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China's Silk Road Project

5/15/2017
By Charles Payne, Principal Analyst

The latest provocation from North Korea and the guessing game over the next FBI director have dominated the headlines. However, the biggest long-term news began over the weekend with China moving forward with its new “Silk Road.”

This project reverse engineers Marco Polo’s route while expanding its footprint, all in the name of China’s goal to propel to the top of the economic globalism at a time when the west is retreating.

The ‘Belt & Road Forum’

The roster and attendees for the Silk Road project named ‘Belt and Road Forum’ were quite impressive. Attendees included Vladimir Putin, along with twenty-eight heads of state, representation from four continents, and sixty countries.

The participating countries boast about a 55% global economic output, inhabit 70% of the world’s population, and hold an estimated 75% of known energy reserve.

The project includes 55,000 miles of high-speed rail.

China is spending billions boring tunnels and building bridges and ports in the jungles of Laos and Sri Lanka. There’s $46.0 billion for Pakistan, including the construction of new power plants. This plan is amazing; while the U.S. will play a role, I’m worried we aren’t leading the way on such an initiative. 

I understand the message in our current political environment that it would be difficult, but China’s $1.4 trillion investment around the world is a “China-First” policy.  Of course, with America’s infrastructure crumbling, there should be an effort to bring our roads, bridges, and tunnels into the future. I wonder if the richest nation on the planet can do both.

I’m a proponent of a stronger military, but we must find funds for an economic investment, mostly at home but also abroad. China has made it clear that it wants to supplant the United States as the world’s premier economy.  I understand that a lot of Americans say they aren’t concerned about an economic arms race with China, and many would rather focus on domestic issues. 

However, the benefits of the U.S. dollar being the world’s reserve currency and a never-ending demand for our debt will allow us to focus on domestic issues and survive $20 trillion in debt.                                                                                            

Herculean Deal

U.S. Commerce Secretary Wilbur Ross announced a “Herculean” accomplishment on Friday with the new United States-China trade agreement. The ten-point agreement is just the beginning with Ross promising much more that will fall in line with the administration’s reciprocal approach to trade.

Most of the $2.5 billion agreement involves greater access in key markets for both nations:

United States

  • LNG (liquefied natural gas)
  • Beef
  • Biotech
  • Financial Services
  • Electronic Payment Services
  • U.S. Bond Underwriting & Settlement License (two companies)

China

  • Exports into U.S. Cooked Chickens
  • Six-Month Extension of current no-action relief to U.S. Regulatory Shanghai Clearing House
  • Access to U.S. Banking Market
  • The U.S. to Recognize China’s One Belt, One Road Initiative

Charles Payne
Wall Street Strategies


 

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