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Belt and Road Forum

Connecting the world

Landmark Belt and Road forum in Beijing to promote agenda for better international consensus and cooperation

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May 1-7, 2017
By CARMEN HO
in Hong Kong
For China Daily Asia Weekly

Around the world, heads of state and government leaders are preparing for the highly anticipated Belt and Road Forum for International Cooperation.

The forum, to be hosted in Beijing on May 14-15, is titled Belt and Road: Cooperation for Common Prosperity, highlighting the need for better global consensus.

At a time when some countries are becoming increasingly protectionist, the forum will serve as an important platform for key discussions that will have an impact on where globalization is headed.

Chinese State Councilor Yang Jiechi, who has been in charge of the forum’s preparatory work, said the theme and agenda are highly relevant.

“Underscoring the importance of international cooperation, connectivity and synergy, the theme and agenda largely overlap with the world’s major agenda,” Yang told media in Beijing.

“We hope to work with other participating parties to push forward the Belt and Road Initiative so as to lay a solid foundation for the kind of cooperation that will facilitate long-term development and usher in a better future for all,” he said.

Proposed by President Xi Jinping in 2013, the Belt and Road Initiative aims to create a trade and infrastructure network across the ancient Silk Road trading routes. It seeks to improve connectivity in more than 60 countries and regions across Asia Pacific, Europe and Africa.

Yang said the forum will focus on connectivity of policy, transportation, trade, finance and people. The Leaders Roundtable will look at policy synergy for more interconnected development.

Chinese Foreign Minister Wang Yi confirmed that 28 heads of state and government are set to attend the forum.

The presidents of Argentina, Belarus, Chile, the Czech Republic, Indonesia, Kazakhstan, Kenya, Laos, the Philippines, Russia, Switzerland, Turkey, Uzbekistan and Vietnam will be in attendance.

The prime ministers of Cambodia, Ethiopia, Fiji, Greece, Hungary, Italy, Malaysia, Mongolia, Pakistan, Poland, Serbia, Spain and Sri Lanka will also be present, as well as Myanmar’s State Councilor Aung San Suu Kyi.

Also set to join the discussions will be ministerial delegations, representatives of international organizations, former foreign heads of state and government, business leaders, experts and scholars.

On April 24, Cui Tiankai, China’s ambassador to the United States, encouraged Washington to join in the initiative, which he said has “opened the gate of opportunities” for US enterprises.

Russian President Vladimir Putin’s attendance is gaining much attention, especially as he announced in recent years his plan to establish a Eurasian Union. The forum will undoubtedly provide insight into Chinese-Russian ties and plans for future cooperation.

Specific regional bank governance is key to supporting such a development focus, said Bruno S Sergi, center associate of the Davis Center for Russian and Eurasian Studies at Harvard University in the United States and scientific director at the International Center for Emerging Markets Research at Russia’s RUDN University. It must take into account “regional integration coupled with global fragmentation”, he said.

Russia must break into new markets, modernize and build up its soft power through economic development, Sergi added.

State Councilor Yang said the forum will explore ways to address problems facing the global and regional economy. The aim is to “make the Belt and Road Initiative deliver greater benefits to the peoples of all countries”.

“The forum will be a good occasion for us to review past progress and plan ahead,” Yang said.

It will be the highest level Belt and Road forum since the initiative’s launch over three years ago. Among the most important diplomatic events that China will hold this year, it will have great significance for bilateral and multilateral relations.

A freight train heading for Lyon, France, sets off from a railway station in Wuhan city, Central China’s Hubei province, on April 6 last year. Catering to the Belt and Road Initiative, the train is expected to further promote China’s cooperation with Eurasian countries. Credit: Stringer / ImagineChina

Cedric Chehab, head of global strategy at BMI Research, said the Belt and Road is good news for global trade growth. It will reinforce the role that emerging markets will play in driving global trade liberalization in the coming years, he said.

