On May 7th, the Belt and Road Trade and Investment Index (BRTII) (hereinafter referred to as BRTII) was released in Beijing. The BRTII is a joint research work completed by China Center for International Economic Exchanges, the University of International Business and Economics, Refinitiv (formerly Financial & Risk business of Thomson Reuters), China Development Bank Research Institute and many other well-known institutions at home and abroad. BRTII aims to serve the “Belt and Road” initiative, provide international, professional, scientific, strategic and sustainable research for the “Belt and Road” trade, investment, capital flows and industrial cooperation under the global value chain. It will also serve as investment guidelines for relevant countries, enterprises and international organizations involved in the building of the Belt and Road.
BRTII is divided into two major index frameworks: trade index and investment index. With the data support from Refinitiv, WDI, UNCTAD, ICRG and other databases, the BRTII research team analyzed and measured 41 sample countries from 2012 to 2017 according to different criteria. Furthermore, the team also evaluated the trade, investment development and future of the countries along the “Belt and Road” in terms of scale, facilitation, risk and potential. The results show that the “Belt and Road” initiative has achieved positive and significant results, and trade between countries along the route has been expanding and investment cooperation has continued to deepen.
With the continuous advancement of the Belt and Road international economic cooperation initiative, the Belt and Road trade index has been increasing year by year. The “Belt and Road Initiative” has effectively increased the overall level of trade between countries along the route and gradually released the role of import and export trade in promoting the economic development of countries along the route. The trade in intermediate goods has become the main form of regional trade, and the growth rate of capital goods trade has been accelerating. Electrical machinery, equipment and energy commodities have become the main trade goods of the “Belt and Road”. The proportion of foreign capital flows in the countries along the Belt and Road has been increasing in the global capital flow, and the “Belt and Road” has become the most important area of foreign capital inflow in the world. In the future, the building of the “Belt and Road” will create huge investment and capital needs. As the largest “intermediate goods” trading country, China will become a new driving force for the continued economic growth of countries along the Belt and Road. Although the relevant trade and investment risks have shown a steady downward trend, the structural risks have constrained the potential in development and cooperation. The results of the index evaluation show that the trade and investment of the countries along the Belt and Road are highly volatile, which is not conducive to promote smooth flow of Belt and Road trade.
Chen Wenling, chief economist of China Center for International Economic Exchanges believes that the Belt and Road initiative originated in China, but the opportunities and achievements belong to the world. In the past six years, the building of the “Belt and Road” has always adhered to the concept of openness, greenness, cleanliness, and achieved high standards of development goals. More and more countries have gradually understood, accepted, and actively participated in the building of the belt and road, which is very different from before. Currently, there are 127 countries and 29 international organizations signed various cooperation documents relating to the belt and road with China.
The Belt and Road cooperation plays an important and positive role in improving interconnection, promoting world economic growth and implementing the UN 2030 sustainable development agenda. In particular, the smooth flow of trade and investment has become the driving force for the world economic development; an important way to release the development potential in countries along the route; and an important support and cornerstone for promoting the construction of an open world economic system. The promotion of the trade and investment facilitation in the building of the “Belt and Road”, and the reduction in the cost of interconnection between soft and hard facilities, transaction costs and business costs, will increase the breadth and depth of economic globalization of participating countries.
Professor Hong Junjie, head of Economics Department of the University of International Business and Economics and Dean of the School of International Economics and Trade, said: “the preparation of this trade and investment index helps us to understand the trade and investment in the area along the Belt and Road region. The calculations show that the countries and regions along the “Belt and Road” have become the world’s second largest trade zone after the EU. The flow of foreign capital has risen against the trend and the interconnection dividend has gradually emerged. It is expected that the Belt and Road region will continue to be the new highlights of future global economic growth.
Chen Fang, Managing Director of Refinitiv China, said: “as one of the world’s largest providers of financial market data, Refinitiv will provide a better way to explore the investment opportunities and understand the risk in the building of the belt and road by offering comprehensive and accurate data. We are very happy and honored to participate in the preparation of the index report. We also hope to maintain close cooperation with relevant institutions in the future to help investors find profitable, affordable and sustainable investment projects relating to the belt and road.”
At present, the global growth, trade and investment patterns are undergoing profound adjustments. Many countries are at a critical stage of economic recovery, structural transformation and upgrading, and they hope to find new economic growth points so as to further stimulate development vitality and cooperation potential. As a new model of international cooperation, the “Belt and Road Initiative” will not only benefit trade and investment among countries along the route, but also facilitate regional and global interconnection and inject new strength and development momentum into the development of globalization.
Below is a summary of the main conclusions of the report:
· The BRTII results show that the Belt and Road international economic cooperation initiative has fully stimulated the resource endowment advantage, locational advantage, industrial advantage and synergies in different regions such as Southeast Asia, West Asia, Central Asia and Central and Eastern Europe. The intraregional trade creation has become increasingly closer. Countries like China and Singapore have played an important role in improving the trade and investment of their neighboring countries and countries along the belt and road region. Especially in the context of global unilateralism and protectionism, open trade and investment have become important stabilizers for the world economy.
· Compared with the European Union and the North American Free Trade Area, the share of the trade within the belt and road region has increased significantly in the total global trade. By 2017, it reached 13.4% of the world’s total trade and its volume was equivalent to 65% of the EU’s internal trade. The “Belt and Road” has become the second largest trading zone in the world after the European Union, and the trade dividend has become more apparent.
· The BRTII study found that the internal trade links among the countries along the belt and road region has become closer and closer since the “Belt and Road” initiative was launched. Their participation in global trade has also steadily increased. In 2017, the trade participation reached 55.2%, and its internal trade connection became closer. In terms of trade methods, the trade of intermediate goods has become the main form of regional trade in the Belt and Road region. In 2017, the trade in intermediate goods accounted for 61.0% of trade within the belt and road region.
· As the largest intermediate goods trading country, together with its huge domestic market, China will become the endogenous driving force for sustained economic growth in countries along the Belt and Road region. According to BRTII results, China’s total import of intermediate products in 2017 was US$943.12 billion, accounting for 36.3% of the total in the Belt and Road region, and 5.0 percentage points higher than that in 2013. The imports from the countries along the Belt and Road region amounted to US$302.31 billion, accounting for 32.1% of China’s total imports of intermediate products. The huge market demand of China has greatly promoted the trade growth among countries along the belt and road region.
· In recent years, countries along the Belt and Road region have become increasingly prominent in global investment, and their cross-border capital growth is much higher than other regions. In 2017, the total outward and inward foreign direct investment of the countries along the Belt and Road region reached US$155.4 billion and US$323.7 billion respectively, up 27.3% and 2.1% year-on-year, making them the world’s most important recipients of foreign capital. The total inward FDI of the countries along the belt and road region accounted for 31.6% of the world’s total, which is significantly higher than the North American Free Trade Zone (23.0%) and the European Union (21.2%). In particular, some major project investments have greatly enhanced the host countries’ ability in sustainable development.
· Whether it is FDI or ODI, China has the largest cross-border capital flows in the Belt and Road region. Since 2015, China’s ODI has overtaken FDI and has become the largest net foreign capital outflow country.