In October 2013, during a visit to Indonesia, Chinese President Xi Jinping announced the launching of the New 21st Century Maritime Silk Road, just one month after announcing the New Silk Road Economic Belt, while on a visit to Kazakhstan. These two initiatives, followed in 2014 by the plan to put together the BRICS New Development Bank and China’s establishment of the Asian Infrastructure Investment Bank that Fall, constitute a new paradigm for mankind.
The “One Belt and One Road” initiative concerns 65 countries and 4.4 billion people and is China’s most important and strategic initiative. As the Middle East and Europe faces social, political, and economic turbulence, China invites all major economies to join this endeavor to improve infrastructure and trade throughout the world. Increasingly, China’s development is inseparable from the world; and world’s stability and prosperity are inseparable from China.
As Li Keqiang wrapped up the National People’s Congress in Beijing, Fernando Menedez reviews the investment outlook between Latin America and China, noting that China is likely shift away from total volume of investments to a greater emphasis on their productivity and sustainability.
In 2015, much emphasis has been placed on a partnership between the African Union and China in order to accelerate the construction of the three major networks to help materialize the “century dream” of connecting all capital cities in Africa with high-speed railways. African economic integration calls for not only consensus and impetus from African countries, but also external investment to drive the process.
Despite China’s remarkable growth, the property market still faces the challenges of consolidation, industrial overcapacity, financial risk, deflationary risk, and structural employment issues. In response the government will adjust to the economy’s “new normal” of slower growth, move toward an innovation based economy with more public goods and services, and pursue a proactive fiscal economy and a prudent monetary policy.
China’s “Foreign Investment Law” was solicited for public comment from foreign companies, lawyers, and policy makers, and though not finalized, represents a move to improve openness, promote foreign investment, and regulate investment behavior. Pan Xiaoming explains the new features that fundamentally change the structure of Chinese foreign investment.
Britain has broken ranks with the United States to join China in the founding of the Asian Infrastructure Investment Bank (AIIB). As other nations like Australia and South Korea choose to similarly defy U.S. opposition to the AIIB, and join, it could shake Japan’s confidence in its own position and even in the reliability of its alliance with the U.S.
Though some view the One Belt, One Road strategy as a Chinese version of the Marshall Plan, they are vastly different. Therefore, no single country can dominate its process. There is room to dispel suspicion and build trust by further enhancing transparency of the AIIB institution through reducing China’s shareholding, offering more leadership positions to foreign nationals, and employing international business standards.
The controversial issue of “currency manipulation” has resurfaced. However, Washington and Beijing have very different perceptions about the identity of the “currency manipulator.” The net effect is currency friction that is likely to prevail until the 2020s.
China’s selectiveness of foreign investment reflects its restructuring economy, one that invests less in capital and labor intensive industries to investments in human resources and technological innovation. Some far-sighted multinational companies are actively making use of the new rules, seizing the opportunity of China’s structural transformation and beginning to make active arrangements in the strategic newly emerging industries and the high-end service industry.
Asian states will look at potential partners around the Pacific Rim and determine if they are ready to walk the walk or simply talk the talk. So far the lesson of Canada and Australia is that walking the walk requires sustained, strategic commitment, but has a big potential payoff. Australia has been taking concrete steps to solidify its relationship with Asia; Canada has been talking about it, and is only now starting to put into place an engagement program with substance.
Sudden cases of factory relocation and closures has caused China’s foreign investment communities to worry about a “massive foreign capital flight.” With further investigation, foreign direct investment in China is shifting from manufacturing to service sectors. The focus of concern about China’s FDI situation should not be exaggerations of “massive foreign capital flight,” but on the solid efforts to improve China’s investment environment.
Chinese Ambassador to the U.S., Cui Tiankai, recently suggested ways to further improve China-U.S. economic cooperation, which is the major external factory driving the improvement of bilateral relations. Export restrictions, economic recognition, IMF quotas, and U.S. politicization of economic issues have been some of the major problems hindering economic ties.
As the two largest economies, China and the U.S. are trying to formulate a new-type of major-country relationship. The establishment of a free trade area should be an integral part of such relationship. This will be a challenging mission, but the rewards will be tremendous.
Discussion of whether or not China will lead the world through a “third industrial revolution” ignores the China’s excess supply of low quality products, polluted air and water, and an information sector that isn’t completely integrated with manufacturing. China still has a ways to go in industrializing while facing changing international circumstances.