China's Belt and Road to Nowhere

Beijing’s mixture of political and economic priorities may not result in an overall Belt and Road policy formula that is workable.
By Christopher Whalen

A great deal of attention is being paid by Western media to China’s ambitious Belt and Road Initiative, the most ambitious foreign-policy initiative yet for paramount leader Xi Jinping. 

Launched in 2013 under the slogan “One Belt, One Road,” the effort involves China spending billions of dollars on infrastructure projects in countries along the old Silk Road linking it with Europe.
The ambition of Xi is immense, but it is largely driven by insecurity. 

Western media parrots China’s propaganda about the Belt and Road Initiative. 

“Its ultimate aim is to make Eurasia (dominated by China) an economic and trading area to rival the transatlantic one (dominated by America),” reports the Economist.
But in fact the motivations for China are far more simple and direct than this grandiose vision suggests. 

Viewed through the prism of China’s economic progress over the past decade, the Belt and Road program is merely a continuation of China’s massive internal investment in infrastructure—only on a larger scale.
China is spending roughly $150 billion annually to build roads, rail lines and other infrastructure in sixty-plus countries that have signed up to the scheme. 

The obvious question is whether China can support such a gigantic effort.
In 1958, Mao announced the “great leap forward,” a program grounded upon the Marxian prescription for the advancement of industrial technology which ultimately resulted in the deaths of between twenty million and forty million Chinese. 

Christopher Balding, writing for Bloomberg View, questions the financial logic of Xi’s version of the “great leap forward” of the Maoist period:
China's just-completed conference touting its Belt and Road initiative certainly looked like a triumph, with Russian president Vladimir Putin playing the piano and Chinese leaders announcing a string of potential deals and massive financial pledges. 

Underneath all the heady talk about China positioning itself at the heart of a new global order, though, lies in uncomfortable question: Can it afford to do so?
Foreign analysts often try to understand Chinese thinking and priorities using the commercial and economic logic of the West, but, in fact, asking whether China can afford the Belt and Road effort is to ask the wrong question. 

In the minds of China’s leaders, who fear political instability above all else, the real question is whether China can afford not to spend more tens of billions on infrastructure projects to keep the country’s restive population under control.
Going back to Xi’s meeting with Donald Trump earlier this year and his carefully scripted defense of free trade, the Chinese leader is clearly focused on creating new channels to absorb China’s massive overcapacity. 

“Trade is the important engine of economic development,” Xi said at a summit of world leaders in Beijing that was largely ignored by the United States, European nations and India.
But, in fact, it is investment flows, not trade, that dominates the economic relationship between the United States and China. 

The key challenge facing China is not how to generate greater trade flows, especially away from its primary partner the United States, but how to allocate investment flows given the dearth of attractive investment opportunities in China.
Just as Germany channeled its surplus savings to the nations of Southern Europe, China has been allowing its citizens to invest trillions of dollars in the United States, Canada and other nations, often focused on direct investment in companies and real estate. 

Over the past five years, for example, Chinese nationals ploughed $1 trillion into foreign real estate and other assets.
“The most important economic truth to grasp about the U.S. trade deficit is that it has virtually nothing to do with trade policy,” noted Daniel Griswold of the Cato Institute in testimony before Congress two decades ago. 

“A nation’s trade deficit is determined by the flow of investment funds into or out of the country. And those flows are determined by how much the people of a nation save and invest—two variables that are only marginally affected by trade policy.”
Thus, when we look at China’s massive investment in infrastructure outside of its own borders, we see the imperative of the Chinese Communist Party (CCP), namely political stability. 

Measured in economic terms, many of China’s supposed “investments” along the Silk Road don’t make a great deal of sense.
But viewed from the political perspective of employing China’s people and the accumulation of unused capacity inside the Chinese economy, the Belt and Road makes perfect sense. 

Beijing’s mixture of political and economic priorities will not necessarily result in an overall policy formula that is actually workable. 

Note for example, the November 2016 decision to impose barriers on foreign investments by private individuals and companies.
The de facto currency controls are slowing the outward flow of investment—and dollars—from China, a change that has negative implications for the value of the U.S. currency, the United States real estate market and also implies a weaker Chinese renminbi (RMB).
As we have noted in previous articles for the National Interest, the Chinese RMB has been under pressure to depreciate against the dollar. 

