China is one of the few countries in the world today with money to spend, and Xi Jinping is ready to write some checks. China’s president will host almost 30 world leaders in Beijing on Sunday at the first Belt and Road Forum, the centerpiece of a soft-power push backed by hundreds of billions of dollars for infrastructure projects. More than 100 countries on five continents have signed up, showing the demand for global economic cooperation despite rising protectionism in the U.S. and Europe.
For Xi, the initiative is designed to solidify his image as one of the world’s leading advocates of globalization while U.S. President Donald Trump cuts overseas funds in the name of “ America First.” The summit aims to ease concerns about China’s rise and boost Xi’s profile at home, where he’s become the most powerful leader since Deng Xiaoping died in 1997.
It has the potential to remake global — particularly Asian — trade and economic patterns.The strategy also carries risks. The initiative is so far little more than a marketing slogan that encompasses all sorts of projects that China had initiated overseas for years, and major world leaders like Trump, Angela Merkel and Shinzo Abe are staying away. How Xi answers a range of outstanding questions will go a long way in determining its success.
Key to reducing uncertainty will be addressing the concerns of strategic rivals like India, Russia and the U.S., particularly as China’s growing military prowess lets it be more assertive over disputed territory. Chinese moves to spend more than $50 billion on an economic corridor in Pakistan, build a port in Djibouti and construct oil pipelines in central Asia are all creating infrastructure that could be used to challenge traditional powers.
In September 2013, when Xi first pitched the plan at an obscure Kazakhstan university, he focused on the Eurasia landmass. Since then, it has repeatedly changed names and expanded to include the entire world, with the main goal of rebuilding the ancient trading routes from China to Europe overland and by sea.
One key driver was economic: China wants to spur growth in underdeveloped hinterlands and find more markets for excess industrial capacity. With more than $3 trillion in international reserves — more than a quarter of the world’s total — China has more resources than developed economies struggling to hit budget targets.
The plan gained steam last year when populist movements spurred a backlash against trade and immigration in the U.S. and Europe. Brexit raised questions about the European Union’s viability, while Trump’s withdrawal from the Trans-Pacific Partnership gutted the biggest U.S. push to shape global economic rules.
Xi wasted no time filling the void. With exporting nations looking for a free-trade champion, he told the global elite in Davos, Switzerland, to resist protectionism and join China in boosting global commerce.
The U.S. and Europe “almost unwittingly” created space for Xi to push China’s interests.China is offering an alternative to the U.S. version of globalization. In the Chinese case, it’s globalization paved by concrete: railways, highways, pipelines, ports.
This year, five European countries — Denmark, Finland, Switzerland, France and Italy — openly voiced support for the initiative. On trips to China in February, Italian President Sergio Mattarella proposed plans for the ports of Genoa and Trieste, while French Prime Minister Bernard Cazeneuve attended the arrival ceremony of a freight train from Lyon.
The summit will feature the likes of Russia’s Vladimir Putin, Greece’s Alexis Tsipras and the Philippines’ Rodrigo Duterte. The U.S. will send Matt Pottinger, a special assistant to Trump and senior director for East Asia on the National Security Council.
China has invested more than $50 billion in Belt and Road countries since 2013, according to the official Xinhua News Agency. Credit Suisse Group AG said this month that China could pour more than $500 billion into 62 countries over five years.
China’s state-run companies like China National Petroleum Corp. and China Mobile Ltd. — the world’s largest wireless carrier — are positioned to reap the rewards. Executives from six of China’s largest state-run firms sought to reassure the public this week that the risks were manageable.
China’s three development banks, its Silk Road Fund and the China-led Asian Infrastructure Investment Bank were involved in $39 billion of lending outside of the country last year, up about 50 percent from 2014. What OBOR does is basically connects hundreds of millions of people, hundreds of millions of markets. China gains from this.
Still, financial hurdles are starting to appear. China’s slowing economic growth has left fewer resources to spend overseas. Its international reserves have fallen about 6 percent over the past year, and China needs a healthy amount to defend the yuan.
Some previous Chinese ventures abroad have turned sour. While China’s no-strings-attached approach to investment is generally welcomed by developing countries, they often have poor credit ratings and questionable governance. China has struggled to recoup loans in Venezuela and Africa, and several projects in Central Asia have spurred protests. Announcements with big dollar signs often fail to materialize.
Nonetheless, Chinese scholars see the sum of Xi’s plan as bigger than any individual project. It represents a “profound change” in how China interacts with the world.