Daily Management Review

China is preparing to launch Globalization 2.0


05/12/2017


To date, China has become one of the few countries that has money, and Xi Jinping is ready to issue several checks.



Global Jet via flickr
Global Jet via flickr
On Monday, the Chinese president will host nearly 30 world leaders in Beijing during the first One Belt, One Road forum, which is the central element of China's soft power, supported by hundreds of billions of dollars in infrastructure projects. More than 100 countries on five continents agreed to participate in the project, which indicates demand for global economic cooperation, despite the growth of protectionism in the US and Europe.

The Chinese president primarily regards this initiative as an opportunity to strengthen his image as one of the leading proponents of globalization in the world, while US President Donald Trump is curtailing America's participation under the slogan "Make America great again." Another goal of the summit is to ease concerns about China's growth. The One Belt, One Road project is likely to become the longest legacy of Xi Jinping. Its global implementation will re-shape convenient trade and economic models. 

The strategy also carries risks. So far, the initiative is nothing more than a marketing slogan covering all kinds of projects that China has been initiating abroad over many years. The way Xi Jinping will solve some problems and answer questions will largely determine its success.

The key to reducing uncertainty will be resolution of problems with strategic rivals such as India, Russia and the US, especially as the growing military power of China allows the country to be more aggressive when it comes to disputed territories.

The Chinese side intends to spend more than $ 50 billion on the economic corridor in Pakistan, build a port in Djibouti and build oil pipelines in Central Asia. All this creates an infrastructure that could be used to fight the traditional powers.

With more than $ 3 trillion of international reserves, which is more than a quarter of the world's total, China has more resources than those developed countries that are trying to hit their budgetary targets.

The plan gained momentum last year, when populist movements provoked a negative reaction against trade and immigration in the US and Europe. Brexit raised questions about vitality of the European Union, while Trump's exit from the Trans-Pacific Partnership destroyed the largest impetus in shaping the global economic rules of the United States.

In fact, One Belt, One Road simply fills the trade and economic vacuum, other countries are very positive about the Chinese initiative. At the same time, Europe and the United States themselves created space for the growth of China's influence, and President hurried to calling resist protectionism and join China in strengthening global trade at the Davos forum. 

As a result, China offers an alternative to the Pax Americana globalization, and the initiative is looking rather attractive. In addition, China is paving globalization with concrete: there are railways, highways, pipelines, ports. And this is much better than hollow trade agreements.

Xinhua says that since 2013, China has invested more than $ 50 billion in the countries – participants of the One Belt, One Road initiative. Credit Suisse Group reported this month that China can invest more than $ 500 billion in 62 countries in five years.

In fact, China's ambitious project links hundreds of millions of people and billions of dollars on the world’s markets.

Nevertheless, financial difficulties begin to appear. The slowdown in economic growth in China leaves less resources for investment abroad. Over the past year, the country’s international reserves have fallen by about 6%, and China needs large funds to protect the renminbi. In addition, China failed some of the previous foreign projects. While developing countries generally welcome China's approach, these projects are often accompanied by low credit ratings and dubious management.

Now, China is struggling to implement credit projects in Venezuela and Africa, and several projects in Central Asia have provoked protests. Very often, large-scale promises for hundreds of millions of dollars and billions are not being realized. Nevertheless, economists see the scale of Xi Jinping's plan. The One Belt, One Road combines projects for a completely fantastic amount. In fact, this can be called "globalization 2.0". 

source: financialexpress.com






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