Viewpoint by William R. Hawkins
William R. Hawkins, a former economics professor and Congressional staffer, is a consultant specializing in international economics and national security issues. He is a contributor to SFPPR News & Analysis, of the Conservative-Online-Journalism center at the Washington-based Selous Foundation for Public Policy Research. This article was published on August 2, 2017 in The World Tribune. Opinions expressed in Viewpoints are those of the writer and not necessarily shared by IDN-INPS. – The Editor
WASHINGTON, D.C. (IDN-INPS) – The state-owned press in China was all aglow about President Xi Jinping’s address to the G20 summit in Hamburg, Germany. Xinhua proclaimed how “Many overseas experts and scholars have praised” it.
Towards the end of his remarks, President Xi brought up his pet project; recreating the ancient Silk Road that once linked Imperial China to Europe through Central Asia and the Middle East. He proclaimed, “Commitment of the Belt and Road Forum is highly compatible with the goal of the G20” and should be seen as part of a “new and inclusive globalization.”
The Belt and Road Forum for International Cooperation had been held in Beijing, May 14-15, 2017. It attracted 29 heads of state (including Russian President Vladimir Putin) and representatives of 130 other countries (including the U.S.), plus the leaders of 70 international organizations, including UN Secretary-General António Guterres.
Called the “Belt and Road Initiative” (BRI), or the One Belt, One Road (OBOR) project, the plan (first mentioned in 2013) calls for China investing up to $4 trillion in infrastructure projects across Eurasia and Africa, crossing some 60 countries. How the first trillion will be used is already under discussion. The aim is to impose what President Xi calls a “common destiny for Eurasia” encompassing over half the world’s population.
The Hamburg summit had as its theme “Shaping an Interconnected World,” which played directly into President Xi’s plan. He called on the G20 to “stay committed to building an open global economy.” Open, that is, to Chinese penetration; but no longer just to imports from factories “outsourced” to China from the West. Now the world is to be open to the capital earned from those trade surpluses so Beijing can buy up the remaining productive assets that have remained in Europe (and America).
That is the path to expansion, wealth and power. Earn profits from productive activity, then invest the money into building – or buying more productive assets. Success breeds success. Nations rise and fall depending on whether they are acquiring assets or having to sell them to cover their losses.
From Trade to Investment: Success Breeds Success
China’s trade surplus has been rising steadily since 2011, the trough of the international financial crisis; earning the country an aggregate gain from trade of over $1.6 trillion (2011-2015). During that same period, the United States ran an aggregate trade deficit of $3.6 trillion; over $1.6 trillion of those losses going to China. So, it can be argued that it has been America that has funded China’s rise to where it can now dream of replacing the U.S. as the globe’s preeminent power.
According to the United Nations Conference on Trade and Development (UNCTAD), China’s foreign direct investment (FDI) increased 44% from $127 billion in 2015 to $183 billion in 2016. China led all other countries in FDI in developing countries. As the Belt and Road projects boost local economic growth, Chinese investors will be in a position to take advantage of new opportunities and further expand their FDI holdings. Beijing will want the largest share of the benefits its capital will generate as have past imperialists.
In the BRI scheme, state-owned banks will provide loans at low interest to developing countries to fund the building of roads, bridges, railways, sea and airports, communications and energy grids. Beijing founded an “international” bank, the Asia Infrastructure Investment Bank, which has attracted the participation of 56 countries with many more showing interest. This should, however, be seen as a cover for legitimacy; the real money will come from Chinese banks and corporations as another demonstration of the fortitude of state-capitalism.
China’s global extraction of oil and other resources has created a formidable capability in construction and engineering. And behind these skills are the industries that produce the steel and other building material, and the heavy machinery to do the work. Most commentators have looked at China’s need to find new foreign outlets for these industries as the motive for the BRI. Beijing needs to maintain domestic employment, which is the foundation for political stability in the Communist regime.
The foreign loans will have strings attached mandating the hiring of Chinese firms to design, build and even operate the new infrastructure. There will also be state financing for Chinese firms seeking to expand their operations overseas.
Last February, Global Times, a media outlet of the Chinese Communist Party, argued that “The Belt and Road forum will project China, which supports globalization, as the ballast for the world economy in the face of rising protectionism in the West.” The “America First” program of President Donald Trump was mentioned, but there was also concern for policies in France, Italy and Germany. President Xi mentioned the danger of protectionism at the BRI Forum. If competition with the advanced economies will become more difficult, then China will look towards controlling the new assets being created in the developing world; pre-empting the rise of any future rivals.
Africa has long been a major focus of China as a source of oil and minerals (paid for by Chinese exports of manufactured goods), so can be seen as a prototype for the BRI. The lure has been almost irresistible to poor countries that have neither the skills nor money to create the core networks needed to become modern societies.
