Zhang Xiaoqiang: Building A Win-win Path Together

Speech delivered by CCIEE Executive Vice Chairman Zhang Xiaoqiang at the Lien China Development Forum

Distinguished Ambassador Luo Jialiang, Professor Yu Minghua, Mr.Lien Jown Jing, Professor Liu Hong, ladies and gentlemen,

Good morning! I am very pleased to participate in the Lien China Development Forum. On the 5th anniversary of the Belt and Road Initiative proposed by President Xi Jinping, it is of great significance to hold this seminar in Beijing discussing the cooperation on the Maritime Silk Road. On behalf of China Center for International Economic Exchanges (CCIEE), I would like to extend a warm welcome to all of you and take this opportunity to share my viewpoints on the Belt and Road from three aspects.

First of all, the Belt and Road initiative has received positive responses from more countries since it was proposed by President Xi Jinping between September and November 2013. The joint building of the Belt and Road has been transformed from an idea to an action, from a vision to a reality and has made great progress. It has provided a strong impetus to the goal of achieving common prosperity.

China has signed Belt and Road cooperation agreements with more than 100 countries and international organizations. The joint building of the Belt and Road and its core concepts have been written into the documents of important international mechanisms such as the United Nations, the G20 and APEC. Moreover, the building of the Belt and Road has been linked to major strategies such as the European Juncker Plan, Kazakhstan’s “Bright Road”, Russia’s Eurasian Economic Union, and ASEAN’s “Interconnected Master Plan”. Together with other relevant countries, China has formulated important plans such as the Strategic Plan for ASEAN-China Transport, the 2030 Railway Strategy for Central Asia Regional Economic Cooperation (CAREC) region, and the Special Infrastructure Plan for the China-Pakistan Economic Corridor Transportation. On 21of July this year, China and Senegal signed a document to build the Belt and Road together, making Senegal the first West African country to sign the documents with China.

Achievements have also been made in the aspect of infrastructure construction. For example, the Addis Ababa–Djibouti Railway connecting Ethiopia and Djibouti has been put into operation since January this year; the China-Laos railway is making good progress, the construction of the railway connecting Bandung and Jakarta and the high-speed rail have made a good start. The port of Piraeus, Greece has become an important transit hub between East Asia and Europe, the China-Russia crude oil pipeline has been officially put into use, and the power project built in Pakistan has played a positive role in easing energy shortage. As of August 26, 2018, the China-Europe freight train has made a total of 10,000 trips, reaching 42 cities in 14 countries in Europe.

In the past five years, the trade between China and the countries along the belt and road route has exceeded US$5.5 trillion. The influence of the platforms such as the China-ASEAN Expo, China-South Asia Expo, and China-Eurasia Expo has been continuously enhanced, which has effectively promoted trade and investment cooperation. China’s non-financial investments in countries along the route exceeded US$80 billion. From January to July this year, the investment made by the countries along the Belt and Road in China increased by 30% year-on-year, much higher than the 5.5% growth rate of foreign investment in China. China has built 82 overseas economic and trade cooperation zones along the route, invested US$29 billion, and created 244,000 jobs for the local markets. The China-Belarus Industrial Park and China-Thailand Rayong Industrial Park have also achieved good results. In 2016, China’s Hesteel Group acquired Serbia’s Smederevo steel mill. By introducing advanced international practices, equipment maintenance and system transformation, the Hesteel turned the Smederevo steel mill into a profit-making enterprise and thus, 5,000 employees are able to keep their jobs. As for the Asian Infrastructure Investment Bank (AIIB), it has reached a total of 87 members after six expansions. So far, it has approved financing of more than US$5.3 billion for 28 projects in 13 countries, including the Philippines, India and Indonesia. For instance, the A2213 project implemented in Bangladesh, which focuses on improving rural distribution systems, benefited more than 12.5 million people in the rural areas. Finally, China’s $40 billion Silk Road Fund has already signed 21 projects and committed to invest more than $8.7 billion, covering transportation, clean energy, urban infrastructure, poverty alleviation and other fields.

In terms of cooperation in agriculture, water conservancy and environmental protection, gradual progress has been made and the people-to-people bond has been greatly strengthened. In the past three years, the China-Kazakhstan Agricultural Innovation Park has introduced 45 varieties of six major categories, including wheat and corn. The WW-5 wheat developed by Chinese experts is able to produce 319 kilograms per mu(666㎡), 82% more than the local wheat. In Sri Lanka, Chinese companies have brought clean water and water storage equipment to local villages and towns in order to help them improve water safety, sewage treatment, and prevent chronic diseases. The Silk Road Chinese Government Scholarship sponsors 10,000 new students from countries along the belt and road to study in China. Apart from all these programs, many other activities have also been organized in relations to cultures, tourism, seminars, and think tank dialogues. The Belt and Road Green Development Alliance was also established.

