1
Università degli Studi di Modena e Reggio Emilia
D
IPARTIMENTO DI STUDI LINGUISTICI E CULTURALIC
ORSO DIL
AUREAM
AGISTRALE INL
ANGUAGES FORC
OMMUNICATION IN INTERNATIONAL ENTERPRISES AND ORGANIZATIONSTHE BELT AND ROAD INITIATIVE: CAN HONG KONG AND EUROPE BENEFIT FROM THIS
GLOBAL INITIATIVE?
Prova finale di:
Vincenzo Campanella
Relatore:
Fabrizio Patriarca
Correlatore Barbara Luppi
Anno Accademico 2018/2019
2 CONTENTS
Abstract 4
Introduction 7
1. The development of the Initiative: challenges and opportunities 10 1.1. Historical stages of the Belt and Road Initiative 10
1.1.1. September 2013: the proposal of the
“Economic belt along the Silk Road” 10 1.1.2. October 2013: the proposal of The Maritime Silk Road 11
1.1.3. Other historical stages 12
1.1.4. Current development of the project 14
1.2. Concrete goals reached and to reach 15
1.2.1. Policy coordination 16
1.2.2. Infrastructure connectivity 16
1.2.3. Unimpeded trade 23
1.2.4. Financial integration 27
1.2.5. People-to-people ties 29
1.3. Opportunities and challenges of the BRI 30
2. European (and Italian) perspective: is this a win-win initiative? 34 2.1. The Belt and Road Initiative from the European perspective 34
2.1.1. Opportunities and challenges 37
2.1.2. B&R projects in Europe 38
2.2. Italian point of view and role in the BRI 40
3. Hong Kong and BRI: pros and cons for this Special Administrative Region 44 3.1. The Hong Kong Special Administrative Region
of the People’s Republic of China 44
3.1.1. Historical, social and political background 45
3.1.2. Economic and financial aspects 47
3.2. Hong Kong and BRI: opportunities 51
3.2.1. Hong Kong footprint in the BRI 57
3.2.2. Economic point of view and data about trade flows since 2013 60 4. Data analysis: Hong Kong and China’s trade flows 62
4.1. Merchandise exports and imports of Hong Kong 63
4.1.1. Hong Kong exports of goods 63
4.1.2. Hong Kong imports of goods 66
3
4.2. Commercial services exports and imports of Hong Kong 69
4.2.1. Hong Kong exports of services 69
4.2.2. Hong Kong imports of services 73
4.3. Merchandise exports and imports of China 75
4.3.1. China exports of goods 75
4.3.2. China imports of goods 78
4.4. Commercial services exports and imports of China 81
4.4.1. China exports of services 82
4.4.2. China imports of services 84
4.5. Differences and similarities between Hong and China 87 4.5.1. China and Hong Kong: differences in the sectors’ trends 89
5. Interviews on the Belt and Road Initiative 91
5.1. International company providing Audit, Tax and Advisory services 91 5.2. Governmental company providing
free advice and services for new companies 93 5.3. International company providing corporate services 96
5.4. Italian bank with a branch in Hong Kong 98
Conclusions 100 References 105
4
Abstract
The Belt and Road Initiative (BRI, hereafter) is an international project proposed by China in 2013. This Chinese initiative aims at building “The Silk Road Economic Belt” and the “21st Century Maritime Silk Road”. The former one is an economic route along the ancient Silk Road (composed of six major corridors ) supposed to span from the Pacific Ocean to the Baltic Sea;
the latter one is a maritime route which has strengthened cooperation between China and ASEAN (Association of Southeast Asian Nations) countries and China and EU.
Policy coordination, infrastructure connectivity, unimpeded trade, financial integration, people- to-people ties are the five main objectives of China to build a global route where products and technologies will be exchanged faster and cheaper in comparison with the past.
Nowadays, the BRI encompasses 125 countries and 29 international organisations, so it represents a global initiative and a major opportunity for many countries (in particular for China and Asian developing countries that have had the possibility to grow faster and reach high levels of development since it was proposed). However, it could also represent a risk since China could aim at creating a one-way trade route, strongly focused on exporting and poorly focused on importing.
This dissertation aims at determining the current development of the initiative in China and how it has been expanding in different countries across Asia and Europe. More specifically, the research will focus on the participation of Hong Kong and Italy - and EU, of course - into the BRI to investigate what are the sectors interested, and challenges and opportunities.
The investigation will be conducted through the collection of data from the WTO Data portal and interviews with stakeholders in Asia and Europe. After the analysis of data, the objective will be to determine if the BRI is a win-win for countries involved in the initiative or China is the only one gaining and acquiring economic and financial power at international level.
La Belt and Road Initiative (Nuova Via della Seta) è un progetto globale proposto dalla Cina nel 2013. L’iniziativa ha come obiettivo quello di costruire la “Silk Road Economic Belt” e la
“21st Century Maritime Silk Road”. La prima è la via economica che riprende l’antica Via della Seta, composta da sei corridoi principali (percorrerà distanze dall’Oceano Pacifico al Mar Baltico); la seconda, invece, è il percorso marittimo che ha rafforzato i rapporti tra la Cina e l’Associazione delle Nazioni del Sud-est asiatico (stati dell’ASEAN) e la Cina e l’Europa.
5
Coordinamento delle politiche, infrastrutture, libero scambio, integrazione finanziaria e legami diretti tra le popolazioni sono i cinque maggiori obiettivi che la Cina deve raggiungere per creare una rotta globale, tramite la quale prodotti e tecnologie si potranno scambiare più velocemente e a costi minori rispetto al passato.
Oggigiorno, la Nuova Via della Seta comprende 125 stati e 29 organizzazioni internazionali. Si tratta, quindi, di un’iniziativa globale che rappresenta un’opportunità per molti di essi, in particolare per la Cina e tutti gli stati asiatici in via di sviluppo che hanno registrato livelli di crescita e sviluppo maggiori da quando essa è stata proposta. Però, questo progetto globale potrebbe anche rappresentare un rischio: si teme che la Cina possa creare una rotta commerciale a senso unico, maggiormente concentrata sull’esportazione del surplus produttivo nazionale.
Questa tesi ha l’obiettivo di descrivere l’attuale sviluppo dell’iniziativa e il modo in cui si sta espandendo in Asia e in Europa. Più nello specifico, la ricerca si concentrerà sulla partecipazione al progetto di Hong Kong e dell’Italia (di conseguenza anche dell’Unione Europea), per analizzare le opportunità, i rischi e i vari settori che potrebbero trarne vantaggio.
