Jun 19,2017 – JORDAN TIMES – Project Syndicate
Last month, Chinese President Xi Jinping presided over a heavily orchestrated “Belt and Road” forum in Beijing.
The two-day event attracted 29 heads of state, including Russia’s Vladimir Putin, and 1,200 delegates from over 100 countries.
Xi called China’s Belt and Road Initiative (BRI) the “project of the century”.
The 65 countries involved comprise two-thirds of the world’s land mass and include some four and a half billion people.
Originally announced in 2013, Xi’s plan to integrate Eurasia through a trillion dollar investment in infrastructure stretching from China to Europe, with extensions to Southeast Asia and East Africa, has been termed China’s new Marshall Plan as well as its bid for a grand strategy.
Some observers also saw the forum as part of Xi’s effort to fill the vacuum left by Donald Trump’s abandonment of Barack Obama’s Trans-Pacific Partnership trade agreement.
China’s ambitious initiative would provide badly needed highways, rail lines, pipelines, ports and power plants in poor countries.
It would also encourage Chinese firms to increase their investments in European ports and railways.
The “belt” would include a massive network of highways and rail links through Central Asia, and the “road” refers to a series of maritime routes and ports between Asia and Europe.
Marco Polo would be proud.
And if China chooses to use its surplus financial reserves to create infrastructure that helps poor countries and enhances international trade, it will be providing what can be seen as a global public good.
Of course, China’s motives are not purely benevolent.
Reallocation of China’s large foreign-exchange assets away from low-yield US Treasury bonds to higher-yield infrastructure investment makes sense, and creates alternative markets for Chinese goods.
With Chinese steel and cement firms suffering from overcapacity, Chinese construction firms will profit from the new investment.
And as Chinese manufacturing moves to less accessible provinces, improved infrastructure connections to international markets fits China’s development needs.
But is the BRI more public relations smoke than investment fire?
According to the Financial Times, investment in Xi’s initiative declined last year, raising doubts about whether commercial enterprises are as committed as the government.
Five trains full of cargo leave Chongqing for Germany every week, but only one full train returns.
Shipping goods overland from China to Europe is still twice as expensive as trade by sea.
As the FT puts it, the BRI is “unfortunately less of a practical plan for investment than a broad political vision”.
Moreover, there is a danger of debt and unpaid loans from projects that turn out to be economic “white elephants”, and security conflicts could bedevil projects that cross so many sovereign borders.
India is not happy to see a greater Chinese presence in the Indian Ocean, and Russia, Turkey and Iran have their own agendas in Central Asia.
Xi’s vision is impressive, but will it succeed as a grand strategy?
China is betting on an old geopolitical proposition.