China’s Challenge to America: Its Role as the World’s Builder
By John F. Copper

China’s Challenge to America: Its Role as the World’s Builder

Jun. 23, 2016  |     |  0 comments

For some years, the two major challenges China’s external aid and investments presented to the United States came from the huge amount of money China possessed and employed to provide financial help to developing countries and the fact China did not comply with the Western definitions (and rules) of aid and investing.

Now there is a new challenge: China has won the title of the “world’s builder” as a result of it applying its monetary resources via aid and investments and the expertise it has acquired by building at home to constructing roads, railroads, dams, communications facilities, pipelines, ports, economic zones and more to projects abroad. America was once the world’s “connector”: building the Panama Canal and other super-sized projects while bringing the world together by constructing railroads, road, etc. and via aid and trade. That is no more.

In two realms in particular China has increased its influence, which is vexing to the United States. One, it has built pipelines through Russia and Central Asia as well as through Burma to South China and is looking at one to pass through Pakistan. This diminishes the importance of the US Navy in protecting China’s oil lifeline to the Middle East, which makes China beholden to the United States and willing to make concessions to Washington on other issues.

Second, China has come to control world trade to a significant degree. In the first decade of this century, China became the world’s leading nation in attracting foreign investments and in exporting goods and services, while its imprint on contributing to the planetary product became the largest of any country. In 2013 China became the world’s foremost trading nation. In all cases, it took the top positions from the United States.

All of this means the United States is no longer the axis of the world’s economic activity. It had held that honor since World War II.

The import of this is now underscored, and amplified, by China’s Herculean efforts to rebuild and expand (actually transform it into a modern transportation system) its ancient Silk Road and add to it a maritime route, the combined effort being known as the “One Belt, One Road” project. Launched three years ago as an action plan, it is now being put into operation and has already gained acclaim as the world’s largest ever such project. No doubt its impact will extend much further than just routes to facilitate trade.

China, it is estimated, will expend USD 1 trillion on the effort. Together with China’s Asian Infrastructure Investment Bank’s contribution, which will inject billions of dollars into road building and other related projects, the total of China’s financial contribution to “bring the world together” will be USD 1.25 trillion or more in just nine years. Putting this into perspective, America’s vaunted Marshall Plan to facilitate the economic recovery of Europe after the war, in today’s dollars, was just over USD 100 billion.

“One Belt, One Road” will span more than 60 countries representing 40 percent of the world’s gross domestic product. It will involve and link up countries in Northeast Asia, Southeast Asia, South Asia, Central Asia, the Middle East, Europe, and Africa. It will create a situation of “All roads lead to Beijing.” It will generate mutual dependency between China and other countries — more on the part of other countries because China is economically so much larger and is the world’s foremost trading country. It will give China considerable control over the world’s transport, both on land and on sea.

China, it is estimated, will expend USD 1 trillion on the effort. America’s vaunted Marshall Plan to facilitate the economic recovery of Europe after the war, in today’s dollars, was just over USD 100 billion.

Some nations and regions are especially important. They deserve special mention in assessing the impact of China’s building efforts.

Pakistan is the sixth largest country in the world by population. It is the second largest Islamic country. It is one of the world’s seven nuclear powers. It is critical geopolitically to the United States in its war on terrorism, being a link to Afghanistan and for its influence among Islamic nations. It has been the top recipient of China’s aid and investments in recent years.

Building infrastructure projects in Pakistan has dramatically increased China’s influence there. At present China is in the process of distributing USD 46 billion more in funds to construct roads, railroads, pipelines, and hydro and other energy projects, most of which are a part of the vaunted “economic corridor” that ties Pakistan from the Indian Ocean to China’s southwest. This eclipses the USD 7.5 billion in US financial assistance to Pakistan since 2008.

Last year China’s trade with Pakistan was USD 16 billion, up 12 percent from the previous year. Both are around triple the figures for US-Pakistan trade. Pakistan has been much friendlier toward China as a result, while US influence has waned.

China’s aid and investments in building have profoundly impacted every country in Southeast Asia. China is a major trading partner of all of the countries in the region. China’s work on the Mekong River project and fast train lines connecting all of the countries of Mainland Southeast Asia to China have helped Beijing expand its influence in the region.

