Unlike the Marshall Plan, Belt and Road Initiative does not require participation in military alliances and is not predicated on another Cold War.
When Chairman Mao Zedong proclaimed the founding of the People’s Republic of China on 1 October 1949, the Chinese people began leaving behind a century of colonial humiliation and building a new life.
What remains poorly understood by the wider world even seven decades later is how terrible the conditions were in China during those days. While China sustained its triumph, Chinese people’s living standard 70 years ago was barely 5 per cent relative to their counterparts in the United States. It was a dire starting point.
Transitions that Raised China’s Living Standard
In the late 1970s, Deng Xiaoping introduced “reform and opening-up” policies and established special economic zones, which ultimately facilitated China’s entry into the World Trade Organisation in 2001.
That paved the way to more than a decade of export-led double-digit economic growth, and the continuing shift from export-led quantitative economic growth to innovation-led qualitative development, which has accelerated under President Xi Jinping’s leadership.
China’s industrialisation peaked between the late 1990s and 2008, when the global financial crisis broke out. Now China’s rate of growth is decelerating, which has been the norm for all industrialised countries from Great Britain in the 19th century to the US in the 20th.
In China, deceleration is a sign that rebalancing towards consumption and innovation by 2030 is on track.
Nevertheless, the standard of living in China continues to improve steadily. Today, it is about a third relative to the US. In other words, it has multiplied six times relative to the US, supporting the rise of the world’s largest emerging middle-income group.
Emerging Economies New Growth Engines
Only towards the end of the last century did global economic integration trade, investment and finance begin to benefit large emerging and developing economies. To be sustainable, globalisation cannot serve just a few wealthy advanced economies. It must also serve poorer and faster-growing economies, which today account for most of the global growth.
So by flirting with trade protectionism and punitive tariffs on imports, advanced economies are seeking to implement the wrong policies at the wrong time. As the advanced countries have fallen into secular stagnation, they desperately need growth. Therefore, the rise of poorer economies is not a win-lose game, because it benefits the advanced economies too.
In the aftermath of the 2008 global financial crisis, all major advanced economies would have faced another great depression without the support of large emerging economies, particularly China. And the contribution of these countries to global GDP growth is expected to climb to 80 per cent by 2050.
In the 1980s, the share of the US in the world economy was more than 20 per cent; in the past four decades, it has steadily declined to 15 per cent. At the same time, China’s share, in purchasing power parity (PPP) terms, has soared from 5 per cent to about 20 per cent. While the PPP indicators inflate the pace of progress, the trend lines do herald a coming structural shift in the world economy.
China can Foster the Share of Developing Nations
In the future, the well-being of the advanced economies will depend on the rising living standards in less wealthy nations. And just as US leadership supported the role of the advanced countries in the 20th-century world, China has the potential to foster the share of emerging and developing countries in the 21st century.
In particular, the China-proposed Belt and Road Initiative can redirect domestic overcapacity and capital for regional infrastructure development to improve trade and relations with South-east and South Asia, Central Asia, the Middle East and Europe even across the Americas and sub-Saharan Africa.
The Belt and Road Initiative (BRI) seeks to accelerate modernisation in emerging and developing economies with the participation of the advanced economies. Yet in recent months, Washington has claimed the initiative’s projects are “debt traps” for Belt and Road countries which is a flawed effort at distraction.
BRI Projects Promote Inclusive Growth
If anything, Belt and Road projects seek to promote more inclusive global economic development. Certainly, China will make its share of mistakes, but it has a track record of learning quickly from them.
In the post-war era, Washington and its allies had an opportunity to lift the developing countries out of abject poverty. Yet success stories involve mainly those Asian economies that ignored the West’s growth lessons, which were too often coupled with conditionality, debt and dependency, in the name of “structural adjustment”.
Unlike the Marshall Plan, the Belt and Road Initiative does not require participation in military alliances. It is not predicated on another Cold War. It does not seek self-interested economic sanctions against the rest of the world. Nor does it encourage regime change to force its will on the international community. It is focused on 21st-century global economic development.