China
Widens its Silk Road to the World
Beijing hopes its top-level two-day Belt and
Road Forum for International Cooperation,
starting this Sunday, will be a game-changer for
globalization
By Pepe Escobar
May 15,
2017 "Information
Clearing House"
- Let’s cut to the chase. China’s new
‘Silk Road’ initiative is the only large-scale,
multilateral development project that the 21st
century has seen so far.
There
is no counter-offer from the West.
Which
is why the two-day Belt and Road Forum for
International Cooperation, starting this Sunday
in Beijing, is being set up as a game-changer
for the global economy. Here the initiative
looks likely to switch to Mark II mode,
accelerating into what President Xi Jinping
dubbed, at Davos in January, “inclusive
globalization.”
The big
ideas behind this grand Chinese plan, however,
are still getting lost in translation. At first
this trans-Asian trade expressway was billed as
One Belt, One Road (OBOR), a literal translation
from the Chinese yi dai yi lu. Now it’s
the Belt and Road Initiative (BRI), but that
still does not really fly in the West, even when
China has tried adding a piece of soft power
spin, as in its attempts to sell the Belt and
Road to English-speaking children:
I
have been covering the
New Silk Roads
since they were first announced in 2013. The
idea started at the Commerce Ministry and then
developed as a natural extension of the Go West
campaign – focused on developing western
Xinjiang Province – launched in 1999. The
Commerce Ministry now insists OBOR/BRI is a
global plan and not just tied to the Xi Jinping
presidency.
The
summit will attempt to portray how its ambitious
trade concept has become a multilateral
“win-win” shared vision that connects all of
Eurasia. Or, to put it more simply,
Globalization Mark II.
It’s
enlightening to examine the pronouncements made
by some of China’s top analysts. Wang Huiyao,
president of the independent Center for China
and Globalization, says this is the “the new
engine of globalization.”
Shen
Digli, from the Institute of International
Studies at Shanghai’s
Fudan University, stresses an “an
inter-connectivity initiative on a global
scale.”
Wang
Yiwei, from the Center of European Studies at
Renmin University, is convinced this could be as
important as the creation of the European Union.
And
Shin Yinhong, from the Center of American
Studies at Renmin University, points out,
crucially, that OBOR/BRI would not work if it
were merely a geopolitical gamble.
Geopolitics as geo-economics
As much
as this will act as a boost to economies from
Bangladesh to Egypt and Myanmar to Tajikistan,
it is also a far-reaching economic/free
trade/investment plan that will open up markets
for Chinese technology and merchandise. And with
this comes priceless geopolitical reach for
China.
In
parallel to this connectivity extravaganza,
arguably spanning 65 nations, 60% of the world’s
population and a third of global economic
output, China will accumulate extra capital from
Central Asia to the Middle East. It will also
polish its status as leader of the developing
world, allowing it to once again try and
reignite the 120-nation Non-Aligned Movement
(NAM).
Representatives from more than a hundred nations
will converge in Beijing and most of them are
from NAM. Of course we will have Vladimir Putin,
representing the Russia-China strategic
partnership (BRICS, SCO) that spans everything
from energy to infrastructure projects
(including the future Trans-Siberian high-speed
rail). But, crucially, we will also have
Pakistani Prime Minister Nawaz Sharif and
Turkish president Recep Tayyip Erdoğan, leaders
of two key hubs of OBOR/BRI.
Most of
the West still needs a weatherman to see which
way the wind is blowing. And a lot of Western
media revel in dismissing OBOR/BRI as a
conspiracy, a “scheme”, or a Chinese attempt to
“encircle” Eurasia. Only one G7 leader will be
in Beijing; Italian Prime Minister Paolo
Gentiloni, who is very keen to investigate
symbiotic links between Italy’s Industry 4.0
program and China’s Made in China 2025
manufacturing initiative.
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Angela
Merkel might have turned down her invitation but
it doesn’t really matter as German
industrialists are all for OBOR/BRI.
And the
Trump administration is starting to wake up to
the action following Trump-Xi at Mar-A-Lago. The
US delegation will be led by Matt Pottinger,
Special Assistant to the President and senior
director for East Asia at the National Security
Council.
And India? The US$62 billion China-Pakistan
Economic Corridor (CPEC), one of the highlights
of OBOR/BRI, and enthusiastically
lauded by
Pakistani officials, runs partly through
Kashmir. Diplomacy, not trade, would better
advance Indian interests. But the reality is the
Narendra Modi administration – which has accused
China of trying to “undermine the sovereignty of
other nations” – is obsessed that the real
Chinese agenda is to strategically control the
Indian Ocean. So no India in Beijing.
Have yuan,
will travel
The New
Silk Road comes with a crossfire of numbers. No
one knows for sure the true value of projects
already signed along the overland belt and
across the Maritime Silk Road, but numbers are
said to already be as high as US$300 billion.
Most of these projects will be developed well
into the next decade.
Ratings
agency Fitch quotes US$900 billion in projects
planned or already happening. Speculation is
rife that OBOR/BRI may need as much as US$5
trillion up to 2022. According to the Asian
Development Bank (ADB), Asia will need a
mind-boggling US$26 trillion for infrastructure
projects up to 2030.
The
Silk Road Fund, set up at the end of 2014, for
the moment relies on just US$40 billion – a mix
of foreign exchange reserves and input from the
China Development Bank and Export-Import Bank of
China. It has invested US$6 billion in 15
projects so far, plus US$2 billion to fund
projects in Kazakhstan.
The
Asian Infrastructure Investment Bank (AIIB),
with 70 member-nations, went online in January
2016 with capital of US$100 billion, but
disbursed less than US$2 billion last year.
The New
Development Bank (NDB), the BRICS bank, is bound
to step up soon, after it got a AAA rating from
Chinese credit agencies.
China
has belonged to the European Bank for
Reconstruction and Development (EBRD) since
2015; that’s the European financing leg for
OBOR/BRI. It’s also linked to a fund in
Luxembourg and another one in Riga, Latvia.
So the
key issue for OBOR/BRI remains how to come up
with low-cost funding in global capital markets.
That will be a top discussion topic at the
summit. Zhou Xiaochun, governor of the People’s
Bank of China, has already laid down the law;
“governments” – including the Chinese government
– simply cannot pay for all that’s needed for
OBOR/BRI.
So
everyone will have to rush to capital markets;
set up their own OBOR/BRI-related financial
mechanisms; and, crucially, do business in local
currencies. That is shorthand for using, most of
all, China’s currency. So if you are hitting the
New Silk Roads, don’t forget your yuan.
This article was first published by
Asia
Times
The
views expressed in this article are solely those
of the author and do not necessarily reflect the
opinions of Information Clearing House.
