Belt and Road Primer
2019/04/11

I. Background

 

In the autumn of 2013, respectively in Kazakhstan and Indonesia, Chinese President Xi Jinping proposed the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road by a five-pronged approach: promoting policy coordination, road inter-connectivity, unimpeded trade, currency convertibility, and closer people-to-people ties.

 

 

-- Policy Coordination

 

Policy coordination is key to effective implementation of the Belt and Road Initiative.

 

In order to expand shared interests, enhance mutual trust, and build consensus on further cooperation, it is important for the countries along the Belt and Road to seek common ground while shelving differences, and increase inter-governmental communication on macroeconomic policy and development strategies so as to better align their national priorities with regional planning needs and common goals.

 

-- Connectivity of Infrastructure

 

While respect for each other's sovereignty and security concerns is indispensable, a closer alignment of infrastructure development planning and technical standards is called for between the countries along the Belt and Road.

 

Such a move would facilitate the construction of key international arteries, so as to build an infrastructure network that not only links all the subregions in Asia, but also extends out to Europe and Africa.

 

-- Unimpeded Trade

 

Removing barriers to trade with the aim of unleashing the potential for greater cooperation between countries involved is a major task in building the Belt and Road.

 

Major measures the countries and regions along the Belt and Road could take include: creating mechanisms to facilitate free trade and the removal of investment and trade barriers; opening free trade areas to create a business-friendly environment at the regional and national levels and unleash the potential for cooperation; and improving the transparency of technical measures and reducing non-tariff barriers in order to liberalize and facilitate trade.

 

-- Financial Integration

 

Financial integration is an important support for the Belt and Road Initiative. Key measures the countries concerned could take to foster financial integration include: increasing financial cooperation to ensure currency stability, build a sound framework for investment, financing, and credit services in Asia, and expand the availability of public financial products; and strengthening the role of the Asian Infrastructure Investment Bank, the BRICS New Development Bank, the Silk Road Fund, and sovereign wealth funds of the countries concerned in funding key projects.

 

-- Closer People-to-People Ties

 

People-to-people ties provide an anchor for the Belt and Road Initiative. Without such an anchor, the strategic goal of connecting diverse cultures and different countries would be out of reach. Increased interaction and mutual understanding, greater awareness of potential benefits from expanded cooperation, and more participation are therefore indispensable to the initiative's success.

To this end, the countries along the Belt and Road are encouraged to step up friendly cooperation in the Silk Road tradition by promoting extensive cultural, academic, scientific, media, and other people-to-people exchanges, including those between youths, women, and volunteer groups, so as to consolidate public support for bilateral and multilateral cooperation. 

 

Close to six years since it was put forth, the Belt and Road Initiative (BRI) has become a widely welcomed international public good with a far-reaching and profound impact on the world. The BRI is an important initiative for international cooperation to enhance both China's development and its cooperation with global partners.

 

Since its inception, the BRI has received strong endorsement and warm support of the international community. So far, a total of 124 countries and 29 international organizations have signed BRI cooperation documents with China.

 

The BRI vision has been included in documents of major international institutions including the United Nations, the G20, the Asia-Pacific Economic Cooperation and the Shanghai Cooperation Organization. Indeed, the BRI has proved a popular and worthy cause that goes along with the trend of our times and responds to the shared aspiration of countries for development through mutually beneficial cooperation.

 

The BRI has made a positive impact on the world in three ways:

 

First, the BRI has opened a new area for international cooperation and boosted confidence in it.

 

The BRI is a significant move China has taken to fully open itself under the new conditions, and it embodies China's commitment to sharing development opportunities and outcomes with more countries in the world.  

 

The BRI is guided by the principle of consultation and cooperation for shared benefits. It represents an approach to international cooperation featuring mutual respect, justice, equity and cooperation for win-win outcomes. It is also a commitment to multilateralism and an open global economy. As such, the BRI will help move economic globalization toward greater openness, inclusiveness, balance and win-win outcomes.

