I. Why was the Belt and Road Initiative put forward?

From an overall point of view, the Belt and Road Initiative was put forward after taking into consideration both international and domestic situations with an aim to solving a series of important issues facing China and the world in their development for a fairly long period of time to come, and is therefore an initiative of strategic significance. If well-implemented, the Belt and Road Initiative will have a direct positive impact on the resolution of many global issues and contribute to economic and social development of China and participating countries.

From an international point of view, the launch of the Belt and Road Initiative was directly linked with the following factors.

1. In terms of the world economy. The 2008 financial and economic crisis affected the whole world and countries were negatively impacted to varying degrees, with the EU countries being the ones that were most severely hit and undergoing a longer duration of impact (graph 1). In 2010, thanks to the concerted efforts of different countries and the international community as a whole, the world economy realized quite strong recovery, but it quickly turned downward and began to shrink again (graph 1).

In order to provide strong momentum for world economicrecovery, President Xi Jinping put forward the Belt and Road Initiative in the fall of 2013 on behalf of China, calling on all countries to join the Belt and Road Initiative in an effort to generate stronger momentum for world economic recovery and push the world economy toward an upward trajectory.

First, the joint development of the Belt and Road Initiative directly involves a large amount of infrastructure projects, such as roads, railways, airports, ports, oil and gas pipelines, power stations (hydropower and nuclear power stations), all of which will spur rapid growth of investments in fixed assets in a short period of time. At the same time, they will fairly quickly create new job opportunities and increase people’s income, which, to some extent, will raise consumption.

Second, the joint development of the Belt and Road Initiative is conducive to promoting the rebalance of world economic recovery. In a quite long period of time in the past, the world economy was mainly driven by developed countries. The situation later changed, and especially after the 2008 financial crisis, emerging market economies and developing countries saw their share in world economic growth rise rapidly, and they became another important engine for the world economy. The Belt and Road Initiative will further strengthen the contribution of emerging market economies and developing countries to the world economy and help balance growth in the world.

Third, the joint development of the Belt and Road Initiative and better connectivity in the world in terms of infrastructure, trade and investment as well as finance will be helpful for the formation of a new mechanism for global growth, as better global connectivity means that with their differenteconomic factors including natural resources, capital and labor force operating under the market mechanism, the comparative advantages of different countries can be better leveraged, and the world will witness more mutually reinforcing growth.

2. In term of globalization. Undoubtedly, globalization has brought positive effects to all countries. However, the studies of some scholars also show that globalization has enlarged, instead of narrowing, the imbalance. Compounded with the industrial hollowing-out phenomenon in some countries and regions caused by the global distribution of factors of production, especially the hollowing-out phenomenon in the manufacturing sector, unemployment has been rising instead of falling in some countries and regions. Hence we have witnessed certain phenomena of de-globalization and even anti-globalization.

However, the problem is that globalization cannot be stopped at whim. Globalization is an objective historical trend, and President Xi Jinping has pointed out that any attempt to cut off the flow of capital, technologies, products, industries and people between economies, and channel the waters in the ocean back into isolated lakes and creeks is simply not possible and runs counter to the historical trend. The correct method is to transform and upgrade the current globalization to work for an economic globalization that is more open, tolerant, inclusive, balanced and mutually beneficial.

How to enable globalization to transform and upgrade toward a better direction? The joint development of the Belt and Road Initiative can be an effective way, because the long-term goals, basic principles, main methods and results of the Belt and Road Initiative are highly aligned with the objectives and necessary work of the transformation and upgrading of globalization.

3. In terms of global governance. Currently, global issues have been increasing, not decreasing, and issues in some areas have exacerbated. Of course, this is closely linked with the unsuitable globalization model and also directly due to the insufficiency and inadequacy in the current global governance system. This is what President Xi Jinping means by the worldwide issue of “governance deficit”. Therefore, we need to improve the efficiency of the existing global governance system through reforms on the one hand, and provide more and better public goods for the world through the additional provision of global governance on the other.

The joint development of the Belt and Road Initiative hopes to help reform the current global governance system to build a new one that can be balanced and inclusive, and also tries to enlarge and strengthen the accumulation of global governance, for example the Asian Infrastructure Investment Bank (AIIB) provides new financing resources for infrastructure development in the world.