China’s central bank sold over $1 trillion in U.S. Treasury bonds to provide the dollars to slow down the decline (by buying RMB). 

Indeed, over the past several years China’s massive foreign currency reserve shrank from $4 trillion to $3 trillion as the country’s nationals went on a spending spree acquiring real estate and commercial assets in the United States and other nations.
With the imposition of currency controls last year, however, China’s posture as a net investor around the world is changing. 

The propaganda headlines of the Belt and Road Initiative suggest a massive capital outflow to other nations, but, in fact, just the opposite is the case. 

Indeed, the South China Morning Post reports that Beijing's strict capital controls are delaying private investments that are part of the Belt and Road project.
First and foremost the importance of China’s Belt and Road Initiative is political, namely to show Xi Jinping in control of China’s command economy as he consolidates political power as dictator of China and the unquestioned leader of the CCP. 

Under Xi, the era of collective leadership in China is well and truly at an end.
But second—and more important—the continuing effort by China to “pump prime” internal economic activity via gargantuan infrastructure projects, both at home and abroad, reveals a basic flaw in the Chinese economy. 

Only when the political monopoly of the CCP has ended and China’s people are truly free to make economic and political choices will the country be able to provide sufficient investment opportunities at home so that desperate measures such as the Belt and Road spectacle will no longer be necessary.

Historian’s Latest Book on Mao Turns Acclaim in China to Censure

“I wrote this book to expose lies and restore the truth.” -- Yang Jisheng

By CHRIS BUCKLEY

The Chinese author Yang Jisheng in 2013. Mr. Yang, a noted chronicler of the Mao era, has published “The World Turned Upside Down,” a history of the Cultural Revolution. 

BEIJING — It seemed that China’s censors had finally muzzled Yang Jisheng, the famed chronicler of the Mao era. 

Last year, he had finished writing a widely anticipated history of the Cultural Revolution. 

But officials warned him against publishing it and barred him from traveling to the United States, he has said, and he stayed muted through the 50th anniversary of the start of that bloody upheaval.
Now Mr. Yang has broken that silence with the publication of his history of the Cultural Revolution, “The World Turned Upside Down,” a sequel to “Tombstone,” his landmark study of the famine spawned by Mao’s policies in the late 1950s. 

The 1,151-page book is the latest shot fired in China’s war over remembering, or forgetting, the dark side of its Communist past, a struggle that has widened under the hard-line president, Xi Jinping.
“I wrote this book to expose lies and restore the truth,” Mr. Yang writes in the book, which has been quietly published in Hong Kong, beyond the direct reach of Chinese censors. 

“This is an area that is extremely complicated and risky, but as soon as I entered it, I was filled with passion.”
Since Xi took power in 2012, the Communist Party authorities have denounced historians who question the party’s lionization of its past and exhume grim events like the Cultural Revolution, which Mao started in 1966, opening a decade of purges and bloodshed.

Tens of millions were persecuted and a million or more people were killed in that convulsive time. 

But officials say dwelling on such events is subversive “historical nihilism” aimed at corroding the party’s authority.

In a sign of how Chinese politics has chilled, Mr. Yang has said little publicly about the book.
“Since the book was published, I’ve been told not to discuss it with foreign media,” he said in a brief telephone conversation. 

He would not say whether he had authorized “The World Turned Upside Down” to be published in Hong Kong.
“There’s quite a lot of pressure,” Mr. Yang said. 

“I just wanted to restore this big story and the facts behind it, to recover the history.”
Mr. Yang, 76, was a university student in Beijing when the Cultural Revolution erupted. 

He threw himself into the early phase, when Mao unleashed student radicals to purge school leaders and Communist Party cadres.
Mr. Yang later worked as a journalist for Xinhua, the state news agency, watching as the fervor of the Cultural Revolution fractured into disarray and disillusionment. 

After a career in journalism, he turned to writing histories of contemporary China.
Up until several years ago, Chinese newspapers and magazines still published laudatory profiles of Mr. Yang. 

