China’s One Road, One Belt Grand Strategy: Founded on the Weaponization of the Global Supply Chain
“Factors in the art of warfare are: First, calculations; second, quantities; third, logistics; fourth, the balance of power; and fifth, the possibility of victory is based on the balance of power.” – Sun Tzu
The 2050 international economic outlook pictures a contested global commerce future environment. Many financial pundits forecast China as the global leader, with the United States haven lost its economic prowess, competing for second place with a rising India. Our basic laws of economics and globalization will be challenged as we transverse through an age of innovation with constant new discoveries in global connectivity, energy, and quantum physics. Since its acceptance into the World Trade Organization, China has enacted its 2050 grand strategy founded on the Belt Road Initiative (BRI) and exploiting the use of smart power to gain global economic dominance. The BRI, which is designed to allow China to surpass the US as the global economic power and establish Chinese world hegemony, is predicated on the weaponization of the global supply chain. China’s unconventional commercial tactics and pursuit of influencing the global market’s lines of distribution postures China to gain global economic dominance.
China’s 2050 Vision: Expand Its Economic & Diplomatic Belt Road Initiative
China’s 2050 Vision is based on implementing its complex BRI strategy to acquire the necessary resources to mitigate its nation’s vulnerable risks, including the shortage of employment, energy, and food. The BRI strategy is a smart power means to establish basic agreements, strategic agreements, or comprehensive strategic agreements with over 137 countries based on their level of strategic contribution to the BRI’s strategic objective ends. China has vowed to invest over $1 trillion in transportation, energy, space development, and global communications improvements with participating BRI countries to improve their economic prosperity and support China’s global influence. China’s BRI goal is to establish over 35 economic corridors to include the following strategic distribution lanes, which will impact the future transport of commercial goods:
- The 21st Century economic belt road represents a commercial trading route from China through the Middle East and Europe
- Suez Canal Economic Zone in Egypt
- European Union Trans-European transport networks
- Transoceanic fiber optic cable
- Addis Ababa-Djibouti economic corridor to include the development of industrial parks in three countries supporting this economic corridor
- New international land-sea trade corridor of the China-Singapore Demonstration Initiative on Strategic Connectivity
- New Euroasian land bridge
- European-Caucasus-Asia international and Trans-Caspian transport corridor
Following a 1+2+3 economic strategy framework, China seeks to invest in energy cooperation, cultural exchange, space exploration, human capital, and technology exchange among its BRI participating countries. In its first step toward weaponizing the global supply chain, China’s Asian National Bank and its Export/Import Bank have proved instrumental in developing an innovative financing system to aid countries with a high debt-to-GDP [Gross Domestic Product] ratio. These participating countries would not otherwise be competitive to receive international financial institutions’ assistance to meet their economic needs. With a predatory mindset, the Asian National Bank negotiates with its BRI nations to offer low bearing interests and zero-cash payment loans in exchange for the use of these countries’ natural resources and unlimited access to key transportation nodes as collateral to secure the loan. In theory, these developing countries have an opportunity to invest in their infrastructure and key economic policies, and with garnered GDP revenue, can defray the cost of the loan. If the country defaults on its interest payments to the loan, China gains the power to negotiate the terms of the loan to either exercise its rights to the country’s collateral natural resources or the ability to administratively control its key transportation nodes.
In return, China gains numerous global competitive advantages. First, it gains the ability to export its workforce to support each of the BRI project developments increasing its national workforce human capital index. Second, it secures much needed natural resources to support its manufacturing industry complex. Third, China’s global companies gain the potential to receive concessions in their export goods processing costs. Finally, China’s BRI provides the opportunity to develop its global commercial market and gain control of the global retail market. With China’s BRI strategy expansion, China is gradually gaining influence to control the transport and processing of commercial goods along global lines of distribution.
China’s lease of Sri Lanka’s Port Hambantota could serve as an example of China’s strategy to gain commercial influence in all significant points of global distribution and concerns over China’s increased influence in the global transportation domain. To support its BRI strategy, China provided $4.8 billion in infrastructure development loans to Sri Lanka to include $1.3 billion for the modernization of the Port Hambantota. The loan’s conditions revolved around a two percent interest rate and the mandate that China’s Communications Construction Company would perform the construction. After paying over $300 million in interest, Sri Lanka defaulted on the loan and negotiated with China to lease Port Hambantota to China for 99 years, with the stipulation that China’s Merchants Port Holdings would manage the port activities. China eventually wrote off the Sri Lanka debt and now controls a principal economic port in the Pacific theatre. China’s aggressive financial tactic to gain control of Port Hambantota demonstrates its smart power capabilities to obtain a competitive commercial advantage in the global market and distribution.