4. In terms of international cooperation. For a long time, the models for international cooperation have been heavily influenced by traditional geopolitics. An important purpose of the joint development of the Belt and Road Initiative is to spread the Silk Road spirit characterized by peace and cooperation, openness and inclusiveness, mutual learning, mutual benefit and win-win results as well as the BRICS spirit of openness, inclusiveness, cooperation and win-win results, and build a new cooperation system that is completely open not only on the regional level, but also on the global level, with which countries big or small, rich or poor, will have equal participation, development and benefit under equal rules. The development of the Belt and Road Initiative does not exclude any country, nor does any country have any prerogatives. Therefore, the Belt and Road Initiative has in fact created a new and innovative platform for international cooperation on regional and global connectivity, which will accelerate regional integration and globalization.

5. In terms of a community of shared future for mankind. President Xi Jinping talked about the idea of a community of shared future for mankind on many occasions, and the essence is that the future and destiny of mankind need the joint efforts of all countries and peoples. Therefore, countries around the world should unite and jointly create a bright future for mankind and people in all countries. How do we build the shared future for mankind? The basic principle is we must adhere to peaceful coexistence and common development, the basic content is all countries must jointly build a world of lasting peace, common security, shared prosperity, openness and inclusiveness as well as cleanness and pleasantness, and the main methods include dialogue and consultation, joint development and sharing, cooperation and mutual benefit, exchanges and mutual learning as well as green and low-carbon development. How do we implement that? The Belt and Road Initiative is a platform for such implementation. All countries, by jointly consulting, building and sharing the Belt and Road Initiative, can make our planet and world a better place.

From a domestic point of view, the development of the Belt and Road Initiative is also of great strategic significance.

1. Opening-up. China’s proposal of the Belt and Road Initiative is a new measure for advancing opening-up under the new historical conditions. As proven by our implementation, since the adoption of reform and opening-up 40 years ago, opening-up has played a very important role in China’s economic and social development and is an extremely important driving force (graph 2).

Opening-up has not only greatly increasedthe size of the economy, but also structurally facilitated China’s development. One example is that as companies engaged in custom manufacturing with materials, designs or samples supplied by foreign partners or subsidized trade fluxed into Dongguan, Guangdong Province, not only has the urban economy developed, but the rural areas have all become important manufacturing bases for the world, which led to the rapid transformation of rural population to urban population and rural areas to urban areas, basically realizing industrialization and urbanization.

As China’s development enters the new era, how do we create a new landscape for comprehensive opening-up? Currently speaking, it can be advanced and deepened by working together with other countries to build the Belt and Road Initiative.

2. Better implementation of other development strategies. Thanks to the development of the Belt and Road Initiative, infrastructure between China’s remote areas in the west and neighboring countries has been improved and the economic ties have been strengthened, which is conducive to further poverty alleviation. Under the Belt and Road Initiative framework, we can use bilateral or multilateral financial cooperation to promote the process of RMB’s internationalization. This will help China’s opening-up and development advance, and also gradually improve the international monetary system, especially contributing to the financial markets of countries along the Belt and Road Initiative, which have been volatile for a long time. Additionally, international cooperation on the Belt and Road Initiative will be of direct benefit to the more effective implementation of China’s strategy of peaceful development and the further flourishing of the Chinese culture amidst the exchanges and mutual learning between the cultures of China and other countries.

II. What does the Belt and Road Initiative do?

President Xi Jinping has put forward five areas of connectivity to develop the Belt and Road Initiatives, namely, connectivity in terms of policy, infrastructure, trade, finance and people-to-people exchanges. These five areas of connectivity are the fundamental aspects of the development of the Belt and Road Initiative. The basic content and thinking is to build stronger and better global connectivity and make the world a more connected place. So far, the following six areas have been the main embodiments.

1. Policy coordination and communication. This is the beginning of the Belt and Road Initiative and also its basic safeguard. Responsible government departments of all relevant countries will, under the basic consensus and framework of the joint development of the Belt and Road Initiative, conduct in-depth studies and evaluation of their respective development strategies and work to find points of convergence and draft cooperation plans. Policies will be formulated based on how development strategies link up and policy coordination between different countries should be achieved.

2. Development of economic corridors. This is the main part and essence of the development of the Belt and Road Initiative. So far, there are the following six economic corridors being planned and built by relevant countries under the Belt and Road Initiative framework.

 (1) New Eurasian Land Bridge Economic Corridor. This economic corridor is formed along the Trans-Eurasian International Railway from Lianyungang, Jiangsu Province of China, to Rotterdam, the Netherlands, and its surrounding regions. The early function of this economic corridor used to be mainly about delivery of commodities between China and European countries. Changes have been taking place after the Belt and Road Initiative was put forward: first, there has been rapid and significance increase in the number of China-Europe Block Trains, and more cities have been connected to such trains. Latest figures show that in 2017 alone, there have been 3,600 China-Europe Block Trains, which was more than the total number of trains from 2011 to the end of 2016. At the same time, cities served by such trains have increased from less than 10 in 2010 to 35, and there are 34 destinations in 12 European countries.

