Anja Manuel writes: The Pakistani town of Gwadar was until recently filled with the dust-colored cinderblock houses of about 50,000 fishermen. Ringed by cliffs, desert, and the Arabian Sea, it was at the forgotten edge of the earth. Now it’s one centerpiece of China’s “Belt and Road” initiative, and the town has transformed as a result. Gwadar is experiencing a storm of construction: a brand-new container port, new hotels, and 1,800 miles of superhighway and high-speed railway to connect it to China’s landlocked western provinces. China and Pakistan aspire to turn Gwadar into a new Dubai, making it a city that will ultimately house 2 million people.
China is quickly growing into the world’s most extensive commercial empire. By way of comparison, after World War II, the Marshall Plan provided the equivalent of $800 billion in reconstruction funds to Europe (if calculated as a percentage of today’s GDP). In the decades after the war the United States was also the world’s largest trading nation, and its largest bilateral lender to others.
Now it’s China’s turn. The scale and scope of the Belt and Road initiative is staggering. Estimates vary, but over $300 billion have already been spent, and China plans to spend $1 trillion more in the next decade or so. According to the CIA, 92 countries counted China as their largest exports or imports partner in 2015, far more than the United States at 57. What’s most astounding is the speed with which China achieved this. While the country was the world’s largest recipient of World Bank and Asian Development Bank loans in the 1980s and 90s, in recent years, China alone loaned more to developing countries than did the World Bank.
Unlike the United States and Europe, China uses aid, trade, and foreign direct investment strategically to build goodwill, expand its political sway, and secure the natural resources it needs to grow. Belt and Road is the most impressive example of this. It is an umbrella initiative of current and future infrastructure projects. In the next decades, China plans to build a thick web of infrastructure around Asia and, through similar initiatives, around the world.
Most of its funding will come in the form of loans, not grants, and Chinese state-owned enterprises will also be encouraged to invest. This means, for example, that if Pakistan can’t pay back its loans, China could own many of its coal mines, oil pipelines, and power plants, and thus have enormous leverage over the Pakistani government. In the meantime, China has the rights to operate the Gwadar port for 40 years. [Continue reading…]