 

Second, the BRI has created new impetus and opportunities for global growth.

 

The BRI aims to address the fundamental issue of promoting development by enhancing all-round connectivity. It has helped countries involved to remove development bottlenecks and implement the UN 2030 Agenda for Sustainable Development. This initiative has thus become an important way for boosting global growth.

 

According to the World Bank and other international institutions, the BRI will cut the costs of global trade by 1.1 to 2.2 percent. Moreover, it will contribute at least 0.1 percent of global growth in 2019.

 

Third, the BRI provides a new platform and new opportunities for fostering closer ties between countries.

 

The BRI cooperation has strengthened economic ties and people-to-people exchanges between nations, hence binding them closer together with shared interests. This will naturally build extensive consensus, enhance cooperation, and ultimately promote development for all.

The BRI is a new path of state-to-state relations based on dialogue rather than confrontation, partnership rather than alliance and on mutual learning and enrichment. It supports multilateral trading system and embraces a more open, inclusive, and balanced economic globalization whose benefits can be shared by all. The BRI is an important platform for building a community with a shared future for mankind and a new type of international relations.

       

II. Reaping the Benefits of the BRI

 

Since its proposal in 2013, the Belt and Road Initiative has created economic opportunities and boosted common development among a number of countries. New progress was made in jointly pursuing the Belt and Road Initiative in 2018, with strengthened industrial cooperation, improved infrastructure and closer ties in trade and investment.

 

The following are highlights of the progress made under this initiative:

 

1. Policy Coordination

 

--The international influence of the BRI has kept increasing since 2013. In 2018 alone, over 60 nations including New Zealand, Austria, Kazakhstan and South Africa joined the initiative.

 

--Many countries and regions have actively dovetailed the BRI with their own development programs such as the EU's Junker Investment Plan, the Russia-led Eurasian Economic Union, Mongolia's Prairie Road and Kazakhstan's Nurly Zhol (Bright Path).

 

-- China has so far signed 171 cooperation documents on the Belt and Road Initiative with more than 150 countries and international organizations.

 

--The BRI is well aligned with the UN 2030 Agenda for Sustainable Development, thus forming a synergy of policies to promote global development.

 

--The BRI connects regional development plans and cooperation initiatives such as the Master Plan on ASEAN Connectivity, Agenda 2063 of the African Union, the Eurasian Economic Union and the Europe-Asia Connectivity Strategy of the European Union, thus creating a synergy for improving connectivity and supporting economic integration among regions in the world.

 

-- Industrial capacity cooperation made headway in 2018. Tangible results were seen in the construction of an industrial park of China and the United Arab Emirates. China has reached agreements with more than 10 countries including France, Japan and Singapore on cooperation in third-party markets.

 

--China established the BRF Advisory Council consisting of leading international figures to provide advice on the growth of the BRF.

 

--China and other participating countries have in recent years set up platforms for multilateral cooperation on port, shipping, finance, taxation, energy, culture, think tank, the media and other areas and launched initiatives on a green Silk Road and a clean Silk Road.

2. Facilities Connectivity

 

-- Ports are better connected than other transportation facilities between China and other nations along the Belt and Road. China maintains first place worldwide in maritime connectivity, with shipping routes connecting its ports with over 200 nations and 600 major ports.

  

-- The China-Laos and China-Thailand railway projects made solid progress. The high-speed railway from Jakarta to Bandung started construction, and the Gwadar port project in Pakistan was also pushed forward.

 

-- China-Europe freight trains have made more than 13,000 trips so far, with the proportion of China-bound trips up by nearly 20 percentage points in 2018. The trains connect Chinese cities with 49 cities in 15 countries.

 

-- Aviation connectivity improved in countries participating in the Belt and Road Initiative, with the number of air routes up by 106 in 2018. The current 387 air routes connect 33 countries participating in the Belt and Road Initiative.

