By Xingjian “Jeff” Zhao, Partner, Head of the DRT Shanghai office.
“As the legend goes, when Henry Kissinger asked Premier Zhou Enlai about the lasting impact of the French Revolution at a Shanghai reception in 1972, nearly two centuries after the Bastille’s fall, the Premier quipped: ‘Too early to say.’ Accurate or apocryphal, Premier Zhou’s statement encapsulates the farsighted historical lens needed to evaluate China’s current ‘soft power’ foray into Latin America, the Caribbean and much of the developing world at large. ‘Soft power,’ as the term’s coiner Joseph S. Nye Jr. explained, is power through attraction as opposed to power through military coercion or economic inducement. The Digital Silk Road dimension of the Belt and Road Initiative as a focus of both Chinese investment and soft power engagement in the region cannot be over-stated. The Digital Silk Road, at its core, is aloose yet choreographed series of initiatives aimed at boosting China’s soft power in, and exporting China’s already well-entrenched digital infrastructure into, America’sbackyard. Infrastructure and equipment providers such as Huawei and ZTE may—despite omnipresent U.S. sanctions—be good economic inducers in certain countries, but not necessarily effective propagators of Chinese soft power. However, fast-growing e-commerce platforms, such as Alibaba, Ant Financial and Tencent, are well-poisedto create necessary points of attraction that would lay the groundwork for China’s soft power play. By selectively exporting an already mature and socially entrenched digital payments infrastructure from China to targeted regions, but not directly participating in local lending and deposits businesses, these companies can expand with minimal exposure to regulatory hurdlesor the need to acquire banking licenses. It isstill far ‘too early to say,’ in Premier Zhou’swords, where this will all lead. But there is already precedent. Ridesharing company Didi Chuxing’s success in Brazil, owing to the company’s ability to localize and adapt its sophisticated pool algorithms and security features from China to Latin American cities, examples how creating points of attraction by importing existing digital infrastructure can align with consumer needs, a company’s bottom line and China’s interests in the soft power space.”
