By Their Belt-Straps

What is the Belt-Road Initiative?

Illustration: Lommes. Source: Wikimedia

In 2013, China’s President Xi Jinping announced plans to connect East Asia and Europe via a network of rail, road, and sea routes to facilitate trade, cultural exchange, and open flows of capital and people. Shortly thereafter, China announced that over $160 billion of infrastructure projects were in planning or construction along the way, projects like a 700 MW hydropower station near Islamabad, Pakistan, or extending the current Eurasian Landbridge – a 7,000 mile rail service between Chongqing and Warsaw. This freight line has cut shipment times between China and Europe from 36 days by sea to 16 days by rail.

This isn’t just a “New Silk Road” – the overland trade route through Persia and Central Europe that facilitated textile and spice trade during the time of the Mongol Empire. That fell apart due to regional fragmentation and excessive transport fees charged by regional powers. Instead, Xi wants to integrate the Chinese economy more deeply into the world economy – via investment, through education, through technology, and by starting new multilateral institutions like the Asia Infrastructure Investment Bank.

Source: Asia Infrastructure Investment Bank

The Belt Road Initiative is like a Marshall Plan for Asia. By building more ways to connect China’s manufacturing powerhouse to Europe’s consumer economy, Xi can promote China’s interests without investing heavily in a blue-water navy. In addition, a land connection will promote growth in the perennially backward Xinjiang and Yunnan regions in the west, and among China’s restive Uighur people.

Xi has learned his economics and history lessons well. More trade means more influence and greater overall prosperity. And it also puts China at the center of Asia’s economic growth.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2018-05-08T07:04:28-04:00May 8th, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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