China Exerts Soft Power with Hard Cash

This piece first appeared in online Asia Times.

The rapid closing of ranks in the formation of the Asian Infrastructure Investment Bank inevitably directed the world’s attention to China’s Silk Road Initiatives as proposed by President Xi Jinping, companion pieces to creating the bank.

The initiatives, popularly abbreviated as one belt and one road, consist of developing a string of ports and harbors from the coast of China around South China Sea and Indian Ocean to Africa through the Suez Canal and end in Athens Greece, thus replicating and expanding the ancient maritime shipping lanes.

The envisioned road would be a high-speed rail from China across Central Asia to Istanbul then north to Moscow and then across Western Europe terminating in Holland. The initial buy-in is $40 billion.

No one can accuse of China of thinking small. But then this is a country that built a 3,000 mile Great Wall and 1,000 mile Grand Canal in ancient days on the backs of manual labor and the high altitude rail across the Tibetan plains (one that Swiss engineers did not think was possible) and the Three Gorges Dam in modern days with modern technology.

Therefore when China proposes these ambitious projects, other countries are quick to express interest. Whether China is a friend or possible foe becomes immaterial, they understand being a stop on the new Silk Road means the opportunity to participate in booming international commerce and share in the prosperity to come.

China is not going around offering handouts or free rides but the opportunity to partner with China.  Since the financial crisis of 2008, China has shown that they can take on mammoth infrastructure projects and get them done on time and within budget.  Since then, China has taken the experience and expertise to Africa and Latin America to put up railroads, highways and hospitals and schools.

In fact, the origin for the bank and the Silk Road initiatives can be traced to the financial crisis of 2008. The near collapse of the economy caught the world including China by surprise. While the crisis dragged down the western European and Japan’s economy, China managed to build a seawall to shelter from the financial tsunami by investing heavily in domestic infrastructure projects. Now they are ready to apply what they learned to help others.

The financial crisis also shocked Beijing and shook their faith in the American leadership and Washington’s ability to manage the American economy responsibly and guard the value of the dollar from the rapacity of Wall Street. Beijing began to look for safer harbors and reduce China’s exposure to holding onto the dollar.

Thus getting a decent return for the roughly $4 trillion in their reserve became a reason for the infrastructure bank and Silk Road initiatives. At the end of the day, upon completion of the belt and road, China will become one end of an integrated world economy that runs across the globe. In the meantime, China will be putting their money and their construction workforce to work.

As the project move forward, China will be working with as many as 65 countries touched by either the belt or the road. They will have to sort through a host of political, economic, cultural, social and environmental issues. They will have to negotiate and conclude joint development agreements and plans motivated by common interests and shared returns. These will be formidable challenges.

If the plans proceed as envisioned by President Xi, it will become a constant reminder of China’s soft power and enhanced stature as a world leader and responsible stakeholder. China won’t have a ring of 1000 military bases around the world garrisoned by American troops but will have the din of jackhammers to remind the local people of the economic benefits to come.

China Daily ran a supplement in the Wall Street Journal explaining the one belt and one road initiative. The full-page infomercial contained a map of the world showing the high-speed rail and the seafaring routes westward to Europe.

Intriguingly, the map also showed a conceptual line that ran from China through Siberia across the Bering Strait down Alaska and Canada all the way to the United States. Such a high-speed rail can take people from one side to the other side of the Pacific in under two days.       

Technical experts inside China have expressed the confidence that China has the technology and expertise to build such a high speed, trans-Pacific railroad. “All” it takes is the mutual political goodwill among four countries: Canada, China, Russia and the United States.

That’s one big Chinese dream to share with the world.