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Economy

New Era Dawns for Belt and Road

May 14 , 2019
  • Fu Mengzi

    VP, China Institutes of Contemporary Int'l Relations
  • Zhang Jing

    PhD student, China Institutes of Contemporary International Relations

The Second Belt and Road Forum for International Cooperation concluded in Beijing on April 27. For the Belt and Road Initiative (BRI), this forum produced numerous practical outcomes, with 283 agreed-upon items, including the following outstanding features:

First, building up Belt and Road on a high-quality foundation. President Xi Jinping stressed at the forum the need to “continuously promote the high-quality development [of the BRI) toward a bright future”. Coordination is needed in the following three aspects to advance the BRI’s high-quality development:

1. Coordination with participating countries’ connectivity strategies.

Connectivity is the BRI’s defining feature. If connectivity is to play its role in the BRI, it is imperative to identity the participating countries’ pressing requirements, to build urgently needed infrastructure facilities, and to build a platform for sustained cooperation. It should be noted that projects for the broad-based improvement of people’s livelihoods could generate positive trickle-down effects, and supporting improved production capacity.

 2. Close ties to the global value chain

Innovation-driven development is clearly the trend of our present era. After years of effort, China is moving upwards in the global industrial chain and has the technology and capability in building the innovation of the “Digital Silk Road.” China’s advancement towards the high end of the global value chain serves as an important driving force for a new type of globalization. These changes in the value chain will help reshape the global division of labor, which not only provides more choices for developing nations, but also helps create conditions for Chinese enterprises and developed nations to carry out industrial and technological cooperation.

 3. Coordination on green development along the Silk Road.

 BRI-driven connectivity, more often than not, involves massive and long-term development, with some massive projects likely to reshape regional ecological features. If environmental issues are not appropriately addressed, these projects are likely to trigger opposition from residents in the relevant areas. Meanwhile, some Western media commentators would play up these negative impacts and amplify opposition voices and. Therefore, it’s imperative to foster green, environmentally-friendly and sustainable development in advancing the high-quality development of the BRI.

Second, forging a global connectivity partnership. President Xi Jinping stressed that “we should forge a global connectivity partnership to achieve common development and prosperity.” Connectivity is the core concept of the BRI. This concept goes beyond physical and “hard” connectivity via roads and infrastructure facilities—it further includes “soft” connectivity such as integrating rules, standards and policies, and building up people-to-people exchanges, cultural bonds, and mutual trust. The concept incorporates five goals for the BRI-driven connectivity, namely: policy synergy, infrastructure connectivity, unimpeded trade, financial integration, and people-to-people bonds. Nonetheless, infrastructure construction remains the foundation and priority for establishing connectivity. In terms of geographical scope, neighboring regions are top priorities, particularly connectivity among Asian nations, with the project gradually expanding to other regions. On this basis, a partnership based on sustainability, mutual trust, wide consultation, joint contribution, and shared benefits among all countries and regions will be explored and forged.

Third, important measures for reform and high-quality opening-up. Against anti-globalization headwinds, global economic slowdown, and surging protectionist populism, the BRI could help blaze a new trail for global governance. This path will promoting the development of economic globalization along more open, inclusive, and balanced lines, that are beneficial to all. In his keynote speech at the forum, President Xi further elaborated the significance of the BRI to the new model of governance, welcoming new contributions and opportunities for the improvement of people’s livelihoods in all countries and regions. The announcement of a series of important new measures for reform and opening-up showed that China is providing a huge impetus to promote the development of a new model of globalization.

The BRI, ever since it was first proposed in 2013, has been progressing and expanding in spite of doubts and criticism, and it will have to continue to face challenges in the future. First of all, some major powers have always been wary of the BRI, fearing that China would use it as a means to establish a “Chinese model” of rules and standards to challenge the existing international and regional mechanisms. These great powers have also expressed concern that BRI’s spillover effects — that is, its military and security roles and significance — could pose challenges or even threats to the stability of the regional and global order. Second, some unfounded accusations against the BRI emerged now and then, such as the so-called “debt trap theory,” which groundlessly blamed the BRI for the debt burdens of some participating countries. Third, the BRI will inevitability have to face various risks and challenges, including political, economic, security and social risks, as well as risks arising from ethnic and religious conflicts.

Meanwhile, in the United States, there is a growing chorus of voices urging the government to contemplate taking part in the development of the BRI. Deborah Brautigam, professor of international development and comparative politics at Johns Hopkins University, wrote an article in The American Interest in April entitled “Misdiagnosing the Chinese Infrastructure Push.” She argued in the article that China’s investments in foreign ports and infrastructure construction “can be explained primarily as commercial activities” and do not pose any military or strategic threat, and there does not exist the so-called “debt trap.” She argued that the West can help shape the BRI by being more closely involved. On April 25, The Atlantic published an article by author Michael Schuman, arguing that “The US Can’t Make Allies Take Sides Over China.” In recent days, Italy, Luxembourg and Switzerland have signed memoranda of understanding to join the China-led BRI. German Economic Affairs Minister Peter Altmaier, who came to Beijing for the second Belt and Road Forum in April, said that European Union countries with concerns about joining the BRI as individual states could deal with China as a group rather than sign bilateral BRI agreements.

The BRI is open and inclusive. It’s natural for the initiative to bear some sign of its Chinese origins, but the BRI poses no challenge to the existing international rules of the world order. Neither is BRI merely a small, exclusive circle that offers privileges only to a few countries while undermining and dividing the region. As for the so-called “debt trap theory,” if any nation involved in infrastructure construction happens to have any debt issue, the Chinese side would be the earliest and biggest victim, as it will have to bear the financial brunt. For some countries, there are historical reasons behind their debt problems. I recently visited the Hambantota port in Sri Lanka, and found that Chinese loans accounted for only 10 percent of its total financing, lower than the proportion of Japanese loans (which stood at 12 percent) and much lower than international commercial loans (38 percent). In Sri Lanka, both the government and the public do not buy the Western media’s accusations about China’s role in the country’s debt issue. China is of course paying attention to the debt problems that some countries experience—one example of its response is the issuance of a Debt Sustainability Framework during the Belt and Road Forum last month in Beijing.

Assessment and precautionary measures need to be strengthened to guard against risks. Some specific risks and challenges could be prevented, but some may be difficult to avoid or control. To some enterprises, in particular, policy changes caused by the political situation in certain countries could lead to the stalling or cancellation of some projects, with great costs to be borne by the enterprises involved. Therefore, positive and smooth inter-governmental exchanges and communication are needed: legally-binding protection of the rights of parties involved in BRI projects is called for. The projects should not merely rise and fall with the change of government or leaders. For instance, the Colombo port city project in Sri Lanka was subjected to setbacks. In Phase II of the project, before the design plan was submitted to the local government for approval, local assessment organizations and third-party groups were invited to carry out an environmental impact evaluation, with the results being announced on TV, and relevant reports being sent to parliamentarians to elicit opinions and suggestions. The transparency of the operation was greatly helpful in winning public support for the project. In a word, openness and transparency of information relating to BRI projects are helpful in winning growing support from the public, and are also conducive in preventing changes or slowdowns from hampering projects — and in avoiding unfounded accusations from outside parties.

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