One Belt, One Road: Why Trump Should Get Behind China's Economic Growth Plan

One Belt, One Road: Why Trump Should Get Behind China's Economic Growth Plan

Beijing could open its capital markets, ease import barriers and enable more foreigners to work and do business in China. 

Like Hong Kong, Macau enjoys special status within China. The Special Administrative Region is effectively governed by Beijing, but retains liberal freedoms reflecting its Portuguese heritage. Much smaller than neighboring Hong Kong, Macau relies on gaming rather than finance as its economic foundation.

The Special Administrative Region took a major economic hit in 2015 in the midst of the Xi government’s crackdown on corruption and ostentatious living. The flow of Chinese “whales” to Macau’s casinos slowed and the economy retrenched. Macau has since recovered, but its leaders hope to diversify for the future. To promote that end the territory hosted the international conference on the Belt and Road Initiative (BRI) and Macau’s development.

The initiative, also known as One Belt, One Road, was proposed by China’s President Xi Jinping four years ago. A priority for Beijing, it necessarily is a priority for anyone under Beijing’s sway. And while Western states have been understandably skeptical of the program, Xi’s plans have been boosted by the Trump administration’s retreat from the international marketplace.

The U.S. government’s withdrawal from the Trans-Pacific Partnership, which it helped birth, and its talk about trashing the free trade agreement with South Korea, have encouraged America’s economic partners to look elsewhere to expand commerce. Beijing is moving to fill the void, advancing other free trade agreements along with BRI. Asian analysts and officials remain amazed at the Trump administration’s pursuit of economic isolation. No one else intends to follow the United States toward some variant of protectionist autarchy.

In fact, participants at the Macau conference wanted the United States to be involved, which is one of the reasons for why I was invited to attend the conference. In May, President Xi spoke of creating “a big family of harmonious coexistence.” Whatever his ultimate ambitions, local officials, with an eye to expanding economic opportunities, believe the more the merrier.

BRI harkens back to the fabled “Silk Road” of ancient times. Imperial China once was a dominant presence in Asia, before choosing isolation. The weakened state lost territory to Western “concessions” and Japanese conquest. Last century’s communist revolution created a new, even more malign form of isolation, until Deng Xiaoping took control and opened the People’s Republic of China to the world.

Since then the People’s Republic of China (PRC) has revived the best of its ancient commercial heritage. BRI offers an extension of Beijing’s already expansive commercial network, with the potential of placing China even more firmly at the center of the global economy. Weirdly, “Belt” refers to land transport while “Road” represents sea lanes. Nevertheless, the basic idea is to enhance old and create new infrastructure to promote commerce among Asia, the Middle East, Africa and Europe.

Nearly seventy countries have signed agreements with the PRC to participate. At its most expansive, the program envisions $4 trillion in spending and could touch two-thirds of the world’s people responsible for a third of the world’s GDP. However, so far Western countries and companies have been hesitant to join China’s BRI parade.

The initiative has multiple objectives. It is a geopolitical attempt to extend Beijing’s influence. It could enhance China’s international economic stature. BRI projects also could strengthen the PRC’s energy supply chain. The program might boost an economy that has been losing altitude. It offers projects for underperforming, even underwater state enterprises and employment for workers who have few obvious alternatives. Similarly, the initiative could help soak up some of the PRC’s infamous industrial surplus, particularly in steel and cement. BRI could increase trade opportunities as China faces protectionist pressures from America and Europe. Some Chinese even claim a hint of enlightened self-interest, comparing BRI to the Marshall Plan, only at thirty times the size.

To the extent that such a program succeeds in expanding global commerce, it will be good for China and the latter’s trading partners, as well as other nations which participate in BRI projects. The initiative also offers opportunities for Macau, which is why the latter hosted the forum. Having historically relied on gambling and tourism and with its trade overwhelmingly linked to China and Hong Kong, Macau is looking for additional economic options. The Special Administrative Region also has some unique advantages: a special relationship with the half dozen Portuguese-speaking nations, an entree into Europe from its Portugal connection, a specialized if small financial industry, and close ties with China and Hong Kong.

Although BRI’s ambitions are grand, so far its successes have been modest. And holding back from participating are major economic and geopolitical players who could help make the program a global reality. For instance, European countries have responded with varying levels of enthusiasm to Beijing’s plans; most did not send heads of state or government to last month’s Beijing forum.

Russia also has exercised caution. Although hostility toward Washington has helped draw Russia and China together, the latter two compete for political influence and business deals in Central Asia. Moreover, Moscow, under Western sanctions, may lack the capital necessary for full participation in BRI.