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Establishing a Policy Support System for the Belt and Road Initiative

2015-08-14

By Luo Yuze, Research Department of Industrial Economy of DRC

Research Report Vol.17 No.3, 2015

With great significance for China to build a new type of open economy system, the Belt and Road Initiative is called Version 2.0 of China’s opening-up strategy. Since 1978, with the inflow of foreign capital, equipment, technology, talents and management experience via opening-up to the outside world, China has made remarkable achievements in economic development, growing into a global trade power from a country with small trade volume. However, influenced by such factors as regional conditions, resource endowment and development stages, China’s opening-up is characterized by disharmony and imbalance of “high speed in the east but low in the west”, and “strong momentum in the coastal areas but weak in the inland areas”. Aiming at constructing a new type of opening-up and cooperation pattern featuring east-west interaction, north-south connectivity, coordinated development of the coastal and inland areas, and integration of domestic and overseas development, the Belt and Road Initiative provides a comprehensive strategic foundation for China to optimize the spatial allocation of economic activities, connect domestic and foreign markets and make use of resources both at home and abroad. Due to its large coverage area, many factors involved, geopolitical complication, imbalanced economic development and cultural diversity, the Belt and Road Initiative calls for a complete policy support system from the government so as to facilitate enterprises’ international cooperation via “Go Global” strategy.

I. Problems and Challenges for the Belt and Road Initiative

Since it was put forward, the Belt and Road Initiative has received active responses from more than 60 countries and regions, becoming the major consensus of the countries along the Belt and Road to strengthen their economic cooperation. But in the actual construction process, there are inevitable problems and challenges, which can be summarized in the following four aspects.

1. High Geopolitical Risks

Many countries along the Belt and Road are undergoing their political and social transformation, with considerable security and stability issues. With religious, cultural and social conflicts intertwined with one another, their own political risks are high. Besides, interests of some large countries are located here. The Middle East is a key strategic area for the US for a long time. Central Asia is traditionally the area of Russian influence. South Asia is where India has exerted its influence for some time. The Maritime Silk Road is faced with the military allies of the US. The competitions of major world powers in this region make the regional situation more complicated. Among them, the Middle East, Central Asia and South Asia are called Strategic Arc of Instability, with frequent coups and local conflicts. In recent years, China has actively promoted boundary delimitation in a peaceful way and has made significant progress. Nevertheless, with some territory disputes unsettled, there are still prominent problems and conflicts, with the hidden problems of clashes. With China’s international status further improved, the relationship between China and the US becomes subtle. Therefore, the development of the relationship between the two major countries will have growing impacts on this region’s situation.

2. Severe Shortage of Funding for the Infrastructure Construction

Infrastructure is the main bottleneck that constrains the economic development and cooperation of countries along the Belt and Road. Based on the estimate of the World Economic Forum, of the 54 countries with data for competitiveness, only 4 (Singapore, the United Arab Emirates, Croatia and Slovenia) have a higher infrastructure competitiveness index than comprehensive basic competitiveness index. There is a huge demand for investment in boosting infrastructure competence. According to the estimate of the Asian Development Bank (ADB), that between 2010 and 2020, Asia’s infrastructure investment demand is $800 billion, of which only about $20 billion can be provided as loans from ADB, including private investments it can leverage.

3. Many Difficulties in Coordinating and Integrating the Plan