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Bonus: The Emperor’s New Road · Trumponomics

• 0:02
  Speaker 1: Hi. I'm Andy Brown, the editorial director of the Bloomberg
• 0:06
  Speaker 1: New Economy. For the past few weeks, I've been sharing
• 0:09
  Speaker 1: highlights of my video broadcasts called on the front Lines
• 0:12
  Speaker 1: and Bloomberg New Economy Conversations, which look at how COVID
• 0:16
  Speaker 1: nineteen is reshaping the global economy. This is the final
• 0:20
  Speaker 1: installment before I hand back to Stephanie Flanders, who has
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  Speaker 1: so generously allowed me to take over her feed. I
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  Speaker 1: leave you with an interview I recorded with Jonathan Hillman
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  Speaker 1: of the Center for Strategic and International Studies in Washington
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  Speaker 1: about his new book called The Emperor's New Road, China
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  Speaker 1: and the Project of the Century. That project, of course,
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  Speaker 1: is the Belton Road initiative, the grand strategy of Chinese
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  Speaker 1: President she Jimping, who has made it his foreign policy signature.
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  Speaker 1: But what is it exactly? An imperial effort, certainly, but
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  Speaker 1: according to Jonathan, not of a organized one, and one
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  Speaker 1: that could repeat the mistakes of empires long gone. Take
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  Speaker 1: a listen. The title of your new book is The
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  Speaker 1: Emperor's New Road, the Emperor being j and paying the
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  Speaker 1: Chinese leader, the road being belt, and road is globes
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  Speaker 1: spanning infrastructure connectivity project. How important is this project to
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  Speaker 1: see and to his historical legacy. Well, this is his
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  Speaker 1: signature foreign policy vision. Um. And so this is so
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  Speaker 1: important that it's been written into the Chinese Party Chinese
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  Speaker 1: Party constitution. UM. So tough to imagine it being more
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  Speaker 1: important than it is. And in fact, I think that
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  Speaker 1: the importance of this thing has almost become a liability. UM.
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  Speaker 1: It's it makes canceling these projects all the more difficult. UM.
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  Speaker 1: No one ever wants to be the person to cancel
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  Speaker 1: an infrastructure project. But if you're a Chinese official, you
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  Speaker 1: certainly don't want to be the person to cancel the
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  Speaker 1: infrastructure project affiliated with shij and Ping's signature foreign policy vision.
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  Speaker 1: Let's talk about roads. The Romans built roads too, straight roads,
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  Speaker 1: and they marched their armies along these osteries. Is the
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  Speaker 1: Belt and Road in your view more and imperialist project
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  Speaker 1: like the Roman roads? Is it more about China find
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  Speaker 1: finding outlets for his industrial surplus, is creating new markets
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  Speaker 1: where products, goods, services, or as China would have it?
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  Speaker 1: Is it all about providing public goods, highways, fiber optic
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  Speaker 1: cables and so on, like the US martialled plan, but
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  Speaker 1: for the whole world? So I do call it an
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  Speaker 1: imperial project in the book, but it's different than the
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  Speaker 1: imperial projects that have come before it. And that's something
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  Speaker 1: I try to do, is I I lay out, UM,
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  Speaker 1: you know, how this compares to UM, what European powers
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  Speaker 1: were doing in Africa and Asia, what Japan was doing
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  Speaker 1: in Southeast Asia, what the United States has done UM
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  Speaker 1: in Pakistan. I think all of those experiences provide almost
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  Speaker 1: a yardstick against which you can measure China's activities and
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  Speaker 1: against which you can come to some conclusions about Chinese power.
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  Speaker 1: And I think that this, this imperial project UM is
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  Speaker 1: more gradual, UM, more incremental, It's more commercial in nature,
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  Speaker 1: and I think China faces barriers to this project that
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  Speaker 1: many of its predecessors did not face UM. But it
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  Speaker 1: is going into some very risky markets. You mentioned the
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  Speaker 1: Marshall Plan UM, and I think the Marshall Plan really
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  Speaker 1: stands out because the Marshall Plan was a finite uh,
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  Speaker 1: you know, it was going to last for a certain
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  Speaker 1: number of years. It involved a specific number of countries.
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  Speaker 1: There was a you know, a budget for the most
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  Speaker 1: Marshal Plan. You could say what was in it and
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  Speaker 1: what wasn't in it. You can't do that with the
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  Speaker 1: Belton Road. It is open ended um and ever expanding UM.
