One Belt One Road Initiative

China's Belt & Road Initiative - And Italy's Symbolic Endorsement

Part One: One Belt One Road


In 2013, President Xi Jinping officially announced China’s Belt & Road Initiative (the “BRI”, then known as the “One Belt One Road” or “OBOR”). The BRI is a proposal to revive the Silk Road and Maritime Silk Road that were established during the Han Dynasty of ancient China: the “Belt” refers to the overland links between China to Central Asia and Europe, while the “Road” refers to the maritime routes connecting Asia, the Indian Ocean, Africa, Europe, and the Middle East.
On the surface, the BRI is essentially a major investment and infrastructure push by China to facilitate trade and international relationships through roads, railways, gas and oil pipelines into the West. China describes it as an economic and development strategy that would strengthen connectivity with the rest of the world. Criticism of the BRI however alludes to the alleged “unofficial” drivers behind the initiative. Such critics argue that the BRI is a way for China to increase its “soft” power, political influence and even military expansion abroad. Others argue that the BRI is locking vulnerable countries into a “debt-trap”.

And yet, as many as 74 countries have officially signed up to the BRI, accounting for two thirds of the world’s population. A further 80 or so countries and international organisations have participated, even if they have not officially endorsed the initiative, spanning across Europe, Asia, Middle East, Latin America and Africa. A whopping $3.67 trillion (£2.87 trillion) has already been invested. Then, on 23 March earlier this year, Italy became the first G7 country to formally endorse the BRI. The two countries signed a Memorandum of Understanding and 29 deals amounting to $2.8 billion (£2.15 billion) worth of projects. This was a major boost to China’s BRI – or as critics might say, a symbolic victory for a country looking to secure a bigger role in the West.

Drivers behind the Belt & Road Initiative

The primary goal of the BRI is to create trading routes and to expand business and supply opportunities. The overland portion of the BRI encompasses new trans-Eurasia road and rail routes, and the success of this “Belt” thus far means that products can now be transported overland for 65% of the cost of shipping by air and a quarter of the time to ship by sea. The maritime portion of the BRI on the other hand focuses on maritime hubs and ports of entry into key markets. Italy’s northeastern Port of Trieste for example, has been described as China’s gateway to Europe, while its southern Port of Palermo could become a crucial point of connection for China into Africa.

There are of course motives behind this ambition.

For example, China is facing a number of problems at home. Its economy is weakening and the government is desperately trying to avert a slowdown. The BRI is therefore a stimulus package designed to create infrastructure opportunities and facilitate expansion abroad by Chinese businesses. The initiative is also intended to strengthen China’s Renminbi and transform it into a global currency (although, 6 years on, the dollar still dominates the majority of BRI projects and economists are questioning the success of this plan1). Furthermore, China is struggling with production over-capacity. The BRI would allow for a relocation of manufacturing capacity - as opposed to exports - which would diversify trade, mitigate rising labour costs within China, and even alleviate pollution issues.

Further theories of China’s motivations are more alarming. The USA has reported that China is using the BRI for military and naval expansion, arguing that BRI projects have been selected in places of geostrategic influence2. China rebukes this as “Western propaganda”. Vice President of the USA, Mike Pence, has also argued that China is using “debt diplomacy” to leverage influence. Those in agreement with Pence point to Sri Lanka’s Chinese- funded Hambantota port. In late 2017 Sri Lanka was unable to repay its debt to China and consequently gave control of the port to China on a 99-year lease.


As an investment project, the BRI provides for a number of opportunities and advantages. These include:

