The Belt & Road Initiative in the Global Arena by Yu Cheng Lilei Song & Lihe Huang

Author:Yu Cheng, Lilei Song & Lihe Huang
Language: eng
Format: epub
Publisher: Springer Singapore, Singapore

8.5 Global Political Context

8.5.1 Chinese Interests

China has numerous interests in promoting the Silk Road Economic Belt . Most importantly, the Belt serves to develop the western regions; China sees the Silk Road and the establishment of transportation infrastructure as the answer to developing its western region and the neighboring Central Asia n nations. In the future, trade liberalization and monetary cooperation will serve as the basis of a new regional economic community, with new regional hubs and large industrial parks (Rolland 2015, p. 1). The basis of the initiative is that transcontinental connectivity could “boost trade, stimulate technological development, and transform the strategic landscape” (Rolland 2015, p. 2). At present, the western autonomous Ujghur region of the country is lagging in growth compared with the coast. Historically, this area had not enjoyed positive relations with the Chinese leadership, spurring social tensions that amounted to security threats. The government is trying to resolve these issues through embracing the region in the Chinese economy. The market on the other hand is still irresponsive to developing that region and there is a large discrepancy between the amount of FDI that the eastern and western regions receive. Although Central China is becoming a more popular investment destination (7.5% registered FDI growth in 2014), the western provinces are behind with a registered 1.6% growth in 2014 (KPMG 2015, p. 27).

Another reason why this initiative is important to China is the questionable future of the Chinese economy (Wang 2015; Yanchun 2015). The main concerns are about economic growth and to what extent domestic consumption could be a pillar of that, especially as China did not achieve its trade objectives in the last three years. However, although it is popular to state that China is giving up its export-oriented model, this is far from reality. Following the global economic crisis and the emergence of its middle class, the government urged a shift to a consumption-led economy, but this does not mean that China has given up its export targets.

From 1979 onwards, China—as a developing country—chose export-oriented development as a sustainable development model. In comparison, many other developing countries focused on increasing their domestic demand. The Chinese model proved to be successful; yet, from 2006, the financial crisis coupled with pressure from the EU and USA , along with Chinese priorities, prompted China to focus its growth on increasing domestic demand.

However, the shift from an export-oriented growth model to one relying on domestic demand is not instantaneous. Currently, the Chinese economy still has abundant resources in terms of an educated labor force, infrastructure , small and medium-sized enterprises (SMEs), and a strong domestic propensity to save, which foreshadow a dual growth path of both increasing domestic demand and exports (Freedholm 2011; Jia 2015). Not only does switching to domestic demand rely heavily on households to reduce savings and focus on consumption, but also collides with the goals of Chinese SMEs that were able to enter the international market. The Chinese strategy of the twenty-first century to establish a

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