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Chinas Infrastructure Play

Why Washington Should Accept the
New Silk Road
Gal Luft

ver the past three millennia, China has made three attempts
to project its economic power westward. The first began in
the second century bc, during the Han dynasty, when Chinas
imperial rulers developed the ancient Silk Road to trade with the far-off
residents of Central Asia and the Mediterranean basin; the fall of the
Mongol empire and the rise of European maritime trading eventually
rendered that route obsolete. In the fifteenth century ad, the maritime
expeditions of Admiral Zheng He connected Ming-dynasty China to
the littoral states of the Indian Ocean. But Chinas rulers recalled Zhengs
fleet less than three decades after it set out, and for the rest of imperial
history, they devoted most of their attention to Chinas neighbors to the
east and south.
Today, China is undertaking a third turn to the westits most
ambitious one yet. In 2013, Beijing unveiled a plan to connect dozens
of economies across Eurasia and East Africa through a series of infra
structure investments known as the Belt and Road Initiative. The
goal of the B&R, Chinese officials say, is to bring prosperity to the
many developing Asian countries that lack the capacity to undertake
major infrastructure projects on their own by connecting them
through a web of airports, deep-water ports, fiber-optic networks,
highways, railways, and oil and gas pipelines. The B&Rs unstated
goal is equally ambitious: to save China from the economic decline that
its slowing growth rate and high debt levels seem to portend. The
infrastructure initiative, Chinas leaders believe, could create new mar
kets for Chinese companies and at the same time provide a shot in
the arm to the struggling banks and state-owned enterprises whose

GAL LUFT is Co-Director of the Institute for the Analysis of Global Security and a Senior
Adviser to the United States Energy Security Council.

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Chinas Infrastructure Play

disgruntled bosses might otherwise trouble the current leadership of

the Chinese Communist Party.
Also called One Belt, One Road, the B&R is a massive undertaking
that will shape Eurasias future. It will extend from the Pacific to the
heart of Europe, stimulate some $4 trillion in investment over the next
three decades, and draw in countries that account for 70 percent of the
worlds energy reserves. So far, however, the United States has either
fruitlessly attempted to undermine the initiative or avoided engaging
with it altogether. That is the wrong course. Washington should in
stead cautiously back the many aspects of the B&R that advance U.S.
interests and oppose those that dont. The United States does not
have to choose between securing its global position and supporting
economic growth in Asia: selectively backing the B&R would help
achieve both goals.
SILK ROAD TRIP

The B&R comprises two main parts: a series of land-based economic

corridors that China refers to collectively as the Silk Road Economic
Belt, and the Twenty-First-Century Maritime Silk Road, which will
traverse the South China Sea, the Indian Ocean, and the Mediterranean
Sea. The first of the Silk Road Economic Belts corridors will connect
northeastern China to energy-rich Mongolia and Siberia by means of
a modernized rail network. The second, the China-Pakistan Economic
Corridor, will link Chinas western region of Xinjiang to the Pakistani
deep-water port of Gwadar, on the Arabian Sea. Beijing will open up
Chinas southwestern provinces to the Indian Ocean by investing in
rail, highways, ports, pipelines, and canals in India, Bangladesh, and
Myanmar (also called Burma). To the south, China is developing what
it has termed the ChinaIndochina Peninsula Economic Corridor,
connecting Southeast Asias 600 million inhabitants to Chinas economy
through investments in ports and high-speed rail. Beijing also aims to
complete two major rail projects: one will likely link Henan Province,
Sichuan Province, and the Xinjiang region to hubs in Poland, Germany,
and the Netherlands by way of Central Asia, Iran, and Turkey; the
other, the New Eurasian Land Bridge, will connect China to Europe
by way of Russia. Finally, Beijing is developing a corridor that will
connect ports in Djibouti (where China is building a naval base), Kenya,
Tanzania, and Mozambique to the Red Sea, the eastern Mediterranean,
and central and southeastern Europe. (Although Beijing has not