Second, based on the major cities along this railway artery, some unique industrial parks have already been or are being developed, including logistics parks, trade cooperation zones, etc. The China-Kazakhstan (Lianyungang) Logistics Cooperation Base is the first such zone for the Belt and Road Initiative, and the China-Kazakhstan Khorgos International Border Cooperation Center is also under development and will be completed by 2019.

 (2) China-Mongolia-Russia Economic Corridor.This economic corridor stretches from China’s Beijing-Tianjin-Hebei region and Northeast region toward the north, passing through Mongolia and reaching Russia’s Mideast regions. The main purpose of this economic corridor is to connect China’s Silk Road Economic Belt with Russia’s construction plan of Transcontinental Rail Plan and Mongolia’s Prairie Road program.

In terms of specific projects, there are three: first, the Moscow-Kazan high speed railway project, which has basically completed its study and designing stage; second, the railway project between China’s Arshan City in Inner Mongolia to Mongolia’s Choibalsan City in Dornod Province, which will take about three years; third, the Ceke Cross-border Railway project, which connects China and Mongolia and promotes their trade development. This project is currently being built.

 (3) China-Central Asia-West Asia Economic Corridor.This economic corridor runs from Xinjiang, China to Central Asia and then the Persian Gulf, Mediterranean and Arabian Peninsula. Key cooperation areas for countries along this economic corridor are energy and infrastructure. The A/B/C lines of the gas pipeline from Turkmenistan to China have been completed and started operation while the D line is still under construction. The Angren Power Plant built by China in Uzbekistan has been completed and started power generation, first phase of the No.2 Power Plant in Dushanbe, Tajikistan built by China has been integrated into power grid and started power and heat supply, The Vahdat-Yovon railway project built by China in Tajikistan has been successfully completed, the high speed rail in Turkey from Ankara to Istanbul built by Chinahas been finished, and the Angren-Pap railway channel built by China in Uzbekistan has also been successfully put into operation.

 (4) China-Pakistan Economic Corridor. This economic corridor runs from Kashgar in China’s Xinjiang to Gwadar in Pakistan and includes the surrounding areas. The development of this economic corridor involves transport infrastructure, energy infrastructure, ports, industrial zones and maritime resources.

In terms of transport infrastructure, first, the second expansion project of the Karakoram Road will extend further from the current road into Pakistan’s central areas; second, the highway project linking Pakistan’s Sukkur and Multan; third, the upgrading of Pakistan’s No. 1 Railway Line to further connect with China.

In terms of energy infrastructure, first, the Sahiwal Power Plant project in Punjab, Pakistan, has been put into operation on June 8, 2017, and is expected to meet 25% of Pakistan’s power needs; second, the Port Qasim Coal Power Plant is expected to be completed in June, 2018 and can solve the electricity problem for more than 10 million people (China Thermal Power Net, 2017); third, the Karot Hydropower Plant project is expected to finish in 2021 with an annual capacity of 3.2 billion kilowatt-hour.

Additionally, the Gwadar Port project is also a very important one, which includes costal highway, dykes, international airport and infrastructure for free trade zones.

 (5) Bangladesh-China-India-Myanmar Economic Corridor. This economic corridor runs from China’s southwest through Myanmar and Bangladesh toward India, and is also called the Southwestern Asian Land Bridge Economic Corridor. An important project of it, the China-Myanmar Oil and Gas Pipeline project, has been completed. The gas pipeline has been put into operation in October 2013 and the oil pipeline in April, 2017.

 
(6) China-Indochina Peninsula Economic Corridor. This economic corridor runs from China’s southwest in Yunnan and Guangxi through Vietnam, Laos, Cambodia, Myanmar, Thailand and Malaysia toward Singapore. Important projects include Jakarta-Bandung High Speed Railway project in Indonesia, China-Thailand railway project, China-Laos railway project and the Joint China-Laos Mohan-Boten Economic Cooperation Zone project.

