China's financial commitments are for the most part credit availabilities, not specific project finance commitments. As the great conservative, Edmund Burke, declared: "the heart of diplomacy is to grant graciously what you no longer have the power to withhold." If Biden wins, the Democrats too are more wary of China’s rise. Waving a gun in the air may make the man feel good but it is beside the point.  And it will not earn him the support of the new stakeholders. And the conceit that rules for trade and investment in the Indo-Pacific can set by arrangements that exclude China, like the Trans-Pacific Partnership (TPP), is preposterous. The devil is always in the details, but if China's vision is realized in any significant respect, in time all roads in Eurasia will lead to Beijing. China has set a goal of $2.5 trillion in trade with Silk Road countries by 2025. It has a vision of reform and opening of itself to its neighbors to the west that is potentially transformative on many levels. /*-->*/. Supply chains for computers and other electronic products criss-crossed the Pacific – a large part of Apple's production takes place at the Longhua complex on the edge of Shenzhen – and as China became wealthier, more investment started to flow in the other direction, into the US economy, where Chinese investors hoovered up stakes in car makers, technology firms and energy generation. A Biden White House might pursue a more multilateral counterweight to Beijing, especially by paying more sincere attention to the emergent Indo-Pacific alliance, but it would not drastically shift the American foreign policy course. They can continue for a while to do abroad what they will have decreasing opportunities to do at home. And China seems confident that its economic size and dynamism will make it a major beneficiary of any removal of barriers to trade and investment or improvement in the communications efficiency in the Indo-Pacific. News & Views. The availability of credit does not guarantee the availability of financially attractive projects, however desirable they may be in terms of their overall impact on China's economy and its relations with the other societies in Europe and Asia. We cannot hope to prevent this through military maneuvers and exclusionary trade arrangements even if it were in our interest to do so, which it is not. Still, the next fifteen years will see at least $46 billion allocated to the development of the China Pakistan Economic Corridor. Many of the countries that lie between China and Europe have troubled political and economic environments. It also has a large maritime dimension. The world's future is far more likely to be determined by the peaceful economic integration of China with the rest of Eurasia than by the U.S. "pivot to Asia." A majority of Chinese private sector and state-owned enterprises in the construction, mining, and telecommunications sectors have already built utilization of "one belt, one road" credits into their business plans. What return on investment can China and its partners reasonably expect from "one belt, one road" projects? Chinese growth is weaning itself from dependence on domestic fixed asset investment and transitioning to reliance instead on the expansion of the services and domestic consumption. Others may be more problematic. As of 2015, China announced that over one trillion yuan (US$160 billion) of infrastructure related projects were in planning or construction. These communities include ASEAN, the Russian-led Eurasian Economic Union, the Shanghai Cooperation Organization, the EU, the South Asian Association for Regional Cooperation (SAARC), and the Organization of Islamic Cooperation. Various elements of CITIC have just announced commitments to fund 300 projects from Singapore to Turkmenistan totaling $113 billion. Both countries were weighing up the intertwining of economics and geopolitics in a new symbiotic reality christened by the historian Niall Ferguson in 2006 as “Chimerica”; whereby American consumers fuelled a Chinese export boom, which Beijing recycled into US government debt that kept interest rates low and American consumer spending high. The “new security concept” of the 1990s informed the more thrusting notion of “China’s peaceful rise” promoted by Beijing under Hu Jintao from 2003; a mix of friendliness and wariness echoed back from Washington in urgings that China be a “responsible stakeholder” in the global order, a term coined by then deputy secretary of state Robert Zoellick. It will, in short, make China the most important single national actor on the entire Eurasian landmass. By some estimates, a one millisecond advantage could be worth up to $100 million a year to a single hedge fund company. ). In this context, the military aspects of the "pivot" are irrelevant. What comes next really depends on whether the geopolitics have firmly succeeded the economics, on whether the Thucydides trap has replaced the Golden Arches theory (China currently has 2,391 branches of McDonald's, more than any other country except the US and Japan) of foreign relations. The old model based on