How Will China’s Economic Belt and Road Initiative Affect World Trade?
On September 7, 2013, China’s ministry of foreign affairs issued a statement noting that in an address delivered at Kazakhstan’s Nazarbayev University, “President Xi Delivers Important Speech and Proposes To Build a Silk China’s Economic Belt With Central Asian Countries.”
An important speech indeed – the first public iteration of Xi’s ambitious, expansive plan to link, by land and sea, economies of Central Asia and South Asia with China and each other and with lands beyond.
Evoking the old Silk Road traveled by Marco Polo in the 13th century, the initial plan had two parts: a land route called the Silk Road Economic Belt and a waterway route called the 21st Century Maritime Silk Road. Together they made up what Xi first called China’s One Belt One Road initiative, a term later replaced by Belt and Road Initiative, or BRI.
Whatever the name, it was a giant undertaking that got underway quickly and has expanded rapidly ever since.
Countries Participating in Belt and Road Initiative as of April 2019
Within fairly short order, it extended to more than 65 countries with a combined GDP of at least $23 trillion and populations totaling 4.4 billion people – roughly 62 percent of the world’s population and 30 percent of global economic output. By 2019, according to Nature magazine, BRI had activities in or arrangements with some 120 partner countries, in all corners of the globe. It is estimated that China eventually will invest between $1 trillion and $8 trillion in BRI projects.
The initiative reaches into the Arctic in a so-called Polar Silk Road and extends into eastern European countries. It encompasses projects in South America, including in Brazil, where China is installing an ultra-high-voltage power line using the technology and expertise applied in the lines it has installed domestically.
In 2019, Italy became the first major Western European country to participate in BRI as it welcomed a commitment by China to upgrade three Italian ports. Later in the year, the small German city of Arnstadt welcomed the overtures of a Chinese company CATL to invest more than $2 billion to build, in an adjoining industrial park, a factory that will produce batteries for electric vehicles.
B-R-I ‘Belt and Road Initiative’
BRI has been termed the largest development project in modern history. Initially it was compared to the Marshall Plan, but its scope has grown far larger as it has burgeoned. It seems as if almost every day you read about a new infrastructure project somewhere in the world that China has a hand in.
The initiative accounts for a large chunk of the coming infrastructure explosion that lies ahead. It truly is an example of China thinking long term – of having “the vision thing” (to use the phrase made famous by a frustrated Vice President George H.W. Bush in 1988 as he notably failed to offer any such inspiration during that year’s presidential campaign). That vision begins with China as the hub of a vast Eastern trading region connected and made prosperous with the help of China-funded infrastructure and energy investments and willing to let China set the rules of the road. Beyond its economic goals, it also has clear geopolitical ramifications, further elevating China’s position as a world power.
China’s Rise and the New Age of Gold
How Investors Can Profit from a Changing World
The radical change coming to the global economy—and the investments you need to make sure you stay ahead of the curve!