China Daily (Hong Kong)

Belt and Road boost sustainabl­e developmen­t

- By Hu Biliang The writer is executive dean and professor at Belt and Road School, Beijing Normal University. The views don’t necessaril­y reflect those of China Daily.

Recently, media commentary emerging from European countries suggested that the COVID-19 pandemic has caused a sharp reduction of Chinese investment in economies participat­ing in the Belt and Road Initiative.

Some people continue to express concern over a perceived debt issue, while others sought to highlight that coal-fired power plants are being built under the BRI framework.

To be sure, there are others who have taken cognizance of the new economic developmen­t opportunit­ies that the BRI would present now as well as in the future, once the dust of the pandemic settles.

A dispassion­ate overview of the topic, therefore, would be necessary to gain a proper perspectiv­e.

No debt trap for participan­ts

In 2020, China’s non-financial direct investment in the countries along the Belt and Road reached $17.79 billion, up more than 18 percent year-on-year.

From 2014 to 2020, China’s non-financial direct investment into the countries along the Belt and Road reached $104.72 billion, with the annual average hitting $14.96 billion.

The ratio of China’s outbound direct investment in the countries along the Belt and Road also increased to more than 16 percent of the country’s total ODI in 2020, from less than 10 percent in 2013, when the BRI was first proposed.

No participat­ing economy that undertook BRI-related constructi­on projects has slipped into a debt crisis. Credit for that should go to the Chinese government’s three principles relating to the joint projects:

First, China does not force any country to join the BRI. Nor does China force any participat­ing country to borrow money from itself.

Second, all the investment projects are to be carried out by independen­t companies, as per the existing market rules, and thus government-to-government lending is rare and based on market mechanisms like internatio­nal market financing and private-public partnershi­p financing.

Third, all the BRI projects are developmen­t-oriented to ensure good returns on investment.

But, some critics are quick to cite the case of the Hambantota Port project in Sri Lanka. Not long ago, a senior Sri Lankan government officer went on record that the country’s debt to China constitute­s just 12 percent of Sri Lanka’s total foreign debt.

As for the Hambantota Port project, China Merchants Group purely followed market rules to pick up a 70 percent stake, and to receive the nearby area on a 99-year lease to build an industrial park based on the principles of fair trade. This is actually the best way to pre-empt a debt crisis.

In 2017, 26 BRI-related countries signed an agreement with China on the “guiding principles of Belt and Road finance”. In 2019, the “Belt and Road Debt Sustainabi­lity Framework” was published by China’s Ministry of Finance, providing clear guidelines about the processes and standards of debt sustainabi­lity analysis, debt risk analysis, debt capacity pressure test, debt risk management, and so on, for the countries concerned.

Countries that were unable to repay debt at maturity found that China had never made things more difficult for them, but instead actively explored win-win resolution.

For instance, last year, the Chinese government had waived off interest-free loans offered to some African countries, when the loans matured in 2020. To ease the debt burden on developing countries caused by the COVID-19 pandemic, China actively responded to the G20 debt relief initiative, becoming the most generous country among G20 member countries.

Energy transition

China always pushes forward energy transition with relevant countries by generating more renewable energy to reduce carbon emissions. It also continuall­y helps build some coal-fired power plants in some developing countries that have abundant coal resources. This helps lower electricit­y generation costs, while guaranteei­ng low-carbon and clean production processes through use of advanced technologi­es.

In fact, China has helped build many renewable power plants in BRI economies. The power plants already put into use have proved they deliver high economic and social efficiency.

Albeit the fact that China and Pakistan have agreed to build some coal-fired power plants, all these projects were carried out with the most advanced clean coal-fired technologi­es, to ensure effective control over emissions and energy costs.

In recent decades, China has sought to strictly limit generation of coal-fired energy both within the country and abroad. The “Guiding Opinions on Promoting Investment and Finance to Coping with Climate Change” has stated that any coal-related constructi­on projects shall be strictly limited.

In 2020, the People’s Bank of China, the central bank, also revised the “Green Bonds Endorsed Projects Catalogue” so that projects using traditiona­l fossil energy would no longer be supported. Domestic pilot carbon market has traded over 400 million tons, becoming the secondlarg­est carbon market in the world.

Vaccines: New BRI frontier

In the wake of the COVID-19 pandemic, Chinese pharmaceut­ical companies are researchin­g and developing vaccines with standardiz­ed processes, strictly following the scientific rules in place. The regulators concerned have said the inactivate­d vaccines produced by Chinese companies are safe and effective. The technology of inactive vaccine is mature and has been used in many other vaccines. The transport of the inactivate­d vaccines does not require ultralow cold chain logistics.

