Last Updated:2017-05-17

By Geoff Raby

Whatever the rest of the world may think, President Xi Jinping's One Belt, One Road (OBOR) jamboree over the past few days is an unmitigated triumph for him domestically, especially before the all-important Nineteenth Party Congress, when major leadership changes will occur. With a succession of world leaders beating a path to China's door, Xi has further entrenched himself as China's paramount leader.

For days, China's state-controlled media has relentlessly featured foreign dignitaries being welcomed by Xi against a backdrop of the PLA's finest in full ceremonial dress, goose-stepping and saluting in all directions. While the theatre and pageantry are obvious and predictable, China is presenting a new narrative to the world: that it has the will, resources and ideas to provide global leadership and it intends to reshape the international order.

This is the symbolic moment, the time for which was bound to come. China has long been the second biggest economy in the world when measured in nominal US dollars, and the biggest in purchasing power parity terms. Since Xi assumed the leadership, he has increasingly made it clear that he believed China's time had arrived. He has dumped the Deng guiding principle for foreign policy – "hide your light, bide your time" – and adopted a more muscular, assertive stance. In this he commands deep popular support at home.

Xi shifts gears

China's foreign policy has building towards this for some time and well before Xi's ascendancy. He has, however, decisively shifted gears and accelerated the trend. In substance but not name, OBOR long predates Xi's tenure. From around the middle of last decade, China has started a series of projects involving trans- Eurasian transport links and oil and gas pipelines.

In 2007, work began on the Chongqing-Duisburg freight railway, which has now been operating for five years, and cross-Myanmar oil and gas pipelines that terminate in Kunming. These have been operating for over two years and, for the first time, China can now receive some its oil and gas supplies directly from the Middle East without going through the Straits of Malacca.

The Chinese built port of Gwadar has been operating for a number of years. When work on it first began, it excited a great deal of interest from the Washington and Delhi security communities that this was to be one "pearl" in a "string of pearls" around the Indian Ocean intended to support China's naval expansion into the Indian Ocean.

Infrastructure expansionism

Admittedly a port can have many uses, but on a drive through the Hunza Valley of Pakistan in late 2006 the tortuous, lethal mountainous road that links Pakistan and China was already dotted with Chinese surveyors as the first step in upgrading the road to make it suitable for road freight to and from China. If Gwadar was about China's projecting naval power, building roads through the distant mountains seems hardly to have been necessary. Running from Kashgar in China's remote western province of Xinjiang, through Gilgit and Islamabad to the port it is also well away from the Pakistan-Indian disputed territory of Kashmir. It is curious that strategic analysts often have a weak grasp of geography.

If there is a strategic challenge in the Kashgar-Gwadar corridor, it is to Russian influence in Central Asia, Moscow's traditional sphere of influence. Beijing intends for Kashgar to become the major economic hub in Central Asia. Planning is already under way for a rail link along this corridor, which seems overly ambitious.

OBOR has always had three major imperatives: economic, internal stability by developing the poorer remote border provinces and strategic. For over a decade, China has been diversifying its holdings of foreign assets away from US Treasury notes, as part of its "Go Global" strategy. Investing in foreign infrastructure also has the advantage of providing a vent for China's growing excess capacity as own infrastructure needs are increasingly built out.

Unacceptable strategic vulnerabilities

Building transport infrastructure from poor border provinces to neighbouring countries not only promotes growth through the capital investment but opens these areas to adjacent markets creating new opportunities for trade and attracting inward investment. These provinces are mostly populated by ethnic minorities, over which Beijing lives in a state of existential anxiety about potential "separatist" movements emerging. Its answer has always been more economic development.

Since the mid 1990s, China has increasingly relied on international markets to supply ever greater amounts of raw materials and energy to fuel its rising prosperity. Until the mid 1990s, for example, China was self-sufficient in crude oil. Today, it is the world's biggest importer. Until the pipeline across Myanmar, all of this went through the Straits of Malacca and the South China Sea. From Beijing's perspective, this is an unacceptable strategic vulnerability in view of the US' overwhelming naval strength.

Over the past three years, Xi has elevated OBOR to become the government's highest priority and the signature policy of his tenure. It has now become essential for overseas investment, and many domestic infrastructure projects, to be badged with OBOR. With this week's conference in Beijing, it has now become the organising principle and narrative for China's foreign policy.

Australia's local OBOR confusion

Canberra continues to tie itself in knots over how to respond, just as it did with the AIIB. Under the influence of conservative Washington think tanks, a prevailing view in Canberra holds that OBOR is an attempt by China to impose a "Sino-centric" order on the world. Accordingly, Canberra to Beijing's irritation has pushed back on China's involvement in the Northern Development Strategy because it is badged with OBOR. Business is also perplexed.

The confusion in Canberra was again on display at the OBOR Conference, when Australia's trade minister attended for only part of the first day and left before the welcoming dinner. These things are carefully noted by Beijing. We are again, as with the AIIB, having the worst of all worlds – neither in with influence, nor out with our principles.

The problem for Canberra is OBOR is here to stay to guide and endorse China's outward investment and as the key organising principle for China's foreign policy. It is not obvious what are the threats and risks. As a major actor, China will definitely influence and shape the international order as it has already done with the AIIB, BRICS Bank, Silk Road Fund and the Shanghai Security Cooperation Organisation. The world order is evolving and China is playing a central role in this.

But it is far-fetched to see a "Sino-centric" order emerging from this, whatever that might mean or look like or that, despite China's great economic weight, it could indeed alone impose a new order on the world. After all, Australia's foreign minister has said that China is unfit even for regional leadership.

Geoff Raby is Chairman and CEO of Geoff Raby & Associates and a former Australian Ambassador to China.

This article first appeared in the Australian Financial Review:
http://www.afr.com/opinion/columnists/xis-one-belt-one-road-triumph-and-australias-sino-confusion-20170517-gw6qef