integration of trade with global markets but with limited financial linkages has reached the end of its useful life. These are early days in the development of a program conceived to span three or more decades. And it can be assumed that there will be some sort of contest between the two. This will create a free trade area (FTA) embracing China, ASEAN, Australia, India, Japan, south Korea, and New Zealand. It is not taken seriously by many within the Beltway. That’s likely to continue. In early October it handed out some $1.5m – in Shenzhen, of course – to test a digitisation of the renminbi that Chinese officials hope will help lead to a counterbalance to the dollar. But, for the program to succeed over the long term, the planning process that is getting under way will have to begin to develop new models for Chinese investment that empower private enterprise along the Silk Road as well as in China itself. But it is only fair to note that the events of 2020, this opening year of a new decade, point heavily towards the decoupling narrative. But slighting China's latest effort to boost its wealth and power or its potential strategic implications strikes me as very likely a big mistake. Covid-19 began in China, in Wuhan, and Beijing’s opacity about the pandemic hugely undermined international trust in it. More to the point, the United States has recently shown neither the will nor the political capacity to muster the means to adapt the Bretton Woods institutions to this century's economic realities and development requirements. China joining CPTPP would boost Asia-Pacific economic integration. As the Chinese economy evolves, we are beginning to see massive growth in China's cross-border capital flows. It says much about the structural (rather than political) character of this shift that, as Emily writes, it is unlikely a Biden win on 3 November would greatly alter the course of US-China relations. US capital streamed into Shenzhen and other manufacturing centres and the output of their factories streamed back across the Pacific and into the hands of US consumers, a process particularly accelerated when China joined the World Trade Organisation in 2001. Meanwhile, as you all know, China is overhauling its economic structure. Thus, China cannot be a main contributor to East Asian integration as expected, owing to the inward-looking nature of its economic regionalism. But the Japanese initiative seems likely simply to support rather than undermine the Chinese objective of strengthening pan-Eurasian economic ties. China's emerging global financial role will be decisively shaped by its experience with Eurasian economic integration. They are explicitly inclusive rather than conditional or limited to countries that meet Chinese-imposed criteria for lending. Leveraging the scale of both countries can enable a company to sell a high v… It is a multifaceted and nuanced story. This article is part of a wider special New Statesman Media Group feature on the US-China decoupling. China's first high-speed train went into service in 2007. China’s Economic Policy Economic growth soared in the last few decades mainly due to the country’s increasing integration into the global economy and the government’s bold support for economic activity. Its institutional linkages will facilitate the investment necessary to realize these efficiencies. The U.S. concerns that underpi… Strategic Risks for East Asia in Economic Integration with China. The "one belt, one road" project has barely registered in official Washington. The creation of the SEZ in 1980, when today's futuristic metropolis of 13 million inhabitants was a fishing village, was an early landmark in the opening up of the Chinese economy under Deng Xiaoping, and with it came probably the biggest economic story of our time: the integration of the Chinese and US economies. Hence the importance of the international consultations and strategic planning efforts that are about to get underway. The "one belt, one road" initiative is partly a short-term measure to alleviate the current overcapacity in China's cement, steel and aluminum industries by conjuring up export markets for them. With Beijing "relying less on exports to the US market, caring less about its currency’s peg to the dollar”, he theorised, "the end of Chimerica would have arrived, and with it the balance of global power would be bound to shift… China would be free to explore other spheres of global influence.”, [see also: Why a Joe Biden win is unlikely to improve relations between the US and China]. But others, especially those relating to strategic sectors, will continue to decline. Beijing has indicated a willingness to commit as much as $1.4 trillion to its "one belt, one road" strategy. The same, for other reasons, is true of China and Russia, and of China and Iran. China’s Visions of Future East Asian Economic Integration East Asia has been the fastest growing area in the world in recent decades. Larry Summers called this interdependence a “balance of financial terror”, where China relied on US spending and the US relied on Chinese financing. The China