WEBVTT - Bonus: The Emperor’s New Road 0:00:02.000 --> 0:00:05.960 Hi. I'm Andy Brown, the editorial director of the Bloomberg 0:00:06.120 --> 0:00:09.080 New Economy. For the past few weeks, I've been sharing 0:00:09.160 --> 0:00:12.680 highlights of my video broadcasts called on the front Lines 0:00:12.920 --> 0:00:16.520 and Bloomberg New Economy Conversations, which look at how COVID 0:00:16.600 --> 0:00:20.560 nineteen is reshaping the global economy. This is the final 0:00:20.600 --> 0:00:23.720 installment before I hand back to Stephanie Flanders, who has 0:00:23.760 --> 0:00:27.200 so generously allowed me to take over her feed. I 0:00:27.320 --> 0:00:30.560 leave you with an interview I recorded with Jonathan Hillman 0:00:30.720 --> 0:00:34.080 of the Center for Strategic and International Studies in Washington 0:00:34.520 --> 0:00:39.320 about his new book called The Emperor's New Road, China 0:00:39.479 --> 0:00:43.400 and the Project of the Century. That project, of course, 0:00:43.880 --> 0:00:47.599 is the Belton Road initiative, the grand strategy of Chinese 0:00:47.600 --> 0:00:51.640 President she Jimping, who has made it his foreign policy signature. 0:00:52.520 --> 0:00:57.880 But what is it exactly? An imperial effort, certainly, but 0:00:57.920 --> 0:01:02.120 according to Jonathan, not of a organized one, and one 0:01:02.160 --> 0:01:05.960 that could repeat the mistakes of empires long gone. Take 0:01:05.959 --> 0:01:13.080 a listen. The title of your new book is The 0:01:13.120 --> 0:01:17.920 Emperor's New Road, the Emperor being j and paying the 0:01:18.000 --> 0:01:22.240 Chinese leader, the road being belt, and road is globes 0:01:22.600 --> 0:01:28.360 spanning infrastructure connectivity project. How important is this project to 0:01:28.560 --> 0:01:35.280 see and to his historical legacy. Well, this is his 0:01:35.360 --> 0:01:39.479 signature foreign policy vision. Um. And so this is so 0:01:39.560 --> 0:01:44.560 important that it's been written into the Chinese Party Chinese 0:01:44.560 --> 0:01:49.560 Party constitution. UM. So tough to imagine it being more 0:01:49.560 --> 0:01:52.560 important than it is. And in fact, I think that 0:01:52.640 --> 0:01:56.360 the importance of this thing has almost become a liability. UM. 0:01:56.400 --> 0:02:00.880 It's it makes canceling these projects all the more difficult. UM. 0:02:01.040 --> 0:02:03.200 No one ever wants to be the person to cancel 0:02:03.440 --> 0:02:06.640 an infrastructure project. But if you're a Chinese official, you 0:02:06.720 --> 0:02:09.160 certainly don't want to be the person to cancel the 0:02:09.200 --> 0:02:13.760 infrastructure project affiliated with shij and Ping's signature foreign policy vision. 0:02:15.560 --> 0:02:21.280 Let's talk about roads. The Romans built roads too, straight roads, 0:02:21.320 --> 0:02:25.280 and they marched their armies along these osteries. Is the 0:02:25.360 --> 0:02:29.200 Belt and Road in your view more and imperialist project 0:02:29.360 --> 0:02:33.040 like the Roman roads? Is it more about China find 0:02:33.120 --> 0:02:36.639 finding outlets for his industrial surplus, is creating new markets 0:02:36.720 --> 0:02:40.640 where products, goods, services, or as China would have it? 0:02:40.720 --> 0:02:43.959 Is it all about providing public goods, highways, fiber optic 0:02:44.000 --> 0:02:47.080 cables and so on, like the US martialled plan, but 0:02:47.160 --> 0:02:50.880 for the whole world? So I do call it an 0:02:50.880 --> 0:02:54.400 imperial project in the book, but it's different than the 0:02:54.440 --> 0:02:57.639 imperial projects that have come before it. And that's something 0:02:57.639 --> 0:03:00.680 