Thesis: China will inject $62 billion dollars of capital to support its “New Silk Road” plans to build infrastructure links to foreign markets. The action will build up Chinese sway in the world.
China plans to build a new silk road, especially for Beijing’s “One Belt, One Road” strategy, which is to build roads, railways, ports, natural gas pipelines and other infrastructure stretching into south and Southeast Asia, the Middle East, and through Central Asia to Europe to create demand for China’s industrial exports. If the plan works well, it will extend Chinese sway across Asia. What’s more, combine with the Beijing’s diplomatic success in securing the support of more than fifty countries for the China-led Asia Infrastructure Investment Bank. I believe Chinese sway will be boosted in the world.
China wants to use its massive foreign exchange reserves to inject $62 billion dollars of capital to two of the three “policy banks”, China Development Bank and Export-Import Bank of China, which are established only for financing infrastructure and other policy priorities within China and abroad. According to the official data, China’s foreign exchange reserves owned $3.7 trillion dollars.
Obviously, the New Silk Road will help China to expand its export market. Also, more foreign infrastructures that connect with China will add more foreign trade partners to China. On the other side, to inject money for infrastructures will also help to support the slowdown in China’s economy. The reason is that most of the foreign infrastructures will be contracted by Chinese companies.
Another reason for the New Silk Road will boost Chinese sway is that Washington was stepping back from international economic leadership. Some Republicans wish to close the US Export-Import Bank because the funding almost runs out. If the Bank is eliminated, it will stunt growth for small and big business that rely heavily on sales from China. In 2014, air transportation industry hold 45.2% of amount money for the US Export-Import Bank. I believe if the Bank is closed, it will hurt so much on air transportation sector including Boeing and Ryanair.
In conclusion, the New Silk Road plan is a long-term plan. And the “policy banks” are non-commercial banks. It still needs more time to transform them into commercial entities. However, once the New Silk Road plan is on the right track and the developments are sustainable, at that time China will boost its sway not only across the Asia area but also across the world.