Reshaping the Economic Cooperation Pattern of the Belt and Road Initiative 9811576300, 9789811576300

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Reshaping the Economic Cooperation Pattern of the Belt and Road Initiative Jinping Zhao Translated by Qiaodan Lu & Manxian Jiang

Reshaping the Economic Cooperation Pattern of the Belt and Road Initiative

Jinping Zhao

Reshaping the Economic Cooperation Pattern of the Belt and Road Initiative

Jinping Zhao Development Research Center of the State Council of the People’s Republic of China Beijing, China

The print edition is not for sale in Mainland of China. Customers from Mainland of China please order the print book from: Zhejiang University Press ISBN 978-981-15-7630-0    ISBN 978-981-15-7631-7 (eBook) https://doi.org/10.1007/978-981-15-7631-7 © The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-­01/04 Gateway East, Singapore 189721, Singapore

General Preface: The Year 2020: A Historic Choice of Economic Transformation and Upgrading

A great nation with 13 billion people is facing a changing situation it has not ever faced for a thousand years. Change, transformation and innovation feature the main melody of the era. In this era of high integration of growth, transformation and reform, “great transformation” is exactly what decides the destiny of China. In other words, not only will “toxic assets” left in the traditional system have to be eliminated completely but also the new way for further growth needs to be paved quickly while letting loose the new motive force of development. The major transformation in China’s “13th Five-Year Plan” (FYP) is historically decisive. With the economic transformation as the focal point, both social transformation and government transformation are in the crucial period of transition in which innumerable thorny problems have to be tackled. Our general judgment is that the year 2020 is like a “gorge” we have to jump over. Specifically, by the end of 2020 we will have eliminated the pressure on short-term growth and changed the way for economic development while achieving a comparatively prosperous society in an all-­ round way and becoming one of the high-income countries in the world. If we plan well enough to make the best use of 2020, a mid-term period in the 13th FYP, we can lay a solid foundation for the medium- to longterm peaceful and sustainable growth. If we fail to grasp the historical opportunity of 2020, we will lose the initiative of “great transformation”, thus resulting in multiple systemic economic risks. The significant breakthrough for achieving the economic transformation and upgrading in the 13th FYP period is how to cope with “four v

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threes”. First, three major trends: one for industrial transformation and upgrading from “made in China” to “intellectually made in China”; one for urbanized transformation and upgrading from scale to population; and one for consumption pattern upgrading from material to service. Second, three major challenges: one for achieving a major breakthrough in structural reform by enhancing the structural adjustment despite the economic downturn; one for “corner overtaking” by responding to the global new round of scientific and technological revolution and increasing the ability to innovate; and one for a real and down-to-earth reform. At present, the transformation depends more on the all-round breakthrough in reform. It couldn’t move forward at all without the change in the systematic structure. And the growth would suffer big pressures. Third, three major goals: one for industry, namely, forming the service-dominated industrial structure by accelerating the process of service in manufacture; one for a major motive force, namely, forming a consumption-oriented new pattern of economic growth in which consumption guides investment and domestic consumption becomes a main force that spurs economic growth, and one for opening-up, namely, forming a new open pattern dominated by service trade so as to redouble service trade in scale. Finally, three major relationships to be handled properly: one between the short term and the medium to long term in which the best job should be done for 2020 (the mid-term period) while resolving contradictions in the short term, basing ourselves on the mid-term and keeping our eyes on the long term; one between speed and structure which requires accelerating the structural adjustment while maintaining an increase by 7% or so; and one between policy and system in which the key is to gain a policy advantage in achieving institutional innovation under the economic pressure. The past 40  years of reform and opening-up have left us numerable valuable assets. The most valuable one is that the more complex the situation may be and the more fundamental the change in environment, the more determined we will be in carrying out the reform and pushing through the transformation. All these require that the “great transformation” needs overall arrangement and ambitious planning; a significant breakthrough in the reform of industrial structure, urban-rural structure, regional structure, ownership pattern, open structure and administrative power structure; and prospective planning in green sustainable development and “internet plus” development trends. By judging the transformational reform in the 13th FYP period, China (Hainan) Institute for Reform and Development (CIRD) and Zhejiang

  GENERAL PREFACE: THE YEAR 2020: A HISTORIC CHOICE OF ECONOMIC… 

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University Press have jointly designed and published this set of series entitled The Great Nation in Great Transformation—Economic Transformation and Innovative Development in China. The book series has paid attention to readability based on being strategic, prospective and academic. It is our expectation that the series will offer enlightenment to readers who are closely watching the transformational reform in China while playing an active role in promoting the transformational reform in the 13th FYP period. The authors of the series are mostly well-known scholars in their own subject areas, who wrote their respective books in their spare time. As the director of the editorial board of the series, I wish, first and foremost, to extend my sincere thanks to the consultants, editorial board members, authors and the leadership and editors of the press. Last but not least, this set of series covers a wide range of subject areas, each volume representing its author’s own research conclusions and academic opinions. The set does not require consistency in terms of viewpoints. Any criticism and correction from readers are truly welcome. China Institute for Reform and Development Haikou, Hainan, China September 2015

