Monday, July 24, 2017

One Belt, One Road (updated)

Chinese is building two modern silk roads, one by land and one by sea. It has been participated by more than 60 countries. It is a $3 trillion infrastructure campaign funded mostly by China. The idea is from President Xi and was initiated in 2013. There are multiple purposes:

·         Improve transportation of products and mineral resources between China and Europe.
·         It provides better market for Chinese products.
·         Enrich the wealth and living standards of the countries between the routes especially the developing countries, which should benefit when US and the West reduce their foreign aids.
·         Eventually China’s higher-value products will catch up with the West and the US. When the developing countries are richer, they are the target markets.
·         It could reduce some conflicts. Philippines received billions on the loan and has downplayed the islet conflict with China. Hence the chance of Chinese military interference would be reduced.
·         China’s Yuan could be used as the reserve currency instead of USD.
·         Improve China’s political and cultural influences in these countries.
·         China needs their energy supply, natural resources, trade and road to Europe.
·         Most infrastructure products are financed by China and built with Chinese management and technologies, hence using China’s excess capacity such as building roads and bridges.

Many developing countries will be benefited by financing their projects via Asian Infrastructure Investment Bank (AIIB), which is mainly funded by China. China may supply most of their services such as building factories or improving ports. However, China will not see their profits from the investments in the short term. Some loans will be partly donated to friendly allies.

US is not participating in this campaign. We will not benefit from these agreements and we will lose our influences to the developing countries. However, some big projects require advanced technologies and they will be supplied by US corporations such as turbines from GE. Honeywell and Caterpillar will likely benefit. India may not participate due to the road thru a territory claimed by Pakistan.

As in most projects, China will face problems and challenges. Thailand and Indonesia are modifying their original railroad projects. The project is easily accepted in developing countries but not in developed countries such as EU. China is having its own economic problems. Some projects may not pay back and China would end up losing money. China needs to analyze the projects carefully. China has to settle the islet disputes in South and SE China Sea. The natural resource prices are lower than 3 years ago.

It is better to invest in profitable infrastructure projects than selling destructive weapons. Many finished projects such as the major railway in Africa do not benefit China and even the host so far. They need to select those projects that are beneficial otherwise it would be a waste of resources. A train started from a Chinese city to arrive in London and another one to Madrid. In general, it is faster than sea route and less expensive than air fright. Or, it is more expensive than sea route and more time consuming than air fright. Many products such as red wine are suitable to ship by train. It also depends how far the products are from the closest seaport or railway station.

Trade: China’s export,   
One Belt, One Road: Episode 2, 3, 4, 5, 6, 1 (poor screen quality)
There are many articles on this One Belt, One Road Initiative (OBOR). Google it for recent articles. Here are some: Wikipedia, US & Heritage.

#Filler:  Victim?
We’re a victim of our own success: A higher living standard means higher wages, more protections to our workers, more regulations for our environment…

# While dancing forward, President Xi said, “I’m a lover, not a fighter”.
While dancing backward, President Trump said, “I’m a fighter, not a lover” and followed by saying, “You’re fired before you fire me.”

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