Asia blues: AIIB and the New Silk Road

Asia blues: AIIB and the New Silk Road

By Steen Jakobsen, Chief Economist and CIO, Saxo Bank A/S

Chinese president Xi Jinping announced his intention to extend Deng Xiaoping's 1979 "reform and opening up" initiative.

Xi's version is called "the new Silk Road" and the initiative has just been given top priority by the Chinese National People's Congress here in March. Now it is being implemented with both political capital and hard currency. In terms of the latter, a new Silk Road fund, Asian Infrastructure Bank (AIIB), has been launched and it has USD 40 billion with which to support infrastructure investment in countries involved in what Chinese more commonly call the "One Belt, One Road" plan.

It may not be a "Chinese Marshall plan" in the fullest sense, but the result should mirror the gigantic boost that the US gave Europe after World War II where (through access to credit and infrastructure investment) the US oversaw a quick European recovery that left Washington as its main financial and geopolitical beneficiary. The Marshall plan gave birth to the rise of the US' hegemonic power.

Xi's vision is to create a Silk Road in Eurasia - a link across Western China (which is underdeveloped and politically unstable) to Venezia in Italy. The plan is to give access to credit and investment, which should in turn build close ties between China and Eurasia. Unlike the Marshall plan, everyone can partake without - at least officially - any pre-conditions attached.

China has over USD 4 trillion of foreign reserves that are presently earning close to nothing in an economic environment characterised by weaker global growth, challenging social tension and capital flight. China is running out of export markets, but the New Silk Road will secure for Beijing not only commerce, but also influence in emerging economies throughout Asia and into Europe.

By doing so, it will also come to offer a real alternative to the US- and European-dominated International Monetary Fund and World Bank.

This is clearly a testament to the coming-of-age of not only China but also Asia. Their influence over the last few decades has mainly been as engines of growth and investment, but now they want to have a political say as well. Also, China wants (and is trying) to step into the void created by the financial crisis and by a Western political establishment that seems content with simply buying time and avoiding reforms at all costs.

The plan's rationale is to work towards China's wish to internationalise the yuan and to secure more geopolitical power. The global response from other major powers has been predictable: The US sees it as an escalation of China's geopolitical emergence and a direct response to its increased focus on Asia.

The Silk Road is under-reported in the Anglo-Saxon media, but more than 60 countries have now signed on to the Asian Infrastructure Investment Bank and the BRICs' new development plan. The US (of course), Japan (of course) and India (of course) remain on the sidelines, for now at least.

I think China and Asia are using this crisis to redefine their overall economic plan. They learned in the 1990s (Asian crisis) not to "trust" the western banks for credit. Now in the 2010s, they have learned that in order to continue growing their export markets, they need to invest by increasing the supply of credit and infrastructure.

This forms the basis of two conclusions:

One, China will continue to see significant growth after this slowdown, which will serve as a platform for anti-corruption efforts and aligning political interests in China before President Xi takes full power of the country in his final four years.
Two, the world now have two equal superpowers: the US and China. This is clearly a win-win for China and win-lose for the US (it will lose hegemonic power but gain access to higher world growth), and this makes for more volatile markets.

