Chapter 2

BRI as China’s Platform to Push

for Economic Globalisation

2.1 Globalisation Characterised by Interconnection

and Interconnectivity

Against the backdrop of global economic growth slowdown, rising unemployment

and widening income disparities and de-industrialisation in some developed nations,
in the West, there is growing resentment towards free trade and economic global-
isation. In contrast, China has leveraged on the Belt and Road Initiative and other
platforms to promote its approach and thinking on global economic development,
free trade and economic globalisation.
Arguably, the ancient Silk Road was the first attempt at globalisation. People from
different regions used the ancient Silk Road as a bridge for trading silk, china, tea,
spices and porcelain and cultural exchange between the East and West.
The contemporary version of globalisation is characterised by trade facilitation,
investment liberalisation and interconnection based on infrastructure connectivity
improvement. In today’s world, globalisation, based on interconnection and global
industrial chains, is intensifying rapidly, and countries have become embedded in
this process to varying degrees.
Never before have global economic activities been so highly interconnected and
interdependent. As New York Times columnist Friedman (2020) said, “Our planet
is now not only interconnected, but also interdependent, and even interconnected in
many ways”.
Since China opened its door to the outside world in the early 1980s, millions
of Chinese workers have joined the global workforce to assemble and manufacture,
firstly, toys, textiles, and garments, and later, home appliances, electronic and commu-
nication equipment, to name a few, for the global market. Since China’s admis-
sion to the World Trade Organization, it has benefited more from global economic
cooperation and free flow of investment and trade than any other major country.

An initial form of this Chapter was published as journal articles, please see Yu (2017a, b).

© The Author(s) 2024 23

H. Yu, Understanding China’s Belt and Road Initiative, Asia in Transition 26,
https://doi.org/10.1007/978-981-99-9633-9_2
24 2 BRI as China’s Platform to Push for Economic Globalisation

China is keen to be a new champion for economic globalisation. During his

speech at the World Economic Forum in Davos in January 2017, China’s Presi-
dent Xi Jinping, made this point clearly. In a move to defend economic globalisation
and oppose protectionism, Xi vowed to promote closer global economic integration
through the implementation of the Belt and Road Initiative.
China’s push for the improvement of interregional infrastructure connectivity via
the BRI platform is based on its understanding that such connectivity is a crucial
component boosting trade and driving economic globalisation. China’s promotion
of its infrastructure-centred BRI marks the nation’s attempt to put its own stamp on
globalisation.
China is a global champion for infrastructure construction and financing. For
example, China has built the world’s largest domestic high-speed rail network, which
is longer than the high-speed railways in all other countries combined. High-speed
rail has thus become a brand that China is now seeking to export overseas under
the BRI (Yu 2014). The construction of Indonesia’s Jakarta-Bandung high-speed
railroad is based on Chinese technology and design, demonstrating that China’s high-
speed railway is “going global”. It showcases China’s ascendancy on indigenous
technological innovation and projects its image as a modern and technologically
oriented economy.
Export of China’s transport and other infrastructure products overseas will not
only create new business opportunities for infrastructure construction and related
industrial companies at home and for Chinese policy banks such as the State Devel-
opment Bank, but also, more importantly, it will help China to tackle its excessive
domestic production overcapacity and allow it the space to move up the industrial
value chain by pursuing domestic industrial upgrading and economic restructuring.
By leveraging on its Silk Road initiative, China seeks to grasp the opportunities
offered by the global economy.
China views the BRI as a long-term policy initiative and has the necessary patience
to pursue the related strategic and economic goals. With its push for BRI implemen-
tation, China will continue to expand its global trading and investment ties to enhance
its economic resilience and to gain wider market access. China anticipates that the
push for BRI implementation will help to develop reliable alternative sources of
demand in the Silk Road countries that can help to absorb many of China’s exports
and then to reduce its dependence on the traditional Western markets.

2.2 Driving Forces Behind China’s Push for Economic

Globalisation

From the Chinese perspective, many regional and global problems, such as the
widening income disparities, de-industrialisation, illegal migration and the refugee
crisis, and unemployment cannot be attributed to economic globalisation. The rising
tide of anti-globalisation will not reverse or stop a trend of globalisation exemplified
2.2 Driving Forces Behind China’s Push for Economic Globalisation 25

by free flow of capital, technology and people. Launching or threatening to launch