Economic Review publishes original research works on the economy of China, and its relation to the world economy. In the US, legislation responded by stripping privileges from Hong Kong and gave the administration the power to impose sanctions on Chinese officials. The challenges posed by a more prosperous and internationally engaged China have no military solution. America does not occupy a similar commanding position now. One study estimates, for example, that a relatively modest five percent growth rate in such assets from their current base could create 137 million tons of demand for Chinese steel. individual US states' tortured relationship with China, factor in the presidential election campaign, Why a Joe Biden win is unlikely to improve relations between the US and China, whether Covid-19 has delivered a death blow to US-China FDI, Devi Sridhar: The UK needs a zero-Covid strategy to prevent endless lockdowns, Ban Donald Trump’s Twitter account – for good, "The social movements of our time are explosive": Aaron Benanav on robots and revolution. The … At the G-20 leaders’ summit in November 2018, Presidents Trump and Xi agreed to resolve the trade dispute within 90 days—by March 1, 2019, though this deadline has been recently extended. Americans like to apply military deterrence to threats and coercive solutions to problems. This year also saw China ditch more of its US debt holdings (Japan had already overtaken it last year as the largest foreign holder of Treasuries). It aims at massive development of economic corridors traversing the entire Eurasian landmass and all its major peninsular extensions. FACEBOOK TWITTER LINKEDIN By James Early. By 2011, it had the world's most extensive expressway system. A post-Bretton Woods global financial order is being born. From left to right: Mr Lye Liang Fook, Mr Joergen Oerstroem Moeller, Dr Francis Hutchinson, Dr Hoe Ee Khor, and Dr Chaipat Poonpatpibul. A similar situation can be identified in China where HSR is seen as one of the elements in the long-term national economic integration and a catalyst for economic growth. This is the notion popularised by the Harvard political scientist Graham Allison in 2012 that describes the historical pattern whereby war almost always follows when a rising power threatens to displace a sitting hegemon. While it remains relatively low as a percentage of China's GDP, continuing rapid urbanization and the concomitant growth of China's middle class promise to correct this. The target for concluding RCEP is the end of this year. As the late Deng Xiaoping would have put it, China and its foreign partners will have to find their way across the many rivers between the Atlantic and Pacific by feeling their way with their feet as they ford them. A 2016 assessment of its record on China noted that “parts of American public opinion have degenerated into hostility” and that “the incumbent superpower undoubtedly feels under pressure”. China is already the world's largest digital marketplace. And China is indeed rising, but is most concerned with establishing a clearly demarcated zone of influence. America recognises China is now a challenger power. It has learned a lot about how to build things that boost transportation and communications efficiency. Having won the 2016 election in Midwestern states whose economies have been particularly affected by the economic integration of the two countries, the president imposed tariffs on Chinese goods in 2018, on some $250bn of imports. China's plan is to enable train travel from London to Beijing in a mere two days as early as 2025. More probable is that the contest will force a choice for other countries and technology platforms; between the US and China, between Silicon Valley and Shenzhen. A large part of the work on these projects – as much as 70 percent, if past practice is a useful guide, but far from all of the work – will be done by Chinese companies. In terms of China's overall program, this is a bit of a sideshow. The East Asian economy is already in many respects Sino-centric. The current surge of Chinese merger and acquisition activity in the EU – much of it involving the German Mittelstand – reflects this objective. The primary goals of AIIB are to address the expanding infrastructure needs across Asia, enhance regional integration, promote economic development and improve public access to social services. The rest will be devoted to building roads, railroads, power transmission lines, fiber optic cables, and oil and gas pipelines. The initiative is also a way of developing Xinjiang and other parts of western China by making them key connectors to Central Asia, Russia, Europe, and the Middle East. Regional Economic Integration Benefits All China's rapid economic development is going to deliver real benefits rather than pose threats to its … China also used its surplus of US dollars to buy American debt and keep down the value of its own currency, the renminbi, becoming the biggest foreign holder of Treasury bonds. Member countries remove all barriers to trade between themselves but are free to independently determine trade policies with nonmember nations. To this end, China is creating new international institutions that both supplement and compete with existing U.S.