The Belt And Road Initiative And The Global Economy: Volume II – The Changing International Financial System And Implications

228 Pages·2019·2.247 MB·English

by  John Joshua

John Joshua
The Belt and Road
Initiative and the
Global Economy
Volume II – The Changing
International Financial
System and Implications
The Belt and Road Initiative and the Global
Economy
John Joshua
The Belt and Road
Initiative
and the Global
Economy
Volume II – The Changing International Financial
System and Implications
John Joshua
Shui Mu Shan Cheng
Fushun, Liaoning, China
ISBN 978-3-030-28067-3 ISBN 978-3-030-28068-0 (eBook)
https://doi.org/10.1007/978-3-030-28068-0
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For Feng Yan with much appreciation
P
reface
These two volumes of The Belt and Road Initiative and the Global
Economy use an eclectic approach which combines economic theories
with economic history and international relations as such themes are
interrelated. The first volume of The Belt and Road Initiative and the
Global Economy will discuss international trade and economic develop-
ment, while the second volume will discuss The Changing International
Financial System and Implications for the global economy.
The first volume starts off with an analysis of the economic policies
regarding the Belt and Road Initiative (BRI) as such policies direct the
purpose and aim of the BRI. It will describe China’s ‘going out’ pol-
icy, the Washington consensus, the Beijing consensus and the state-led
development paradigm. This leads to a discussion of globalization with
Chinese characteristics. Chinese policies are an attempt to actualize the
Chinese dream and the community of common destiny. After a detailed
analysis of Chinese policies, the first book will proceed with an analysis of
various theories of economic development which relate to the BRI, espe-
cially in regard to theories of economic growth, comparative advantage
and globalization. Arguments about diversification versus specialization,
creative destruction and defensive innovation, and China’s transforma-
tion towards high-technology will then follow.
Subsequently, the importance of the BRI towards regional integra-
tion and trade is explained, especially how integration of regions can
intensify economic development. It is argued that various gaps in eco-
nomic development have to be overcome if economic development is to
vii
viii PREFACE
succeed. China’s changing global trade relationships are also described.
After a detailed analysis of the theories underlying economic development,
the book will proceed to discuss how the construction of infrastructure
enhances economic growth and development, as well as social develop-
ment. A discussion on the backward and forward linkages highlights
the importance of infrastructure which can be used to eliminate various
bottlenecks which may impede economic development. The importance
of financial deepening to economic development has been pointed out;
however it has been explained that speculative investment is likely to be
unstable for economic growth and development. The assessment of any
viability of projects is important to the successful implementation, how-
ever, such cost–benefit analysis has to go beyond the economic terms
of the actual projects, bust instead have to include an assessment on the
political risks and viability of the projects as well, as such political risks may
override any projects, even though they may be economically feasible.
A detailed description of most projects and their economic contribu-
tion will be provided. There are separate sections on every geographic
hemisphere where projects of the BRI occur; however, the BRI in this
book expands across all continents, except the Antarctic. They have all
been included as they will have a direct impact on the operation and
functions of the BRI. The separate sections will discuss the Northern Sea
Route, Europe and the Euro-Asian connection, the quadrangle of East
Asia: China, Japan, Korea and Russia; the South-East Asia region, South
Asia and the China–Pakistan Economic Corridor, the Middle East, the
African Continent, and the South American Hemisphere.
The international financial organizations will have considerable influ-
ence on the successful implementation of the BRI, so that such inter-
national institutions are analysed as well. There are separate sections on
the Asian Infrastructure Investment Bank, the Shanghai Cooperative
Organization, and the Bretton Woods Institution: the International
Monetary Fund and the World Bank. The World Trade Organization is
also discussed in detail, as well as the international organization of the
BRICS: Brazil, Russia, India, China and South Africa. At the end of the
first volume is a postscript which highlights the prospects and challenges
of the BRI.
The second volume begins with an analysis of the changing interna-
tional financial system. There is a detailed discussion on the international
reserve currencies and exchange rates. Subsequently, the financial crisis
of 2008–2009 is discussed in detail and is seen here as a precursor to
PREFACE ix
reforms. This is followed with arguments about the eventual internation-
alization of the RMB. The decline of the American dollar is also analysed
in detail. The decline of the American dollar and the internationalization
of the RMI are the inevitable consequence of the global shift of eco-
nomic and financial power which is analysed in great detail.