a trade war, or putting up more trade and non-trade barriers will only result in a
“lose-lose” outcome as this will invite more retaliation from both sides.
Nevertheless, globalisation in its present form is far from perfect. The next phase
of economic globalisation should be based on a more balanced, inclusive and sustain-
able model. This would require national governments to implement more measures to
cushion the various adverse effects and deal with the downsides of globalisation. For
the international community, the most likely hit would be on the poor and vulnerable
who lack the resources and necessary skills to take advantage of economic globali-
sation; this group of people requires protection in order to share more in the benefits
of economic globalisation.
First, having already benefited much from globalisation through opening up its
domestic economy, it fits China’s own interests to push for free trade and economic
globalisation. China’s emergence as a major global economic power, in particular
since its admission to the World Trade Organization (WTO) in 2001, is testimony of
the power of free trade and globalisation. According to WTO data, in 1983, China’s
share in global merchandise trade was merely 1% or so, while in 2021, it accounted
for 15.5% of global merchandise exports and 12.2% of global imports. The free
trade and free flow of capital and technology offered by burgeoning globalisation
have contributed enormously to the Chinese economic miracle of the past several
decades. China’s determination to play an even more proactive and important role in
the next phase of economic globalisation is hence understandable.
The fragmentation of production processes due to technological innovation and
the global pursuit of lower production bases has led to China’s emergence as the
world’s major manufacturing plant and a key regional hub of the global supply
chains. Its market-driven development experience over the last three decades has
confirmed China’s belief that globalisation has a vital role to play in its economic
future.
For the past five years, the United States and China, the world’s two largest
economies, have been engaged in a tit-for-tat trade war. However, bilateral trade
volume between the two countries increased from US$635.15 billion in 2017, the
year prior to the trade war, to US$690.58 billion in 2022, an enormous figure that
marks a historic new record (Fig. 2.1). The United States’ trade deficit with China
jumped to US$382.92 billion in 2022 from US$346.83 billion in 2016 (Fig. 2.2). It
is apparent that the United States is importing more from China despite the tariffs
imposed on the imported goods from China.
Both the former Trump and current Biden administration have attempted to rebal-
ance trade with China and reduce the trade deficit through different measures. These
measures have included imposing punishing tariffs on vital Chinese goods under
President Trump, restricting high-tech exports to China (chip and semiconductor
products made with the American technology and equipment) and pursuing diversi-
fied trade and resilience supply chain policies under President Biden. However, none
of these measures have so far achieved trade rebalancing or deficit reduction with
China.
26 2 BRI as China’s Platform to Push for Economic Globalisation

800

700

600
US$ Billion

500

400

300

200

100

0
2016 2017 2018 2019 2020 2021 2022

US Exports to China US Imports from China

Fig. 2.1 U.S.-China trade in goods. Note The figures are in billions of USD calculated on a nominal
basis, not seasonally adjusted. Source United States Census Bureau (2023)

-382.92 2022
-353.49 2021
-308.14 2020
-342.63 2019
-418.23 2018
-375.17 2017
-346.83 2016

-600 -400 -200 0 200 400 600 800

US$ Billion
US Exports to China US Imports from China Balance

Fig. 2.2 U.S. trade deficit in goods with China. Note The figures are in billions of USD calculated
on a nominal basis, not seasonally adjusted. Source United States Census Bureau (2023)

The much-discussed decline of China’s export capacity has failed to materialise.

Due to its comparative advantage in terms of manufacturing production capacity,
its linkage of upstream and downstream industrial sectors, and productivity and
efficiency of skilled Chinese labour, China has maintained its position as a key hub
in the global supply chain and the world’s major manufacturing base.
The United States’ long-held argument is that countries can gain huge benefits
through the globalisation of trade and capital, but now the rise of China poses a
threat to the national security of the United States and its close allies, which has
led both of the two most recent American administrations, the Trump administration
2.2 Driving Forces Behind China’s Push for Economic Globalisation 27

and the present Biden administration, to use various policy and legal tools to limit
China’s influence and supress its development, including tariffs, investment reviews,
and export controls. Senior US officials touted the benefits of “near-shoring” and
“friend-shoring” and signalled to the multinational corporations that moving supply
chains out of China would be wise.
Some policy experts and scholars in the United States (e.g. Boustany and Friedberg
2019) who have argued that China is unlikely to make concrete concessions or give in
to the American pressures of tariffs on imports of Chinese goods have now gone even
further by calling on the United States to adopt a strategy for partial disengagement
with China, aiming to build leverage to address the perceived threats from China, to
slow down Chinese technological advancement, as well as to retain the US supremacy
in economic, military and technological power over China.
The US trade pressure and “economic decoupling” policy towards China have not
served either the intended purposes of balancing the US-China trade relationship,
excluding China from regional supply chains, de-sinicizing, or suppressing China’s
manufacturing and export capacity. The free market is simply adapting itself to find
the cheapest way to offer goods to consumers. The policies of the Trump admin-
istration and the Biden administration in the United States have succeeded only in
changing the routes of products entering the American market and have been unable
to reduce the dependence on Chinese products in any meaningful way. For example,
Vietnam and Mexico have become two prominent source countries for the US’s
imports of merchandised goods. Nevertheless, these countries are deepening their
trade, investment and economic ties with China. For example, Mexico’s imports of
auto parts from China have doubled in the past five years, while Vietnam’s imports
of electronic intermediate goods, equipment and materials for textile and garment
manufacturing have increased substantially over the past several years.
In some cases, the Chinese-made goods are simply repackaged and rebranded and
then shipped to the United States through a third country like Vietnam. For example,
according to the Economist’s revaluation (2023a, b), at the end of 2022, the U.S.
Department of Commerce found that four major solar suppliers located in Southeast
Asia were effectively circumventing tariffs imposed by the United States on Chinese
goods by doing small-scale processing of Chinese products.
China, with its well-developed infrastructure, large skilled workforce and efficient
logistics, remains the cheapest supplier of manufacturing goods to the global markets.
It would be difficult and extremely costly for another country to replace China as the
world’s largest manufacturing base. For many ordinary Americans, buying affordable
and competitive consumer goods from China is still the primary choice. The US-
imposed restrictions and anti-China policy measures might have the power to change
the direction of US trade with China, but they cannot free the entire supply chain
from Chinese influence.
The approach taken by the American government only promotes the transship-
ment of Chinese goods through third countries, while at the same time deepening
the trade relationship between China and the transshipment countries (e.g. Vietnam
and Mexico), making the global supply chain more complex and dangerous. Conse-
quently, the global supply chains have become more complex and costly under the
28 2 BRI as China’s Platform to Push for Economic Globalisation

