BRI enables China to undermine US-driven global governance systems
Cavanna, July 2019, https://tnsr.org/2019/07/unlocking-the-gates-of-eurasia-chinas-belt-and-road-initiative-and-its-implications-for-u-s-grand-strategy/, Thomas P. Cavanna is a visiting assistant professor at the Fletcher School of Law & Diplomacy in the Center for Strategic Studies. He writes on U.S. grand strategy and U.S. foreign policy toward China and South Asia. He holds a French “Agrégation” and a Master’s degree and doctorate in history from Sciences Po. He was also a Fox Fellow at Yale. Dr. Cavanna is currently working on a book on the Belt and Road Initiative and U.S. grand strategy., Unlocking the Gates of Eurasia: China’s Belt and Road Initiative and Its Implications for U.S. Grand Strategy
The Belt and Road Initiative not only helps China blunt potential aggressions, it also allows it to project strategic influence at the bilateral, regional, and systemic levels. Although the United States remains dominant on each of those levels, Beijing could gradually erode America’s hegemony and weaken its security system in the Indo-Pacific.
Belt and Road is designed to erode America’s grip on the international governance architecture, a dominance that Beijing has long resented. Chinese-led financial bodies like the Asian Infrastructure Investment Bank, which has a $50 billion endowment and has attracted dozens of states despite U.S. attempts to stop them from joining, or Brazil, Russia, India, China, and South Africa’s (BRICS’) New Development Bank, which has a similar endowment, accelerate the momentum generated by the Chiang Mai Initiative — an endeavor that works to decrease regional defaults in partnership with ASEAN, Japan, and South Korea — the Shanghai Cooperation Organization’s Interbank Consortium, and maybe soon a non-Western credit rating agency.140 Additionally, Belt and Road has led to the signature of many bilateral commercial agreements and the creation of China-based international courts for conflict resolution. It boosted negotiations over the Regional Comprehensive Economic Partnership, which could lift the barriers that separate leading Asian economies, including China, India, Japan, South Korea, and ASEAN, on more than 90 percent of the products that they exchange. Finally, Beijing’s new Cross-Border Interbank Payment System and clearing centers help internationalize the RMB (or yuan, as it is commonly known).141 Although this effort is curtailed by capital controls, the Chinese central bank’s lack of independence, Beijing’s investments in U.S. treasury bonds, and the dollar’s domination, the International Monetary Fund added the RMB to its Special Drawing Reserve, and European financial centers are positioning themselves as “‘hubs’ for its use.”142 Meanwhile, the newly created “petro-yuan” could transform the pivotal worldwide commodity market.143
Belt and Road is designed to erode America’s grip on the international governance architecture, a dominance that Beijing has long resented.
Systemic consequences might follow from the strides Beijing has made. By offering alternatives to loan recipients, promoting infrastructure building, and distinguishing economics from politics, China-led financial institutions, in combination with Chinese bilateral development policies, could slowly weaken the austerity principles that the so-called “Washington Consensus” has dictated for decades.144 Belt and Road’s commercial agreements could consolidate Beijing’s “agenda-setter” status.145 Finally, while the RMB may never achieve dominance, it could erode the dollar’s supremacy, which is already threatened by America’s fiscal deficits and large-scale “economic warfare” with countries like China, Russia, and Iran, not to mention digital currencies and the BRICS’ de-dollarization campaign.146
Washington’s security interests may be affected by those dynamics. Thanks to its leadership in international institutions — such as the International Monetary Fund or the World Bank — and its monetary dominance, America became a “system-maker” after 1945. Combined with the appeal of its loans, investments, and market, this status allowed the United States to borrow without consequences, navigate financial crises, offload adjustment costs, dictate lending terms, tame economic competitors, and open foreign markets.147 In turn, these gains strengthened the foundations of America’s hard power. They also contributed to weakening Britain’s empire, maintaining Europe and Japan’s strategic dependency, and convincing most allies to fund U.S. military enterprises. They even helped punish Washington’s enemies — for example, Russia following its 2014 military aggression against Ukraine.148 As it erodes America’s “system-maker” status, Belt and Road could reduce these benefits.