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  Speaker 1: And it involves developing countries. And I think one of
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  Speaker 1: the lessons here um. You know, the United States learned
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  Speaker 1: this in Pakistan as well. Um, Developing countries is a
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  Speaker 1: lot more difficult than rebuilding developed economies. Skolars often note
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  Speaker 1: that the original Silk Road was a two way into
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  Speaker 1: change or exchange. China sent silk con pulsman one way,
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  Speaker 1: and then in the other direction came ideas from other civilizations,
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  Speaker 1: including Buddhism, which changed China. Two questions, One, what are
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  Speaker 1: the most important Chinese exports along the Belton Road and
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  Speaker 1: what comes back into China. So I think the most
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  Speaker 1: important exports are China's state owned enterprises. I mean, they
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  Speaker 1: are really the number one beneficiary of this undertaking. China
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  Speaker 1: has seven of the world's ten largest construction companies. As
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  Speaker 1: you know, they've built so much at home that they've
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  Speaker 1: run out of things to build, and so now they're
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  Speaker 1: they're eager for work abroad. Um. They are in many
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  Speaker 1: cases the most influential actors on the grounds. They bring
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  Speaker 1: with them, um, their own workers. In many cases, they
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  Speaker 1: bring with them their own equipment. UM. So that that
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  Speaker 1: is a major export UM. You know, and from that
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  Speaker 1: also comes um. You know in some cases Chinese standards,
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  Speaker 1: Chinese practices for for for building projects. UM. So, I
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  Speaker 1: don't want to discount the standard setting importance of this
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  Speaker 1: as well. UM. And then what comes back UM, I
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  Speaker 1: think a lot less than is often advertised. Countries I
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  Speaker 1: think signed m o US for the Belton Road and
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  Speaker 1: politicians will say that this is going to increase our
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  Speaker 1: exports to China. UM. I think, you know, the evidence
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  Speaker 1: for that is pretty limited. UM. This is definitely something
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  Speaker 1: that's financed by China, intended to benefit China UM and
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  Speaker 1: benefiting most of all its stay enterprises. Sin Jong, the
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  Speaker 1: major western gateway for the Belt in Road China explains
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  Speaker 1: it's cracked down on the weak. Is there The u
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  Speaker 1: N says more than a million weeks are incarcerated in
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  Speaker 1: re education cats um. In terms of combating terrorism, the
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  Speaker 1: security of Belton Road is clearly talk of mind. What
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  Speaker 1: did you learn about Si Joan in writing this book
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  Speaker 1: and how c looks at the whole question of security
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  Speaker 1: there so, I think of the early days of Belton Road.
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  Speaker 1: One of the arguments that was made for it domestically
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  Speaker 1: within China, was that it was going to benefit less
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  Speaker 1: developed regions, Western China being you know, an important part
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  Speaker 1: of that. It was gonna help balance growth right between
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  Speaker 1: the more developed coastal regions and the region's inland. UM.
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  Speaker 1: That hasn't happened. And I think if you if you
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  Speaker 1: go UM as I had the opportunity to do UM
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  Speaker 1: a few years ago into Shinjin and UM, I think
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  Speaker 1: it was very striking UM that this is an area
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  Speaker 1: that's supposed to be critical for connecting China to other
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  Speaker 1: countries through the Belton Road UM, and it is plagued
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  Speaker 1: with UM, security checkpoints, UM, with police stations, UM. Economic
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  Speaker 1: activity UM was quite slow, but you know, the security
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  Speaker 1: sector was thriving. And so I think, to me, this
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  Speaker 1: is a real UM, a real contradiction in the Belton Road,
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  Speaker 1: a real tension between China's UM it's focus on connectivity
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  Speaker 1: and how it describes the Belton Road and it's unwillingness
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  Speaker 1: to give up control UM. And so I think you
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  Speaker 1: see that really historically in Shinjin. I mean, you know,
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  Speaker 1: even beyond the enormous human cost there, there's also this
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  Speaker 1: economic cost of UM. You know, this is not a
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  Speaker 1: place to do business to you know, have goods and
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  Speaker 1: people moving freely. Um, that comes. That comes with a
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  Speaker 1: high toll. And I think the bigger point here too
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  Speaker 1: with the Belton Road initiative, this tension between connectivity and control.
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  Speaker 1: It's that if those physical barriers, but it's also in
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  Speaker 1: some ways you know, China's approach to connectivity. Um. You
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  Speaker 1: know it's great firewall, um that it's sharing with other countries,
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  Speaker 1: you know, sharing technology to limit the spread of ideas
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  Speaker 1: and information. Um, you know, putting capital controls in place
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  Speaker 1: to limit the flow of finance. So this is really
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  Speaker 1: UM to me, a a core, a core tension in
• 8:37
  Speaker 1: this global vision of connectivity. Roads require plants. They are
• 8:44
  Speaker 1: rather precise engineering projects. But you look at Belton Road
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  Speaker 1: rather differently. To you it's anything but carefully laid out.
