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Will China’s Silk Road Damage the US Economy?


Will China’s Silk Road Damage the US Economy? By www.ProfitableTradingTips.com The Chinese Silk Road forum is over and we
wonder if anything will come of all the hype? The Washington Post writes that the forum
demonstrated China’s power and influence and the power of its propaganda. It’s easy to laugh at the sheer cheesiness
of the promotional campaign for the “Belt and Road Forum” in Beijing. In one video released in the run-up to the
meeting, a father reads his rapt daughter a bedtime story about President Xi Jinping’s
infrastructure plan. In another, a group of children express “gratitude” for the $900
billion initiative: “The future’s coming now/the Belt and Road is how,” they sing. The Belt and Road Forum is a projection of
Chinese power, yes, but it is also a vivid display of the power of Chinese propaganda
– a lesson in what happens when truths, half-truths and state-sanctioned talking points, mixed
and repeated, begin to pass as fact. All of this refers to an infrastructure and
development plan for trade routes by land and sea from Chinese manufacturers to buyers
across Asia and Europe. The natural routes are still those used in the caravan days when
silk traveled from China to Europe. Today China is pledging hundreds of billions of
dollars to build railroads, airports, ports and power plants along this route, as well
in every corner of the globe. Who is worried? India and the USA are concerned. America First or America Last? Donald Trump gained the US presidency promising
to make America First but his route to this goal is isolationism. This leaves China as
the global leader in advancing trade deals and helping develop infrastructure nearly
everywhere. While America is hunkering down behind a tariff wall China could end up developing
infrastructure from Beijing to Vienna. The way in which this could damage the US economy
is by making it shrink while China’s grows. Does this jive with reality? Not All As It Seems Despite glowing Chinese propaganda not all
is well with the Silk Road plans. First of all it is a Chinese enterprise meant to benefit
China. All will be well advised to keep that fact in mind. Reuters writes of the Silk Road
and cheap funds, heavy debt and growing risk. Behind China’s trillion-dollar effort to build
a modern Silk Road is a lending program of unprecedented breadth, one that will help
build ports, roads and rail links, but could also leave some banks and many countries with
quite a hangover. At the heart of that splurge are China’s two
policy lenders, China Development Bank (CDB) and Export-Import Bank of China (EXIM), which
have between them already provided $200 billion in loans throughout Asia, the Middle East
and even Africa. They are due to extend at least $55 billion
more Even Chinese bankers admit that if they lend
too much to countries that cannot pay the loans will be unsustainable. China’s central bank governor Zhou Xiaochuan
is among those to warn that this reliance on cheap loans raises “risks and problems”,
starting with moral hazard and unsustainability. China has been caught out before; it is owed
$65 billion by Venezuela, now torn by crisis. The problem for nations like Pakistan is that
they will borrow from China to pay for projects completed by Chinese companies and largely
by Chinese workers. Where is the money going to come from to pay off these loans? And remember
that China is not growing like it used to, has mounting national and personal debt issues
and risks landing in a trade war with its largest customer, the USA. It remains to be
seen if China’s activities in Asia and toward Europe make any difference to the US economy. For more insights and useful information about
trading stocks, options, futures or Forex, visit www.ProfitableTradingTips.com.


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