure investment that Asia
needs in October 2014. The creation of the AIIB was seen as
an effort to fill a gap not filled by existing multilateral agen-
cies and also to compensate for China’s lack of voice in ex-
isting multilateral institutions such as the World Bank, IMF,
and Asian Development Bank. The AIIB was launched with 57
members, actually more than China expected (see Exhibit 8).
The initial capitalization of the AIIB was set at USD 100 bil-
lion with USD 50 billion coming from China. Voting rights are
to be proportional with capital contributions. China claims
that the AIIB will be run on a commercial basis and that it
will not be used as an instrument of Chinese policy. The AIIB
formally opened its doors in January 2016. The AIIB will have
extensive needs for project management / contract manage-
ment / project monitoring systems for projects that are dis-
persed around Asia. These will require a combination of lo-
cal and global communications flows, information needs, and
systems that cut across borders and can be integrated. China
cannot afford for the AIIB to be less than world-class and less
than multilateral. Thus the AIIB will need world-class systems
involving international cooperation. Having leading Europe-
an countries onboard is particularly important for the global
credibility of the AIIB.
The New Development Bank (formerly the “BRICS”
Development Bank) was founded by Brazil, Russia, In-
dia, China, and South Africa, countries that account for
more than 40% of global population and 25% of global
GDP, in July 2014. The headquarters is in Shanghai, the
president from India, the chairman of the board of di-
rectors from Brazil, and the chairman of the board of
governors from Russia. Non-BRICS countries can join,
but the BRICS countries will retain at least 55% of the
shares. Authorized lending is to be USD 34 billion start-
ing in 2016 and the contingent reserve arrangement is
for USD 100 billion, USD 41 billion of which will come
from China.
The Silk Road Fund was set up by China Invest-
ment Corporation, the Export-Import Bank of China,
and the China Development Bank in November 2014
with an initial capitalization of USD 40 billion. The Silk
Road Fund is a medium to long-term investor focused
on railways, roads, and pipelines, as well as resource
development and industrial development.
In addition, to these institutions, China has set up
the China–ASEAN Investment Cooperation Fund (for
South-East Asia), the China–CEE Investment Coop-
eration Fund (for Central and Eastern Europe). There are
also plans for a Shanghai Cooperation Organization De-
velopment Bank to focus on China, Russia, Kazakhstan,
Kyrgyzstan, Tajikistan, and Uzbekistan.
It will be very interesting to see how the new financial institu-
tions will work. The AIIB, with 57 initial members, is the most
international and multilateral.The New Development Bank, as
indicated, will have 55% of the shares reserved for the BRICS
countries. The Silk Road Fund is to be purely administered by
Chinese banks. We also have to remember that the China De-
velopment Bank, which has made loans in some 140 coun-
tries, is by far the world’s largest development bank lender,
with an international loan portfolio nearly twice that of the
World Bank, three times that of the Asian Development Bank,
and about as much as the initial target capitalization of the
AIIB, the New Development Bank, and the Silk Road Fund
combined.
While the AIIB, the New Development Bank, and
the Silk Road Fund will finance some One Belt One
Road infrastructure projects, they will never be able
to fund all the potential demand. Thus there will be a
need for co-financing from the private sector for the
OBOR initiative to succeed.
What are some of the early indications?
Some of the most striking early indications of the robust-
ness of the OBOR initiative have involved the international re-
sponse to the initiative. While the US and Japan have been
skeptical, most other responses have been positive, even
though there are fears in some countries in Southeast Asia,
South Asia, Central Asia, and Africa that China may use the
initiative in an attempt to obtain and exercise undue influ-
ence over other nations. One manifestation of the response is
the fact that 57 countries have signed up to be members of
the AIIB. Another is the vast amount of attention the initiative
is receiving around the world. A Google search on “One Belt
One Road”in January 2016 generated 352,000“hits.”
In terms of actual investments, Chinese state-
owned enterprises reportedly invested USD 12 billion
in OBOR-related projects in the first nine months of
2015, including projects in Singapore, Indonesia, Russia,
Thailand, and Laos12. By October 2015, analysts were
estimating that Chinese investments in the OBOR initia-
tive would reach USD 200 billion by 201813.
There have been several individual announce-
ments of projects related to the OBOR initiative. At the
China–ASEAN summit, in 2014, Premier Li Keqiang an-
nounced that China would provide loans worth USD
20 billion to ASEAN countries for infrastructure devel-
opment. In May 2015, agreements for projects cost-
ing USD 25 billion were made between China, Russia,
12 “China’s SOEs flock to“One Belt, One Road”projects,”Asia Asset Management, October
15, 2015 andWataru Kodaka,“One Belt, One Road: Chinese businesses investing
heavily in Southeast Asia,”Nikkei Asian Review, January 2, 2016.
13 Summer Zhen.“China’s‘One Belt One Road’investment to reach US$200 billion in
three years,”South China Morning Post, October 28, 2015.

9. 9
Future Watch Report
Kazakhstan, and Belarus for rail, energy infrastructure,
industrial parks, and financial service projects. In the
same month, China signed investment agreements
totaling USD 22 billion with India (essentially Chinese
investments into India), though much of this was not
explicitly OBOR-related. In April 2015, China signed
agreements worth USD 46 billion to develop energy,
infrastructure, and transportation projects along the
China-Pakistan Corridor. In January 2015, China signed
a series of MOUs to contribute to the development of
roads, railways, and airports to improve connectivity
within African and between Africa and the rest of the
world. In 2014, Premier Li signed announced USD 10
billion in additional loans to Africa and an increase of
USD 2 billion in the China-Africa Development Fund.
Overall estimates are that China will provide on the
order of USD 1 trillion in financing to African nations
by 2025, most of it targeted on infrastructure14. In June
2014, President Xi announced the “1+2+3” China-Arab
Cooperation program focused on technology trans-
fers and cooperation in space, aviation, and nuclear
energy15. Several Middle Eastern countries, notably
Egypt, Iran, and Saudi Arabia, have signed up to the
AIIB, promising further interaction in infrastructure. The
China Development Bank reportedly had lent out USD
126 billion on 400 projects in OBOR regions by the end
of 2014 and had plans to fund 900 projects with USD
800 billion in investment16.