L’analisi sarà condotta tramite una raccolta di dati dal portale WTO Data e tramite interviste a soggetti economici direttamente coinvolti nell’iniziativa. Dopo l’analisi di questi dati, l’obiettivo sarà determinare se la Nuova Via della Seta è vantaggiosa per tutti gli stati che ne entrano a far parte, o se la Cina è l’unico vero vincitore di questo progetto (acquisizione di potere economico e finanziario a livello internazionale).
La Belt and Road Initiative (Nueva Ruta de la Seda) es un proyecto internacional propuesto por China en 2013. La iniciativa aspira a construir la “Silk Road Economic Belt” y la “21st Century Maritime Silk Road”. La primera es la ruta económica que se desarrolla a partir de la antigua Ruta de la Seda y está compuesta por seis rutas principales que conectan al final el Océano Pacífico al Mar Báltico. Le segunda, en cambio, es la ruta marítima que ha reforzado las relaciones entre China y la Asociación de Naciones del Asia Sudoriental (ASEAN) y China y Europa.
Coordinación de las políticas, infraestructuras, libre mercado, integración financiera y relaciones interpersonales directas entre las diferentes poblaciones son los cinco objetivos principales que China tiene que alcanzar para la creación de una ruta global en la cual bienes y tecnologías se podrán comerciar de manera más rápida y más económica con respecto al pasado.
Hoy en día la Nueva Ruta de la Seda incluye 125 países y 29 organizaciones internacionales.
Se trata, entonces, de una iniciativa global que representa una oportunidad increíble para
6
muchos de esos, en particular para China y todos los países asiáticos en vías de desarrollo, que han registrado niveles de crecimiento y desarrollo mayores desde que el proyecto empezó. Sin embargo, hay que tener en cuenta los riesgos: se teme que China pueda crear una ruta comercial unidireccional, enfocada en la exportación de su propia producción excedentaria.
Este trabajo de fin de master tiene por objeto describir el desarrollo actual de la iniciativa y la manera en que se está extendiendo en Asia y en Europa. Más concretamente, la investigación se centrará en la participación al proyecto de Hong Kong e Italia (en consecuencia Europa también), para analizar las oportunidades, los riesgos y los sectores que podrían beneficiar.
El análisis se llevará a cabo mediante la recogida de datos desde WTO Data y entrevistas a partes interesadas directamente involucradas en la iniciativa. Después del análisis de estos datos, el objetivo será determinar si la Nueva Ruta de la Seda es beneficiosa para todos los países que deciden entrar o solo China se beneficiará, adquiriendo poder económico y financiero a nivel internacional.
7
INTRODUCTION
This dissertation aims at determining the current development of the Belt and Road Initiative in China and how it has been expanding in different countries across Asia and Europe. More specifically, the research will focus on the participation of Hong Kong and Italy - and EU, of course - into the BRI to investigate what are the sectors interested, and challenges and opportunities. In order to do it, it has been divided in five chapters.
In the first one, I have described the Initiative starting from a timeline composed by the most crucial moments of the development, like the proposals of the two different routes (the road and the maritime one) and the later steps.
Furthermore, particular attention has been given to the current development of the project (mostly concerning the financial aspect) and the five concrete goals that China aims at reaching through the construction of the six Economic Corridors and the 21st Century Maritime Silk Road (MSR): policy coordination, infrastructure connectivity, unimpeded trade, financial integration and people-to people ties.
When talking about infrastructure connectivity, it is crucial to mention and describe the Seven Pillars of the Belt and Road: the six economic corridors are the New Eurasian Land Bridge, connecting the eastern part of China to Belgium and Netherlands, the China - Mongolia - Russia Economic Corridor, connecting those three countries, the China - Central Asia - West Asia Economic Corridor, which goes from Central Asian countries (Kazakhstan, Uzbekistan, etc.) to West Asia (Iran, Turkey, etc.), the Chine-Indochina Peninsula Economic Corridor, which arrives in the five countries of Indochina, Malaysia and Singapore. Finally, there are the China- Pakistan Economic Corridor and the Bangladesh-China-India-Myanmar Economic Corridor.
The Twenty-First-Century Maritime Silk Road (MSR), indeed, is the maritime route which will connect China to Africa and Europe, through the Indian Ocean.
In the last part of the chapter, opportunities and challenges of the Initiative have been analysed.
The second chapter deals with the European and Italian perspective about the Initiative. Several countries, especially from the Eastern part of Europe, have joined the Chinese project in 2012.
Between 2018 and 2019, indeed, Greece, Portugal, Italy and Luxembourg have signed different agreements to effectively become part of it.
8
However, some countries (especially Germany and France) have shown some scepticism, due to lack of clearness of the Chinese economic strategy and the fact that a single response from each country should be avoided. In fact, it would be more recommendable to act with unity, as European Union, instead of singularly dealing with China.
Concerning European Union, it is crucial to affirm that the aim of this Institution is to create a sustainable, comprehensive and international rules-based connectivity.
In order to identify which is the best approach to follow, opportunities and challenges for Europe have been analysed. Afterwards, the most important B&R projects have been described.
Finally, it has been given special attention to the Italian point of view: Italy signed a Memorandum of Understanding in 2019 and, since then, projects have started in Trieste, Genoa and Palermo (3 strategic ports, important for the 21st Century Maritime Silk Road).
In order for these ports to be considered fundamental for trade business with Asia, many structures and infrastructures are needed: China, therefore, is trying to invest and build what is necessary.
However, it must be said that scepticism and critics coming from several Italian political parties and some EU countries are quite common, because of several reasons concerning economic and political Chinese power around the world.
The third chapter focuses on Hong Kong and the role that this Special Administrative Region can take in the Belt and Road Initiative.
After describing the region from a social, historical and political point of view, which is extremely important due to the many differences with China, particular attention has been given to the economic and financial characteristics of it. Hong Kong was part of UK until 1997, when China decided to reintegrate it as a Chinese territory. This explains the cultural and economic differences, which have also been reason of strong confrontation between China and the Special Administrative region in the last years.
With all the information found, opportunities arising from the Initiative have been identified.
Many opportunities arise from the fact that, thanks to the BRI, Hong Kong could exploit the international market concerning the service sector. Moreover, this Region is considered to be the connection point between Asia and Western world, due to the economic and financial system. Finally, it can represent the risk management centre of the Initiative, controlling potential risks of cooperation projects and B&R businesses.
The end of the chapter focuses on the B&R projects involving Hong Kong and many firms owning a branch in it. The Region is involved in several projects in Southeast Asia (Thailand,
9
Indonesia, Vietnam, Cambodia), South Asia (Pakistan, Bangladesh), and Central and Northeast Asia (Kazakhstan, Mongolia, Russia).
In the fourth chapter, an analysis of data has been conducted. Using the WTO Data Trade portal, a comparison between China and Hong Kong has been made in order to establish if the BRI is providing opportunities also for the latter one or Xi Jinping’s country is exploiting this huge opportunity at a higher percentage.