“In contrast, we expect developed markets to pursue a more insular approach compared to the previous two decades,” Chehab told China Daily Asia Weekly.

“The boost to trade will be particularly significant for the least-developed emerging markets along the route, which include some of the least trade-integrated countries in the world.”

Early and significant beneficiaries will include Bangladesh, Cambodia, Laos, Myanmar and Pakistan, he said.

“The impact on more developed markets such as Russia and Western Europe will be less significant given existing physical and legal infrastructure linking these economies to global markets,” Chehab said.

The initiative has already begun to expand regional investment and domestic demand, contributing to job creation, poverty reduction, economic growth and development of the entire region.

Yang noted that more than 100 countries and international organizations have joined the initiative, of which more than 40 have signed cooperation agreements with China.

The United Nations, the Asia-Pacific Economic Cooperation forum, the Asia-Europe Meeting and the Greater Mekong Subregion have all taken the Belt and Road into consideration in various resolutions.

At the heart of the initiative is the aim to improve people’s lives across the region and to deliver both tangible and intangible benefits to the whole world.

“History has proven that closed and exclusive arrangements have no future, while welcoming cooperation with open doors and ensuring benefits for all is the only way forward,” said Yang.

In a keynote address in January, President Xi said: “There is no point in blaming economic globalization for the world’s problems because that is simply not the case. And that will not help solve the problems.”

Xi also said that “no one will emerge as a winner in a trade war”.

Eugene Lim, Asia-Pacific head of the international commercial and trade practice at Baker McKenzie, noted the significant influence the Belt and Road can have on policy, trade, transportation, finance and people.

“It appears that the Belt and Road Initiative is opening China and the region to freer trade while China takes on a larger role in globalization,” he said.

“If successful, the initiative could lead to a shift away from the dollar-based global financial system. More importantly, the success of this initiative will be a linchpin to China taking on a leadership role in global trade.”

The forum will also encourage all parties to uphold the principles of the UN Charter and pursue harmony, openness, inclusiveness and mutual learning. Environmental protection will also be underlined as a priority of international cooperation.

It will serve as a platform to push forward major projects and cooperation agreements, as well as to come up with some key mid- to long-term strategies.

Yang said the initiative will “enable China and partner countries to jointly pursue the new vision of innovative, coordinated, green, open and shared development, and facilitate China’s endeavor to implement the 13th Five-Year Plan (2016-20), boost all-round reform and opening-up”.

As the project covers multiple provinces, autonomous regions and major municipalities in China’s interior and coastal regions, it will accelerate coordinated development of the whole country.

A particular emphasis will be on China’s western regions to reduce regional disparity.

Lim from Baker McKenzie noted that the Belt and Road can open and increase trade throughout the 10-member Association of Southeast Asian Nations (ASEAN) through infrastructure development.

“The Belt and Road Initiative is tied to the existing free trade agreements within ASEAN,” he said.

“By utilizing the existing free trade agreements, the initiative will reinforce globalization at an important time as well as promote economic development in the Belt and Road regions of ASEAN.”

Frank Pan, an associate with Baker McKenzie in Shanghai, said with the West increasingly looking inward and the US retreating from the Trans-Pacific Partnership trade deal, the way is clear for China to exert greater influence not only over the region but also the world.

“I think we can expect to see China solidifying its position on the global stage, as it continues pushing for the Belt and Road Initiative and other free trade agreement talks,” he said.

Companies, nations catch the vision Belt and Road funding set to rise as initiative builds momentum and enhances cross-border trading and financing

May 1-7, 2017
By CARMEN HO
in Hong Kong
For China Daily Asia Weekly

It is more than three years since the Belt and Road Initiative was launched, and in that time significant progress has been made. Despite a few setbacks, investment continues to pour in for Belt and Road projects.

Chinese companies’ investments in countries participating in the initiative increased 38.6 percent in 2016 to $18.93 billion, according to the official Belt and Road website, accounting for 13 percent of total Chinese overseas direct investment. BMI Research expects this figure to further increase this year.

