Rogue Nation

China's Belt And Road Initiative Does Not Support Globalisation, So Much As Subvert It.
By Douglas Bulloch

In this Monday, May 15, 2017, photo, Xi Jinping, front row third right, waves with leaders attending the Belt and Road Forum as they pose for a group photo at the Yanqi Lake venue on the outskirt of Beijing. They are, front row from left, Turkish President Recep Tayyip Erdogan, Vietnamese President Tran Dai Quang, Russian President Vladimir Putin, Xi, Indonesian President Joko "Jokowi" Widodo and Kazakhstan President Nursultan Nazarbayev, and second row from third left to right, Hungarian Prime Minister Viktor Orban, Cambodian Prime Minister Hun Sen, Spanish Prime Minister Mariano Rajoy, Malaysian Prime Minister Najib Razak and Ethiopian Prime Minister Hailemariam Desalegn.

Now that the flurry of breathless commentary – occasioned by China's recent 'Belt and Road Forum' – is subsiding, it is time for another look at this Initiative.' 

Following my earlier piece from a couple of weeks ago, clearly there are plenty of commentators prepared to give it a fair wind and who see it very much as a corollary to the familiar narrative of China's rise to hegemonic status. 

Indeed, some see it as a key part of China's laudable effort to support 'globalisation' so warmly welcomed at Davos earlier this year.
Others remain skeptical, suggesting that it is both lacking in detail, and has failed so far to come up with an answer to the strategic, as well as the economic challenges implied. 

One sharp eyed tweeter last week pointed out that the maps which ordinarily decorate the feature puff-pieces usually include Kolkata in India – a country which is becoming ever more hostile to the Belt and Road initiative – revealing most of them to be little more than aspirational doodles.
In fact, insiders have long known that both Russia and India are concerned about strategic encroachment from China on areas of the world they regard as their own spheres of influence, which is one reason why China has so routinely spoken of the project in terms of 'win win' cooperation. 

At least two years ago, for example, Indian sources began to speak of a 'Project Mausam' as their own variation on the same geopolitical theme. 

Now they talk about the Indian Ocean Region (IOR), referred to by Brookings as a 'pivot for India's growth' which neatly mixes a Chinese style acronym, with a dynamic U.S. reference for its own geopolitical aspirations with the 'pivot.'

Conceptual pathways
In each case, the geopolitical term attempts to describe an amorphous set of aspirations which only hints at the ultimate goal. 

For the U.S., the 'pivot' explained something about a hoped for reorientation that has become ever more confused. 

At the same time, India's growing self-confidence as a future economic leviathan also needs some conceptual pathway towards a strategic presence they cannot yet express, economically or militarily.
To many observers it seems so obvious that China is the coming power, that legions of commentators are stumbling over themselves to herald its arrival. 

China is, of course, happy to play along. 

What was 'One Belt, One Road' has now morphed into the 'Belt and Road Initiative' with everyone taking their cues from Beijing and dutifully using the approved acronym while admitting to uncertainty over its scope.
A week or so after the culmination of the 'Belt and Road Forum' in Beijing and the press coverage has turned hostile in India and skeptical elsewhere. 

Even in China there are quietly expressed doubts about whether it really makes sense in the long run, and indeed, whether China can actually afford it given that such vast infrastructure outlay must generate equally vast returns to pay for it.

Closing down
Setting aside the practical and strategic concerns, there is the small matter of whether China has enough on its plate with its own reform programme? 

Many of those who would like to see China succeed with the Belt and Road Initiative have been cheerleaders in the past for China's opening up, and the broad pathway of liberal reforms they have been following. 

These have come under strain since the elevation of Xi Jinping, but still form a backdrop of expectation, if somewhat deferred. 

Yet while China has become more authoritarian domestically, reversing direction on many market reforms, it has simultaneously taken control of its overseas strategic direction with the Belt and Road Initiative.
There is, therefore, a curious coincidence in the timing of China's most ambitious announcements yet concerning the Belt and Road Initiative, and the progressive closure of China's capital account in the face of unrelenting capital flight. 

Then last week saw the PBOC alter its methodology to include a counter-cyclical factor when weighing the daily rate of the yuan against the US dollar, leading some to suggest this amounts to a re-pegging.
Had China simply liberalised its capital account and allowed the market a decisive role in both capital allocation and price discovery, then the question of where Chinese firms might invest would depend on expected returns. 

However, the current Chinese leadership has stepped back from these long standing commitments and reasserted the central role of the state in economic decision making, through state banks and State Owned Enterprises.
And it is in this approach to driving international trade that the Belt and Road Initiative aligns itself with China's wider retreat from the path of liberal reform. 

Instead of the Belt and Road Initiative serving as a useful conduit for free trade between willing partners, it secures a role for the Chinese state in the direction of trade through investment. 

In other words, it is less the realisation of China's liberal reforms than their final repudiation.
The very idea of the Belt and Road Initiative therefore, might come to be seen as not so much a step forward for China, but as a defensive retreat, an attempt to control the conditions of its opening up, to direct not so much their own affairs, but the affairs of others too. 

It shows as clearly as anything else, that globalisation, as far as China is concerned, comes with conditions, some of which the rest of the world might not be ready to accept.