In order to do that, data from 2013 (when BRI was announced) to 2018 have been analysed:
trade data have been used, taking into consideration imports and exports of goods and services.
Furthermore, a more specific investigation has been made, through the analysis of the different leading sectors, in order to establish which of them (concerning goods and services) are experiencing an increase in the value of import and export and which are suffering from a decrease.
The fifth and final chapter is dedicated to the interviews conducted during the research activity, personally done in Hong Kong. The interviews consist of six questions whose aim is to understand which countries are going to benefit the most from the BRI, which sectors are more closely involved, the opportunities and risks for Hong Kong and Italy and the real objectives behind the Initiative. A question concerning the scepticism of some EU countries has also been asked.
The interviewees are managers, shareholders and stakeholders working in international institutions and firms (governmental and private), directly involved in this Chinese global project.
Finally, the results coming from the analysis of data, the interviews and the information found during the research activity have shown interesting aspects.
Chinese imports and exports (goods and services) are growing faster than Hong Kong ones.
Even though they are so connected, politically and geographically, Xi Jinping’s country registered a higher increase in the period from 2013 to 2018.
Moreover, the majority of the interviewees support the idea that China will be the country which will benefit the most from the BRI.
Concerning Italy and Europe, risks and opportunities should be carefully taken into account before signing binding agreements. As affirmed by some interviewees, all the countries joining the Initiative could benefit, but it is essential to thoughtfully analyse pros and cons.
10
CHAPTER 1
THE DEVELOPMENT OF THE INITIATIVE: CHALLENGES AND OPPORTUNITIES
1.1. Historical stages of the Belt and Road Initiative
1.1.1. September 2013: the proposal of the Economic belt along the Silk Road
In September of 2013, during a speech delivered at Nazarbayev University (Kazakhstan), the Chinese President Xi Jinping raised the initiative of building an ‘economic belt along the Silk Road’, a trans-Eurasian project spanning from the Pacific Ocean to the Baltic Sea.
This is when the economic route spreading over the ancient Silk Road has been officially proposed. Originally the project was not as global as it is today. It mostly concerned several Asian and few European countries, with whom China wanted to strengthen relationships.
Nowadays it is a global project which connects many countries of different continents, but this will be explained later.
During the speech mentioned above, China and Kazakhstan agreed to ensure cross-border oil and gas pipeline construction and to strengthen oil and gas development and refinement.
Moreover, the two presidents discussed about commercial nuclear, new and clean energies and tried to enhance cooperation in several sectors, like agriculture and technology. 1
The proposal of this new economic project was the main topic of the speech and Xi gave extreme importance to points as cooperation, openness, security and stability, not only between the two countries, but also among all the ones which would later join the project.
Moreover, it was highlighted the importance of environmental conservation and the fact that economic progress will not bring to the destruction of the environment.
It is also important to notice that, when proposing the development of the project, Xi affirmed his willingness not to interfere in the domestic affairs of Central Asian nations, sustaining that a genuine relationship of support and trust among countries is more important that the dominant role of China in the regional affairs.
1 WU J., ZHANG Y., CHINA DAILY, 08/09/2013. Xi proposes a 'new Silk Road' with Central Asia, p. 2.
Retrieved from http://www.chinadaily.com.cn/china/2013xivisitcenterasia/2013-09/08/content_16952228_2.htm [Accessed: 04/09/2019]
11
To create the new economic belt, Xi Jinping suggested that China and Central Asian countries should accelerate communication and mutual understanding among countries (many different cultures and habits are involved in this project), improve road connectivity, promote unimpeded trade and enhance monetary circulation.2
In order to do that, “Xi also said that they should work to improve traffic connectivity so as to open the strategic regional thoroughfare from the Pacific Ocean to the Baltic Sea, and gradually move toward the set-up of a network of transportation that connects Eastern, Western and Southern Asia.”3
Exploring ways to facilitate trade and investment, remove barriers and promoting local- currency stability (so as to improve their immunity to financial risks and their global competitiveness) are three points the President focused on.
1.1.2. October 2013: the proposal of the Maritime Silk Road
After one month, in October 2013, during a speech to the Parliament of Indonesia, the Chinese president proposed the project of The Maritime Silk Road initiative declaring:
“China will strengthen maritime cooperation with ASEAN countries to make good use of the China-ASEAN Maritime Cooperation. Fund set up by the Chinese government and vigorously develop maritime partnership in a joint effort to build the Maritime Silk Road of the 21st century.
China is ready to expand its practical cooperation with ASEAN countries across the board, supplying each other’s needs and complementing each other’s strengths, with a view to jointly seizing opportunities and meeting challenges for the benefit of common development and prosperity.” 4-
While proposing these projects, President Xi Jinping mentioned several times the ancient Silk Road and the relationships that China and the rest of Asia used to have. More than two thousand years ago, inhabitants of Eurasia explored and opened up several routes of trade and cultural exchanges that linked the major civilizations of Asia, Europe and Africa. Therefore, Central
2 Ibid. p. 1 [Accessed: 04/09/2019]
3 CHINA DAILY, 07/09/2019. President Xi proposes Silk Road economic belt.
Retrieved from http://www.chinadaily.com.cn/china/2013xivisitcenterasia/2013-09/07/content_16951811.htm [Accessed: 04/09/2019]
4 ASEAN-CHINA CENTER, 03/10/201. Speech by Chinese President Xi Jinping to Indonesian Parliament.
Retrieved from https://reconasia-production.s3.amazonaws.com/media/filer_public/88/fe/88fe8107-15d7-4b4c- 8a59-0feb13c213e1/speech_by_chinese_president_xi_jinping_to_indonesian_parliament.pdf
[Accessed: 04/09/2019]
12
Asia, by connecting eastern and western markets and exporting products, culture and traditions, was considered to be the epicentre of one of the first waves of globalization.
The routes improved trade in a substantial way and played a significant role in the development of those civilizations.
In 1877 Ferdinand von Richthofen, a German traveller and scientist who made seven expeditions to China from 1868 to 1872, coined the name "the Silk Road" due to the trade of lucrative silk firstly developed in China. For thousands of years, the Silk Road principles (peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit) promoted the progress of human civilization and contributed greatly to the prosperity and development of the countries along the Silk Road. Symbolizing communication and cooperation between the East and the West, those principles are considered nowadays ad historic and cultural heritage shared by all countries around the world.5
1.1.3. Other historical stages
Another important historical stage of the project is the document called ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’, issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic of China in 2015.
This document contains the principles and the cooperation priorities of the BRI that will be explained and analysed afterwards
Moreover, in 2016 it was published the ‘13th Five-Year Plan’, which defines the major objectives for the social and economic development of the country, and The Belt and Road Initiative was a major topic. China wants to keep integrating and being increasingly present in the global economy, so that the BRI is the perfect mean through which this country can keep expanding its economic and financial power, due to free trade agreements and the construction of infrastructure.