“There is little doubt that 2016 was a year of tremendous expansion of the Belt and Road Initiative,” said Fiona Chan, partner at Appleby, a law firm in Hong Kong and one of the world’s largest providers of offshore legal services.

“Projects and deals of over $490 billion in value were announced in (that) year alone, among which nearly two-thirds were investments into various infrastructure developments across countries along the Belt and Road region. Banks and enterprises in the public and private sectors were quick to seize the opportunity to invest in these countries,” Chan said.

“Countries such as Thailand, Indonesia, Laos, Malaysia and the Philippines have all signed up substantial road and railway projects with China, which would undoubtedly enhance cross-border trading and financing, as well as movements of people,” she said.

Proposed by President Xi Jinping in 2013, the initiative’s momentum has been building ever since. The Belt and Road “saw a significant ramp-up in investment in 2016 and we expect 2017 to be a pivotal year in the development of the initiative from an idea into something more tangible”, BMI Research said in a report.

The Belt and Road will have an especially large impact on regional supply chains and logistics, as well as on project finance opportunities, according to a report by multinational law firm Baker McKenzie.

So, understandably, companies in the transportation and financial services sectors see this China-led strategy as particularly relevant.

Germany-based Rhenus Logistics, which has a comprehensive logistics network covering the entire Asia-Pacific region, is involved in a rail freight link that connects western China with Duisburg, Germany.

“Economic corridor development is making steady progress. An interconnected infrastructure network is taking shape,” said Chinese State Councilor Yang Jiechi, who has been in charge of the preparatory work for the Belt and Road Forum for International Cooperation to be held in Beijing on May 14-15.

“Trade and investment have increased significantly. Key project cooperation is under way. The Asian Infrastructure Investment Bank and Silk Road Fund have provided firm support to financial cooperation,” Yang said.

He said China Railway Express trains to Europe have been operating on the vast Eurasian landmass, loaded with goods and matching countries’ market needs. “The trains have also set up a bridge of communication and friendship between peoples along the route, and become a welcome sight along the Belt and Road.”

While the Belt and Road Initiative covers at least 65 countries, BMI Research has highlighted 10 markets as hotspots for investment activity: Bangladesh, Egypt, Kazakhstan, Kenya, Laos, Pakistan, Russia, Sri Lanka, Thailand and Hong Kong.

Egypt’s total project value under the Belt and Road Initiative is more than $206 billion, of which $18 billion is from China-backed projects. Chinese companies are the largest investors in Egypt’s Suez Canal Corridor, a mega project launched in 2014 that will grow the region’s industrial base and expand the logistical capacity of canal-related infrastructure.

Close behind is Russia, with a total project value of $182 billion and a China-backed project value of nearly $78 billion.

Russia accounts for a majority of Belt and Road-related investment in Europe and Central Asia. Chinese companies play important construction and financing roles in key projects like the $19.5 billion Moscow-Kazan high-speed railway. Oil and gas pipelines are also a focus, such as the $21 billion Power of Siberia pipeline.

A cruise ship navigates the Suez Canal near Port Said, Egypt, on March 9. Chinese companies are the largest investors in Egypt’s Suez Canal Corridor, a mega project that will grow the region’s industrial base and expand the logistical capacity of canal-related infrastructure. Credit: Soeren Stache / ZB / DPA

Worldwide, Pakistan has the greatest number of China-affiliated infrastructure projects, with a combined investment value of $73.2 billion. The country is a crucial link between the Belt and Road’s land and maritime components.

China is spearheading construction of the China-Pakistan Economic Corridor — $46 billion worth of roads, railways and industrial zones connecting the Indian Ocean port of Gwadar to the northeastern border with China. This is one of the largest foreign investment programs in Pakistan and will significantly boost its construction industry.

