HOW CHINA PLANS TO DOMINATE WORLD ECONOMY
By: Students Of Economics
Tags: China Pakistan Relations, International Relations, Economics

By Tayyab Rather

In a world of economic war, China has been hustling to reach the top of the list to stand as the world’s largest economy. Currently, China stands below the United States of America in terms of being the largest economy with a tremendous $14 trillion gross domestic product. Whereas the United States has a gross domestic product of $21 trillion. To compare it with other countries, India is amongst the most populated economy which has a GDP of $2.8 trillion. It would be a fair enough to state that China and the U.S are in a state of a modern-era cold war.

Evidently, It is possible to conclude that the United States is an economic nemesis of China and vice versa. Both of them are at their best to get the maximum output. A defeat in the economic race would also mean a defeat to the debate of Capitalism vs. Communism. Both these world leaders are the veto-powers of United Nations.

The United States has always been a dominant power since the cold war in terms of the economy. There are numerous reasons, for instance, international trade in U.S dollars.

Even though the U.S is apparently the largest economy, it is evidently true that China might take the lead and take its economy to a level up with its futuristic motives. It involves China’s multi-trillion dollar plan to connect the world economy. This achievement of globalization will be a huge success for China and it is willing to do it by hook or crook.

China is amongst the largest countries in the world and has a very strategic location giving it a comparative advantage to be the next world economic leader. It lies in the south of Asia and stretches all the way to the west of Asia connecting the majority of Asian countries as well as to the warm, tropical China Sea which is active all round the year, unlike Arctic ocean which gives it great accessibility to connect to the world.

The Silk Road

China’s economic history dates back to the 2nd century BCE when the Silk Road was established to trade through the various parts of the globe.

The ancient Silk Road would stretch more than 5000 kilometres (3000 mi) all the way to Europe. This land route was enhanced by a Sea route with a starting point from the South China Sea and would extend to Europe and Africa. These routes were mainly used to trade silk, however, the trading goods had diversified over time. It is now considered to be a world heritage site by UNESCO.

China’s Future Strategy

In order to maximize its economic dominance, China has currently 2 ongoing structural projects i.e The Belt Road Initiative and Maritime Silk Road to clone the post era Silk Road into a more innovative and more advanced structural program which costs anywhere between $5–10 trillion dollars.

Notice how these projects resemble that of the ancient Silk Road. Only China has the ability to think on such a broader perspective followed by bulk financing.

Chinese president Xi Jinping has signed an agreement with more than 70 countries to make it’s future motive functional stating that it will be mutually beneficial for the countries it is collaborating with.

Belt and Road Initiative

Also known as One Belt One Road, is the modern era global infrastructure program initiated by China in 2013. China intends to reroute global trade by providing massive debts with less bureaucratic policies to other countries in order to build these groundbreaking infrastructural programs. This way, China has planned to build 6 economic corridors mainly in Asia. Each of them is very crucial for China’s land trade to connect to continents like Europe and Africa.

These 6 main economic corridors are;

Eurasian Landbridge; Connecting China and Russia

China-Russia-Mongolia Economic Corridor

China-Central Asia-West Asia Corridor; Connecting China and Turkey

China Pakistan Economic Corridor China-Indo China Peninsula Corridor Bangladesh-China-India-Myanmar Corridor

China Pakistan Economic Corridor

China Pakistan Economic Corridor, also called CPEC is China’s flagship project of the Belt and Road Initiative. The CPEC program aims to build a highway and a seaport in Pakistan which means pumping billions of dollars into an underdeveloped economy on low-interest rates. Gas pipelines, energy plants, fibre optic networks and railroads are being supplied and assisted to the Pakistani government. The project would cost around $62 billion.

China has planned to build a modern highway all the way from Kashghar, China to the Gwadar port in Pakistan. A part of the highway called the Karakoram Highway has already been constructed in the north of Pakistan which is claimed to be the highest paved highway in the world standing at an altitude of 4,800 metres. The highway would pass through the country and connect the Gwadar port. This would assist Pakistan into a massive infrastructural development and a contribution to the GDP. Pakistan has recorded its highest ever GDP growth as the project progresses.

To most of the people, the Gwadar port might look like any other ordinary port but it is in the likes of China due to its unique location and due to the fact that it is a deep-water port. The Gwadar port is claimed to be the world’s deepest seaport.

The Gwadar port provides China with an accessibility to acquire an alternative route to connect to the world via sea-port. China establishes an alliance with Pakistan as a western neighbour. This strategic alliance provides China from refraining its cargo ships taking a round-trip of Asia from South-East China, instead, it would use the Gwadar port to station its goods and transport via land providing easy access to Africa and Middle-East with greater efficiency. Goods and services shall be transported in and out of the country through Western-China.

