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.