In this way China could continue the ‘opening up policy’ started 30 years ago.
5 THE NATIONAL DEVELOPMENT AND REFORM COMMISSION, MINISTRY OF FOREIGN AFFAIRS, AND MINISTRY OF COMMERCE OF THE PEOPLE'S REPUBLIC OF CHINA, WITH STATE COUNCIL AUTHORIZATION, March 2015. Vision And Actions On Jointly Building Silk Road Economic Belt And 21st- Century Maritime Silk Road.
Retrieved from http://milano.china-consulate.org/ita/xwdt/t1254267.htm [Accessed: 05/09/2019]
13
In the chapter 51 of the ‘13th Five-Year Plan for Economic and Social Development of The People’s Republic of China (2016–2020)’, called ‘Move Forward with the Belt and Road Initiative’, it is possible to read that China wants “improve the bilateral and multilateral cooperation mechanisms of the Belt and Road Initiative focusing on policy communication, infrastructure connectivity, trade facilitation, capital flow, and people-to- people exchanges […], make further efforts to facilitate transport among countries along the routes, and simplify customs clearance procedures along the routes […] and strengthen cooperation with international organizations including international financial organizations and institutions”.6 Furthermore, there is a section dedicated to the economic corridors (see Seven pillars of BRI:
six major corridors and The Twenty-First-Century Maritime Silk Road (MSR)), underlining the importance of increasing infrastructure connectivity with all the countries involved in the project around Asia, Africa and Europe.
Finally, in the last part of this section, it is stressed the importance of cultural exchanges and cooperation: this shows how much China is willing to open up to the world and it is interested in exporting the Chinese culture abroad and expanding its knowledge about other cultures and habits.
In March 2017, during the ‘Annual Government Work Report’ by Premier Li Keqiang, the importance of the BRI was also stressed. The Premier of the State Council affirmed that through the construction of the corridors and maritime hubs, China aims at promoting the export of national technologies, standards and services.
Plus, he underlined the importance of foreign trade to keep registering a steady growth and, as well, the implementation, improvement and optimization of imports and exports.7
The topic of openness to the world was also brought up during the ‘19th National Congress of the Communist Party of China’ in October 2017 by Xi Jinping.
In order to pursue openness, the Belt and Road Initiative is the key: the development of free trade policies, free trade ports and new forms of trade and investment will help China to
6 CENTRAL COMMITTEE OF THE COMMUNIST PARTY OF CHINA (CPC), 2015. The 13th Five-Year Plan for Economic and Social Development of The People’s Republic of China (2016–2020), pp. 146-148.
Retrieved from https://en.ndrc.gov.cn/newsrelease_8232/201612/P020191101481868235378.pdf [Accessed:
06/09/2019]
7 LI K. (PREMIER OF THE STATE COUNCIL), 05/03/2017. Report on the Work of the Government (delivered at the Fifth Session of the 12th National People’s Congress of the People’s Republic of China).
Retrieved from http://www.xinhuanet.com/english/china/2017-03/16/c_136134017.htm [Accessed: 06/09/2019]
14
strengths international economic cooperation and to be even more protagonist of the global economy.8
Figure 1. The Belt and Road Initiative’s timeline
1.1.4. Current development of the project
Nowadays, The Silk Road Economic Belt and The 21st Century Maritime Silk Road constitute the project called Belt and Road Initiative (BRI) or One Belt One Road (OBOR).
By the end of March 2019, the Initiative has encompassed 125 countries and 29 international organisations; 173 co-operation agreements across Central & Eastern Eurasia and maritime Asia Pacific, Europe, Africa and Latin America have been signed.9
With respect to the cost of the project, The Research Institute of Finance, which is part of the Development Research Centre of China’s State Council, has estimated the infrastructure financing needs of countries along the Belt and Road routes (excluding China) to be around US$1.4 trillion from now until 2020.10
Morgan Stanley, indeed, has predicted China’s overall expenses over the life of the BRI could reach $1.2–1.3 trillion by 2027, though estimates on total investments vary.11
In the meantime, in the first layer of the common OBOR finance it is possible to read that China will provide 80% of the project funding through long–expiry loans. This percentage will be
8 CHINA DAILY, 4/11/2017. Full text of Xi Jinping's report at 19th CPC National Congress. Retrieved from https://www.chinadaily.com.cn/china/19thcpcnationalcongress/2017-11/04/content_34115212.htm
[Accessed: 08/09/2019]
9 THE TELEGRAPH, 02/05/2019. Belt and Road projects: past, present and future
Retrieved from https://www.telegraph.co.uk/china-watch/business/belt-road-projects-list/[Accessed: 08/09/2019]
10 SILK ROAD BREFING, 10/07/2019. Who is Financing the New Economic Silk Road?. Retrieved from https://www.silkroadbriefing.com/news/2019/07/10/financing-new-economic-silk-road/ [Accessed: 08/09/2019]
11 COUNCIL ON FOREIGN RELATIONS, 28/01/2020. China’s Massive Belt and Road Initiative. Retrieved from https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative [Accessed: 08/09/2019]
15
covered by organizations such as the Silk Road Fund (backed by China’s sovereign wealth fund by providing 40 billion USD), China Investment Corporation and the State of Administration of Foreign Exchange. Plus, many banks like the Bank of China (100 billion USD), China Development Bank, China Import-Export Bank, CITIC Bank (113 billion USD) and AIIB (100 billion USD) will help for the development of the project.
The other 20%, indeed, will be provided by local banks, through loans and stock shares.
The funding of BRI can be classified into four distinct channels:
- Policy banks: China Development Bank (CDB), which is financing infrastructure, energy and transportation, surely is the most important one. There is also the Export-Import Bank of China (EXIM), whose aim is to implement Chinese state policy in the industry, diplomacy and foreign trade.
- State-owned banks: there are many state-owned banks in China, but four of them are significantly financing the BRI. These are Industrial & Commercial Bank of China (ICBC), China Construction Bank (CCB), Agricultural Bank of China (ABC) and Bank of China (BOC).
- Sovereign wealth funds: these state-owned investment funds invest in financial assets (bonds, stocks, real estate). The most relevant one is The Silk Road Fund, a US$40 billion multilateral investment fund created to facilitate the BRI.
- International financing institutions: The World Bank Group is to be mentioned, being deeply involved with countries along BRI. It also works with the Asian Infrastructure Investment Bank and plans to invest about US$80 billion in infrastructure for BRI participants.
