In May 2017, over 30 railway personnel from Kazakhstan, Kyrgyzstan and Uzbekistan received training on high-speed trains in Central China, in an effort to facilitate cooperation on railway projects under the “B&R” initiative. (PHOTO:  PEOPLE’S DAILY ONLINE)

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The “Belt and Road” is short for the Silk Road Economic Belt and the 21st Century Maritime Silk Road proposed by Chinese President Xi Jinping during his visit to Central and Southeast Asia in 2013. Xi proposed the joint construction of the Silk Road Economic Belt through an innovative cooperation model and the gradual realization of extensive regional cooperation. He said that Southeast Asia has been a significant hub of the Maritime Silk Road since ancient times, and China is willing to strengthen maritime cooperation with ASEAN countries. He suggested jointly building the 21st Century Maritime Silk Road while achieving common development and prosperity.

 “Spanning thousands of miles and years, the ancient silk routes embody the spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit. The Silk Road spirit is the great heritage of human civilization,” said Xi in his keynote speech at the opening ceremony of the Belt and Road Forum for International Cooperation in May 2017.

 

Linking global value chain
Ever since the “B&R” initiative was first proposed, China has put the Silk Road spirit into action, bearing much fruit. To date, more than 100 nations and international organizations from around the globe have responded positively and participated. In 2016, the “B&R” was recognized in a UN Security Council resolution for the first time and unanimously adopted. This indicates that the “B&R” initiative is a significant move that addresses the needs of world economic growth and enjoys the widespread support of the international community.

Over the past three decades of globalization, China has been in an intermediate position within the global value chain. Finished goods are China’s major imports from the developed economies and intermediate goods account for the greatest share of its exports to developed economies. When it comes to trade with other developing economies, China primarily exports finished products and imports intermediate goods. Both light industry and heavy industry have similar features.

According to statistics on 188 countries and regions in the world, China is among the five biggest sources of finished consumer goods in 123, and intermediate goods in 73. Meanwhile, China is one of the top five importers of finished goods in 60 countries and regions and intermediate goods in 74.

To date, up to two-thirds of countries have built close ties with China by trading intermediate and finished goods. China is a hub of global commodity circulation.

In the global value chain, the exports of developing economies generally have low added value whereas the exports of developed economies have high added value. China is in an intermediate position within the global value chain, connecting economic cooperation between developed and developing economies and facilitating double loop in the division of labor within the global value chain.

 

Boosting developing economies
Many developing countries and regions have been marginalized in globalization. According to statistics of GDP per capita calculated on the basis of purchasing power parity by the World Bank, GDP per capita in high-income economies increased by 26,780 international dollars from 1990 to 2014, while in low-income economies the increase was merely 896 international dollars. In 1990, GDP per capita in high-income economies was 24.5 times that of low-income economies, and the gap was even expanded to 27.4 times in 2014.

Developed economies have witnessed a widening income gap and increasing Gini coefficient on the whole over the past three decades.

Data from World Income Inequality Database shows that the United States has the highest Gini coefficient among the G7 countries, rising from 0.336 in 1983 to 0.38 in 2010. Canada saw an increase to 0.32 in 2010 from 0.299 in 1983. According to Income Inequality, a report released in 2015 by the Organization for Economic Cooperation and Development (OECD), income inequality has reached the highest level in the past half century across OECD members. The average income of the richest 10 percent across OECD countries was about nine times higher than that of the poorest 10 percent, while it was seven times higher 25 years ago.

According to the World Bank, 26 of the 49 economies that were classified as low income in 1987 remained in the same rank in 2015. Nineteen of them—Bangladesh, Bhutan, Cambodia, Ghana, India, Indonesia, Kenya, Laos, Lesotho, Mauritania, Myanmar, Nigeria, Pakistan, Sao Tome and Principe, Solomon Islands, Sri Lanka, Sudan, Vietnam and Zambia—moved up to the lower middle-income rank. Only four—China, Equatorial Guinea, Guyana and Maldives—went up to the upper-middle rank.

Against this backdrop, China’s “B&R” initiative indicates its commitment to global governance as an emerging power, and its endeavors to facilitate a fair, reasonable and inclusive system of international trade and investment, creating a greater platform for social and economic interaction around the globe, enhancing economic cooperation among developing economies and their exchange with the developed economies, enabling more effective allocation of resources, advocating a community of shared future for mankind and opening up opportunities for a fairer and more sustainable world growth.

 

Injecting vitality into world economy
China’s complete industrial system will lay a solid foundation for industrial division and cooperation under the “B&R” initiative. According to the UN Industrial Development Organization’s Industrial Development Report, China is a significant driver of added value in global manufacturing. When calculated at the constant price of 2000, China’s share in global manufacturing added value rose from 5.1 percent in 1995 to 20.8 percent in 2014, overtaking the United States as the biggest manufacturer in the world. In terms of quantities of manufacturing products, in 2014 China’s global share ranked first in seven out of the 22 categories according to the international standard industrial classification—tobacco products, 49.8 percent; textiles, 29.2 percent; clothes and fur, 24.7 percent; leather, leather products and shoes, 33.4 percent; alkali metals, 23.8 percent; electrical equipment, 28.2 percent, and other transport devices, 34.1 percent. China was among the top three manufacturers in 15 categories, and one of the top six manufacturers in all categories except for the category of motor vehicles, trailers and semi-trailers. Around the globe, approximately a half of the cement, flat glass, architectural ceramics, cellphones, PCs, color TVs, monitors, program-controlled switches, and digital cameras were made in China.

In addition to the labor-, capital- and technology-intensive industries, China is also getting stronger in the knowledge-intensive industry, such as internet economy, with Alibaba, Tencent, Baidu and Jingdong ranking among the world’s top 10 giants in the field. In 2017, China has become the world’s biggest e-commerce market.

In the field of high technology, China is transforming from a follower of the developed countries to an equal or even a leader. One good example of this is the entry of China’s high-speed trains into the global market. The United Nations’ World Economic Situation and Prospects 2018 report estimated that China alone contributed about one-third of global economic growth.

According to the World Bank’s statistics, since 1960 the share of the world’s total trade volume in GDP has undergone four periods: rapid growth at an average rate of around 2 percent before 1975, slow growth at a rate of 1.1 percent between 1975 and 1989, explosive growth at a rate of 2.2 percent between 1990 and 2007, and stagnation after the financial crisis in 2008, during which there was a contraction of 0.2 percent. During the first period, benefiting from globalization after the Second World War up to 1975, Japan was able to overcome the middle-income trap and grow into a developed economy through two decades of rapid growth. During the second phase, globalization was in a depression. The Reagan administration boosted the American economy by advocating neoliberalism. The period also witnessed a bubble burst in Japan, drastic changes in Eastern Europe and the dissolution of the Soviet Union. Grasping new opportunities provided by globalization in the third period, China maintained the trend of impressive growth following reform and opening up, and saw two booms with double-digit average annual growth, each lasting for five consecutive years, between 1992 and 1996, and between 2003 and 2007. In the fourth period, things have been tough, especially due to the outbreak of the financial crisis across the developed economies, and global governance has seen an increasing deficit.

Now there has been increasing awareness that China’s “B&R” initiative will benefit the world at large. At a time when the global economy is at a turning point, “B&R” will help alleviate income inequality, long-term inadequate investment and sluggish growth, injecting vitality into global economy and creating new opportunities for shared prosperity in the world.

 

Zhang Hui is deputy dean and a professor at the School of Economics, Peking University.