[TOPIC: TRADE WAR] The Rise of China

Trade disputes between the US and China began long before the current economic friction and occurred in tandem with the rise of China. Ever since the opening of China in 1978 and its entrance to WTO, the world has witnessed rapid growth and consolidation of Chinese economic power, through which Beijing uses to exert its political influence in the region, as well as around the world. This phenomenon manifests itself in China’s recent ambitious international projects that aim to expand China’s trade and investment activities. The West, especially the US is wary of this strategy because of the geopolitical implications that could result from a Chinese-dominated international system. Many experts say that the root cause of trade war is more about the hegemonic competition between a rising and a declining power or in other words, the US trying to prevent China from overtaking its dominance in the current world order, than about opposing trade policies [1].

Belt and Road Initiative

The Belt and Road Initiative (BRI) is a Megaproject that China is currently undertaking and considered the largest project of the century: an interregional network of railroads and shipping lanes linking itself with 70 countries across 4 continents. As the name implies, there are two segments: The "Belt," which recreates the ancient Silk Road land route, and the "Road," which alludes to a route through various oceans. The main focuses of this massive project are in infrastructure, transportation, and energy. Furthermore, it comprises more than 60 percent of the world population and over 30 percent of the global trade and GDP.

Source: World Bank

Source: World Bank

On the one hand, several experts argue that the Belt and Road Initiative brings a lot of benefits to developing countries and citing projects such as an oil pipeline in Myanmar and rail networks in Kenya, which seem to be worthy capital investments [2].  On the other hand, analysts warn that the massive amount of loans from China might lead the recipient states to fall into a “debt trap”. For instance, Sri Lanka borrowed billions USD from China for infrastructure projects, including the Hambantota port project [3]. However, owing more than $8 billion to Chinese firms, which is over its ability to pay back [4], the Sri Lanka’s government had to agree to lease this port to China Merchant Port Holdings in 99 years with $1.4 billion in return. A study by the Center for Global Development suggests that 8 more countries: Djibouti, Kyrgyzstan, Laos, Maldives, Mongolia, Montenegro, Pakistan and Tajikistan would struggle to repay their Chinese Belt and Road loans [5]. To critics, by gaining access to the strategic locations in these countries, China is building a string of overseas military bases [6].

Made in China 2025

This is the defending and ambitious plan made by the Chinese government to create globally competitive advances in autonomous technologies by 2025. This national strategy aims to build up 10 strategically and technologically important sectors such as 5G networks and cybersecurity, high-end precision tools and robotics, and aerospace, most of which are currently exclusive domains of Western companies [7]. This project includes government incentives and heavy investments in research and innovation. In fact, between 2000 and 2015, China’s spending on research and development (R&D) had soared by an average of 18% annually, whereas that of the US rose only around 4% [8]. Moreover, in 2017, China’s input on R&D ranked 2nd around the world with 1.36 million patents on inventions and about 9.8 patents per 10,000 people [9]. This surge in China’s R&D places China in a highly competitive position with the US, the largest supporter of science and technology.

Additionally, foreign companies seeking to access the Chinese market are allegedly required to enter into joint ventures with, and transfer technology to, domestic firms [10]. In the U.S. government point of view, this plan breaks international rules by using illegal and unfair methods to get US technology at effective discount rates [11].


Reference

[1] The World Bank. 2018. "Belt and Road Initiative." 29 March. https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative.

[2] [6] Taylor, Adam. 2018. "Why countries might want out China Belt Road." The Washington Post. 22 August. https://www.washingtonpost.com/world/2018/08/22/why-countries-might-want-out-chinas-belt-road/.

[3] Ching, Frank. 2018. "China Belt Road Debt Trap ." Japan Times. 28 August. https://www.japantimes.co.jp/opinion/2018/08/28/commentary/world-commentary/chinas-belt-road-debt-trap/#.XIeW9ij7RPY.

[4] Schultz, Kai. 2017. "Sri Lanka, struggling with debts, hands a major port to China." New York Times. 12 December. https://www.nytimes.com/2017/12/12/world/asia/sri-lanka-china-port.html?module=inline.

[5] Center for Global Development. 2018. "China Belt and Road Initiative Heightens Debt Risks in Eight Countries, Points To Need in Better Lending Practices " Center for Global Development. 4 March. https://www.cgdev.org/article/chinas-belt-and-road-initiative-heightens-debt-risks-eight-countries-points-need-better.

[7] Wei, Liu. 2018. "Trump Trade War on China is About More Than Trade" The Diplomat. 20 July. https://thediplomat.com/2018/07/trumps-trade-war-on-china-is-about-more-than-trade/.

[8] Showstack, Randy. 2018. "China Catching Up to United States in Research and Development" Earth and Space Science News . 24 January. https://eos.org/articles/china-catching-up-to-united-states-in-research-and-development.

[9] Wangshu, Luo. 2018. "Research and Development Success in China." The Telegraph. 27 February. https://www.telegraph.co.uk/news/world/china-watch/business/research-and-development-success-in-china/.

[10] Hopewell, Kristen. 2018. "What is made in China 2025" The Washington Post. 3 May. https://www.washingtonpost.com/news/monkey-cage/wp/2018/05/03/what-is-made-in-china-2025-.

[11] Liu, Tao, and Wing Thye Woo. 2018. "Understanding the U.S.-China Trade War." China Economic Journal 319 - 340. https://www.tandfonline.com/doi/abs/10.1080/17538963.2018.1516256.