Thursday, 1 December 2016

President Xi Jinping planning for a major new geo-political initiative?

     With the decision of the US President- Elect Donald Trump to withdraw from the Trans Pacific Partnership [TPP] on day one of his assumption of power as the next President of the US, the South China Morning Post [SCMP] from Hong Kong reports that the Chinese President Xi Jinping is planning for a major new geo-political initiative. At the heart of the proposal is to hold a summit level meeting of about 30 State leaders in China on the Chinese proposed "One Belt-One Road"[OBOR] initiative and that this summit is slated to surpass and perhaps even eclipse the G-20 summit held at Hangzhou earlier this year. President Xi sees this as an opening to give China's geo-political ambitions a "push" forward to further extend China's influence. The US decision to withdraw from the TPP is seen as the catalyst that has presented the Chinese leadership with an opportunity to fill the gap. The Chinese leadership also realizes that important states are at present beset with domestic problems and therefore the timing of the Chinese initiative is just about right.
    Connected with the OBOR proposal was the Chinese decision to establish the AIIB Bank that is slated to offer finance for infrastructure projects, particularly in Asian countries. Recently the President of the AIIB, Jin Liqun stated that the financing targets of the Bank are on track, with US$ 1.2 billion expected to be disbursed in the first year of operations. So far the Bank has disbursed US$829 million to six projects in Pakistan, Tajikistan, Indonesia and Bangladesh. It would be noted that all six countries are close to the periphery of China, where it has deep strategic interests. Only two major countries are outside the ambit of the AIIB at present--the US and Japan.
    However some significant problems for the Chinese leadership persist. The Chinese leadership is not at all sure which way its relationship with the Trump Administration is slated to go. While they are distinctly relieved that Trump has decided to "dump" the TPP and has not referred to his campaign promises of labelling China as a "currency" manipulator, nor has he mentioned about the imposition of a 45 per cent import duty on all Chinese imports into the US, yet they remain sanguine about whether Trump might push for confrontation on security and trade issues. In that eventuality, the Chinese would have a difficult time in managing their investments planned under the OBOR initiative.
   Secondly the Chinese are aware that with their shrinking foreign exchange reserves, limits to their ambitions would necessarily have to placed with a tightening of controls on the outward flow of the Renmenbi [Yuan]. Chinese investments are bound to slow down, although the Chinese maintain that OBOR projects would not be affected. It is however clear that while the Chinese currency may have depreciated against the US dollar, yet it has actually appreciated against the currencies of the SE Asian countries. The Chinese leadership does not expect that the Yuan's depreciation against the US dollar would seriously impact its proposed infrastructure projects.
    The Chinese are also conscious of the fact that two important states of Asia--India and Japan continue to remain skeptical of the OBOR and it is likely that President Xi Jinping may make one more effort to bring both India and Japan on board to see the merits of the OBOR. Should India begin to show interest, it may even receive an invitation for the proposed OBOR summit conference. Otherwise, in the fast paced evolving geo-strategic events in South and East Asia, India may just be left standing as a mere spectator! 

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