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publicly identified that corridor as part of the B&R, it has taken steps
such as purchasing a controlling stake in the Greek port of Piraeus
and announcing a plan to back a high-speed railway connecting it to
Serbia, Hungary, and Germanythat make its intentions fairly clear.)
So far, state-owned Chinese construction and engineering firms
have taken on most of the projects generated by the B&R. Backed by
the deep pockets and political clout of the Chinese government, these
corporate giants are hard to outbid; that will remain the case for the
foreseeable future. As for financing, China has developed dedicated
institutions to back the projects. The Asian Infrastructure Investment
Bank, which opened for business in January, is perhaps the best known
of these. Together with the Silk Road Fund, a B&R-focused Chinese
government fund, and the New Development Bank, a multilateral
development organization formerly known as the brics Development
Bank, the aiib will lend nearly $200 billion to infrastructure projects
over the coming decade.
Most important, China has retooled its foreign policy in service of
the Belt and Road Initiative. To encourage their support for the B&R,
Beijing welcomed India and Pakistan into the Shanghai Cooperation
Organization, a regional bloc; it is likely pushing for Iran to join, too.
In Europe, China has upgraded its relations with the Czech Republic,
turning Prague into the hub of its ventures on the continent. During a
state visit in March, Chinese President Xi Jinping finalized business
and investment deals worth some $4 billion with the Czechs. Driven
by the belief that the B&Rs success depends on stability in the Middle
East, meanwhile, China has recently taken an activist approach in the
region that contrasts starkly with its historical reluctance to get involved
there. In January, Xi became the first foreign leader to visit Iran after
the lifting of international sanctions on that country; on the same trip,
he met with the leaders of Egypt and Saudi Arabia. China has also
attempted to mediate between the rival factions in Syrias civil war; has
supported Saudi Arabias efforts to defeat the Houthi rebels in Yemen;
and, in December 2015, passed a law that will allow the Peoples
Liberation Army to participate in counterterrorism missions abroad.
WASHINGTONS SNUB

The B&R will guide Chinas economic and foreign policy for the fore
seeable future. Yet many China watchers in the United States have
downplayed the initiatives importance, suggesting that it is a public
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Chinas Infrastructure Play

Roadwork: a map of the Belt and Road Initiative in Hong Kong, January 2016

B O B BY Y I P / R EU T E R S

ity stunt meant to portray China as a benevolent power, a vanity project intended to secure Xis legacy, or an unwieldy boondoggle that
China, which has struggled with some development initiatives in the
past, will fail to execute.
Nowhere is this underappreciation more apparent than in Washington. Congress has not held a single hearing dedicated to the B&R;
neither has the U.S.-China Economic and Security Review Commission, a body that Congress created in 2000 to monitor bilateral trade
and security issues. At both the 2015 and the 2016 meetings of the
U.S.-China Strategic and Economic Dialogue, the highest-level annual
summit held between the two countries, U.S. and Chinese officials
detailed more than 100 areas of potential cooperation without mention
ing the B&R once, and in their public statements, U.S. officials tend
to refer to the initiative in vague terms. Washington has not only
refused to acknowledge the importance of the B&R; in some cases,
the Americans have attempted to undermine it, as when the United
States futilely opposed the creation of the aiib.
This passive-aggressive approach is misguided: it allows China to
shape Eurasias economic and political future without U.S. input; it
denies American investors opportunities to profit from major infra
structure projects; and, insofar as it seeks to weaken the initiative, it
could stifle a source of much-needed growth for Asias developing econ