But now he is denounced by Maoists emboldened by the hard-line pronouncements.
Party journals have attacked his conclusion that up to 36 million people died in a famine from 1958 caused by the Great Leap Forward, Mao’s reckless attempt to leap into a communist utopia, which Mr. Yang chronicled in “Tombstone.” 

That book was published in Chinese in Hong Kong in 2008.
“Yang Jisheng is not a historian,” an editorial in Global Times, an ardently pro-party Chinese newspaper, said last year. 

Last year, Yanhuang Chunqiu, a liberal-leaning Chinese history magazine where Mr. Yang was long a chief editor, was taken over by editors much more willing to toe the party line. 

The changed atmosphere was also evident when a court in Beijing ordered a historian to apologize for questioning the party’s heroic account of a 1941 battle in the war against Japan.
Last year, too, Chinese media mostly stayed silent about the 50th anniversary of the start of the Cultural Revolution. 

An exception was an editorial in the party’s main newspaper, People’s Daily, which urged citizens to look to the future.
“Chinese political culture, both past and present, insists that the legitimacy of rulers depends on an immaculate record of what they have done,” said Perry Link, a professor at the University of California, Riverside, who has written widely about Chinese culture and politics.
“They’re afraid that telling the truth about those events pulls the rug on their right to rule,” he said. 

“They want to be damn well sure that history stays inside its box.”
Now that “The World Turned Upside Down” has appeared in stores, the next battle will be over whether people get to read it in China, where such books are banned.
The book began appearing in late December in Hong Kong, which keeps its own system of law, including much greater freedom than is found in mainland China. 

That freedom has shrunk in recent years. 

Publishers there have been spooked by the 2015 abduction to China of five Hong Kong booksellers who peddled lurid potboilers about China’s leaders.
Even so, Hong Kong remains an enclave for books banned in mainland China. 

Piles of Mr. Yang’s book in bookstores there suggest that mainland readers have been buying copies to sneak across the border, despite customs checks.
“Mr. Yang’s work is quite influential inside China,” said Jian Guo, who together with Stacy Mosher translated “Tombstone” into English and is translating “The World Turned Upside Down” with Ms. Mosher.
“Yes, some of his books, including ‘Tombstone,’ are banned on the mainland,” Mr. Guo said. 

“But an electronic version of ‘Tombstone’ has been floating around since 2008, and an enormous amount of pirated copies has been distributed by small book vendors.”
Mr. Guo, a professor at the University of Wisconsin-Whitewater, said the abridged translation of Mr. Yang’s latest book would include about two-thirds of its original content.
“We expect to publish in 2019,” Eric Chinski, the editor in chief of Farrar, Straus and Giroux, said in an email. 

The company also published an abridged translation of “Tombstone” in 2012.
Mr. Yang’s book is by no means the first history of the Cultural Revolution; several were published under official auspices in mainland China in earlier decades as the Chinese government tried to confront the ordeal of the era.
But in recent years, the party has become much more wary about allowing such research. 

Many younger people have only a sketchy idea of what happened when Mao started the Cultural Revolution to purge China of what he saw as threats to the purity and survival of his revolution.
Mr. Yang “wanted his readers to remember the tragedy of the past, whether it was the Great Famine or the Cultural Revolution, to reflect on it, to make sense of it, so that the tragedy would not repeat itself,” said Mr. Guo, the translator.
“He considered this task of a conscientious rememberer to be all the more urgent now in the face of the officially enforced historical amnesia in China,” Mr. Guo added.
Mr. Yang did not have extensive access to archives for his new book, as he did when he wrote “Tombstone.” 

Instead, he drew on hundreds of memoirs, histories and studies, many published in Hong Kong or available online, and there are fewer revelations than in his previous book.
As in other recent scholarship, Mr. Yang emphasizes that much of the worst bloodshed came later in the Cultural Revolution, when Mao brought back the military and party apparatus to brutally enforce order.
“It’s fair to say this is a work by an eminent journalist, rather than a product by an academic historian,” said Warren Sun, a historian of the Chinese Communist Party at Monash University in Melbourne, Australia. 

He said he had read some draft chapters of Mr. Yang’s book, and found a few debatable claims.
But Mr. Yang “was working under very difficult conditions, and thus deserved great respect for his moral courage,” Mr. Sun said.