There have also been announcements of sub-
stantial OBOR-related investments within China itself.
Chongqing, which has greatly benefited from existing
east-west links17, for example, is reportedly planning to
spend on the order of RMB 1.2 trillion (USD 170 billion)
in infrastructure projects related to OBOR in the 2014
to 2020 period, including high-speed rail lines, airports,
and industrial parks18.
With respect to the Digital Silk Road, several initia-
tives are under discussion between Chinese and Euro-
pean counterparts. Deutsche Telecom and Nokia are
just two of the European companies involved. In No-
vember 2015, Inmarsat reached an agreement with the
China Transport, Telecommunications, and Information
Center (CTTIC) to provide satellite communications for
One Belt One Road.
14 Larry Hanauer and Lyle J. Morris, Chinese Engagement in Africa: Drivers, Reactions,
and Implications for U.S. Policy,The Rand Corporation, 2014 and Christopher Alessi,
and Beina Xu, China in Africa, Council for Foreign Relations, April 27, 2015.
15 Chaoling Feng, Embracing Interdependence:The Dynamics of China and the Middle
East,The Brookings Institution, 2015.
16 Eric Ng,“‘One Belt’infrastructure investments seen as helping to use up some industrial
over-capacity,”South China Morning Post, November 2, 2015.
17 Chongqing went from nowhere in the computer industry in 2008 to assembling on
the order of a third of the world’s personal computers in 2015. Much of this output is
shipped by rail to Europe.
18 The Hong KongTrade Development Council,“One Belt One Road:Yuxinou Railway
Development,”August 11, 2015.
What are some of the wider implications of
the OBOR initiative?
The OBOR initiative provides an overarching vision that com-
bines several of China’s key initiatives in a way that it believes
is not threatening to other nations. As such, we expect that
OBOR will become an even wider initiative over time, as well
as a framework that will heavily influence Chinese policy, for-
eign relations, economic strategy, and investments over the
next two decades.
The OBOR initiative will undoubtedly bring the
various parts of Asia closer together through physical,
psychological, economic, cultural, and political link-
ages. It will improve infrastructure in places that need
it and promote economic development along the way.
It will also connect East Asia more closely with Europe.
In fact, some of the major economic flows are likely to
be between China and Western Europe simply because
those are the biggest markets along the “Belt” and the
“Road.”
The OBOR initiative will also substantially expand
China’s influence in Southeast Asia, Central Asia, South
Asia, Africa, and Europe. The main land links between
Southwest China and Southeast Asia will create north-
south connections in a region where the Asian Devel-
opment Bank and others have been trying to build
east-west connections with limited success for more
than two decades. The key reason for the lack of suc-
cess of these prior efforts has been that the attempt has
been to build corridors from nowhere to nowhere (at
least in economic terms). The north-south connections
that start in Kunming and will go through Vietnam,
Laos, and Myanmar, respectively and eventually meet
up near Bangkok before heading down the Malay Pen-
insula to Singapore. These connections will connect
China to the larger Southeast Asian centers of Bangkok,
Kuala Lumpur, and Singapore. China will be the crucial
source and destination for goods going through these
three corridors, which will greatly extend China’s influ-
ence in the region. Is it not that farfetched to project
that Kunming will eventually become the economic
capital of Southeast Asia.
The economies of Central Asia are so small com-
pared to China’s economy that the result of the OBOR
initiative is likely to be China dominating Central Asia
economically. China will become an even more domi-
nant customer for the resources and agricultural out-
put of Central Asia and a more dominant supplier of
manufactured goods to Central Asia. It would not at all
be surprising for Urumqi and Kashgar to become eco-
nomic capitals for Central Asia due to trade and invest-
ment flows precipitated by the OBOR initiative. Urumqi

10. 10
has already been designated by China as a center for
RMB trade settlement, lending, and investment for
Central Asia. The countries of South Asia will have in-
teresting choices to make. Myanmar has been pushing
back against what has been considered China’s heavy-
handed approach to the nation. Pakistan seems firmly
onboard as a Chinese ally and dependent. India can
choose to participate in OBOR efforts or not. If it partici-
pates, there is some danger of becoming too depend-
ent on China. If it does not, it runs the risk of missing
out on the potential benefits of OBOR and becoming
isolated within Asia.
Another implication is that while the OBOR initia-
tive includes maritime linkages, most of those linkages
are present already. OBOR is likely to enhance these ex-
isting connections. Since there is now more container
ship capacity going through the Suez Canal to North
America than through the Panama Canal (due to the
limited size of ships that can go through the Panama
Canal), improved ports and shipping, as well as inter-
modal services, should enhance China’s trade with
places as far away as the East Coast of the United States.
The main new linkages under the OBOR initiative,
however, will be the land linkages. The likely outcome
is that there will be something of a shift in the relative
importance of trade involving sea transportation and
land transportation. This is true for links between China
and Europe, as well as between China and Southeast
Asia and South Asia. In economic terms, this means that
land transport hubs may become more important than
they have been in the past. This does not mean a fall in
volumes carried by sea per se, but rather an increase
in the percentage of China’s trade that is transported
by land. Since China is the world’s largest trading na-
tion and is home to seven of the world’s ten busiest
container ports, any modal shift will be felt in global
transportation markets. In geopolitical terms, it means
that China’s main trade links will increasingly be land
links that will not be subject to interruption of sea trade.
To be direct about it, the increased importance of land
transport compared to sea transport will increase the
relative power and influence of China in Southeast and
South Asia compared to the US.
For Europe, there are several implications of the
OBOR initiative. One is the potential for significant eco-
nomic development in areas of importance to Western
Europe, such as Africa, the Middle East, Eastern Europe,
and Central Asia. A second is that trade routes involv-
ing East Asia, Central Asia, Africa, the Middle East, and
Europe may be shifted. For a variety of reasons, includ-
ing colonial ties and infrastructure, Western Europe has
played a central role in trade routes involving Africa,
the Middle East, and Eastern Europe. New transporta-
tion infrastructure could weaken Western Europe’s
traditional transportation roles along with its position
in supply chains. A third implication is the potential for
enhanced trade between the economies of Western
Europe and China, which dwarf the other economies
in between (see Exhibit 9 for a pictoral representation).
