One Belt and One Road “One Belt and One Road”•“One Belt and One Road" short for "Silk Road Economic Belt" and "21st Century Maritime Silk Road" Essence"OBOR" is not an entity and the mechanism,it is a economic cooperation concept, and belongs to the multinational economic belt. "OBOR" is a development strategy and framework that focuses on connectivity and cooperation among countries primarily in Eurasia, which consists of two main components, the land-based "Silk Road Economic Belt" (SREB) and oceangoing "Maritime Silk Road" (MSR). "OBOR" aims at borrow the ancient symbol"silk road",and carry the banner of peaceful development, actively develop an economic partnership with countries along the Silk Road and regions,to build community of interest,fate community and community in responsibility of political mutual trust, economic integration, culturally tolerant Countries and regions along the “One Belt, One Road ”data such as population and economic scale Develop regional economyAbsorb excess capacityReduce foreign exchange reserveWhy do China want to carry out "One Belt,One Road"?For the nation 123Drive capacity output by capital outputStrengthen international cooperationReverse balance of payments situationFor the word: Infrastructure Networks Sources of fundsAIIB is a proposed international financial institution which is focused on supporting infrastructure construction in the Asia-Pacific region.SCODB is multilateral development finance institution,and it expand cooperation in the settlement in local currencies and promote the economy and trade communion of regions by joint contribution and joint benefitNew Development Bank is a proposed international financial institution which is focused on supporting infrastructure construction of these 5 BRICS and other developing countries.SIF is a state owned investment fund of the Chinese government to foster increased investment in countries along the One Belt, One Road, an economic development initiative primarily covering Eurasia. The five major Co-operationpolicy coordinationunimpeded trade financial integration facilities connectivitypeople-to-people bonds important content priority areasimportant supporting important guarantee social foundation The Back-up Force of OBOR123456land silk roadmaritime Silk Road1. High-speed diplomacy 2. Shanghai Cooperation Organization Development Bank 3. Silk Road fund 4. Asian Infrastructure Investment Bank (AIIB) 5. Nuclear diplomacy 6. BRICS Bank OBOR“ construction”Relationship between OBOR and AIIBThe implementation of "One Belt and One Road" stratgy requires a large number of investment from financial institutions, including AIIB.The aid program of AIIB, which targets the construction of infrastructure in Asian-Pacific region, overlaps with OBOR strategy. ISSUESOvercapacity ProblemResources AquisitionNational SecurityTrade InitiativeTransportation Network Overcapacity Problem Overcapacity Problem•1. OBOR opens up new export markets to compete with America and Japan.•2. It helps emerging market countries and less developed countries in infrastructure construction, using the sufficient foreign exchange reserves to solve the overcapacity problem Resources Aquisition•China's oil and gas resources are highly dependent on overseas mineral resources.•OBOR will build some effective channels to get resouces. It contributes to the resources diversification. National Security•The industry and infrastructure of coastal region ,western area and central area need to be protected from external concealed threats.•OBOR will improve the capability to strengthen the national security at risk of conflict. Trade Initiative•OBOR will make China have a greater say in global market and regional economy. Transportation Network•With building a transportation network in the neighboring area, OBOR will promote the export trade and mobilization of resouces. China's Regions in Pursuing Opening-Up China in Action•High-level guidance and facilitation. •Signing cooperation framework. •Promoting project cooperation. •Improving policies and measures. •Boosting the role of cooperation platforms. Fund- June 29th, 2015.- 57 countries- Legal capital: $100bn- Dec 29th, 2014.- Beijing, China.- Legal capital: $40bn- Supported by four national organization- July 21st, 2015.- Five countries- In Shanghai, China.- Sep 11th, 2014.- Discussed. 14th Summit- Not officially founded yet. -57 members-$100billion-China (30.3%) 1st-Korea (3.8%) 5th“to build better infrastructure in developing countries”- The Netherlands, Germany, France, and other many countries are favorable to the foundation of AIIBNews Articles 30.3% 30.3% → → 26% of votes26% of votes→ → 75%75%→ → 2 25%5% ■ 1. Four financial platforms will solve existing money problemsolve existing money problem. 2. Four financial platforms will promote economic development promote economic development of numerous countries. 3. As the four platforms pursue open-door policy → enough financial back up enough financial back up for OBOR4. Four financial platforms will enable sustainable investmentsustainable investment. 5. Four financial platforms will enable developing countries to have louder voicehave louder voice.■ AIIB1. AIIB will play the main role play the main role in ‘One Belt One Road’ project.