-sponsored funds and banks. China is in the process of becoming the world's preeminent economy. I am referring to China's "Silk Road Economic Belt" and the "21st Century Maritime Silk Road," the "one belt, one road" project. Digital packets transmitted from Western Europe to Shanghai or Tokyo must either cross Europe, the Middle East, the Indian Ocean and the South China Sea, or transit the Atlantic, the United States, and then the Pacific Ocean. Also, the institutional integration of East Asia needs the effort of all the players in the region. A third trunk will go through Kazakhstan and Russia to Western Europe. Doing this is how one repositions oneself to future advantage. Our own decade’s Big Idea about US-China relations is yet to emerge but if I had to predict one I would invoke either “decoupling” pure and simple, or something related like “spheres of interest”. The purpose of the "one belt, one road" project is to promote its economic integration with what has been called the "world island" – the conjoined continents of Asia and Europe. Regional economic integration has enabled countries to focus on issues that are relevant to their stage of development as well as encourage trade between neighbors. The financial war that Lou warned of may now be under way. Updated Oct … In the short term, on the macro level, even under conservative assumptions, investment in Asian and European infrastructure looks like a good bet. Perhaps the key to accomplishing this is partnership with foreign companies and lenders with greater experience in risk-based lending and turning a profit outside home markets. A New Statesman Media Group special on the decoupling of America and China. Pakistan estimates that this influx of Chinese investment will stimulate a 15 percent increase in its GDP by 2030. Investors are willing to spend hundreds of millions of dollars to gain a few milliseconds in highly profitable "high frequency trading" – the automated buying and selling of financial instruments by computers. And on Investment Monitor, there are features exploring whether Covid-19 has delivered a death blow to US-China FDI, and how drops in Chinese investment have a bigger impact on Trump-voting states. As another example, consider the benefits of shorter, land-based telecommunications routes that connect the two ends of the "world island." In 2014, 55 percent of Chinese lived in cities, up from less than 20 percent in 1980. Implementation is expected to begin in earnest in 2021, the 100th anniversary of the Chinese Communist Party. To continue to lead, one must engage and contribute, not deny the reality of change or boycott, bluster, and block needed reforms. China has its act mostly together. Companies must decide how best to leverage the growing power and economic integration of these two economies. Too many cables pass through heavily trafficked choke points like the Strait of Malacca or the Suez Canal.  Accidents in these choke points cause several hundred disruptions of the global undersea system each year. The spectrum of conceivable possibilities ranges from a new affirmation of mutual dependence and a de-escalation of tensions, probably focused on a common commitment to decarbonisation, to some form of localised war (especially if China invades Taiwan) threatening to spill over into global conflict. Do also look out for the next episode of our World Review podcast, on which Emily and I will be joined by Courtney Fingar of Investment Monitor and Sommer Mathis of City Monitor (another new NSMG site, focused on urbanism) to discuss US-China decoupling and other mega-stories that define the backdrop to the US election. This optimism continued well into the 2000s, as trade soared following China’s entry into the World Trade Organisation and attitudes on both sides acknowledged that with the country’s rising prosperity came both greater leverage over the US and geopolitical power in the world. But, in the longer term, "one belt, one road" is a strategy to use Chinese resources to tie Europe and Asia more closely and efficiently to each other and to China.  The added efficiencies of its planned railroads, highways, pipelines, power grids, fiber optic cables, and air and sea ports respond to real market requirements and opportunities. Now, however, parts of the process that began in Shenzhen in 1980 are going into reverse. They were the decade in which, in the process, geopolitics started to dictate economics, and the integration, by some measures, peaked and started to decline. According to the OECD, China is on its way to a 69 percent urban population by 2030. What we can do is find ways to leverage China's rising prosperity to boost our own.  