  • Regions with high infrastructure needs such as Southeast Asia, Central Asia and Africa which will be a key target of the BRI.
  • Investment, construction and sponsor opportunities for the core elements of the BRI including roads, rail, ports, energy and the water sector. CMS’s survey of Chinese and international respondents concludes that ports in particular are emerging as the top investment sector.3
  • Growth and development in commodities, goods and commerce sectors (although a recent Reuters article argues that there is little evidence thus far that has proved increased demand for global commodities as a result of the BRI).4
  • Projects are unlikely to be “standalone” and instead each infrastructure project or transport route depends on the network around it. This will create a “value chain” meaning that each project will continue to provide ongoing opportunities.
  • Chinese banks have been set up for the sole purpose of financing and supporting BRI projects, including the Asian Infrastructure Investment Bank (“AIIB”) and the Silk Road Fund (“SRF”). These have the backing of the Chinese government as well as international ones – the AIIB has 93 member states – and aim to facilitate raising funds on global capital markets.
  • The political imperative on Chinese businesses to make the BRI a success (on October 2017 the BRI was written into the Communist Party of China’s constitution).
  • Urban development in key Eurasia hubs – and particularly those that are well-connected to trans-Eurasia routes. Chinese cities with their own China-Europe direct train are becoming increasingly attractive for business and investment.
  • Business and investment reciprocity with China. Historically, China has been heavily criticised for its slow progress in opening up to foreign investment and business. However, its commitment to the BRI seems to have coincided with a shift in this regard, especially as world leaders such as France’s Emmanuel Macron demand “reciprocity” and “balanced and fair trade” when dealing with China.5 Although France has not formally endorsed the BRI as Italy has done, in March France and China signed 15 deals worth a total of €40 billion (£34.4 billion). These include two major offshore wind farms in Dongtai, China, in a deal worth €1 billion (£860 million) between China Energy Investment Corporation and France’s EDF Energy. This is a major first step for EDF Energy entering the Chinese market. In addition, China recently passed its new Foreign Investment Law which aims to ease concerns and demonstrate an openness to foreign businesses. Critics, however, have pointed out that this new law does not go far enough in actually addressing such concerns and in addition have argued that it’s more a general guideline than an enforceable and clear set of rules. Ultimately, foreign businesses still appear to be largely under the Communist Party of China’s control when operating in China.


It is clear therefore that the BRI comes with just as many challenges as it does opportunities, with such challenges varying between the political, economic, legal, commercial and geographical. The results from CMS’s survey into the greatest risks to BRI-related investments showed that over 83% considered ‘Political’ to be a top risk, over 80% considered ‘Macroeconomic’ to be a top risk, and over 60% considered ‘Environmental and Natural Disasters’ to be a top risk.6

Indeed, as of February this year, 14% (234/1674) of Chinese-invested BRI projects since 2013 have encountered problems.7 For example:

  • The BRI operates in a large number of countries and jurisdictions each with different standards such as engineering and construction standards, tax laws, regulatory frameworks, tender procurement laws, competition regulation and cultural issues. This means that there is no one-size-fits-all framework for BRI projects and transactions.
  • In addition to the above, local laws may affect the financing of the project. For example, foreign exchange controls or different regulations that affect the enforcement of securities.
  • National and local governments are usually heavily involved with projects and infrastructure. This can raise political challenges and means that any deal can be subject to government influence or ruling. For example, in 2017 the Nepalese government halted plans for a hydroelectric plant by Budhi-Gandhaki and China’s Gezhouba Group amid criticisms over the tender process.
  • The BRI is an especially political topic, given the strained relationship between China and the USA. China is already an economic superpower, and the world is cautiously waiting to see if it can take the USA’s spot as a world superpower. 8 With the USA’s strong rhetoric denouncing the BRI, states that would otherwise freely participate in the BRI find themselves stuck between China and the USA. Panama, for example, which was previously open to Chinese investment, has maintained a more nuanced position to manoeuvre its relationship between the two powers. It’s Vice President, Ms de Alvarado, commented carefully on the “debt diplomacy” criticism and noted that Panama is “not dependent on companies coming and financing our projects [but] countries that are vulnerable because their economies are weak, because they do not have a sound system to ensure that steps are taken considering their own interests, would be in a different situation."9
  • Environmental issues and natural disasters. A large number of the countries in which BRI operates are vulnerable to environmental disasters and problems. This can impede infrastructure deals, construction and ongoing operation.
  • • Emerging countries especially pose a variety of challenges. Often these jurisdictions have complex legal frameworks that are difficult to navigate. For example, Indonesia’s new Public Private Partnership (“PPP”) scheme encountered various regulatory discrepancies and conflicting laws. Emerging countries are also subject to political volatility, demonstrations and protests, histories of corruption and lack of existing infrastructure.
  • National security concerns are growing particularly in relation to Chinese businesses and Chinese technology. Huawei, Hikvision and Alibaba are some of those that have received lots of media and global attention.
  • Projects, generally, are subject to various challenges such as those above, as well as performance delays and public opposition. Furthermore, the complexity of projects mean that they involve numerous parties and numerous contractual arrangements between financiers, off-takers, construction contractors, consultants, lawyers, investors, and state-owned enterprises.
Part 2: "Italy's Bet" will be released in due course. Stay tuned!



Mamie is an English Literature graduate from the University of Leeds who is now pursuing a career as a commercial solicitor. Mamie is drawn to the intellectual, international and complex challenges this career will provide. She is an ambitious learner and enjoys broadening her knowledge and developing her skills – some of her many motivations for joining TCLA’s commercial knowledge writers team. Mamie has been working as a paralegal for over a year, during which she has specialised in GDPR for a major telecommunications company. Having now secured a couple of vacation schemes, she is excited for what’s to come.

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