Wang Yiwei: is the Belt and Road Initiative anything but “throwing money around”
Different foreign countries and regions have different opinions with the Belt and Road Initiative. Why have some countries and regions received investment worth USD 40 billion or USD 50 billion from China’s Belt and Road Initiative (BRI), while others gets no big projects from the BRI? At home, some doubts also prevail. The domestic economy growth has slowed down and many fields need investment, so why does China go to invest in risky countries along the route? Will investment in the Belt and Road get nothing back and fail to deliver any economic benefit?
It seems that the BRI investment is misunderstood at home and abroad to varying degrees. It is either regarded as “foreign aid” or as “throwing money around”. People are worried about that it will trigger a debt crisis, after all, many fields at home still need money injected in, such as targeted poverty alleviation and infrastructure improvement. In fact, the BRI is not “foreign aid”. From the domestic background, it was proposed to solve the two major problems facing China’s reform and opening-up, that is, to address the unsustainability of the development model and the problem of diminishing effects of globalization. Therefore, it also marks such changes as China has turned from integrating into globalization to shaping globalization and from opening up to the world to promoting the opening up of the world to China. From an international perspective, it marks the efforts China makes to advance the integration of Europe and Asia, consolidate the support of its neighboring countries, facilitate trade and investment, deepen economic and technological cooperation, and establish free trade zones, so as to eventually develop a large Eurasian market.
Nor is the BRI simply Chinese outbound investment. China’s economic growth model is shifting from being driven by exports and investment to investment and innovation. Hence, it is increasingly important for China to strive for discourse power in industry, industry standards and international affairs. The BRI fully demonstrates China’s state-owned enterprise advantages and institutional advantages, and is promoting China’s transformation from relying on labor, resources, capital and technological advantages to standards, discourse power, development model and innovation advantages. That China beat fierce competition from Japan to win the contract to build Indonesia’s Jakarta-Bandung high-speed railway cannot be separated from the support of domestic state-owned banks. The Chinese model is making its mark in Africa, where the first Chinese-standard cross-border electrified railway was designed, built and operated in the Chinese model. The same is true of Kenya’s Mombasa-Nairobi Standard Gauge Railway and Mombasa Port.
Where does the money come from? There exists a huge funding gap in infrastructure connectivity. According to Connectography, investment in infrastructure in the next 40 years will exceed that in the past 4,000 years, because developed countries need to upgrade their infrastructure, such as building information ports, digital customs clearance, smart power grids and smart cities, while developing countries are faced with infrastructure weaknesses. It is unrealistic to only rely on China’s investment in the construction of the BRI. Instead, the global financing method must be adopted and the financing mode innovated. Public-private partnerships (PPP) are therefore favored. It is probably a knee-jerk reaction for domestic critics to worry that China will be an easy marker to throw money at the BRI projects when seeing a huge investment gap in infrastructure.
Where does the money go? Investment in developed countries is of course less risky, but facing the obstacles of investment restrictions, the long-term return is not as good as that in the countries along the Belt and Road. According to the risk-return tradeoff theory, in view of the development potential and the future market, China should invest in countries along the route. These countries are generally at the early stage of China’s reform and opening-up and attach great importance to China’s experience in industrialization and urbanization. China has a strong capacity in technology marketization, which can help maximize the potential of its investment in these countries. Both the electric car and the automobile are created by Europeans, but Americans get the most out of the inventions. Today, China has also tapped into the fullest potential of the non-home-made inventions including high-speed rail and Internet. In the future, the international high-speed railway standard and 5G standard are Chinese standards to a considerable extent or where Chinese standards occupy an important part. China’s investment in infrastructure, energy and ports which are vital to national economy and people’s livelihood in countries along the route will help these countries enhance their economic ties with China, build a community with a shared future and get rid of dependence on western countries.
The BRI focuses on policy coordination, connectivity of infrastructure, unimpeded trade, financial integration and closer people-to-people ties, that is, the development of standards based on financial and technological advantages, including industrial standards of new infrastructure (such as 5G technology), pricing power on bulk commodity--energy pipelines, and international investment and trade rules--C-WTO and E-WTO (WTO rules from business to e-commerce). On this basis, China will strive to deepen bilateral and multilateral cooperation and connectivity with countries along the route, vigorously promote Chinese standards to go global, and enhance China’s status in the global division of labor. The BRI also reflects that China opposes protectionism, further promotes investment facilitation in the course of all-round opening-up, creates an open and win-win cooperation model, builds inclusive globalization, and enhances China’s international voice. Therefore, the benefits of the BRI should not be considered only in terms of economic benefits.
Faced with frequent changes in a very few foreign governments and their lack of credit, domestic people are worried about the economic benefits and security risks of the BRI, which entirely makes sense. However, in assessing the benefits of the BRI, people should not consider it as it stands, but take a long-term and holistic view to focus on key links and take into account the historical practices of great power in investing in infrastructure. Moreover, the scale effect also needs time to build. Take China Railway Express as an example. There is a problem of empty dispatch in return trip in early stage, which is just caused by insufficient scale.
Indeed, the cooperation projects under the BRI, especially some infrastructure projects, require tremendous investment and long construction cycle and have slow cost recovery. However, in the long run, it is of great and far-reaching significance to improve regional infrastructure connectivity and benefit the people of countries along the route. It is also necessary to distinguish the projects to see whether it is a strategic project, a policy project, or a commercial project. Strategic projects are guaranteed by the government, such as China–Pakistan Economic Corridor, which are not aimed at making money. Most policy projects are for demonstration purpose, such as Jakarta-Bandung high-speed railway, their value cannot be measured simply by whether they are profitable or not. While the remaining commercial projects are run in accordance with the market principles, and are profitable projects. Some projects encountered problems and are held up. In the long run and on the whole, they are also for trial and error, laying the foundation for other projects and later projects.
In a word, following the principle of “enterprises as main players, market operation, international practice, government guidance”, and adhering to extensive consultation, joint contribution and shared benefits, the BRI is not “throwing money around”, but a new “Long March” for China. It is to expand and deepen the cooperation and friendship between China and relevant countries, will greatly enhance the ability and reputation of “Made in China”, “Built by China” and “Planned by China”, is reshaping the history of human civilization and the discourse power in globalization and reflects China’s responsibility as a major country in international community after its rise.