Geopolitics is all about leverage and geo-economics is all about bargaining on the leverage. The relative peace in the world today exists between the thin line of leverage and bargain, especially in the case of the ongoing trade war between China and the US.
Since Chinese President Xi Jinping inaugurated the Belt and Road Initiative (BRI), China’s New Silk Road-styled global trade and infrastructure project, in 2013, the focus has shifted from geographical boundaries to digital boundaries. The idea behind Xi’s digital push is to build digital infrastructure and develop internet communication along the Silk Road. China’s modern-day “Digital Silk Road” is an attempt to revive and extend it beyond hard infrastructure towards soft infrastructure.
The idea of digital connectivity in the Belt and Road Initiative is to build capabilities in emerging technologies, which appears to have taken off parallel to the broader BRI agenda. One of the key goals of the BRI was to put China at the forefront of setting up the new global technological order. Xi understands that without the help of technology, his projects of the 21st century “will be merely a mirage.”
A China-centered transnational network infrastructure to reboot globalization
Nearly two years ago, at the first Belt and Road International Forum, Xi announced that technology would be integrated into the BRI to create the “Digital Silk Road of the 21st century.” A Digital Silk Road is also expected to function as a complex alliance between the Chinese state and its homegrown internet companies to increase the strategic power of China. China-based Internet firms see the Digital Silk Road as an opportunity to expand their footprint across the world. Chinese Internet companies have been assigned a critical role in addressing this problem. The increased cooperation between the objectives of the state and digital companies will eventually produce great outcomes for the Chinese economy.
Chinese giant Alibaba’s Alibaba Cloud started in 2009 and quickly expanded internationally, establishing data centers in Dubai, Sydney and Frankfurt. The BRI has offered a major boost to Alibaba cloud’s business development. China wants to push Chinese companies to compete in terms of quality with their American counterparts.
China has listed the internationalization of the yuan as one of the prime motives of the BRI
Apart from that, the Chinese state is forcing them to export China-owned technical standards. China Mobile has been actively promoting the globalization of TD-LTE, especially in the BRI regions. In 2017, the company reported that 53 countries and regions were rolling out 99 TD-LTE networks; of these, 39 TD-LTE networks from 21 countries and regions are along the BRI routes. The sheer size of economies of scale of Internet proprietary network standards will not only generate considerable royalties but also provide a significant market share abroad.
Internationalization of the renminbi: It’s just the beginning
China has listed the internationalization of the yuan as one of the prime motives of the BRI. The BRI is expected to serve as a stimulus for the global use of the Chinese currency through international transactions and infrastructure investment. China needs the transnational financial data network to improve the global circulation of its own currency to gain power over their strategic infrastructure.
It has already taken a great stride by opening the Cross-Border Inter-Bank Payments System (CIPS) as a parallel – or an alternative to – the US-led society for Worldwide Interbank Financial Telecommunication system (SWIFT). As a China-centered international financial clearing system, CIPS is expected to promote cross-border transactions denominated in renminbi, helping China gain authority over the global system. This will also increase the demand for the renminbi.
China is positioning itself at the forefront of 5G, recognizing that fifth-generation mobile communications will be vital for the “information expressway’’ that can enhance its global competitiveness. Huawei, the controversial Chinese telecom company, is also involved in deploying 5G mobile technology under the Digital Silk Road. As of February 2019, Huawei owns 36% of all 5G patents worldwide.
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A large number of semi-authoritarian countries around the world are under the BRI umbrella. The Chinese digital platforms will help them to conduct surveillance of their populations in the future. Furthermore, if the countries particpating in the BRI become dependent on China for their internet, they also open up opportunities for China’s intelligence community to collect, monitor and divert their data traffic. Given China’s history of extensive surveillance, censorship and stealing intellectual property, this is highly problematic. The Digital Silk Road will give China unprecedented leverage as a global player.