Development is Key to Advancing the Belt and Road Initiative

The fundamental problems that the Belt and Road Initiative (BRI) aims to solve and the goals it is expected to achieve boil down to development. As the world’s second largest economy, China is highly complementary to most other developing countries in terms of factor endowments and macroeconomic characteristics. Historical experience suggests that large economies can generate spillover effects in areas such as investment, trade, technology, and finance. The BRI is neither an initiative to create a new set of international economic and trade rules nor an attempt to solve various difficulties in economic development with a single development model. Instead, it is an open international platform that China and other countries build together to promote economic development. We attribute the macroeconomic logic behind the BRI partly to the interaction between the positive externalities of China’s development and the rebalancing of the global economy. Reform and opening up have greatly improved China’s macroeconomic efficiency, and the country’s high savings have successfully translated into strong domestic investment and large trade surplus. Developed countries’ pursuit of trade balance has prompted China to pay more attention to trade with other developing countries, and China’s outward investment has also become more balanced between developed and developing countries. Given that the economies of China and most BRI countries are complementary to each other, there is sizable room for cooperation between these parties. Thanks to its large economic scale, China’s development brings positive externalities that are reflected in four aspects: (1) Strong infrastructure construction capacity and proactive action promote cross-border infrastructure construction and provision of public goods. (2) Large market demand makes global terms of trade favorable to developing countries. (3) Fledgling innovation system helps drive technological progress in related countries. (4) Industrial adjustment boosts outward investment. The BRI has gradually materialized from an idea and a vision into policies and action, and has progressed from “sketching the outline” to “filling in the details”. Under the influence of investment and trade, the BRI has initially realized infrastructure connectivity (i.e., a general connectivity framework consisting of six corridors, six connectivity routes) and joint rule-making; boosted trade, investment, and employment in related countries; and played a notable positive role in the economic growth of related countries. However, there are also risks in the provision of cross-border public goods and outward investment. We believe that effectively promoting high-level opening up, including renminbi (RMB) internationalization, could help advance the BRI to a new level.