Asian Development Bank (ADB) and Asian Infrastructure Investment Bank (AIIB) are also important institutions.12
1.2. Concrete goals reached and to reach
The Belt and Road Initiative stands up for equity, fairness, and mutual benefits. Mutual benefits refer to the fact that this huge initiative aims to a win-win cooperation and common
12 BELT AND ROAD NEWS, 17/05/2019. Financing and Funding for the Belt & Road Initiative.
Retrieved from https://www.beltandroad.news/2019/05/17/financing-and-funding-for-the-belt-road-initiative/
[Accessed: 09/09/2019]
16
development that will lead to new relationships among countries, based on trust and transparency.
The key points of the Belt and Road Initiative are policy coordination, infrastructure connectivity, unimpeded trade, financial integration, and closer people-to-people ties (a five- pronged approach), focusing on eight fields: infrastructure connectivity, economic and trade cooperation, industrial investment cooperation, energy resources cooperation, financial cooperation, cultural and people-to-people exchanges, ecological and environmental cooperation, and maritime cooperation.
In order to reach these five goals, China has planned to build six Economic Corridors and the Twenty-First-Century Maritime Silk Road (MSR).
1.2.1. Policy coordination
It refers to the fact that communication and agreements among countries and with international organizations are fundamental for the achievement of the desired results. United Nations, G20 and APEC (Asia-Pacific Economic Cooperation), for example, have redacted some documents on the BRI and many intergovernmental cooperation agreements have been signed by those organizations and by many countries. In fact, nowadays, the Belt and Road has expanded, and it includes participants in Africa, Latin America and the South Pacific.
1.2.2. Infrastructure connectivity
It plays a major role in the BRI because without an efficient connection among countries, high levels of trade would be impossible to achieve, as well as economic development. For this reason, China and many countries that joined Initiative are investing money and time to accelerate infrastructure connectivity.
From the point of view of railways, major progress has been made in building inter-regional and intercontinental railway networks, such as the China-Laos Railway, China-Thailand Railway, Hungary-Serbia Railway, and Jakarta-Bandung High-Speed Railway.
As it is explained in the governmental website called ‘Belt and Road Portal’, “China Railway Express (CR Express) is a railway network in which containers and other international intermodal trains travel between China, Europe and the countries along the B&R according to fixed train numbers, routes, schedules and service time. China Railway Express connects not
17
only Europe and the countries along the line, but also East Asia, Southeast Asia and other areas. It is not only a railway passage, but also an intermodal corridor.”13
It has been calculated that by the end of 2018, China-Europe rail service had connected 108 cities in 16 countries in Asia and Europe. A total of 13,000 trains had carried more than 1.1 million TEUs (twenty-foot equivalent unit).
In March 2019, the railway that starts from China and arrive in Poland, passing through Kazakhstan, Russia and Belarus has been inaugurated. The journey covers a total distance of 9,965 kilometres and it takes approximately 14 days to be completed, half the time it takes to ship through maritime routes.
Many investments have been made also for the construction of roads, especially highways and bridges to connect countries, and ports. Concerning the ports, China has signed 38 bilateral and regional shipping agreements with 47 B&R countries.
Moreover, it is fundamental to mention the Gwadar Free Trade Zone: Gwadar port, located in the North Arabian Sea, connects Pakistan to the Indian Ocean and it is becoming one of the largest free trade zones. China is building a route to Gwadar and the country is carrying out infrastructural development for the project, so that more revenues in the future will be generated thanks to it.14
Pakistan could benefit the most from this project, becoming a regional trade hub. This is due to the fact that this port represents a gateway for all the countries willing to use this transit route and pay transit fees (Russia, Kazakhstan, Kyrgyzstan, Afghanistan, Uzbekistan, Tajikistan, etc.).
From the point of view of air transport, China has signed many agreements (126 countries and regions) in Europe and Asia. The result is that 1,239 new international routes have been opened between China and B&R countries.
Seven pillars of BRI: six major corridors and The Twenty-First-Century Maritime Silk Road (MSR). The construction of proper infrastructures has brought to a decrease in the transaction costs of products, capital, technologies and information.
13 BELT AND ROAD PORTAL, 28/04/2019. An Overview of China Railway Express. Retrieved from https://eng.yidaiyilu.gov.cn/qwyw/rdxw/88413.htm [Accessed: 12/09/2019]
14 GEOPOLITICA.RU, 18/07/2019. Gwadar Port: The Golden Goose of Pakistan. Retrieved from https://www.geopolitica.ru/en/article/gwadar-port-golden-goose-pakistan [Accessed: 13/09/2019]
18
The international economic cooperation that China aims at achieving is possible through the construction of corridors and passageways: the six major corridors for international economic cooperation and the maritime route will strengthen connectivity between Asian and European countries. It is important to describe them.
Figure 2. The Belt and Road Initiative: Six Economic Corridors Spanning Asia, Europe and Africa
Source: The Belt and Road Initiative http://china-trade-research.hktdc.com/business-news/article/The-Belt- and-Road Initiative/The-Belt-and-Road-Initiative/obor/en/1/1X000000/1X0A36B7.htm
- New Eurasian Land Bridge (NELB): as it is possible to read in the website ‘BRI updates - Latest development of the Belt and Road Initiative’ this bridge was opened in the 1990s and regularly used since 2011. “NELB is a 10,800 km-long new rail link connecting the Chinese coastal cities of Lianyungang and Rizhao on the Pacific Ocean and the port cities of Rotterdam (in Netherlands) and Antwerp (in Belgium) on the Atlantic Ocean. While the original Eurasian Land Bridge connects Russia’s eastern port of Vladivostok and Rotterdam through Siberia and Moscow, the new route takes a southern path that passes through cities in China, Kazakhstan, Russia, Belarus, Poland, Germany, etc.”15
Nowadays, it is useful because it provides a freight train route for transporting goods between China and Europe. Even though it is much faster than maritime routes (it takes 16 days, while in the past it took 37 days), costs are higher than the sea route, so it only represents an
15 BRI UPDATES, LAST DEVELOPMENT OF BELT AND ROAD INITIATIVE, 18/07/2018. New Eurasian Land Bridge (NELB).
Retrieved from http://www.briupdates.com/dictionary/detail/2ee7a1dedbef46ceaa80593d8aaaeb9d [Accessed:
14/09/2019]
19
alternative. Only 2.1% of goods traded between China and Europe (by value) has been shipped through rail route in 2016.16
The latter one, therefore, remains the most preferred option for goods’ shipment.
- China-Mongolia-Russia Economic Corridor: these three countries are making great efforts to establish a partnership that will improve economic and social relationships between them.
This route covers the transportation and tourism sectors in Northeast Asia.
China's side of the Tongjiang-Nizhneleninskoye railway bridge was completed in October 2018 and the China-Mongolia-Russia cross-border terrestrial cable system has been completed.
