Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China’s “One Belt, One Road” Is a Nice Thought, but Nothing More

Politics / China Feb 01, 2017 - 03:49 PM GMT

By: John_Mauldin

Politics

BY JACOB SHAPIRO : In late 2013, Chinese President Xi Jinping showed off the One Belt, One Road (OBOR) plan in Kazakhstan and Indonesia.

Xi’s OBOR could be a bold economic development program that will vault Chinese political power ahead in the modern day. However, the OBOR plan is at an early stage.


More than three years after Xi unveiled OBOR, the plan is still vague, lacks funds, and faces a hard fight against constraints of things discussed previously in This Week in Geopolitics (subscribe here for free) like geography, Eurasian instability, and current trade patterns.

Plus, OBOR is first and foremost about China’s domestic economic inequalities and not China spreading its power around the globe.

This is a Herculean task

OBOR is meant to make many economic paths to cover two-thirds of the world’s people and a third of global GDP.

The One Belt part means overland paths; One Road means sea routes (see the map below).

To link Eurasia, China must build roads, railways, ports, and such across vast distances in harsh lands and in some of the least populated areas of the world. (Also, some of the most lawless and insecure parts.)

This is a herculean task and $240 billion that was already funded barely makes a dent in the total amount of needed funds. HSBC thinks that OBOR needs at least $4–6 trillion over the next 15 years, but that is likely too small. Even if true, from where and whom this money will come is not known.

There are two deeper problems

There is no central organizing body or goal that OBOR is meant to do beyond enriching Eurasia. OBOR boils down to a vague list of projects and it does not have a clear and steady funding mechanism or a head to see how these small projects fit into a bigger scheme.

Also, China wants OBOR not to get more foreign power, but to lessen its own domestic economic pressures. OBOR is one part of Xi’s attempt to try and do what many Chinese leaders have not done: move the wealth of the coast to the poor parts of China’s interior without social instability.

The two parts will greatly benefit China

The One Belt part of the plan aims to do this through easy access to overland markets to help take in China’s large excess capacity of steel, coal, and other key items. China wants to cut production of these items, but cannot do so without lower economic growth rates.

China is still quite poor and a large gulf comes between the economic strength of the Chinese on the coast and those inland. China hopes One Belt will help it find a place to dump the surplus items it has made and justify more infrastructure spending in less-developed regions.

One Road, the maritime part of the plan, is more notable because the global shipping routes that form the basis of the world economy are the true 21st century Silk Road.

The United Nations Conference on Trade and Development says about 80 percent of global trade by volume and over 70 percent of global trade by value is shipped via maritime routes. Even China’s interior provinces trade mostly by shipping goods overland to and from the coast—not via overland routes to the west.

The issue for China is that its economy needs these routes, and their security is guaranteed by the US Navy because while many Asian countries will happily take Chinese money and put it to good use, there is also not much trust in Chinese intentions.

OBOR will give China global prestige

Eurasia is not the pivot of the world as it was when the ancient Silk Road was a vibrant and strong trade route. Today, most global trade is at sea, which is the US’ domain and OBOR will not change that.

OBOR as funded and directed by China is a nice thought, but when you look at the facts, it is clear that OBOR is still just a hope. But OBOR has done well at giving China global prestige and domestic credibility for Xi, which is the basis of most Chinese moves on the global stage.

Prepare Yourself for Tomorrow with George Friedman’s This Week in Geopolitics

This riveting weekly newsletter by global-intelligence guru George Friedman gives you an in-depth view of the hidden forces that drive world events and markets. You’ll learn that economic trends, social upheaval, stock market cycles, and more… are all connected to powerful geopolitical currents that most of us aren’t even aware of. Get This Week in Geopolitics free in your inbox every Monday.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in