The world needs more belts and more roads, Chinese-style
The world needs more belts and more roads, Chinese-style
- Influential author Parag Khanna says the Belt and Road Initiative is exactly the blueprint needed in this age of uncertainty and instability
A new generation of Western doom-and-gloomers about China has emerged. Many point to admittedly serious problems, some of them chronic and structural, and argue the country has peaked and that now it’s downhill all the way. The “death spiral” list usually runs the gauntlet of demographic collapse, food and energy insecurity, failing growth model, and worsening authoritarianism.
Parag is the founder and managing partner of FutureMap, a global strategic advisory firm and the author of several influential books, including most recently, Move: How Mass Migration Will Reshape the World — and What It Means for You. He holds a PhD in international relations from the London School of Economics.
Can you explain your basic idea about the belt and road, which has been distrusted and criticised by so many Western governments and the mainstream media?
The [Foreign Policy] piece was actually framed as a reaction to the Red Sea crisis pointing out that alternative infrastructural connectivity and pathways – in this case railways and overland routes across Eurasia as an alternative to the choked Red Sea passageway, in light of the Houthi terrorist attacks – allow for a more resilient movement of goods and trade. That’s a factual statement.
The fact that the Belt and Road Initiative and other trans-Eurasian infrastructure provide that resilience is not evidence itself that belt and road is not part of China’s grand strategy, and that it is merely intended to be a global public good. It can be both.
Of course, it is part of China’s grand strategy and has been before it had a name. I wrote my first book about infrastructure and connectivity and their impact on geopolitics, particularly in Eurasia.
I was travelling in Central Asia, the former Soviet republics, 20 years ago. [Officially] belt and road has only been around for 10 of those 20 years. And yet, I was describing the belt and road before it had a name. My point is that it also contributes to the global systemic resilience in global markets, for the movement of goods, which again is true.
For the doom-and-gloomers, they usually point to China’s coming demographic collapse, food and energy insecurity, failing growth model, and worsening authoritarianism. In light of your belt and road analysis, what’s your take on those problems? Let’s start with population decline.
I have long wrestled with China’s structural headwinds. I used to say 20 years ago that every problem in China is the biggest problem in human history because it was at the time, the most populous country in the world. Technically, it no longer is. But it is still big enough that its problems are significant.
I actually coined the term “peak China” about five or six years ago before this wave of pessimism, cynicism and critique of China. Because I was pointing to both the domestic and international headwinds that China faces, both the same structural features that we talk about now domestically, but also the backlash against China’s onerous policy and aggression in its own periphery and globally as well. I take each of those headwinds seriously.
The demographic one was foreseen long ago with the excessive continuation of the one-child policy leading to both gender and demographic imbalances. You now have a shrinking population and massive overcapacity in real estate and so on.
One of the things I say in my last book called Move – about the future of global demographics, migration and mobility – is that the world’s largest country needs more people, and by that I mean China.
You can see in certain industries that despite a large population, China is in fact importing people in areas where it has significant labour shortages.
The demographic problem is very real. However, one of the correctives I offer to the analysis [of demographic collapse] is that when you have 1.4 billion people, you do still have 700 million below the median age, which in China’s case is in the low forties. So there are 700 million people who are young, able-bodied, and are of working age and are productive, and another couple of million more who are older.
So yes, China has a very large ageing population prior to having built a full welfare state in the European style. But that does not mean that it doesn’t have a larger productive age population than any other country on Earth right now. So we have to understand both of those demographic realities simultaneously.
Whether or not China can cope with that is something it is heavily working on. In the many many visits that I have paid to China over the past couple of decades, I have seen that they are not setting out to build a bloated bureaucratic heavily institutionalised bricks and mortar healthcare system but rather do things that are more localised village-level clinics, telemedicine, you name it. They are trying to redirect some of the excess working age population that’s unemployed into some of those roles that relate to the services industry and elderly care, and so on.
Of the many problems that China faces, this is one that I do believe they will find a way to manage as they do with others.