Fulin Chi

Preface

Based on the increasing economic strength of China, the Belt and Road Initiative is proposed to break new ground in pursuing opening up on all fronts through links running eastward and westward, across land and over sea, advance mutually beneficial cooperation with countries along the Belt and Road and promote both Chinese and global development with everlasting vitality. Thanks to the abundant resources and large population, this wide area is expected to provide a huge market. The implementation of the Belt and Road Initiative not only cultivates the image of China as a responsible emerging power, but also meets the strategic demands of coping with fresh challenges posed by major adjustments to the global economic landscape; it also nurtures new economic growth points by improving the domestic economic structure and encourages sound interactions between China and the countries along the Belt and Road, based on the deepening collaboration with regard to trade and investment as well as the favorable external environment. However, potential restraints and difficulties are in the way, including development at different levels, poor infrastructure, intricate religious and historical issues, the accumulating risks of geopolitical conflicts and insecure bilateral ties, and thus the Initiative will take a long, gradual process which needs painstaking efforts. Characterized by a strong willingness, mutual benefits, stable foundations and solvable problems, economic cooperation will act as a breakthrough for sharing collaborative fruits,

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reinforcing and expanding common ground as well as taking the lead in the long-term sustainable development during the implementation of the B&R Initiative as soon as possible. In order to promote the Belt and Road economic cooperation, first and foremost, it is vital to improve the bilateral and multilateral economic cooperation mechanism and create a favorable policy environment to encourage entrepreneurial participation and practical collaboration based on the cooperative philosophy of amity, sincerity, mutual benefit and inclusiveness, as well as the principle of achieving shared growth through discussion and collaboration. Great attention should be paid to six relations during this process: first, the role of a global power versus a developing nation. China shall shoulder responsibilities and obligations within its capacity in case of over-­ commitment; second, the market versus the government. The market plays an important role in collaboration and development, but enterprises are supposed to conform to the market rules while the government should also perform its duties, such as guidance and promotion, supporting policies, providing services and security assurance; third, the selfinterest of each country versus the common interests of the region. The countries along the Belt and Road shall insist on the principle of mutual benefits while taking the general balance of each party into consideration, especially through offering extra support to weak, impoverished countries; fourth, intra-regional collaboration versus extra-regional collaboration. The countries along the Belt and Road are expected to collaborate with both the regional partners and other districts or nations; fifth, competition versus cooperation. Competition and cooperation are complementary to each other, as cooperation encourages benign competition among various markets while competition helps to increase efficiency, deepen cooperation and promote economic integration; sixth, long-term vision versus steady progress. Due to the fact that the Belt and Road Initiative is a huge, time-consuming project, we must make an overall plan on the basis of long-term development, form the blueprint and common vision, reach a consensus on development and then coordinate efforts. At the same time, it is significant to progress steadily to ensure effectiveness and sustainability. Viewed from a domestic perspective, the institutionalization of the policy environment for economic cooperation has only recently got off the blocks, which gives rise to a series of problems, such as the administrative systems of outward foreign investment and economic cooperation failing

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to satisfy the needs of enterprises going global on a large scale, the small coverage and low level of the facilitation and liberalization of trade and investment along the Belt and Road, the limited capacity of cross-border financial and producer services as well as the incomplete infrastructure and platforms for the auxiliary industries. In order to improve the supporting policy system for economic cooperation, emphasis should be laid on six aspects: the first is to speed up the establishment of the regional cooperation mechanism and create a sound cooperative environment; the second is to conduct effective cooperation through partnerships; the third is to make full use of the manufacturing advantage and take the initiative to progress in regional industrial cooperation; the fourth is to strengthen the bilateral collaboration with countries with abundant resources and secure resource supply by means of interest binding; the fifth is to substantially reduce regional cooperation costs through accelerating the construction of software and hardware; the sixth is to take advantage of various financial tools to support and improve the internationalization and competitiveness of the real economy. Since 2013, Ministry of Foreign Economic Research, Development Research Center of the State Council (DRC) has conducted policy research on the implementation and promotion of the Belt and Road Initiative and published valuable studies in response to the national demands for scientific decision-making. Focus on the “The Belt and Road”: Economic Impact and Policy Proposal was published as part of the preliminary research findings in November 2015 to provide reference for related studies. Later on, the research project on the economic and trade policies for the Belt and Road Initiative, carried out in accordance with the annual research plan of key projects published by DRC in 2015, made great progress, thereby passing expert assessment and concluding in April 2016. In order to transfer achievements as soon as possible, the most recent studies are expected to be compiled through the joint efforts of members of the research group. This book can be regarded as a sequel, which further focuses on the topic of economic cooperation within the Belt and Road Initiative, an analysis of the cooperative direction and specific tasks in broad fields, including trade and investment, as well as facilities connectivity based on the actual situations, finally giving experts’ suggestions to advance collaboration. If any difference exists compared with the last book, this one is closer to realistic policy-making and implementation as a deeper analysis of policy research.