The key to achieving such a good start is that the Belt and Road initiative adheres to principles of dialogue and consultation, joint construction and shared-outcome, cooperation and mutual benefit. The participating countries are promoting the implementation earnestly as they are committed to improve the livelihood of the people living along the route. The joint building of the Belt and Road reflects the desire of all countries, especially the developing countries to promote peace and seek development. This is not only economic cooperation, but also an important way to improve the global development model and global governance as well as promote the healthy development of economic globalization.

Secondly, challenges and doubts continue to remain in the process of the Belt and Road cooperation, which requires more attention, deep understanding, and targeted solutions.

For example, media, scholars, and government officials from some developed countries believe that the Belt and Road initiative is the Chinese version of the “Marshall Plan”. This is not true because the initiative is essentially different from the Marshall Plan. Unlike the Marshall Plan, which only allows countries with a common social system to participate, the belt and road initiative does not engage in geopolitical alliances or military alliances. It does not draw the boundary by ideology but seeks common ground while reserving differences; it does not export one country’s development model to other countries but promote exchanges and mutual understanding; it does not attach political conditions or exclude other cooperation programs and partners. The United Nations Under-Secretary-General Gettu believes that China welcomes all countries to take part in the initiative, which is why the Belt and Road has been able to expand its circle of friends continuously.

Some people have suggested that the building of the Belt and Road has greatly increased the debt burden of developing countries. Recently, the Washington Post reported that China has caused “debt traps” in countries such as Pakistan. This is pretty much a one-sided view based on fake data. The Belt and Road was initiated only five years ago and some large projects have just started. The belt and road-related debts only account for less than 10% of the total foreign debts of some developing countries. According to the Pakistani government, 42% of the country’s long-term debt comes from multilateral financial institutions, and loans from China account for only 10%. Although China is Kenya’s largest creditor, the debt accounts for merely 21% of its total debt. Scholars in some countries said that China has raised tens of billions of dollars for the country’s Belt and Road project, while some other people treat this as a sudden surge in foreign debt. In fact, the figure mentioned above is the total estimated investment for various projects and it will take five to eight years to complete the projects and use up all the money. Furthermore, some of the projects are investment projects, not borrowings. For instance, the Silk Road Fund I introduced earlier has committed more investment than the Asian Infrastructure Investment Bank, however, the fund is investment-oriented. That means good returns will lead to high yields on investment, but there is no debt-based clause, which is completely different from loans. More importantly, whether it is investment or projects with loans, the key is to look at the return. A good return will not only enable the borrowers to repay the loan but also get a high return rate. Therefore, enhancing efficiency and sustainable financing are the most important things.

Frankly speaking, there are indeed some problems in the building of the Belt and Road. For example, we need to enhance financial support and risk management for major projects, and pay more attention to projects that can benefit the livelihood of local people. A few enterprises have emphasized excessively on short-term profit and did not fully comply with local laws and regulations relating to environment and corporate social responsibility. For those major transportation infrastructure projects require large investment, long period of construction, large social benefits but offer low financial returns, we need to come up with more effective solutions. Moreover, the implementation of some important projects have been interrupted due to political, election and other reasons, we need to properly resolve the problems and take into account the legitimate rights and interests of all parties. In terms of financing, the existing financial system and capital market development cannot meet the huge financial need of the Belt and Road. According to the Asian Development Bank research report, the developing countries in Asia (China, Japan and South Korea are excluded) will need an annual amount of US$1.8 trillion for infrastructure construction, but only half of the fund can be provided by themselves.

Thirdly, in his speech at the Belt and Road Forum for International Cooperation held in Beijing last May, President Xi Jinping stated that the Belt and Road should be built into a road for peace, a road of prosperity, a road of opening-up, a road of innovation and a road connecting different civilizations. At the symposium on the 5th anniversary of the Belt and Road, held on August 27 this year, he emphasized that we must adhere to the principles of dialogue and consultation, joint construction and shared outcome, win-win cooperation and mutual learning so as to improve the well-being of the people. It is also proposed to focus on the key tasks and pay attention to details, build more platforms for trade promotion, work hard on financial security systems, and accelerate the creation of a sound financial system supporting the building of the Belt and Road. Based on past experience and the principles above, I would like to make five points here.