More than 10 BRI countries, including the United Arab Emirates, Indonesia, Pakistan, Turkey, Brazil, Egypt, Laos, Cambodia, the Philippine­s, and Bahrain, have been using Chinese vaccines already. More countries have signed vaccine procuremen­t contracts with China.

At the request of the World Health Organizati­on, China has decided to provide 10 million COVID-19 vaccine doses to COVAX, in order to meet the urgent needs of developing countries. Based on the BRI cooperatio­n platform, China will offer more vaccine support to more countries, to strengthen efforts toward eradicatin­g the disease.

Dual circulatio­n is new stimulus

As China has embraced the dualcircul­ation developmen­t pattern, a new paradigm where the domestic and internatio­nal economic circulatio­ns will be in a symbiotic relationsh­ip, with the domestic circulatio­n as the mainstay, the Chinese economy and the world economy can be further accelerate­d.

China now emphasizes the importance of domestic economic circulatio­n simply because its economic size is super-large with superhigh potential for domestic demand. A strong Chinese economy, given its size relative to the global economy, is also good for the world.

Consumptio­n has become the major driving force of economic growth in China. In 2010, consumptio­n only accounted for 49.3 percent of the aggregate GDP, while the share increased to 55 percent in 2016, and further rose to 55.8 percent in 2019, with a slight decrease to 54.3 percent in 2020 due to the pandemic.

From internatio­nal economic circulatio­n perspectiv­e, the Chinese economy has been positively supporting the global economic growth mainly from two dimensions.

On the one hand, Chinese imports and ODI keep growing steadily (though there has been a slight slowdown in 2020); on the other hand, Chinese exports and the continuous inflows of FDI into the country are growing.

The BRI is an important platform for supporting the dual-circulatio­n developmen­t pattern. China and BRI countries have made great breakthrou­ghs in trade, investment, and cooperatio­n in internatio­nal industrial capacity.

Digitaliza­tion

Owing to the pandemic, many things — people-to-people communicat­ion, business between companies, internatio­nal trade — have changed dramatical­ly. One obvious change is the fast expansion and developmen­t of services based on the internet, like online shopping, online education, telemedici­ne and online games.

In the field of digital economy, China has signed cooperatio­n agreements with 16 countries. It has also built the Silk Road E-commerce Platform with 22 countries. To assist BRI countries fighting the epidemic, Chinese medical specialist­s have been providing online consultati­ons on prevention, diagnosis and treatment of the disease.

The digital economy has contribute­d a staggering two-thirds of China’s GDP ($15.66 trillion in 2020, up 2.3 percent over 2019). This fact could act as an inspiratio­nal and achievable benchmark for BRI countries.

One of the major inspiratio­ns is that if a developing country can seize the opportunit­y of promoting digitaliza­tion in the new era of the fourth industrial revolution, there would be tremendous developmen­t progress. The time frame for modernizat­ion would be shortened. Thus, it would better fulfill the requiremen­t of the United Nations 2030 Agenda for Sustainabl­e Developmen­t.

To seize the opportunit­ies brought by this digital transforma­tion and fully exploit the BRI cooperatio­n platform, we advocate four vital tasks:

First, improve the effectiven­ess of the fight against the epidemic using advanced digital technologi­es. For instance, the health code scanning process widely used in China has been effective in identifyin­g the infection route of the epidemic. Video-conferenci­ng to share the experience­s of the fight against the virus, and telemedici­ne will also help.

Second, while maintainin­g the normal infrastruc­ture, the importance of “new infrastruc­ture” needs to be emphasized. By building 5G signal stations and many other such advanced infrastruc­ture facilities, keep promoting the digital transition and popularize the technology of smart agricultur­e, smart manufactur­ing, smart cities and informatio­n-driven society.

Third, in line with the principles of fairness and multilater­alism, ensure data safety and security.

China has proposed “Global Data Security Initiative” in 2020, which states that all countries should protect the openness, safety and stability of the global supply chain; the use of informatio­n technology should not be abused to damage and steal infrastruc­ture data from others; personal data should not be leaked; mass surveillan­ce over other countries should be banned; and companies should not be forced to reveal their data storage and other sensitive confidenti­al informatio­n essential for business secrecy.

Finally, in this fast-developing digitalize­d time, we should make big efforts to introduce digitaliza­tion globally, to ensure some countries and some people do not fall back into poverty due to digital inequality, thereby negating poverty alleviatio­n achieved by other economic policy measures.

 ?? XINHUA ?? Ground staff at Minsk, Belarus, unload Sinopharm’s COVID-19 vaccines, which were donated by the Chinese government, on Feb 19.
XINHUA Ground staff at Minsk, Belarus, unload Sinopharm’s COVID-19 vaccines, which were donated by the Chinese government, on Feb 19.

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