Our view is that the connections will tend to favor the
more competitive manufacturers, wherever they may
be along the OBOR routes. This may favor China, which
exported €302 billion to the EU in 2014 while importing
€165 billion of goods from the EU19. Another is that
OBOR will be used as a rubric under which to substan-
tially increase Chinese investment and influence in
Europe, with an eye for mutual economic benefit, but
also with an eye towards the EU designating China as a
market economy for purposes of trade actions and for
China trying to split European nations away from the
US on a range of issues.
If we look at the bigger picture, as we have stated,
in our view, the OBOR initiative is nothing less than
an attempt to re-establish the notion of China as the
Middle Kingdom with all roads (as well as railways, ship-
ping lines, and air traffic) leading to China. Others have
reached similar conclusions. According to the Financial
Times, “If the sum total of China’s commitments are
taken at face value, the new Silk Road is set to become
the largest programme of economic diplomacy since
the US-led Marshall Plan for postwar reconstruction in
Europe, covering dozens of countries with a total popu-
lation of over 3bn people.20” In our view, once the land
routes are in place, the sheer size of China’s economy
will lead to it dominating Central and Southeast Asia,
and dramatically increasing its influence in South Asia.
As indicated above, we could see a future in which the
economic capitals of Southeast Asia are Kunming and
Nanning and the economic capitals of Central Asia are
Urumqi and Kashgar. In addition, the OBOR initiative
is likely to extend China’s influence in Africa, Eastern
Europe, and Western Europe significantly. In the fu-
ture, it might be very difficult for countries that have
benefited from OBOR projects, and are tied ever more
closely to China economically, to resist pressure from
China on other issues. The result could be a much more
integrated economy across Asia, Africa, and Europe,
but with Chinese state-owned companies, Chinese-
led funding organizations, and Chinese initiatives at
the least strongly influential and at the most dominant
across the regions.
19 European Commission, European Union,Trade with China, October 10, 2015.
20 Charles Clover and Lucy Hornby,“China’s Great Game: Road to a new empire,”Financial
Times, October 12, 2015.

11. 11
Future Watch Report
Will the OBOR initiative come to
anything in terms of actual projects
and investments, or will it be business
as usual, particularly with regard to
infrastructure projects along the One Belt
and One Road?
There is nothing particularly new about the recognition of the
potential value of building infrastructure that will better con-
nect China to Southeast Asia, South Asian, Central Asia, Af-
rica, the Middle East, and Europe. In fact, existing multilateral
agencies and private sector companies have been working
on such projects for decades. In many cases, it is not the de-
mand for infrastructure or the finance that create problems,
but rather the fact that the countries involved can be diffi-
cult to deal with, are not necessarily known to follow through
on commitments, and lack the legal systems to deal with dis-
putes in an even-handed manner. In other cases, generating
the revenue (or getting the commitments necessary to do so)
to pay back investors is problematic.
China’s OBOR initiate is likely to affect these chal-
lenges in a number of ways. The first is that for China
the OBOR initiative is clearly as much (if not more) polit-
ical and geostrategic as it is economic. This means that
some projects are likely to be funded by China even if
they do not meet traditional financial return hurdles.
The second, related way is that the OBOR initiative is
about as high in profile as is possible in the Chinese
context. Failure is not an option and success will be
measured in investments made, projects completed,
friendships and alliances strengthened, and geostrate-
gic position improved, not necessarily financial returns.
The third is that we believe that some governments
are likely to act very different when it comes to meet-
ing their obligations and commitments if the projects
are part of a Chinese initiative rather than one involv-
ing private sector entities, other donors, or traditional
multilaterals. Should the OBOR initiative fund projects
with lower financial returns, and / or if the OBOR initia-
tive reduces political and expropriation risks, then we
would expect many projects will go forward than has
been the case in the past.
What are some of the challenges associated
with OBOR?
One of the major challenges of the OBOR program is the
sheer size and scale of the undertaking. If one major goal is to
help Asia meet the shortfall in infrastructure funding, then it is
not clear that all of the commitments to date will make a dent
in the problem. It will be necessary to mobile huge amounts
of private sector funding to make many of the projects work.
Half-built corridors are not very useful in the scheme of
things. This is particularly important given the fact that Chi-
na is facing an economic slowdown, an increase in bad debt,
and challenges in local government finance. The result is that
China will not nearly be able to fund the OBOR initiative on
its own. If it is not able to attract additional financial partners,
then it will have to scale down its ambitions.
OBOR-related infrastructure development will be
complicated by the lack of development of most of
the OBOR countries. According to IMF standards, only
seven of the 64 countries covered under the initiative
to date are advanced economies (the Czech Republic,
Estonia, Israel, Latvia, Singapore, Slovakia, and Slovenia)
and these are either at the lower end of the “advanced
range,” are very small, or both. Presumably if all the
countries covered by the OBOR initiative were devel-
oped, they would already have much better infrastruc-
ture, and would not require the initiative in the first
place. However, the low level of development of many
OBOR countries indicates a lack of support structures
and soft infrastructure than might be necessary to ab-
sorb investments in hard infrastructure, or to maintain
the infrastructure once it is in place.
Another challenge is related to geography and
topography. Western China and Central Asia have vast
distances and few people, which make it extremely
expensive in terms of potential revenues per kilometer
of transportation infrastructure. Some of the links to
Southeast Asia go through dense rain forest. Some of
the links to South Asia must bypass some of the world’s
highest mountains. The physical construction of some
of the land routes will be extremely challenging.
There are also political and geopolitical challenges.
