Belt
& Road Initiativeh
By FBWorld Team
It's
hard to imagine that in 1978 China was one of the poorest countries
in the world. As the United States and Russia battled over economic
supremacy China seemed to be out of the game stricken with poverty
and starvation.
Fast-forward
the clock nearly thirty years and China is a world power with
firm footing in global trade. With an initiative underway that
will likely restructure global trade as we know it. Most famously
known as the Belt & Road Initiative. It has other names
as well, One Belt One Road, and the 21stcentury Silk Road.
The
Chinese government calls the initiative ìa bid to enhance
regional connectivity and embrace a brighter futureî.
The purpose of the initiative is to built a freight, passenger
rail system as well as freeway system for automobile & trucking
transport that would connect China to Europe. The Ancient grid
of the Silk Road are the guidelines in which this project will
be planned.
152
countries are involved. On the North the rail lines & roads
will pass through Mongolia, Russia, Middle East, On the South
they will pass through India & Africa. On the far west of
this project will be Europe on the far east of this project
will be China. The idea behind a move like this would be to
control transportation and trade through the Continent &
put deals in place for the surrounding natural resources.
The
advantage of pulling off an initiative like this is a subject
of debate, but many people who are looking at the region closely
know that while the specifics are unclear what is clear the
move will make Beijing the Power broker of the region so itís
safe to assume that inland countries that make use of ìSilk
Road of the 21st†centuryî more than the maritime
shipping lanes made safe by the U.S Navy will slowly pull away
from giving the U.S preferential trade status & begin to
do what they can to get close with Beijing.
Isle of imported spirits at popular Chongqing store DC metro
This
economic reform is already making a tremendous impact and experts
believe what were seeing is only the beginning. U.S Associations
going forward are going to need to be aware of this so they
can adapt or they will have difficulty surviving. Since this
reform is creating a middle class with growing spending power
and an appetite for the finer things in life.
When people look back on the Gold Rush, they find the real winners
were the Inns, Salons, and people who sold picks & shovels.
The people stationed along the route serving those traveling
in search of fortune. Its important to keep in the mind that
the Belt & Road initiative is not where it started. Itís
the next chapter of Chinaís economic reform that spawned
when Nixon traveled there to get the needed leverage to pull
U.S troops out of Vietnam. Since then China has been reforming
itself and generating more & more economic activity.
We
are talking about a population that went from starving to the
leading producers of electronics, clothing, and competitively
priced consumer goods. Now that the population is getting skilled
the economy is undergoing a second revolution and Beijing is
taking steps to give their newly minted work force an arena,
they can compete in.
What does this mean? There is a new consumer class emerging
in Asia and there going to demand greater products for themselves.
Especially in the areas of fine foods & luxury goods.
Now
lets take a step back for a second. Why are so many different
people in varying disciplines coming to this conclusion? Is
it the emergence of brilliant entrepreneurs like Jack Ma, and
Steven Hung? Is it the fact that many of the products we come
to depend on seem to originate from there? Is it the images
we see of modern cities that rival New York and San Francisco
that werenít there fifteen years ago?
One thing seems to be true. If you were to stand naked in your
room and divide all your possessions into three piles. One pile
being from the United States, another from other nations, and
lastly China. You might notice your pile from United States
to be older clothes and things that you have had for a while.
Your pile from China to be mostly new clothes new things and
highly useful easily disposable goods like plastic cups etc.
(For the sake of simplicity we will not go into what you will
find in the pile that has been produced by other nations.)
What
makes this so interesting is that if things continue to trend
this way. Fast-forward the clock another thirty years and your
U.S pile gets pretty small and your Chinese pile becomes the
majority of your possessions.
Vendor offering fresh baked Chinese Bread
In
the meantime lets take a look at the day in the life of one
of the Chinese workers who made those goods. Wake up, peer at
Xiaomi smartphone for the mornings We Chat text and voice messages.
Spoon break fast rice porridge with one hand; with the other
use the phone to order a new air purifier in TaoBao, just another
purchase in the 2 trillion Chinese E-commerce market. At work
use Baiduís search engine and check the inbox on email
provider 163.com. While slurping a bowl of noodles for lunch,
pursue the latest musings of actor Yao Chen, who has over 78
million followers on Weibo. (Thatís almost 8 million
more than Katy Perry twitters most popular celebrity.) Choose
a restaurant to meet for dinner, using Dianpingís recommendations.
On the ride home update a dating profile on momo and zone out
with Demi-Gods and Semi-Devils, an online game based on a martial
arts epic.
There
are over 649 million Chinese online, more than twice the number
of people online in the U.S. But they live in a parallel universe
that is utterly apart from the rest of the world. The tech terms
of our era-Google, Twitter, Facebook are forbidden in China,
casualties of the ruling Communist partyís opposition
to free expression. A vast system of online censorship, commonly
known as the great firewall, blocks the populace from viewing
material deemed dangerous to the state. Since the advent of
the Arab Spring, which underscored for Chinese officials the
political power of the Internet, mainland censors have stepped
up their work, erasing threats to the party real and imagined.
Cordoned
off by the Great Firewall and largely inhabited by indigenous
tech outfits, the Chinese online ecosystem is evolving into
the Galapagos of the Internet. But unlike the scattering of
rocks in the Pacific Ocean, china is crammed with 1.3 billion
people who propel the worldís second largest economy.