Major Belt and Road-related infrastructure projects in Southeast Asia include Indonesia’s $27.7 billion Trans-Sumatra toll road, the $23 billion Ho Chi Minh City metro system master plan in Vietnam, and the $21 billion Cross Island Line in Singapore.

“China and Myanmar recently reached an agreement to open a cross-border pipeline in southeast China. This will allow China to diversify oil supply routes and make it less dependent on shipments via the South China Sea,” said Frank Pan, an associate at global law firm Baker McKenzie in Shanghai.

Recently, China’s tax authority released 10 new measures to improve and streamline tax services for investors to implement the Belt and Road Initiative, said Eugene Lim, Asia-Pacific head of Baker McKenzie’s international commercial and trade practice. “Additionally, China has plans to introduce and strengthen regional customs cooperation to facilitate the accomplishment of the Belt and Road,” Lim said.

Cedric Chehab, head of global strategy at BMI Research, said: “Trade-positive factors for countries along the route will include a vast reduction in logistical costs to trade, the concurrent negotiation of new bilateral or regional trade agreements between participant states, and the associated development of new export-oriented manufacturing zones along the route (for example, Pakistan, Bangladesh and Myanmar).”

Pan at Baker McKenzie said the Belt and Road is important to the underdeveloped parts of China. It will also increase China’s integration into regional and global markets.

Appleby’s Chan said: “With outbound investments by Chinese banks and enterprises leading infrastructure construction in the developing world, international banks such as the Asian Development Bank and the World Bank and other international investors are also keen to provide funding.

“The Belt and Road Initiative will continue to attract investments from all over the world into the region.”

On track to ‘real globalization’ Expert says the Belt and Road Initiative is set to benefit the world’s poor and can be as significant as the EU

May 1-7, 2017
By ANDREW MOODY

andrewmoody@chinadaily.com.cn

Leading international relations expert Wang Yiwei believes China will advance a new model of globalization at a major forum to be held in Beijing this month.

The director of the Institute of International Affairs and the Center for EU Studies at Renmin University of China believes the case will be made for a more connected world.

World leaders will descend on the capital for the Belt and Road Forum for International Cooperation, which runs from May 14-15.

“It will be a landmark event for the Belt and Road Initiative, which will enter its 2.0 phase. The mechanisms will be created to put forward a new type of globalization,” Wang said.

The initiative was launched by President Xi Jinping in 2013 and has resulted in China forging a series of bilateral partnerships with other countries, particularly related to infrastructure.

“China has signed bilateral international capacity cooperation agreements with more than 40 countries. This was its 1.0 phase with just China as the hub,” Wang said.

Speaking at his office at the Beijing university, Wang, 45, said the challenge of the forum will be to establish an institutional framework for the initiative that will set it on its future course as a multilateral entity.

“The purpose of the forum will be to draft the necessary mechanism so that the initiative is sustainable in the longer term. It needs to move from being largely bilateral to multilateral.

“Countries should be able to participate in the initiative without China necessarily being involved.”

Wang believes the initiative could become as significant as the European Union, which began as the European Economic Community in 1958.

“I think it could be that significant. The Belt and Road Initiative could actually be as important as the European Union. There has never before been such ambition to achieve such global connectivity,” he said.

Wang, who is the author of The Belt and Road Initiative: What Will China Offer the World in Its Rise, one of the few books in English on the project, said Xi transformed the debate about how countries work together when he made a defense of globalization at the World Economic Forum in Davos in January.

The academic believes the existing version of globalization has not served a large proportion of the world’s population very well, and China’s version with a focus on infrastructure is likely to prove more beneficial to many around the world currently in poverty.

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Academic Wang Yiwei believes China’s infrastructure-focused version of globalization is likely to benefit many around the world currently in poverty. Credit: Zou Hong / China Daily

“This is real globalization. Under America’s version of globalization, 1.3 billion — or one-fifth of the world’s population — are without electricity, including 300 million people in India alone,” he said.

