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China’s One-Belt-One-Road initiative is not just about economics

April 25, 2017

By: Sanjaya Baru

Britain used to be called a nation of shopkeepers. China can be called a nation of contractors. Having built its way up to become a $10-trillion economy, China is saddled with over-construction at home and is looking for new construction opportunities worldwide.

The One-Belt-One-Road (Obor) initiative is partly driven by the need to sustain investment, even as domestic consumption and world trade are unable to sustain growth. This much is obvious. But this is not the full story. China’s long-distance construction activity, both across China itself (from the east coast to Xinjiang and Tibet) and across Eurasia, has been driven as much by these economic calculations as it has been by geopolitical ones.

There is no other part of Obor that is manifestly geopolitical in its scope than the $46-billion China-Pakistan Economic Corridor (CPEC). Even Pakistani analysts have questioned its economics. Yet, China insists that the CPEC is only about economics.

Responding to Indian concerns about the CPEC passing through territory that is still legally India’s — Pakistan-Occupied Kashmir (POK) and Aksai Chin — Chinese foreign minister Wang Yi recently said that the CPEC was an economic project for the “purpose of serving economic cooperation and development. It has no direct link with political and boundary dispute.” Wang then dangled a carrot, stating, “Obor is for common development of all participants. So, we welcome India to take active part in building the Obor.” Ah! Construction projects?

Geopolitical analysts have long argued that China’s rise has so far been unique in that, unlike most other ‘Great Powers’, it has become one without firing a single shot. This is not entirely true since China has fired at least three times in the past half-century: at the Soviet Union, at India, and at Vietnam. But it is true that China’s has so far risen more as a ‘geoeconomic’ power, using its economic muscle to browbeat difficult neighbours and economic partners. Consider some recent actions on the economic front that China has taken, or threatened to take, in the case of Britain, the Philippines, Mongolia and so on.

Make Trade, Not War
As a geoeconomic power, China has used its economic muscle to achieve geopolitical aims. This is not news. Over the last two decades, China has locked the West and Russia into a relationship of economic dependence by offering to their consumers lowcost consumer goods. Russia President Vladimir Putin knows better than anyone that restive Russian citizens have been kept happy with access to low-cost goods from China. Deprived of that source, the Russian consumer would become sullen.

The US has so far shied away from fighting its dependence on China and President Donald Trump is the first leader to insist that Americans ‘buy American’ and China better get used to ‘fair trade’ terms rather than ‘free trade’. The proof of that puddingwill be in the eating. It was not happenstance that the first Chinese to call on Trump was Alibaba executive chairman Jack Ma.

It is only pure economists, innocent about geopolitics, who insist that trade is a win-win game and economic interdependence contributes to peace. It was one of the pious tenets of the Washington Consensus in economics that no two trading partners have ever gone to war.

Leonid Brezhnev’s Soviet Union and Mao Zedong’s China disproved that dictum, just as Margaret Thatcher’s Britain did when it attacked Argentina, a trade partner.

Hanging by a geopolitical thread

There are many such examples. So, China’s assurance that Obor is ‘merelyan economic and development project’, and that India should not object to it merely because of territorial disputes, carries little weight, if any. The list of 28 heads of state and government who have confirmed their attendance at the Obor Summit on May 14-15 in Beijing is a mix of Asean (Association of Southeast Asian Nations) and European Union (EU) countries, Russia, and a couple of African nations. This is not a particularly high-profile gathering. So, there is no reason why Prime Minister Narendra Modi should attend it.

The Modi government’s stance, that China needs to explain to it the Obor initiative and the CPEC project before it can take a view, has widespread political support at home cutting across party lines.

Reliance on Geo
China’s economic initiatives on the foreign trade, investment and infrastructure construction fronts have underscored the wisdom of Nobel laureate economist and professor Thomas Schelling’s famous words, “Aside from war and occasionally aside from migration, trade is the most important relationship that most countries have with each other. Broadly defined to include investment, shipping, tourism and the management of enterprises, trade is what most of international relations are about. For that reason, trade policy is national security policy.”

In short, the Obor initiative, much less CPEC, is not just about economics. Without doubt it is about geoeconomics — the deployment of economic instruments in pursuit of geopolitical objectives.

The writer is Honorary Senior Fellow, Centre for Policy Research


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