In the article ‘What does the China-Mongolia-Russia Economic Corridor mean for Mongolia?’
of September 20th, 2018, written by Connor Judge, it is affirmed that “the central CMREC route (also known as the “Prairie Road” (Талын зам\草原之路) ‘starts’ at the port of Tianjin, China and heads northwest before entering Mongolia at the Erlianhaote border crossing. In practice however, Siberian and Mongolian resources are exported out of Tianjin. The route then heads through Mongolia before entering Russia along the trans-Siberian express at Ulan Ude. For North East China’s provincial powerhouses, this primary route represents the shortest path to Europe; and Mongolia is keen to position itself as the pivotal logistics hub.”17
Nowadays the three countries, and especially Mongolia, would like to develop other routes.
Obviously, there are some problems to face like financing, rail gauge incompatibility, customs, environmental issues. However, Mongolia is willing to solve these issues, proving that it is an active BRI partner.
- China-Central Asia-West Asia Economic Corridor. This corridor runs from Xinjiang in China and exits the country via Alashankou to join the railway networks of Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan) and West Asia (Iran, Turkey, etc.)
By linking railway networks from China to the Mediterranean Sea, this economic corridor enhances the connectivity between China, Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan, Iran and Turkey. In addition to investment in rail, China is also developing roads and other infrastructure that could transform the economies of Central Asia countries and
16 Ibid. [Accessed: 14/09/2019]
17 BELT AND ROAD ADVISORY, 30/09/2018. What does the China-Mongolia-Russia Economic Corridor mean for Mongolia?. Retrieved from https://beltandroad.ventures/beltandroadblog/china-mongolia-russia-economic- corridor [Accessed: 14/09/2019]
20
connect Chinese and overseas companies willing to exploit the great economic opportunities offered by this project.
Since 2013, in this corridor’s framework, cooperation has advanced not only in the trade sector, but also in infrastructure connectivity and energy. Many agreements on international road transport have been signed, especially with Turkey, Kazakhstan and Uzbekistan.
- China-Indochina Peninsula Economic Corridor. This corridor links China with the five countries of Indochina – Thailand, Myanmar, Laos, Cambodia and Vietnam – and also with Malaysia and Singapore. In the article from Standard Chartered of 3 January 2019 called ‘One masterplan. Six corridors’, it is stated that:
China hopes B&R investments will help improve the under-resourced infrastructure in the region and also tie in with smaller national projects like Thailand’s Eastern Economic Corridor and Malaysia’s Digital Free Trade Zone. All the countries in this region, with a significant percentage of their exports heading to China, will benefit from improved connectivity. To that end, China is building rail links through Laos and Thailand (though the latter has experienced delays) that if completed will create a direct rail connection from Singapore to Kunming and beyond. A high-speed rail project between Singapore and Kuala Lumpur, though currently shelved, would slash travel times along that route even further.18
- China-Pakistan Economic Corridor. The objective of China-Pakistan Economic Corridor is to build an economic route running from Kashgar, Xinjiang, in the north, to Pakistan’s Gwadar Port in the south.
US$ 55 billion are needed to invest in this corridor, and around US$ 35 billion for the power plants. Once the fishing port of Gwadar will be transformed into the largest port in South Asia, China will gain direct land access to the Arabian Sea and the Indian Ocean, bypassing the Malacca Strait chokepoint, through which much of China’s crude oil imports currently pass.
With this corridor, it will also be easier for China to sell its goods to Pakistan's growing middle class.19
- Bangladesh-China-India-Myanmar Economic Corridor. This corridor aims at linking the Chinese city of Kunming in Yunnan Province to the other countries of the corridor. They not
18 STANDARD CHARTERED, One masterplan. Six corridors.
Retrieved from https://www.sc.com/en/feature/one-masterplan-six-corridors/ [Accessed: 16/09/2019]
19 Ibid. [Accessed: 17/09/2019]
21
only agreed on the construction of the land bridge, but also on the construction of air and clean water ways, power transmission lines and oil pipelines through Myanmar.
This is one of the least active corridors, since India and China have been unable to reach agreements on several points.
India boycotted the first summit held in 2017 and despite China's efforts to include it, the former one decided to sit out.
In April 2019, during the second edition of Belt and Road Initiative Summit in Beijing, China displayed a map with B&R routes that curiously showed Jammu & Kashmir and Arunachal Pradesh as part of India. The map also surprisingly portrayed India as part of BRI even though it had boycotted the BRI summit for two times, showing that it was not willing to be part of the project. The map was displayed by China’s ministry of commerce during the three-day BRI Summit. At the Summit the Chinese President made attempts to address concerns expressed by India over BRI.
After that, China decided to eliminate thousands of maps which showed Arunachal Pradesh as part of India.20
The Twenty-First-Century Maritime Silk Road (MSR).
Figure 3. The Twenty-First-Century Maritime Silk Road (MSR)
Source: Belt & Road Initiative making a difference in Asia-Pacific region - https://www.chinadailyhk.com/articles/165/106/34/1545891548672.html
20 MOHAN G., INDIATODAY, 27/04/2019. China removes BRI map that showed Arunachal & J&K part of India. Retrieved from https://www.indiatoday.in/world/story/bri-summit-china-jammu-and-kashmir-arunachal- pradesh-1511347-2019-04-27 [Accessed: 17/09/2019]
22
The aim of the MSR is to connect the littoral Chinese provinces with the South China Sea and the Indian Ocean; from there to Eastern Africa, via the Horn of Africa and the Mediterranean Sea, it finally reaches European ports. This is possible thanks to a network of port infrastructure (seaports, industrial zones, oil and gas storage facilities and railway connectors) from where cargo can be shipped inland.
Nowadays, China is massively investing in the development of the blue economy (the part of the economy related to the exploitation and preservation of the marine environment), which contributed to 9.4% of China’s GDP in 2017, more than US$ 1.2 trillion. Moreover, in the period 2012-2017, China’s blue economy grew by an average of 7.5% annually and nowadays it accounts for about 10% of China’s GDP. It is affirmed that by 2035 blue economy will expand to 15% of GDP.21
Finally, it is possible to affirm that China is trying to improve cooperation in domains as maritime law enforcement, navigation security and marine disaster response. In this way, all the countries joining BRI could pursue the development of blue economy, driven by mutual cooperation and respect.
1.2.3. Unimpeded trade
It is another important goal of BRI: China is putting effort into liberalizing and facilitating trade and investment in the participating countries and regions. It is essential to reduce the costs of trade and business, in order to let countries fully exploit the BRI.
From this point of view, it is important to mention the ‘Initiative on Promoting Unimpeded Trade Cooperation Along the Belt and Road’. It has been issued by China and subscribed by 83 countries willing to strengthen cooperation and coordination and promote partnerships among Europe, Asia, South America, Africa and other regions.