US’s pursuit of de-risking and de-link strategy, whereas China’s influence has not
been shaken.
Second, China’s push for globalisation via the BRI platform is intended to facil-
itate Chinese outbound foreign investment and its pursuit of better returns on its
investment. China has since 2008 been transformed from a key destination of inward
foreign investment to a major global investor. Chinese construction companies have
become engaged in infrastructure projects throughout the region and beyond. Mean-
while, the Chinese central and local governments have for the past two decades
encouraged the Chinese firms to “go out” by investing abroad and to become globally
competitive. Chinese companies and business people are cutting deals and looking
for commercial opportunities the world over.
Many Chinese state-owned firms and private firms have become globally compet-
itive, and adopted a “go global” strategy to gain market access and expand their
business overseas. For example, Sinopec and PetroChina, two state-owned oil giants
in China, achieved foreign sales of US$126 billion and US$123 billion, respectively,
in 2021. Foreign sales accounted for 27% and 34% of Sinopec and PetroChina’s
respective total sales. The private-owned Chinese tech firms are also expanding their
business abroad. For example, Huawei’s foreign sales amounted to US$25 billion,
accounting for 65% of the firm’s total sales in 2021. Meanwhile, Lenovo’s foreign
sales reached US$19 billion and accounted for 57% of its total sales revenue (See
Table 2.1).
Third, China’s push for economic globalisation is intended to sustain its domestic
economic growth and tackle the problem of excessive production overcapacity that
afflicts many of its domestic industries. After nearly three decades of fast economic
growth, China’s economy has slowed down substantially for the past several years.
The Chinese government therefore views the BRI as a new engine to boost its flagging
economy and gain market access for Chinese companies in the BRI countries.
China’s ongoing industrial transformation and economic restructuring from an
export-led economy to one driven more by domestic investment and demands is
an encouraging sign for the promotion of global economic rebalancing and offers
potential to guide economic globalisation along a more inclusive and sustainable
path.
Fourth, China’s drive for economic globalisation is intended to meet the huge
energy demand at home that has accompanied domestic industrial and economic
development, and rapid urbanisation. To meet this growing domestic energy demand
and diversify energy supply, China must use the BRI to improve energy facilities and
other forms of infrastructure connectivity, which will involve establishing strategic
partnerships in both upstream and downstream energy projects with participating
countries. This goal can only be pursued through continuing the trend of free trade
and economic globalisation.
Expanding its global trade and growing economic ties with the BRI coun-
tries will increase China’s global economic reach. BRI implementation and the
signing of Regional Comprehensive Economic Partnership agreement (RCEP) both
demonstrate China’s dedication to promoting closer regional and global economic
integration as the means to accelerate the trend of economic globalisation.
2.2 Driving Forces Behind China’s Push for Economic Globalisation 29

Table 2.1 Foreign sales of selected Chinese firms

Company Foreign Percentage of Ownership Headquarters Sector
sales total sales
(US$ (%)
billion)
Sinopec 126 27 State-owned Beijing Energy
(中国石化)
PetroChina 123 34 State-owned Beijing Energy
(中国石油)
CNOOC 15 33 State-owned Beijing Energy
(中海油)
Haier 7 25 Private-owned Qingdao Household appliance
(海尔集团)
Alibaba 1 12 Private-owned Hangzhou Internet
(阿里巴巴)
Huawei 25 65 Private-owned Shenzhen Telecommunication
(华为) equipment
Lenovo 19 57 Private-owned Beijing Telecommunication
(联想集团)
ZTE 6 53 State-owned Shenzhen Telecommunication
(中兴通讯) equipment
Sany 2 30 Private-owned Changsha Diggers
(三一集团)
Source Respective companies; the author’s own estimation

China has emerged as the largest merchandise trading nation. China’s share in
world merchandise exports increased from 5.9% in 2003 to 15.5% in 2021 (Table 2.2).
Meanwhile, China’s share of world merchandise imports had jumped to 12.2% in
2021, compared to the corresponding figure of 5.4% in 2003 (Table 2.3). Admission
to the WTO has helped to open up the Chinese domestic economy and allowed China
to become a key global manufacturing hub, by leveraging on its supply of cheap but
skilled labour and low production costs.
In contrast, other major trading nations’ shares in world merchandise exports have
been decreasing for the past decades. For example, the United States’ share in world
merchandise exports had dropped to 8.1% in 2021, compared to the corresponding
figure of 12.6% in 1993. In addition, Germany’s share in world merchandise exports
had decreased to 7.5% in 2021 from 10.2% in 2003 and Japan’s share had fallen to
3.5% in 2021, from 9.8% in 1993.
Through the boom in trade, China has achieved rapid economic growth based on
its strong manufacturing and exporting capability. This has resulted in China’s rise
to become the world’s second-largest economy and the largest trading nation.
There has been much media fanfare that other countries, such as Vietnam and
India, could potentially replace China as the world’s next manufacturing base and
export hub, particularly since India has overtaken China to become the world’s most
30 2 BRI as China’s Platform to Push for Economic Globalisation

