The Belt and Road Initiative
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China’s Belt and Road Initiative benefit foreign companies
BEIJING — Trade and cooperation projects surged between China and countries along the route of Belt and Road Initiative during the first quarter as more foreign companies get involved. Trade with countries along the new commerce routes amounted to $236 billion in the first quarter of 2015, according to the statistics released by the Ministry of Commerce (MOC) on April 29. China is engaged in joint construction of 70 cooperative zones through projects such as the construction of industrial parks, with more than $8 billion invested by companies, said Shen Danyang, spokesperson with MOC. These zones are expected to realize an annual output of at least $20 billion, and provide up to 200,000 jobs, Shen said. The government has not identified all nations included in the Belt and Road, but so far as many as 60 have voiced support and interest in the initiative, which was designed to better connect China to the region. During the first quarter, non-financial investment into these countries stood at $2.56 billion, accounting for 10 percent of its total overseas investment. Chinese firms are expected to step up their overseas ventures such as acquisitions as the Belt and Road Initiative goes ahead, according to a report released by the international consulting firm Ernst & Young. “Chinese firms now are more aware of transactional and operational risks while they venture overseas, as well as of the importance of professional intermediary services such as law, finance and public relations consulting,” said Sameh El-Shahat, CEO of China-i Ltd, a risk management and public diplomacy advisory firm. “The growing trend and demand means a huge market for global law firms, accounting agencies and PR companies,” Sameh said. Gu Chunyuan, senior vice president with ABB Group, a global leading power and automation facility and service provider, believes there is much more room for foreign companies to benefit from the Belt and Road Initiative, especially in infrastructure development. “Improving infrastructure connection is a top priority in the initiative and it also highlights environmentally friendly design, construction and management. This means opportunities for companies with leading technology, global presence and insight of Chinese market,” Gu said. Meanwhile, communication and cooperation platforms such as exhibitions and forums also allow foreign enterprises to seek win-win partnership with Chinese counterparts, said Xu Ningning, executive president of the China-ASEAN business council.
Understanding China’s Belt and Road Initiative
China is increasingly flexing its economic muscle in order to assert itself as a responsible global power. The United States’ reaction has been generally skeptical—even negative. In March 2015, the United States at first privately and then publicly opposed China’s establishment of the Asian Infrastructure Investment Bank, or AIIB, even as 53 other countries joined as founding members. In July, dramatic falls in the Chinese currency market sparked renewed U.S. concern regarding China’s assertive role in international finance and its potentially destabilizing effects on global commerce, as well as its influence on the U.S. dollar’s dominance as a global currency. While these developments raise questions within the United States and other developed countries, many developing countries eagerly welcome China’s investment. Chinese investments in Asia, the Middle East, and Eastern Europe—provided under the new Belt and Road initiative—are responding to the regions’ need for investment and development. Such development is certainly a boon to China, as well as the United States. New rail, roads, and ports provide access to previously excluded regions, such as the energy-rich states of Central Asia, while new energy and communications infrastructure can accelerate productivity for local economies in South and Southeast Asia. Yet, for the economies of these developing countries and the United States’ own economic interests in the region, how—and if—China will undertake these development initiatives in a cooperative and sustainable manner is crucial to understand. The Belt and Road initiative concept In September 2013, Chinese President Xi Jinping formally announced the Silk Road Economic Belt in Kazakhstan and subsequently expanded the program to include the Maritime Silk Road in February 2014. Commonly referred to in English as the Belt and Road initiative, the program aims to unlock massive trade potential and bolster economic development to the so-called belt—the land route starting in western China that crosses through Central Asia to the Middle East—as well as to the so-called road: the maritime route around Southeast Asia, the Persian Gulf, and the Horn of Africa.Given its leading role in decades of global development, the United States should keep an eye on the Belt and Road initiative’s expansion but avoid instinctively reacting negatively to China’s global economic ambitions. The United States should instead assess specific projects in key regions and make smarter, nuanced assessments regarding China’s rising role in the world and its effect on the international system, as well as what it will mean for U.S. interests around Asia and beyond. The Belt and Road initiative has become a defining strategy for economic outreach to China’s partners—a wide range of nations that include Spain, Indonesia, Russia, the United Arab Emirates, as well as others. The United States’ reaction has been fairly muted. In a March 2015 Washington, D.C., panel, Deputy Secretary of State Tony Blinken suggested that the Chinese effort was “consistent” with U.S. goals and could be “complimentary” with U.S. efforts but had few examples to offer. The Belt and Road initiative in reality Through open-source and field research, the Center for American Progress has tracked funded Belt and Road initiatives in order to see where and how these contracts and projects are developing—specifically focusing on which countries in Asia, the Middle East, and North Africa are receiving heavy investment, as well as what types of projects are emerging. Current projects reflect China’s economic expertise, such as financing comparatively low-cost manufacturing or infrastructure initiatives, and China’s global economic