The major functions are:
- Promotion of trade growth: to promote and expand trade through facilitation measure, development of new business models and cooperation on trade in services.
21 GHIASY R.,SU F., SAALMAN L., 09/2018. The 21st Century Maritime Silk Road, SIPRI (Stockholm International Peace Research Institute), p. 5. Retrieved from https://www.sipri.org/sites/default/files/2018-09/the- 21st-century-maritime-silk-road.pdf [Accessed: 17/09/2019]
23
- Establishment of a two-way investment: China will improve investment cooperation with Belt and Road countries and regions. In the next five years, China is expected to invest up to US$
150 billion in Belt and Road countries and regions.22 - Promotion of inclusive and sustainable development.
Trade value is expanding every year thanks to BRI: from 2013 to 2018 the value of trade between China and other B&R countries surpassed US$6 trillion, accounting for 27.4% of China's total trade of goods. In 2018 the value of trade of goods between China and other B&R countries reached US$1.3 trillion, growing by 16.4% year on year. Trade in services between China and other B&R countries has increased as well, growing by 18.4% from 2016 to reach US$97.76 billion in 2017.23
These values are also possible since new trade models, like cross border e-commerce, are being used by countries.
Cross border e-commerce has been growing in the last few years and thanks to it, many agreements have been signed for the cooperation among countries.
Nowadays, digital trade is spreading as the power source that can change the world’s trade patterns. Actually, the project of a ‘digital silk road’ was proposed for the first time in July 2015 at the China-EU Digital Cooperation Roundtable in Brussels. This project involves investments in e-commerce, smart economy and telecoms, which have a huge importance because they could transform the South-east Asian market.
The level of digital infrastructure construction of many countries along the Belt and Road is relatively low, which implies large opportunities for mobile communications equipment, fixed- line broadband upgrades and Internet data centres (IDC). Furthermore, the development level of each country’s information industry varies so companies can implement a niche market strategy and expand the profit margin. 24
Chinese telecoms industry is willing to provide solutions and products, since there are many enterprises with international competitiveness. In fact, in the last years, digital technology has
22 MINISTRY OF COMMERCE PEOPLE’S REPUBLIC OF CHINA, 16/05/2017. Initiative on Promoting Unimpeded Trade Cooperation Along the Belt and Road. Retrieved from http://english.mofcom.gov.cn/article/newsrelease/significantnews/201705/20170502578235.shtml [Accessed:
17/09/2019]
23 Ibid. [Accessed: 17/09/2019]
24 EY. Analysis of the “One Belt, One Road’ initiative. Telecommunications and Aviation sectors. Retrieved from https://www.ey.com/cn/en/services/specialty-services/china-overseas-investment-network/ey-key-connectivity- improvements-along-the-belt-and-road-in-telecommunications-and-aviation-sectors [Accessed: 20/09/2019]
24
been expanding and this has been leading to the creation of new lines of business that are transforming the traditional business models.
Both Chinese state-owned companies (China Telecom and China Unicom) and private ones (Huawei and ZTE) have been playing an increasing role in building new underwater fibre-optic cables across BRI countries in order to improve international digital connectivity.
In 2017, Huawei signed a deal to build the Pakistan East Africa Cable Express (PEACE), linking Pakistan to Kenya. Plus, it may be extended to Egypt and to South Africa, reaching a total length of 13,000 km. China is also considering of building a fibre-optic cable across the Arctic Circle, along with Finland, Japan, Russia and Norway.25
Due to improvement in connectivity, e-commerce in B&R countries has increased. According to a 2017 eMarketer Report, it has flourished in China and it is expected to more than double and to make up around 25% of total retail sales by 2021 in Asian-Pacific countries.26
In particular, in the Chinese Ecommerce Report of 2018, it is possible to notice that e-commerce in China is mainly focused on mobile. Since 2017 it is the world’s largest mobile e-commerce market, with more than 120 million mobile phones shipped to customers through virtual channels during the year. Alibaba (a Chinese multinational company specializing in e- commerce, retail, Internet, and technology) is the most used online store. Furthermore, experts estimate that mobile commerce in China will reach about US$ 1.5 trillion in sales in 2019, representing a quarter of the country’s overall retail market.27
Figure 4. Shares of sales in total retail ecommerce sales
Source: China e-commerce report 2018 - free.pdf version
25 HSBC, 14/05/2018. China’s digital silk road. Retrieved from https://www.business.hsbc.com/belt-and- road/chinas-digital-silk-road [Accessed: 20/09/2019]
26 EMARKETER, 09/09/2017. Asia-Pacific Retail and Commerce Sales, summary. Retrieved from https://www.emarketer.com/Report/Asia-Pacific-Retail-Ecommerce-Sales-eMarketers-Estimates-
20162021/2002091 [Accessed: 20/09/2019]
27 DAXUECONSULTING, 25/03/2019. New retain in China: Redesigning the consumer journey. Retrieved from https://daxueconsulting.com/new-retail-in-china-daxue-consulting/ [Accessed: 21/09/2019]
25
This company coined the expression ‘New Retail’ in 2017. This is a consumer-centric, data- driven approach that merges online and offline interactions with elements of traditional retail.
It includes social media and entertainment in the shopping experience. Furthermore, it not only improves shopping for customers, but it is great also for retailers. Since logistics and supply chain are optimized, they save a huge quantity of time and money.28
There are four key innovations involved in this approach: extreme digitalization, data hunger, immediate shopping, traceable quality.
Extreme digitalization not only refers to digital commerce, but also to the fact that ‘New Retail’
stores, for instance, let clients try on clothes virtually or to fill a virtual cart that will be delivered to their homes.
Data hunger relates to personal data collection and it is highly linked with the digitalization:
purchase history, payment activities, phone numbers and addresses of their customers, and financial transactions. This could be a controversial topic, due to privacy and use of personal data. However, Chinese consumers seem to be less suspicious than Western buyers about the topic of data collection and data use.29
Immediate shopping is a major innovation because it makes everything easier and faster. The strategy SNBN (See Now Buy Now) allows customers to buy instantaneously: during a fashion show, for example, if a consumer see clothes he would love to wear, it is possible for him to buy it immediately. Plus, in every new retail store, a customer can see a product, scan it and then go home waiting for it. It will arrive in a reasonably short time.
Finally, traceable quality refers to the fact that ‘New Retail’ stores offer product tracking. So, the consumers that are willing to pay more for quality have the possibility to choose among products also considering the origins of items, pictures of the distributor’s operating permits and food safety certificates.
It is a project involving the connection between online and offline shop, so that for a consumer it is easier to shop and for the seller there is a massive improvement in efficiency and productivity, since everything is connected and data are visible and plentiful.
