FROM EIR DAILY ALERT
New Silk Road Is Becoming a Project of All Asian Powers
Oct. 29, 2018 (EIRNS)—Asian economic powers are making combinations in preparation for a new economic system fostering productive investments across Eurasia and Africa. China’s Belt and Road Initiative may be becoming a cooperative project of the Asian economic powers.
A column in East Asia Forum Oct. 28 by Prof. Shiro Armstrong, director of the Australia-Japan Research Centre in the Crawford School of Public Policy of Australia National University, is called “Japan Joins To Shape China’s Belt and Road.” Armstrong observes, of Japanese Prime Minister Shinzo Abe’s Oct. 25-27 China visit, that “This embrace of joint infrastructure investment cooperation through the Belt and Road Initiative ... is on a scale even larger than was anticipated before Abe’s arrival in Beijing. There was also a raft of other announcements that will help normalize the political relationship between the two Asian giants that share one of the largest economic relationships in the world. But the most consequential of those could be the joint investment in infrastructure projects.” He says Asia needs huge infrastructure investments, and China-Japan-South Korea competition will improve them—stressing that infrastructure projects are inherently high financial risk for those providing the credit, but high productivity payoff.
“As Chinese policymakers search for ways to better deploy the country’s vast sums of capital abroad, Japan has experience of doing just that dating back to the 1970s—including of geopolitical pushback.”
Indian Prime Minister Narendra Modi’s subsequent visit to Japan starting yesterday has resulted in a handful of agreements including one on high-speed rail infrastructure in India. But more importantly: Modi and Abe signed an agreement for immediate stand-up of a $70 billion currency swap line. This is clearly: a) for defense of the rupee against the impact of the so-called “reverse carry trade” which has driven it down, and the resulting ructions in the Indian financial system; b) to stop capital flight from India; and c) by stabilizing currency values, to reduce borrowing costs for Indian firms to participate in projects. This kind of stability arrangement is essential should America, Russia, China, India and Japan launch a new monetary arrangement modeled on FDR’s Bretton Woods, to foster industrial and infrastructure development in other countries.
If the United States and South Korea were now to agree to exempt new transport infrastructure from sanctions on North Korea, one should remember President Donald Trump’s comment at his Murphysboro, Illinois rally on Oct. 27, when discussing his diplomacy with Kim Jong-un and North Korea’s unique geographical and economic-development potential: “North Korea is going to be great. That location is so good. Between China, Russia and South Korea. What a location. It’s going to be fantastic.”
