The bustling Yangshan Deep-Water Port in Shanghai Photo: TUCHONG

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The “Belt and Road Initiative (BRI),” a collaborative international cooperation effort championed by China and embraced globally, has been formally proposed and implemented for a decade. At this pivotal moment, it is of great theoretical and practical importance to summarize the economic impact of the BRI.

International trade and investment

One of the key focuses of the BRI is to facilitate “unimpeded trade,” with a critical emphasis on reducing international trade and investment barriers, enhancing the facilitation of trade and investment. Trade and investment facilitation involves refer to the simplification of procedures, improvement of infrastructure, and standardization of regulatory frameworks throughout the entire process of international trade and investment. This approach aims to reduce barriers and create a more convenient international trade and investment environment, optimize resource allocation, and enhance the efficiency of international trade and investment. Typically, it involves three basic paths: perfecting procedural systems, optimizing resource allocation, and enhancing information transparency.

To better leverage the positive role of the BRI on international trade and investment efficiency, attention should be focused on the following three areas. Firstly, there should be a push to advance negotiations and upgrades of free trade agreements with partner countries. This involves actively signing free trade agreements with partner countries to eliminate or reduce tariff and non-tariff barriers, increase the freedom of international trade and investment, and improve the ease of market entry, production, operation, or market exit for businesses. 

Secondly, there should be an acceleration of the construction of public infrastructure in partner countries. This entails making full use of the financial service advantages brought by the Asian Infrastructure Investment Bank and the benefits of the Public-Private-Partnership (PPP) model, to expedite the construction of public infrastructure in partner countries and enhance the accessibility of transport services, as well as the quality of communication and power infrastructure. 

Thirdly, there should be a focus on enhancing political mutual trust. This involves adhering to the principles of “consultation, contribution, and shared benefits,” upholding the concept of a “community of shared future for humanity,” strengthening cultural exchanges, enhancing political mutual trust, and providing a secure external environment for the construction of the BRI and transnational economic and trade cooperation.

Stabler supply chains

The BRI is primarily focused on international trade and investment, but its scope extends beyond these aspects. It encompasses not only the import and export of goods, the international flow of factors, and the development of global markets, but also the interconnection and integration of industrial and supply chains between a country and other nations, especially the partner countries. 

Firstly, it involves shaping competitive and cooperative relationships in industrial and supply chains between China and partner countries. With the continued advancement of the BRI, collaboration in industrial and supply chains among partner countries is strengthened. This collaboration can lower cooperation costs between upstream and downstream enterprises, contribute to the development of core capabilities for businesses, enhance their responsiveness and adaptability to environmental changes, optimize production and transaction processes, continuously create “cooperation dividends,” and achieve a “win-win” situation for collaborative enterprises. This, in turn, promotes the integration of industrial and supply chains between China and partner countries.

Secondly, it involves promoting forward and backward integration and interaction in industrial and supply chains. China’s outward direct investment in partner countries has shifted from state-owned enterprises to private enterprises, and from infrastructure and energy to manufacturing, wholesale and retail. Over half of China’s overseas economic and trade cooperation zones established by Chinese enterprises are located in partner countries, and all 20 national-level overseas industrial parks are also situated in partner countries. In 2022, the import and export trade volume between China and partner countries reached 13.83 trillion yuan, accounting for a substantial 32.9% of China’s total foreign trade. Partner countries’ resource-intensive products have become an important upstream product supply source for China, contributing to the strengthened integration and interaction of industrial and supply chains.

Currently, there is still significant potential for improvement in China’s industrial and supply chain cooperation with certain regions, particularly in South Asia, including India. Two key areas for enhancement have been identified:

To start with, there is a need to shift from market-driven, one-way trade to mutually beneficial two-way trade through market sharing. Leveraging China’s “super-large-scale market advantage” to enhance domestic production and technological capabilities and encouraging the establishment of bilateral or multilateral free trade zones within the BRI framework can stimulate the trade potential between China and partner countries. This approach can also strategically cultivate export markets and optimize the sources of imported products.

Meanwhile, there is an opportunity to form an international production network system that complements China’s technological advantages with the resource and labor factor advantages of partner countries. Utilizing China’s production technology advantages, especially in high-end manufacturing, involves relocating certain production processes or stages to partner countries. Encouraging industries with advantages in areas such as machinery, transportation, communication, and power to expand internationally can lead to the establishment of technology cooperation alliances or networks tailored to partner countries. This will strengthen the construction of complementary industrial chain systems in partner countries, promoting localized operations and fostering mutual benefit.

