China is taking bold new steps to lead the world. Its recent strategy to roll out and enforce a new Silk Road might be the signature statement that amplifies its ambition for global dominance.
China’s economic growth, in terms of annual GDP, has slowed down considerably from its usual double digit levels over the last two decades to about 7% in the last two years according to the World Economic Forum on Asia. This suggests that the speed of economic growth, local productivity and national development is cooling.
Therefore, new economic strategies such as the One Belt One Road (OBOR) initiative might offer the means for China to stimulate its own economic growth and offer prosperity to all associated countries within the new belt.
The OBOR programme was inaugurated by China in 2013 as an economic and political platform for a new world order positioning China as the new leader of the global economy. At its core, this new initiative has the single goal of connecting Asia, Africa and Europe along five strategic economic corridors.
This OBOR Strategy is similar to America’s famous Marshall Plan following the Second World War. However, OBOR has two separate routes of giving: the Silk Road economic belt as well as the 21st century maritime Silk Road. The plan is already yielding significant returns, and Chinese exports to countries along the new Silk Road are expected to soon exceed those to the US and EU markets, which are presently China’s main export destinations.
The Economic Rationale
The economic plan unites sixty countries along a new Silk Road, and the initiative is beginning to gather critical momentum as one of China’s boldest moves to play a leading role in creating new frontiers in the global economy.
Amidst fears of an impending worldwide recession, China’s initiative has the country’s national interest at its core. China aims to ensure sustained economic growth in the long term by exploiting new markets and trading options. Premier Xi Jinping has stated that in direct contrast to the protectionist agenda expounded by President Trump, China wants to position itself as a champion of free trade.
China is also trying to create an economic corridor that carries its products directly to new markets in Europe, thereby enabling it to promote exports to more than one hundred countries along the new international trading routes. This initiative allows China to deepen and broaden its culture, lifestyle and influence on the global stage.
In the last few years, more than seventy-five corporations and countries have signed up to this new Chinese economic initiative across eight key sectors, which has created $3.1trn in global trade, according to 2015 Global Development Reports by the World Bank and the Brookings Institute.
Investment and the New Silk Road
The Chinese OBOR initiative is cultivating a rapid explosion in commodity demand from China to OBOR member states at a time of global uncertainty and populist nationalism, which is boosting local economic growth significantly, creating employment and generating prosperity in OBOR member countries.
The initiative also involves critical foreign direct investment, huge infrastructure development and specific project financing by China to key OBOR member countries. This will facilitate Chinese construction of new sea ports, modern high-speed railways, airports and the provision of technical assistance and partnerships. In turn, this will all help to develop successful economic zones that will boost local trade, enterprise development and sustain growth in participating countries.
Indeed, it seems to be clear that the silent aspect of this Chinese initiative is to promote the internationalisation of its local currency, the renminbi. In fact, in the last ten years, China expanded its local currency swap to more than 30 countries especially in Africa and Asia with the quest to expand the establishment of settlement banks in other countries.
To deepen this aspiration, China is playing an active role in funding the Asia Infrastructure Investment Bank and the New Development Bank, which further extends the internationalisation of its currency. This new strategy aims to radically alter established global trade patterns and weaken the global dependence on the US dollar.
It is still unclear to what extent China has been successful in stimulating and upgrading its domestic demands, how widespread the beneficial impact of its prosperity has had on its poorest citizens and how long the participating countries will enjoy the largesse of China’s economic agenda.
What is clear is that we may be on the verge of a new world order with China as the global leader, although the success of the OBOR initiative and associated global economic agendas will be critical to the nation’s ambitions to end US hegemony in the 21st century.