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Clingendael Institute: Silk Road Headlines

Some institutions utilize big data to predict trends, e.g. global wealth and power. The Lowy Institute Asia-Power Index provides insight on the influence of 25 countries in Asia. An interesting observation is that China might be less dependent on the international market in the mid-long run, given the fact that its middle-class (read: Gross National Income) will grow until 2030. Yet, its demography might become a challenge, since the workforce might decline with around 158 million. This might be attributed to a growing number of elderly workers (people over 60). Also, the presence of the People's Liberation Army in BRI-countries is not always welcomed with open arms [Five big takeaways from the 2019 Asia Power Index]. All in all, steps are being taken to transform the Chinese economy from a producing market into a consuming one, similar to that of the United States.

Analysts assume that the Sino-US trade war will have a cascading effect on the global arena. The scenarios are straightforward and well summarized. An escalating trade war would impact foreign exchange markets through multiple channels: shifting trade flows, as well as expectations on growth and monetary policy. Basically, this means that multinationals need to rethink their supply-chain in order to produce goods at a cost-effective price, which will affect GDP and inflation rates in the countries involved [A $600 Billion Bill: Counting the Global Cost of the U.S.-China Trade War]. Essentially, the trade war could also delay the internationalization of the Yuan in the long run.

An intriguing consideration is the power play between BRI and the financial market in general, which is highlighted in the second half of the article [Making a multilateral Belt and Road]. How much is China willing to give up on (or sacrifice) national interests to safeguard the growth of BRI through the usage of (foreign) investors? It all depends on the goal of the affiliated institutions (AIIB and SCO - Shanghai Cooperation Organization) and that of the BRI itself. It seems that certain institutions are acquiring a more multilateral character, which is beneficial for the region, ergo, the influence of China. This might provide a healthy investment climate, by setting up clear rules for mitigating the involved risks, but also to commit to the UN SDG goals in order to realize long-term growth and tackle environmental issues. However, it is not yet clear how the Chinese taxpayers will react, if they perceive that their tax money might be squandered. A delicate balancing act, to say the least.

The recent recalibration of the BRI provides enough food for thought. As the BRI matures, so does its string of investment projects/proposals. Yet, its foundation is firm. Currently, BRI is expanding across multiple continents with varying levels of success. Nonetheless, it keeps on growing and is becoming ever more popular. However, as Warren Buffet once stated: 'Bad things aren’t obvious when times are good'.

A. Cikmazkara

This week's Silk Road Headlines

Connecting the dots: Challenges to EU connectivity in Central Asia [ISS]

A Eurasian Central Clearing Bank Is The Next Logical Step For China, Eurasia And The Belt & Road [Silk Road Briefing]

Asia’s shot at global leadership through RCEP [East Asia Forum]

Making a multilateral Belt and Road [East Asia Forum]

Five big takeaways from the 2019 Asia Power Index [Lowy Institute

]In Counter To China, India Scores Big Sri Lanka Port Deal With Japan [NDTV]

At the Dawn of Belt and Road: China in the Developing World [RAND]

A $600 Billion Bill: Counting the Global Cost of the U.S.-China Trade War [Bloomberg]

New report on the Chinese Belt and Road Initiative predicts boost to global GDP “by over $7 trillion per annum” [CIOB

China’s Middle East Model [CSIS]

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