IEEJ：January 2015ｃ○ IEEJ 2015

Special Bulletin
A Japanese Perspective on the International Energy Landscape (203)January 26, 2015

China's "One Road and One Belt" Project and Asian Economic Cooperation
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn January 24 in Hong Kong, the seventh "Sino-US Colloquium: Silk Road Energy Dialogue"
took place with the subtitle of “Asian energy security cooperation,” sponsored by the Hong
Kong-based China Energy Fund Committee and cosponsored by the China Institute of International
Studies and the U.S. Energy Security Council. Participants, mainly including Chinese and Americans,held active discussions in three sessions.
China's President Xi Jinping announced the so-called "Silk Road Economic Belt" and "21stCentury Maritime Silk Road" initiatives in the autumn of 2013 and indicated his strong ambition topromote these initiatives anew at last November's annual summit of the Asia Pacific EconomicCooperation forum. The former initiative aims to build an economic belt linking China to Europe
through central Asia, while the latter seeks to build a maritime transportation/economy belt linking
China to the Middle East via the ASEAN (Association of Southeast Asian Nations) region. They arecombined into the "One Road and One Belt" project. This is a grand project for China to promote
giant economic zones and regional cooperation under the key word of "Silk Road" symbolizing
China's past prosperity as the world's economic, cultural center. In order to materialize the project,
China has made steady preparations by creating financial cooperation and investment promotion
mechanisms like the Asia Infrastructure Investment Bank, the New Development Bank or BRISC
Bank, and the Silk Road Fund as policy tools.
Last May, President Xi Jinping also advocated a “view on Asian security.” “Asian security must
be protected by Asian people,” Xi stated then, indicating China's willingness to take leadership inestablishing a new order for Asian security. China may thus think that Asia on its own should addressand solve Asian problems regarding energy security as one of the "security" concepts and that it isimportant to promote Asian energy cooperation in line with the "One Road and One Belt" project.
Such Chinese thinking might have been behind the Hong Kong conference.
Under such thinking, participants in the conference made various points. Interestingly, one of
the focuses of discussions at the conference was what implications the recent crude oil price plunge
would have for Asia. The first session concentrated on this issue, with views exchanged on Saudi
Arabia's strategy as the cause of the plunge, future prospects, factors to reverse or further promote
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the price plunge, and various impacts of the plunge on international politics, the world economy andenergy markets.
As reasons behind the crude oil price issue attracting such massive global attention, participantsin the conference cited oil's strategic importance as a good, oil's lack of substitutability in thetransportation sector (and the importance of the transportation sector) and the presence of the market
power, and pointed out that the oil price drop will become a major issue for Asia destined to increase
its dependence on oil imports and deepen strategic interdependent relations with the Middle East.
The conference participants commonly recognized that crude oil price drops would
economically benefit most Asian countries that are net oil importers, including China and Japan. But
it was pointed out that present low crude oil prices may be unsustainable over a long term andbecome a destabilizer leading to higher prices in the future by bringing about energy investment
shortages, and social and economic deterioration in oil producing countries. Given that Asia is notprepared to respond to the existing oil market instability, how Asia should respond to oil and otherenergy supply disruptions became an issue. It was interesting for the conference participants toquestion anew how Asia should enhance the framework for cooperation, if Asia’s accumulated
cooperative relations with the International Energy Agency would be sufficient and whether Asia
should explore independent cooperation within the region.
As a matter of course, energy challenges facing Asia are not limited to oil problems. Asiannatural gas/LNG prices soared amid crude oil price spikes, making the Asia premium problem more
serious. Asia must promote cleaner and more efficient use of coal growing as a main energy sourcein the region. Asia must spread renewable energy while addressing cost efficiency and supplyintermittency problems. Energy subsidy cuts and energy conservation promotion have become major
policy challenges in Asia. In expanding nuclear energy use, Asia must address safety,
non-proliferation and nuclear security. Asia must provide underdeveloped or low-income regionswith modern energy including electricity. Asia thus has a mountain of energy problems. At the Hong
Kong conference, participants came up with a message that Asia should promote regional
cooperation in view of these many common problems facing Asian countries, while falling short ofdiscussing details of or solutions to these individual problems. They also indicated that they had inmind a wider framework covering the Middle East and Europe included into the Silk Road initiatives,
as well as the United States and Russia as Asia-Pacific countries.
Interestingly, some conference participants cited cooperation within the European Union as aharbinger of Asian energy cooperation and discussed what Asia should learn from European
experiences while recognizing various differences with Europe. It was noteworthy that expectations
that the promotion of energy cooperation would help ease political or geopolitical tensions in Asia
came out along with a view that Asia should adopt a geo-economic approach leading to win-win
relationships, instead of any geopolitical approach resulting in a zero-sum game. I would like to2

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closely watch what initiatives China will implement or enhance for Asian energy cooperation under
its international strategy.

Contact: report@tky.ieej.or.jp
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