Dual circulation

The new development paradigm is a natural extension of the BRI in the new era. There is an intrinsic and expansive relationship between the two, and the BRI can play a positive role in promoting the mutual reinforcement of domestic and international circulation. Serving as a crucial means to advance China’s opening-up and connect various domestic regions, the BRI contributes to fostering international circulation by promoting more openness.

The construction of the BRI reduces domestic market barriers, lowers domestic logistics and trade costs, and, by leveraging the “domestic market effect,” helps shape a comparative advantage in export trade. Simultaneously, by connecting partner countries, it expands international markets and generates new international demand, thus strengthening the international circulation. In particular, the opening and development of the China-Europe Railway Express, with diversified transportation including maritime and land routes, promotes positive interaction between domestic and international circulation, forming a new international logistics channel. 

To better leverage the positive role of the BRI within the new “dual circulation” paradigm, efforts can be made in the following areas. First, there should be a focus on expanding the scale of import and export trade. The BRI has already reduced average trade transport time by 4% and lowered trade costs by 3.5%. To further advance trade liberalization, facilitate trade links, and clear bottlenecks, it is essential to drive the expansion of trade between China and partner countries.

Secondly, there should be a concerted effort to leverage the role of international investment. In the process of BRI construction, the integrated model of investment, construction, and operation has become a crucial development strategy for Chinese companies going global. There is potential to further strengthen foreign direct investment, encouraging China’s advantageous industries to extend beyond manufacturing into high-end areas such as collaborative design, cooperative research and development, brand building, and marketing.

Third, there should be a focus on enhancing the connectivity of multilateral rules. It is important to uphold the importance of both “hard connectivity” and “soft connectivity.” While strengthening infrastructure development, efforts should also be made to promote the alignment of policies, rules, and standards among partner countries. Furthermore, strengthening alignment and integration with multilateral economic and trade rules will facilitate maximum consensus and cooperation between China and partner countries.

Fourth, the channels and pathways of development platforms should be optimized. This involves fully utilizing the top-level design role of the BRI International Cooperation Forum, strengthening cooperation with existing international organizations and developing and strengthening institutions such as the Asian Infrastructure Investment Bank and the New Development Bank of BRICS. It also entails harnessing the leadership role of the China International Import Expo, and through equity investment institutions like the Silk Road Fund, China-Africa Industrial Cooperation Fund, and China-Latin America Production Capacity Cooperation Investment Fund, mobilizing social capital to jointly develop significant investment projects in partner countries.

Inclusive growth

It is important to note that the BRI’s efforts to enhance China’s international trade and investment efficiency with partner countries, ensure the safety and stability of industrial and supply chains, and promote the mutual reinforcement of the “dual circulation” are not isolated but interconnected. For instance, improving international trade and investment efficiency helps reduce domestic and international transaction costs, ensuring the safety and stability of industrial and supply chains with partner countries. This, in turn, contributes to the positive interaction between domestic and international circulations. The safety and stability of industrial and supply chains help mitigate economic operational risks, subsequently enhancing international trade and investment efficiency and promoting the optimal combination of domestic and international circulations. This mutual reinforcement of domestic and international circulations aids in reducing excessive reliance on European and American countries, thereby improving international trade and investment efficiency and ensuring the safety and stability of industrial and supply chains.

However, while the BRI plays a positive role, there are still some shortcomings and issues to address. For example, the underdeveloped financial markets in some partner countries result in weak financial market linkages, and there are systemic risks in the operation and information sharing aspects of industrial and supply chains. Considering that the BRI leads a new model for inclusive global growth, it is essential to further strengthen the concept of a community with a shared future for humanity embedded within the initiative. Through bilateral or multilateral cooperation, inheriting, improving, innovating, and integrating existing international economic and trade rules can better safeguard the interests of developing countries. While expanding cooperation with partner countries, it is key to better allocate the “cooperation surplus” to improve the welfare of all countries and promote inclusive growth and sustainable development between China and its partner countries.

Yang Qinglong is an associate professor from the School of Economics and Management at Nanjing Institute of Technology.

Edited by WENG RONG