Economic Growth has a considerable impact on the environment.
Hence, the consequences of international economic growth on the envi-
ronment are discussed as well. The conflicts between trade liberalization
and environmental degradation and health are discussed. Trade poli-
cies and the political decision-making process are investigated for their
effectiveness in the protection of the environment. Policies on renewable
energy and energy security and their ramifications are also discussed.
The effect of the BRI on China’s domestic economy is analysed in
great detail, including how the BRI creates new markets and investment
opportunities, which after all was the initial aim of the BRI. Hence, the
BRI is especially discussed in relation to China’s economic growth, and
subsequently how it will affect the economies of the participating coun-
tries as well as the global economy overall. China is moving towards the
innovation frontier which will also have an effect on China’s exports and
so will affect the globalization of China’s economy. However, the bene-
fits accruing from the BRI are not expected to be equally distributed.
Following an analysis of the impact of the BRI on China’s domestic
economy, the effects of the BRI on the domestic economies of the par-
ticipating countries will also be discussed. There are separate sections
on China’s trade and investments within the African continent, China’s
trade within Eurasia, China’s investment and trade in Europe, the inter-
relationship within the quadrangle of East Asia: China, Japan, Korea
and Russia, China’s effect on the economies of South-East Asia and
the implications of China’s trade with South Asia, the Middle East and
South America are also described.
The present shift of economic power towards the emerging econo-
mies is explained in detail; especially the important role that is taken by
the BRI in this process, so that the BRI is expected to have a significant
impact on the global economy which is likely to lead towards an eco-
nomic transformation on a global scale. An analysis will follow about var-
ious arguments on convergence versus diversification. The gravity model
and its relationship to regional economic growth are analysed in detail.
This is followed with a detailed analyses about the flying geese paradigm
and the leading dragon as well as the new global production networks.
x PREFACE
The BRI will have a considerable impact on international relations.
The discussion on international relations begins with an analysis on trade
dependence and political dependence. The BRI is seen here as a globaliz-
ing force which is creating a counter push by various nations which is
analysed in detail. This leads us into discussions on the present thrust
towards protectionism, policies of sanctions to maintain hegemony, and
multiple trade disputes to prevent China from rising. The discussion on
the arising disputes in international relations regarding the BRI is then
followed up with arguments about how nations rise and fall. There is
a historical perspective on the rise and fall of nations, followed up with
an analysis about the current shift in global power which leads to an
increase in military expenditure. However, the shift in global power may
be seen as the consequence of failed ideologies and economic policies.
Finally, a postscript is provided which points to the present shift in
global power and its prospects and challenges. The BRI is intended to
put the Chinese dream into practice. However, it has to incorporate the
aspirations and hopes of the participating nations as well if the BRI is to
succeed. Many participating economies of the BRI require bottlenecks
releasing investments rather than just the construction of infrastructure
to enable the extraction of raw materials to prevent the occurrence of a
resource curse and the BRI has to be coordinated amongst those coun-
tries involved.
The BRI is expected to transform the geopolitical and geostrate-
gic international relations and so is likely to change global governance.
Western economies are in decline and so require structural changes to
their economies to lead to a paradigm shift to create a sustained eco-
nomic development, a shift away from neoliberal ideology. The growing
importance of the Beijing Consensus will have economic as well as polit-
ical ramifications; consequently, the Washington Consensus is in decline.
The world is moving from a unipolar towards multipolar world order.
The global economy is at a turning point and the horizon is constantly
shifting; such a shift constitutes opportunities for change but when such
opportunities are mismanaged, unexpected dangers will develop. The
world is moving in interesting times, full of challenges and prospects;
but without challenges there cannot be any worthwhile prospects either.
Prospects will depend on how well such challenges are being managed.
Fushun, China John Joshua
c
ontents
1 Introduction 1
2 The Changing International Financial System 11
3 International Economic Growth 47
4 The Effects of the Belt and Road Initiative on China’s
Domestic Economy 75
5 Effects of the Belt and Road Initiative on the Domestic
Economies of Participating Countries 97
6 Effects of the Belt and Road Initiative on the Global
Economy 139
7 The Belt and Road Initiative and International Relations 163
8 The Rise and Fall of Nations 189
Postscript: The Shift in Global Power and its Ramifications 205
Index 213
xi