3. Multi-country and multi-port construction. Strengthening key port construction is an important part of the 21st Century Maritime Silk Road. Key ports in China include Shanghai, Tianjin, Ningbo-Zhoushan, Guangzhou, Shenzhen, Zhanjiang, Shantou, Qingdao, Yantai, Dalian, Fuzhou, Xiamen, Quanzhou, Haikou and Sanya, while unique roles of Hong Kong and Macao Special Administrative Regions will be fully utilized. Key ports under joint development with relevant countries include Gwadar Port in Pakistan, Hambantota Port and Container Dock of Colombo in Sri Lanka, Piraeus Port in Greece, Kyaukpyu Port in Myanmar, New Haifa Port in Israel, Port Said, Port Ain Sokhna and Port Damietta in Egypt, Port of Singapore, Port Antwerp and Zeebrugge Dock in Belgium, Naples in Italy and Kuantan Port in Malaysia.

4. Chinese enterprises “going global”. The development of the Belt and Road Initiative will mainly rely on joint project development. For projects, the main driving force comes from enterprises. Because the Belt and Road Initiative is at its early stage and mainly involves large-scale projects on infrastructure, significant capital, long time and advanced technology are required, which means that China’s state-owned companies are more suitable; however, as the Belt and Road Initiative develops in depth, more business opportunities will emerge that are more suited to different types of enterprises, particularly private companies. Studies show that after the launch of the Belt and Road Initiative, Chinese companies have accelerated their speed of “going global”, especially in terms of development industrial parks. A case in point is the Thailand-China Rayong Industrial Park.

5. Financial innovation. Countries along the Belt and Road Initiative have relevantly less developed economy due to one important reason, which is the severe shortage of capital for development purposes and outside capital is required as an important complement. Currently, it’s hard for the global financial governance system such as the World Bank and Asia Development Bank to provide sufficient fund for these countries, and we must resort to financial innovation to provide new funding. Considering the investment required by the infrastructure development under the Belt and Road Initiative, there is an even greater amount of capital needed, and we must find new ways.

Therefore, President Xi Jinping put forwardthe proposal in October 2013 on setting up the Asian Infrastructure Investment Bank to support infrastructure development and connectivity of developing countries, especially those in Asia. In January 2016, the AIIB was officially opened, and issued 1.73 billion USD in loans that year in support of infrastructure projects in Pakistan, Bangladesh, Tajikistan and Indonesia. The Silk Road Fund was officially stared in December 2014 and by the end of the first quarter of 2017, it has signed 15 projects and pledged 6 billion USD for infrastructure, energy development, industrial cooperation and financial cooperation in Central Asia, South Asia, Southeast Asia and West Asia and North Africa. What’s more, the New Development Bank of BRICS, which started operation in July 2015, also provided loans to countries along the Belt and Road Initiative.

China’s financial institutions have also been conducting financial innovation to provide more loans to the Belt and Road Initiative. China Development Bank has issued more than 160 billion USD in loans to countries along the Belt and Road Initiative by the end of 2016 with a key focus on supporting infrastructure, connectivity, industrial cooperation, energy and resources and people’s wellbeing. The Export-Import Bank of China and Industrial and Commercial Bank of China has also given huge financial support to the Belt and Road Initiative.

6. Comprehensive cooperation. The Belt and Road Initiative, to a large extent, aims at building a new platform for international cooperation so that all countries can use this new platform to carry out cooperation on education, science and technology, medical care, tourism and culture and ultimately make the world we live in a better place.

III. How do we develop the Belt and Road Initiative?

If there is no good way to implement, a good initiative cannot have good results. Therefore, the “how” part of the issue is also very important. Based on the current experience and lessons, it’s crucial to stick to the following four points.

1. Joint consultation, development and sharing. The joint development of the Belt and Road Initiative is a basic concept for an open and inclusive system. Under this concept, all countries are entitled to equal rights of participation, and the key is to take into consideration the common interests of all parties. How do we make sure that interests of all parties can be guaranteed at the very beginning? The practice now is to have close integration of development strategies by different participants and they should jointly formulate specific plans for the joint development of the Belt and Road Initiative and incorporate the interests of all sides. Later, based on the needs and actual situations of participants in joint development, we can identify their respective responsibilities and obligations. Finally, interests and benefits will be gained in light of the different responsibilities and obligations. At the end of the day, the most important thing about seeking a right balance between different interests is to have consultation and joint participation for win-win outcomes.

2. Government-guided, market-led and enterprises-implemented. The joint development of the Belt and Road Initiative has some unique features, one of which is that it’s very important to have top-level design, including coordination and communication on strategies and policies. Therefore, governments of relevant countries play a special and important role. But the foundation of cooperation is still the basic market principles and the market is still the ultimate driving force and guarantee for the success of international cooperation on the Belt and Road Initiative. Talking about such cooperation with no heed to the force of the market is doomed to fail, and on the contrary, if enterprises conduct their businesses activities according to market principles, even if their businesses encounter temporary effects due to non-market forces such as political reasons, they will always ultimately come back to the proper market operation. For example, the port projects in Sri Lanka undertaken by China Communications Construction Company was started in the previous Sri Lankan administration, and was affected and experienced one-year stop after the change of government. However, once after being carefully verified by the new Sri Lankan government, it came to the conclusion that this project was in complete agreement with market principles and is business in nature, and normal operation was restored.