As a result the US has had only marginal success in getting support for its policy of trammeling China’s involvement in the South China Sea and its efforts to build closer relations with Vietnam, Burma, and the Philippines. The three cannot disregard China’s Leviathan economy, its role as a trading partner, and its importance as a builder. Plus China is close-by.

American strategists have long felt they could disrupt China’s relations with Russia as the United States did in the late 1960s and after. But China’s money and its building of railroads and pipelines have helped Russia financially and have kept the two allies close, much to the chagrin of Washington in its efforts to deal with Vladimir Putin in Ukraine and elsewhere. The “alliance” also makes it harder for the US to challenge China in the North China Sea and the South China Sea.

China’s building, together with its aid and investments, in Mongolia and the countries of Central Asia — like its roads, railroads and pipelines in Pakistan and Burma — have helped China acquire needed energy and natural resources without using sea transport. China has also found new markets for its products. US influence there has declined.

While Africa is included in the Maritime Silk Road, China is also separately developing roads, railroads, dams, communications facilities, pipelines, ports, and economic zones on the continent. Almost every African country is a beneficiary of China’s building. In fact, China’s financial help has given Africa unprecedented economic growth, making it the second fastest-growing region in the world (after Asia). African leaders regularly praise and thank China for this.

Latin America is similar. China is building roads, railroads, pipelines, and more, in America’s backyard. A region that used to be America’s exclusive sphere of influence is no more.

China is also into future giant projects (besides “One Belt, One Road”), once the purview of other nations — especially the United States. It has proposed new canals to link the Atlantic and Pacific oceans. China has discussed with the government of Thailand to build a canal across the 30-mile Kra Isthmus in the southern part of the country. The Kra Canal may become a link in China’s maritime Silk Road and shave the transport costs from the Middle East and South Asia to the Far East.

Beijing’s leaders have even broached the idea of building an undersea tunnel to Taiwan and another under the Bering Sea to connect Asia and North America. Its Bohai Strait tunnel launched in April this year to connect two areas in North China by ultra-fast trains will provide the experience.

China is also a world leader in advancing green energy. It builds dams, nuclear power plants, and solar farms. It is embarrassing that it has assumed a central role in these realms while the United States preaches enlarging renewable energy.

China has proposed new canals to link the Atlantic and Pacific oceans. It has discussed with the government of Thailand to build a canal across the 30-mile Kra Isthmus in the southern part of the country.

China has funneled much of its aid and investments through three regional organizations that China controls or influences: the Shanghai Cooperation Organization, the Association of Southeast Asian Nations, and the Forum on China-Africa Cooperation. All of these organizations are large in terms of the nations participating and their total economic impact, and critically America holds membership in none of them. (Incidentally, regional economic bodies in recent years have largely overshadowed the efforts of global organizations in promoting economic growth.)

The success China has had in building and the global reputation it has achieved for it have greatly enhanced China’s global power and influence — mainly at the expense of the United States. As a result, the Obama administration has reacted negatively.

President Obama tried to persuade other nations not to join China’s Asian Infrastructure Investment Bank. But he did not succeed. Most Asian countries have gladly participated. Even US allies, such as the U.K., have ignored Obama’s plea.

Ditto for President Obama’s call to not permit the Chinese currency, the Yuan, to become a global currency (as this would amplify China’s financial influence throughout the world and diminish the role of the US dollar). Last year the Yuan became one of the “core currencies” making up the International Monetary Fund’s Special Drawing Rights or SDRs, often called the “IMF’s currency” or “global money.”

Reportedly the Obama administration has also put pressure on the government of Thailand to reject China’s Kra Canal proposal.

President Obama’s moves seem to reflect pique or a reaction based on jealousy over the US being upstaged by China. It may also relate to Obama’s concern over his legacy.

Many observers note that Obama’s (originating from Secretary of State Clinton in 2011) Asian pivot is the only tenet of his foreign policy that might deserve being tagged a doctrine, and it has not fared well. Some consider it a reactionary anti-China containment policy. Many label it a strategic (military) policy that is a zero-sum (my gain is your loss) construct. Asians prefer a non-zero-sum system based on economic relations.

President Obama has added an economic “leg” — the Trans-Pacific Partnership agreement. It is designed to limit China’s influence over world trade. But it has been slow to develop and currently seems to be in limbo, with both of the US presidential candidates opposing it.

One might wish the United States, given its long-time commitment to assist developing countries enjoy economic growth, would cooperate with China rather than obstruct.

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