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The Belt and Road Initiative - A New Imperial Era for China

The Cold War, long forgotten by the citizens of the Western world has been reignited with the economic firepower of China in recent years and has announced a new age of investment in infrastructure and business alike.

Despite China being one of the last Communist governments to survive the mass collapse of the 1990s, she has risen above the Western bloc as one of the most important superpowers of the modern world.

Since 1990, China’s GDP growth has progressed at a rate of knots, with the last negative growth year being 1976- a decade in which multiple oil crises and numerous Middle Eastern Crises hurt both East and West.

This thirty-year string of success has been noted by Hawks in the US Senate and, with incumbent President Donald Trump holding the keys to White House power for at least the next six months, we can expect more anti-Chinese measures in US foreign policy and overall Western policy as well.

The real centre of China’s storming economic success is its Belt and Road Initiative (BRI). The BRI is a Beijing planned investment policy approved in 2013 and has encapsulated China’s political and economic activity since then. $100 billion has been pumped in BRI countries across the globe with a return of only $48 billion back.

The subjects of such extensive investment have been countries in Africa, Asia and South America- although, it should be noted that larger countries in these regions have not officially signed up the scheme as of yet. In Latin America, there are notable exceptions to the mass flow of money including Argentina, Colombia, Brazil and Mexico. These countries make up 70% of Latin American GDP.

Since the start of the “new China” and its embracing of private business, trade and other free-market aspects, the private sector has a big part to play in the BRI. For example, the hot topic that is the tech giant Huawei has billions of dollars coming from deals in the African continent. In 2018 alone, Huawei took home a profit of $5.8 billion from African sales- 60% of this was through the sale of equipment and services and the remainder being via sales of its phones.

This influence and investment have mostly gone unnoticed by the White House and Africa poses no current economic or political threat to both the US democracy or US tech companies. However, there are markets closer to home that, if they were to welcome Huawei investment, may make US Hawks squirm. The UK, for example, is an economy that has welcomed foreign investment and Huawei is no different. £1.2 billion pounds has been promised in research investment, and more are bound to come in other sectors of British business.

Despite the copious amounts of money available to countries rich and poor, many Western governments are concerned about the consequences of such expenditure.

In the UK for example, Prime Minister Boris Johnson experienced pressure from his own cabinet, backbench, opposition MPs and pressure from across the pond in the form of Mr Trump to limit Huawei’s involvement in the production and installation of the new 5G network.

The concerns centred around a potential link between Huawei and the Chinese government in Beijing and the damage that could be done with a “back door” into some of the more sensitive parts of the network. In a world of internet warfare and after a series of high profile hacking incidents undertaken by Chinese hacking groups in 2009, these concerns were valid and the UK government correctly banned all Huawei involvement in sensitive parts of the network.

However, in countries like Latin America, South East Asia and Africa, where the West has less at stake, we may see a remarkable increase in Chinese influence. We have already seen the expansionist side of Chinese policy at work in the South China Sea and with markets like Latin America and the Caribbean, who have a combined GDP of $5.61 trillion, they have a lot of growing room.

The US does have a substantial history in intervening with Latin American politics, however, with Mr Trump pulling troops out of the Middle East and a general reluctance to engage in global politics, we cannot guarantee a check on the influence of China in these markets.

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© 2020 by James Thomas Consulting.