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  Speaker 1: Great explain that. So sometimes you'll see you'll see maps
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  Speaker 1: of the Belton Road, um, you know, and there are
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  Speaker 1: many maps, and they're they're there are not. I don't
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  Speaker 1: think that there really is an official Belton Road map.
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  Speaker 1: There's just different depictions of this. UM. But at some
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  Speaker 1: point Chinese officials started saying that there were six corridors
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  Speaker 1: in the Belton Road. Um. And so there's broad sweeping
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  Speaker 1: lines across the Eurasian Supercontinent and it gives this this
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  Speaker 1: feeling of form and structure that when you actually go
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  Speaker 1: and look, does not exist. UM. So no evidence that
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  Speaker 1: China is channeling economic activity into these corridors, with the
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  Speaker 1: exception of the China Pakistan Economic Corridor, which by the way,
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  Speaker 1: is not very focused on connectivity at all. And so
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  Speaker 1: in a way it's the exception that proves the rule. Um.
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  Speaker 1: But a lot of the activity is really more opportunistic,
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  Speaker 1: more disorganized, sometimes chaotic, um. But you don't get that
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  Speaker 1: impression from listening to a Shijian Pings speech at a
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  Speaker 1: Belton For him, that really requires going and looking at
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  Speaker 1: individual projects and stepping back and asking whether they reflect
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  Speaker 1: a lot of the rhetoric that's being used the US.
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  Speaker 1: Of course, portrays Belton Road is a debt trap China
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  Speaker 1: forcing expensive infrastructure onto emerging economies like Sri Lanka and
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  Speaker 1: then swooping in to take over ownership when debts go unpaid.
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  Speaker 1: What does that narrative get right about the Belton Road
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  Speaker 1: and what does it obscure? So the debt trap narrative,
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  Speaker 1: I think in a way gives Chinese officials too much credit.
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  Speaker 1: This idea that they have strategically raised a country's debt
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  Speaker 1: levels to a point that they can then take hold
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  Speaker 1: of a strategic asset. UM. That's very that's very sophisticated.
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  Speaker 1: Economic statecraft involves having lots of different actors on the
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  Speaker 1: same page. UM. To me, it's much more likely the
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  Speaker 1: Hammond Tode case in Sri Lanka that so much has
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  Speaker 1: been made of the poster child for debt trapped diplomacy.
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  Speaker 1: It's much more likely to me that China was trying
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  Speaker 1: to limit its losses UM in taking over that court,
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  Speaker 1: but not that it's set out to have this be
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  Speaker 1: its ultimate goal, because I think, frankly, the project has
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  Speaker 1: been a stain on the Belton Road on China's reputation. UM.
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  Speaker 1: And you know, not a lot of economic activity happening
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  Speaker 1: at him and Tota Port Um. And so the real
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  Speaker 1: story of him and Tote port which I get into
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  Speaker 1: in the book, I think, is a little bit less
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  Speaker 1: spy thriller, a little bit more Shakespearean drama. UM and
• 11:37
  Speaker 1: domestic politics are are the key. UM. It's really you
• 11:41
  Speaker 1: know about um politicians, unchecked ambission and ego UM, and
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  Speaker 1: the facts unfortunate fact that Sri Lanka now has to
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  Speaker 1: pay the price for that. Well, what about Chinese financial liabilities?
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  Speaker 1: China itself is sitting and amounted a debt and here
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  Speaker 1: it is lending to shake the economies and what you
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  Speaker 1: just described as some of the risk es places on Earth,
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  Speaker 1: including Pakistan. Does that come a point where China runs
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  Speaker 1: out of money to fund this grand road building ambition. Yes.
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  Speaker 1: The risk runs both ways, and I think that's important
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  Speaker 1: to remember. I think there's this idea sometimes that even
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  Speaker 1: when China fails, it wins, and I don't think that
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  Speaker 1: that's the case. So there is financial risk, there's reputational
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  Speaker 1: risk um. And in fact, even before the pandemic we
• 12:33
  Speaker 1: saw a really a pretty pronounced pull back in Belton
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  Speaker 1: road activity. So you know, peak Belton road activity was
• 12:39
  Speaker 1: probably a big pull back. UM. And now the pandemic
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  Speaker 1: has really frozen things. You know, Chinese officials are saying, um,
• 12:50
  Speaker 1: you know close to projects are impacted by this, but
• 12:53
  Speaker 1: they will still tell you don't worry, no major projects
• 12:56
  Speaker 1: have been canceled. Again, I think, going back to this
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  Speaker 1: idea that this is Shusun paying signature foreign policy vision.