- -Solve inequality problem Solve inequality problem among nations by redistributing resources and better investment conditions better investment conditions - -Participation of private companies are desperate Participation of private companies are desperate as well, but as the investment vehicles are developing countries, private companies may not be attractedmay not be attracted to investment proposals. -To address the issue, AIIB should guaranteeAIIB should guarantee safe investment and minimized loss. Assessment of Financial Platform To China:1. To digest overcapacity: China‘s total capacity utilization does not exceed 65%, but traditional export market has opened up in a more full by United States and Europe. Meanwhile, the countries along the route of One Belt One Road lack the infrastructure, who just need cost-effective Chinese construction business. China also has the excess of foreign exchange assets. China uses its huge foreign exchange reserves accumulated as a capital to boost global growth and uses its export of capital to digest its excess capacity. 2. To revitalize the stock of the economy: The promotion of OBOR is conducive to the expansion of cross-border use of RMB in the peripheral region, RMB payment system and the utilization of the huge foreign exchange reserves. After the abolish of geographic restrictions, Chinese domestic enterprises and commercial banks could issue RMB bonds in offshore to help the circulation of RMB in the international market. 3. To strengthen National Security: OBOR can not only hedge the US-led TPP (Trans-Pacific relations agreement), TTIP (trans-Atlantic partners to negotiate), which attempt to isolate China, but also provide the opportunity for China to participate in the development of new global trade rules. Shanghai FTA Shanghai Free Trade Zone-International transfer port China‘s industrial and infrastructure are concentrated in coastal areas, and there is a great potential for their development in central and western regions.Significant To the World:•1. New economic growth stimulation:• The global economic recovery is slowdown and monetary policy in developed economies trends to differentiation. Economies of many countries face difficulties and need a new economic growth engine to drive the world economy. • The projection of OBOR benefits China and most countries, because it seeks new impetus to the global economic recovery and mobilizes new investment to achieve the win-win situation.•2. Regional Collaboration:• OBOR breaks the original development model of spot and block patterns and extends vertically and horizontally, connecting Asia-Pacific Economic Circle in the east the European economic zone in the west, considered as "the world's longest, most development potential economic corridor." • This strategy helps the further deepen China-ASEAN cooperation and regional economic integration, building closer community, and seeking the coordinated development in line with the strategic interests of Asia-Pacific, Asia-Europe and most member states.Significant Challenges•OBOR strategy is an inevitable outcome of current global status, and it also faces difficulties.•a. Specific difficulties during the implementation of investment projects:• 1. The environmental impact of large-scale investment• 2. Changing risks of foreign policy• 3. Breaking-in with various foreign countries’ cultures, customs, even institutions•b. How to deal with relations of big powers: the United States, Russia, India•c. How to deal with relations of small countries: • Scruples: Not Threaten- Joint Development Hot Discussion“New Normal” Trap•World:•Since Subprime Crisis: the 8th year of low economic growth, low interest rates and expanding government intervention• •Keynesian stimulus: Unconventional Monetary Policy (UMP):• (Liquidity management: short-term nominal interest rate-central bank's balance sheet structure, content)• Zero Interest Rate Policy (ZIRP)• Quantitative Easing (QE)• •New Normal: a ‘Trap of Debt and Money’ – Financial market bubble •Soaring debts-economic slowdown•As the New Normal Trap deepens, there can be a desperate call for breakthrough•China presents new global financial & economic paradigm If bank loans stop, money supply shrinks and causes deflation… which means less money to go around (liquidity crisis), causing massive default on debtSource: FRB of ST. Louis Hot Discussion “New Normal” Trap•China:•OROB: Stimulate Real Economic Growth• A new wheel of growth to overcome New Normal• •Connecting Asia to Europe through new continental and maritime silk roads•New investments in economic & social infrastructures of the region will raise productivity•New infra-connected areas will form new markets and boost demand and growth• •Reconnecting ‘money & investment’ with growth of productivity & demand•Chinese style ‘New Marshall Plan’ with win-win strategy•Provides new global economic growth opportunities•New global financial and economic paradigm is possible• •OROB is China’s message to the world about building new growth platform •A package of comprehensive strategies: AIIB, OROB and RMB Internationalization• AIIB to offer new model of investment, cooperation and financial alternative•Rapid RMB internationalization boost AIIB and OROB prospects•China presents new global financial & economic paradigm 。