The China-Pakistan Corridor, for example, starts in an
area known for unrest over which the Pakistan Govern-
ment has not always been able to effectively exert. It
is planned to go through Pakistan-controlled Kashmir,
which is opposed by the Indian Government. Russia is
under sanctions over its disputes with the Ukraine. Iran
is in the process of coming out of sanctions. There are
civil wars in Syria, Afghanistan, and Iraq. Other countries
that the OBOR initiative is supposed to connect have
been subject to political instability, international sanc-
tions, or both. Routes through such countries may be
very risky from a financial, political, and security stand-
point. Risk of expropriation, inefficiencies, and corrup-
tion is also likely to be high in several OBOR countries.
Each of these can affect the success of OBOR projects.
It is possible that there will be a political opposi-
tion, suspicion, and even backlash to a China-led
scheme. China is already getting pushback on infra-

12. 12
structure investments in Myanmar, Laos, Vietnam,
and some African countries due to the perception of
Chinese interests operating with too heavy a hand, or
due to territorial disputes, such as those in the South
China Sea. While many of Chinese port investments are
purely commercial in nature, others may have military
features. Some have commented that the Maritime
Silk Road will increase China’s desire to control or at
least have a military presence astride the sea lanes of
importance to China. India is particularly concerned
about the potential presence of the Chinese navy in
the Indian Ocean operating from bases in surround-
ing countries21, though some analysts project that it is
more likely that it would be easier for China to build up
a presence in East Africa22. This or any other reason that
leads to a failure for OBOR countries to coordinate poli-
cies could result in severe difficulties for the initiative.
We note that this is less of an issue for the One Road
(Maritime Silk Road) part of the initiative because pre-
sumably countries that did not wish to cooperate could
be bypassed unless they occupy particularly important
strategic locations.
Finally, for Western countries and companies there
are potential reputational risks should OBOR projects
be used to spread China’s influence, prop up discred-
ited governments, result in corruption, or cut off other
companies from international markets.
Will contracts associated with OBOR only
go to Chinese companies?
There is a question about whether contacts related to the
One Belt One Road program will be limited to Chinese com-
panies. It is clear that one of the motivations for the program
is to help Chinese industries and companies utilize excess ca-
pacity and another is to help Chinese companies internation-
alize. Thus we expect that the bulk of the contracts related to
OBOR will go to Chinese companies. However, this will prob-
ably depend on the location of the project and the funding
vehicle used for the particular project. Projects funded direct-
ly by Chinese sources, such as the China Development Bank
or China’s Silk Road Fund, will probably use Chinese compa-
nies exclusively, or almost exclusively. The exceptions are like-
ly to be if the technical demands or political sensitivities of the
project (projects outside of China will probably include some
companies from the country in which the project is built) re-
quire the use of non-Chinese companies.
21 ShannonTiezzi,“The Maritime Silk RoadVs.The String of Pearls,”The Diplomat,
February 13, 2014.
22 Morgan Clemens,“The Maritime Silk Road and the PLA,”A paper for China as a
Maritime Power Conference, July 28-29, 2015.
On the other hand, projects funded through the AIIB are like-
ly to be more open to non-Chinese companies. The AIIB is a
multilateral organization and it would be extremely embar-
rassing to China to have countries that have signed on to the
AIIB withdraw. This implies that the AIIB will have to operate
on a more neutral basis with international standards in or-
der to keep other countries (particularly European countries
whose presence gives the AIIB much more legitimacy than it
would have otherwise) onboard. Presumably, China will also
wish to reward countries that have agreed to become mem-
bers, in some cases over the opposition of the US and oth-
ers. Thus we would expect that projects funded through the
AIIB will be much more open to non-Chinese companies than
projects funded directly by China.The New (“BRICS”) Develop-
ment Bank will probably be somewhere in between, with the
vast majority of contracts given to companies from China or
other BRICS countries, but with companies from other coun-
tries that eventually become members (membership is not
limited to the BRICS countries, though the majority of shares
will be held by BRICS countries). In addition, some OBOR-
related projects might be funded by European sources and
might favor European companies.
For a country like Finland this means that its com-
panies are likely to be seriously considered for contracts
related to OBOR if they offer some expertise that is not
available in China, the projects involved are funded by
the AIIB, or the projects are funded by European source.
It also means, however, that if Finland does not believe
its companies are being treated fairly for AIIB-funded
projects, for example, it could consider withdrawing
from the AIIB. While any such decision should only
be taken in the context of Finland’s overall diplomatic
and economic relationship with China, we should re-
member that China would be extremely embarrassed
should a country like Finland withdraw from China’s
first major foray at creating a multilateral organization.
In a less dramatic vein, China will be anxious to avoid
any criticism of the AIIB or China’s behavior within the
AIIB, which could provide leverage to ensure fairness.
What opportunities does OBOR represent
for non-Chinese companies?
There are likely to be OBOR opportunities in a number of ar-
eas, some obvious some less obvious. These include oppor-
tunities in infrastructure, financial and professional services,
transportation and logistics, information and communica-
tions, commerce and supply chains, energy and natural re-
sources, and agriculture.
Infrastructure Development, Operation, and Maintenance
The most obvious opportunities associated with OBOR in-
volve the construction of new infrastructure and facilities.

13. 13
Future Watch Report
This will involve all stages of development, including plan-
ning, design, engineering, construction, materials, construc-
tion equipment, utilities, project logistics and management,
and related goods and services. The nations covered by the
OBOR initiative will pose a wide range of challenges for the
design, construction, and commissioning of relevant infra-
structure projects. The geographies include deserts, high pla-
teaus, mountains, and rain forests. The land-based linkages in
particular will involve vast distances, technical projects such
as bridges, tunnels, and airport construction, and extremely
challenging project logistics and project management capa-
bilities. OBOR is likely to create enormous demand for build-
ing materials, construction equipment, and all of the equip-
ment necessary to operate the new infrastructure, including
equipment for airports, seaports, logistics hubs, multimodal
and within mode interchanges (the latter for example when
train gauges do not match), and industrial parks. Certainly
much of this will be supplied from China, but areas involving
specific technical capabilities (particularly in development,
design, and engineering), projects far from China, and pro-
jects funded by multilateral institutions and non-Chinese in-
vestors should be open to non-Chinese companies.