Table 2.2 World merchandise exports by region and selected major economies (percentage)
Region/Country 1948 1953 1963 1973 1983 1993 2003 2015 2021
World (US$ 59 84 157 579 1838 3688 7382 15,985 21,678
billion)
World 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
North America 28.1 24.8 19.9 17.3 16.8 17.9 15.8 14.4 12.7
United States of 21.6 14.6 14.3 12.2 11.2 12.6 9.8 9.4 8.1
America
South and Central 11.3 9.7 6.4 4.3 4.5 3.0 3.1 3.4 3.3
America and the
Caribbean
Europe 35.1 39.4 47.8 50.9 43.5 45.3 46.2 37.3 36.9
Germany 1.4 5.3 9.3 11.7 9.2 10.3 10.2 8.3 7.5
Netherlands 2.0 3.0 3.6 4.7 3.5 3.8 4.0 3.5 3.9
France 3.4 4.8 5.2 6.3 5.2 6.0 5.3 3.2 2.7
United Kingdom 11.3 9.0 7.8 5.1 5.0 4.9 4.2 2.9 2.2
Africa 7.3 6.5 5.7 4.8 4.5 2.5 2.4 2.4 2.6
Middle East 2.0 2.7 3.2 4.1 6.7 3.5 4.1 5.3 5.3
Asia 14.0 13.4 12.5 14.9 19.1 26.0 26.1 34.2 36.3
China 0.9 1.2 1.3 1.0 1.2 2.5 5.9 14.2 15.5
Japan 0.4 1.5 3.5 6.4 8.0 9.8 6.4 3.9 3.5
India 2.2 1.3 1.0 0.5 0.5 0.6 0.8 1.7 1.8
Six East Asian 3.4 3.0 2.5 3.6 5.8 9.6 9.6 9.9 9.9
traders
Note The Six East Asian traders include Hong Kong SAR, Malaysia, Republic of Korea, Singapore,
Taiwan, China and Thailand
Source World Trade Organization (2022)

populous nation in 2023 and has a huge reserve of young people. However, compared
to the corresponding figure of 15.5% for China, India’s share in world merchandise
exports was only 1.8% in 2021 (Table 2.2).
Given China’s efficient transport and logistics network, its well-established
upstream and downstream industrial network and status as the hub of the global
supply chain, India will be unable to knock China off its perch as the world’s main
manufacturing hub in the foreseeable future.
2.3 Infrastructure Development and Connectivity in the BRI Countries 31

Table 2.3 World merchandise imports by region and selected major economies (percentage)
Region/Country 1948 1953 1963 1973 1983 1993 2003 2015 2021
World (US$ 62 85 164 594 1883 3805 7599 16,299 22,034
billion)
World 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
North America 18.5 20.5 16.1 17.2 18.5 21.3 22.7 19.3 18.0
United States of 13.0 13.9 11.4 12.4 14.3 15.9 17.1 14.2 13.3
America
South and Central 10.4 8.3 6.0 4.4 3.9 3.3 2.5 3.8 3.4
America and the
Caribbean
Europe 45.3 43.7 52.0 53.3 44.1 44.5 44.6 36.2 36.4
Germany 2.2 4.5 8.0 9.2 8.1 9.0 8.0 6.4 6.4
Netherlands 13.4 11.0 8.5 6.5 5.3 5.5 3.5 3.1 3.4
France 5.5 4.9 5.3 6.4 5.6 5.7 5.2 3.5 3.2
United Kingdom 3.4 3.3 4.4 4.8 3.3 3.3 5.2 3.8 3.1
Africa 8.1 7.0 5.2 3.9 4.6 2.6 2.2 3.4 2.9
Middle East 1.7 2.2 2.3 2.7 6.2 3.3 2.8 4.3 3.9
Asia 13.9 15.1 14.1 14.9 18.5 23.5 23.8 30.8 33.4
China 0.6 1.6 0.9 0.9 1.1 2.7 5.4 10.3 12.2
Japan 1.1 2.8 4.1 6.5 6.7 6.4 5.0 4.0 3.5
India 2.3 1.4 1.5 0.5 0.7 0.6 1.0 2.4 2.6
Six East Asian 3.5 3.7 3.2 3.9 6.1 10.2 8.7 9.1 9.4
traders
Note The Six East Asian traders include Hong Kong SAR, Malaysia, Republic of Korea, Singapore,
Taiwan, China and Thailand
Source World Trade Organization (2022)

2.3 Infrastructure Development and Connectivity

in the BRI Countries

Infrastructure connectivity plays a crucial role in bridging different areas and regions
and enabling them to reap the full socioeconomic benefits of economic coopera-
tion and globalisation. Geographical economic theories suggest that long distance
between two locations increases transport costs, which then negatively impacts
on bilateral trade flows (e.g. Brakman et al. 2001; Overman et al. 2003). Modern
infrastructure facilities are regarded as an important factor in accelerating economic
growth. Sapir’s paper (1990) on South Korea illustrates how public investment in
infrastructure construction helped this country to transition from a poor nation to a
developed country.
Conversely, infrastructure underdevelopment can deter firms from investing in
landlocked countries and impede these countries’ economic growth. Hence, high
32 2 BRI as China’s Platform to Push for Economic Globalisation