I try to do, is I I lay out, UM, 0:03:00.720 --> 0:03:04.639 you know, how this compares to UM, what European powers 0:03:04.680 --> 0:03:08.040 were doing in Africa and Asia, what Japan was doing 0:03:08.080 --> 0:03:11.720 in Southeast Asia, what the United States has done UM 0:03:11.880 --> 0:03:15.760 in Pakistan. I think all of those experiences provide almost 0:03:15.800 --> 0:03:20.240 a yardstick against which you can measure China's activities and 0:03:20.280 --> 0:03:23.239 against which you can come to some conclusions about Chinese power. 0:03:23.800 --> 0:03:27.880 And I think that this, this imperial project UM is 0:03:27.960 --> 0:03:33.040 more gradual, UM, more incremental, It's more commercial in nature, 0:03:33.360 --> 0:03:37.080 and I think China faces barriers to this project that 0:03:37.160 --> 0:03:40.680 many of its predecessors did not face UM. But it 0:03:40.800 --> 0:03:43.360 is going into some very risky markets. You mentioned the 0:03:43.400 --> 0:03:46.960 Marshall Plan UM, and I think the Marshall Plan really 0:03:47.000 --> 0:03:50.320 stands out because the Marshall Plan was a finite uh, 0:03:50.400 --> 0:03:51.760 you know, it was going to last for a certain 0:03:51.840 --> 0:03:54.800 number of years. It involved a specific number of countries. 0:03:55.520 --> 0:03:57.240 There was a you know, a budget for the most 0:03:57.360 --> 0:03:59.040 Marshal Plan. You could say what was in it and 0:03:59.080 --> 0:04:01.040 what wasn't in it. You can't do that with the 0:04:01.040 --> 0:04:07.080 Belton Road. It is open ended um and ever expanding UM. 0:04:07.200 --> 0:04:09.840 And it involves developing countries. And I think one of 0:04:09.840 --> 0:04:12.480 the lessons here um. You know, the United States learned 0:04:12.520 --> 0:04:17.279 this in Pakistan as well. Um, Developing countries is a 0:04:17.320 --> 0:04:24.479 lot more difficult than rebuilding developed economies. Skolars often note 0:04:24.560 --> 0:04:28.559 that the original Silk Road was a two way into 0:04:28.680 --> 0:04:32.760 change or exchange. China sent silk con pulsman one way, 0:04:32.960 --> 0:04:36.839 and then in the other direction came ideas from other civilizations, 0:04:36.839 --> 0:04:41.680 including Buddhism, which changed China. Two questions, One, what are 0:04:41.680 --> 0:04:45.680 the most important Chinese exports along the Belton Road and 0:04:45.800 --> 0:04:50.400 what comes back into China. So I think the most 0:04:50.440 --> 0:04:54.800 important exports are China's state owned enterprises. I mean, they 0:04:54.839 --> 0:05:00.799 are really the number one beneficiary of this undertaking. China 0:05:00.880 --> 0:05:04.600 has seven of the world's ten largest construction companies. As 0:05:04.600 --> 0:05:06.280 you know, they've built so much at home that they've 0:05:06.360 --> 0:05:08.880 run out of things to build, and so now they're 0:05:08.960 --> 0:05:12.159 they're eager for work abroad. Um. They are in many 0:05:12.200 --> 0:05:15.120 cases the most influential actors on the grounds. They bring 0:05:15.160 --> 0:05:18.360 with them, um, their own workers. In many cases, they 0:05:18.400 --> 0:05:21.120 bring with them their own equipment. UM. So that that 0:05:21.240 --> 0:05:24.279 is a major export UM. You know, and from that 0:05:24.400 --> 0:05:28.080 also comes um. You know in some cases Chinese standards, 0:05:28.160 --> 0:05:32.160 Chinese practices for for for building projects. UM. So, I 0:05:32.200 --> 0:05:34.560 don't want to discount the standard setting importance of this 0:05:34.600 --> 0:05:38.560 as well. UM. And then what comes back UM, I 0:05:38.600 --> 0:05:42.720 think a lot less than is often