Full coverage: Panview欄目“ Belt & Road, China's bridge to the world"
By Ravi Amar Prasad, Yenching scholar at Peking University
On Oct. 18, President Xi Jinping opened the 19th Communist Party of China (CPC) Congress with a monologue lasting 3 hours and 23 minutes. The speech set the tone for discussions over the next months and years ahead, and provided a roadmap for Chinese policy over the next five years and all the way through into the middle of the century.
Xi had laid out his contribution to the CPC's theoretical framework, named "Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era", meaning that Xi's Thought now equals Mao Zedong's and Deng Xiaoping's.
This is very significant, since both Mao and Deng have continued to play an important role in Chinese politics irrespective of the official post they had held within the state and/or CCP, and presumably, and so will Xi. That means Xi's major projects, including the Belt and Road Initiative (B&R) will be harder to abandon for political reasons, even after Xi leaves the Presidency. Hence the B&R is here to stay and will be made to succeed.
Beyond this, the speech did not tell us much new about the formulation of B&R, which had its own unique summit in Beijing in May 2017. Much we'd heard before; that the B&R would continue to be pursued as a "priority" and would serve as a "new platform for international cooperation" that promotes shared development. However, there were five areas related to the B&R that did catch our eye.
1)Giving and taking: The Belt and Road Initiative is the strongest manifestation of China's "go outwards" policy devised by Jiang Zemin in 1999, which promoted overseas investment and trade. Xi mentioned that "going outwards" should be seen as an "equal priority" with "bringing in." The terminology, "equal priority" is a new and strong statement, and may indicate a readiness to improve market access for foreign investors. If "bringing in" is also seen as part of the B&R, then we can expect more international investors to get involved.
2)Reshaping global trade? The speech mentioned "new models of trade" would be promoted. The concept was little further elaborated, but stands in line with previous Chinese calls that the global trade system is highly-imbalanced. The People's Bank of China Governor Zhou Xiaochuan gave a speech in 2009 in which he described the current trade system premised on the US dollar as unsustainable. Instead, a system premised on a basket of currencies and perhaps one super-sovereign currency (such as the IMF’s SDR) would be more sustainable. Given its size, the B&R is a key vehicle for the Chinese government to implement its thinking behind global trade and investment system. Whether that means further RMB internationalisation or the promotion of a super-sovereign currency is unclear, but what is clear is that China now feels in a strong position to start influencing the global trade debate to a greater extent.
3)Take-offs and trade-offs: Considerable emphasis in Xi's speech was placed on achieving China's two centenary goals, which were first advanced in 2012 when Xi came into power. They are both domestic goals: the first aims for China to become a "moderately prosperous" society by 2020 and the second aims to have completed modernization by 2050. To achieve the goals, economic growth domestically needs to be sustained. Yet, there exists the possibility of a trade-off between the centenary goals and objectives related to the B&R, especially in the case of a domestic economic slowdown. In such a scenario, the government would likely have to increase its fiscal stimulus to support growth and meet centenary goals. By re-allocating limited investment pools towards the domestic economy, it could well come at the cost of further B&R investments abroad.
4)Anti-corruption and B&R: Renewed focus in the speech was placed on anti-corruption efforts. In recent months, anti-corruption efforts have been extended to overseas acquisitions; from December 2016 the regulator began clamping down on acquisitions that were deemed excessively expensive or with dubious motives. The clampdown aims to prevent capital outflows, especially by those trying to siphon money out of China. While recent data suggests such efforts are working, and outflows have stabilized, the number of overseas investments under the BRI have risen dramatically. One likely explanation is that companies have started branding their overseas investments as BRI investments in order to improve the likelihood of approval by the regulator. With Xi's renewing efforts to clamp down on corruption, we would expect this phenomenon to accelerate and in turn BRI investments to constitute a greater proportion of China's total investments abroad.
5)Innovate, innovate, innovate: Xi spent much time outlining how China aims to become "a country of innovators" and how innovation will become the "primary force in driving development." B&R will have a key role to play here through intellectual exchanges, technology transfer, mergers/acquisitions and initiatives related to start-up incubators and hubs. Numerous start-ups are already attracted to China on the basis that they can scale up using Chinese capital and then benefit from market access both in China and at home. Chinese backed incubators and venture capitalists, including Silk Ventures, are also widening their presence internationally.
Accordingly, the 19th Communist Party Congress has reinforced Xi's position of power, and we can expect bright prospects for the Belt and Road Initiative. But we should also continue to watch closely on those still uncertain aspects of the B&R.
(The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )
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