transportation costs act as a key barrier to the growth of trade flows and local
industrial and economic take-off. Infrastructure development not only is the key
to unleashing untapped trade and economic growth potential, but also it lays the
foundation for economic globalisation by allowing the multinational corporations to
source resources and set up manufacturing assembling plants across different nations
based on their comparative advantages and resource endowments.
Geographical economic theorists have produced a number of studies identi-
fying the contribution of transportation improvements in increasing bilateral trade
and mutual investment (e.g. Redding and Venables 2001; Yu 2011; Amiti and
Javorcik 2008). As demonstrated from the Chinese case, infrastructure investment
also helps to promote regional economic integration through redistribution of indus-
trial and economic activities (Qin 2016). Drawing on its own development expe-
rience, China believes that enhancing interregional connectivity, and in particular
transport development, will boost regional economic growth and promote closer
regional integration.
Physical infrastructure connectivity has hard and soft components, which both
contribute to realisation of efficient and smooth flow of goods, service, capital, tech-
nology and people. Hard infrastructure refers to a comprehensive network of express-
ways, railroads, ports, airport, power plants, energy supply, and electricity infras-
tructure and ICT adoption (information and communications technology), while soft
infrastructure refers to institutional quality, trade facilitation mechanisms, efficient
and speedy custom procedures, and border controls. Hard and soft infrastructure are
thus both vital to effectiveness and reliability of regional connectivity. As Brooks’
study (2016, p. 191) emphasises:
The competitiveness of each country’s production depends on the other countries in a produc-
tion network as well as on the efficiency of the trading links among them. They thus have
a strong incentive to cooperate with each other, particularly on improving physical and soft
infrastructure to reduce the costs of trading between them.

Infrastructure underdevelopment and poor connectivity are daunting challenges

that are faced by many BRI countries. Due to domestic economic and fiscal
constraints, and the shortage of external channels for infrastructure funding, many
BRI countries are ranked poorly on global infrastructure competitiveness (see
the global infrastructure competitiveness rankings of the selected BRI countries
in Table 2.4) in terms of transport and utility infrastructure, as well as ICT
communication infrastructure.
As shown in the Global Competitiveness Index published by the World Economic
Forum, while Singapore has world-class infrastructure, many BRI countries score
very poorly on international infrastructure performance, including Angola, Demo-
cratic Republic of Congo, Kenya, Tanzania, Nepal, Pakistan, Bangladesh, Kyrgyz
Republic, Vietnam, Cambodia and the Philippines.
In relation to infrastructure connectivity, these countries are facing the serious
challenges of inadequate and inefficient highways and railroads, outdated or uncom-
pleted seaport and airport facilities, as well as lack of cross-regional road and railroad
links or a reliable power supply. These difficulties have impeded the growth of trade
2.3 Infrastructure Development and Connectivity in the BRI Countries 33

Table 2.4 Global ranking of infrastructure competitiveness of the selected BRI countries (Rank/
141 countries/economies)
Country Overall rank on 1. Transport 2 Utility 3 ICT adoption
infrastructure infrastructure infrastructure
Angola 126 116 129 123
Argentina 68 78 57 68
Bangladesh 114 100 113 108
Brunei 58 77 45 26
Darussalam
Cambodia 106 96 107 71
China 36 24 65 18
Congo 140 138 139 138
Democratic
Republic
Egypt 52 44 64 106
Ethiopia 123 121 120 137
Greece 37 39 35 52
Hungary 27 30 29 54
Indonesia 72 55 89 72
Iran 80 82 76 84
Kazakhstan 67 73 60 44
Kenya 110 81 115 116
Kuwait 66 79 52 37
Kyrgyz 103 129 88 65
Republic
Laos 93 87 97 102
Malaysia 35 29 51 33
Mongolia 101 119 91 96
Nepal 112 91 116 109
New Zealand 46 57 30 21
Nigeria 130 130 124 118
Pakistan 105 69 114 131
Philippines 96 102 96 88
Peru 88 97 79 98
Russia 50 49 50 22
Serbia 51 46 54 77
Singapore 1 1 5 5
South Africa 69 45 92 89
Sri Lanka 61 50 82 107
Tajikistan 91 111 80 121
(continued)
34 2 BRI as China’s Platform to Push for Economic Globalisation

Table 2.4 (continued)

Country Overall rank on 1. Transport 2 Utility 3 ICT adoption
infrastructure infrastructure infrastructure
Tanzania 121 110 122 133
Thailand 71 53 90 62
Vietnam 77 66 87 41
Saudi Arabia 34 34 47 38
Notes (1) The transport infrastructure index comprises the following eight elements: road connec-
tivity, quality of road infrastructure, railroad density, efficiency of train services, airport connec-
tivity, efficiency of air transport services, liner shipping connectivity and efficiency of seaport
services. (2) The utility infrastructure index comprises the following four components: electricity
access % of population, electricity supply quality % of output, exposure to unsafe drinking water
% of population, and reliability of water supply. (3) The ICT adoption index uses the following
measures: mobile-cellular telephone subscriptions per 100 population, mobile-broadband subscrip-
tions per 100 population, fixed-broadband Internet subscriptions per 100 population, fibre Internet
subscriptions per 100 population, and Internet users as % of adult population
Source World Economic Forum (2019)

