Mar 4, 2016

One Belt, One Road will benefit China – and the world

by Justin Yifu Lin

China’s principal global project is about more than short-term gain.
Throughout 2015, a major focus of the international community has been China’s economic slowdown and the potential impact on the world economy. To boost the economy, the Chinese government has launched various initiatives in the past few years, the most important ones being the Silk Road Economic Belt and the Maritime Silk Road (Belt and Road).

Aimed at promoting regional integration between China and other Asian, African and European countries covered by the initiative through improving infrastructure including ports, roads, railways and oil and gas pipelines, China’s One Belt, One Road initiative will enhance economic development in China and the other One Belt, One Road countries. With a vision to establish an “international community with shared interests, destiny and responsibility,” the One Belt, One Road initiative is also a Chinese effort to assume more international responsibility.

China is now beyond doubt the world’s leader in terms of infrastructure building. Its economic development in the past three decades has been partly driven by massive investments in infrastructure, and the country has obtained valuable experience and expertise in this field. In addition, China’s huge foreign exchange reserves can also provide adequate financing for its overseas investments.

In 2015, China initiated the establishment of the Asian Infrastructure Investment Bank (AIIB) to facilitate realizing its grand vision for the One Belt, One Road project. With 57 founding members, the AIIB is the first international financial institution designed to serve the investment needs of developing countries in the field of infrastructure building.

In the meantime, China has been trying to export its manufacturing industries to other countries while simultaneously upgrading its own industries. The economic development of many developing countries in the post-World War II era has shown that transferring labor-intensive industries from more developed economies to low-income ones can sustain rapid economic growth in the latter for at least two to three decades.

China itself benefited from absorbing labor-intensive industries from more developed economies, including Japan and the so-called “four Asian tigers” – Hong Kong, Singapore, South Korea and Taiwan.

Compared to these economies, China’s existing manufacturing industries are far bigger and will present greater opportunities for other economies. For example, when Japan started to export its labor-intensive industries in the 1960s, its manufacturing industry employed 9.7 million workers. When the four Asian tigers upgraded their manufacturing industries in the 1980s, their respective manufacturing sectors employed about 5.4 million. Today’s manufacturing sector on the Chinese mainland, however, employs 125 million workers, with 85 million of them working in labor-intensive industries. As China seeks to upgrade its industries and relocate factories, it will sustain the industrialization of almost all low-income countries along the Belt and Road.

The development of manufacturing often hinges on the establishment of solid infrastructure. The Belt and Road can greatly facilitate the transferring of manufacturing industries from China to low-income economies to promote economic development from Beijing to Brussels.

However, China’s efforts to promote win-win cooperation have been described as a threat to the existing US-led international order. The irony is while China is often asked to shoulder more international responsibility by the US, its very efforts in doing so are being simultaneously undermined by the latter. Recent moves by the US, from its “pivot to Asia” to the Trans-Pacific Partnership and its boycott of the AIIB, were all aimed at limiting China’s influence.

As the world becomes increasingly interdependent and China’s economic well-being becomes evermore enmeshed with economic situations overseas, the international community needs to acquire a better understanding of China’s global strategies in order to achieve mutually beneficial outcomes.

The Belt and Road can greatly facilitate the transferring of manufacturing industries from China to low-income economies to promote economic development from Beijing to Brussels.