Even Beijing itself has admitted to the inadequacy of its previous “growth at all costs and investment-driven” economic model. Is this the end of that growth model?
It is not incorrect to say that there has been a massive misallocation of capital and that consumer demand has been suppressed, in all of these standard critiques. However, it’s to some degree incorrect to say that China has committed massive overinvestment to an egregious extent that it was a flawed model to begin with. That is incorrect.
You would not have the thriving e-commerce, service digital sectors if you had not had the heavy investment in mobility, transportation, airports, communications, internet, 5G and so forth. The fact that companies like Alibaba can deliver any product anywhere within the Chinese realm within 48 hours is because of that fixed capital formation and investment.
Has it been too much in certain areas like real estate? Yes, absolutely. I offer no panacea to that critique.
However, the notion that China has catastrophically overinvested I think doesn’t do justice or give enough credit to what actually drove China’s success in the first place.
President Xi Jinping’s authoritarianism has been blamed by some critics for everything wrong with China today. Is China’s current governance good or bad for its future prosperity and stability?
This is one where data can more or less answer the question for us rather than it being a matter of opinion.
We know that productivity growth may not have taken off the way we would like it to accelerate despite the previous waves of reform prior to Xi Jinping. But I think we can pin it down more to structural factors in the economy rather than saying that Xi is alone responsible for a decline in labour productivity.
The demographic issue, regulatory issue, capital issue, market issue and so forth are typically the kind of factors you want to look at in answering questions like that rather than blaming it on one person. Having said that, has he had an impact on squeezing out key elements of the private sector in driving away talent, millionaires and their technology firms and innovation and certain categories of scientists?
Of course, all of those things have happened. And yet, China remains the world’s centre of manufacturing and production. It is a huge and accelerating centre of robotic automation. And this is crucial given the dwindling labour supply for the secondary economy. China is finding ways to compensate.
Yes, these are self-inflicted wounds, whether it is misallocation of capital and overinvestment, whether it is not ending the one-child policy soon enough, whether it is the authoritarian squeeze on talent and capital flight. I am not going to defend them.
But I am saying that China has the capacity to weather these storms and self-inflicted wounds in ways better than other countries could at perhaps similar or lower levels of development.
How serious is food and energy insecurity to China, both in terms of its ability to import from overseas – specifically in reference to the US ability to block major sea lanes – and develop its own domestic supply?
This is by far the weakest of the arguments that critics of China would make. For many years, we have heard critics who said with electricity consumption, the data doesn’t match the likely GDP growth. They say China has so many people and mouths to feed, how can it possibly generate enough food.
The fact is that to think in that way presumes globalisation doesn’t exist. Therefore, it’s really faulty and pointless logic that has never applied and does not apply the more you look at how China is connected to the world economy.
It is the largest trading nation in the world. It borders 14 other states. China has access to many of the world’s largest energy producers. It is not going to suffer shortages of natural gas or oil, looking at the pipeline network that has developed and cultivated.
And obviously, it has massive investment that leads the world in renewable energy capacity and so forth; food as well.
Almost no country is self-sufficient in food. Almost every country, even the largest food producers in the world import food. China is no different. It imports food and buys food companies all over the world. Chinese people’s nutritional attainment has only increased in lockstep with their wealth.
If you have to answer the question about food and energy, you might want to circle back to that in one word, and that’s Russia. Russia has become one of the world’s largest food producers and is obviously one of the largest oil and gas producers. It’s effectively becoming a geopolitical vassal state of China.
In the geopolitical dimension of it, it’s hypothetical that China’s supply lines could be cut off. But that brings us back to belt and road and the philosophy of connectivity in the first place. In China’s point of view, you want to be connected to as many trade routes and suppliers for all of the goods and commodities that you need. And that’s precisely what China has already accomplished.
Should there be some temporary blockade of oil supply, for example, through the Strait of Malacca, make no mistake, China would get them elsewhere and certainly have already thought of what all those alternatives are.
This is not something to lose sleep over, even if World War III is something to lose sleep over.