Why China is pushing 'One Belt, One Road' initiative?

Chinese President Xi Jinping at the Boao Forum for Asia on March 28, 2015. Photo: Reuters

China's initiative of jointly building the Silk Road Economic Belt and the 21st Century Maritime Silk Road, commonly referred to as "One Belt, One Road", has gained the broad endorsement of the international community. But some Western media and scholars have slammed the initiative as China's push for regional dominance. In fact, the real goal of the initiative, which is the result of the development of the Chinese economy, is to promote economic prosperity and cooperation in the region on the basis of mutual respect.

China is the world's second-largest economy and is very likely to surpass the US to become the largest in the next 10 years. One the other hand, the Chinese economy is facing the downward pressure. In 2014, China's economic growth edged down to a 24-year low of 7.4 percent from 7.7 percent in 2013. Worse still, China's GDP growth is expected to further slow to around 7 percent next year. Therefore, as a vital engine of the global economy, China envisions that the "One Belt, One Road" strategy could help maintain the sustainable development of its economy.

History has proven that when a country becomes a great economic power it must take on the responsibility of supplying global public goods. For instance, after World War II, the US put forward the Marshall Plan to give economic support to rebuild the war-devastated European economies. The American initiative helped revive Europe's economy and its integration.

Currently, China has become a big economy and, of course, wants to shoulder the duty of offering public goods to other countries in need. Actually, as a regional cooperation framework, the "One Belt, One Road" strategy is designed to provide global public goods to the countries involved. But it is different from the Marshall Plan which had set a number of unacceptable political conditions for the former Soviet Union and its East European allies for economic aid. The Vision and Actions on Jointly Building the Silk Road Economic Belt and the 21st Century Maritime Silk Road, an explanatory document released by China's National Development and Reform Commission (NDRC), the Foreign Ministry and the Commerce Ministry in March, makes it clear that the "One Belt, One Road" initiative is "a systematic project which should be jointly built through consultation to meet the interests of all countries along the Belt and the Road".

Zhao Jinping, head of the Foreign Economic Relations Department of the Development Research Center under the State Council, said in Beijing in May that the "One Belt, One Road" strategy is the continuation of the friendly trade spirit of the ancient Silk Road. "History shows that the ancient Silk Road brought common prosperity to the countries along the road through fair trade," Zhao said.

At present, China is entering a period when GDP growth is slowing, industrial restructuring is accelerating, economic development pattern is transforming and problems triggered by the stimulus plan made during the global financial crisis are emerging. To deal with these problems, China needs to explore new growth points to promote its economic development. And the "One Belt, One Road" strategy can be one of the driving forces.

"The One Belt, One Road strategy brings China a good opportunity to transform its economic development mode from the labor-intensive one to one based on innovation. Through this opportunity, China can not only optimize its industrial structure, but also promote industrialization in the countries along the Belt and the Road," Zhao said. Most countries along the Belt and the Road, which are developing countries, need the process of industrialization to grow their economies and create job opportunities, Zhao noted.

The last 30 years have been the heyday for economic globalization led by the developed countries, when China took advantage of the favorable external economic environment to conduct its reform and opening up. In the future, China also needs a good external economic environment. The investment liberalization advocated by the World Trade Organization (WTO) is increasingly replaced by the regional economic integration as the major impetus of the economic globalization. Take the US-led Trans-Pacific Partnership (TPP) as an example. The Pan-Pacific free trade agreement is a vast regional economic integration framework that prioritizes high-level liberalization of investment and trade and high-level openness of market access.

Western media and scholars have criticized the "One Belt, One Road" strategy as China's tool to counter the TPP and the US pivot to Asia strategy, with some even saying that China wants to be the architect of the Asian economic rules. In response to these criticisms, Zhao said, "Given the large gap between China and the developed market economies in trade openness, China is not qualified to join in the TPP by far." Zhao added that China needs to work with the countries along the Belt and the Road to create a production network, which China can rely on to cooperate with the developed countries. "The production network is vital for creating a good external economic environment," Zhao said.

Zhao also pointed out that the economic collaboration with the countries along the Belt and the Road will contribute to the enhancement of China and the region's position in the global industrial chain, as China's traditional advantage in labor costs is weakening.

Southeast Asian countries are increasingly taking the place of China as the world's manufacturing plant. The average monthly salary of Rangoon's manufacturing workers is only one-eighth of that of their counterparts in Beijing.

Apart from speeding up the transformation from labor-intensive manufacturing to technology-intensive manufacturing, China can also work with the countries with cheaper manpower along the Belt and the Road to readjust its industrial distribution.

There are a total of 65 countries along the Belt and the Road, most of which are developing countries and emerging economies. In recent two years, President Xi Jinping and Premier Li Keqiang have visited over 20 countries, attended the Dialogue on Strengthening Connectivity Partnership and the sixth ministerial conference of the China-Arab States Cooperation Forum, and met with leaders of relevant countries to discuss bilateral relations and regional development issues. They have used these opportunities to explain the rich contents and positive implications of the "One Belt, One Road" initiative. And their efforts have helped bring about a broad consensus on the initiative.

According to Zhao, the "One Belt, One Road" strategy, to which no political condition is attached, is very popular in the countries along the Belt and the Road, where Chinese companies are welcome. At the same time, Chinese companies have the willingness to "go out". "The successful implementation of the One Belt, One Road strategy not only depends on the governments, but also on the market and the enterprises," Zhao said.

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