Posts   |   Bloomberg Businessweek Misses the Point on the New Silk Road

November 28, 2015
Bloomberg Businessweek Misses the Point on the New Silk Road

Bloomberg Businessweek’s Michael Schuman takes on China’s One Belt, One Road — and is not impressed. Or, rather, he sees it merely as a program that is “all about China” and “designed to forward Beijing’s strategic and economic interests around the world—at the expense of the West’s—and offer lucrative opportunities abroad for Chinese companies enduring a slowdown at home.” He writes plainly that “it’s a boondoggle that could set back China’s reform, expose its banks to financial risk, and alienate the very nations it’s meant to woo.”

The piece essentially portrays One Belt, One Road as a threat to the West and a risky Chinese white elephant. He writes: “China’s international infrastructure push is, after all, a diplomatic endeavor, one to which the reputation of the state has become intimately tied… That could turn China’s grand Silk Road dreams into an even grander disappointment.”

Schuman’s piece reflects some of the unease I hear in elite level and popular discussions about One Belt, One Road – that it’s a self-interested Chinese play to build infrastructure to give contracts to Chinese companies, build closer trade networks, and tie emerging economies closer to Beijing. This misreads the enormously transformative nature of the initiative on the recipient countries – which is a net-plus for a global economy in search of new sources of growth.

Throughout the piece, however, a slight counter-narrative emerges.

Schuman writes: “Beijing’s initiatives may lead to a sort of ‘development competition.” between the U.S. and China, in which Washington feels compelled to increase its own assistance and financing for the emerging world, as has already happened in Africa.”

This would be a good thing. Washington SHOULD indeed get back in the development business with serious investment in infrastructure. It’s good for America, good for US exporters, and good for the global economy.

Schuman also writes: “Still, the news for the West isn’t all bad. By improving infrastructure, China could help lift growth in poor nations—and the entire global economy. The construction projects will potentially create business for engineering and other companies from the West, too. ‘We shouldn’t freak out too much about what the Chinese are doing,’ [Scott] Kennedy [of CSIS] says. “There’s a huge strategic opportunity for the U.S.”

That’s the key point. I agree with Kennedy, but I also am generally a believer in infrastructure-led development. As far as I am concerned, I’m not worried if Beijing only manages to get one-third of its projects done — and loses face on the other two-thirds. That’s still one-third more key infrastructure than we had before the initiative.

That same new port or railway financed by the Chinese will allow trade with the broader world. All we need to do is look around at the emerging markets success stories, and they all have one thing in common: infrastructures that promote connectivity with the global economy. A well-run container port is a powerful enabler of growth. Just look at Dubai and Jebel Ali port – a key feature of Dubai’s growth story.

Those same ports financed by China can receive a whole a lot of U.S goods too.

For the full piece, see link here