The Belt and Road Initiative looks to focus government and business attention on trade connectivity
By Duncan Gordon
As Chinese President Xi laid out his vision for the Belt and Road Initiative during the Belt and Road Forum for International Cooperation, the world’s banks, multilateral organizations, governments, businesses and ordinary people watched on with anticipation. Many countries already have comprehensive trading partnerships with China in place but this was a chance to understand how this unprecedented initiative could enhance trade between countries along the route.
One keen listener was Steve Howard, Secretary General of the Global Foundation (Australia). He said that the speech was “historic” and thought it was positive that the initiative was laid out in such precise terms, which is very helpful for potential trade partners. “It had big vision combined with clarity,” Howard said. There was a consensus among attendees at the forum that the initiative will put the spotlight on trade, boosting bilateral and multilateral exchanges at a time when some countries are looking inwards.
The evidence for that are the 68 cooperation deals that China signed with other countries and multilateral bodies during the two-day event in Beijing. Malaysia signed nine agreements with China, including commercial deals worth over US$7 billion. Meanwhile, President Xi and Indonesian President Joko Widodo watched on as their countries signed an agreement to export more crude palm oil to China. The forum has given extra impetus to trade connectivity between China and its partners.
Kirk D Evans is in the Business Development Division of GIIPE (Golden Integrated Industrial Port Estate), an industrial estate, port, residential and hotel area on the coast of Medan in North Sumatra, Indonesia. Asked about the impact of the Belt and Road Initiative on the business, Evans said: “It puts a focus on everything. Southeast Asian companies are looking to China now because of the initiative. It has focused everyone on working out ‘how can we do this?’ and tries to bring governments and enterprises together.” Businesses and analysts in Belt and Road countries and beyond appear optimistic that the initiative will concentrate efforts to foster free trade and development.
Another current of thought suggests that the Belt and Road Initiative will encourage governments, businesses and lenders to look at the bigger picture when it comes to trade. Steve Howard explains that China is Australia’s biggest trading partner, and his country relies on China to consume its exports, such as iron ore, dairy, and other foods. “We already have a Belt and Road between our two countries,” Howard jokes. So how can the initiative add to that relationship? “Trade should be framed up into a bigger picture that is really about supply chains. How do we have guaranteed supply chains so that what we’re selling is produced, transported, transmitted, gets to this end and is consumed. This is already going on but I think the initiative will provide the confidence and the clarity to make it happen.”
It is not just the volume of trade that is increasing between China and Belt and Road countries. The goods and services themselves are changing as China climbs up the manufacturing supply chain. The government’s strategy, launched in 2015, aims to make China a high-tech manufacturing power. Peter Drysdale, Emeritus Professor of Economics in the College of Asia and the Pacific at The Australian National University, said that the shift in production in China to higher value-added manufactured goods is changing the nature of imports arriving in Australia from China. In ASEAN countries as well, high-tech Chinese products, such as Lenovo laptops and Huawei smartphones, have seen sales continue to grow among Southeast Asian consumers. Meanwhile, Ant Financial, the fintech company affiliated with Chinese e-commerce giant Alibaba, set up a joint venture to develop financial services in Indonesia earlier this year.
At the Belt and Road Forum, President Xi extolled the great potential for increasing trade connectivity between countries. “In this diverse, digitised, globalized world never have we seen such close integration between countries as today,” Xi stated. The Belt and Road Initiative offers a unique opportunity for international cooperation on trade, one that developing and developed countries alike should grasp with both hands as they pursue a brighter future.