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Insights into Editorial: Taking advantage of BRI
Chinese President Xi Jinping highlighted innovation, green investment and the need for transparency in Belt and Road projects.
Xi Jinping slammed protectionism and called for more free trade at the opening of the Second Belt and Road Forum for International Cooperation in Beijing.
The Belt and Road Initiative (BRI) is an ambitious effort to improve regional cooperation and connectivity on a trans-continental scale.
The initiative aims to strengthen infrastructure, trade, and investment links between China and some 65 other countries that account collectively for over 30 percent of global GDP, 62 percent of population, and 75 percent of known energy reserves.
Why is important to study the BRI?
The Belt and Road Initiative can transform the economic environment in which economies in the region operate.
Regional cooperation on the new and improved transport infrastructure and policy reforms could substantially reduce trade costs and improve connectivity, leading to higher cross-border trade and investment and improved growth in the region.
For example, shipment times from China to Central Europe are approximately 30 days, as most goods travel by sea. Shipment times by train are about half as long, but given current infrastructure, much costlier.
Hence, improving the capacity and network of rail infrastructure could radically change average travel times.
And while rail transport will remain costlier than maritime for these routes, the time and cost reduction will have significant consequences for certain goods impacting the mode choice and total flows of international trade.
There are at least five reasons why India should have sent an observer to the Belt and Road Initiative (BRI) Forum:
First, the defining feature of the 21st century is that Asia, not China, is at the centre of the world.
- Of the estimated $30 trillion increase in middle-class consumption growth estimated by 2030, only $1 trillion is expected to come from Western economies and most of the rest from Asia.
- China’s population is nearly one-third of the total population of Asia but by 2050 its population of working age will shrink by 200 million people while in India the working-age population will increase by 200 million.
Second, the global spread of the BRI signals the political end of the old order where the G7 shaped the economic agenda:
- Italy, a member of the G7, is joining the BRI, despite the publicly voiced objection of the U.S., just as Britain joined the Asia Infrastructure Investment Bank in 2015.
- Asians are gravitating to the new as it better meets their needs, not because the old is crumbling.
Third, the Asian Development Bank, not China:
- Asian Development Bank drew global attention to infrastructure as the key driver of economic growth in Asia and the financing gap of $26 trillion.
- The most visible feature of the BRI is the network of physical and digital infrastructure for transport, energy transmission and communications, harmonised with markets for advanced manufacturing and innovation-based companies.
- Two-thirds of the countries funded by the initiative have sovereign debt ratings below investment grade, and their being part of supply chains is a catalyst for growth.
Fourth, the BRI, faced with criticism over lack of transparency and insensitivity to national concerns,
- For this, China has been in mode of evolving towards standards of multilateralism, including through linkages with the United Nations Sustainable Development Goals.
- The International Monetary Fund describes it as a “very important contribution” to the global economy and is “in very close collaboration with the Chinese authorities on sharing the best international practices, especially regarding fiscal sustainability and capacity building”.
- China is now also seeking co-financing with multilateral institutions as well as private capital for a Silk Road Bond.
Fifth, for the BRI to have strategic objectives is not unusual.
The Marshall Plan in the 1950s also required recipients to accept certain rules for deepening trade and investment ties with the U.S.
Chinese control over supply-chain assets like ports provides the ability to project naval power, which will however remain minuscule compared to that of the U.S. comprising 800 overseas bases.
China’s Promising Reforms in Second Belt and Road Forum for International Cooperation:
Xi also made five pledges on China’s behalf, promising reforms to:
- Expand market access for foreign investment,
- Strengthen international cooperation on intellectual property protection,
- Increase imports of goods and services,
- Boost international macro-economic policy coordination, and
- Generally, ensure that bilateral and multilateral deals are implemented in good faith and the rule of law is obeyed.
With the Belt and Road Initiative aiming to bridge distances between countries and create a more interconnected world.
Cooperation should not only happen in the science sector but in all areas, including education, culture, sports and archaeology, as well as between parliamentarians, NGOs and other civil society groups.
Way Forward for India:
Amongst the first countries to oppose the project, India had signalled its strong displeasure ahead of the first BRF over the inclusion of the China-Pakistan Economic Corridor (CPEC) as a BRI project.
The CPEC passes through Pakistan-Occupied Kashmir, and is the main reason for India not participating in the BRI.
No country can accept a project that ignores its core concerns on sovereignty and territorial integrity.
Connectivity projects must be pursued in a manner that respects sovereignty and territorial integrity. India’s position has not changed since then.
While China has painted CPEC as a commercial project, it has also deployed security personnel over the years to protect the corridor. This makes it an active participant in domestic politics in the subcontinent.
The best way forward is India and China should move ahead by respecting each other’s sovereignty issues by leveraging their strengths. To make things move, India should take the lead.
The BRI is part of a transformation triggered by colonialism and industrial capitalism from the 1840s and influenced by the UN institutions and global rules from the 1950s.
There are cases of excess debt, political corruption and policy shifts following change in governments but overall the BRI remains popular. For example, Nepal has just chosen the Chinese gauge over the Indian one for its rail network.
Asians are not subscribing to a “China-led Asia”, which would imply returning to the colonial order.
The BRI’s commercial advantage has certainly increased China’s international weight and India needs to shape the new standards to benefit Indian technology companies.