Belt and Road Initiative: Reaping Rewards Together

On May 14, 2017, Chinese President Xi Jinping said at the Belt and Road Forum for International Cooperation that the Belt and Road Initiative is rooted in the ancient Silk Road. “It focuses on the Asian, European and African continents, but is also open to all other countries,” he explained. “All countries, from either Asia, Europe, Africa or the Americas, can be international cooperation partners of the Belt and Road Initiative. The pursuit of this initiative is based on extensive consultation and its benefits will be shared by us all.”

He made it clear that opening up and cooperating to achieve mutual benefits are the heart of the Initiative. All involved parties should know from the start that the economic nature of the Initiative is producing mutual benefits. All parties can share the fruits by actively participating in cooperation under the Belt and Road Initiative.

 Supplying the Demand

In recent years, emerging economies, especially China, have become major engines for global growth. Developing countries in Asia, especially Central and Western Asia, represent a large, growing market. According to estimates from the Asian Development Bank, the annual demand for investment in infrastructure in Asia will reach as much as US$730 billion in the next six to eight years. According to the World Bank, annual demand for investment in infrastructure in Asia is about US$800 billion.

However, the total investment in Asia’s infrastructure from those two multilateral banks is only around US$30 billion every year. A huge funding gap is limiting Asia’s infrastructure construction. A shortage of investment is preventing the growth of developing countries and regions, including those in Central and West Asia. The economic demand for the Belt and Road Initiative is clear. Due to China’s economic structural transformation, the country maintains ample production capabilities, competitive technological abilities and tremendous foreign exchange reserves. This is the supply side of the Belt and Road Initiative.

The combination of apparent demand and ideal supply forms the economic foundation of the Belt and Road Initiative.

Understanding Cooperation

In the global sphere, the Initiative is intended to promote peaceful development. Domestically, it is China’s strategy to open up wider. And it is also an international cooperation program to promote further development of technology. Mechanisms for achieving mutual benefits can be analyzed at the basic enterprise level to encourage wider participation and cooperation under the Initiative.

China is eager for a bigger market. Chinese enterprises need to go abroad in search of better opportunities, while other Asian countries, especially those in Central and West Asia, have an expanding market but insufficient investment. The demand-and-supply balance makes building infrastructure abroad attractive to capable Chinese enterprises. The economies of participating countries will be promoted by the improvement of infrastructure. Profits earned from those projects will be used to repay loans, creating a positive economic circle.

The Belt and Road Initiative was born from the economic interaction between China and other Asian countries. Its aims are in the interests of both sides, considering the demand-and-supply situation. This Initiative, including the Silk Road Economic Belt and the 21st-Century Maritime Silk Road, is regarded as the longest and most promising economic corridor in the world, connecting the Asia-Pacific region and Europe.

Many industrialized European nations in this region are facing the threat of recession. By providing advanced technology as part of the Initiative, they would get access to the large, growing markets of developing countries. As the designer of the plan, China will cooperate with industrialized nations in Europe and facilitate their investment in developing countries. China can provide enterprises entering foreign markets with platforms offering advanced technology and tested marketing strategies. Such cooperation would help upgrade China’s manufacturing industry. European enterprises can also profit from their technological advantages. In such ways, European countries can participate in the Initiative as third parties. This new ‘open door’ marks the emergence of the “Third Party” mode for international production capacity cooperation.

Like many Asian countries, Africa is in need of infrastructure. As the Belt and Road Initiative progresses, African nations will benefit in the next phase of the Initiative. As construction continues, some African countries will become importers of investment and technology and benefit directly from new infrastructure. Asian regional development will benefit developing countries in Africa as well. The flow of production factors will promote coordinated development among regions.

Because the Belt and Road Initiative offers such a mutually-beneficial mechanism for every participating party, countries in North America will probably seek to join. As a result, a comprehensive roadmap for mutual benefits will coalesce within the Initiative. Recently, Canadian Prime Minister Justin Trudeau expressed his country’s hopes about joining the Asian Infrastructure Investment Bank when he visited China. The United States sent representatives to the Belt and Road Forum to scope out economic opportunities within the plan.  

Everyone Wins with the Belt and Road

How does a nation benefit from the Belt and Road Initiative? In the keynote speech at opening ceremony of the Belt and Road Forum for International Cooperation, Chinese President Xi Jinping remarked that pursuit of the Belt and Road Initiative requires a peaceful and stable environment. “We should forge partnerships of dialogue with no confrontation and of friendship rather than alliance,” he said. “Opening up brings progress while isolation results in backwardness. For a country, opening up is like the struggle of a chrysalis breaking free from its cocoon. There will be short-term pains, but such pains will create new life. The Belt and Road Initiative should be an open one that will achieve both economic growth and balanced development.” The president frequently mentioned the words “opening up” and “cooperation” in his speech, stressing that countries along the routes should open up and cooperate in order to reap the benefits.

Of course the deeper connotations and practices of the Belt and Road Initiative are much broader than this. It focuses not only on business cooperation by promoting connectivity in roads, trade and currencies, but also on policy coordination and closer people-to-people ties. Before more intricate steps can be taken, opening up and seeking cooperation should become common ground and concrete steps. Only then will policy coordination, connectivity of infrastructure, unimpeded trade, financial integration and closer people-to-people ties be achieved. 

The author is a deputy director of the Institute of China’s Economic Reform & Development at Renmin University of China.