What looks to be the single largest economic-development project in history, the Chinese-led Belt and Road Initiative will be officially unveiled in Beijing tomorrow at the Belt and Road Summit (Sunday, May 14th). The two-day summit will be hosted by Chinese President Xi Jinping and will feature over 65 participating countries, 29 heads of state, and a mind-boggling $1.4 Trillion investment proposal. This event will undoubtedly mark the beginning of a long-term project that will, in my opinion, change the global economic landscape to China’s favor.
The project hopes to “create the world’s largest platform for economic cooperation, including policy coordination, trade and financing collaboration, and social and cultural cooperation.” (McKinsey) Of course, China’s financial institutions, the Asian Infrastructure Investment Bank and the Silk Road Fund will lead the charge in financing these endeavors.
To help comprehend the scale of this project, China’s Belt and Road Initiative is 11 times larger than the U.S. Marshall Plan, which rebuilt Europe after World War II. Though, of course, if you were to visit any major American news site today to learn more about this event, you wouldn’t find it.
What Is The Belt And Road Initiative?
According to the official Chinese Action Plan, the Belt and Road Initiative (BRI) “help(s) promote the economic prosperity of the countries along the Belt and Road and regional economic cooperation, strengthen exchanges and mutual learning between different civilizations, and promote world peace and development.” In other words, China is attempting to rebuild the historic Silk Road in an attempt to foster higher economic expansion in a slow-growth global economy and to further China’s influence in global affairs.
The BRI will consist of two primary elements, the land-based “Silk Road Economic Belt” and the oceangoing “Maritime Silk Road.” The Silk Road Economic Belt includes countries located on the original Silk Road though Europe, the Middle East, West Asia, and Central Asia. The Maritime Silk Road is designed to include countries located in Southeast Asia, Oceania and North Africa.
Why the Belt and Road Initiative?
The Belt and Road Initiative was developed to help China transform from an export-driven and government-led economy to a more consumer-led economy. China, the 2nd largest economy in the world, is currently experiencing an economy that is led by falling exports and sluggish economic growth. Over the past two decades, China’s government has invested heavily on its industries becoming the global destination for manufacturing. While this has thrusted the country to global prominence, it has also created a major problem of overcapacity. BRI is China’s answer to this problem.
Since Belt and Road was originally mentioned in 2013, the U.S. has pulled a Bueller by not responding to this move. This project by China, if executed properly, is one that will shift geopolitical power away from the U.S. to China. While the U.S. has stepping away from Asia and becoming more isolated, China has been making a move to become more accessible with greater influence in the region.
For months, the U.S. had no plans to attend this forum, which, of course, led to the Chinese media making a big deal of it. However, on Thursday, President Trump announced that the U.S. would send a delegation (a low-ranking one) to the event.
What concerns me is the long-term effects of this project. The sheer size and scope of BRI is one that will take decades to develop. This is the type of investment that tends to benefit future generations. China’s policy-makers tend to be inter-generational thinkers and the Belt and Road Initiative is certainly a long-term investment. This contrasts sharply with U.S. policies, which have lately been too short-sighted and is not as effective over the long-term. Nonetheless, a major project like this will certainly open a number of investment strategies to those that are well-positioned.