As the American regime moves to strengthen an alliance regime known as Trans-Pacific Partnership (TPP) in the hope of building up both the industrial base of nation states nominally aligned to the west while pushing back on Beijing’s strategic naval ambitions throughout the South China Sea. Its a very slow go, but the American regime has been welcomed in its effort to strengthen states throughout the ring of fire; an area not known for any comity. While we move west toward the littoral Pacific, the Han Masters in Beijing are moving west along their soft interior toward Urumqi, Almaty, embracing the southern Eurasian steppe that has long been home to Moscow. The Silk Road is now titled One Belt-One Raod (OBOR), its a vast Eurasian steppe interior that Beijing seeks to command in its hope of replicating monetary advantages that the U.S. commanded at the end of WWII. Its an ambitious project of linking Central Asia, the Middle East, Africa and Europe to Beijing.
The tangible benefits Bretton Woods afforded the U.S. was an ability to run continuous deficits because the world’s trade being denominated in dollars affords our regime fiscal privileges Beijing seeks. Ignore for the moment the entire Judeo-Christian framework underwriting, animating the Bretton-Woods framework; its rule of law, the complete lack of criminalizing political/social differences, highly efficient-liquid bond markets. Its these spheres of autonomy operating outside the commanding heights of centralized authority that Beijing cannot advance in its hopes of acquiring this exorbitant privilege. The boys in Beijing are identical to all secular militants and positivists, they only see what can be measured, not the theologic animating the structure of faith intrinsic to Bretton-Woods.
In a word, Keynes substituted the U.S. dollar for specie. The madmen of Beijing think they can replicate this endeavor. They will fail.
Instead of camels and caravans Beijing has taken structural equity positions in building Greece’s second largest port Piraeus, from which China will build high speed rail linking Hungary to Germany. China envisions positioning nuclear facilities in Pakistan linking natural gas fields throughout the land of the pure to Iran via China’s far western interior. Master Xi has recently visited Serbia, Poland and Uzbekistan positioning nearly 60 finance minsters abroad to set up the Asian Infrastructure Investment Bank (AIIB). The AIIB is how China envisions replicating Bretton-Woods.
The first large problem its structural, political opacity. Beijing has never listed member countries. With over 900 public deals under way totaling nearly $890 billion, the boys in Beijing aren’t transparent about the the AIIB or how it works. If anything, China is taking advantage of a benign security environment to achieve geopolitical aims in the hope of framing out new monetary, fiscal arrangements identical to Bretton-Woods.
The thinking behind OBOR is to challenge how the U.S. positions itself as the main trading depository between Asia, Europe and Latin America. China views Asia, Europe and the Middle East as a single space moving east positing Beijing as the final resting place for manufactured goods.
Premiere Xi first spoke of OBOR in 2013 after visiting Kazakhstan, he placed Zhang Gaoli as head of the AIIB after achieving membership in China’s Politburo Standing Committee. His first opening salvo was to seed the AIIB in 2015 with $82 billion from the Central Bank to three state owned banks for OBOR projects. This coupled to China’s sovereign wealth fund contributing $40 billion. All seed monies were deployed to finance roads linking Pakistan, Tajikistan and Uzbekistan moving south to the Arabian Sea.
Given China’s need for opacity, we should anticipate a weakening of operational tempo and overall success to OBOR, for the Chinese enjoy employing competing bureaucratic interests throughout the Silk Road Project, reconciling them will challenge Beijing, especially now with weakened growth throughout the first world.
China’s strategic thinking for OBOR was to extend China’s commercial interests while reducing China’s economic dependency on domestic investment in infrastructure, all while delivering abroad Beijing’s excess capacity in steel and cement.
Inevitable tensions will emerge testing China’s strategic thinking about an Asian Bretton-Woods.