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A Chinese Marshall Plan for the Muslim World?

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Chinese and American officials are engaged in quiet, but intense behind the scenes discussions about a greater role for China in bringing stability to the Muslim world, through targeted investments in job-creating infrastructure projects in war-torn regions of Central Asia, the Middle East and North Africa.

The Obama Administration has belatedly come to the conclusion that the fight against the Islamic State and other jihadist groups cannot be ultimately won by military means alone, and there must be a multi-generational economic transformation in the Muslim world to combat the spread of jihadist ideology.

Since Xi Jinping took power in Beijing two years ago, he has been promoting a “One Belt, One Road” program of investment in railroads, highways, ports and other vital infrastructure across Eurasia, from central China to the Atlantic coast of Western Europe. His “New Silk Road” has already seen the completion of freight rail links from Chongquing in central China, to the German port of Duisburg, a distance of 11,000 kilometers (7,000 miles approx.). When Xi Jinping visited Germany in March 2014, he and German Chancellor Angela Merkel were in Duisburg to greet one of the arriving freight trains, which cut transport time in half and greatly reduce costs, compared to maritime shipping.

On June 5, 2014, Xi Jinping addressed the opening session of the sixth ministerial meeting of the China-Arab States Cooperative Forum at the Great Hall of the People in Beijing. In that speech, he elaborated on the importance of his “Maritime Silk Road” program for building economic ties between China and the Arab world. During that meeting, plans were advanced for a free trade area for China and the Gulf Cooperation Council (GCC).

Subsequently, a number of Arab states, including Saudi Arabia and Egypt, joined the Chinese-sponsored Asia Infrastructure Investment Bank (AIIB), which will fund some of the infrastructure projects along the Maritime Silk Road, running from China, through Southeast Asia, through the Indian Ocean, to Africa, and on through the Suez Canal into the Mediterranean Sea.

China has more than $3 trillion in foreign exchange reserves, which Xi Jinping has clearly been willing to spend on his “One Belt, One Road” project.

The question that is occupying American negotiators is whether China will be willing to invest in areas along the Silk Road route where there is currently instability, chaos and warfare. Will China put capital into Iraq, Syria, Libya, Yemen and other areas where security issues are, at best, uncertain?

Behind the scenes, Washington is attempting to encourage such Chinese investment. During their meetings in New York and Washington in September, President Obama and President Xi agreed that China’s renmimbi would be added to the International Monetary Fund’s Standard Drawing Rights (SDR) currency basket, an agreement that the US upheld. At the beginning of December, the IMF announced the adding of the renmimi to the SDR basket, marking the first time that a non-advanced sector currency was added to the fund.

Beijing recently announced that it would be building its first overseas naval base in Djibouti on the east African coast across from Yemen. The United States and France already have bases there, and the agreement between Djibouti and China could not have happened without prior US consent. This marks a significant move by China to establish its first permanent overseas security presence. It is a crucial location along the proposed Maritime Silk Road route.

Washington is testing whether China is now willing to deploy its extensive hard currency reserves for investment in parts of the Muslim world facing grave economic and security problems that fuel jihadist recruitment.

When Xi Jinping comes to Washington in March 2016 to attend an international conference on nuclear proliferation and security, the Obama Administration hopes to be able to announce a US-China agreement on a Marshall Plan for the Middle East. That coincides with the target date for implementation of the Vienna Agreements on the forming of a transitional governing council for Syria and the drafting of a new constitution—if the January 2016 ceasefire has been successfully put in place.

Up until now, the Obama Administration has taken a cool approach to Xi Jinping’s “One Belt, One Road” (OBOR) program, fearing it is, first and foremost, a Chinese geopolitical project to gain global influence through the carrot of large-scale investment, and that it will ultimately weaken American clout in key parts of Eurasia and Africa. The Obama Administration refused China’s invitation to join the AIIB, even after key US allies Great Britain, France, Germany, South Korea and Italy joined the new bank as charter members.

Now, however, Washington is testing whether China will target investments in Arab states where the US has strategic interests, but where Washington cannot generate serious funds for economic development. The Obama Administration is counting, in part, on China’s growing worries about the involvement of hundreds of Uighurs, ethnic Turks, from China’s northwest Xinjiang Region, in the Islamic State (ISIL).