needs, such as easier access to ports and new sources of energy. For example, President Xi’s state visits have consistently highlighted new projects under the Belt and Road initiative, including the Suez Canal in Egypt, energy production in Pakistan, and port development in Indonesia. Also, recent maps of the Belt and Road initiative have adopted existing trade corridors as additions, including the China-Pakistan Economic Corridor, the Bangladesh-China-India-Myanmar Corridor, and others. Despite locking in more than 1,400 contracted projects and $7.06 billion worth of contracts with more than 60 countries, the Belt and Road initiative has faced political, social, and economic obstacles that are an inherent part of economic development and global partnerships. How China responds and adapts to these obstacles will remain important for U.S. interests across Belt and Road initiative countries.Four key takeaways Current Belt and Road initiative projects are linked by their proximity and utility to diversify and insulate China’s trade access. The Chinese-Pakistan Economic Corridor will allow China to circumvent India and the Straits of Malacca, and as a result, it is critical in shortening Chinese trade routes. Israel is an inland corridor that keeps China immune from the effects of Egypt’s political instability on the Suez Canal. Indonesia’s ports and strategic maritime location is a critical pillar in Southeast Asian trade, while Europe is another destination market for Chinese goods and finance. Recently, China and Spain have heralded an agreement for rail transportation from western China’s Xinjiang province to Madrid, Spain. The rail line is expected to cut the transit time between the two destinations by more than half, taking approximately 21 days rather than 45 days through shipping routes. Similarly, new energy development in Pakistan and Central Asia seeks to diversify energy access as China observes the volatility in the Middle East. Furthermore, China has sought to vary its financial markets, seeking linkages with Germany’s Börse stock exchange in order to increase trading in renminbi and accelerate its use as a global currency. The Belt and Road initiative pursues development projects that enhance the domestic economic viability of potential trade partners. For example, investments with Southeast Asian countries include large infrastructure projects—ports, energy plants, and urban housing—that meet the host countries’ development demands. The theme of integration and connectivity inherent to the Belt and Road initiative is in sync with other similar regional initiatives, such as the still-developing Master Plan on ASEAN Connectivity. Through Chinese government-backed financial institutions and the $40 billion Silk Road Fund, Chinese loans offer financing beyond what partner governments or other international institutions are offering. Many of these countries welcome Belt and Road initiative investments—particularly in expensive infrastructure—but some countries, such as Ukraine, are already struggling to repay the extensive loans that are required to finance such projects. The Belt and Road initiative is heavily invested in countries that have both a strong government relationship with China and hold popular support for Chinese investment. China’s bilateral relationships with partner countries have been key—both in ensuring political support for Chinese-led development, as well as in providing domestic security and engagement with villages and workers affected by Chinese projects. This is a nuanced departure from China’s traditional noninterference approach to development and business relationships with partner countries. China’s strong political connections on the government level have been useful for its economic activity in partner countries. For example, Pakistan has promised to provide domestic security forces for its $46 billion Chinese-led Belt and Road initiative projects. However, in other countries, China’s bilateral relationships have weakened at the local level. Construction of the Myitsone Dam in Myanmar is at a standstill due to local protests regarding the environmental and cultural effects of damming the river. Sri Lanka has also halted Chinese-funded projects because of development and political concerns. As the Myanmar Institute of Strategic and International Studies has noted: [T]he Belt and Road Initiative was generally welcomed by many countries, but there were also countries that had concerns and apprehensions … [success] would greatly depend on the successful implementation of the project. Such projects in the region have not appeared as official projects of the Belt and Road initiative. Finally, as the above trends imply, while Chinese firms and government entities are pursuing Belt and Road initiative projects independently of one another, their respective tracks are both parallel and coordinated. CAP’s analysis of press reports notes that the commercial efforts—such as those in the Special Economic Zone for Myanmar—are largely motivated by how investments will help China’s economy. Other contracts, such as handshake agreements between two governments, are worked out between Chinese government entities—embassies and ministries—and partner governments and then handed off to Chinese companies to implement. With its overarching goals, the broad Belt and Road initiative has allowed the Chinese government and Chinese companies to work in relative tandem. The Belt and Road initiative is fulfilling a global demand for investment and development that can connect millions of people and spur increased economic growth for both China and many other nations stuck in their development paths. Yet, as one Chinese interlocutor noted, “We rely too much on money to solve our problems.” As its experience in Sri Lanka, Myanmar, and elsewhere indicates, China will need to grapple with the additional political, social, and economic considerations inherent to successful investment and development. With the international development community prioritizing sustainability, it is in the interest of China, the United States, and partner countries to ensure that the Belt and Road initiative continues to evolve and adapt in the coming months and years. Such adaptation can not only achieve important economic development—it can also ensure China does so sustainably and in a manner that does not undermine that very development.