“China’s globalization is based on more equal cooperation. There is a focus on south-south cooperation (that between developing countries, of which China remains one).”

Wang, the son of teachers from a village in rural northern Jiangxi province in East China, first studied environmental engineering at East China University of Science and Technology.

He switched to international politics and relations at Fudan University in Shanghai, where he received both his master’s and doctorate before receiving a Fox International Fellowship to study at Yale University in the United States for a year.

He held a number of academic positions in South Korea and China before joining Renmin University in 2013.

He is also the author of 15 books, including Hai Shang: Revelations on European Civilization, which he launched at the London Book Fair last year.

Wang has also served as a Chinese diplomat, being scholar-in-residence at the Chinese mission to the EU for three years.

He believes Europe could play a role in the Belt and Road Initiative, but he is concerned about the continent’s struggles.

“When I was working in Brussels there were so many crises. The problem that the EU now has is that the EU does not have the right political constitution to deal with its problems with there being 28 countries that are so different.”

He is hopeful that the United Kingdom, despite beginning the process of exiting the European Union, can be a useful partner in the initiative, with the City of London financial center being a vital hub.

“I think Brexit slightly undermines that because there is a great need for London to develop links with other countries, not least the European Union,” he said.

However, he believes the UK still will remain important when it leaves the EU.

“Britain had the first maritime Silk Road and colonized the world. The country has exported its legal and political system and even its customs around the world. It is a country that knows the world better than China and also the United States.”

Wang insists the Belt and Road is more likely to be successful than the Washington Consensus of the 1990s, which was aimed at encouraging private enterprise in developing countries.

“The Washington Consensus has failed. It has failed to work in almost every area, apart from perhaps Poland. That was more like shock therapy.”

Wang said that many of the initiative’s projects are tangible, such as the railway in Kenya from Mombasa to Nairobi.

“I visited that and it is an attempt to recreate the same economic success as the Shanghai Yangtze River economic delta in East Africa,” he said.

“The Kenyan president (Uhuru Kenyatta) goes to the Mombasa port (being built by the State-owned China Road and Bridge Co) every three months and says he is eager to copy the China model.”

CRRC sets sights on rail-link deal Train maker subsidiary to upgrade Malaysian facilities in a bid to win contract for Kuala Lumpur-Singapore high-speed project

May 1-7, 2017
By ZHONG NAN and REN XIAOJIN in Beijing,
and FENG ZHIWEI in Zhuzhou, Hunan province

Chinese rail vehicle manufacturer CRRC Zhuzhou Electric Locomotive will upgrade its facilities in Malaysia this year as it aims to win the service contract for the upcoming Singapore-Malaysia high-speed rail project, its chairman said.

China Railway and China Railway Signal & Communication sent teams to Singapore in December in the hopes of beating international rivals from Japan, South Korea and Germany to win the project.

The 350-kilometer high-speed railway between Kuala Lumpur and Singapore, first proposed in 2013, is considered a game changer. By linking the two major Southeast Asian countries, the railway will shorten the travel time between the capitals from four hours to 90 minutes.

Eyeing this lucrative opportunity, Zhou Qinghe, chairman of CRRC Zhuzhou, a subsidiary of railway vehicle and equipment maker China Railway Rolling Stock Corp, said the company’s expansion into Southeast Asia is in line with the aims of the Belt and Road Initiative.

The China-led trade and infrastructure network envisions a Silk Road Economic Belt and 21st Century Maritime Silk Road to reach more than 60 countries and regions in Asia, Europe and Africa.

“The Belt and Road Initiative will help China export more high-speed rail technologies to a number of lucrative markets during the 13th Five-Year Plan (2016-20) period,” Zhou said.

“As most countries along the routes of the initiative — especially in Southeast Asia, Central Asia, the Middle East and Eastern Europe — are planning to build high-speed rail lines or upgrade their existing railway systems, they are willing to acquire technical support from China to assist in the daily operations, maintenance, staff training and other services.”

