Can BRI be the Road to Peace and Prosperity?

The debate about the Belt and Road Initiative (BRI) in the west seems to have reached an impasse. At least three issues require sustained analysis. These are: 1. Trade, investment and growth prospects both in PRC and other countries, but particularly in the Global South; 2. Distributional issues and the possibilities of advancing arrangements that can enhance people’s well-being in various BRI countries; 3. The geopolitical consequences and how to avoid a new cold war. On the trade and investment side, BRI promises to create a multilateral trading and investment area under Chinese leadership. Both preexisting US hostility and fears generated by such prospects summed up under the paranoid term “China’s Sharp Power”, have given BRI a bad press in the west in the absence of any model-based scientific analysis. In order to assess the impact of BRI using consequentialist logic, it is desirable to have model-based counterfactual results. In order to lend concreteness to a Geoeconomic and Geopolitical analysis of BRI, this short article presents some results from a regional economy wide model developed by the author. Aggregate consequences for the Chinese economy in terms of economic growth, output and employment impacts are estimated for two BRI scenarios—a high investment and demand scenario and the current low investment and demand scenario. Some important dynamic econometric issues are discussed in an appendix of the paper on which this section is based. Also, a more complex economic systems model with explicit banking and financial sectors for the Chinese economy is presented for further, more sophisticated modeling work can be found in the same technical paper. As a first approximation, the current modeling results show that BRI will certainly not harm the Chinese economy; but the low demand scenario does not translate into great gains either. The high demand longer term scenario is much more attractive for the economic policymakers in China. But for the global south---particularly Africa--- prospects for a new deal is there. Achieving a more equitable distribution and enhancing the capabilities of the great majority of people there will require favorable political conditions. While the Chinese do not try to promote democracy, they also do not try to overthrow existing governments. Therefore, progressive political forces of the global south need to organize around a pro-people political, social and economic agenda. Finally, in the sphere of international relations, even in the instance the economic consequences alone cannot justify the strategic importance given to BRI by the Chinese rulers, or perhaps especially in that situation, the prospects for a new cold war are real. One possible conclusion is that although the original investment impetus came largely from balance of payment surplus, excess capacity in PRC and the profit seeking by its private sector firms, by now the geopolitical motives are the main drivers of BRI with modest prospects of economic gains but real prospects of energy security and overall trade and investment security. But this is a delicate and fraught game in geoeconomics and geopolitics in the 21st century. So far, the US response lacks subtlety and nuance . Such responses fueled by fear and insecurity on the part of the US can lead to a dangerous geopolitical conflict.