flows across countries and stunted local economic growth potential. The BRI coun-
tries urgently need external financing to accelerate domestic and regional infrastruc-
ture construction. As estimated by the Asian Development Bank (2017), Asia and the
Pacific countries will require over US$26.1 trillion for climate-adjusted infrastructure
development up to 2030, with average annual investment of US$1.74 trillion.
From the soft infrastructure aspect, the BRI countries are almost all located in
regions with underdevelopment of soft infrastructure in terms of border compliance,
as reflected in relatively long waiting times to export and high cost to export. The
World Bank’s “Doing Business Archive” records the time and cost (excluding tariffs)
associated with three sets of procedures, including documentary compliance, border
compliance and domestic transport, within the overall process of importing and
exporting a shipment of goods.
Compared to the corresponding figures for the OECD high-income countries,
scores for East Asia and the Pacific, Central Asia, South Asia, Latin America &
Caribbean, Middle East and African regions on trading across borders were much
lower. This is an indication of underdevelopment of soft infrastructure facilities. In
terms of cost and time to export, Sub-Saharan Africa’s scores were almost twice as
high as those of the OCED countries (Table 2.5). The OECD economies came out
quite well on simplification of custom procedures and compliance with export and
import requirements compared to regions which have high concentrations of low-
income and developing countries. In South Asia, the Middle East, and Africa, much
improvement is still needed in relation to port efficiency and elimination of red-tape
bureaucracy in customs clearance.
For the BRI countries, enhancing connectivity by improving both hard and soft
infrastructure issue is the key determinant for unleashing full growth potential and
pursuing industrial take-off. However, this constitutes the most difficult part as it
requires enormous amounts of long-term investment. Given that many BRI countries
2.3 Infrastructure Development and Connectivity in the BRI Countries 35

Table 2.5 Trading across borders scores by region

Region Trading across Time to export: border Cost to export: border
borders score compliance (hours) compliance (US$)
East Asia and Pacific 71.6 57.5 381.1
Europe and Central 87.3 16.1 150.0
Asia
Latin America and 69.1 55.3 516.3
Caribbean
Middle East and North 61.8 52.5 441.8
Africa
OCED high-income 94.3 12.7 136.8
countries
South Asia 65.3 53.4 310.6
Sub-Saharan Africa 53.6 97.1 603.1
Note The ranking of regions on the ease of trading across borders is determined by their scores for
trading across borders. These are the average scores for border compliance on imports and exports.
The data collection was completed in May 2019. The scores are presented on a scale between 0 and
100, where 0 represents the lowest and 100 represents the best performance
Source The World Bank May (2019)

remain among the world’s least developed countries, they have to source different
channels to meet their huge infrastructure financing needs, including government
budgets, regional cooperation funds, commercial banks, private investment in the
form of public–private partnerships (PPP), and multilateral development institutions
and capital market initiatives.
In his remarks at the 19th ASEAN plus Three Summit held in Vientiane in
September 2016, Li Keqiang, China’s then Premier, reaffirmed that: “China will
work with other parties to make full use of such financing platforms as the AIIB and
the Silk Road Fund to secure greater financial support for connectivity projects in
Asia, especially in ASEAN countries” (State Council of the People’s Republic of
China 2016). China has provided huge investment abroad for BRI-affiliated infras-
tructure projects since 2013. According to the Chinese official data released by the
Ministry of Commerce, the stock of Chinese direct investment in the BRI countries
between 2013 and 2022 was worth US$177.2 billion.
Meanwhile, the American Enterprise Institute’s “Worldwide Chinese investments
& construction” data from 2013 to 2022 estimated that the Chinese BRI-related
investments and contracts were worth as much as US$369.1 billion. Regardless
of the discrepancy between these two sets of figures, they both report enormous
BRI-related capital investment in infrastructure financing and construction which is
an indication of China’s emergence as a significant player in global infrastructure
industry.
36 2 BRI as China’s Platform to Push for Economic Globalisation

2.4 Limitations of China’s Push for Economic Globalisation

The success of China’s efforts to drive forward globalisation remains a matter for
conjecture, as taking on a leadership role in the new wave of economic globalisation
is no easy task. China’s power has its limits, and it may not be able to replace the
West in leading globalisation in the short term. The United States combined with
Europe and Japan still account for over half of the world’s merchandise trade, far
exceeding China’s contribution. The West is still the world’s primary and dominant
market for trading merchandised goods. Hence, it is not feasible for China to steer
and maintain the dynamism of global trade and economic globalisation on its own.
In addition, China still has a long way to go in promoting the open economy at
home. Although Chinese leaders have publicly committed to further opening up of
the Chinese economy and industries to foreign investment, the reality indicates quite
the opposite. The domestic economic reforms on critical areas have been sluggish
and without any real breakthrough for the past decade.
The reform of state-owned enterprises in China is such a case in point. For
example, despite the Chinese government’s rhetoric, since 2013, reform of the state-
owned enterprises (SOEs) has been disappointingly slow. Due to the lack of real
progress, much of the once-held optimism at home and abroad has faded. Aims to
increase competition and promote better market access for the private sector, as well
as to raise corporate efficiency and profit-making capacity, are yet to be realised. It is
largely business as usual for the SOEs, as they continue to enjoy privileged treatment
in terms of exclusive market access, market protection, bank credit and state policies.
The situation on protection of SOEs’ privileges has hardly changed, and there has
been little sign of the SOEs retreating from the non-strategic and competitive sectors
as pledged by the Chinese authority in 2013. Yu (2019) points out that the increasing
encroachment of the state through its creation of larger and more powerful SOEs is
antithetical to the Chinese authority’s commitment to deregulation and development
of a market-based competitive domestic economy.
The dominance of SOEs in the Chinese economy has strengthened, despite the
nation’s implementation of “reform and opening up” and promotion of the market
economy since the late 1970s (Yu 2014). Far from being in retreat, the state is
marching in and the market is retreating. The inadequacy of the SOE reform process
appears to contradict the state’s proclaimed commitment to deregulation and devel-
opment of a market-based competitive economy in China by allowing “the market
to play a decisive role”. Despite the private entrepreneurial sector being the key
to unleashing China’s economic potential, the state sector is still seen by the CCP
as crucial to maintaining its domestic economic, political and social control. The
ongoing SOE reforms under President Xi Jinping are seen as causing conflict with
the market-oriented direction of development and reform in China to which the
Chinese authority has expressed commitment, and as perpetuating the blockade on
fair and genuine competition between the state and non-state sectors.
Powerful vested interests within the state sector and central ministries, such
as the State-owned Assets Supervision and Administration Commission of China
2.4 Limitations of China’s Push for Economic Globalisation 37