In addition, the infrastructure will be useless if it
is not managed and maintained. OBOR could create
substantial opportunities for third party operators and
managers in countries that lack the requisite skills, skills
that are also in relatively short supply in China. Manage-
ment of the infrastructure post-construction is another
area in which non-Chinese firms may see substantial
opportunities, as well as in maintenance of infrastruc-
ture outside of China’s borders.
Financial and Professional Services
There will also be substantial opportunities in the financial
services sector related to the OBOR initiative. New multilateral
institutions, like the AIIB and the New Development Bank, will
not nearly be able to fund all of the infrastructure that could
be built under the OBOR initiative. There will be large poten-
tial opportunities for other sources of funds, and related fun-
draising opportunities through organizing bond issues, loan
syndication, IPOs, setting up public-private-partnerships, cre-
ating special purpose vehicles, and other means for funding
the projects. As many of the countries covered by the OBOR
initiative are Islamic, many OBOR financial arrangements are
likely to have Islamic finance requirements. Putting togeth-
er the financing, contractual, and monitoring arrangements
associated with OBOR undertakings should create a large
amount of business for the financial sector as well as for re-
lated legal and accounting services. In many cases, contracts
will have to be written and executed in countries with legal
and regulatory systems very different from those found in
China.
Increased trade flows resulting from OBOR projects will also
result in increases in trade finance, trade settlement, com-
modities trading, and commodities future transactions. Ma-
rine and aviation financing and insurance and ship and air-
craft leasing services will also be required. Even the payments
and treasury arrangements for OBOR projects will create sub-
stantial business. While Chinese financial institutions or Chi-
na-backed institutions may have pole position for much of
this business, there will have to be counterparties all through
the OBOR countries, and a significant amount of fund raising
will have to be done from non-Chinese investors with whom
Chinese institutions may have limited access.
Transportation and Logistics
The infrastructure likely to be built under the OBOR initiative
will be useless if it is not used by transportation and logistics
companies. At its simplest, this will create substantial business
opportunities in all of the countries connected by OBOR ini-
tiatives in terms of trucking, rail services, port activities, pipe-
lines, and related operations. This in turn, will require trucks
(especially long-haul trucks), railway stock, ships, airplanes,
and all of the parts, maintenance, fuel, and servicing needed
to keep them all operating. On a larger scale, transportation,
logistics, and logistics management for large flows of goods
across vast distances, numerous developing countries (all
with their own customs, inspection, and legal requirements),
difficult terrain, and some nations not known historically for
ease of business operation will represent enormous challeng-
es. It will take a high level of skill, extensive international net-
works, and a huge amount of experience to tackle the chal-
lenges of operating and managing transport and logistics
across the OBOR routes. Chinese companies do not at pre-
sent have the capabilities to operate and manage such inter-
national networks, or the on-the-ground capabilities in many
OBOR countries needed to do so. Of course, Chinese com-
panies may use the OBOR initiatives to build such networks,
which is something that existing international transportation
and logistics companies should watch carefully.
Specifically regarding maritime transportation,
we expect that under the OBOR initiative Chinese
companies such as COSCO, China Shipping Group,
China Merchants Holding Company, China Harbor En-
gineering Company, China Overseas Port Holdings, and
Shanghai International Port Group will become much
more active internationally. We expect to see these and
perhaps other Chinese companies obtain a large share
of the port construction, port operation, and shipping
business generated by the OBOR initiative. We expect
that these and perhaps other friendly companies such
as Hong Kong-based Hutchison Port Holdings will
come to dominate many of the ports along the One
Road and that as China’s shipping companies become
stronger they will favor ports controlled by Chinese
interests, such as Piraeus in Greece. Port and shipping

14. 14
managers that we have interviewed do not expect that
the OBOR port construction will change the types of
ships used. Instead, they indicate that lower volume
ports might be served with smaller existing ships and
the largest ships might be concentrated even more on
trunk routes between leading ports. The managers also
do not believe that port construction on its own will
generate more trade, but combined with land trans-
portation investments and investments in industrial
parks near the ports could result in significant trade
creation. So the upshot seems to be more of the same,
and the immediate focus more on trying to grow trade
to reduce overcapacity in the shipping industry rather
than OBOR resulting in the introduction of new types
of ships.
Information and Communication Systems
The OBOR initiative is likely to generate substantial demand
for information and communication systems. The first sys-
tems that are likely to be required are actually those to sup-
port the new multilateral organizations that China is develop-
ing, most notably the AIIB and the New Development Bank.
These organizations will need information systems for their
own internal use. They will also need systems for contracting,
for payments, for accounting, for oversight, and for all of the
functions associated with major financial multilaterals. They
are likely to have information system needs that are similar
to existing multilaterals, such as the Asian Development, the
World Bank, the Inter-American Development Bank, and oth-
ers. Other information and communication systems will be
needed on a project by project basis. Communications will
require ICT hardware and software, network operations, ca-
bles, microwave equipment, satellites, and related products
and services.
We also expect that there will be opportunities in
creating and managing systems to monitor and control
traffic across the land and sea-based OBOR networks.
There will also be a need for information and com-
munication systems that allow for integrated manage-
ment of flows of cargo across the “One Belt” and the
“One Road.” There should be a specific opportunity to
create a container-by-container management system
for road and rail traffic including a range of satellite and
ground-based technology solutions. Chinese sources
are already talking about integrating information sys-
tems across the OBOR ports in order to optimize sched-
uling and improve efficiency. There are likely to be op-
portunities for non-Chinese companies here in areas in
which Chinese companies might not have the relevant
expertise, in countries in which Chinese companies
have little operational experience, and in countries in
which a large Chinese presence might be particularly
sensitive. Examples of the latter might include Russia,
India, Vietnam, and some European countries. Again,
Chinese companies are likely to use OBOR projects to
extend their international reach and foreign companies
need to monitor this carefully.
The Digital Silk Road initiative hopes to extend
cooperation in 5G, cloud computing, the Internet of
Things, big data, e-commerce, digital investment,
smart cities, and smart energy. While these areas are
not necessarily linked to the infrastructure projects
described above, they represent areas in which coop-
eration, particularly EU-China cooperation, may result
in substantial funding for collaboration, pilot projects,
and other business opportunities. Again, we should
note that China’s purpose is clearly to absorb advanced
technology from abroad and to promote the interest of
Chinese firms in these areas.