China’s investment in significant global points of transportation nodes, including ports, canals, rail systems, and storage, has established the foundation to control global commercial lines of distribution, a key strategic tactic to gain control of the global market. China’s investment in important mining regions, oil exploration, and global communications will disrupt US commercial industries’ ability to gain the resources necessary to maintain its manufacturing production vitality. Although today’s strong commercial relationship between US-Sino industries serves as a market opportunity for the US economy, this relationship will change as soon as Chinese manufacturing production and exports become comparable with US commercial outputs. As China grows economically, it may institute national fiscal policies to include quantitative easing, foreign corporate tax incentives, and trade incentives to suppress US foreign partnerships with global companies and legitimize Chinese companies to lead in the global market. China is gaining a more favorable position in the global commercial market through its diplomatic and economic investments to suppress US commerce and promote its own economic growth.
China is gaining a more favorable position in the global commercial market through its diplomatic and economic investments to suppress US commerce and promote its own economic growth.
China’s BRI investment poses a threat to one of the National Defense Strategy’s objectives for protecting and fomenting American prosperity. China’s economic expansion could deter US commercial interests, freedom of navigation, and American prosperity in the event of increased economic or military conflict with China. China’s BRI expansion serves as a direct commercial threat to the US industrial complex. As China continues to grow its national manufacturing production and strives to become a global innovator, Chinese goods will be in direct competition with US goods. China’s ability to influence the global distribution channels—ports, canals, and rail infrastructure—provides Chinese companies with the ability to saturate foreign retail markets. Through its BRI strategy and weaponizing its diplomatic lines of effort, China has gained the ability to disrupt the processing of US goods in vital global ports and transportation nodes. China’s business expansion strategy has provided it a competitive advantage in increased global retail and commercial markets.
China: Gaining Dominance of the Global Supply Chain
China has deliberately financed key continental transportation infrastructure development projects, including the Suez Canal in Egypt, Panama Canal, Gwadar Sea Port in Pakistan, Port of Trinidad and Tobago, and coastal ports along the African continent, to facilitate the transport of exports and imports to and from China. Unique to the BRI strategy is China’s decision to invest in and influence global navigational and distribution “choke-points,” including the Malaccan strait in the Indian Ocean, Gulf of Hormuz in the Middle East, Suez Canal, Panama Canal, and Straight of Bab el-Maneb on the east coast of Africa. On the global scale, China’s investment in the expansion of the Panama Canal, shipping lanes in Venezuelan ports, and critical inland transportation systems in South America demonstrate its ability to influence global commercial supply chain entry/exit points in the world’s continental markets. China’s control of the key global transport nodes allows China to weaponize the supply chain to gain a competitive commercial advantage in the global market.
A mature BRI strategy in 2050 will provide China with a competitive advantage in the processing of vessels in the world’s major canals, processing of goods at the major ports of entry, and the prioritization of the ground transport of goods in key countries’ economic zones. China’s ability to leverage port economics within BRI participating ports provides it with a commercial advantage in the global market. As China’s industrialization and GDP grow, its exports will start leveling with US exports in the commercial market. Many of the international ports, which have not been re-designed in years to meet today’s shipping and trading demands, will have to prioritize the processing of the commercial goods. International port authority managers will face decisions on prioritizing the processing of US versus Chinese cargo given the escalating number of containers and goods at the ports.
To the detriment of US industry, China, which will have innate administrative relationships with these port authority management offices due to their BRI investments, will influence the ports’ goods processing for Chinese goods. Chinese goods will have a competitive advantage over US exports’ processing times at the ports, which will lead to a commercial marketing and supply chain advantage for Chinese business in the host country. Chinese companies will have the port of entry processing advantage to distribute Chinese goods into the foreign retail market, hence gaining foreign consumer confidence. BRI participating countries’ foreign consumers’ confidence towards Chinese goods will be achieved at the expense of a slower US industry global supply chain. The Chinese high-volume exchange of vital goods with BRI participating partners will deter US economic lines of communication into the continental markets, such as Africa, South America, and the Middle East. Increased port processing times for US goods at BRI participating ports and shipping distribution channels will lead to higher inventory levels at key global transient points, which will lead to US industry financial loss. The US financial loss and decreasing global sales will eventually create a downward spiral in US exports and manufacturing, affecting US GDP.
