Since the end of World War Two, America became a global hegemon. However, the world didn't become a unipolar world where America was the largest superpower by a mile until the collapse of the Soviet Union in 1991. Despite being in a biopolar post-WW2 world with the Soviet Union, America was able to create a new international system. This new international system consists of institutions like the United Nations (UN), the World Bank (WB), the International Monetary Fund IMF), the World Health Organization (WHO), and the World Trade Organization (WTO).

The US secured its influential spots in all of these international institutions while creating them. Also, they gave other countries opportunities to participate in and run these organizations alongside the US, which is something that no other empire in history has been willing to do with its neighbors. This allows the US empire to maintain influence while conserving attention and resources, something that other empires throughout history haven't considered doing to sustain their influence on the world stage.

"Hegemon" is a political science term for a leading or major power. When the world is bipolar, it means that there are two superpowers. When the world is unipolar, there's only one superpower.

Because the US created these international institutions that the rest of the world relies on today, the US has positioned itself in being a highly influential nation today. The only way that other countries can curb the influence of the US is to create their own international system, which is difficult to do. China is laying the bricks to do that.

The array of sanctions that most nations imposed on Russia for its invasion of Ukraine have scared some nations, most notably China. China has ambitions for taking over Taiwan and because it's afraid of enduring similar sanctions as Russia, it has met with bankers to discuss how it can protect its assets from those sanctions. Assets aren't the only thing China is concerned about. It's also concerned about its economy and its influence on the international stage.

While the US remains the most influential nation in the world thanks to the positions it has secured through the creation of new international institutions, China sees gaps in the way that those institutions run the world.

Take the IMF for example, during its early years, the IMF provided more funding for infrastructure projects. As time went on, it chose to divert funds away from infrastructure and allocated more funds to projects that relate to democracy, public health, and education. At the same time, the IMF is more willing to give money to countries that are run by democracies and have better human rights records. For any infrastructure funding the IMF wants to provide, nations have to give proof that there's economic viability for the project. Many third-world nations have issues with corruption, are run by an authoritarian, or have systems of government that learn more authoritarian than democratic. Those nations have a difficult time coming up with reasons for why their infrastructure projects are economically viable. Furthermore, those same nations continue to receive aid from wealthier countries and feel frustrated that those nations see them as charity cases rather than partners.

China is capitalizing on this opportunity by providing those nations with funding to build infrastructure in their territory. Not only does China get to provide low-interest loans to these countries, but China also gets to use its own materials and send its own workers to build the projects. There are some local workers involved with the building of these infrastructure projects, but, in the end, the majority of the workers are Chinese. And unlike the IMF, China doesn't care if authoritarians run the country or whether the project has economic viability or not. China's way of capitalizing on this opportunity is called the Belt & Road Initiative.

To understand where China gains from helping these countries, don't think about the territories it can seize through the bankruptcy process, which is illegal under international law and under the laws of those recipient nations. Don't think about the interest revenue that Chinese state-owned banks are generating from these deals because the loans that China provides to these recipients are low-interest loans.

Think of it as China's way to:

As we go through this series, you will understand why China's Belt & Road Initiative isn't a systemic risk to the world economy and understand why this project is seen as part of China's strategy to challenge the US Dollar system.

Some will read the entire series and become more bullish on Chinese equities. Others will read the entire series and would want to do a pair trade where they short the Chinese economy while going long on a couple of economies that benefited from the Belt & Road Initiative. New perspectives on business strategy and capital allocation will be created in your minds as you read through this series.

I look forward to hearing your thoughts and questions as we go through this series.