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omies and Europes stagnating ones. As the failed U.S. attempt to pre
vent its allies from joining the aiib shows, resisting Chinas regional
economic initiatives puts Washington in an uncomfortable position
with some of its closest partners, many of which see the B&R as a useful
tool for pulling the global economy out of the doldrums. U.S. officials
should also be mindful of history: transnational infrastructure projects
have often bred hostility among great powers when not managed
collaboratively, as the grandiose rail projects of France, Germany,
and the United Kingdom did in the years leading up to World War I.
The United States failure to properly respond to the B&R is espe
cially striking given that Washington inadvertently helped precipitate
Beijings interest in the project. The rebalance, or pivot, to Asia
that U.S. President Barack Obama initiated in 2011 has proved hollow,
but it has nevertheless reinforced Chinas sense of encirclement by the
United States and its allies, as has the Obama administrations de facto
exclusion of China from the Trans-Pacific Partnership. Those actions
killed many of Chinas ambitions in the Pacific, leading Beijing to seek
strategic opportunities to its west. In addition, by opposing Chinas
calls for a larger voting share at the International Monetary Fund in
the first decade of this century, the United States pushed Beijing to
establish a multilateral lender of its own. And by backing restrictions
on projects that violated American environmental standards at the
World Bankwhere, in 2013, the United States supported a ban on
funding for most new coal-fired power plantsthe United States
made room for Beijing to develop alternative institutions with the
knowledge that it could find customers among its less scrupulous
neighbors. Even the United States unsustainable federal debt played
a role in the creation of the B&R: as it ballooned in the years after the
2008 financial crisis, the yield on U.S. Treasury bonds plummeted,
pushing China, the worlds largest foreign holder of U.S. debt, to di
rect more of its massive savings to infrastructure instead.
BACKING THE BIG DIG

Over the course of the next four years, Asian countries will need around
$800 billion annually to build the transport, energy, and communica
tions networks that they require to achieve their development goals.
The investment provided by todays development banks meets less
than ten percent of that needand even if the aiib and Chinas other
funding outfits live up to their promise, the money will still fall short.
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Chinas Infrastructure Play

The United States should not allow its concerns about great-power
rivalry to distract it from the challenges this deficit poses to global
prosperity. Above all, Washington should not attempt to leverage its
relationships with the Asian countries where China plans to back
infrastructure projects to stymie the initiatives progress. Such a
course would grant countries such as Kazakhstan, Myanmar, and Sri
Lanka inordinate power, creating new flash points between Beijing
and Washington.
Instead, Washington should approach the B&R with an open mind.
U.S. officials should publicly acknowledge Chinas initiative and the
potential benefits it offers, provided that Beijing leads the effort trans
parently and ensures that it works largely in the service of international
development rather than Chinas own
gain. The two countries should then The B&R could become
find a bilateral forumthe Strategic either a source of greatand Economic Dialogue is just one op
tionin which to discuss a joint eco power competition or a
nomic development agenda and come force for stability.
up with a role for the United States
that plays to its strengths. American defense contractors, for example,
could provide physical security and cybersecurity services to B&R proj
ects, and the U.S. military could help secure some of the more volatile
regions where Washington already has military assets, such as the Horn
of Africa. That would spare China the need to increase its overseas military
presence and bolster the legitimacy of the U.S. forces working in those
areas. The United States should reassure some of its allies, particularly
those in Southeast Asia, where anxiety about Chinas ascendance runs
deep, that the B&R is largely a force for economic development rather
than Chinese expansionism. And U.S. officials should seek a role for
Washington in the aiib, either as a member of the bank or as an observer.
Such a course would have a number of benefits. By cautiously em
bracing the B&R, the United States could ensure that American firms
and investors are not excluded from the opportunities offered by what
might become the biggest economic development project in history.
Washingtons engagement could also encourage some of the Euro
pean, Japanese, and South Korean investors who have been reluctant
to fund Chinese-led infrastructure projects to change their tune
which would have a broadly positive impact on global growth and, by
extension, on the U.S. economy. And by becoming a more active par

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ticipant in the B&Rs various related institutions, the United States

would be better positioned to ensure that Chinas projects adhere to
international labor and environmental standards.
Together, China and the United States are responsible for half of
the worlds economic growth. At a time when the world economy is
facing a potentially prolonged stagnation, Beijing and Washington
would be better off harmonizing their development agendas than
stepping on each others toes.
DONT SELL THE ROPE