Be it government-guided or market-led, it will always go to the enterprises, because enterprises are the operators of the market and implementers of projects. Without enterprises, it will be meaningless to talk about government-guided or market-led. Therefore, there must have proper relationship between the government, market and enterprises in the development of the Belt and Road Initiative.

3. Project implementation and practical cooperation. International cooperation on the Belt and Road Initiative concerns many aspects, but ultimately it’s about the implementation of specific projects, which has to be done through enterprises and companies. By the end of May 2017, of the 98 state-owned companies in China, 47 of them have participated in the Belt and Road Initiative in different ways in 1,676 projects (Information Office of the State Council ,2017), mainly focusing on infrastructure, energy development, industrial cooperation and industrial park cooperation. 

For example, China Communications Construction Company has built more than 10,000 kilometers of road in countries along the Belt and Road Initiative. When I was doing research in Kyrgyzstan, local government officials told me that 80% of road in Kyrgyzstan were built by that companies. In addition, this company also built many other railways, such as the Mombasa-Nairobi Railway in Kenya and major projects like the Gwadar Port in Pakistan.

4. Mutually reinforcing software and hardware and their close integration.Hardware mainly means capital and technology, while software is shown as culture, concept and thinking. Because countries along the Belt and Road Initiative have huge differences in languages, cultures, religions, customs and traditions, a lot of problems will happen and cooperation may even fail if we cannot learn and understand from each other.

IV. What are the prospects for the development of the Belt and Road Initiative?

After spending a few recent years studying the development projects of the Belt and Road Initiative, I have come to the following four preliminary conclusions: first, the Belt and Road Initiative proactively responds to the current requirements of the international community and is in line with the development trend and expectations of history; second, this initiative has received positive response from some countries; third, the joint development of the Belt and Road Initiative has already brought some new business opportunities for participating countries and yielded early results; fourth, the promotion of the Belt and Road Initiative also helps China to build a brand-new structure for opening-up in the new age. Therefore, I’m optimistic about the development of the Belt and Road Initiative on the whole.

First, this is a positive initiative. There are three reasons why the Belt and Road Initiative can very likely advance history in the correct direction: firstly, promoting the transformation and upgrading of the current globalization and achieve a new type of better globalization that fits the requirements of development in the new age; secondly, providing more and better global public goods, such as the AIIB and New Development Bank of BRICS; thirdly, providing a new platform and model for international cooperation where all countries can participate in open, inclusive, practical and win-win cooperation through joint consultation, development and sharing.

Second, many countries have started actively participating in the practical implementation of the Belt and Road Initiative and some countries have already started to carry out relevant projects. There is also already a good environment internationally for advancing the Belt and Road Initiative.

Third, so far the development of the Belt and Road Initiative has brought tangible benefit to some countries. For example, the Mombasa-Nairobi Railway in Kenya has created 38,000 jobs directly and much more indirectly. According to the estimation of the Kenyan government, after the completion of this railway, cargo transportation costs in East Africa will drop by 79% and Kenya’s economy will grow by 1.5 percentage points more annually. Another example is the China-Pakistan Economic Corridor, which will enable tens of millions of Pakistanis to benefit from it. In a nutshell, Chinese enterprises’ participation in relevant projects will create new jobs for the local communities, improve infrastructure and promote local economic growth.

My feeling from the recent years of field studies about the Belt and Road Initiative is that it has really created new opportunities for relevantcountries. Such new development opportunities are mainly about two aspects: first, new opportunities created by better infrastructure and connectivity; second, new opportunities created by industrial cooperation. I have discovered that opportunities tend to be greater in sectors such as mining, agriculture and agricultural products processing, manufacturing (especially iron and steel, cement, textile and machinery), energy (oil, gas and hydropower), infrastructure, real estate and the service industry (particularly tourism and traditional Chinese medicines). 

To summarize, the Belt and Road Initiative has a positive trajectory and optimistic future. With close cooperation from participating countries, we will achieve good results and make the world we share a better place.

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Hu Biliang is Professor of Economics of Beijing Normal University and the Director of the Belt and Road Research Institute as well as the Dean of Emerging Markets Institute of the University.