China’s long term trade and currency goals: The Belt & Road Initiative

IMAGE/The UNZ Review


Abstract While all eyes have been focused on the evolving US-China trade war, China has been pursuing multiple initiatives of which its long-term global investment strategy known as the Belt and Road Initiative (BRI) is the most ambitious – and now (finally) being addressed by mainstream media and US Congressional hearings. China’s BRI, encompassing the land-based Silk Road Economic Belt and the sea-based 21st Century Maritime Silk Road, is the world’s largest multilateral infrastructure-building project. This initiative is now creating a community of states that have common interests in the building of infrastructure with China’s financial assistance and in setting rules and standards for international trade within the BRI area. Through this process, the BRI is creating the world’s largest trade and investment area, and one with clear security implications as China’s geopolitical profile rises. Enjoying the highest level of political support in China, the multiple projects of the BRI utilize Chinese finance provided primarily by state development banks in an extension overseas of the industrial development model fashioned at home. Critical commentary has fastened on the possibility of countries entering “debt traps” as they sign up for BRI projects. Such claims need to be scrutinized from the perspective of China’s own debt-fuelled economic development strategy and the mutual goals tying China to dozens of industrializing countries in a new arc of Chinese economic and financial diplomacy. The wider significance of BRI explored here includes its role in promoting the internationalization of China’s currency and reinforcing China’s industrial and energy strategies abroad.


The evolving US-China trade war, which reached a dangerous level of US tariffs being imposed on $200 billion worth of imports from China, has been holding center stage in international relations discussions in 2018. But Beijing’s tit-for-tat response to the US is far from the only strategic weapon it has been deploying. What is less discussed in the context of the US-China strategic conflict, and is arguably of greater significance, is Beijing’s Belt & Road Initiative (BRI), which encompasses projects involving over 70 countries and counting (in Eurasia, South Asia, Southeast Asia, Africa and now in Latin America), in infrastructure projects worth more than $1 trillion and counting. Strategically the BRI draws countries into China’s orbit, through the building of infrastructure financed through loans from Chinese and China-promoted banks.1 The initiative is now just on five years old and already encompasses countries that account for half the world’s economic activity. These countries now form the world’s largest trade and investment area. The BRI has come in for much criticism, with articles in both the Financial Times and the New York Times among others querying its long-term viability.2 By contrast, an evaluation published by The Economist provides a balanced account of the BRI and its prospects, while pointing to some clear sources of concern (that will be elaborated below).3 The US Congress recognized the significance of the BRI’s five-year milestone by staging Senate hearings on the initiative – the first by the US legislature on this significant foreign policy challenge to the US. Leading scholars advanced testimony at these hearings of the Congressional US-China Economic and Security Review Commission (staged on Jan 25 2018) providing a summary and analysis of the progress achieved in the first five years of the initiative.4 Most commentary on the Belt & Road Initiative recognizes the grandeur of the vision and the scale of its execution, but also the challenges it poses for other great powers, in particular the United States.5 But there is also much critical commentary, mainly focused on the issue as to whether countries engaging in BRI projects are entering “debt traps” or, even worse, whether they are setting themselves up to become constituent parts of an emerging Chinese empire. One recent commentary from the Washington, DC-based Center for Global Development, identifies eight developing countries (all relatively weak or marginal players, apart from Pakistan) that are said to be in particular danger of falling into debt arrears – these countries being Djibouti, Kyrgistan, Laos, the Maldives, Mongolia, Montenegro, Tajikistan and Pakistan.6 The eight include small countries that have long wished for closer relations with China, like Tajikistan and others that are buttressed by very large and substantial commitments on the part of China, such as Pakistan. The issues raised are substantial and call for some engagement. The case of Sri Lanka raises particular concerns, with its transfer to China of ownership of the Hambantota port as Sri Lanka was unable to meet debt repayments on the project.7 This and other projects deserve scrutiny.

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