Since 2003, China (PRC) has taken part in a number of aggressive financial maneuvers to outcompete Western governments. In the early Bush administration, China artificially pegged exchange rates of the Yuan to be lower than true valuations, which shored up the ability of Chinese industrial exporters to bring manufacturing of Western products from North America and Europe into China. In the near-two decades since then, China has developed tens of trillions of dollars worth of manufacturing infrastructure, which combined with a shift to centrally-planned economic production zones and state-owned megacorporate enterprises (also initiated in ~2003), has resulted in a substantially superior industrial sector (compared to other large economies) capable of immense production.
Although the design, masterplanned by current Chinese President Xi Jinping, has drawn the ire of many western populists (most notably former president Donald Trump through his “trade war”), it is nonetheless completely (or near-completely) supported by Chinese citizens. What is important to understand is that the Chinese mainland is composed of a near homogeneous ethnic group, the Han Chinese (other groups, such as the Zhuang, Manchu, Uyghurs, and Hui, make up less than 10% of the population). As such, they hold similar cultural values; two values of note for understanding their economic structure is their belief in ethnic supremacy (more akin to overzealous paternalism over different international and subnational groups than necessarily a caste-based view) and their view of the role of government as the head of a large family that shouldn’t be questioned and should be trusted to take care of the worries in life (again, a paternalistic-type view). According to Isaiah Berlin’s concepts of liberty, the Han people generally believe more in a “freedom from” [harm, worrying about insecurity, etc.] approach, as compared to Western belief in “freedom to” [speak, practice religion, organize, protest, etc.]. This means that not only are the Chinese people fully supportive of their government’s actions (a >90% approval rating means popular license to govern without impunity), but the government is seen as a means to strengthen China through whatever means necessary- and however many Yuan are necessary. The only debate over what is done occurs through official Chinese Communist Party discourse and internal structure/hierarchy, which is accepted as legitimate even though undemocratic (it is meritocratic instead, a common theme in modern China).
The governmental structure of China is broken into different provinces, each with a different industrial production mandate, and within each province are cities which compete against each other to receive commendation from the central government (these cities are organized themselves within special economic zones that incentivize certain types of production). What Xi Jingping has been doing recently is reaching out to workers in the construction sector in various cities and provinces to gain popular approval over huge construction (infrastructure) projects that dwarf those of the West. Because of the 20-year-long growth spurt the Chinese economy has seen, it has the unique license to extend itself beyond typical limits that countries may have (with respect to economic stability). Just like the U.S.’s military hegemony in the late-20th century and economic growth out of WWII has allowed the U.S. Dollar to be the world’s reserve currency, allowing the U.S. to deficit spend trillions with little recourse for action, China’s recent growth and standing on the global stage allows it to invest heavily in domestic infrastructure, despite going through immense turmoil with a looming real estate crisis, lockdowns, and high oil prices. This ability to improve the lives of domestic citizens in turn lends credibility to Xi’s government on the world stage and gives the nation leverage when negotiating with other governments (in trade deals and such). Why would any country (or company) manufacture goods in a different country when all the components they need are on one street in Jinjiang or Shenzhen? Why would Russia need Western monies (or SWIFT) when China is there to offer its Yuan and its own international banking system? Why would other less-developed countries, or those spurned by the West in the past, turn to the U.S. when China is, at the very least, clear about its prerogatives (money, growth)? These types of questions give credence to why China is more and more being seen as legitimate on the global stage, and due to its expanding economy, it also has the ability to actualize its military potential.
The Russian invasion of Ukraine has shifted the geopolitical order of the world, with two blocs forming, one allied with the U.S. and Europe, and the other with China and Russia. As China expands its international influence, it will seek to use strategic entry points, such as the war in Ukraine, to broker deals with various nations. With the U.S. and its allies “distracted” on the western front, China is seeking to become a leader in the east, distributing military supplies and aid as NATO does in the west. China’s first goal is to create a boundary zone where it is unchallenged within its own sphere of influence, as the U.S. is in the Americas. This necessitates military dominance in East Asia and considerable spheres of influence in South Asia; a strategic relationship with Russia covers its north and western ends. However, it is noteworthy that China and Russia are not necessarily allies. China is always very aware of its appearance on the global stage, and knowing how the rest of the world has reacted to the Russian invasion means it is not in their best interest to explicitly have an alliance with Russia; rather, it is much better for Beijing to use Moscow as a physical, military, philosophical, and economic buffer between themselves and the West. However, to seek dominance in East Asia, particularly areas near the South China Sea, Taiwan, the Korean Peninsula, and Japan (the first island chain), China is actively seeking to expand its naval and air force capabilities. While a military alliance with India is unlikely, as conflict in Tibet has raised hairs on both sides, the aforementioned strategic relationship with Russia is currently being exploited by China to force economic neutrality upon India, which is reliant on Russia for energy needs (as is the case with much of Eastern Europe). Likewise, many Latin American and African countries are being held into neutrality due to a combination of economic and sociopolitical pressures from Beijing that threatens democratic stability across the globe.