• 13:02
  Speaker 1: So the risk is there, and I think because of
• 13:06
  Speaker 1: how important this is politically, you know, I think that
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  Speaker 1: the risk has been underappreciated and UM and and maybe
• 13:15
  Speaker 1: overlooked to some extent. You say, of the projects have
• 13:18
  Speaker 1: have have been put on hold. Is is this a
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  Speaker 1: permanent set back to Belton Road or just a temporary
• 13:24
  Speaker 1: phenomena that and it gets restarted when COVID is under control.
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  Speaker 1: So I think this is this year and you know
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  Speaker 1: in the next year, is I think the great renegotiation
• 13:35
  Speaker 1: along the Belton Road. I think UM, Chinese officials are
• 13:38
  Speaker 1: spending more time renegotiating deals than negotiating new deals. The
• 13:43
  Speaker 1: project pipeline was already slowing down before the pandemic, and
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  Speaker 1: so I think this, you know, will accelerate a process
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  Speaker 1: that was already in place. UM. Recipient countries are you know,
• 13:54
  Speaker 1: have are going to be quite limited in what they
• 13:56
  Speaker 1: can can do, what they can take on. So that's
• 13:58
  Speaker 1: going to impose a constraint around this. UM And also
• 14:02
  Speaker 1: if you just imagine what the world of infrastructure projects
• 14:05
  Speaker 1: looked like when this was announced, you had some some
• 14:09
  Speaker 1: targets that were ready to go. But the longer you
• 14:12
  Speaker 1: do this, the more difficult it becomes to find those,
• 14:15
  Speaker 1: you know, the low hanging fruits. So the low hanging
• 14:17
  Speaker 1: fruit has been picked um and it turns out that
• 14:20
  Speaker 1: some of it was rotten. How much? How much has
• 14:24
  Speaker 1: China spend on it so far? So all of these estimates,
• 14:29
  Speaker 1: any Belton Road estimate, including the one that I'm about
• 14:31
  Speaker 1: to give, should be taken with a grain of salt. Um.
• 14:34
  Speaker 1: It depends on what you count for countries participating and
• 14:37
  Speaker 1: what activities and so on. The best data that I
• 14:39
  Speaker 1: have seen suggests that this is still a little bit
• 14:42
  Speaker 1: south of five billion dollars in terms of total activity
• 14:46
  Speaker 1: across country is participating in the Belton Roads and since
• 14:50
  Speaker 1: it was announced in so not the one trillion that's
• 14:54
  Speaker 1: often assigned to it, certainly not the four trillion that's
• 14:57
  Speaker 1: sometimes assigned to it, and definitely not the eight trilli
• 15:00
  Speaker 1: and um that you occasionally here. Final question you your
• 15:04
  Speaker 1: book is pot Egano makes Pocio politics, but also pot travelogue.
• 15:10
  Speaker 1: You actually road railways in Africa helped cargo ships a
• 15:14
  Speaker 1: carls the Caspian. When we all start traveling a gating
• 15:18
  Speaker 1: off to COVID, what pots of Belton road would you
• 15:21
  Speaker 1: recommend visiting, particularly for those of your rita's with a
• 15:24
  Speaker 1: taste for adventure. So I think it's becoming easier now
• 15:29
  Speaker 1: to find um the boat that I took from Kazakhstan
• 15:33
  Speaker 1: into Azerbaijan Um. You know, when I was looking for it,
• 15:38
  Speaker 1: I was told it was going to come to one port. Um.
• 15:41
  Speaker 1: Then I'm on on online tracking ships trying to get
• 15:44
  Speaker 1: a sense for whether it's actually gonna show up. Showed
• 15:47
  Speaker 1: up at at a port, a new port that was
• 15:49
  Speaker 1: an hour away, UM, and so I had to scramble
• 15:52
  Speaker 1: to get on it. It was a thirty two hour ride.
• 15:55
  Speaker 1: But really unlike anything you know, I have done before,
• 15:59
  Speaker 1: you know, to be on the on the roof of
• 16:02
  Speaker 1: a U ship going across the Caspian Um, it's something special,
• 16:08
  Speaker 1: and so it's a it's a adventure that most people
• 16:11
  Speaker 1: don't take. It was me and a gang of Russian
• 16:14
  Speaker 1: bikers actually who wanted to get their motorcycles from Kazakhstan
• 16:17
  Speaker 1: to Azerbaijan Um. So some interesting company. Jonathan Hillman The
• 16:24
  Speaker 1: Emperor's New Road, Thanks for your time. It's been great
• 16:27
  Speaker 1: talking with you. Thanks to having me, Thanks for listening.
• 16:33
  Speaker 1: I hope you'll tune in later this year for a
• 16:35
  Speaker 1: digital edition of the annual Bloomberg New Economy Forum. With
• 16:39
  Speaker 1: business and government leaders from around the world, we'll talk
• 16:42
  Speaker 1: about the challenge of building a more sustainable and equitable
• 16:46
  Speaker 1: post COVID economy.