(SASAC), have resisted any reform proposals that might reduce their dominance of
the Chinese economy. In September 2015, the Central Committee of the Chinese
Communist Party (CCP) and State Council of China jointly issued the “Guiding
Opinion on Deepening Reform of the State-Owned Enterprises” document (termed
the Plan hereafter). In this Plan, the Chinese government outlined many ambitious and
bold measures for SOE reform, including the retreat of the SOEs from the compet-
itive sectors such as the real estate industry (The State-owned Assets Supervision
and Administration Commission of China 2015). Nevertheless, the powerful state
conglomerates only paid lip service to this latest round of state reform plans and
there is no sign of SOEs retreating from the real estate sector.
China has to take bold actions to reform its SOEs, in order to introduce more
competition and set a level playing field for state and non-state sectors. Its strict
regulations and rules need to be eased in order to allow domestic and foreign private
investors greater access to strategic industrial sectors ranging from petrochemicals,
resources, telecommunications and infrastructure to public utilities and other service
industries. The existing laws and regulations have impeded or prevented entry of
private investors into many strategic market sectors by limiting their access to bank
loans, state funds and favourable state policies.
Concrete actions taken so far contradict the CCP’s stated commitment to allow
broader participation of private companies in the domestic economy and reduce
government interference. This wave of state-directed SOE reforms may claim to be
market-driven, but in practice it reflects the Chinese leaders’ determination to retain
the state sector’s dominance over domestic industries and increasingly to use the
SOEs as a powerful instrument for achieving the various political and social goals
of the Party-state (Yu 2019).
China has long been criticised for forcing foreign companies to transfer techno-
logical know-how to their Chinese counterparts in exchange for greater access to
the Chinese market. This strategy has restricted the involvement of foreign compa-
nies and foreign technologies in the domestic markets. Many foreign countries have
also accused China of adopting “an aggressive mercantilist policy” on trade through
offering unfair subsidies to its SOEs to undermine competitors and thereby restricting
foreign access to a wide range of domestic industries.
Domestic and foreign private enterprises have increasingly complained of the
adverse effects of the tightening of the regulatory and investment environment in
the Chinese market over the last decade. The deterioration in market conditions has
indeed either swallowed up or squeezed out many domestic and foreign privately
owned companies.
Thus, the SOEs present a test of the willingness of the Chinese leader to implement
a genuine market-oriented reform agenda that increases access for private compa-
nies to domestic industries. Moreover, China can only claim a leadership role in
championing globalisation by fulfilling its commitment to opening up the domestic
economy.
38 2 BRI as China’s Platform to Push for Economic Globalisation

2.5 The Systemic Risks of Globalisation and Call

for National Resilience

Today, people, goods, money and services can easily cross-national borders, which
also facilitates the cross-border spread of viruses and global epidemics of infectious
diseases. China was the country where the COVID-19 pandemic first broke out, and
it quickly spread beyond China’s borders. The coronavirus pandemic has highlighted
further the risks and vulnerabilities of globalisation.
As of writing this chapter, the global pandemic has caused 7 million deaths, and
many more could have been uncounted in the least developed countries. Billions in
economic output and millions of jobs have been lost due to the severe impacts of the
pandemic, which has changed the world forever.
Goldin and Mariathasan (2015) point out in his coauthored book, “The Butterfly
Defect: How Globalization Creates Systemic Risks, and What to Do About It”, that
globalisation brings not only economic development opportunities, but also sudden
and significant systemic risks, including infectious diseases, financial crises and
terrorism. Goldin analysed that the impact of the crisis will sweep the world in a
nonlinear, unpredictable way. His predictions are undoubtedly forward-looking in
terms of the significant systemic risk effects of the COVID-19 pandemic that are
sweeping the world.
In the context of globalisation, the public health challenges faced by citizens are
not limited to the domestic environment but may also come from abroad. Therefore,
at the early stages of an outbreak of an infectious disease in a country, it is essential to
alert the international community immediately. One important lesson learnt from the
global COVID-19 pandemic is that individual countries must also take precautionary
measures quickly to effectively block the cross-border spread of the virus.
Cutting off the cross-border spread of the virus is the most effective measure to
stop the global spread of infectious diseases. If measures to prevent and control the
spread of the virus are not put in place in a timely manner, the infectious disease
disaster in one country is very likely to evolve into a global public health disaster,
affecting every country and everyone.
The international community live in an era of globalisation characterised by inter-
connection, while, unfortunately, there are no global governance systems or insti-
tutions in place that can deal with such fast-changing emergencies. A sound global
governance system is needed to facilitate economic integration among countries
while, at the same time, a regulatory system is required to prevent and mitigate the
major systemic risks brought by globalisation. However, despite being the multilat-
eral organisation leading global public health throughout the world, the World Health
Organization (WHO) has insufficient human, financial and technical resources. The
WHO is not tasked with coordinating national responses or providing technical
support to lead the fight against global spread of a pandemic. Indeed, the onset of
the COVID-19 pandemic has highlighted the weak leadership of such international
organisations.
2.5 The Systemic Risks of Globalisation and Call for National Resilience 39