To do this, we need to ramp up our competitiveness and deal with the world as it is, not as it used to be. It produced half of global GDP and held seventy percent of the world's gold reserves. A key building block in this effort is the so-called "regional comprehensive economic partnership" or RCEP. Investing in roads, railways, fiber optic cable, and power generation and distribution assets outside China could enable the productive use of China's industrial overcapacity, stabilizing employment and the Chinese economy. Elsewhere on the New Statesman, Emily Tamkin reports on its impact on the US election, and Ido Vock and Michael Goodier chart the social ties between the two countries. If nothing interrupts this process, it will reverse 40 years of increased trade, financial and economic integration of the two countries. Washington has lost intellectual command and practical control of geopolitics in the Indo-Pacific region. Still, if these initiatives work at all, they will have enormous geopolitical impact. That was particularly the case after the global financial crisis. An initial tranche of $50 billion has been committed to a new Asian Infrastructure Investment Bank (AIIB). Reflecting on Chimerica in 2009, Ferguson wondered whether it would speed up China's rise and delink it from American consumption. If the 1990s were the era of the Golden Arches theory, and the 2000s the era of the peaceful rise and Chimerica, then the 2010s were the era of the “Thucydides trap”. Tech Monitor, a new sister publication of Investment Monitor focusing on the tech industry, has reviewed the growing impact this shift is having on technology supply chains. A lot more money is on the way. This is an area with a population of 4.4 billion and a current economic output of $21 trillion. It tells a complicated story, of US-China entanglement in some fields but not in others. The China expert Julian Gewirtz describes three schools of thought in the Chinese elite today: those who embrace the ongoing interdependence of the two economies; those who think Beijing should use that interdependence to “win” the trade war; and those who want to cut the dependence. On Wednesday 14 October, Xi Jinping visited Shenzhen to mark 40 years since its establishment as China’s first special economic zone (SEZ), which the president dubbed "a miracle in world development history". The U.S.-China economic relationship has reached a critical juncture. Chinese state-owned enterprises have more money for infrastructure build-out than they can profitably deploy in China, where returns on such projects are very low at present. China’s Reform and Economic Integration with ASEAN The discussion panel at the seminar “40 Years of China’s Reform and Implications for ASEAN”. So now, as the US approaches an important presidential election on 3 November and questions about its wider future abound, the New Statesman Media Group is joining forces to tell that story. US technology companies such as Apple, Microsoft and Google are all reportedly looking to move their supply chains out of China. In support of this, China seeks to inspire mergers, acquisitions, and green-field investments to create what might be called "multinational companies with Chinese characteristics," some with headquarters in Europe or elsewhere outside China. China Development Bank says it will finance up to $1 trillion in "one belt, one road" projects. To put this in perspective, it is more than ten times Washington's historic commitment to the Marshall Plan, which totaled $120 billion in today's dollars. The Rise and Future of China as an Economic Power As the People's Republic of China turns 70, its leader focuses on hyper-growth. Here on the New Statesman’s international team, US editor Emily Tamkin reports on China as a factor in the presidential election campaign. They are additive and do not supplant them. The process of China meeting CPTPP standards could help economic liberalisation at home, just as China’s entry into the World Trade Organization unleashed China’s economic boom. The United States is in denial about the nature and direction of change in the global political economy. Economics Biden, Like Trump, Will Deepen Integration With China Over the past four years, economic ties between Beijing and the rest of the world have only strengthened.  But the initial emphasis on state-owned enterprises replicates the infrastructure-investment-led approach to development that has run out of steam in China's domestic economy. The American and Japanese decision to boycott the Asian Infrastructure Investment Bank and related Chinese initiatives is a major forfeiture of strategic influence. … $46 billion has been allocated to the China-Pakistan Economic Corridor. A second will cross the Karakorum Mountains and branch into two lines: one reaching Pakistani ports on the Arabian Sea; the other crossing Iran to Turkey, the Mediterranean, the Black Sea, and Southeastern Europe, with a branch connection to the Arabian Peninsula. Shorter routes are the keys to speed – and profit.  And routes under Chinese, Russian, and European control will arguably be more secure from exploitation by the much-feared U.S. National Security Agency. 25/11/19 RCEP crucial to ASEAN, China economic integration–Dominguez. China has a record of making extravagant offers of credits abroad that are then underutilized. [CDATA[/* >