Commerce, Manufacturing, and Supply Chains
The expansion of trade routes should, not surprisingly, re-
sult in an expansion of trade. The land or One Belt portion
of the OBOR initiative has a particularly important potential
to expand trade between China and Western Europe. Exist-
ing railways that connect China and Europe have already cut
transit times by between two and three weeks (to around 15
days) compared to sea transport. Rail freight is quicker than
sea freight and far less expensive (about 80% cheaper) than
airfreight. However, use of the existing rail connections is ex-
tremely limited and it complicated by gauge changes, slow
speeds in some sections, and cumbersome connections. Im-
provements that reduce the time and cost of the land links
should enhance trade between China and Western Europe.
This means that manufacturers in both China and Europe
should have quicker and cheaper access to each other’s mar-
kets.
The improved connectivity should have additional
impacts on trade through its impact on manufactur-
ing and supply chains. When transportation links are
improved, there is a tendency for the more competitive
manufacturing locations to be favored and for speciali-
zation to be increased. Given the huge trade surplus
that China already runs with the EU, better connectiv-
ity could increase the surplus even more. One also has
to take into account the fact that the OBOR initiative
will also connect other economies that might have a
difficult time producing a complete product or system
ready to sell in international markets, but could provide
components, subassemblies, and supporting products
if they have better physical connections to the major
manufacturing centers. Thus OBOR opens up the po-
tential for the economies of Central Asia and South
Asia to become part of regional production systems
in a way that East Asia also has extensive production

15. 15
Future Watch Report
systems, and for some Southeast Asian economies to
become more important in existing production sys-
tems. There are plans to create numerous industrial
parks along OBOR routes in order to take advantage of
these possibilities. New locations will be able to extend
their positions in international production systems, or
in some cases join such production systems for the first
time. In the process, there may be both gains and losses
in individual countries due to expanded trade potential
due to the OBOR initiative.
Better physical links could also extend e-Com-
merce potential. Much of e-Commerce is either na-
tional in scope, or in Europe regional in scope. To the
extent that the OBOR initiative brings nations closer
together, it could result in the international expansion
of e-Commerce and e-Commerce companies in OBOR
countries, particularly from China. Certainly companies
like Alibaba are looking to further e-Commerce oppor-
tunities in OBOR countries.
Energy, Natural Resources, and Agriculture
The OBOR initiative should have a substantial impact on the
energy, natural resource, and agricultural sectors. The most
obvious impact on the energy sector would be China’s ability
to access energy from the Africa, the Middle East, South Asia,
and Central Asia while reducing the potential for supply dis-
ruptions in the shipping lanes of East Asia. This is of national
strategic importance, not just economic importance, so pro-
jects that achieve this goal may well be funded regardless of
their economic return. While energy is the primary focus of
several of these investments, once the corridors are in place,
they will be used for natural resources and other goods as
well.
In addition to the transportation of energy and nat-
ural resources, the OBOR initiative, by making a number
of resource-rich economies more accessible and bet-
ter connected, could result in increased investments
in exploration and resource development. This could
increase demand for equipment and services related to
oil exploration, oil production, mining, drilling, oil field
operation, mine operation, and related activities.
The OBOR initiative could also have a significant
impact on agriculture within OBOR-linked nations. Cen-
tral Asia, particularly Kazakhstan, has a small population
and underutilized agricultural resources. The OBOR
initiative could make both China and Europe much
more accessible to Central Asian agricultural producers.
In Southeast Asia, OBOR-related land routes could be
much more efficient in getting produce from agricul-
tural areas to markets in China and elsewhere. In Africa,
better port infrastructure and land transport from farm
regions to the ports could enhance agricultural export
opportunities. Expanded agricultural potential could
also result in increased agricultural investment in sev-
eral countries covered by the OBOR initiative. China
has already signed agricultural MOUs with ten OBOR
countries and has agreements to cooperate to stream-
line inspection and customs procedures for agricultural
products with 20 countries.
Are there any other ideas that might be
leveraged by Finland concerning OBOR?
While Finland is peripheral geographically to much of the ex-
isting OBOR scheme, it would not be peripheral to a“One Belt
Two Roads” (OBTR) strategy in which the second “Road” is an
Arctic shipping route. Recent climate changes have made the
prospects of a northern shipping route from China to Europe
far more interesting than ever before. Finland, or more like-
ly Finland in conjunction with other Scandinavian countries,
could be far more central to a OBTR strategy. COSCO is already
planning regular services on an Artic route to Europe23. In
addition to assessing how to leverage the logistics opportu-
nities afforded by this route, Finland and Finnish companies
should also assess the manufacturing and service opportu-
nities. This route will require new ships and services, and will
present numerous technical challenges of the sort that the
Scandinavian countries have been dealing with for decades.
It could also present opportunities for potentially very cheap
backhaul of goods from Europe to China, providing potential
advantages to Nordic manufactures. We assume that the po-
tential of this route is under active investigation by Finland
and Finnish companies now. If not, it certainly should be, as it
may create as many if not more distinctive opportunities for
Finnish companies than much of the OBOR initiative.
So what can Finland and Finnish
companies do?
There are a number of things that Finland and Finnish compa-
nies can do to address the opportunities and challenges asso-
ciated with the OBOR initiative. These include being outward-
ly supportive but inwardly analytical and opportunistic, de-
veloping or finding projects that can be put under the OBOR
rubric, finding areas in which Finnish companies have distinc-
tive capabilities to contribute to OBOR projects, seeking op-
portunities in which Finland and Finnish companies might be
favored, looking beyond the initial stages of the OBOR initia-
tive, redirecting or re-branding existing efforts to fit the OBOR
rubric, exploring where consortia involving Finnish compa-
nies may contribute, seeking out the right Chinese partners,
23 Costas Paris and Joanne Chiu,“Chinese Shipping Group Cosco Planning RegularTrans-
Arctic Sailings,”TheWall Street Journal, October 27, 2015.