The US financial loss and decreasing global sales will eventually create a downward spiral in US exports and manufacturing, affecting US GDP.
Another aspect of China’s BRI strategy and its pursuit to weaponize the global supply chain is China’s investment in the global minerals market. China’s mining exploration, gas pipeline, and energy development ventures in South America, Central America, Africa, and the Middle East demonstrate its deliberate plan to control the exploration, production, and transport of the world’s critical minerals. China’s use of smart power through diplomatic and economic means has resulted in building an economic corridor from Latin America to China using Venezuela as the South American continent entry point. China’s ability to influence the South American mineral distribution channel is a competitive advantage in future military-industrial production. The ability to process unexplored silver, copper, and specialized metals will provide them with a competitive industrial advantage in future years. China’s free trade agreements with BRI participating countries in Latin America and Africa, as well as subsequent science mineral exploration has positioned its industrial base to compete against US industrial market production capacity in the next decade through this ability to influence the mineral supply chain.
China: Weaponizes the Global Supply Chain
In the overall strategy to interconnect its global supply chain, as evident in its self-port evaluation, China seeks specific characteristics to evaluate the feasibility of an infrastructure site to support its BRI concept. China’s strategy to interconnect all the major ports, under strong Chinese influence through economic investments demonstrates its pursuit to weaponize the supply chain to gain a competitive advantage in the world market. China’s evaluation criteria for selection of its ports include the GDP output in port cities, output value of tertiary industries in port cities, import and export volume of foreign trade in port cities, port logistics supply capacity (number of 10,000-ton berths), port logistics operations scale (volume of container handled, cargo throughput of foreign trade and volume of freight handled), and annual growth rates of port cargo and container throughput. China’s deliberate port evaluative criteria led to the pursuit of its BRI participant countries to achieve its BRI strategy. China’s financial investment in the Suez Canal, and ports along the African continental coast, the Strait of Hormuz, and the South American coastlines demonstrate China’s deliberate strategy to interconnect its global and economic corridors.
As China employs its BRI strategy, it gains numerous economic and military advantages to include using its government-subsidized Chinese companies to manage the country’s transportation infrastructure, energy development, and port authority construction projects. China’s future global supply chain is to e-connect Chinese factories, seaports, financial institutions, and digital feeds into the consumer market or point-of-sale to provide Chinese manufacturing with a dominant economic advantage against the US and world industry. Among its key BRI advantages, China gains the ability to earn subsea cable digging rights and later install its Huawei digital network. With the undersea digital structure, China gains the potential to develop a globalized central IT system, which can control the digital supply chain distribution of door-to-door goods from Chinese factories to BRI participants’ consumer markets. With a singular globalized central IT system and administrative access to BRI participant ports’ traffic systems data, China can formulate global supply chain real-time data to produce near-perfect manufacturing inventory, a disruptive technology in the global consumer market. China is consolidating the numerous transportation and supply functions previously managed by several global companies into a singular distribution of commercial goods.
By providing administrative management assistance to the ports authority, China has achieved tremendous influence on significant global transient points and the ability to disrupt US or other competitors’ commercial supply chains. Of grave concern to US industry and the global market is China’s demonstrated use of port economics in its BRI participant ports to provide a commercial processing advantage for China’s industrial goods over its economic competitors. The most threatening aspect of China’s port commercial expansion is its ability to leverage cyber-surveillance to include drones to monitor operations, facial-recognition technologies to control access to container yards, and cyber-espionage against foreign goods. China’s ability to influence port authority’s operational management and communication systems to affect any significant step in port processing tasks below, could stand to expedite Chinese goods or delay US goods:
- Ticket booking and collection
- Entering the terminal gateway
- Customs clearance
- Waiting at the loading site
- Boarding the ship
- Freight transportation
- Transportation to the storage site
- Custom clearance
- Exiting the terminal
Few scientific studies determining the financial ratio of economic loss due to on-set port disruptions in international ports exist. The National Cooperative Freight Research Program has endorsed the use of Input-Output modeling to access the social and economic loss for on-set port disruptions for commercial goods processing in US ports. There exist on-set port disruptions financial coefficients to assess the economic loss due to the result of a terrorist act, workforce strike, and natural disaster in a US port, given the relative volume of processed containers per port. For this article’s purposes, the US I-O port coefficients are used to determine the economic loss of disrupted US goods processed in Chinese administrative ports participating in BRI. The US export industry could anticipate losing over $0-100,000 for an ordinary two-day disruption. The economic loss would be attributed to the opportunity cost for the sale of the merchant goods, expected delays due to the unscheduled ground transportation after the output, and the cost of standing inventory.