advertised. Countries I 0:05:42.720 --> 0:05:45.080 think signed m o US for the Belton Road and 0:05:45.480 --> 0:05:47.880 politicians will say that this is going to increase our 0:05:47.920 --> 0:05:51.200 exports to China. UM. I think, you know, the evidence 0:05:51.279 --> 0:05:54.200 for that is pretty limited. UM. This is definitely something 0:05:54.279 --> 0:05:58.280 that's financed by China, intended to benefit China UM and 0:05:58.400 --> 0:06:03.880 benefiting most of all its stay enterprises. Sin Jong, the 0:06:03.960 --> 0:06:09.280 major western gateway for the Belt in Road China explains 0:06:09.440 --> 0:06:11.839 it's cracked down on the weak. Is there The u 0:06:12.000 --> 0:06:14.960 N says more than a million weeks are incarcerated in 0:06:15.120 --> 0:06:20.240 re education cats um. In terms of combating terrorism, the 0:06:20.320 --> 0:06:24.159 security of Belton Road is clearly talk of mind. What 0:06:24.279 --> 0:06:27.960 did you learn about Si Joan in writing this book 0:06:28.080 --> 0:06:31.200 and how c looks at the whole question of security 0:06:31.200 --> 0:06:34.920 there so, I think of the early days of Belton Road. 0:06:35.000 --> 0:06:38.880 One of the arguments that was made for it domestically 0:06:38.920 --> 0:06:42.120 within China, was that it was going to benefit less 0:06:42.120 --> 0:06:46.400 developed regions, Western China being you know, an important part 0:06:46.440 --> 0:06:48.960 of that. It was gonna help balance growth right between 0:06:48.960 --> 0:06:53.240 the more developed coastal regions and the region's inland. UM. 0:06:53.360 --> 0:06:56.320 That hasn't happened. And I think if you if you 0:06:56.400 --> 0:07:00.120 go UM as I had the opportunity to do UM 0:07:00.160 --> 0:07:04.760 a few years ago into Shinjin and UM, I think 0:07:04.760 --> 0:07:08.039 it was very striking UM that this is an area 0:07:08.080 --> 0:07:11.640 that's supposed to be critical for connecting China to other 0:07:11.680 --> 0:07:15.080 countries through the Belton Road UM, and it is plagued 0:07:15.160 --> 0:07:22.640 with UM, security checkpoints, UM, with police stations, UM. Economic 0:07:22.720 --> 0:07:26.680 activity UM was quite slow, but you know, the security 0:07:26.720 --> 0:07:29.400 sector was thriving. And so I think, to me, this 0:07:29.480 --> 0:07:33.280 is a real UM, a real contradiction in the Belton Road, 0:07:33.320 --> 0:07:39.680 a real tension between China's UM it's focus on connectivity 0:07:39.720 --> 0:07:44.360 and how it describes the Belton Road and it's unwillingness 0:07:44.440 --> 0:07:47.400 to give up control UM. And so I think you 0:07:47.480 --> 0:07:51.400 see that really historically in Shinjin. I mean, you know, 0:07:51.720 --> 0:07:57.080 even beyond the enormous human cost there, there's also this 0:07:57.160 --> 0:08:00.120 economic cost of UM. You know, this is not a 0:08:00.200 --> 0:08:03.360 place to do business to you know, have goods and 0:08:03.400 --> 0:08:07.480 people moving freely. Um, that comes. That comes with a 0:08:07.560 --> 0:08:10.400 high toll. And I think the bigger point here too 0:08:10.440 --> 0:08:13.600 with the Belton Road initiative, this tension between connectivity and control. 