Clinton or Trump? That is the question that is going to keep almost the entire world engaged in a guessing game until the day of reckoning - November 8, 2016. But no matter who would win, the US along with countries under its sphere of influence is likely to enter as soon as the new US president is inaugurated into what would be a mortal economic war of attrition with China and its partner countries with Russia perhaps sitting on the fence most of the time eroding the US economic influence in Europe and on occasions siding with China.
No one at this juncture knows how this war would end. Would it throw the world economy into throes worst than the Great Depression of the 1930s or further deepen the Great Recession of current decade or perhaps blossom into Great Global Economic Co-operation the world has never witnessed?
The battle lines have already been drawn with the launch of the Trans-Pacific Partnership comprising 12 Pacific Rim countries, including Japan and the United States (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam). TPP member countries controlling 40 per cent of global economy have agreed to create one of the world's biggest free trade zones. It is expected to substantially reduce tariffs, and even eliminate them in some cases, between member countries and help open up trade in goods and services. It is also expected to boost investment flows between the countries and further boost their economic growth. The member countries are also looking to foster a closer relationship on economic policies and regulatory issues.
The 11 countries that are currently part of the negotiations are all members of the Asia-Pacific Economic Co-operation (Apec). They have a combined population of more than 650 million people. A free trade agreement could turn this into a potential single market for many businesses. The average per capita income in the participating countries was $31,491 in 2011 and their combined gross domestic product (GDP) stood at more than $20 trillion. One cannot ignore the fact that the initiative is being led by the US, the world's biggest economy and biggest trading nation, and one that sees Asia-Pacific as key to its future growth.
Clearly, the US would use the TPP as a major weapon in its economic war against China with its focus mainly on trying to undermine Beijing's growing economic might in the region. The multilateral aid agencies, like the World Bank, the Asian Development Bank as well as the International Monetary Fund would also be pressed into service in this war on behalf of the US as all these organisations have become the handmaiden of those countries that have been contributing the most to these agencies all these years empowering them to guide the policies of these institutions.
On the other side of the fence facing the economic as well as the fire power of world's current super power and its lackeys is China which in just 30 years has developed from a poor inward-looking agricultural country to a global manufacturing powerhouse. Its model of investing and producing at home and exporting to developed markets has elevated it to the world's second-largest economy after the US.
Now faced with a slowing economy at home, China's leadership is looking for new channels to sustain its appetite for growth at a time when developing neighbours are experiencing rapidly rising demand. At the heart of One Belt, One Road lies the creation of an economic land belt that includes countries on the original Silk Road through Central Asia, West Asia, the Middle East and Europe, as well as a maritime road that links China's port facilities with the African coast, pushing up through the Suez Canal into the Mediterranean. The project aims to redirect the country's domestic overcapacity and capital for regional infrastructure development to improve trade and relations with Asean, Central Asian and European countries.
The Asia Development Bank estimates that Asia needs US $8tn to fund infrastructure construction for the 10 years to 2020. China, in part, is banking its future on responding to its neighbours' huge infrastructure needs via One Belt, One Road. Meanwhile, China's growing domestic market means the chance for the region and the world to capitalise by providing goods and services.
The initiative is not without its challenges as co-operation and co-ordination with partner countries over the long term are paramount for it to be a lasting legacy. Key to One Belt, One Road's success is the development of an unblocked road and rail network between China and Europe. The plan involves more than 60 countries, representing a third of the world's total economy and more than half the global population. China's ultimate goal is to extend the initiative to Africa and Latin America.
There are compelling geopolitical reasons, such as energy security, for China to push forward with its One Belt, One Road plans at a time when partners are potentially excluding it from strategic agreements. The TPP countries, the Transatlantic Trade and Investment Partnership and the EU-Japan agreement show comprehensive liberalization agenda, but do not include China and have the potential to increase trading costs.
In response, China plans to negotiate free-trade agreements with 65 countries along the One Belt, One Road. Until now China has signed 12 free-trade agreements with states including Singapore, Pakistan, Chile, Peru, Costa Rica, Iceland, Switzerland, Hong Kong and Taiwan and a further eight are under negotiations with Japan, Korea, Australia, Sri Lanka, Norway, the Regional Comprehensive Economic Partnership, Asean and the Gulf Co-operation Council.
The US and its camp followers have persuaded themselves perhaps intentionally to doubt China's intentions. They have started attributing ulterior motives to China for naval expansion and energy security. What the critics deliberately ignore is that securing economic growth is at the core of China's national security. To ease worries, President Xi Jinping has emphasised "Three Nos":
1. No interference in the internal affairs of other nations.
2. Does not seek to increase the so-called 'sphere of influence'.
3. It does not strive for hegemony or dominance
One Belt, One Road could have as much impact on China's internal economy as it will have internationally. China's top priority is to stimulate the domestic economy via exports from industries with major overcapacity such as steel, cement and aluminium. Many will be build-transfer-operate schemes in which large SOEs will lead the way, but smaller companies will follow. The domestic plan divides China into five regions with infrastructure plans to connect with neighbouring countries and increase connectivity. Each zone will be led by a core province: Xinjiang in the Northwest, Inner Mongolia in the Northeast, Guangxi in the Southwest and Fujian on the coast.
One Belt, One Road's vast scale has elevated it to high-profile status given China's financial resources. But even China's deep pockets have limits, with the country's total debt to GDP at 240 to 270 percent. Three financial institutions have been set up to support its development, which have met some resistance in the West given they provide alternatives to the World Bank, IMF and ADB.
Silk Road Infrastructure Fund: Launched in February 2014, the China-led US $40bn Silk Road Infrastructure Fund invests in One Belt, One Road infrastructure projects. The fund is capitalised mainly by China's forex reserves and is intended to be managed like China's sovereign wealth fund.
Asian Infra Investment Bank: Founded in October 2014, the AIIB aspires to be a global development bank with 21 Asian member countries (China, India, Thailand, Malaysia, Singapore, the Philippines, Pakistan, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Laos, Myanmar, Mongolia, Nepal, Oman, Qatar, Sri Lanka, Uzbekistan and Vietnam), with a registered capital of US $100bn.
New Development Bank: The NDB is a BRICS multilateral development bank established on 15 July 2014, by Brazil, Russia, India, China and South Africa. The bank was seeded with US $50bn initial capital, with the intention to increase capital to US $100bn. The bank will be headquartered in Shanghai. Each country will have one vote and no country will have veto power.
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