Earlier this year, China Railway submitted a detailed plan to transportation authorities in Singapore and Malaysia. This included high-speed train designs, blueprints for the construction of terminus stations. Also noise and vibration data, and tender documents for various construction periods.

Southeast Asia is not a new market for the group, however, as it has already set up manufacturing and maintenance facilities in Malaysia.

CRRC Zhuzhou opened a $131 million manufacturing facility in Malaysia’s Perak state in 2015, which is managed by CRRC (Malaysia) Railway Vehicles. It will act as the company’s gateway to other member states of the Association of Southeast Asian Nations (ASEAN).

The plant is capable of manufacturing various types of rail vehicles, from bullet trains to mass-transit trains and electric locomotives.

CRRC Zhuzhou has already supplied 18 metro-engineering maintenance trains to Singapore and they are now being used on the city state’s urban rail network.

“Because most Southeast Asian nations have just started to build new railway lines or bought new trains, they are keen to acquire technical support from China in the daily operations, maintenance, staff training and other services,” Zhou said.

CRRC Zhuzhou’s ASEAN plant is involved in production, assembly, testing, maintenance and refurbishment, with an annual production capacity of 100 electric trains and light-rail vehicles.

CRRC Kuala Lumpur Maintenance, another CRRC Zhuzhou subsidiary, was launched in 2011. Ninety percent of its 116 staff are local workers.

“Benefiting from the location, CRRC Zhuzhou can provide timely maintenance services for the new railroad and reach more countries in Southeast Asia,” said Zhou, who has worked in the export business for more than two decades.

A high-speed train manufactured by China Railway Rolling Stock Corp arrives at a maintenance warehouse in Xi’an, Shaanxi province, in July 2016. Credit: Wang Shutian / Xinhua

Maintaining rail equipment can be a lucrative business in itself, according to Liao Hongtao, deputy general manager of the company.

“Even though a lot of money can be made from selling trains, providing maintenance services can also be profitable,” he said, adding that many core parts require extensive maintenance after a year of use.

At present, the maintenance subsidiary’s main business involves servicing the 38 sets of six-car electric multiple units and 50 sets of light rail vehicles on Malaysia’s Ampang Line. More than 90 percent of its revenue comes from the local market.

In ASEAN, CRRC Zhuzhou’s main markets are Singapore, Indonesia, Thailand and Malaysia, where there is rising demand for electric locomotives and mass-transit trains for city and suburban lines.

CRRC Zhuzhou has six subsidiaries covering more than 10 countries and regions across Asia, Europe and Africa. Last year, the company established a European sub-branch in Austria, opening itself to the continent’s high-end market through international acquisitions and collaborations.

The global rail and transit industry will be worth $240 billion this year, with maintenance services accounting for half that figure, according to a study by the Paris-based International Union of Railways last July.

However, CRRC Zhuzhou faces fierce competition from foreign rivals such as Siemens of Germany and Bombardier of Canada, who have their own global service networks to boost revenues in major markets such as Asia, the Middle East and Europe.

CRRC Zhuzhou understands the importance of building a complete network as part of its global expansion, according to Liao, its deputy general manager. “The tactic of establishing an ASEAN rail center in Malaysia is based on our market share in the country and its geographic location,” he said.

Wang Zhipeng, a professor of rail transportation at Beijing Jiaotong University, said: “In the long term, China and the ASEAN economies will count on enhanced regional cooperation, especially in rail transportation, to stimulate trade and attract investment while improving regional economic integration.”

Zhou of CRRC Zhuzhou said that ongoing plans in Southeast Asia to build a high-speed rail link will fuel the hope that the region could one day have a system similar to the one in Europe.

With his eyes firmly fixed on future orders, Zhou predicted that ASEAN members will need 1,100 new carriages, and refurbishment for another 700, within the next five years.