More practically, by using Freshippo or Taobao apps, it is possible to shop traditionally in store or to order and have products delivered in a very short time. In the first case, the consumer can scan a code on the product tag to know every detail of the product he is willing to buy (origins,
28 DUDARENOK A.G., DAXUECONSULTING, 20/09/2019. Chinese New Retails giants are going global and social. Retrieved from https://daxueconsulting.com/chinese-new-retail-platforms/ [Accessed: 21/09/2019]
29 Ibid. 28 [Accessed: 21/09/2019]
26
ratings, reviews), as he would do while shopping online. It is also possible to use the apps to complete payment through biometric facial recognition.
This is a practical example of “New Retail” in a supermarket, and nowadays it has spread in hundreds of thousands of stores across China.
To summarise, in a globalized world, it is fundamental to have efficient means for international trade. So, digital trade is the innovation needed in business models: both sellers and consumers exploit the benefits of this online platforms, in which the first ones can share costumer resources and solve information problems in a simpler way and the second ones can choose among billions of different products and services. Many enterprises could benefit from this innovation, in the sense that by eliminating trade barriers and exploiting the business cooperation opportunities, they could enter the global market and expand their business without the need of a physical plant.
1.2.4. Financial integration
It is an extremely relevant pillar of the Belt and Road Initiative. As affirmed at the beginning of the chapter, international financial institutions and commercial banks have played an innovative role in supporting economically the Belt and Road Initiative. This has been possible through the expansion of the financing channels, which provide stable and transparent financial support.
The countries participating to the Initiative have made continued efforts to consolidate and improve financial cooperation and to achieve long-term benefits and win-win outcomes. With a constant supply of innovative financial products, channels for financing the Belt and Road Initiative have massively expanded.
For those reasons, several financial institutions have been created with the aim of supporting the development of the Initiative.
The most important one is the Asian Infrastructure Investment Bank (AIIB), responsible for investment in the construction of infrastructure in the Asia-Pacific region.
Officially opened for business in January 2016, nowadays it involves 100 approved members worldwide and its mission is to improve social and economic outcomes in Asia, by focusing on investment in sustainable infrastructure.30
30 ASIAN INFRASTRUCTURE INVESTMENT BANK (AIBB), Members and Prospective Members of the Bank.
Retrieved from https://www.aiib.org/en/about-aiib/governance/members-of-bank/index.html [Accessed: 23/09/2019]
27
In the Article 1 of the Purpose section of the original document published by Chinese government, called ‘Asian Infrastructure Investment Bank – Articles of Agreement’, it is affirmed that:
Article 1 Purpose
The purpose of the Bank shall be to: (i) foster sustainable economic development, create wealth and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors; and (ii) promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions.31
In order to reach these goals, the Bank promotes and encourages investment not only in infrastructure’s development, but also in projects, enterprises and activities which could contribute to the economic growth and development of the Region. The Bank is also willing to supplement private investment when private capital is not available, on reasonable terms and conditions.
Figure 5. Investment Figures Since AIIB Launch
Source: 2018 Aiib Annual Report And Financials - https://www.aiib.org/en/news-events/annual- report/2018/home/index.html
31 ASIAN INFRASTRUCTURE INVESTMENT BANK, 2017. Articles of agreement, p. 2. Online PDF-Version.
Retrieved from https://eng.yidaiyilu.gov.cn/wcm.files/upload/CMSydylyw/201711/201711150415020.pdf [Accessed: 23/09/2019]
28 Figure 6. Project Figures Since AIIB Launch
Source: 2018 Aiib Annual Report And Financials - https://www.aiib.org/en/news-events/annual- report/2018/home/index.html
Thanks to those two graphs, it is possible to notice that US$ 7.5 billion were invested at the end of 2018, registering more than 200% growth in less than two years. The total amount of projects, indeed, has grown from 8 to 35 in less than two years. This shows how fundamental AIIB is nowadays for the BRI.
It was important to sign agreements and memorandums with other global financial institutions, since they could lead to a faster and larger development and growth of the countries involved.
In April 2017, for instance, AIIB President Jin Liqun and World Bank Group President Jim Yong Kim signed an important memorandum to strengthen cooperation between the two institutions. The World Bank Group is composed by five different institutions aiming at reducing poverty, increasing shared prosperity and promoting sustainable development.
One of these five institutions, the International Bank for Reconstruction and Development (IBRD), provides loans to middle-income developing countries, financing projects backed by sovereign governments. BRI involves many developing countries, so this institution plays a major role in it.
It is fundamental to mention the thematic priorities of AIIB: nowadays it is crucial to consider some priorities, like green development and sustainability. Concerning these topics, the Bank is prioritizing sustainable infrastructure with a focus on green investments and green financing system. Environmental protection, climate adaptation and investments for climate mitigation are concepts extremely relevant for this institution.
Then, it is worth to talk about cross-border connectivity, which is the core of the BRI: if countries are well connected, it will be easier to communicate, trade and create relationships of mutual benefits.
29
Finally, private capital mobilization is about finding new solutions to let private sector collaborate with governments.
1.2.5. People-to-people ties
It represents the cultural milestone to build the BRI. Regarding the cultural aspect, many activities and exchanges have been organized: festivals, radio and television programs, cultural exhibitions, etc.
Furthermore, many agreements have been signed by several countries. China, for example, has signed cooperation agreements on the protection of cultural heritage with Indonesia, Myanmar, Serbia, Singapore, and Saudi Arabia.
The expansion of cooperation in tourism is another result to be achieved. In this regard, B&R countries will surely benefit from the Initiative from a touristic point of view. According to the statistics released by the China Tourism Academy, the number of tourists from China to the Belt and Road countries has witnessed a 77% increase within five years, from 15.49 million in 2013 to 27.41 million in 2017, with an average annual growth rate of 15.34%. 32
In conclusion, on 22nd May 2018, Guangzhou undertook a three-year plan and published the
‘Three-year Action Plan for Advancing the Belt and Road Initiative (2018-2020)’ for the achievement of five key objectives:
1) Trade and Investment Liberalisation and Implementation: the aim is to promote and improve innovation and trading mechanism across the province’s institutions, with special cooperation with Macau and Hong Kong.
2) Increasing Investment, Trade and Cooperation: the main goal is to secure investment in several designated sectors, to enhance production capacity cooperation at the international level and to take every opportunity leading to the development of the trade in services sector among B&R countries.
3) Optimising Infrastructure Connectivity: it is imperative to optimise the development of seaports, airport and innovation centres.
4) Financial Cooperation and Technological Innovation: the adoption of advanced provincewide financial services systems and the launch of a national innovation centre are
32 BELT AND ROAD PORTAL, 16/09/2019. B&R countries see thriving tourism cooperation with China.
Retrieved from https://eng.yidaiyilu.gov.cn/qwyw/rdxw/103436.htm [Accessed: 25/09/2019]
