Now that we, as a nation, have finally come to the logical conclusion that a fail-safe security paradigm flows out of a sound economic template it is imperative that we take a very close and deep look at the two super-economies that are emerging so close to our borders.
A close study of these two neighbourhood economies is essential for Pakistan's official economic managers to introduce the right measures at the right juncture at the right time into the national economy for Pakistan to be able to withstand the pressures and become a partner of these economies rather than their economic colony.
China in the north is fast growing into the world's most extensive commercial empire. By way of comparison, after World War II, the Marshall Plan of the US 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 the world's largest trading nation, and its largest bilateral lender to others.
According to Anja Manuel, (China Is Quietly Reshaping the World - The Atlantic, October 17, 2017), 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.
Ninety-two 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 the World Bank and Asian Development Bank loans in the 1980s and 90s, in recent years, China alone lent 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. The 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. The Belt and Road is China's biggest foreign policy initiative to date, but it's no Marshall Plan. Beijing is not doing this out of altruism, or out of a desire to stabilize the countries it loans to. For one thing, China is too dependent on its eastern seaboard and the narrow Malacca Strait near Singapore to get goods in and out of its vast territory; for example, over 80 percent of its oil goes through the Strait. So building trade routes through Pakistan and Central Asia makes sense. The Belt and Road also helps China invest its huge currency reserves and put its many idling state-owned enterprises to work.
The initiative also has a positive side-effect for Beijing: Some Chinese government officials say specifically that it's about competing with the United States. At a minimum, it creates leverage to make many smaller countries feel economically beholden to China.
So what does all this mean for the "liberal international order" that the US did so much to create and uphold over the past seven decades? Anja Manuel asks and admits: The effect is not all bad.
If the point of that order was to secure peace and prosperity, there are ways in which China's largesse actually complements it. Countries that trade more generally fight less, not just with their trading partners, but with the world in general. In its own way, China is thus helping to uphold international peace.
On the prosperity question, China's economic impact on the countries it lends to so far seems mixed at best. While the 20 percent or so that China gives in traditional aid does help local economies, most of its largesse comes as loans, which have not been as helpful. While Chinese loans used to have low interest rates around 2.5 percent, they are now creeping up to near 5 percent or more.
A few months ago, a Chinese firm began training hundreds of Pakistani engineers to work on a power plant near Karachi, and other Chinese projects are also employing more local people.
Perhaps the biggest challenge China's efforts pose to the "liberal international order" is that, in contrast to most Western aid and loans, the Belt and Road projects often encourage terrible governance, environmental, and human rights standards, although China's record on this has improved somewhat over the past few years.
Of course, while the US and Europe insist on high standards for their aid projects today, both their companies and governments also had terrible records on human rights and the environment when they ventured to India, Africa, Latin America in the 19th and early 20th centuries.
China is learning quickly. In 2017, the Chinese government published new, more stringent guidelines for outbound investors. China's new infrastructure investment bank, the AIIB, wants to apply world-class standards, and many Chinese companies - including the national oil behemoth CNOOC - are improving rapidly.
"If China's geo-economic push continues, it will be its largest legacy and have a profound impact on the world-not necessarily all negative. Since the West doesn't have $1 trillion to lavish on developing country infrastructure in a new great game, its best choice may be to co-opt and shape this juggernaut. If the Belt and Road initiative is a success, asphalt will be smoother, logistics will run faster, and countries that were cut off from world markets will be able to trade more. If the research cited above holds true, that will lead to fewer interstate wars, although it will make many small countries beholden to China.
"President Xi emphasized in both his 2015 and 2017 visits to the United States, and at Davos, that China wants a more equitable international system, but it does not want to unravel the international order. By encouraging China to raise the labor, human rights and environmental standards of their projects, the world should hold him to it."
According to Alyssa Ayres (Will India start acting like a global power?-Nov-December 2017 issue-Foreign Affairs) like China economy has been at the center of India's recent global transformation. Indian economy, with a GDP of over $2 trillion at current exchange rates, is estimated to have now surpassed the economies of Canada and Italy (both members of the G-7). The US government projections anticipate that India will be the world's third-largest economy by 2029, lagging behind only China and the United States. A slowdown in China and contractions in Brazil and Russia have increased India's share of global GDP as measured by purchasing power parity, which the International Monetary Fund (IMF) projects will exceed eight percent by 2020 - above that of Japan in 1995 and that of China in 2000. A 2016 survey conducted by the firm KPMG found that India had moved up four notches to become their top pick for growth opportunities in the next three years.
According to UN estimates, India's large working-age population will continue to grow until 2050, while Japan, China, and Western Europe age. By then, Japan's median age is expected to stand at 53 years, China's at nearly 50, and Western Europe's at 47. The median-age Indian will be just 37-year-old.
Although India remains home to the world's largest number of poor, its middle class is growing and now consists of anywhere from 30 million (as the Pew Research Center estimates) to 270 million people (as the National Council of Applied Economic Research estimates), depending on how "middle class" is measured. A growing middle class wields market power, which explains why giant multinational companies, from Apple and Xiaomi to Bosch and Whirlpool, have India in their sights: all those four are now manufacturing goods in India for the growing Indian market. India has also become a global hub for automobile manufacturing, producing nearly one in three small cars sold worldwide. Ford, Hyundai, Maruti Suzuki, and Tata are all making cars there. Collectively, the Indian automotive industry built only slightly fewer automobiles in 2016 than South Korea and more than Mexico, both major car-producing nations. Although India needs to do much more to develop its manufacturing base, its advances in the auto industry represent an about-face from just 15 years ago.
India is also a space power: it sent a probe to the moon in 2008 and has another in the works, and in 2014, it placed a vehicle in orbit around Mars (at a fraction of the cost of NASA's latest Mars orbiter).
While deepening its ties with the West, New Delhi has also shown a determination to invest in alternative international organizations over the course of the past decade. Take the BRICS, comprising Brazil, Russia, India, China, and South Africa. In less than a decade, the group has become an important diplomatic forum and has accomplished more than most observers expected. At their 2012 summit, the BRICS began discussions on the New Development Bank-which announced its first loans in 2016-an institution in which these five countries could have an equal voice, unlike their disproportionately low representation in the World Bank and the IMF. And in 2014, they agreed to form the BRICS Contingent Reserve Arrangement, an alternative to IMF support in times of economic crisis. India also supported the Chinese-led creation of the Asian Infrastructure Investment Bank, and it is now the bank's second-biggest contributor of capital.
In 2017, India also joined the Shanghai Cooperation Organization, and it maintains an active presence in other institutions far outside the United States' orbit, such as the Conference on Interaction and Confidence Building Measures in Asia. India will likely continue to maintain this diverse array of relationships even as it strengthens its ties with the United States.
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