Contact the writers at zhongnan@chinadaily.com.cn

Initiative driven by global vision Interconnectivity and cooperation between nations are hallmarks of the modern trading network

May 1-7, 2017

Editor’s note: Three researchers share their views with China Daily’s Cui Shoufeng on the Belt and Road Forum for International Cooperation scheduled for May 14 and 15 in Beijing. The forum will be attended by 28 heads of state and government leaders. Excerpts follow:

The focus is squarely on interconnectivity

By ZHAO MINGHAO

The Belt and Road Initiative (comprising the Silk Road Economic Belt and 21st Century Maritime Silk Road) was proposed by China, but its dividends belong to all the countries and organizations that are part of it. The program is endorsed but not unilaterally funded by China, and it aims to motivate all participants to pitch in and enjoy their share of the fruits.

The Belt and Road is part of China’s pursuit to better interact with the rest of the world. In other words, the initiative matters a great deal to China for its economic transition, especially to the less-developed provinces and regions in West China, which are likely to be at the forefront of the reform and opening-up.

The Belt and Road focuses on economic growth and interconnectivity. The initiative, as President Xi Jinping has emphasized, aims to facilitate transnational trade and investment cooperation, as well as create fresh demand to achieve global economic balance.

To a large extent, infrastructure connectivity, capacity cooperation and trade exchanges will serve as a linchpin of the initiative’s construction. And local governments should guide enterprises, whether they are State-owned or private, to participate in the projects.

The author is a research fellow at the China Center for Contemporary World Studies of the International Department of the CPC Central Committee

Capacity cooperation involves capital flows

By XU WEIHONG

Cross-border capacity cooperation has always been about optimizing the allocation of the global factors of production through the market. On the one hand, Made in China products remain competitive in the global market, allowing the country to have surpluses against many trading partners.

On the other hand, Chinese investors have shown unprecedented keenness for overseas markets, laying the foundation for China’s capacity cooperation with the economies along the Belt and Road routes.

Capacity cooperation will inevitably involve two-way capital flows, highlighting the need for modern financial services. The inter-connectivity of capital is supposed to include Chinese enterprises’ procurement of overseas mineral resources and/or establishment of branches and pursuit of mergers abroad.

Procuring overseas mineral resources marks the expansion of industrial chains driven by the rising labor cost and scarcity of certain resources in China, while establishing branches and seeking mergers abroad often enjoys policy support but can be susceptible to geopolitical risks.

As the overseas promotion of the Belt and Road Initiative begins to bear fruit, it is vital to reduce unnecessary financing support to Chinese enterprises. Unreasonably low financing costs will disrupt global market pricing, which may create trouble for Chinese investors aspiring to become global competitors.

At the heart of the Belt and Road capacity cooperation is the upgrade of Chinese enterprises’ “go global” practice, as well as expanded allocation of the factors of production.

The author is a member of the academic committee of the Pangoal Institution, and chief economist with AVIC Securities

Not inconsistent with security needs

By CHU YIN

The security risks embedded in the promotion of the Belt and Road Initiative cannot and should not be ignored. The continuing unrest in some economies along the two routes, and the rise of regional terrorism and sectarian clashes, to some extent, have hampered the initiative’s overseas operations, and even halted some projects.

Key regions where major players like Russia and Ukraine, for example, are in dispute, can pose a challenge to the regional integration pursued by the Belt and Road Initiative.

The initiative’s pursuit of shared economic prosperity hinges on an overall secure environment, which calls for China to better protect Chinese citizens and assets in the economies along the Belt and Road routes, even though China’s pursuit is to recalibrate the global security order by cooperating with other countries, instead of seeking hegemony.

The Shanghai Cooperation Organization is a case in point, with China’s security cooperation with members of the Association of Southeast Asian Nations being another. Security mechanisms like these are based on mutual respect and are becoming a cornerstone of regional stability and global peace.

For Beijing, securing the operation of the Belt and Road projects is not inconsistent with its cautious approach to security cooperation; instead, it is part of the efforts to provide public goods needed by other participants.