0:08:14.800 --> 0:08:17.440 It's that if those physical barriers, but it's also in 0:08:17.480 --> 0:08:20.760 some ways you know, China's approach to connectivity. Um. You 0:08:20.760 --> 0:08:24.520 know it's great firewall, um that it's sharing with other countries, 0:08:24.840 --> 0:08:28.040 you know, sharing technology to limit the spread of ideas 0:08:28.040 --> 0:08:31.280 and information. Um, you know, putting capital controls in place 0:08:31.320 --> 0:08:33.920 to limit the flow of finance. So this is really 0:08:34.200 --> 0:08:37.520 UM to me, a a core, a core tension in 0:08:37.600 --> 0:08:44.040 this global vision of connectivity. Roads require plants. They are 0:08:44.200 --> 0:08:49.840 rather precise engineering projects. But you look at Belton Road 0:08:50.480 --> 0:08:55.680 rather differently. To you it's anything but carefully laid out. 0:08:55.880 --> 0:09:01.160 Great explain that. So sometimes you'll see you'll see maps 0:09:01.200 --> 0:09:03.360 of the Belton Road, um, you know, and there are 0:09:03.400 --> 0:09:05.880 many maps, and they're they're there are not. I don't 0:09:05.880 --> 0:09:08.680 think that there really is an official Belton Road map. 0:09:08.760 --> 0:09:11.760 There's just different depictions of this. UM. But at some 0:09:11.800 --> 0:09:15.359 point Chinese officials started saying that there were six corridors 0:09:15.400 --> 0:09:19.400 in the Belton Road. Um. And so there's broad sweeping 0:09:19.440 --> 0:09:23.320 lines across the Eurasian Supercontinent and it gives this this 0:09:24.120 --> 0:09:29.280 feeling of form and structure that when you actually go 0:09:29.320 --> 0:09:33.679 and look, does not exist. UM. So no evidence that 0:09:33.800 --> 0:09:38.640 China is channeling economic activity into these corridors, with the 0:09:38.679 --> 0:09:42.319 exception of the China Pakistan Economic Corridor, which by the way, 0:09:42.440 --> 0:09:45.440 is not very focused on connectivity at all. And so 0:09:45.520 --> 0:09:48.600 in a way it's the exception that proves the rule. Um. 0:09:48.840 --> 0:09:51.679 But a lot of the activity is really more opportunistic, 0:09:52.080 --> 0:09:56.440 more disorganized, sometimes chaotic, um. But you don't get that 0:09:56.480 --> 0:09:59.559 impression from listening to a Shijian Pings speech at a 0:09:59.600 --> 0:10:02.520 Belton For him, that really requires going and looking at 0:10:02.559 --> 0:10:06.480 individual projects and stepping back and asking whether they reflect 0:10:06.600 --> 0:10:10.480 a lot of the rhetoric that's being used the US. 0:10:10.600 --> 0:10:14.800 Of course, portrays Belton Road is a debt trap China 0:10:15.120 --> 0:10:19.800 forcing expensive infrastructure onto emerging economies like Sri Lanka and 0:10:19.840 --> 0:10:24.360 then swooping in to take over ownership when debts go unpaid. 0:10:25.440 --> 0:10:29.640 What does that narrative get right about the Belton Road 0:10:29.679 --> 0:10:34.000 and what does it obscure? So the debt trap narrative, 0:10:34.559 --> 0:10:37.480 I think in a way gives Chinese officials too much credit. 0:10:38.040 --> 0:10:42.360 This idea that they have strategically raised a country's debt 0:10:42.440 --> 0:10:44.760 levels to a point that they can then take hold 0:10:44.840 --> 0:10:49.760 of a strategic asset. UM. That's very that's very sophisticated. 0:10:49.800 --> 0:10:53.840 Economic statecraft involves having lots of different actors on the 0:10:53.920 --> 0:10:57.600 same page. UM. To me, it's much more likely the 0:10:57.640 --> 0:11:00.560 Hammond Tode case in Sri Lanka that so much has 0:11:00.600 --> 0:11:04.200 been made of the poster child for debt trapped diplomacy. 