16. 16
exploring the indirect implications of OBOR (including market
developments, shifting economic geography, changing com-
petitive positions, development of new supply chains), seek-
ing guidance where appropriate, and avoiding being passive
in addressing OBOR opportunities.
Be outwardly supportive and enthusiastic about OBOR, while
being analytical and opportunistic about OBOR-related op-
portunities. Like many “Big Idea” Chinese initiatives, there is a
significant amount of hype involved in OBOR. Everyone un-
derstands that, but no one talks about it, at least no one that
wishes to benefit from the initiative talks about it. Having said
that, non-Chinese countries and companies can benefit if
they make a hardnosed assessment of participation in OBOR-
related projects and are opportunistic in identifying where
their expertise, capabilities, products, and services can con-
tribute to the OBOR initiative.
Finland and Finnish companies could develop, find, or sug-
gest projects that can be placed under the OBOR rubric. China,
and Chinese officials at all levels, will be looking to make OB-
OR a success. Xi Jinping has a great deal riding on this person-
ally so no one will wish to disappoint. Foreign companies and
governments should not assume that the details of OBOR
have been worked out. It is a concept that is still being formu-
lated and it is likely that China will welcome suggestions for
projects that can help China reach its goals. The key point is
that Finland and Finnish companies should not wait for China
to define OBOR in its entirety. If Finland and Finnish compa-
nies wait, this increases the likelihood that Finland and Finn-
ish companies will be bypassed. What do we think the chanc-
es are that China will approach Finland or Finnish companies
with OBOR-related projects? In some cases, like agreements
to seek cooperation on the Digital Silk Road, it could happen,
but we think there will be few such instances. This means it
will fall to Finland and Finnish companies to be proactive.
Analyze the areas in which Finland and Finnish companies
can offer specific skills, capabilities, products, and / or services
that can further OBOR objectives. Although the most obvious
areas in which there will be opportunities for non-Chinese
firms are in construction-related activities and equipment,
financial activities, transportation equipment and activities,
and communication and information products and services,
the range of OBOR-related activities is so large that assessing
areas in which Finland and Finnish companies have distinc-
tive expertise, capabilities, products, and services and screen-
ing them for possible OBOR-related business could turn up
several additional prospects.
Seek opportunities in which Finland and Finnish companies
might be favored. A goal should also be to identify geogra-
phies in which where Finland and Finnish companies oper-
ate that China and Chinese companies do not or places that
are sensitive to Chinese involvement. In addition, there will
be portions of OBOR projects that are funded from Europe in
which European companies are likely to be favored over Chi-
nese and other companies.
Look beyond the obvious initial stages of the OBOR initia-
tive. The most obvious manifestations of the OBOR initiative
involve large-scale infrastructure investments, but there will
be large opportunities that support the initiative through the
design, supply, operation, management, and use of the infra-
structure developed through OBOR projects. Over the long-
run, these will generate opportunities at least as large as the
initial investments themselves.
See if existing initiatives or activities can be enhanced by redi-
recting or even re-branding then as OBOR-related initiatives
or activities. A huge number of companies inside and outside
of China are already doing this and they do it whenever China
announces a major new initiative. Projects that have failed to
obtain Chinese support in the past have been supported if
they can be shown to contribute to “Big Idea” initiatives such
as OBOR.While this may seem artificial, it may be the best way
to obtain OBOR-related business. To give an example, China’s
Silk Road Fund justified taking a stake in the special purpose
vehicle that acquired the Pirelli tire company on the basis that
since the acquisition involved advanced technology, that it
was compatible with OBOR because it would improve China’s
competitiveness, and that was a fundamental goal of OBOR.
We expect to see similar examples of “stretching” the OBOR
rubric in the future.
See if there are OBOR-related opportunities that could be ex-
plored or exploited by consortia of Finnish companies or con-
sortia including Finnish and non-Finnish companies. It might
well be too difficult for individual Finnish companies to take
the time and effort to become engaged in OBOR-related
business, or the relevant projects might be too large for them
to undertake on their own. Identifying areas in which consor-
tia consisting of or including Finnish companies could suc-
ceed may well be a task for TEKES to manage.
Seek out the right Chinese partners. The lion’s share of projects
related to OBOR initiatives are likely to go to Chinese compa-
nies. This means that Finnish companies should be looking
to find Chinese companies with complementary capabilities
that could be potential partners. Finnish companies could try
to capitalize on the insistence of Chinese leaders that the OB-
OR initiative is designed to generate international coopera-
tion.
There are several indirect implications of the OBOR
initiative of which Finnish companies should be aware.
If the initiative succeeds, it could greatly enhance the
economic potential of many of the OBOR nations,
which in turn could make them more attractive mar-
kets. Finnish companies should assess the implications

17. 17
Future Watch Report
for their existing and potential business. The initiative
may also change the competitive balance between
companies. In particular, it is likely to result in a much
stronger international profile for numerous Chinese
companies, and to introduce Chinese companies into
Southeast Asia, South Asia, Central Asia, Africa, Central
and Eastern Europe, and Western Europe. Finnish com-
panies should assess how their Chinese competitors,
or other competitors for that matter, could use OBOR
to improve their competitive positions. The initiative
also has the potential to substantially improve supply
chains throughout Asia, which could make Asian com-
panies as a whole more competitive vis-a-vis European
companies.
Seek guidance where appropriate. China’s Government and
the Chinese Communist Party are relatively opaque to most
foreigners. The reason is that it can be challenging to figure
out what the Party and Government want, who the relevant
stakeholders are (or how to approach them), and how to de-
velop and present a win-win proposition that allows the for-
eign government or foreign companies to achieve their goals
while helping the Chinese Communist Party and the Chinese
Government to achieve their goals. Foreign governments and
companies often need assistance to navigate the complex-
ity of the Party and Government system in China and how to
identify and develop opportunities in China.
Finally, we stress once again that Finland and Finnish compa-
nies should not be passive. China’s leaders have not fully de-
fined the OBOR initiative or the full range of OBOR projects.
