Economic Policy

China’s One Belt One Road Offers Better Prospects than ‘America First’

The United States' America First policy has alienated many allies while China's One Belt One Road is gaining traction with many American companies. Alexandra Calloway-Nation examines the opportunities offered by OBOR in the wake of waning American trade policies.


The future of free trade in the United States has not seemed very bright since the Trump Administration has started acting on its “America First” rhetoric, which has manifested itself in the U.S.’ withdrawal from the TPP in January 2017, ongoing NAFTA renegotiation talks, and most recently tariffs on most steel and aluminum imports from China. During his trip to Asia last November, President Trump reinforced this “America First” sentiment at the APEC summit where he set himself and the U.S. apart at an event that highlighted multilateral cooperation by stating, “I am always going to put America first.” In stark contrast to the U.S., China has gone ahead with its One Belt One Road (OBOR) initiative, leaving the United States out in the cold, and potentially leaving American companies out of the picture.

American companies do not share the isolationist sentiment of current U.S. trade policy, but instead are finding ways to profit from OBOR. According to an August 2017 article by The Economist, General Electric sold $2.3 billion USD in equipment to projects along the Belt and Road in 2016, nearly three times the total from its previous year with projections of double-digit growth in those revenue streams in the coming years. The government’s double-whammy of withdrawing from the TPP while also making ominous threats about only engaging in future trade agreements by putting “America First” (as exampled by the ongoing NAFTA renegotiation talks) show that for the time being it is turning away from the rest of the world, and going down a more solitary path at a time when most countries, perhaps aside from Great Britain, are turning more towards multilateral systems.

According to a December article by The Diplomat, there is a massive global “infrastructure gap” where infrastructure needs vastly outstrip spending. This gap exists not for a lack of capital, but for a lack of feasible projects and governments or companies willing to invest in those projects. Jim Barry, the head of infrastructure at BlackRock says, “There’s absolutely zero correlation between the scale of need for infrastructure and addressable opportunities for the private sector.” Governments are better prepared than private companies to investment in large-scale infrastructure projects over a longer time frame, which aren’t expected to generate revenue but are necessary to create the foundation for future development projects. In his new book on OBOR, China’s Asian Dream: Empire Building along the New Silk Road, Tim Miller says “Chinese officials admit that they expect to lose 30 percent of their investments in Central Asia and up to 80 percent of their money in Pakistan.”

This begs the question, can American companies still take advantage of these new projects along the Belt and Road when Chinese government officials and companies expect to lose so much of their investment as a consequence of doing business there?  

Chinese companies have an advantage over their American counterparts, not only in receiving government subsidies and loans, but also because many of them are state-owned enterprises, directly controlled and funded by the Chinese government. The Silk Road Fund was founded in 2014 by the Chinese government to fund the infrastructure investment projects along OBOR. Since this is a state-owned investment fund, its funding is only available to Chinese or Chinese-majority owned companies. The funding preferences of the largest Chinese infrastructure investment organization have a huge impact on the demographics of the national origins of companies doing business along OBOR. Not only do American companies not have access to these low-interest loans afforded to Chinese companies by their government, but Chinese companies also receive preferential treatment when bidding on infrastructure projects.

Since OBOR itself is a relatively young initiative, and the Silk Road Fund is a young institution, there may still be opportunities to set new precedents that would allow non-Chinese companies to take advantage of the same opportunities available to Chinese companies. There is a surplus of need in infrastructure investment, and not enough Chinese companies to fill that gap for many years. This leaves the door open for American companies to leverage their negotiation and business-government relations skills strategically to make the most of burgeoning opportunities across OBOR.

Alexandra Calloway-Nation holds an M.A. in International Trade and Economic Diplomacy from the Middlebury Institute of International Studies at Monterey (MIIS) and is the D.C. Chair of the MIIS International Trade Association. She is proficient in Mandarin Chinese and has studied China extensively, her areas of interest are Chinese foreign policy and economic development. She currently works at a major U.S. investment bank.

Please note that opinions expressed in this article are solely those of our contributors, not of Political Insights, which takes no institutional positions.


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