China's influence on global trade

China Doesn’t Need to Go to War to Claim a Trade Victory

In Melbourne, thousands of commuters are getting home later than usual.

The city is upgrading our rail system. So we’ll eventually end up with more stations and a quicker ride in and out of the city.

And Pakistan is also upgrading their rail system…but China is paying for it.

China gave Pakistan a US$60 billion loan. US$8 billion of which will go towards updating the rail system.

At the same time, they’re also giving billions to Nigeria, South Africa, Egypt and Iraq.

No, China hasn’t had a philanthropic streak.

They’re loaning out money for the promise of trade routes. As you would imagine, China dominates world trade.

In 2016, China sent out more than US$2 trillion to the world and brought US$1.3 trillion goods into their borders.

And their ambition is going to raise them up to be the clear super power over the next few years. China is planning to build two modern day silk roads.

One across land and one across the sea.

The road will stretch from Beijing, all the way to Germany. The maritime route will extend from the eastern most tip of China to Venice. Along the way, there will be railways and pipe lines all moving more goods into China.

Such infrastructure will open China up to the world and make trade a whole lot easier. Of course, such a project will be trillions in the making, touching more than 65 countries.

One Belt One Road initiative

Source: Visual Capitalist

But not everyone is happy about it, mainly the US. Others fear such a route will give China too much power over global trade.

So even as talks of a trade war have quieted down, China is already claiming victory. They don’t need to get into an escalating tit for tat tariff war with the US. Their ‘One Belt One Road Initiative’ will cement their dominance on a global scale.

But one has to think why China would entrust billions to corrupt and financially doubtful nations. Don’t they want to receive their money back?

A military win for China

Truth is, China doesn’t see these loans as a financial investment. Rather, a political strategic move.

If countries like Pakistan or Iraq refused to pay, yes, China will lose money. But they’ll likely gain an outpost, which will be under their control.

Take Sri Lanka, for example.

China loaned Sri Lanka U$1.5 billion to build a port, which would make up their maritime route. When it was clear Sri Lanka couldn’t pay back, they agreed to give China a 99-year lease on the port.

Many believe similar deals will happen to other projects when countries can’t pay.

With their 99-year lease on the Sri Lankan port, China also has a 40-year lease on a statically situated port in Pakistan. China now pushes for a similar agreement in Myanmar.

If they get it, China will basically control the Indian Ocean, not just in terms of trade but militarily.

Chinese trade and military control

Source: Vox

Not only might this cause tension between the US and China. It will create a huge boom to infrastructure sectors around the world.

PS: If you’re more than a few years away from retirement, your job could be at risk of being automated. This free report details the changes ahead. And some steps you could take to ensure you — and your children — are well placed in the age of automation.

Harje Ronngard

 

The Australian Tribune Editorial

The Australian Tribune Editorial

The Australian Tribune is an unorthodox news service. Your Australian Tribune editorial team deliver the unfiltered stories that could impact your daily life — political and economic stories you’re unlikely to get anywhere else. And we’re not afraid to step on some toes to do it. We are honest, conservative and never dull. We are an independent service, meaning we don’t answer to shareholders or outside advertisers. This helps avoid conflicts of interest that inhibit mainstream sources, which keeps our voice independent. The Australian Tribune is owned and operated by Port Phillip Publishing.
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