In 2014, Vice Foreign Minister Zhang Ming talked about China-Africa cooperation as “a model of mutual complementarity. China and Africa are both at a critical stage of development. With different features and advantages, our economies are cut out for each other. China has mature, applicable technologies and equipments and relatively abundant capital. Africa, on its side, boasts great strengths in market size, labor cost and resources.” Called a “win-win” situation in Beijing, it is just the old “division of labor” common to imperialism.
There has been a backlash in Africa against a trade pattern than suppresses local industrial development and often brings in Chinese workers rather than provides skilled jobs to Africans. And, there is an effort to set up Chinese enterprises to control the distribution of exports down to the retail level to maximize the gains from trade. Chinese interest in African agriculture is also strong, setting off concern about food security as the Chinese buy up farm land and export harvests. As The Economist reported in 2015:
Africans are increasingly suspicious of Chinese firms, worrying about unfair deals and environmental damage. Opposition is fuelled by Africa’s thriving civil society, which demands more transparency and an accounting for human rights. This can be an unfamiliar challenge for authoritarian China, whose foreign policy is heavily based on state-to-state relations, with little appreciation of the gulf between African rulers and their people.
Economics and Geopolitics
Unrest in Africa may be one reason the BRI, though still counting Africa as part of its plan, is shifting more attention to Eurasia. Pakistan is a country where Chinese infrastructure has been welcomed. It is also a case study of the strategic purpose of BRI, which goes beyond merely economic gain. China and Pakistan have long been allies against India.
For nearly a decade, Beijing has been working to transform the fishing village of Gwadar into a major deep-water port that could also be a pipeline terminal for pumping oil shipped from the Middle East into land-locked western China. The use of the port as a base for the Chinese navy has also troubled Indian strategists. Beijing has announced a $46 billion plan to expand the China-Pakistan Economic Corridor running from Kashgar to Gwadar as part of the BRI.
India did not participate in the BRI Forum seeing the whole idea as a national security threat. Chinese involvement in Sri Lanka, off India’s southeast coast, is another danger that will be made worse as the BRI advances. China’s alliance with Pakistan, the principle supporter of terrorism in Afghanistan, as well as India, gives Beijing confidence in having invested heavily in Afghan oil and mineral projects.
A defeat/withdrawal of the U.S. and its allies (including India), leading to a Taliban victory, would benefit both China and Pakistan. Pakistan could expand its identity as a Muslim state into Central Asia in partnership with China’s accelerated drive to control the area’s rich resources.
Another headache for Washington would be the incorporation of Iran into the BRI network. When Tehran was under sanctions for its nuclear program, China continued to be Iran’s top buyer of oil (being given waivers by the Obama administration to do so). Beijing also complained that sanctions were disrupting the Silk Road.
With most sanctions now lifted, China wants to compete for Iran’s rich potential and hopes the BRI will give it an edge. Unlike some Western governments and firms, Beijing has no qualms about doing business with dictatorships. It just feels like home. And Iran’s anti-Western theocrats fit China’s grand strategy. Airports, telecom nets, roads and railways meant for commercial use can also support bombing missions and troop movements.
Social Energy + Vision = Greatness
The Belt and Road Initiative is one of the most ambitious ideas of the modern age. It is truly transformative in its strategic vision. It could do great things in lifting millions out of poverty. The Asian Development Bank estimates there is an annual need for $1.7 trillion in new infrastructure across the region. China seems poised to provide the largest share of that, though there is still room for other powers to make their prescience felt as well. But will they?
In his landmark speech in Warsaw, Poland just before the G20 summit, President Donald Trump warned, “Today, the West is also confronted by the powers that seek to test our will, undermine our confidence, and challenge our interests,” then asked, “The fundamental question of our time is whether the West has the will to survive?” There seems to be a lack of collective vision in the West, and even in the United States, that can match President Xi’s drive to “make China great again” on a global scale.
There are a number of G20 countries opposed to China’s expansion. Australia, India, Japan, and South Korea are aligning for security. Indonesia, though tempted by Beijing’s money has a long history of distrust towards the Chinese. Russia is also under pressure from China in Central Asia, vying for influence in lands that were once part of the Soviet Union. Many Europeans are also worried about Chinese maps that show the Belt and Road Initiative running across their continent.
The U.S. is well positioned to rally a coalition that can not just block China, but offer the developing countries along the BRI route a better partnership for mutual advancement on more civilized terms. But to do so, Washington will have to get its act together and show some semblance of national unity to match the strength of purpose evident in Beijing. For decades, Congress has not even been able to muster the effort to renew America’s own infrastructure.
The Belt and Road Initiative is the vanguard for Beijing’s reach for global power. It may not work, given all the imponderables of a project on this scale, not to mention conflicting interests with nations along its route. But at least the Chinese are showing the kind of social energy necessary to achieve great things. Do Americans still have that trait? How the 21st century plays out depends on the answer. [IDN-InDepthNews – 11 August 2017]
Image: Screen shot from CCTV News.
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