 

--Development of major transport links such as the China-Europe railway express and the new land-sea corridor is making a big difference; cooperation on transnational economic corridors is being intensified; construction of infrastructure projects on railway, port, motorway and pipeline construction as well as economic and trade cooperation parks is proceeding smoothly.

 

-- Establishment of large transport infrastructure projects along the Belt and Road, including the Colombo Port City and Hambantota Port in Sri Lanka, the Jakarta-Bandung high-speed railway in Indonesia and the Mombasa-Nairobi railway in Kenya.

 

3. Unimpeded Trade

 

-- In the past five years, China set up 82 overseas economic and trade cooperation zones in countries along the Belt and Road, investing 28.9 billion U.S. dollars and creating about 244,000 local jobs. As of May 2018, China had signed 16 free trade agreements with 24 countries and regions, nearly half of which are countries along the Belt and Road.

 

-- China's accumulative trade volume with Belt and Road countries surpassed 7 trillion U.S. dollars. It has built 82 overseas economic cooperation zones in Belt and Road countries, with investment exceeding 30 billion U.S. dollars.

 

--In 2018, non-financial investment from China to B&R countries came in at 15.64 billion U.S. dollars, up 8.9 percent.

 

-- In the first seven months of 2018, Chinese companies raised investment in 54 countries along the Belt and Road. The 8.55-billion-U.S. dollar newly added investment represented an 11.8 percent increase year on year. New construction contracts along the Belt and Road worth 57.11 billion U.S. dollars.

 

-- Kazakhstan, the world's largest landlocked country, has gained access to the Pacific Ocean through the Lianyungang port in China; and the China-Kazakhstan logistics terminal has become an international economic platform of cross-border transportation, warehousing, logistics and trade for many other Central Asian countries.

 

--With the regular China-Europe Railway Express freight services, the number of Chinese companies operating in Duisburg of Germany has grown from 40 in 2014 to more than 100. Statistics from the Duisburg City Council show that, in the city's logistics sector alone, such freight services have created more than 6,000 jobs.

 

--Since it was leased to a Chinese company, the Piraeus port in Greece has become one of the fastest growing container ports in the world, soaring to the 36th place in global container traffic ranking from the 93rd in 2010. The port has about 10 Chinese staff but employs 3,000 Greeks, and it has also created more than 10,000 indirect local jobs.

 

-- Chinese investment in Egypt has made the country the world's third largest producer of fiberglass, and a large number of technical and managerial professionals have been trained.

 

--82 cooperation parks are being jointly built by China and other B&R participating countries which have created more than US$2 billion in tax revenue and about 300,000 jobs for host countries.


4. Financial Integration

 

-- The Asian Infrastructure Investment Bank was established in 2015 to fund infrastructure improvement in Asia, with an authorized capital of 100 billion U.S. dollars. The multilateral development bank's total lending exceeds 2 billion dollars so far.

 

--The Silk Road Fund, to which China contributed 40 billion dollars initially and an additional 100 billion yuan (about 15 billion U.S. dollars) later to support the Belt and Road projects, has signed contracts to provide financing for 19 projects.

 

--Countries along the Belt and Road accounted for over 60 percent of all members of the Asian Infrastructure Investment Bank, a multilateral development bank headquartered in Beijing, as of December 2018.

-- Eleven Chinese banks have set up 71 branches in 27 Belt and Road countries, and the renminbi cross-border clearing system covered 41 countries and regions.

 

5. Closer People-to-People Ties

 

--By the end of April 2018, 1,023 pairs of sister cities had been formed between China and 61 countries along the Belt and Road, accounting for over 40 percent of the total number of sister cities China had with other countries.

 

--In 2017, tourists made around 60 million trips between China and other Belt and Road countries, with the number of tourists from and to China rising 2.6 times and 2.3 times from 2012, respectively, making it a new source of growth for global tourism.

