May 30, 2017

China’s “One Belt One Road” vs. U.S. Global Leadership

By Abhik K. Pramanik

Last week, the Administration released its full FY18 budget request, which includes a 32 percent cut to the International Affairs Budget and signals the potential elimination of U.S. assistance to 37 nations. China, on the other hand, recently held a summit to launch a multibillion dollar global infrastructure and development initiative spanning 65 countries that account for 60 percent of the world’s population.

One Belt One Road is President Xi Xinping’s ambitious effort to re-assert China’s global economic leadership. China seeks to revive the historic “Silk Road” trading route— spanning from the Netherlands to Indonesia— which helped facilitate international trade for centuries. During the 1600s, at the Silk Road’s peak, China was by far the world’s largest economy, accounting for nearly 30 percent of global GDP.

China has pledged hundreds of billions of dollars to One Belt One Road— which some have dubbed the Chinese equivalent of the Marshall Plan— in order to modernize transportation infrastructure, further strengthen economies ties across Asia, and build new markets for Chinese companies. The plan is funded through Chinese-led multilateral financial institutions, including the New Development Bank and the Asian Infrastructure Investment Bank, neither which the U.S. participates in.

Investing in Central Asia

To increase economic connectivity among nations on its borders, China will invest billions in Central Asia. This includes new train lines that will run through Kazakhstan, Turkmenistan, and Uzbekistan, as well as roads to China built in the Kyrgyz Republic and Tajikistan.

U.S. investments in the region may seem small in comparison. U.S. aid to Kazakhstan totaled $6 million last year, while aid to Turkmenistan came to just $3.9 million. Non-military assistance to both countries is slated to be zeroed out in the Administration’s proposed FY18 budget.

The potential effects of the loss of a U.S. development footprint could be enormous. According to Nisha Desai Biswal, former Assistant Secretary of State for South and Central Asian Affairs, American assistance in the region is focused on “priorities like combatting terrorism… advancing human rights and democratic governance,” in contrast with Chinese assistance to repressive regimes focused on promoting its own economic interests.

Wanted: Development Finance

Nonetheless, One Belt One Road certainly meets a critical financial need in the developing world. According to the Asian Development Bank, the continent will need at least $1.7 trillion a year in infrastructure investment to meet Asia’s development goals by 2030 and continue the continent’s growth from a collection of predominantly middle-income countries to high-income nations.

This enormous new Chinese investment comes at a time when the Administration’s budget calls for ending America’s development finance institution, the Overseas Private Investment Corporation. For nearly 40 years, OPIC has helped American businesses invest in emerging markets where private finance is unavailable, generating strong economic returns and returning hundreds of millions to the U.S. Treasury each year.

Over the last half-decade in Central Asia alone, OPIC has invested in academic projects like the University of Central Asia in Tajikistan and the American University of Central Asia in Kyrgyzstan— loans that will allow the universities to boost their enrollment and meet the needs of under-developed regions in both nations. In Kazakhstan, OPIC recently invested in a project to increase grain yields among grain farmers that will not only increase growth, but also help solve local nutritional needs.

Congressional Response

China’s recent economic assertiveness has not gone unnoticed on Capitol Hill. At a recent Senate Foreign Relations Committee hearing on American economic leadership in the Asia-Pacific, Dr. Robert Orr, Dean of Maryland’s School of Public Policy, noted that “cuts to our economic development tools in the region… will only quicken our retreat.” Additionally, Dr. Orr called on Congress to reverse “penny wise and pound foolish” cuts which would likely cement China’s rise.

With President Trump’s recent return from his first overseas trip last week, he should seize the opportunity to work with Congress and ensure America’s leadership and commitment throughout Asia is not supplanted by Beijing. Ultimately, while the president’s FY18 budget’s proposed increase in defense spending may be warranted, if such an increase isn’t paired with a strong International Affairs Budget, no amount of military spending will be able to replace the loss of U.S. influence in the world.

Image: China-Pakistan Friendship Highway, CC.