With the effects of the Russian invasion of Ukraine growing, there is increasing pressure globally for nations to choose sides, between the NATO-aligned western bloc and the Russo-Sino eastern bloc. What may concern many (especially in the West) about this geopolitical realignment is that it may no longer be dominated by the United States, which resulted in favorable international economic conditions for North America and Europe over the past 75+ years. The primary reason the Ukraine conflict in particular is alarming is because Russia’s control over much of Eurasia’s oil supply and Africa’s grain (wheat) supply has led to countries buckling to the pressure of the China-Russian alignment. Over the past decade, China has been laying the economic groundwork for a neocolonial takeover of the Global South (primarily underdeveloped countries, according to OECD standards) through its Belt and Road Initiative. The BRI is essentially a form of Chinese economic diplomacy where China forms agreements with nations to invest in the countries’ central infrastructure, production capacity, and resource extraction capacity. The caveat of this is that often the BRI efforts, which do increase national GDPs to an extent, often result in cases of human rights violations, negative environmental impacts, and neocolonialism/economic imperialism through “debt traps,” in which countries make “a deal with the devil” and become indebted to China in exchange for the promise of economic/infrastructure development. Essentially, the danger is that China is increasingly holding more and more economic and diplomatic power over many smaller nations due to the massive debts they must take on to participate in the BRI.
So why do countries join the BRI anyways, if there is such a large negative impact? The answer, in the case of many Latin American countries, is that they have been screwed over by the West, particularly the U.S., so much over the past century and a half, that they would rather take a deal with China, whom they know to be potentially malevolent but at least transparent about their intentions, over the United States, which has orchestrated countless coups and perpetrated other untrustworthy behavior since the introduction of the Roosevelt Corollary to the Monroe Doctrine over the a century ago. Similarly, Africa finds China to be a more savvy business partner than European nations. A saying in many central African states is: “When Britain visits, we get a lecture. When China visits, we get a hospital.” Simply put, China’s economic imperialism’s edge is not derived from its production capacity or its long-tenured relationship with other countries (Cuba, one of the only other communist governments in the world, may be one of the only BRI nations whose admission is for philosophical reasons)- it is because the Chinese are better at doing business with underdeveloped nations than the U.S. and its allies are; Beijing is incredibly adept at exploiting bridges that the U.S. burned. A critical strategic relationship with Russia (i.e. leverage over Moscow due to the unpopularity of the war in Ukraine) likewise means that China has the upper hand in negotiations with countries negatively impacted by the war (which is most of the world). The explicit danger of these deals is that China may attempt to tie forgiveness of their exploitative loans (especially “hidden debt”) to the construction of military bases in different nations. From an American perspective, this prospect is very alarming, but furthermore from a global perspective, the shift from a global unipolar military hegemony (Pax Americana) to a bipolar system (1->2) has historically led to increased military conflicts, genocides, and famines. Additionally, the informational asymmetry of many of the loans China has given to overseas partners may lead to a trillion-dollar bubble that has pervaded throughout the global economy, beyond just the saturated, but semi-isolated, Chinese domestic market.
The best ways for the U.S. and its allies to counteract the potentially devastating impacts of the BRI are to provide alternatives [for developing nations] to Chinese loans and projects, seek to remove any leverage the “Eastern Bloc” may have over exploitable countries, and provide economic safety nets to nations which may fall victim to Chinese debt traps.
First, creating a western version of the BRI is essential; it looks as though the world is going through a stage of deglobalization in which supply chains are increasingly being divided between the east and west, so at least having a foothold in contested nations in Africa, Latin America, and South Asia is essential to preventing further global inflation (like what was seen in the aftermath of the COVID-19 pandemic), as those nations are the most likely sources for raw materials and future production as western economies move more and more towards service-based economies. To do this, hundreds of billions of dollars must flow from western countries to the Global South. Second, removing leverage from China and Russia likewise comes down to two things: Resilient supply chain infrastructure and energy. Decreasing global dependencies on countries hostile to democracy (such as Russia, China, and Iran) decreases the risk of harmful inflationary crises hitting the global economy, which poses an outsized risk to less-sheltered economies (such as the U.S., Mexico, and Australia). Decreasing dependence on antidemocratic oil likewise lessens the leverage that oil-producing nations may have over smaller, less energy-independent ones. Third, providing a safety net to countries that fall indebted to China can prevent catastrophic fallout in the event that entire continents may decide to default on their debts to China. Providing mechanisms by which nations may transition debt structures away from China and towards NGOs and benevolent international banks (whose codified purposes are not to increase investment opportunities, but to increase global financial stability) may allow for a “release valve” for countries to enjoy the benefits of international agreements without sacrificing military autonomy or fall victim to economic imperialism.