 

---- Under the initiative, China has set up 81 education institutions and projects as well as 35 cultural centers in countries along the Belt and Road. In the first half of 2018, China spent over 270 million yuan (around 39.3 million U.S. dollars) on the Silk Road scholarships.

 

-- China has signed cultural cooperation agreements with more than 60 Belt and Road countries, and established 17 overseas cultural centers in Belt and Road countries.

 

-- Since 2013, China has signed 76 bilateral cooperation documents on culture and tourism with B&R countries and established bilateral or multilateral culture and tourism cooperation mechanisms with ASEAN countries, Central and East European countries, Mongolia and Russia.

 

-- Since 2014, a young sinologist training program hosted by the Ministry of Culture and Tourism has received 360 sinologists from 95 countries.

 

-- China has set up 16 culture centers in B&R countries, which have hosted more than 1,600 events.

 

-- China has reached film co-production agreements with 21 countries and regions along the B&R. Multiple productions have already been completed, including "Kung-Fu Yoga" (2017) produced by China and India, "Born in China" (2017) co-produced with the U.S. and the animated series "Little Mole and Panda" (2016) by China and the Czech Republic.

 

-- China issued an overall plan for publishing industry cooperation with B&R countries and saw an increase in Chinese works published in Vietnamese, Thai, Russian, and Nepali. The plan also includes translating foreign books into Chinese.

 

 

III. BRF 2019

 

On 14-15 May 2017, China hosted the Belt and Road Forum for International Cooperation (BRF) in Beijing. The BRF is a major international event for countries and parties concerned to engage in consultation on building the Belt and Road and sharing the benefits. It is also an important platform for the participating parties to strengthen cooperation and synergize their development strategies. Before and during the BRF, national governments, local authorities and enterprises reached a number of cooperation agreements, policy measures and practical results. The Chinese side has put together a list of major deliverables of the BRF, which includes 76 items comprising more than 270 concrete results in five key areas, namely policy, infrastructure, trade, financial and people-to-people connectivity. In response to the wishes of the participating parties, President Xi announced at the first Forum that China will hold the second BRF this 2019.

 

The Second BRF, scheduled to be held from 25-27 April in Beijing, is themed: "Belt and Road Cooperation: Shaping a Brighter Shared Future", and the Forum events will include the opening ceremony, a leaders' roundtable, a high-level meeting, thematic forums, a CEO conference and other side events. Representatives from over 100 countries, including about 40 leaders of foreign governments, have confirmed their attendance.

 

2019 is in the transition phase toward the second five years of Belt and Road construction. During the second forum, more agreements will be signed, and more detailed guidance and documentation will be introduced, based on the last five years of experience. Specifically, we can expect the following outcomes:

 

· Participating parties will further enrich the vision of advancing quality BRI cooperation by following the principle of consultation and cooperation for shared benefits, sticking to people-centered development philosophy, forging extensive partnerships, jointly promoting all-round connectivity, and implementing the UN 2030 Agenda for Sustainable Development. The second BRF will hopefully send a positive message of strengthening international economic cooperation, promoting global growth, and building an open global economy.

 

· Participating parties will set clear priorities for cooperation and make concrete progress toward quality cooperation including governmental cooperation agreements and initiatives and concrete cooperation projects involving the participation of the business sector. All these will be included in a list of deliverables and be released in due course. The second BRF will produce even greater numbers of cooperation outcomes that are of still higher quality.

 

· Participating parties will strengthen cooperation mechanisms for quality BRI cooperation by improving bilateral cooperation mechanism, enhancing trilateral cooperation and encouraging cooperation among participating countries in third markets, and expanding multilateral cooperation with focus on ensuring the sound development of the BRF and financial institutions to explore multi-party cooperation in specific areas.

