By Liu Ying Source: Beijing Review Published: 2017-5-19
The Silk Road Economic Belt and 21st-Century Maritime Silk Road Initiative (Belt and Road Initiative) has received enthusiastic support from more than 100 countries and international organizations since being put forward, and over 40 have signed more than 50 cooperation agreements or memorandums with China aimed at pushing forward its development. In addition, it has been aligned with the development strategies of dozens of countries and regions, such as the European Union`s Juncker Plan, Russia`s Eurasian Economic Union, Kazakhstan`s Bright Road, Mongolia`s Steppe Road and Viet Nam`s "Two Corridors and One Economic Circle" initiative.
Starting with infrastructure connectivity, the Belt and Road Initiative has advanced both economic globalization and China`s opening up.
A booster for globalization
Belt and Road Initiative—proposed by Chinese President Xi Jinping in September and October 2013 at a time when world economic recovery remained weak and isolationism, populism, terrorism and trade protectionism were on the upswing—aims to boost world economic growth and promote China`s all-round opening up under its "new normal" economic conditions. Focusing on improving global interconnectivity, the initiative refuels the engine of globalization.
With the three principles of "extensive consultation, joint contribution and shared benefits," the Belt and Road Initiative focuses on promoting policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bond, with the aim of reinvigorating the world economy, promoting China`s opening up in an all-round way, fully utilizing domestic and foreign markets and resources, connecting energetic Southeast Asia with developed Europe, and promoting economic growth in Asia and Europe and the world at large.
U.S. President Donald Trump`s new policies are arousing worldwide attention. We have seen tax cuts, increasing investment in infrastructure and relaxation of energy control to boost economic growth, but we have also seen de-globalization measures such as withdrawal from the Trans-Pacific Partnership and the Paris Agreement. Tensions in Syria and the Korean Peninsula have also intensified uncertainty about world stability.
The U.S. Federal Reserve is expected to raise interest rates three times this year and next year, arousing turmoil in global financial markets and bulk commodity prices. The backflow of capital to the United States has accelerated cross-border capital flows, increasing instability in global financial markets and adding uncertainties to the recovering global economy.
At the crucial turning point of global economy, people have to adapt themselves to "black swan" events that follow one another: Before the shock brought by the United Kingdom`s EU-exit decision has completely passed, general elections in some European countries are bringing new uncertainties to the world. Global trade growth has fallen behind GDP growth for five years in succession, and political turmoil in various places will further dampen world economic recovery.
Against this backdrop, the Belt and Road Initiative is helping push forward globalization by increasing connectivity, promoting trade and investment, and facilitating capital flows, especially toward underdeveloped countries and regions.
In terms of infrastructure connectivity, by April 17, China had opened 51 China-Europe rail lines, forming connections between 27 of its cities and 28 cities in 11 countries in Europe and slashing freight transportation times between various destinations.
The initiative has boosted trade and investment among countries and regions along the Belt and Road routes. China has signed over 100 bilateral investment treaties with such countries, and is striving to realize integrated customs clearance with these nations. New trade models, for example, cross-border e-commerce, are developing rapidly, pushing forward globalization.
In the meantime, over 20 international capacity cooperation mechanisms have been established between China and Belt and Road countries. Nearly 80 overseas economic trade and cooperation zones, cross-border economic cooperation zones and industrial parks have been built to share China`s experience in industrialization with less developed countries and regions, facilitating flows of personnel, capital and commodities.
During the Beijing APEC meeting in November 2014, President Xi announced China will contribute $40 billion to set up the Silk Road Fund, which will provide investment and financing support for infrastructure, resource, industrial, financial and other connectivity-related projects in countries and regions involved in the initiative.
The China-proposed Asian Infrastructure Investment Bank, committed to financing infrastructure construction in Asia and projects under the Belt and Road Initiative, was established in December 2015. To date, the bank has 70 members, and countries and regions are queuing up to join.
To date, there have been over 30 funds that support Belt and Road projects. Invested in European, Asian and African countries and regions, financing from the funds will serve to better integrate those economies into global industrial and value chains and increase local industrialization levels. In the meantime, relevant countries and regions are intensifying efforts in financial supervision cooperation to maintain financial security and stability.
Opening up 3.0
Chinese President Xi proposed the Belt and Road Initiative based on the ancient Silk Road. On the basis of China`s opening-up practices, the initiative is aimed at improving infrastructure connectivity in Europe, Asia, Africa and even the entire world, and in the meantime, intensifying the opening up of China`s inland areas, especially the central and western regions. The Belt and Road Initiative can be regarded as version 3.0 of China`s opening up.
The first stage of China`s opening up started in 1978, when the nation first adopted the policy. This is regarded as version 1.0, when the government shifted the orientation of its development strategy from independent development to opening up to the outside world. During this period, China`s economy was connected with international markets step by step, and exports began to stimulate the nation`s economic growth, together with investment and consumption. After China`s late leader Deng Xiaoping`s historic south China inspection tour in 1992, China adhered more steadfastly to the strategy of reform and opening up, and the process of joining the WTO was accelerated.
After its accession to the WTO in 2001, China entered version 2.0 of its opening up. Since then, China`s economy and industries have integrated into world markets and global industrial and value chains, making it an integral part of the global economy. China has maintained double-digit growth for 30 consecutive years, making significant contributions to world economic growth and becoming an important powerhouse for global growth.
During the global financial crisis and European sovereign debt crisis in 2008 and 2009, China contributed more than 50 percent of world economic growth. Even after the transition to its economic "new normal", China still contributes more than 30 percent of world economic growth. In 2016, China contributed 1.2 percentage points of world GDP growth, while the United States and Europe only contributed 0.3 and 0.2 percentage points respectively.
The Belt and Road Initiative is part of China`s version 3.0 opening-up policy. Raised amid sluggish global growth following the financial crisis, it`s a proposal and development strategy conforming to the trend of world development while taking into consideration China`s development conditions. Therefore, it will stimulate China`s economic growth in an all-round way.
In this stage, there are three features of China`s economy: First, it has entered a new normal economic period, with GDP growth at a medium-high speed; second, industrial development is promoted toward the medium-high end, with the service sector taking over manufacturing as the leading growth engine; third, China has become a top outbound investor, with outbound investment exceeding paid-in foreign investment. China has grown from a participant to a contributor and leader of the global economy.
The Belt and Road Initiative`s role in promoting China`s all-round opening up lies in three things. First, it promotes opening up of all the regions, especially China`s resource-rich inland central and western regions. Second, it integrates opening up both internally and externally. Third, it realizes high-level opening up. China is building a high-standard free trade network, focused on its neighbors yet covering the whole world, which is part of the nation`s strategy of opening up at a high level. In addition, China has completed the upgrading of its free trade areas with Australia, South Korea and Association of Southeast Asian Nations.
On the domestic front, China has established seven new pilot free trade zones this year, bringing the total number of such zones to 11. Promoting free trade inside and outside the country is particularly commendable against the backdrop of rising trade protectionism.
Liu Ying is a research fellow of Chongyang Institute for Financial Studies, Renmin University of China.