The New Marshall Plan: The Challenge of Chinese Leadership
By Christopher ChoPublished September 22, 2016Written by Christopher Cho, 9/22/2016
GLOBAL AMBITIONS: Beijing's globe-spanning trade plan seeks to resurrect the Silk Road of old—along with the glory and geopolitical clout that came with it.
For centuries, the Silk Road—a sprawling and ancient network of trade routes—linked imperial China to Central Asia, the Middle East, and Europe. Chinese rulers accumulated tremendous wealth and influence through these thoroughfares, and it appears that President Xi Jinping is nostalgic. "As I stand here and look back at that episode of history, I could almost hear the camel bells echoing in the mountains and see the wisp of smoke rising from the desert," said the Chinese president, speaking before a university audience in Astana, Kazakhstan in 2013. During the speech, President Xi outlined his signature foreign policy initiative: resurrecting those same historic trade routes, along with the glory and geopolitical clout that came with them. President Xi's new Silk Road initiative, a gargantuan project set to surpass the Marshall Plan as the largest-ever program of economic diplomacy, is representative of an assertive China's global aspirations and contrasts Washington's increasingly inward turn.
Known as One Belt, One Road (OBOR), Beijing's plan is comprised of a broad and ambitious confederation of initiatives to construct roads, ports, railways, and other infrastructure across Asia and Europe to integrate China's economy more tightly into the global market. The project is separated into two complementary components. The first is the Silk Road Economic Belt, which aims to connect China to Central Asia and Europe by land; the other, the Maritime Silk Road, consists of sea routes linking the country to South Asia, the Middle East, and Africa. The project is global in the truest sense. OBOR encompasses 65 countries, 4.4 billion people, and 40 percent of the global GDP. Already, China has announced plans to invest nearly $900 billion into countries along OBOR routes. In comparison, the U.S. invested an inflation-adjusted $130 billion into the post-war reconstruction of Europe through the Marshall Plan.
Yet, despite its massive scale, OBOR has largely been overlooked by Western media. This may stem from skepticism of what some consider a nebulous and half-baked trade deal. It would be a foolhardy mistake, however, for Washington to dismiss OBOR as a frivolous vanity project of President Xi's making. Under Xi's watch, the government's bureaucratic organs have positioned themselves firmly behind the president's goals. And to achieve its ends, Beijing wields a formidable monetary arsenal: the newly established $40 billion "Silk Road Fund" has already funded a hydroelectric power project in Pakistan and invested in a liquefied natural gas project in Russia. The freshly minted Asian Infrastructure Investment Bank led by China can also be expected to fund future OBOR projects. Finally, China's foreign currency reserves--$4 trillion—are, by far, the largest in the world.
Beyond the hazy, cordial banners of "cooperation" and "mutual benefit," Chinese enthusiasm for OBOR is grounded in economic and geopolitical considerations.
- Overcapacity in the steel and construction sectors: Constructing railways, roads, and ports abroad will help export steel, which China produces in excess of global demand. Furthermore, investing in nascent neighboring economies could potentially spur greater demand for Chinese goods and services later on.
- Rising domestic labor costs: Chinese businesses squeezed by rising domestic labor costs and an economic slowdown at home are eager to outsource manufacturing jobs more efficiently.
- Trade and energy security: China's current maritime trade routes are acutely vulnerable. In times of conflict, a blockade could have a potentially crippling effect on the economy. OBOR will keep markets open for Chinese goods and services, and secure access to energy.
- Regional leadership and strategy: The most enduring consequence of OBOR's potent cocktail of trade and finance will be bolstered Chinese sway in Southeast, South and Central Asia—regions where the West would like to gain influence—in addition to parts of the Middle East, Africa, and Europe. Furthermore, senior generals in the People's Liberation Army have confided that OBOR will have a "security component," according to one former U.S. official.
For the past four decades, an American-led order in Asia has preserved peace and made a continental economic boom possible. Now, China—the foremost beneficiary of this peace—threatens the very system that enabled its rise in an aggressive bid for regional supremacy. As The Economist's Simon Long pithily observes, "[T]he trend in economics as in diplomacy is towards parallel sets of institutions: the old ones, where America has a leading role; and the new, where it is absent and China dominates." At the same time, however, insurgent populists—the likes of Donald Trump and Bernie Sanders—are advocating unapologetically for an insular America. Incredible stakes hinge on the passage of the U.S.-led Trans-Pacific Partnership, a free-trade pact involving 12 Pacific Rim countries; yet the volume of populist rhetoric has driven even the reliably pro-free trade Hillary Clinton against it.
President Obama once described Asia as "the part of the world of greatest consequence to the American future." Uncontested, OBOR may shape the Asia and the 21st century as dramatically as the Marshall Plan did Europe and the 20th. The ball is now in America's court. Asian countries fretting Chinese domination seek an American counterweight. Indeed, Washington's response to OBOR will determine the role of U.S. leadership in Asia, or lack thereof, in the decades to come.