The United States, however, should not give the B&R its blanket sup
port, since doing so would pose serious risks. First, it would feed Russias
fears of U.S.-Chinese collusion, triggering paranoia in the Kremlin,
where there is already concern about Chinas push into former Soviet
states, and Moscow could lash out in response. India poses a similar
challenge. It recognizes the B&Rs economic promise, but like Russia, it
is wary of Chinas motives; specifically, New Delhi is troubled by the
commitments Beijing has made to Pakistan and by Chinas growing pres
ence in the Indian Ocean and the neighboring countries of Bangladesh,
the Maldives, and Sri Lanka. Any perception that China and the United
States are attempting to change the status quo in the region might feed
New Delhis anxiety and accelerate an arms race between China and
India. In both cases, Washington should tread carefully, doing every
thing it can to avoid creating the appearance of unwanted collaboration
between China and the United States. As for the Middle East, the Gulf
states will chafe at the prominent role the B&R could give Iran as a land
bridge between Central Asia and Europe. So Washington should make
clear that its support for Chinas infrastructure push will depend on Bei
jings commitment to preserving the delicate balance of power in the
Persian Gulf, and it should try to ensure that projects that provide eco
nomic boons for Iran are balanced by investments of similar benefit to
the Gulf states. And to ensure that it is seen as a leader on global infra
structure itself, Washington should launch and promote its own infra
structure projects, such as the New Silk Road initiative proposed in 2011
by then Secretary of State Hillary Clinton to connect Turkmenistan,
Afghanistan, Pakistan, and India with roads and pipelines.
The greatest risk that the United States would face by supporting the
B&R wholesale is that China could use American goodwill to advance its
own ascendance to the United States detrimentabove all, by attempt
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ing to change the delicate status quo in Southeast Asia and the South
China Sea. If China is indeed pursuing a long-term strategy to supplant
the United States as the worlds dominant power, as some China watchers
contend, then giving it the chance to take such a course would be a grave
mistake. In response to the recent rejection of Chinas historical claims to
most of the South China Sea by an international tribunal, for example,
Beijing might try to build dual-use infrastructure that would further mil
itarize the region and intimidate its rivals there. That is something the
United States should not tolerate, as no degree of economic integration
can justify compromising the United States Pacific alliances.
Chinese officials would likely recognize that U.S. involvement in the
B&R would place some limits on Beijings ability to redraw the lines of
the Eurasian economy. But for reasons of self-interest, they should still
welcome American cooperation. Infrastructure projects tend to carry a
high risk and produce only modest returns on investment; the B&R is
too vast and expensive to rest on one countrys shoulders. American en
gagement would clear the way for co-investments by U.S.-, European-,
and Japanese-led institutions, such as the World Bank, the Asian
Development Bank, and the European Bank for Reconstruction and
Development; it would attract private capital to Chinas projects, as well.
The Belt and Road Initiative could become either a source of greatpower competition or a force for stability and collaboration. Beijing and
Washington can ensure that the latter possibility wins out. In general, the
best course for the United States will be one of selective buy-in: it should
participate in projects that advance its interests, such as infrastructure
investments aimed at improving intraregional trade in Southeast Asia,
while avoiding or resisting those that undermine them. For its part, Bei
jing should prioritize projects that benefit both China and the United
States, and it should put vanity projects on the back burner.
It will take a great deal of magnanimity for the United States to resist
the urge to oppose such a grand strategic initiative as the B&R, espe
cially since Chinas westward push comes at a time when Washington is
increasingly confused about its own role in the world. But the United
States must remember that its response to the project will help deter
mine the future of U.S.-Chinese relations and of the international or
der. And as the global economy slows down and hundreds of millions of
Asians languish with few hopes of escaping poverty, the United States
must recognize that its fate is linked to that of the developing world
and that it should give its blessing to initiatives that will lift all boats.

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