The Question arises that why is the Gwadar port so unique?

To know its significance, it’s important to know that China is one of the world’s largest crude oil importer as stated by the EIA report in 2018 acknowledging that crude oil imports are at an average of 8.4 million barrels per day. The crude oil supply is mainly imported from countries in the Middle East through the Strait of Hormuz. Economists refer the Strait of Hormuz as the “Jugular of the World” due to its importance for the supply of ‘Black Gold’ to the whole world.

The Gwadar Port is the closest port to the Strait of Hormuz to provide a land trading connection to the Middle East and China, which is why China has acquired the Gwadar port from Pakistan on a 40-year lease.

Maritime Silk Road

The BRI is followed by another project simultaneously called the Maritime Silk Road which provides China numerous seaports across Asia and Africa to provide trade routes across the world secured for China. The BRI and the Maritime Silk Road are considered to be a single project because these projects are planned for the same ambition i.e. To enhance China’s trading capabilities

There are a total of 8 sea-ports China has acquired so far outside its territory, this includes;

Gwadar, Pakistan; 40 year lease

40 year lease Kyaukpyu, Myanmar; 50 year lease

50 year lease Kuantan, Malaysia; 60 year lease

60 year lease Obock, Djibouti; 10 year lease

10 year lease Malacca Gateway, Malaysia; 99 year lease

99 year lease Hambantota, Sri Lanka; 99 year lease

99 year lease Muara, Brunei; 60 year lease

60 year lease Feydhoo Finolhu, Maldives; 50 year lease

China’s Hook or Crook policy;

Even though China wants to enhance it’s trading capabilities, It’s ulterior motives are corresponding to something more than a simple economic dominance. These goals are far more strategic and political for an individual to understand it’s complexity.

The debt trap strategies might be considered as an old but an effective strategy for countries to dominate over each other. It was used by the United States as mentioned by John Perkins in his book “Confessions of an Economic Hit Man”.

The methodology of this strategy is to provide hefty loans to countries such that it’d be impossible for the countries to return. Thus country which lends might not get it’s finance back but in return owns the country politically.

China has adopted the same strategy and has lended massive loans to countries which are underdeveloped or facing a corruption problem. This way, China achieves its far more superior goals with a financial cost.

Take for example Sri Lanka’s port Hambantota, China had authorized $361 million debt to Sri-Lanka for its reconstruction. After incurring certain losses, It was crystal clear that Sri Lanka wasn’t able to pay back its loans thus the majority of the port was handed over to China as a part of a 99-year lease.

China seems to be lending different countries billions of dollars of loans including Pakistan, Tajikistan and Sri Lanka to achieve it’s a very important strategic goal of becoming a superpower and rerouting global trade.

Economists tend to believe that China is establishing numerous seaports and naval bases in the Indian Ocean to secure its trading route. It is usually called the “String of Pearls” and is formed by connecting the dots of the ports and bases formed by China.

There is a complete naval base which has been established in Djibouti, one of China’s acquired sea-port on a 10-year lease. Apart from being a naval base, it might be considered as a national threat to the neighbouring countries especially in the Middle East where the United States has established alliances with numerous countries.

Chinese Internment Camps

China has constructed internment camps/ re-education centres in the West of China. The Western-China mainly comprises of a Muslim majority in the Chinese western province Xinjiang. The Muslim majority have a cultural heritage of Kazakhstan but are a part of China. They have obtained independence twice in the previous century.

Currently, China has two BRI economic corridor projects which originate from Xinjiang. The first one connects China and Pakistan and the second connect China to Europe. The Western province is also where China’s majority natural resources like oil & gas exist.

China has constructed the internment/ re-education camps to ensure that the province is in the safe and secured hands of the Chinese by condemning Muslim rights. Losing the Xinjiang province would mean losing the majority part of the Belt-and-Road initiative. China is achieving this goal by eradicating Muslim extremism and even torturing Muslims according to certain reports.

The Spratly Islands are a chain of islands in the South China Sea which have a legal claim by various countries like the Philippines, Taiwan, Vietnam, Malaysia and Brunei. However, China is changing the game by building man-made islands and military bases in the region. China lay claims to the region according to it’s vaguely explained “nine-dash line”

This area is extremely rich in natural resources, it is the source of 10% of the world fisheries and it controls 30% of global shipment supply which is mainly why China wants to take control of this land.

Opinions & Conclusions

China is outpacing the world in the development, the strategy it has adopted has given it a potential to become a superpower in the near future. It has been massively investing in other countries and building alliances.

The BRI projects have slowed down in 2020 as China heads on with a battle against Coronavirus and it might have put its projects to a stall. The economy is close to faltering following a decrease in overall exports generating lesser revenues for the country. This has a direct effect on its BRI projects causing fewer expenditures.