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The first chapter expounds on the relevant background of the policy system of promoting economic cooperation concerning the Belt and Road Initiative; from the second to ninth chapter, the research reports on different kinds of topics, namely, cooperation mechanisms, trade, investment, capacity, infrastructure construction, energy, cross-border industrial park cooperation and the opening-up pattern; the tenth chapter is a case study report, which conducts a deepening analysis of advancing bilateral institutional cooperation between China and the Gulf States. My gratitude goes first to Deputy Director Long Guoqiang and colleagues in the Ministry of Foreign Economic Research. Without their guidance and efforts, this book would not have been published. Researcher Luo Yuze, who coordinated this research, has also been extensively involved in the topic planning and coordination, reviews and defense, based on his profound knowledge of the regional cooperation research on the Belt and Road Initiative. In addition, I would like to express my sincere gratitude to several interns who have made great efforts in terms of literature research, compilation and proofreading. Finally, I wish to thank my friends in China Institute for Reform and Development and Zhejiang University Press, whose support and endeavors meant so much to me. I am fully aware that deficiencies and problems are unavoidable due to the tight schedule, heavy workload and limited ability of the contributors, and there are still some areas that need further studies, which will be rectified and improved in the future. Beijing, China April 12, 2016

Jinping Zhao

Contents

1 Accelerating the Establishment of the Policy System to Promote the Belt and Road Initiative  1 1.1 Implications of the Belt and Road Initiative  1 1.2 Background and Status Quo of the Belt and Road Economic Cooperation  4 1.3 Cooperation Philosophies of the Belt and Road Initiative 10 1.4 Opportunities and Challenges Related to the Belt and Road Economic Cooperation 18 1.5 Policy Ideas on Promoting the Belt and Road Economic Cooperation 23 2 Regional Cooperation Mechanisms of the Belt and Road Initiative 33 2.1 Importance of Promoting the Belt and Road Initiative 34 2.2 Difficulties in the Belt and Road Cooperation Mechanisms 42 2.3 Basic Thoughts on Promoting the Belt and Road Cooperation Mechanisms 47 2.4 Suggestions for the Belt and Road Regional Cooperation Mechanisms 52 2.5 Conclusion 62

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3 Future of Trade in Goods in the Belt and Road Region 63 3.1 Status Quo and Development Trends of Trade in Goods in the Belt and Road Region 64 3.2 Features of Trade Liberalization in the Belt and Road Region 81 3.3 Ideas and Policies for Expanding Trade Exchange in the Belt and Road Region 86 4 Research on Investment Promotion Policy of the Belt and Road Initiative 91 4.1 Opportunities Brought About to China by Investing in the Belt and Road Region 92 4.2 Situation and Progress of China’s Investment in the Belt and Road Region 96 4.3 Major Problems and Challenges of China’s Investment in the Belt and Road Region 99 4.4 Strategic Focus of Improving China’s Investment in the Belt and Road Region103 4.5 Policy Suggestions for China’s Investment in the Belt and Road Region105 5 Research on China’s Belt and Road Capacity Cooperation111 5.1 Importance of China’s Belt and Road Capacity Cooperation112 5.2 Status Quo and Existing Problems of China’s Belt and Road Capacity Cooperation122 5.3 Feasibility Analysis of International Capacity Cooperation127 5.4 Policy Suggestions130 6 Promoting the Belt and Road Infrastructure Construction135 6.1 Importance of Promoting the Belt and Road Infrastructure Construction136 6.2 Status Quo and Problems of the Belt and Road Infrastructure Construction137 6.3 Principles for Promoting the Belt and Road Infrastructure Construction140 6.4 Policy Suggestions for Promoting the Belt and Road Infrastructure Construction142