0:11:04.440 --> 0:11:07.680 It's much more likely to me that China was trying 0:11:07.720 --> 0:11:11.640 to limit its losses UM in taking over that court, 0:11:11.720 --> 0:11:14.319 but not that it's set out to have this be 0:11:14.960 --> 0:11:17.679 its ultimate goal, because I think, frankly, the project has 0:11:17.720 --> 0:11:22.800 been a stain on the Belton Road on China's reputation. UM. 0:11:22.880 --> 0:11:26.080 And you know, not a lot of economic activity happening 0:11:26.120 --> 0:11:29.040 at him and Tota Port Um. And so the real 0:11:29.120 --> 0:11:31.079 story of him and Tote port which I get into 0:11:31.120 --> 0:11:33.640 in the book, I think, is a little bit less 0:11:33.640 --> 0:11:37.520 spy thriller, a little bit more Shakespearean drama. UM and 0:11:37.600 --> 0:11:41.520 domestic politics are are the key. UM. It's really you 0:11:41.600 --> 0:11:48.000 know about um politicians, unchecked ambission and ego UM, and 0:11:49.280 --> 0:11:52.840 the facts unfortunate fact that Sri Lanka now has to 0:11:52.840 --> 0:11:58.679 pay the price for that. Well, what about Chinese financial liabilities? 0:11:58.800 --> 0:12:01.280 China itself is sitting and amounted a debt and here 0:12:01.280 --> 0:12:03.880 it is lending to shake the economies and what you 0:12:04.120 --> 0:12:06.960 just described as some of the risk es places on Earth, 0:12:07.000 --> 0:12:11.439 including Pakistan. Does that come a point where China runs 0:12:11.440 --> 0:12:17.680 out of money to fund this grand road building ambition. Yes. 0:12:17.720 --> 0:12:20.400 The risk runs both ways, and I think that's important 0:12:20.400 --> 0:12:23.760 to remember. I think there's this idea sometimes that even 0:12:23.800 --> 0:12:26.760 when China fails, it wins, and I don't think that 0:12:26.760 --> 0:12:29.520 that's the case. So there is financial risk, there's reputational 0:12:29.640 --> 0:12:33.600 risk um. And in fact, even before the pandemic we 0:12:33.640 --> 0:12:36.720 saw a really a pretty pronounced pull back in Belton 0:12:36.800 --> 0:12:39.720 road activity. So you know, peak Belton road activity was 0:12:39.760 --> 0:12:46.640 probably a big pull back. UM. And now the pandemic 0:12:46.679 --> 0:12:50.240 has really frozen things. You know, Chinese officials are saying, um, 0:12:50.320 --> 0:12:53.680 you know close to projects are impacted by this, but 0:12:53.760 --> 0:12:56.240 they will still tell you don't worry, no major projects 0:12:56.280 --> 0:12:58.800 have been canceled. Again, I think, going back to this 0:12:58.880 --> 0:13:02.400 idea that this is Shusun paying signature foreign policy vision. 0:13:02.720 --> 0:13:06.520 So the risk is there, and I think because of 0:13:06.679 --> 0:13:09.679 how important this is politically, you know, I think that 0:13:09.720 --> 0:13:14.959 the risk has been underappreciated and UM and and maybe 0:13:15.000 --> 0:13:18.600 overlooked to some extent. You say, of the projects have 0:13:18.600 --> 0:13:21.400 have have been put on hold. Is is this a 0:13:21.480 --> 0:13:24.840 permanent set back to Belton Road or just a temporary 0:13:24.840 --> 0:13:29.079 phenomena that and it gets restarted when COVID is under control. 0:13:29.960 --> 0:13:32.160 So I think this is this year and you know 0:13:32.240 --> 0:13:35.040 in the next year, is I think the great renegotiation 0:13:35.320 --> 0:13:38.440 along the Belton Road. I think UM, Chinese officials are 0:13:38.440 --> 0:13:43.600 spending more time renegotiating deals than negotiating new deals. The 0:13:43.640 --> 0:13:47.200 project pipeline was already slowing down before the pandemic, and 0:13:47.240 --> 0:13:50.600 so I think this, you know, will accelerate a process 0:13:50.640 --> 0:13:54.360 that was already in place. UM. Recipient countries are you know, 0:13:54.440 --> 0:13:56.320 have are going to be quite limited in what they 0:13:56.360 --> 0:13:58.600 can can do, what they can take on. So that's 0:13:58.600 --> 0:14:02.400 going to impose a constraint around this. UM And also 0:14:02.440 --> 0:14:05.120 if you just imagine what the world of infrastructure projects 0:14:05.120 --> 0:14:09.520 looked like