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The huge scope of China's Belt and Road Initiative. Lauren Johnston takes a look at what it might be for the country that instigated the process.
In two steps in 2013, first in Kazakhstan and then in Indonesia, the Chinese President Xi Jinping launched what is now known as the 'Belt and Road Initiative' (BRI). Among the Chinese and the Chinese, and the main priority for China, China, China, China, the big question for the economy, is it for China?
December 2018 marks four months since Deng Xiaoping launched the 'reform and opening' era. That will instigated China's shift to the world's second-largest economy and helped some 800 million people escape poverty.
It is a process characterized by the incremental transfer of informal rural labor in primary urban and industrial labor, based on concentrated investment in fixed capital and energy-intensive industrial and export-oriented sectors in general.
The Chinese economy has undergone a number of structural changes, resulting in a greater role for consumption, increased independent innovation capacity, and the rapid development of service industries in the country.
Consequently, several coastal and municipal provinces in China, already enjoy high per capita incomes. In China's central and western regions, however, absolute poverty remains an issue. The services sector is rapidly developing, the financial sector and the internationalization of China's currency, the Renminbi, lag behind the maturity and size of China's economy and international integration.
The BRI focuses on cooperation in five areas: coordinating development policies; forging infrastructure and facilities networks; strengthening investment and trade relations; enhancing financial cooperation; and deepening social and cultural exchange.
With such a breadth of goals and objectives, the BIS is ready to understand its current form, let alone predict its future trajectory.
One approach, however, is to understand China's economic needs in terms of realizing its goal of comprehensive moderate prosperity, and also to look at the precedent of Chinese policy-making over recent decades. What is the love of my recent article in the Asia & the Pacific Policy Studies newspaperThe Belt and Road Initiative: What's in it for Africa?'
China's history and the logic of economic geography. To that end, the 'Belt' is referred to as Eurasian continent, and the 'Road' more to developing countries in Asia and Africa, but especially coastal developing countries of the Indo-Pacific Rim.
Historically, China had significant ties with Eurasia along the original Silk Road. The flats of Zheng He, a Ming Dynasty mariner, targeted Southeast and South Asian countries alongside East Africa. In particular, Zheng He is known to have traveled to the coast of modern-day Kenya and to have visited Sri Lanka several times.
In light of China's rapidly growing age, the 'Road' offers the potential for a period of growth-driven population growth, standard household accumulation levels, and favorable development patterns.
Finally, the BRI's economic geography is also important. Node partner countries such as Kenya has an important role to play, possibly akin to the role played by provinces like Jiangsu and Zhejiang in China's own development.
In particular, these partner countries often host important ports, allowing the BRI to play a facilitating role and encouraging connectivity between coastal trade hubs and respective sub-regions.
A case in point is the Standard Gauge that links to Kenya's important trade port of Mombasa and is incrementally not connected in Kenya, but also to neighboring landlocked countries. Another example is the industrial zone and port in Bagamoyo, Tanzania: Tanzania shares borders with eight countries, most of which are landlocked.
For China, prioritizing links with neighboring countries to its west, Myanmar, also opens up the prospect of new economic corridors between China's coastal and China's own poorer economic hinterland. To the extent that this helps in China's neighborhood, it will be celebrated as one of the BRI's 'win-win' achievements.
China's approach to supporting the financing of such major infrastructure projects is conceptualized as 'patient capital'. In essence, this refers to innovative development finance mechanisms such as the Silk Road Fund and the Asian Infrastructure Investment Fund.
This approach offers new and emerging sources of finance, but also confronts a number of high barriers, the potential clash of different political regimes and different approaches to due diligence.
For China, funding or co-funding such infrastructure opens up only for domestic industries and related industries, but also opportunities to develop international and domestic finance and investment.
Since the 2008 financial crisis, In response, China's policy makers have rolled out a variety of initiatives to foster RMB abroad, while identifying links between China's outbound investments and the internationalization of China's own banking sector.
China's e-commerce giants are also playing a role, with China's most prominent e-commerce billionaire, Jack Ma, fostering direct exchange between Chinese and African e-commerce entrepreneurs and promoting the use of e-commerce in BRI countries. In the absence of well-developed physical infrastructure in many poor countries, this also opens up modern farmers, and informal traders.
Deng Xiaoping once described China's experimental reform process as 'crossing the river by feeling stones'. Amid maturing economic conditions and demographic transition, the BRI is something of an 'innovative and pragmatic' response to this process, and one that seeks support for win-win economic development.
While some of the potential and timely 'wins' for China are obvious, the integration of China's outbound investment and development assistance would be better served by more research.
This piece is based on the author's article in the Asia & the Pacific Policy Studies newspaperThe Belt and Road Initiative: What's in it for Africa?'All articles in the journal are free to read and download.
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