Forum: What does the future hold for Belt & Road?
Editor’s Note:
Chinese Premier Li Keqiang said in his annual government work report at the fifth session of the 12th National People’s Congress that China faces “far more complicated and grave situations” both at home and abroad, as it steps up economic restructure efforts and aims to play a greater international role. 2017 could be an uneasy year for China with uncertainty surrounding Donald Trump’s administration. Is a ChinaUS trade war imminent? Is the Belt and Road initiative more welcomed or questioned? CGTN’s first opinion program “The Point with Liu Xin” held a round table discussion with some distinguished guests to figure out these issues. Liu: In the just released US President’s Trade Agenda for 2017, Trump’s team has said that they are going to pay much more attention to freer trade and fairer trade. So which goes first, free trade or fair trade? Or are they mutually exclusive? Do we have to choose one of them? Stratford: I think, ideally, you have to have both of them. And you can only have sustainable relationship if you have both of them. If a population or a country believes that trade is not being conducted fairly or it’s not working for them, they’ll have a popular uprising or there will be other political forces that will cause the country to make some adjustment. I think that is what’s happening in the United States right now. There is a pretty broad consensus now in the US that the trade relationship with China has not been as fair as it could be and that the US has suffered from that. On one level, you can talk about the trade deficit and how China has quadrupled it since joining the WTO 16 years ago. But I don’t think that really gets to the heart of the problem. A lot of companies doing business here feel distressed because they are not allowed to do in China what Chinese companies are allowed to do in the States; and they believe that sets up unfair advantages. In the long run, it can have a huge negative impact on the US economy.
Charles Liu: Tim, I totally disagree. I don’t think it is a question of fair trade where Americans lost out. Americans have gained so much by being able to buy goods at prices which they would not have been able to afford if it was all manufactured in the US. What we have is a situation in which there is a good portion of the US population left behind in the new global order. They lost not because of China, but because of automation, higher productivity, higher efficiency, and the economies of scale that China has produced. Is that unfair? What is really unfair is that US society has not been able to take care of those who have been left behind by globalization. Geraci: When Country A trades with Country B, we know that opening up trade and lowering the barrier benefits both countries’ income. The problem is that this income is not fairly redistributed within the country. On average, the US economy would grow, but that growth then gets concentrated in the hands of a few people. Maybe there are some people at the low end who benefit from buying cheaper goods from China. But if the country does not have an income redistribution mechanism within itself, then it creates the problem of the one percent versus the 99 percent. Liu: Over the last three years, for instance, China has signed industrial capacity cooperation agreements with more than 20 Belt and Road countries and built 52 economic and trade cooperation regions in 18 such countries. It is fair to say that the realization of the Belt and Road initiative is not only boosting the industrialization of the countries within the area, but also getting them on the map of economic globalization via the China bridge. So when it comes to the economic background of this Belt and Road initiative, some people are actually questioning, and some people in the West are saying, that China just wants to dump its excess industrial capacity, steel, infrastructure capability. Is that true? Pearson: I think that’s a very negative perspective you are getting from the West. It might just be jealousy, possibly because the Middle East policy in the last 50 years has not been so successful. Don’t ask the Western media about the Belt and Road. Ask somebody else on it; ask an Afghan farmer. I talk from the perspective of the small businessmen and I am the chair of the chamber of commerce. 80 percent of our clients are SMEs. What they rely on is what China gives them. If you wake up in Shanghai and you need to get to your factory in Ningbo, you can get on a train. It is only going to set you back 250 yuan ($ 36.3). Time is money for this small business person. China is enabling small business owners by trying to explore that economic opportunity and connect to people who are currently outside the opportunity. The world is increasingly polarized between the haves and have- nots – migration results from that. That’s the issue of this century, and China is trying to pre- empt the issues that create the Islamic State. It is trying to pre- empt the issues that create trade wars. I was born in a Belt and Road country and I have a scar on my leg because I received an injection from a nurse who used a rusty needle, because we weren’t at a decent hospital. It is not just about economic benefits. It’s about healthcare access for the ordinary people, and this is going to bring SubSaharan Africa, Southeast Asia and the Middle East onto the global economic map. That’s 80 percent of the world’s population. If you can give these people the opportunity to earn their own living, you simultaneously get rid of a terrorism threat, which has nothing to do with religion.
Charles Liu: I just invested in a project in Pakistan. It’s part of the Belt and Road, and I can tell you, for the local population, they are ecstatic. But what’s more important from a geopolitical and micro- economic context, it’s not a question of dumping excess capacity. It’s really a question of China becoming a capital exporter. What do you do when you export capital? Do you do what Wang Jianlin does and go to buy movie studios in Hollywood or football clubs in Europe? No, the government will not do that. What you do is you build infrastructure in surrounding countries, what you end up with is economic integration of these countries with your country at the core. Pearson: That’s true.
Charles Liu: That’s the end result, strategically. Xiang: The Belt and Road initiative is such a broad, long- term strategy, so we can’t discuss it without mentioning one point: dumping of excess production. According to the official figures so far, we have invested $ 18 billion in the countries along the route. Most are used to build infrastructure, highways or ports. All the infrastructure is very helpful for these countries. And of course, it will be helpful for Chinese investors and enterprises to do business there. So it’s a multi- faceted initiative – geopolitical, trade, investment, currency, culture. Geraci: However, it does create a little bit of friction in some recipient countries. They do not fully understand the reasons, and that’s why we should make an effort, we who are living here, to explain to people in the West why China is doing this. It is not to dump steel, but to develop infrastructure. But then infrastructure is a tricky thing, because there is sensitive infrastructure and there is non- sensitive infrastructure. If you build a road, it’s fine. If you buy a port, it’s a little bit tricky. If you buy a telecom infrastructure, it gets even trickier. Stratford: You know when I talk with current US government officials, former government officials, people in the think tanks, I find very few people who want to criticize the Belt and Road, and I think that the opposition from the US might have come from the views of one or two people. But everyone I talked to thinks that the US’ opposition was a mistake. In terms of dealing with steel capacity and so on, it’s a lot better to find additional users for steel than to dump them in existing market where there is a supply and nexus of demands. I don’t think that’s a problem. The only concern I hear, not only from the US but also other countries in the region, is as China expands its economic contribution, it also expands its political influence. What I hear are concerns that China sometimes uses its economic influence to pressure countries for political goals. You see examples of that with South Korea right now. They feel like they are getting pressured economically because of political reasons and that’s the only concern that I see is serious. Other concerns are red herrings.
Liu: Wouldn’t it be nice if the US is also part of the Belt and Road initiative? Then it can benefit all of us. Everybody will win.
Stratford: There are American companies that are involved, and the Chinese government and the infrastructure bank. They all make it clear that Americans are welcomed and they are delighted to be participating in it. Liu: So the window is open? Stratford: Yes, I don’t think that the opposition from the West is as strong as you think.