By Beatrice E. Rangel
As China pushes its Belt and Road Initiative to promote infrastructure development and through these means enhance trade flows with emerging markets, the world will enter into a new development phase with two engines: the U.S. and China.
While for China this will be a debut into international economic supremacy, for the U.S. it is a sequel to the post-world war period.
Indeed, the U.S. emerged as the reigning economic power after World War II but the international monetary stage portrayed two leading actors: the Sterling and the dollar.
Now another currency is about to enter the play: the yuan. And the world is thus getting ready to rewrite the rules for international trade, finance and development .
From the Chinese perspective, the road traveled by the U.S. is worth replicating, after all this is the reason for engaging Laura Cha as advisor to the financial authorities in Beijing while trusting in her hands the Hong Kong exchange.
Ms Cha, who is U.S. educated and a true genius on matters related to international finance, created the regulatory framework that guides China's financial development. Ms Cha is a true connoisseur of the virtues and pitfalls of the Bretton Woods order and a supporter of monetarism.
China will thus aim at following in the U.S. steps which used its relative economic power to build an international system that would support its economic might while preserving stability and predictability to all nations.
The first step in this direction is to promote the development of trade infrastructure to support the rise of the TransPacific trade corridor. As the situation stands most emerging markets lack appropriate trade infrastructure. This poses future problems to China as its economy needs to be fed by minerals, commodities and energy coming from over 100 emerging markets. If the developing countries lack logistics, capillarity to handleTranspacific trade is a challenge.
But China is overcoming this hurdle by means of acquiring ports in Europe. Trieste will soon become the new Venice while Ambers will also serve the traffic created by the new Silk Road.
Many wonder whether these humongous investments will bankrupt China. Nothing further from the truth.
China is betting on exploiting the riches of the dark matter. Dark matter is the invisible incoming income flows that nurture the US economy as the rest of the world pays arbitrage to access the U.S. tech-based services.
These income flows accrue to economies that export technology embedded in capital. When U.S. capital invests in any given business venture abroad it gets a rate of return much higher than that that would receive for a similar investment made at home. This difference nurtures the capital account keeping external accounts in balance.
These invisible income flows are the dark matter found in a much-hailed study by Ricardo Haussman and Federico Sturzenegger. Such dark matter will begin to flow into China over the next decade and by these means the country will strengthen is global economic position.
The U.S. meanwhile would generate an even larger layer of dark matter given that the growth of economies that benefit from the Belt and Road initiative will increase their trade exchanges with the US while increasing the value of U.S. investments worldwide. A virtuous circle of dark matter production will seem to consolidate. So, for those that fear that the current Trump induced tantrum with China will lead to a world economic crisis, please relax as physicists have found out the dark matter is indestructible!!!!Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was Chief of Staff for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.
For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.
You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.