The author is an associate professor at the University of International Relations, and a research fellow at the Center for China and Globalization

Belt and Road means integration This initiative has no geographical restrictions, maximizing the reach and benefits of its development vision

May 1-7, 2017

By KEYU JIN

On May 14 and 15 in Beijing, President Xi Jinping will host the Belt and Road Forum for International Cooperation, where the focus will be on his landmark program to invest billions of dollars in infrastructure projects across Asia, Africa and Europe.

The vision behind the projects under the Belt and Road Initiative — which consists of the Silk Road Economic Belt and the 21st Century Maritime Silk Road — is essentially about connectivity, facilitated by infrastructure.

If by working together, different countries’ respective comparative advantages can be exploited — whether capital, technological know-how, logistical or construction capabilities, raw materials, or even China’s industrial goods — infrastructure can be built efficiently and cheaply. This cooperative approach can spearhead development in low-income countries and lift emerging economies out of the middle-income trap.

But investing in infrastructure is difficult. It requires large amounts of funding, and carries non-trivial political, sovereign and financial risk. Many governments are trying to solve this problem by improving their state governance, maintain policy continuity and provide an enabling environment for investment in infrastructure. They make a big push to promote public-private partnership, but successes are few and far between.

At a time when a large funding gap in world infrastructure impedes economic progress, when expansionary fiscal policy is particularly potent in creating jobs and stimulating the economy — someone has to take the lead. The objective is clear: The world needs to de-politicize infrastructure decisions, and create a dedicated international pool of long-term capital that is not dependent on taxes, or yearly appropriations of funds.

China is acutely aware of the urgency of infrastructure development in many low-income emerging market economies. The idea of connectivity initially emerged from cooperating with the members of the Association of Southeast Asian Nations.

It then quickly became apparent that connectivity among Asian countries was not enough to achieve better economic results. If it is to play its maximum role, infrastructure needs to stride vast territorial boundaries.

Ahead of the Belt and Road Forum, some clarifications are in order. China is, first of all, not shy of proposing ideas, and then opening them up to debate and discussion. But there needs to be someone to initiate, to organize and to take a leading role.

Second, China needs to stress the participatory approach in implementing the Belt and Road Initiative. It has no geographical restrictions. It is inclusive, and global integration is what it is all about. Third, it is not about replacing the role of a dominant superpower.

The sequence of events reveals that China first proposed the initiative when Barack Obama was the US president, long before Donald Trump was elected. It is unlikely that its intention was to fill in the gap of a superpower as it rescinds from the world stage. It is just that somebody has to do the job.

And the United States is not doing the job even in the case of its own infrastructure upgrade. Bipartisan debates on how to spend taxes, and a lack of leadership, are reasons that the richest country’s infrastructure is lagging behind. They have let politics get in the way.

Thus, China emerges as an obvious candidate — with capital, experience and a vision for global integration.

There are things that China could have done better. It could have run a better campaign to help advance the economic case. Economic strategy and skillful diplomacy would have to a great extent alleviated the concerns. Sometimes, China’s lack of understanding and appreciation of local customs and cultures created barriers and raised tension with the local people.

Some Chinese companies’ behavior has been a cause of concern. Less than adequate attention to environmental protection and sustainability, and to the interests of the local community, has been a convenient excuse for some people to disparage China’s Belt and Road Initiative.

It is comforting to see that the Chinese government is fixing the problems, and the Chinese companies investing overseas, whether State-owned enterprises or private companies, have demonstrated their commitment to do a better job.

In the end, we cannot let politics get in the way of a truly global, economically sensible, 21st century initiative. The Belt and Road Initiative is like an orchestra. It needs a conductor and it casts its players around the world. Who becomes the conductor and who is picked as the first violinist is of course important. But more crucial is that it plays — and performs.

The author is a professor of economics at the London School of Economics and a World Economic Forum Young Global Leader.

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