Even as Beijing detaches its citizens from the global net, the
nations native tech firms are thriving. Chinese connect to the
Internet through homegrown companies some of which boast of
greater market caps than those of their foreign counterparts.
It
seams the Chinese are taking to their new lifestyle well. Of
the 649 million who are now members of the middle class their
level of discretionary spending is expected to rise.
Many
things have happened Since Nixon made his famous visit. Why
was his visit such a turning point for China?
To
answer this question were going to have to tumble down the rabbit
hole a bit. The year is 1974 and I would like to introduce you
to a key personality whom circumstance conspired with to completely
change the way a nation saw themselves and addressed global
commerce.
Deng
Xiaoping a loyal supporter of Mao Zedong. (Also known as Chairman
Mao) Known in the west for enforcing mass starvation and genocide.
Known in China for raising the standard of living, raising annual
life expectancy, and the status of women. To truly understand
the significance of what followed one would have to see the
world, as Deng Xiaoping would have in 1974.
Mao
Zedongís health is fading and Hua Guofeng is next in
line to succeed him. Just two years ago in 1972 a historic event
happened. As pressure mounted on the U.S to turn the tide on
the Soviet Union and pull the U.S troops out of Vietnam. Nixon
came to china and Brokered a landmark deal with Mao. This Deal
gave the U.S political power to pressure North Vietnam to let
the U.S troops out and diplomatic might when negotiating with
Russia. This Gave mainland china official recognition as China
under the direction of Mao Zedong which was originally given
to Taiwan under the direction of Chiang Kai Shek After world
war 2. Which came with an official seat on the U.N.
Now
lets take a second step back to really understand what it meant
to have been given an official seat on the U.N. Even though
Deng Xiaoping had been educated in France and Russia. He and
pretty much all of his associates have been isolated in china
since the Japanese invaded in 1932. From that point forward
it seemed that one incident after another continued to isolate
the country. Then smack its 1972 and here comes Nixon. Without
warning Deng and associates are traveling to New York and all
the worlds recognized leaders are in one room.
Imagine
what this must have been like. Deng and associates can now meet
and talk to world leaders casually. If synergy existed they
could meet up at their hotel room and make future arraignments.
As Deng Xiaoping experienced this I am sure he learned a great
deal about other countries and the United States. This instilled
a curiosity in Deng Xiaoping that would slowly mutate into resolve
over time.
Chinese Hotpot very popular in Central China.
Knowing
this letís refocus on 1974. For the last two years Deng
Xiaoping has been watching how the west is conducting themselves
and finds that he does not agree with Democracy but does agree
with how the west approaches commerce. While it is true he is
part of the Communist Party he was never a Marxist at heart.
More of a revolutionary nationalist who wants to see China on
equal terms with great global powers, and adopting western economic
practices appears to be a path that just might bring about that
outcome.
Driving
Deng Xiaoping to make a huge gamble. He will challenge the party
agenda and work to out maneuver Hua Guofeng as Maoís
Successor. A huge risk that could cost him his life. Four years
later in 1978 Deng Xiaoping takes power and begins to reform
the country.
Deng was able to hold power for 14 years until he retired in
1992. His affects on the country completely restructured the
way things are done in China and have spawned the saying that
nobody knows capitalism better than communist China.
Presently
there is a legion of Chinese Entrepreneurs who have been unleashed
after decades of communism and they are taking no prisoners.
Many have cast away poverty and starvation and with the pain
fresh in their minds of those hard times they are resolved to
never return to that level of poverty and starvation again.
Ask
Zuo Zongshen an Entrepreneur in Chongqing China who grew up
in poverty and now owns a motorcycle company with over 18000
employees ìChongqing Zongshen Power Machinery Companyî
if he is willing to give up what he has built and go back to
poverty. Ask his employees if they would like to return to the
days when that kind of work and its benefits were not available
to them. Today there are over 750 million examples of people
like Zuo Zongshen and his employees and even though the economy
is currently appearing to peak. Rest assured the people who
drove the economy to those heights are not done, and will willingly
sacrifice to pull themselves past this slide to even greater
heights.
Which
is a huge opportunity for entrepreneurs throughout the world.
How does one profit as this shift is taking place? Turns out
the things most in demand are food products, Luxury goods &
raw materials.
For entrepreneurs in California that means offering wine, craft
beer & anything edible. Lets also not forget entertainment.
There is a Disneyland Shanghai.
Chinese
Entrepreneur who imported
Napa Wine Frank Family Vineyards and put together a wine club.
Bare
in mind this is a transition that has taken place up until now.
Now that this Belt & Road initiative is underway China is
going to be directly connected to every country on the Asian,
African, and European continent. Itís safe to assume
that Chinese nationals will be given preferential treatment
when it comes to positioning themselves on the Silk Road of
the 21st†century to make a profit. Given the natural resources
and access this is going to give the Chinese workforce its safe
to assume their going to be demanding better and better goods.
As
this next transition takes place it makes sense that China could
surpass America as the worldís consumer. Does this have
implications as to how credit and world resources will be distributed?
Absolutely! But the change should not be feared.
According
to Euromonitor Chinese consumers prefer to buy their goods through
E-commerce platforms like Alibaba & JD.com Which paints
a pretty nice target for U.S entrepreneurs looking to feed this
growing monster. Hopefully selling to the companies looking
to sell to consumers who are and will be traveling and trading
on this Silk Road of the 21st†century.
By Arthur Walsh