The Belt and Road Initiative could play a key role in shoring up the precarious global economic recovery clouded by trade tensions, as it could not only bolster international trade and investment but help improve global governance, experts said on June 11.
“The BRI can bring common benefits to different participants and stakeholders, and therefore can act as an important mechanism offsetting global downside pressure,” said Wei Jianguo, a former vice-minister of commerce.
Wei’s remarks came after finance ministers and central bank governors from the group of 20 major economies gathered in Japan over the weekend and stressed the downside risks brought by Sino-US trade tensions.
“Global growth appears to be stabilizing, and is generally projected to pick up moderately later this year and into 2020,” the G20 officials said in a joint communique, which was published on the website of Japan’s Ministry of Finance.
“However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified,” the communiqué said, adding that international trade and investment are still important engines of growth.
“The trade and geopolitical tensions mentioned in the communiqué refer to various factors, but mainly trade tensions between the world’s two biggest economies,” Wei said.
The biggest reason behind Sino-US trade tensions is the lack of mutual trust, Wei said, citing the importance of strengthening global governance via international cooperation, which is expected to enhance mutual trust.
“The BRI has helped to strengthen global governance and could to play a bigger role in the future, considering its continuous efforts to tighten the bond between peoples and encouraging cultural exchanges,” Wei said.
Meanwhile, the initiative can help shore up global growth by boosting international trade and investment, said Liu Chunsheng, an associate professor of international trade at the Beijing-based Central University of Finance and Economics.
“As trade tensions sour, economies caught up in these are looking for new partners. This gives the emerging market economies involved in the BRI a great potential in stabilizing international trade and investment, considering their large population and market vacuums,” Liu said.
During the January-May period, the value of China’s trade in goods with economies taking part in the BRI reached 3.49 trillion yuan ($504.7 billion), up 9 percent year-on-year, faster than the 4.1 percent of China’s total foreign trade in goods, according to customs data released on June 10.
“The initiative is helping to unleash that potential, as it has established a platform of information sharing, enabling both participants and non-participants in the initiative to identify, discuss and evaluate investment opportunities in the economies taking part in the BRI,” Liu said.
Also, Chinese investments in infrastructure across the participating economies have helped to elevate their economic efficiency, which will bring more international investment, Liu said.
The G20 officials also endorsed the G20 Principles for Quality Infrastructure Investment as a common aspiration, aiming to maximize the impact of infrastructure on sustainable growth while preserving debt sustainability and integrating environmental and social considerations, according to the communique.
“Infrastructure investment financing is indispensable for the development of emerging markets, while both the funds’ recipients and providers should pay close attention to ensuring the induced economic growth could cover the debts,” Liu commented.
It would be a “prejudice” against China to say the principles are especially targeted at Chinese investments in economies involved in the BRI, Liu said. “The recipient countries will need to strike that balance wherever they get the investments, and China does not attach any additional conditions, particularly political ones, to the investments.”
Chinese companies can pursue the aspired quality infrastructure investment by better understanding and communicating with local markets, experts said.
Alan Wang, partner at Freshfields Bruckhaus Deringer LLP, a multinational law firm headquartered in London, said both Chinese companies as well as host countries partners are in the process of getting to know each other better to achieve mutual benefit.
As Chinese companies continue to mature with better understanding of local business environments and more efficient commercial viability assessments, Wang expects to see more cooperation and smoother project implementation under the BRI.