ISSUE NO. 17
by Jayne Jin, MBA ’13
The 1st Belt and Road Forum for International Cooperation (BRF) was held in Beijing, China on 14-15 May 2017, with 29 heads of state, three heads of international institutions, and approximately 1,500 guests from over 130 countries attending the event. The main goal of the BRF is to provide a platform for the participating parties to strengthen cooperation and synergize development strategies. A comprehensive list of outcomes was achieved during the two-day forum and the joint communique of the leaders roundtable was announced.
One of the most notable deliverables is Chinese President Xi Jinping’s announcement of RMB 840 billion financial support, including RMB 100 billion of new capital to the Silk Road Fund, RMB 300 billion of Overseas RMB Fund Business, RMB 380 billion equivalent of loans for related projects, and RMB 60 billion of aids for joint parties, all of which showed China’s solid commitment to the Belt and Road Initiative.
What is the Belt and Road Initiative?
In 2013, Chinese President Xi Jinping launched the Belt and Road Initiative. The name could be a little bit confusing where the “Belt” refers to the Silk Road Economic Belt, the land route; and the “Road” refers to the 21st Century Maritime Silk Road, which is actually the sea route.
The Belt and Road Initiative, drawing inspiration from the ancient silk road, aims to enhance connectivity between Asia and Europe and beyond to boost trade and stimulate economic growth. Linking 65 countries with 4.4 billion people that collectively account for 63% of the world’s population and 29% of global GDP, the Belt and Road Initiative encourages free and convenient flow of all elements of production and develops multi-dimensional cooperation platforms, to achieve mutual gains and shared development.
If only one word could be used to describe the Belt and Road Initiative, that is – connectivity, through infrastructure, trade, finance, policies and most importantly people, with three levels of building blocks:
- Infrastructure network: railways, highways, airports, ports, satellites, oil and gas pipelines, water, electricity, telecommunications, and the Internet, etc.
- Industrial parks: create industrial clusters and free trade zones to deepen cooperation and accelerate the process of industrialization.
- Economic corridors: comprehensive regional connectivity to integrate resources, investment, and talents to boost economic growth and transform cities to urbanization and modernization.
Why the Belt and Road Initiative?
While the world economy is experiencing modest recovery, the growth of global trade and investment remains limited. We need new growth engines to drive demand and boost economy. In the meantime, the world economy is highly imbalanced. Most developing countries still face the common challenges of poverty reduction, let alone prosperity. There are 1.3 billion people in the world living without electricity. The fact that 65 countries along the Belt and Road Initiative account for the world’s 63% population but only 29% GDP is self-evident of unequal world development.
The bottleneck of development lies in infrastructure. As the Chinese proverb goes, “If you want to get rich, build the roads; if you want to get rich faster, build the highways.” However, there is a huge gap between the supply and demand of global infrastructure. According to the McKinsey report, the cumulative need for world’s infrastructure investment amounts to $49 trillion over the period from 2016 to 2030 in order to support an average global GDP growth rate of 3.3%, and 60% of the investment need will be in emerging economies.
The Belt and Road Initiative is the solution proposed by China to build cross-border and trans-continental connectivity projects to enhance cooperation, unleash potential, and boost economy. McKinsey estimated that global flows account for 15~25% of global GDP growth, and returns to the most connected countries are 40% higher than to the least connected countries. The short-term benefit is job creation and increased productivity, trade, and investment. The long-term benefit is endogenous economic growth through technology advancement and innovation.
Since China joined the WTO in 2001, China’s economy has been deeply integrated into globalization. Until 2016, China’s GDP has grown seven times compared to 2001. In the past five years, China’s economy has maintained vigorous growth, contributing to 25~30% of world GDP growth. While China is facing economic challenges, it is not wise to retreat from the world economy. China has benefited from globalization and enjoyed generous support from other countries, it is China’s turn to reciprocate and contribute. Because if the world is better, China will be better.
From “Made in China” to “Built by China”
China has the world’s longest, fastest, and most sophisticated railway network. In less than ten years, China has built 19,000 kilometers of high-speed railways, which accounts for more than 60% of world’s total amount. By 2020, the network will reach 30,000 kilometers, connecting more than 200 cities in China.
With the most advanced technology and expertise in construction and infrastructure building, China could share its successful experience with the world of building infrastructure as a catalyst to facilitate trade and economic development, which in turn lifted 700 million Chinese people out of poverty.
From capital inflows to capital outflows
According to The Emerging Market Multinationals Report (EMR) 2016, published by the Emerging Markets Institute of Johnson at Cornell, China has long been a net recipient of foreign direct investment since the 1970s. However, China’s outward FDI doubled in 2008, which marks the beginning of a significant expansion of Chinese outward investment. The amount reached $125 billion in 2015, ten times as of in 2005. The gap between China’s inward and outward capital flows is narrowing and there is a remarkable trend of outward FDI led by Chinese multinational enterprises.
It is estimated that, in the next five years, China will have $8 trillion goods imported, $750 billion outward FDI, and 700 million outbound trips, all of which will benefit countries along the Belt and Road Initiative and beyond.
The Belt and Road Initiative: Connecting the Chinese Dream with the World Dream
A great cause should be pursued for common good. The Belt and Road Initiative is originated in China and belongs to the world. It is not a solo for China, but a chorus of all countries along the routes. For more than three years, over 100 countries and international organizations have responded positively and offered support for the Belt and Road Initiative. Bloomberg projected that, by 2050, countries along the Belt and Road Initiative will contribute 80% of global economic growth with 3 billion more people entering the middle class. China is committed to partnering with the world to create a prosperous and peaceful community of shared future for mankind.
- Win-winism: not a zero-sum game, but common development; not exporting excess capacity, but complementarity and cooperation; not giving money away, but generating real economic growth.
- Inclusive globalization: open to diversity, mutual consultation, mutual respect and mutual benefit; fully align and synergize with other global, regional and national frameworks.
- A community of shared future: shared commitment, interests and responsibility to build open economy and shape the future of the world together.
The Belt and Road Initiative is such a bold and visionary proposal for the world that it not only takes generations of collaborative efforts to achieve common prosperity, the path itself is full of risks and challenges. Despite all the obstacles, there is one crucial foundation that determines the ultimate success of the Belt and Road Initiative – TRUST. China has the responsibility to assure the world that the Belt and Road Initiative is not about pushing China’s own agenda but for the public good. As Mr. Henry Paulson addressed at the Belt and Road Forum, China should “welcome the scrutiny” and engage in “greater dialogue and discussion”, “the more China can demonstrate that the Belt and Road initiative is open to outside participation in this way, the more it will be embraced by global (and even American) firms and suppliers“.
Finally, just as Mr. Jin Liqun, President of the Asian Infrastructure Investment Bank (AIIB) spoke at the Atlantic Council on April 24, “CREDIBILITY has to be earned through not what you are talking about, but by your performance”. China should work diligently with countries and partners together to “make the promise of the Belt and Road Initiative a REALITY”, said Mr. Jim Yong Kim, World Bank Group President at the Belt and Road Forum.
The opinions, beliefs and viewpoints expressed by the various authors in this article do not necessarily reflect the opinions, beliefs and viewpoints of Cornell University and the Emerging Markets Institute, or official policies of the Cornell University and the Emerging Markets Institute
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