First of all, we should deepen policy communication, strengthen coordination of development strategies and promote the negotiation of free trade agreements (or an upgraded version). For example, at the RECP (Regional Comprehensive Economic Partnership Agreement) Ministerial Meeting held in Singapore in August this year, a “Joint Declaration” was adopted to welcome the progress made in various aspects of the negotiations and the participants are striving to conclude the negotiations before the end of this year. These 16 countries account for half of the world’s population and 30% of GDP, which means they have huge potential for cooperation and development. It is necessary to strengthen customs cooperation, improve the inspection and quarantine coordination mechanism, and speed up logistics. In the areas of trade and investment liberalization and facilitation, personnel and factors circulation, we will create more convenient and efficient cooperation frameworks and mechanisms, and enhance cooperation in improving financial supervision and expanding the scale of local currency swaps.

Secondly, we should pay more attention to inclusive and sustainable development, strengthen cooperation in green finance, protect the ecological environment, support the development of small and medium-sized enterprises, agriculture and rural areas, and make greater progress in employment and people’s living standards. We must make more efforts to guide the social capital engaging the construction projects of countries along the route, develop local capital markets, and actively promote financing models such as PPP. We should make new progress in the aspect of cooperating with international financial organizations such as the World Bank and the Asian Development Bank, especially in the areas of joint financing, technical assistance, and institution-building. Apart from that, we should work together to reform international institutions such as the WTO and the IMF continuously, so that they can play a better and more positive role.

Thirdly, we should strengthen the coordination between the “soft” and “hard” projects. While developing major construction projects and industrial parks, we should also enhance our cooperation in other areas, such as scientific and technological innovation, humanities exchanges, education and health to enhance sustainable development in developing countries. For example, for projects like transportation, energy and manufacturing, we should not only focus on smooth construction, but also on the training of local managers, engineers, and employees. Furthermore, we should strengthen medical and health cooperation in rural areas and improve prevention and treatment of infectious diseases.

Fourthly, we should be more open and jointly oppose trade protectionism. China is building a new open economy, further reducing tariff, expanding imports, relaxing access restrictions for foreign investment, and improving the business environment. On August 28th, China’s first foreign investment negative list came into effect and 22 opening measures were launched in the fields of manufacturing, transportation, logistics, professional services, infrastructure, energy, agriculture and so on. The “negative list” lists the schedule and roadmap for opening the automotive and financial sectors and 48 special management measures were retained. Comparing with 2017, the special management measures were reduced by 315. We also hope that countries along the belt and road will share the concept of openness, develop open cooperation, and oppose trade protectionism with practical actions.

Last but not least, we should gather more strength to promote international cooperation. We welcome not only the vast number of countries from Africa and Latin America countries to participate in the building of the Belt and Road, but also enterprises from Western Europe, Japan, South Korea, the United States, Canada and other countries. According to a research report published by the well-known European think tank Bruegel, the Belt and Road Initiative have brought new opportunities for European countries to expand their trade. In March this year, the Siemens Group of Germany announced the opening of a global Belt and Road office in Beijing, and has started cooperation with more than 100 Chinese companies to explore new markets. Executives from Honeywell and HSBC said that the Belt and Road initiative means that a lot of new opportunities will be made available in areas such as infrastructure. We welcome any country who is willing to take part in the building of the belt and road.

Ladies and gentlemen,

This year marks the 15th anniversary of the establishment of the strategic partnership between China and ASEAN. All the ASEAN countries are located along the Maritime Silk Road, and Vietnam, Laos, Myanmar and Thailand are also important participants of the “China-Indochina Peninsula” economic corridors. The China-ASEAN cooperation has made continuous progress in recent years. From January to July this year, the trade between China and ASEAN reached US$330 billion, a year-on-year increase of 20%. China imported US$151 billion of goods from ASEAN, a year-on-year increase of 22%. Since the diplomatic relation was established between China and Singapore in 1990, the governments of the two countries have made significant progress in important projects such as the Sino-Singapore Suzhou Industrial Park and the Sino-Singapore Tianjin Eco-City. Since then, the Sino-Singapore Guangzhou Knowledge City and the Sino-Singapore Chongqing Interconnection Cooperation Project have also made positive progress. From January to July this year, Singapore’s investment in China reached US$3.62 billion, a year-on-year increase of 23.5%, making it the largest investor in China. Furthermore, the leaders of China and Singapore have also reached important consensus on cooperation in the building of the Belt and Road. This forum gives all the participants the opportunity to conduct in-depth exchanges and discussions, and offer their valuable suggestions on strengthening cooperation between the two countries, deepening cooperation in the Maritime Silk Road and building a community with shared future for mankind.