 

With the concerted efforts of all the participating parties, the second BRF will deliver fruitful outcomes, create more driving forces for the economic growth of both participating countries and other countries concerned, provide more opportunities for international economic cooperation, and contribute more to the vision of a community with a shared future for mankind and a new type of international relations.

 

 

IV. China-Philippines Cooperation under the BRI

   

During the state visit of Chinese President Xi Jinping last November 2018, twenty-nine cooperation documents were signed, among which the most important document is the Memorandum of Understanding (MOU) on Cooperation on the Belt and Road Initiative. The Philippines, with its unique geographical advantage, is a natural partner in the Belt and Road Initiative. With the signing of the MOU, we will be able to inject fresh vitality to the bilateral relations and lift our economic and trade cooperation to a new level.

 

In just a little more than two years, China has become the Philippines' top trading partner, largest export market and largest source of imports. According to China Customs statistics, the bilateral trade volume in 2018 reached US$56 billion, a year-on-year increase of 8.5%. China imported more than 2 million tons of tropical fruits from the Philippines over the past two years. Philippine companies sold US$124 million products in 5 days during the first China International Import Expo which was held in Shanghai last November.

 

According to a latest report released by DTI, China topped the list of foreign investors with P48.7 billion last year, nearly 84 times increase from P575.8 million in 2017. China Telecom successfully won the bid of the third telecom operator license in the Philippines, and promised to invest about US$5 billion in five years. Hebei Iron & Steel Co. is willing to establish an Iron & Steel Plant in Cagayan De Oro worth US$3.5 billion. CNOOC actively participate in the investment of LNG projects in the Batangas. Furthermore, China is going to set up a Chinese Industrial Park in Clark.

Infrastructure is one of the key areas of cooperation. China attaches great importance to the Philippines' "Build, Build, Build" Plan. The Philippines and China have agreed to cooperate on infrastructure for the next ten years to boost economic development and improve their investment environment. Under the infrastructure cooperation program, Philippines and China will identify cooperation areas and projects based on their demands and economic situations and based on strategic merits, growth potential and driving effect.The key areas of China and the Philippines' infrastructure cooperation are transportation, agriculture, irrigation, fish ports, power, water resources management, information and communication technology and telecommunications. 

  

Government-government cooperation projects funded by China's grants or soft loans in the Philippines has gradually started. The two drug-rehab centers in Mindanao have been completed and turned over ahead of schedule. The two bridges over Pasig River in Manila and the Chico River Pump Irrigation Project have started construction. The Kaliwa Dam, the Safe Philiipines, Manila-Bicol Railway, Subic-Clark Railway, and five bridges over Pasig river project are all in steady process.

 

On the financial front, both sides have concluded significant documents, such as Memorandum of Understanding on Renminbi Clearing Arrangement, MOU on Panda Bonds Issuance, Letter of No Objection to the Organization of the Renminbi-Philippine Peso Foreign Exchange Trading Market.

 

The progress in people-to-people exchanges between two countries is also impressive.  Last year, there are 1.25 million Chinese tourists visiting Philippines, achieving a 29.6% year-on-year increase. China is the second largest tourist origin in Philippines. Both sides are confident that more than 1.5 million Chinese tourists will visit the Philippines this year and generate revenue of more than 32 billion pesos.  Right now there are more than 300 flights operating between the cities of two countries every week.  The Chinese government has agreed to welcome Philippine English teachers working in China.  In recent years we provide more than 50 government scholarships for Philippine students annually and we will provide an additional 50 on annual basis from 2019-2021. China will also set up a Chinese Cultural Center in the Philippines.

 

With the improved relations of China and the Philippines, the inclusion of plans anchored on achieving sound macroeconomic policies and accelerated infrastructure development, under the Belt and Road Initiative, that is in line with the government's "Build, Build, Build" Program embodied in the Philippine Development Plan 2017-2022, proves to be of strategic timing and importance. The Philippines is off to a good start in envisioning the enabling environment needed for the success of forthcoming infrastructure projects in the country.

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