More than 500 delegates and entrepreneurs from countries along the Silk Road Economic Belt attended the China-EU Rail Logistics Forum Multi-communication, in Zhengzhou, capital of Central China’s Henan province, on Feb 20. [Photo by Xiang Mingchao/provided to chinadaily.com.cn]
The Silk Road Economic Belt and 21st Century Maritime Silk Road initiatives of President Xi Jinping are aimed at promoting regional economic cooperation. Being supplementary to the existing world economic order, the initiatives will help boost regional economic cooperation and development through infrastructure construction based on China’s successful experiences over the past decades.
The “Belt and Road Initiative” is the first independent concept put forward by China for international economic cooperation. They are particularly important in the context of the International Monetary Fund’s failed efforts to push forward infrastructure investment.
Given their popularity among some Southeast, South, Central and West Asian countries, the initiatives, if well implemented, will become a vital component of the established international system. The advance of China’s westward economic cooperation is also expected to lower the risk of direct conflicts between China and the United States in the Pacific and help Beijing follow its “peaceful development” strategy.
Unlike the “go west” policy in which the central government invested the funds with the local governments trying to get optimum returns on them, China should not be the only country to fund all the “Belt and Road” projects. Other countries and regions involved should make their part of the contributions and cooperate with each other to make the initiative a success. Indiscriminate investment is unlikely to yield the expected benefits; instead, they could invite criticism from the international community.
China should also avoid going the Japan way. The large-scale overseas investment drive Japan launched in the 1980s — thanks to the yen’s appreciation and rising labor costs — sparked worldwide worries over whether Japan would “buy” the entire world. In the end, the returns on many of Japan’s overseas projects were below expectations.
True, China is the world’s second-largest source of outbound direct investment. But then more than half of its overseas investment projects are not profitable. Given this fact, blindly pushing domestic enterprises to invest overseas under the “Belt and Road Initiatives” is unlikely to produce satisfactory results.
The “Belt and Road Initiatives” are a well-planned global economic tactics, but their success cannot be taken for granted in the situations prevailing at home and abroad. So, China has to play a guiding role in their implementation and refrain from excessive intervention.
Infrastructure projects in partner countries should be carried out under a global cooperation mechanism that guarantees good returns on investments. And domestic enterprises should establish a decision-making mechanism that can hold decision-makers accountable for their wrong decisions.
Therefore, the two prime recipes of the initiatives’ success are a cautious approach and proper implementation.
The author, Huang Yiping, is deputy-dean of the National School of Development, Peking University.