Therefore, in the face of infectious disease pandemics, the resilience of sovereign

states has become particularly important. The COVID-19 pandemic will prompt
countries to rethink and comprehensively assess the benefits and risks of globalisa-
tion. If it is unconstrained and lacks safeguards to manage risks, is it in the interest of
all countries, especially poor countries with weak resilience, to continue with glob-
alisation, characterised by interconnectivity? Can the economic and trade gains of
globalisation offset the potential systemic risks? How can countries pursue economic
growth and efficiency while protecting the health of their own citizens? Globalisation
advocates the removal of restrictions on the movement of people across borders and
the opening of borders. But in the absence of effective regulatory safeguards, this is
not a viable approach and can exacerbate the global spread of viruses.
The pandemic has made us realise the fragility of globalisation, and that globali-
sation is not as solid and irreversible as imagined. It is an indisputable fact that both
states and international organisations lack awareness of the negative effects of glob-
alisation and underestimate the major risks it poses. The pandemic will eventually
pass. However, the COVID-19 pandemic will permanently change the landscape of
globalisation. After the pandemic, the process of globalisation will slow down, and
the “era of national sovereign economy” may prevail again.
Globalisation promotes competition and efficiency, but ignores individual national
resilience. When infectious disease pandemics arrive, countries with less resilience,
especially those with weak public health systems, find that their public health
systems are overwhelmed by a sudden flood of patients. The once-in-a-century global
pandemic has tested the resilience of every country, in relation to its public healthcare
system, economic stability, administrative system efficiency, manufacturing capacity
and social cohesion.
In order to curb the spread of the virus, countries announced various lockdown
measures: banning foreigners, vehicles, ships and planes from entering the country.
The global situation under the pandemic was called the “Great Lockdown” by the
International Monetary Fund (2020). The three-year-long coronavirus pandemic had
forced governments to adopt policies of “unilateralism and isolationism” in order to
protect themselves. This is a reality of globalisation in the twenty-first century, and
it has also presented a great irony since the pandemic brought back to a globalised
world the prototype of a “closed and self-contained” society. Many countries not only
adopted closed-door measures one after another, but also acted separately. Some
countries even competed with each other for limited medical supplies, food and
industrial resources.
Apart from making empty promises and broad vision statements, international
organisations, including the United Nations, have failed to come up with a mean-
ingful global response plan. In the era of globalisation, the international commu-
nity’s expectation of countries to cooperate with each other to deal with crises has
become nothing more than a beautiful fairy tale. Major powers such as China and
the United States have accused each other of scolding the others while shirking their
own responsibilities during the pandemic.
While mankind is facing a global public health crisis, unfortunately, international
organisations such as the United Nations and major countries have not shown the
40 2 BRI as China’s Platform to Push for Economic Globalisation

global leadership or international coordination needed to fight emergencies such as

a pandemic. The world has never been more uncertain than it is today, and anxiety
and fear are enveloping humanity.

2.6 The Era of Globalisation Calls for a New Type

of Global Governance System

The pandemic has highlighted the huge risks arising from the facilitation of cross-
border movement of people, and the global governance and regulatory systems lag
far behind globalisation characterised by interconnection. Globalisation in this form
is uncontrolled and unsustainable; hence, the pandemic may prove a turning point in
that “anti-globalisation” may become the mainstream voice.
However, it should be emphasised that in the twenty-first century it would be
impossible and misguided to return to an era of self-isolation. The globalisation of
interconnection has brought opportunities for economic growth and industrialisation
in developing countries and has also helped to eradicate poverty in these countries.
Insularity will only limit trade and investment, impede the proper functioning of
economies and industries, push more people into poverty, and even lead to war.
During the G20 Leaders’ Virtual Summit held in March 2020, Singapore’s Prime
Minister Lee Hsien Loong argued:
Naturally, countries will now want more safeguards against the risks of globalization, and
to strengthen national capabilities to reduce dependence on others. Stronger assurances of
supply chain reliability and safer human mobility will be needed. A more hard-headed, prag-
matic internationalism may arise. But we should resist the urge to turn inwards and discard
globalization completely, because autarky will result in a poorer world for all. The pandemic
is proof of our interdependence, not an indictment of globalization. (Prime Minister’s Office
Singapore 2020)

A virus does not respect borders, neither does it discriminate on the basis of
race, region or country. Countries in the “global village” era must find ways to
strengthen cooperation, unite to fight the pandemic, and stabilise the world economic
situation. The international community must also take concerted and firm measures
to gradually address the risks posed by globalisation. In future, countries throughout
the world should not only pursue economic growth and industrial efficiency through
globalisation, but also the globalisation of the future must strike an effective balance
between achieving economic growth potential and maintaining national economic
security.

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