when this was announced, you had some some 0:14:09.559 --> 0:14:12.880 targets that were ready to go. But the longer you 0:14:12.960 --> 0:14:15.800 do this, the more difficult it becomes to find those, 0:14:15.880 --> 0:14:17.760 you know, the low hanging fruits. So the low hanging 0:14:17.800 --> 0:14:20.520 fruit has been picked um and it turns out that 0:14:20.600 --> 0:14:24.000 some of it was rotten. How much? How much has 0:14:24.080 --> 0:14:28.920 China spend on it so far? So all of these estimates, 0:14:29.320 --> 0:14:31.640 any Belton Road estimate, including the one that I'm about 0:14:31.640 --> 0:14:34.440 to give, should be taken with a grain of salt. Um. 0:14:34.480 --> 0:14:37.280 It depends on what you count for countries participating and 0:14:37.320 --> 0:14:39.880 what activities and so on. The best data that I 0:14:39.960 --> 0:14:42.440 have seen suggests that this is still a little bit 0:14:42.480 --> 0:14:46.320 south of five billion dollars in terms of total activity 0:14:46.760 --> 0:14:50.600 across country is participating in the Belton Roads and since 0:14:50.640 --> 0:14:54.360 it was announced in so not the one trillion that's 0:14:54.400 --> 0:14:57.280 often assigned to it, certainly not the four trillion that's 0:14:57.320 --> 0:14:59.960 sometimes assigned to it, and definitely not the eight trilli 0:15:00.040 --> 0:15:04.680 and um that you occasionally here. Final question you your 0:15:04.680 --> 0:15:09.520 book is pot Egano makes Pocio politics, but also pot travelogue. 0:15:10.480 --> 0:15:14.640 You actually road railways in Africa helped cargo ships a 0:15:14.640 --> 0:15:18.360 carls the Caspian. When we all start traveling a gating 0:15:18.400 --> 0:15:21.040 off to COVID, what pots of Belton road would you 0:15:21.160 --> 0:15:24.880 recommend visiting, particularly for those of your rita's with a 0:15:24.960 --> 0:15:29.520 taste for adventure. So I think it's becoming easier now 0:15:29.600 --> 0:15:33.600 to find um the boat that I took from Kazakhstan 0:15:33.680 --> 0:15:38.000 into Azerbaijan Um. You know, when I was looking for it, 0:15:38.120 --> 0:15:40.960 I was told it was going to come to one port. Um. 0:15:41.120 --> 0:15:44.640 Then I'm on on online tracking ships trying to get 0:15:44.640 --> 0:15:46.960 a sense for whether it's actually gonna show up. Showed 0:15:47.080 --> 0:15:49.400 up at at a port, a new port that was 0:15:49.440 --> 0:15:52.240 an hour away, UM, and so I had to scramble 0:15:52.240 --> 0:15:55.640 to get on it. It was a thirty two hour ride. 0:15:55.960 --> 0:15:59.200 But really unlike anything you know, I have done before, 0:15:59.440 --> 0:16:01.920 you know, to be on the on the roof of 0:16:02.080 --> 0:16:08.280 a U ship going across the Caspian Um, it's something special, 0:16:08.320 --> 0:16:11.440 and so it's a it's a adventure that most people 0:16:11.520 --> 0:16:14.720 don't take. It was me and a gang of Russian 0:16:14.760 --> 0:16:17.800 bikers actually who wanted to get their motorcycles from Kazakhstan 0:16:17.880 --> 0:16:24.160 to Azerbaijan Um. So some interesting company. Jonathan Hillman The 0:16:24.240 --> 0:16:27.720 Emperor's New Road, Thanks for your time. It's been great 0:16:27.760 --> 0:16:32.960 talking with you. Thanks to having me, Thanks for listening. 0:16:33.080 --> 0:16:35.240 I hope you'll tune in later this year for a 0:16:35.280 --> 0:16:39.240 digital edition of the annual Bloomberg New Economy Forum. With 0:16:39.440 --> 0:16:42.680 business and government leaders from around the world, we'll talk 0:16:42.720 --> 0:16:46.720 about the challenge of building a more sustainable and equitable 0:16:46.840 --> 0:16:55.239 post COVID economy.