China's Marshall Plan?

It has been easy to be skeptical about China's path to economic development.  So much has looked just like the sort of thing a small-town mayor with an industrial park to fill might have used to lure some runaway industry.  For those of us who believe that high-end industrialization is driven by investments in the basics like machine tool manufacture, she seemed like a country destined to be trapped forever in some evil sweatshop-for-the-world status where runaway industry that had located in China could just as easily leave.

This view of China seems like it needs a serious update.  It looks like her heavy thinkers have seen the sweatshop trap and are plotting to escape it.  Someone (or many someones) has decided that there are no compelling reasons to get stuck at the stage of "screwdriver" industrialization and have set in motion plans to adopt some of the higher powers advanced industrialization can bring.  We know such strategies have worked quite well in places such as Korea.  The difference is, Korea is a small country-China is not.  Not all strategies scale.  It will be interesting to see if this is one of those times.

The New Silk Road: China's Marshall Plan?

China’s plan for massive investments along the New Silk Road and Maritime Silk Road is a bid for diplomatic clout.

By Shannon Tiezzi November 06, 2014

In 2013, Chinese President Xi Jinping unveiled plans for two massive trade and infrastructure networks connecting East Asia with Europe: the New Silk Road (also known as the Silk Road Economic Belt) and the Maritime Silk Road. A little over a year later, these initiatives are rapidly becoming reality as Beijing shows it is more than willing to put its money where its mouth is.

Bloomberg, citing Chinese government officials, reports that China plans to create “a $16.3 billion fund … to build and expand railways, roads and pipelines in Chinese provinces that are part of” the planned Silk Road Economic Belt. China’s state-owned China Daily also picked up the report. The massive investments will help boost economic development in China’s poorer inland regions, a key goal of the Silk Road Economic Belt.

Meanwhile, Beijing also plans to promote policies that encourage Chinese banks to lend money to other countries along the planned route. And that’s in addition to the massive amounts of infrastructure funding China had already promised to Silk Road partners: $1.4 billion for developing port infrastructure in Sri Lanka;$50 billion in infrastructure and energy deals in Central Asia; $327 million in general aid to Afghanistan, some of which will fund “the construction of rail lines, highways, water conservancies, [and] power facilities,”according to China Daily. With the establishment of China’s new Asian Infrastructure Investment Bank (AIIB), expect to see even more money flowing into the region to shore up infrastructure capabilities. Want China Times estimates that the total value of the Silk Road Economic Belt, when all is said and done, will be an astronomical $21.1 trillion.

Xinhua’s recently unveiled an updated, interactive map depicting the extent of two Silk Road projects. A quick comparison to Xinhua’s earlier version of the map reveals a number of new “stops” that have been added in the past six months, including Moscow, Russia; Dushanbe, Tajikistan; Jakarta, Indonesia; and Colombo, Sri Lanka. And Beijing is still expanding its list of potential partners: in his recent visit to China, Afghan President Ashraf Ghani indicated his country’s willingness to be part of the project.

In most cases, the Silk Road is not a hard sell. Regional partners (particularly smaller, and often over-looked countries like the Maldives) are eager to gain Chinese assistance in building critical infrastructure for their people. As Chinese Foreign Ministry spokesperson Hong Lei put it in a recent press conference, “A place needs to have well-functioning roads before it can get rich.” In less prominent countries, China may be the only ready source of international aid. And in countries that have several major power suitors vying for their affections (the Central Asian states, Indian Ocean states, and Eastern Europe in particular), China’s largess may spark a sort of “bidding war” that encourages China’s rivals to commit funding and diplomatic attention in ways they might not otherwise do. For example, Indian Prime Minister Narendra Modi’s concerted outreach to India’s smaller neighbors, including Bhutan, Sri Lanka, and Nepal, is partially motivated by fear that New Delhi is being overshadowed by Beijing in those regions.

For China, the Silk Road Economic Belt and Maritime Silk Road are opportunities to expand Chinese influence while also showcasing Beijing’s softer side. If brought to fruition, the Silk Roads would boost China’s trade with effectively the whole Eurasian continent. Meanwhile, with Beijing footing the bill for much of the requisite infrastructure development, the vast trade network would increase the number of regional governments that view China as a patron and benefactor rather than a threat. To use China’s favorite foreign policy catchphrase, it’s a “win-win” situation – China can foster a softer image for itself even while boosting its regional influence.

China’s economic powers are riding high, and still growing. Beijing is naturally trying to take advantage of its advantageous financial situation to boost foreign policy influence. It’s no coincidence that some are comparing China’s Silk Road Economic Belt and Maritime Silk Road to the Marshall Plan enacted by the U.S. after World War II. In both situations, a rising global power wants to use its economic strengths to secure foreign policy goals (including the basic goal of sustaining its own domestic economy). The Marshall Plan helped establish the U.S. as a bona fide super power; Beijing is betting its twin Silk Roads can do the same. more