BEIJING // The Chinese president Xi Jinping on Sunday signalled an expansion of its Belt and Road Initiative (BRI), previously One Belt, One Road, by bringing in a wide range of trade issues and pledging US$124 billion for the plan.
BRI calls for building ports, railways and other facilities in a huge swath of 65 countries, which has unnerved some governments. Speaking before an audience that included the Russian president Vladimir Putin, Mr Xi said his government had “no desire to impose our will on others”.
But he called for “economic integration” and cooperation on financial regulation, anti-terrorism and security – fields in which China’s position as the world’s second-biggest economy would make it a dominant player, especially after the United States under president Donald Trump pulled out of the Trans-Pacific Partnership (TPP).
Still, since Mr Trump’s election, the US, which has previously not got involved in most of China’s economic initiatives, has changed its stand in an attempt to help American companies win business abroad.
“US firms have a long and successful track record in global infrastructure development, and are ready to participate in Belt and Road projects,” Matt Pottinger, a special assistant to Mr Trump, said at the forum. He announced the creation of an American Belt and Road Working Group with representatives of the US embassy in Beijing and American companies.
At a glance
What: China's Belt and Road Initiative could change global business.
Why: The plan calls for the creation of international trade, infrastructure and finance links.
David Kelly, the director of geopolitics at the Beijing-based consulting firm China Policy, tells The National: "BRI's extension to the US may have been sold to Trump as a concession made by Beijing, similar to pledged investment by [the Chinese internet major] Alibaba's [founder and chairman] Jack Ma, with eventual announceables of new manufacturing jobs and construction projects.
“To Trump, this may appear to be a cheap solution to filling the hole that, he now discovers, his TPP decision has left.”
Mr Xi used his inaugural address at the two-day forum on Sunday to reiterate his call for unified global trade. “We should jointly create an environment that will facilitate opening up and development, establish a fair, equitable and transparent system of international trade and investment rules,” Mr Xi said.
Mr Xi also proposed the creation of a new platform for close coordination between multilateral development financing institutions.
China is expected to sign trade agreements with 30 countries during the forum, and gradually expand it to cover 60 countries that are connected to the Belt and Road plan, he said.
Analysts say China is creating a network of countries with which it has trade agreements in order to reduce tariff barriers, as well as push for an alternative to the TPP.
The Beijing event has brought together government leaders and heads of the IMF, the World Bank, the World Economic Forum and the World Trade Organisation, all eager to tap the business potential that will be created with the creation of six economic corridors planned under BRI.
While no major western leaders attended, Britain, France and Germany were represented by top finance officials.
Leaders of international organisations also joined Mr Xi in emphasising green development and the need to implement the Paris Agreement on climate change. This is another area the Trump administration has decided to eschew, potentially further strengthening China’s global position.
China emphasised its commitment to shared global development by pledging additional funds, which include a $14.5bn injection into the $40bn Silk Road Fund. The fund is a state-owned investment vehicle of the Chinese government designed to foster increased investment in countries along its planned economic corridors.
The state-run China Development Bank will extend additional loans worth $36.2bn in BRI projects while the Export-Import Bank of China offered an additional $18.8bn. In addition, Chinese financial institutions will be asked to extend a further $43.5bn in loans to the BRI projects.
Explaining BRI’s success in attracting support from across the globe, Mr Kelly says: “The key issue was declining global demand, which it was BRI’s primary object to rekindle. Success or otherwise in particular projects should be weighed against this.”
Despite the success of the forum on its first day, some criticism of the Belt and Road programme was voiced by representatives of developed countries. China has been accused by critics of crafting procurement rules for cross-border projects in a manner that means the bulk of deals and machine supply orders go to Chinese companies.
“Connectivity needs to be based on networks, not on one-way streets or one centre. It requires a multi-lateral approach, not just a single project,” Germany’s economic affairs and energy minister Brigitte Zypries said at the event. She called for joint planning for infrastructure projects by all stakeholders instead of leaving it to one sponsor or country.
Ms Zypries called for “a transparent procurement process and adherence to international standards” on the lines of Organisation for Economic Co-operation and Development members’ consensus on export financing. There was a need to “involve the private sector on the basis of fair and transparent participation”, she said.
“We welcome recent signals by the Chinese leadership for free trade and open markets,” Ms Zypries added.
The US came in for thinly veiled criticism from leaders of European countries and international organisations, who complained about the trend towards trade protectionism.
“Protectionism is becoming the new normal,” said Mr Putin, adding that the “ideas of openness and free trade are increasingly often being rejected [even] by those who until very recently expounded them”.
The BRI has been growing since Mr Xi unveiled it in 2013, and it now has 68 countries representing 40 per cent of global GDP eager to participate.
The chairman of the Chinese shipping conglomerate Cosco Xu Lirong told Reuters on the sidelines of the forum that the state-owned conglomerate will sign a deal today with Kazakhstan’s national railway company to take a 24 per cent stake in a dry port in the Khorgos Eastern Gates special economic zone.
He declined to comment on the value of the investment but said that China’s Lianyungang port will also invest in the project, which borders China’s far western Xinjiang region.
Pakistan, meanwhile, is implementing one of BRI’s corridors, the $46bn China Pakistan Economic Corridor (CPEC). India was the only major country that stayed out of the forum meeting as part of its protest against CPEC, which passes through the disputed areas of Kashmir.
Chinese companies may be taking risks in expanding to less developed areas along the Belt and Road routes, but they could be risks well worth taking.
About 50 Chinese state-owned enterprises have participated in nearly 1,700 projects in countries along the new Silk Road routes over the past three years, the government says. China’s main strength lies in the construction of railways, which include a 750 kilometre line linking the Ethiopian capital of Addis Ababa with Djibouti, and the 480km Mombasa-Nairobi railway in Kenya. Rail projects with Chinese participation are also planned in Laos and Thailand.
It is not just the international development banks that are financing BRI. China’s three biggest commercial banks had extended loans worth US$225.4bn in countries covered by BRI by the end of 2016. ICBC and Bank of China provided $67bn each, while the China Construction Bank extended $90bn.
This is besides the $200bn provided by the China Development Bank and the Export-Import Bank of China, according to Pan Guangwei, the executive vice president of the China Banking Association. Chinese banks have set up 62 branches and offices in 26 countries along the BRI routes in the past four years, he said.
But Mr Pan points out most of these infrastructure projects do not promise short-term economic returns. He says investors involved must be prepared to mitigate risks and manage foreign exchange and commodity price volatility, probably over a long period.