Many countries and companies will wait until there is more
definition before engaging. The trouble is that by the time
projects are defined, they are often allocated. The best way to
obtain business associated with the OBOR initiative is to help
define the projects. According to Chinese officials, the OBOR
initiative is supposed to be open and participative. Finland
and Finnish companies should try to identify projects that
they are well suited for and that are consistent with the OBOR
initiative to present to Chinese counterparts.
Source: Based on Exhibit 1
Exhibit 1. Countries Covered by the OBOR Initiative
•• China
•• Southeast Asia: Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, Philippines, Singapore,Thailand,
Timor-Leste, Vietnam
•• South Asia: Bangladesh, Bhutan, India, Maldives,
Nepal, Pakistan, Sri Lanka
•• Central and Western Asia: Afghanistan, Armenia,
Azerbaijan, Georgia, Iran, Kazakhstan, Kyrgyzstan,
Mongolia, Tajikistan, Turkmenistan, Uzbekistan
•• Middle East and Africa: Bahrain, Egypt, Iraq, Israel,
Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar,
Saudi Arabia, Syrian Arab Republic, Turkey, United
Arab Emirates, Yemen
•• Central and Eastern Europe: Albania, Belarus,
Bosnia & Herzegovina, Bulgaria, Croatia, Czech
Republic, Estonia. Hungary, Latvia, Lithuania,
Macedonia, Moldova, Montenegro, Poland,
Romania, Russia, Serbia, Slovakia, Slovenia, Ukraine
Source: Hong KongTrade Development Council based on Chinese Academy of
Social Sciences
Exhibit 2. Countries Covered by the OBOR Initiative

18. 18
Exhibit 3. The Main One Belt One Road Routes
Source: Xinhua; Enright, Scott & Associates
Exhibit 4. OBOR Economic Corridors
Source: Hong KongTrade Development Council; Enright, Scott & Associates

19. 19
Future Watch Report
Exhibit 5. The OBOR Corridors
•• New Eurasian land bridge to run from Jiangsu
Province to Rotterdam: China –Mongolia-
Kazakhstan-Russia- Belarus- Poland- Germany-
Netherlands would extend existing route to
Kazakhstan freight railways
•• China-Mongolia-Russia Corridor: High speed rail
and road links, freight trains are already running
along this route
•• China-CentralAsia-WesternAsiaCorridor:mostly
for energy, China-Central Asia gas pipeline already
exists (world’s longest) Turkmenistan, Uzbekistan,
Kazakhstan, Xinjiang plans to link Middle East with
this pipeline as well
•• China-Southeast Asia Corridors: three lines
Kunming through Vietnam, Laos, Myanmar also
connect through Nanning to Guangdong Province
•• China-Pakistan Corridor: note passes through
Kashmir and Indian Government is opposed to this
•• Bangladesh-China-India-Myanmar Corridor: rail
construction, road construction, industrial parks
•• China-Myanmar Corridor: pipelines, highways, rail
Exhibit 6. Selected Documents Regarding OBOR
Implementation and Cooperation
•• Joint Communique on the 14th Meeting of the
Council of Heads of Governments of the Shanghai
Cooperation Organisation Member States (15 Dec
2015)
•• Henan’s Implementation Plan for Participating in
the Building of the Silk Road Economic Belt and 21st
Century Maritime Silk Road (1 Dec 2015)
•• Co-operation between China and the CEE
Countries: The Medium-Term Agenda and The
Suzhou Guidelines (24 Nov 2015)
•• Action Plan for Harmonisation of Standards Along
the Belt and Road (2015-2017) (22 Oct 2015)
•• NDRC Approves Infrastructure Projects Serving Belt
and Road (15 Sept 2015)
•• Sino-Kazakhstan Joint Declaration on a New Stage
of Comprehensive Strategic Partnership (31 Aug
2015)
•• Hunan’s Belt and Road Action Plan (2015-2017) (14
Aug 2015)
•• Mid-term Roadmap for Development of Trilateral
Co-operation between China, Russia and Mongolia
(9 July 2015)
•• Joint Ministerial Statement: Fostering Pragmatic
Cooperation towards the Future of GMS Economic
Corridors (11 June 2015)
•• Guangdong’s Implementation Plan for Participating
in the Building of the Belt and Road Initiative (3 June
2015)
•• JointStatementonCooperationontheConstruction
of Joint Eurasian Economic Union and the Silk Road
Projects (8 May, 2015)
•• Joint Statement on Establishing All-weather
Strategic Co-operative Partnership between the
People’s Republic of China and the Islamic Republic
of Pakistan (20 April 2015)
•• Announcement on the Reform of the Integrated
Regional Customs Clearance Along the Silk Road
Economic Belt (30 March 2015)
•• Vision and Actions on Jointly Building the Silk Road
Economic Belt and 21st Century Maritime Silk Road
(28 March 2015)
•• The Belgrade Guidelines for Co-operation between
China and the CEE Countries (16 Dec 2014)
•• The Bucharest Guidelines for Co-operation between
China and the CEE Countries (26 Nov 2013)
Source: Hong Kong Trade Development Council

20. 20
Exhibit 7. Key OBOR Provinces in China
Source: Enright, Scott & Associates
Exhibit 8. Founding Members of the Asian Infrastructure
Investment Bank
Australia Italy Poland
Austria Jordan Portugal
Azerbaijan Kazakhstan Qatar
Bangladesh Kuwait Republic of Korea
Brazil Kyrgyzstan Russia
Brunei Lao Saudi Arabia
Cambodia Luxembourg Singapore
China Malaysia South Africa
Denmark Maldives Spain
Egypt Malta Sri Lanka
Finland Mongolia Sweden
France Myanmar Switzerland
Georgia Nepal Tajikistan
Germany Netherlands Thailand
Iceland New Zealand Turkey
India Norway UAE
Indonesia Oman United Kingdom
Iran Pakistan Uzbekistan
Israel Philippines Vietnam
Source: AIIB

21. 21
Future Watch Report
Exhibit 9. NASA Satellite Image of the Earth at Night
Source: NASA

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