The economic loss would be attributed to the opportunity cost for the sale of the merchant goods, expected delays due to the unscheduled ground transportation after the output, and the cost of standing inventory.
Recommendations to Counter Chinese Risks to US Strategy
The US Government should exercise a whole of government approach to interlace the Department of Commerce (DOC), private industry, and international trade organizations to educate and monitor China’s weaponization of the global supply chain and port economics. The Department of State (DOS), Department of Transportation (DOT), DOC, and private industry play an instrumental role in monitoring potential export commercial disruptions. Subsequently, these agencies can pursue legal recourse through sanctions or negotiations to prevent intentional disruptions to US goods processing. Below are recommended actions from all economic and diplomatic interlocutors to monitor the access to global distribution lines of communication and US commerce fair trade practices to include:
- The Departments of Defense (DOD), DOC, and DOT need to develop an operational link with the US regional trade councils, such as the US/Arab Trade League, to monitor any grand-scare transport disruptions of US goods into foreign markets.
- The US Combatant Commands need to establish an operational link and partnership into the National Security Council and DOS’s strategic port initiative to incorporate military instruments of powers into its overall counter-BRI strategy.
- The DOD and DOT need to establish an operational link with major US global transport companies to evaluate any commercial goods transaction disruptions in BRI hosted ports.
- The DOD should establish security cooperation efforts with India to support India’s anti-BRI strategy and foreign direct investment. The US should invest in securing strategic ports, which may deter China’s BRI strategy and weaponization of the supply chain.
- The DOC, Small Business Administration, and DOT need to establish an open-source education program open to the US market, explaining the importance of verifying its supply chain and measuring potential commercial disruptions in BRI participating countries.
- The DOD and DOS need to monitor the Chinese subcontractor companies operating in the ports undergoing the BRI implementation. Specifically, the departments need to inform BRI host nations of the Chinese investor group POLI, Inc., a large state-owned enterprise under the supervision of the Government of China’s Assets Supervision and Administration Commission of the State Council. POLI is the parent of over 100 subsidiary companies supporting the Chinese military-industrial complex. POLI, Inc. has links to illegal exports of assault rifles and arms material. It serves as an example of China’s smart power capabilities in the BRI participating ports and the ability to extend military power projection through intelligence collection and cyber deterrence in key economic lines of distribution and navigation.
The next century’s international global market will be defined by the ability to maximize the global supply chain to maintain a competitive advantage. As economically powerful countries mature their smart power strategies to control global lines of distribution and strategic materials production, the global commercial marketplace will be contested. Global companies will have to adjust their supply chain monitoring systems, international transportation negotiations, and build strategies to gain supply chain transportability efficiencies to maintain a competitive advantage in their industries. The future economic transportability competition will force the DOD, DOT, and DOC to establish smart power strategies to maintain US influence in the global transportation systems to preserve economic freedom of movement. The US Government and private industry will have to mobilize to combat an economic conflict. A conflict challenged by the age of innovation and predatory economics to deter power economies. The US will have to rely on its national will, fair practices, and human freedoms to ensure our global economic lines remain open and fruitful to safeguard global prosperity against rising economic predatory strategies.
By LTC Gerard M. Acosta, USA, Graduate Student, Global Supply Chain Management Concentration, The Dwight D. Eisenhower School for National Security and Resource Strategy, National Defense University
The views expressed in this article are those of the author and do not reflect the official policy or position of the National Defense University, the Department of Defense, or the US Government.
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