In Tandem with Africa and Asia
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“One belt–One Drive” – A new Silk Road or China’s Marshall Plan?
‘If you want to get rich, you have to builds roads first’ said Chinese President Xi Jinping in 2014, citing an ancient proverb when announcing the inception of the controversial Asian Infrastructure Investment Bank (AIIB). Alongside the massive $40bn ‘Silk Road Fund’, announced at a similar time by Mr Xi, it is hoped this will fund the “One belt – One Drive” initiative, China’s signature foreign policy. As parallels with the US Marshall plan and implications of economic imperialism continue to be drawn, the key question will be whether the policy proves transformative or exploitative.
Our journey, sadly now coming to an end, has attempted to follow both new and old silk roads as a means to understand the world economy in the 21st Century. The term ‘Silk road’, popularly associated with the ancient overland trade routes from China’s Ancient capital Xi'an to Europe shown above, was in fact only coined in in the late 19th Century by a German Geographer describing East West trade routes. Given Europe’s miserly growth rates this century and Africa’s massive potential, we decided to follow African – Asian trade routes to better symbolize the Silk Road theme, and in particular the journey of natural resources used in smartphone production from African mine to Chinese Factory. In turn, we have told the story through blogs, photographs and skype lessons, using our own Fairphone.
China is increasingly influential in Africa’s mining Sector
Every smartphone begins its lifecycle in a mine
Whilst this may not be the standard interpretation of the ‘Silk Road’, China’s foreign policy initiative has included Africa where it has been the leading provider of bi-lateral FDI, especially in infrastructure, for several years. In our cycle through Africa last year and my last ride there in 2011/12, we saw plenty of evidence of this, especially in Zambia. Whether the investment has been transformative or exploitative for the local population, as I discussed in a blog in 2011, remains an area for debate. Critics claim that the money has benefited the ruling class but hasn’t trickled down to grass routes. We met a chieftainess (unusual in itself), in the rural Northwest who had been flown to China alongside other tribal rulers to help win hearts and minds. Local Zambians meanwhile were often sceptical of Chinese investment. Money spent by China Aid on a brand new football stadium in the Copperbelt, for example, has done little to alleviate the widespread poverty and unemployment. Either way, Chinese investment in Zambia’s crumbling road network certainly improved our enjoyment on the bikes!
A White Elephant in Africa?
Chieftainess Inkelengi enjoyed a business class flight to China
The recent depression in commodity prices, however, has dented optimism on Africa’s potential and China’s foreign policy focus has subtlety switched from Africa to Asia since 2013.
2 years can be a long time for Investors (source:FT)
Within Asia, China’s ‘one belt-one drive’ policy, as well as various maritime ambitions, is represented by various overland rail and pipeline projects going West to Central Asia and Europe and South into South East Asia. We started our journey in Singapore where plans are afoot for a high speed rail network connecting Kunming in China’s Yunnan province all the way down to Asia’s richest city state. We followed this route north and gauged local opinion as to the motives and impact of the potential investment.
Our Route roughly followed the proposed new rail network in SE Asia
In Singapore, a former colleague suggested it was a balancing act for governments trying maintain relationships with both China and the US. The latter is wary of China’s growing dominance in the region, which is playing out dangerously in the South China Sea. Another private sector economist in Bangkok was sceptical whether the project would every complete citing the ‘10 rounds of negotiations and regular stand off over who builds it and where the raw material and labour come from’.
This was also a big issue in Africa where dispute over having too many Chinese workers was a regular feature of infrastructure projects. For many in Thailand, as the economist I met put it, ‘the policy is simply a way for China to export their excess capacity, especially in steel’. Soft loans from Chinese state owned banks conditional on Chinese companies winning contracts were other criticisms I heard from in both Africa & Asia.
Nonetheless, more trade between countries that the new infrastructure will help to create can undoubtedly be mutually beneficial. Economics students here can revert to the theory of Comparative Advantage, the only concept in social sciences that is ‘both true and non-trival’, according to Nobel laureate Paul Samuelson. As discussed above and in my previous blog, exactly who benefits depends on who wins the contracts for building the infrastructure and the terms of trade for the eventual goods and services exchanged in the future. Either way, China spending money on these projects is a more sustainable use of their foreign exchange reserves compared to propping up the US current account deficit through its purchase of Treasury bonds. Moreover, greater trade will hopefully mean there will be less military tension between trading partners, for example over maritime territory in the South China Sea.
Helping build Sino-African relationships in Zambia. Lets hope China and America can toast peace in the South China Sea
Certainly, there is little coincidence that China’s new foreign policy initiative coincides with the aftermath of an investment boom and the associated overcapacity, now in need of new markets abroad. Ironically, could we being seeing Lenin’s theory that imperialism is driven by capitalist surpluses now hold true in one of the last remaining (ostensibly) communist countries. Either way, I hope that today’s new silk roads will follow their predecessors and help spread the exchange of innovation and ideas needed to take the planet peacefully forward. Lenin was writing partly about the causes of WWI. We can’t afford a third.