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China’s Pacific Century Ambitions

I hope you’re following the events unfolding in the South China Sea, as China asserts territorial rights far beyond accepted norms.

Because as the country seeks to increase its geopolitical strength and influence, it’s also upending the status quo. And creating ripples that will spread far from home.

For example, a U.S. Navy patrol recently circled around Chinese-built islands in the South China Sea. Clearly, America doesn’t accept China’s efforts to restrict “freedom of navigation” in this crucial international waterway, which sees more than half of the world’s shipping traffic.

Far to the north, China is asserting its rights to resources in the Arctic.

It’s also developing the first regular Asia-to-Europe shipping service through the Northern Sea Route from Dalian to Rotterdam. This would enable shippers to bypass the Suez Canal and cut transit time from 48 days to 35 days.

China is also moving forward with its massive New Silk Road and Maritime Silk Road projects with the goal of asserting its regional leadership in Asia.

Old Silk Road main routes

The New Silk Road contains maritime and security components, as well. Three ports will be upgraded and developed in Sri Lanka, Bangladesh, and Pakistan. Some have dubbed this port development the “string of pearls” security strategy.

Early next year, the China-led Asia Infrastructure Investment Bank (AIIB) will open with 59 country members and $50 billion in capital. Not only is this a direct challenge to the World Bank and Asian Development Bank, but it’s also a funding source to build the infrastructure necessary to tie these projects together, as well as soak up China’s excess industrial capacity and enhance its diplomatic leverage in the region.

But China isn’t content with keeping its influence close to home. The country plans to challenge what symbolized America’s emergence as a world power in the early 20th century – the Panama Canal.

10,000 Miles Across the Pacific

When Teddy Roosevelt went down to Panama after America took over the massive project from the French, he cut the ribbon to begin the American effort with the words: “Let the dirt fly.”

And fly it did – over 545 million cubic meters of it.

Candidate Ronald Reagan’s battle cry during his 1976 presidential primary fight and the debate over the Panama Canal Treaty was, “We built it, we own it, and we’re going to keep it.”

Now China is planning a 170-mile canal through Nicaragua. A 50-year concession has already been awarded to HKND, founded by Wang Jing, who has close ties to the Chinese Communist Party and made his fortune in the telecom business.

Nicaragua Canal Planned Route

This ambitious project would require three dams, submerging 175 square miles of farmland, as well as moving 100 million cubic meters of dirt per month. With a target completion date of 2020, the new canal will be able to handle ships up to 246 feet wide.

The irony is that America very nearly went with a canal route through Nicaragua before the U.S. Senate, fearing volcanic activity and bending under heavy lobbying, decided by one vote to build along the French route in Panama (which was then part of Colombia).

Such odd twists are what make this rivalry between the United States and China so interesting. Hopefully, the competition will result in growth and development that benefits everyone.

A Pacific Century would affect not only Asia, but all countries throughout the Pacific Rim, from Canada and America through Chile.

Good investing,

Carl Delfeld

Carl Delfeld

, Special Correspondent

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