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China's Belt and Road Initiative

Written by Fahad Nasir 5:23 pm Articles, Current Affairs, International Relations, Published Content

Is China’s Belt and Road Initiative (BRI) Another Marshall Plan?

Though they’re separated by more than half a century, the American Marshall Plan and China’s Belt and Road Initiative (BRI) were both responses to global crises. Fahad Nasir provides a comparative analysis of the two financial initiatives, drawing upon the differences and similarities between the two in a comprehensive manner.
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About the Author(s)
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Fahad Nasir is an Islamabad-based civil engineer who graduated from NUST Islamabad. He is currently working for a semi-government organization.  His areas of interest include international relations, socio-economic issues in Pakistan, governance, and politics.

Introduction

A few months ago, China hosted the Third Belt and Road Forum to reiterate Beijing’s unwavering commitment to the initiative and mark the tenth anniversary of China’s Belt and Road Initiative (BRI). This, once again, brought the comparison between BRI and the post-World War II Marshall Plan into the limelight. 

During a 2013 visit to Kazakhstan, Chinese President Xi Jinping defined the contours of BRI, considered one of the most ambitious and impactful policy initiatives the world has ever witnessed. The initiative, driven by multiple motivations, generated scores of projects and partnerships in the domains of trade, education, and culture between China and other countries. Estimates suggest China’s financial commitment to BRI stands at approximately $1.4 trillion and continues to grow, with projects underway in nearly sixty-five countries.

In contrast, the Marshall Plan, proposed by then-US Secretary of State George C. Marshall in 1947, aimed to rebuild war-ravaged Western European industries and localities after World War II. From 1948 to 1952, the US provided European nations with around $13.3 billion in aid, approximately $150 billion in today’s value, to reinvigorate the European economy.

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Similarities Between the Marshall Plan & BRI

Both the Marshall Plan and China’s Belt and Road Initiative are often compared due to their ostensibly similar objectives. A central parallel between the two programs is that both of them were developed in response to a global crisis to rejuvenate regional economies and stimulate international trade. The Marshall Plan designated funds and projects for European countries to compensate for war losses, rebuild infrastructure, and promote interdependence in order to avert future global wars.

Similarly, China introduced BRI after the 2008 global financial crisis to reintegrate world trade and accelerate industrialization. Nevertheless, both the USA and China also had implicit internal motives to develop the plans under discussion. Both initiatives were also shaped by implicit motives, seeking to export their respective industrial and labor overcapacity to foreign markets.

Under the Marshall Plan, numerous American companies invested in Europe’s redevelopment, creating a substantial market for American exports in Europe.  In a similar vein, Chinese public and private companies are significantly expanding their businesses and actively investing in infrastructural mega projects in BRI partner countries. This is apparent from the fact that an article published on the Council on Foreign Relations website claimed that as of 2019, at least one million Chinese laborers were employed in BRI projects abroad.   

Additionally, both the Marshall Plan and China’s Belt and Road Initiative significantly boost the power of their respective domestic currencies. The Marshall Plan provided European countries with dollars to build up their reserves, ease trade restrictions, and stabilize currency exchange rates in terms of US dollars, ultimately strengthening the US dollar in international markets.

Likewise, analysts believe that BRI serves as the Chinese tool to establish global dominance of the renminbi. Through BRI-associated financial institutions, like the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB), China has introduced renminbi-denominated lines of credit for the partner countries. This incentivizes the countries to settle trade and debts in renminbi and hold renminbi reserves, thus, internationalizing the Chinese renminbi.

Having similar driving forces, the Marshall Plan and BRI set comparable economic objectives. The former established a framework for European countries to foster intra-European trade. It provided Europe with funds to implement infrastructural projects and increase their agricultural and industrial production, thereby bolstering foreign direct investment in Europe. BRI also aims to increase foreign direct investment in its partner countries by undertaking countless infrastructural projects and tapping their natural resources to lower trade costs, help countries fight inflation, and establish financial stability. 

Differences Between the Initiatives

On the contrary, some key structural differences are revealed upon detailed study of the anatomy of the Marshall Plan and BRI. Both plans are disparate in terms of funds disbursement and repayment methods. A major chunk of Marshall Plan funds to European countries predominantly comprised of grants, aid, and in-kind subsidies in the form of food, raw materials, and machinery, along with technical assistance for various projects.

Conversely, China’s BRI principally provides funds to partner countries in the form of repayable loans via Chinese state-owned banks, although at relatively lower interest rates that vary for each recipient country. Under the scope of BRI, mega projects, including but not limited to the fields of energy, transport, science, and technology, are often accomplished through debt and equity financing with a focus on financial integration and regional cooperation.

While attempting to achieve their respective objectives, both programs are distinct when it comes to monitoring and evaluating their implementation. During the Marshall Plan, many new institutions sprung up to ensure integrity, transparency, and mutual benefit. The USA established the United States’ Economic Cooperation Administration (ECA), and the Organization for Economic Development (OECD) in 1948. The former managed the allocation of the Marshall Plan funds, while the latter determined how and where the allocated funds would be utilized.

Similarly, the European Payments Union (EPU) was established in 1950 to promote intra-European trade and stabilize currency exchange rates, ensuring sustainable economic prosperity. On the other hand, BRI projects often face criticism for their lack of transparency and accountability. Experts claim that the massive scale of BRI, coupled with a dearth of independent and autonomous institutional monitoring, makes BRI prone to delays, corrupt practices, and unsustainable debts.

Lastly, the USA had geopolitical imperatives behind the Marshall Plan’s formulation, whereas BRI lacked such motivations. In the post-WWII era, the USA’s political and ideological hegemony in Europe was threatened due to the expanding influence of communism. The establishment of a Soviet-backed government in Czechoslovakia in 1948 highlighted this threat. Therefore, the Marshall Plan aimed to counter and contain the rise of communism by reviving European economies and steering them away from the USSR’s influence.

Some argue that BRI is also formulated to confront the global dominance of the USA and establish China’s strategic supremacy. This might be true to a trivial extent; however, Beijing has consistently emphasized that BRI is an all-inclusive platform to root out economic inequality, set up intergovernmental cooperation, and establish people-to-people bonds. President Xi has also reaffirmed this by stating, “It (the BRI) does not differentiate countries by ideology nor play the zero-sum game. As long as countries are willing to join, they are welcome.”  Thus, inclusivity and mutuality are the driving forces of BRI, making it unlike the Marshall Plan, which primarily aimed to contain communism.

Conclusion

The comparative analysis of China’s Belt and Road Initiative with the Marshall Plan underscores that while both initiatives responded to global crises, they are separated by seven decades and vastly different geopolitical contexts that led to their development. Although their economic and domestic objectives share some similarities, the scale of financing offered by the Marshall Plan is considerably smaller compared to BRI. On that account, it would be rather inaccurate to label China’s colossal BRI as the 21st century Marshall Plan, as the BRI’s projects and aspirations are far more overarching and transcendent.


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