The People’s Republic of China (PRC) is a rising power whose 2049 goals consist of surpassing the U.S. diplomatically, economically and militarily. The Annual Threat Assessment of the United States Intelligence Community identifies China as one of, if not the greatest threat to U.S. national security. While China is a threat, its economy is slowing, and its once-robust soft power and diplomacy under Xi Jinping are waning. Initiatives like the BRI, SCO and BRICS show signs of diminishing influence. China will likely remain a challenge to the U.S., but surpassing the U.S. on the global stage seems unlikely.
Launched by Xi Jinping in 2013, the Belt and Road Initiative (BRI) aimed to create a global infrastructure network encompassing roads, railways, ports and special economic zones. Originally called the New Silk Road or One Belt, One Road, the project was initially greeted with enthusiasm, and some 147 countries across six continents joined. Over time, concerns grew as countries realized that China would be the main beneficiary and that many participant nations would wind up losing out.
The core of the BRI model involves China lending money for infrastructure projects in BRI nations. Typically, these loans stipulated that Chinese firms would handle construction, often using Chinese labor. This resulted in limited local job creation, with China quickly receiving loan repayments through state-affiliated construction firms. Nonetheless, the loan remained, requiring countries to make payments. Given their existing economic difficulties, BRI nations accepted these loans.
Furthermore, projects often faced delays when countries could not meet payment deadlines. As a result, many nations now grapple with crippling debt and unfinished, non-functioning infrastructure. In 2021, China had to provide 128 rescue loans to 22 debtor nations. Roughly 60 percent of BRI nations are experiencing economic distress, and China is increasingly seen as the cause. Fewer countries are now showing interest in the initiative, some projects have been canceled and a few countries — like Italy — are expected to exit or already have.
China leads two major international organizations: the Shanghai Cooperation Organization (SCO) and BRICS (Brazil, Russia, India, China and South Africa). The SCO, founded in 2001 in Shanghai, comprises eight member states: China, India, Kazakhstan, Kyrgyzstan, Russia, Pakistan, Tajikistan and Uzbekistan. This grouping aims for political, trade and economic cooperation. BRICS is a loose alliance which conducts regular meetings focusing on trade, cooperation and potential de-dollarization.
Beijing had hoped that these organizations would rival the United Nations, the World Bank, the IMF and the dollar-based international trade system. The goal was to create an alternative to the U.S.-led international order and replace it with a Beijing-led world order, but without actually saying that.
There are a number of reasons why the BRI, SCO and BRICS cannot rival the U.S.-led institutions. First, at the time when the UN charter was signed in California in 1945, there was no alternative. Consequently, most nations wanted to join. As a result, the UN counted 51 founding members. Convincing countries that Beijing has a better solution than the 193 current UN member states is a hard sell.
The BRI, SCO and BRICS lack key institutions, trade deals, defense pacts and a common currency. BRICS has a China-led New Development Bank, mainly funded in U.S. dollars. In contrast, the international system led by the United States boasts well-established institutions like the World Bank, the IMF and the Bretton Woods dollar-based global trading system, all of which were established during the same conference at Bretton Woods, New Hampshire, in 1944. The General Agreement on Tariffs and Trade (GATT), which later became the WTO, emerged in 1947. These institutions were integrated into the UN and underpinned the U.S.-led global order.
A major obstacle to a China-led, de-dollarized global order is the absence of a viable alternative currency. Approximately 60 percent of central banks’ foreign currency reserves worldwide are in U.S. dollars, which also account for 88 percent of global foreign exchange transactions. In contrast, the Chinese yuan represents just 2.69 percent of global reserves, and even BRI loans are typically denominated in dollars. Most BRI, SCO and BRICS members avoid holding large quantities of Chinese currency in their reserves.
In military strength, the U.S. ranks first, with a $858 billion defense budget and 750 military bases in 80 countries. It is the leading member of NATO, AUKUS (with Australia and the UK) and the Quad (with Australia, India and Japan). China, ranking third, has a $225 billion budget, two overseas bases (Djibouti and Cambodia), potential ports in six foreign locations, an army outpost in Cuba and surveillance posts in Argentina and the Bay of Bengal (Myanmar). China’s sole official defense agreement is with North Korea, whereas the U.S. has entered into bilateral defense pacts with over 50 nations.
Despite its issues like debt, internal politics and a reputation for international interference and conflict, the world appears to favor the United States over China and the U.S. dollar over the yuan.
Antonio Graceffo, PhD, China-MBA is the author of seven books about China and Southeast Asia. He works as an economics professor at LETU American University, Mongolia. Previously, he was a lecturer at Shanghai University. Antonio holds a PhD from Shanghai University of Sport, where he wrote his dissertation, in Chinese.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.