Mark Tanner

The Lion, The Dragon and the Belt Road

2017/04/12 Mark Tanner
If “The Belt and Road” still sounds unfamiliar, it won’t be for long. A colossal trade network is currently taking shape, weaving through continents with China at its core powering the expansion. Officially denoted the Silk Road Economic Belt and the 21st Century Maritime Silk Road, this project’s ambition is unparalleled. Xi Jinping’s pet legacy project aims to revitalize the trade routes which formerly shrouded the country in glory.

$100 billion worth of deals with 61 countries have already been inked, with a further $4-$8 trillion expected to be invested over the project’s unspecified lifetime. The development strategy signifies immense investment into infrastructure. Whether it be rail, port or road, capabilities are surging to connect and heighten cooperation between China, Asia, Europe, East Africa and Oceania.

For many recipients of this investment, new infrastructure will increase both China and global trade. Greater wealth will flow to these countries and the global economy will boost as a result. We’re already starting to see an improved flow of goods across Eurasia; trains now link 12 European cities to 16 Chinese cities, creating trade connections that are far faster than ship, and much cheaper than air. Rail freight leaving London can be in Beijing 18 days later. Even then there are still train swaps along the way due to different track gauges, leaving room for greater expediency.

However the project has not been all smooth sailing with some trade routes passing through volatile regions. Notably, investment and cooperation hasn’t always been welcomed either. Last month Australia rejected a deal to align a $5 billion AUD state infrastructure fund with China’s Belt and Road initiative over fears it could damage relations with the US and induce a domestic political backlash to growing Chinese clout.

As an integral trading partner for many regions and the biggest export market for 43 countries (including Australia) China has much to gain from these initiatives. Reliance breeds compliance and The Belt and Road will only make more countries reliant on China for trade.

We are increasingly seeing the entanglement of China’s growing trade and its political goals. K-Pop celebs, Korean cosmetic brands and workers at Hyundai have seen their sales in China halve surely must be weighing the benefits of the THAAD defence installation. The Japanese saw the geopolitical effects on trade in 2012 and we may even see it with Trump, although the meeting with Xi Jinping in Florida over the weekend may have tempered that somewhat. One of the few concrete notions stemming from the ‘Citrus Summit’, a 100-day plan was agreed upon to help lessen the widening US trade deficit with China.

It will be a long time, if ever, before China holds the soft power that the US does. Hollywood, music and sport fuel powerful influence over ideals and brand preferences. And yet unlike superpowers before them, China hasn’t implemented its rule through war – a tough feat in today’s interconnected world. Their near unfathomable trajectory to the top of the world stage stems from the much more passive, yet equally as powerful approach of becoming the integral cog of global trade. The resulting effect has seen countries quick to appease China, from dropping their territorial disputes to avoiding hosting the Dalai Lama.

Love it or hate it there is no denying China’s influence in the world will only grow, especially in the wake of The Belt and Road initiatives. The ability of brands exporting to China to alter this is minimal, yet it is a good idea to be aware and plan for situations where it may influence trade issues in your country. Go to Page 2 to see this week’s China news and highlights.

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