Subscribe to Trend in Google News! Subscribe
Kazakhstan counts on international experience on operating nuclear power plants
Kazakhstan counts on international experience on operating nuclear power plants
Kazakhstan’s Energy Ministry comments on Marine Access Channels project
Kazakhstan’s Energy Ministry comments on Marine Access Channels project
Kazakhstan sees decrease in production of iron ores
Kazakhstan sees decrease in production of iron ores
Loading Bars
Latest
Kazakh ambassador hails Iran’s role in SCO
Fuzuli International Airport to unbreakably connect Karabakh with Azerbaijan - Turkish official
Georgian PM, Estonian Defense Minister discuss military cooperation
Turkish President Recep Tayyip Erdogan completes official visit to Azerbaijan
Not every politician can achieve rapid development in short time in territories liberated from occupation - Erdogan
Biden heads to G20 to talk energy prices, supply chain woes
President Aliyev names visit of President Erdogan to Azerbaijan example of true brotherhood
Day will come when it will be possible to get from Zangezur to Istanbul - Erdogan
You are going to Armenian border, aren't you? You will go further - Turkish president
If Armenia shows sincere will in its relations with Azerbaijan, there will be no obstacles to normalization of relations with Turkey - President Erdogan
Turkey and Azerbaijan, as two brotherly countries, always next to each other – President Aliyev
Joint steps of Azerbaijan and Turkey will forever remain in history - President Aliyev
Shusha Declaration officially raised Azerbaijani-Turkish relations to level of alliance - President Aliyev
Presidents of Azerbaijan and Turkey make press statements (PHOTO/VIDEO)
Georgian GDP continues its robust recovery – Renaissance Capital
President Erdogan presents President Aliyev with 'Kharybulbul' image watch (PHOTO/VIDEO)
Presidents of Azerbaijan and Turkey hold one-on-one meeting in Zangilan (PHOTO/VIDEO)
Russia to supply Turkmenistan’s Turkmengaz with pipes
Iran facing problems at filling stations
Azerbaijan increases propylene production in 9M2021
Azerbaijani, Turkish presidents view works done under “smart village” project in Zangilan (PHOTO/VIDEO)
Uzbekistan reveals data of foreign investment in mining industry
Uzbekistan, Singapore to co-op for humanitarian programs and projects
GM to boost EV profile with 40,000 charging stations in U.S., Canada
First Vice-President Mehriban Aliyeva posts photos from Aghali village, Zangilan district on her Instagram page (PHOTO)
Russia, UAE ink inter-governmental space exploration deal
Georgia plans to renovate its Airports Association
U.S. home price growth slowed in August- S&P Case-Shiller
Kazakhstan counts on international experience on operating nuclear power plants
Bahar Azadi gold coin price dips in Iran
Engineering work in Azerbaijan's liberated lands continues - MoD (PHOTO/VIDEO)
Uzbekistan's GDP grows in 9M2021
Kazakhstan sees decrease in production of iron ores
Kazakhstan’s Energy Ministry comments on Marine Access Channels project
Iran keen to increase Methanethiol production
Webinar on Engineering products organised by the Embassy of India (PHOTO)
Iran plans to develop Chaharmahal Bakhtiari Province
Azerbaijan becomes largest diesel supplier to Georgia
Bahrain approves Sinopharm vaccine for children aged 3-11
Official welcome ceremony held for Turkish President Recep Tayyip Erdogan in Aghali village, Zangilan district (PHOTO/VIDEO)
Israeli co Emtan to provide Spanish police with 9,120 pistols
Iran boosts its TEU container transit via Shahid Rajaee port
Iran issues loans to several enterprises
Azerbaijan talks provision of Internet to inaccessible areas
Turkmen Khazar Consortium opens tender for chemicals
Opening of Fuzuli Int’l Airport to speed up investment, social dev’t of Azerbaijan’s Karabakh - Israeli expert
President Ilham Aliyev and President Recep Tayyip Erdogan lay foundation for “Dost Agropark” in Zangilan (PHOTO/VIDEO)
Kazakhstan increases cargo transportations volumes via maritime
Turkmen company to purchase chemical products via tender
Azerbaijani products on display at int'l exhibition in China (PHOTO)
Turkey unveils number of ships docking at Iskenderun port
India, UK take part in joint exercise Konkan Shakti 2021
Fitch Ratings unveils long-term IDR of Astana Gas KMG
TDB and ICD sign MoU to support private sector investment in common African member states
Georgia shares its TOP-5 fuel exporters
Kazakhstan provides transit corridor for Afghan women
Iran’s West Oil & Gas Production Company prevents declining gas production
Iran’s Tejarat Bank provides loans related to coronavirus
Azerbaijan's mortgage fund issues record number of loans for 10M2021
Kazakhstan, Hungary sign memorandums in number of spheres
Iran reveals COVID-19 data for October 26
Turkey sees growth in number of registered Iranian companies for 9M2021
Leadership of Turkish Defense University visit Azerbaijani War College of Armed Forces (PHOTO)
Azerbaijan, WB discuss possible co-op in restoration of liberated lands (PHOTO)
Iran not to raise price of energy carriers - PBO
Ports giant DP World expects container volume growth to moderate in Q4
Azerbaijani, Turkish presidents laid foundation stone for Zangazur corridor (PHOTO/VIDEO)
Russian company plans to participate in restoration of Azerbaijan's liberated lands
Kazakhstan offers Hungary to launch Budapest - Almaty - Budapest flight
Azerbaijan shares data on number of vaccinated citizens
Bank of Georgia to support construction of solar power plant
Tehran in need for new small-scale gas stations
Iran`s TEDPIX keeps downward trend
Azerbaijan confirms 2,266 more COVID-19 cases, 1,194 recoveries
Iran unveils details of its gas extraction, consumption and export
Iran begins cargo shipment from northern ports
TAP covers 17% of Greek demand for natural gas
Iran and Russia's trade turnover increases
Gadkari bats for green hydrogen; says India needs to reduce oil imports
Indian Defence Minister invites foreign defence firms to take part in DefExpo 2022
Iran's crude steel production declines
Foreign companies to pay taxes online in Kazakhstan since 2022
European Fund for Southeast Europe provides funding to Georgian TBC Bank
Russia records another 36,466 coronavirus cases
Hungary names areas for further co-op with Kazakhstan
Hungary increases export of goods to Kazakhstan
Uzbekistan forms new investment projects with South Korea
President Ilham Aliyev and President Recep Tayyip Erdogan attend opening ceremony of Fuzuli International Airport (PHOTO)
BSTDB ready to expand cooperation with local financial institutions in Azerbaijan (Exclusive)
Iran shares data on its oil extraction and exports
BSTDB may consider supporting Azerbaijan in issuing green bond (Exclusive)
Azerbaijan, Turkmenistan implementing large transport projects
Six Indian Naval Ships Arrive In Sri Lanka To Boost Defence Cooperation
Turkish President Recep Tayyip Erdogan arrives in Azerbaijan. First official welcome ceremony held at Fuzuli International Airport (PHOTO/VIDEO)
High oil prices to improve Azerbaijan’s external balance – BSTDB president (Exclusive)
New steel production plant to appear in Georgia
Azerbaijan repairs civilian properties in Barda destroyed by Armenia (PHOTO)
Iran can extract oil for next hundred years - Iranian Parliament's Research Center
Turkish president's current visit to Azerbaijan is another step towards strengthening bilateral ties - administration
Iran increases aluminum ingots production
All news