China's Belt and Road Initiative delivers promising initial results
BEIJING - After a little more than three years, China's Belt and Road Initiative, envisioned as an infrastructure and trade network connecting Asia with Europe and Africa along ancient trade routes, is delivering promising early results on trade and investment. It's a win-win scenario given that China and countries along the routes have signed more than 40 cooperative agreements so far, covering more than 10 key industries including steel, electronics, automobiles and equipment-making, the Ministry of Commerce(MOC) said. "The Belt and Road Initiative strengthened our confidence in going global when we felt at a loss and pointed out a new way for us -- integrating industrial chains," said Sun Weijun, deputy head of Tianjin Julong Group, a leader in China's palm oil industry. Julong Group's continuous efforts paid off when China-Indonesia JuLong Agricultural Industry Cooperation Zone was promoted to a state level overseas economic and trade cooperation zone in August 2016. So far, a total of 52 overseas economic and trade cooperation zones have been established between China and countries along the routes, while more than 1,400 major projects are in the pipeline, according to the MOC. Liu Chiyan, general manager of Fuzhou Hongdong Pelagic Fishery Co, Ltd, spoke about the company's achievements in boosting local industrial development and employment during its overseas expansion. Located in Southeast China's Fujian province, the east end of the ancient Maritime Silk Road, the Fuzhou Hongdong company has taken advantage of the Belt and Road Initiative in establishing its nine overseas fishery bases. "There are 2,000 local employees in our company's fishery base in Mauritania alone. We provide them food and dorms, shuttle buses, social security and medical insurance," said Liu. "That's why countries like Ghana, Kenya and Tanzania are offering preferential policies to solicit our investment." The company's Mauritania fishery base has a complete industrial chain including fishing, food processing and cold-chain logistics. "Take the stone industry as an example: after more than three years of the Belt and Road Initiative, trade protectionism has greatly degraded in the stone processing industry," said Liu Liang, president of Yingliang Group, a leader in mining exploration, sales and processing. China said it will press ahead with the Belt and Road Initiative as one of three major strategies, along with Beijing-Tianjin-Hebei coordinated development and the Yangtze River Economic Belt Initiative, according to a statement issued on Friday after the Central Economic Work Conference, during which Chinese leaders and senior officials gathered to map out priorities for 2017. China has decided to promote the Belt and Road Initiative, improve its investment environment and open up more fields to global integration. "The Belt and Road Initiative is not just the trade and investment type of integration that people thought in the beginning, but it really goes into areas like intellectual property rights or environment or climate change, or collaboration in areas that people never thought such an initiative could cover," said Margit Molnar, head of the China Desk of the Economics Department of the Organization for Economic Cooperation and Development (OECD). The Belt and Road Initiative, also known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road, was put forward by China in 2013. Strengthening the initiative was listed as one of the major tasks of the Central Economic Work Conference in 2013. The China-proposed initiative has been increasingly recognized as a solution to global economic difficulties and uncertainties worsened by a sluggish recovery, downturns in trade and investment, a lack of growth momentum and setbacks in globalization.
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1 These early harvests have truly pointed to the broad prospects the Belt and Road initiative will bring.
2 The Belt and Road initiative, meeting the development needs of China, countries along the routes and the region at large, will serve the common interests of relevant parties and answer the call of our time for regional and global cooperation.
3 Though proposed by China, the Belt and Road Initiative is a common aspiration of all countries along their routes.