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7 The Belt and Road Energy Cooperation151 7.1 Strategic Significance of the Belt and Road Energy Cooperation Against Global Energy Reform152 7.2 Status Quo, Progress and Problems of the Belt and Road Energy Cooperation156 7.3 Ideas and Policy Suggestions for Enhancing Energy Cooperation161 8 Overseas Economic Cooperation Zones Under the Belt and Road Initiative171 8.1 Importance of Developing Overseas Economic Cooperation Zones Under the Belt and Road Initiative172 8.2 Lessons Learned from Singapore’s Overseas Economic Cooperation Zones175 8.3 Development of Overseas Economic Cooperation Zones Under the Belt and Road Initiative179 8.4 Policy Suggestions for Building Overseas Economic Cooperation Zones Under the Belt and Road Initiative188 9 Coordinating Domestic Regional Opening Policies with the Belt and Road Initiative195 9.1 Importance of Coordinated Regional Open Economy to China’s Long-Term Economic Growth196 9.2 Accelerating the Construction of Domestic Transport Routes Through Coordinating the Belt and Road Initiative201 9.3 Establishment of Pilot Free Trade Zones to Promote Reform and Opening up in Central and Western Regions206 9.4 Coordination Between the Adjustment of Domestic Industrial Layout and the Going Global Strategy208 9.5 Policy Suggestions for the Transfer of Eastern Industries to the Central and Western Regions211 9.6 Summary215

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10 Significance, Impacts and Future Path of China-GCC Free Trade Area217 10.1 Basic Information About China-GCC Economic Cooperation218 10.2 Impacts of China-GCC Free Trade Area on China’s Major Strategies222 10.3 Impacts of China-GCC Free Trade Area on Investment and Services236 Epilogue267 References269

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4

Fig. 2.5

Fig. 2.6

Changes in the world economic growth rates (1985–2015). (Source: IMF Database) 5 Changes in the world export growth rates (1985–2015). (Source: IMF Database) 7 Shares of China and US in world GDP (1980–2015). (Source: IMF Database) 8 Shares of China and US in world trade (1985–2014). (Source: WTO Database) 9 Development trend of trade between China and B&R countries. (Source: General Administration of Customs (Only goods are included in the trade, all in current US dollars)) 37 Development of China’s overseas contracted projects and shares of the Silk Road countries. (Source: National Bureau of Statistics)38 Main fields of regional cooperation 41 Comparison of intra-regional trade intensity index. (Source: The Asian Development Bank: Asian Economic Integration Report, November 2014. Note: The higher the trade intensity index, the closer the trade relationship within the region) 44 Comparison of the pulling effect of China’s demand (excluding Hong Kong, Macao and Taiwan) and US demand on Asia-Pacific countries or regions. (Source: Zhao Jinping and Zhang Qi: Research Report: Policy Implications and Countermeasures of Accounting Trade in Value-Added in APEC Economies, 2015) 51 The Belt and Road regional cooperation mechanism framework 54

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List of Figures

Fig. 2.7 Fig. 2.8 Fig. 2.9 Fig. 3.1 Fig. 3.2

Fig. 3.3 Fig. 3.4 Fig. 3.5 Fig. 3.6 Fig. 3.7 Fig. 3.8 Fig. 3.9

Fig. 3.10 Fig. 3.11 Fig. 3.12 Fig. 3.13 Fig. 3.14 Fig. 3.15 Fig. 3.16

Status of major countries in the Belt and Road region (GDP ratio). (Source: World Bank Database) 54 The Belt and Road investment and financing cooperation mechanisms57 Implementation paths of institutional arrangements for regional integration 61 Proportion of China’s exports to B&R countries in China’s total exports. (Source: UNCTAD Database) 65 China’s main export markets. (Note: East Asia in the figure includes Japan, South Korea, etc.; Western Europe refers to the 15 member countries of EU before 1996; Latin America is comprised of Mexico, Central America and South America (the same as the following figures). (Source: UNCTAD Database)67 Proportion of B&R countries’ imports from China in their total imports. (Source: UNCTAD Database) 68 Main import markets of B&R countries. (Source: UNCTAD Database)68 Proportion of B&R countries’ exports to China in their total exports. (Source: UNCTAD Database) 69 Main export markets of B&R countries. (Source: UNCTAD Database)70 Proportion of China’s imports from B&R countries in its total imports. (Source: UNCTAD Database) 70 China’s main import markets. (Source: UNCTAD Database) 71 Imports of main global economies. (Note: “EU15” represents the EU member states as of 1 January 1995, namely: AUT, BEL, DNK, ESP, FIN, FRA, GER, GRC, IRL, ITA, LUX, NLD, PRT, SWE and UK. Source: UNCTAD Database) 71 China’s trade balance with B&R countries. (Source: UNCTAD Database) 72 Product structure of China’s exports to B&R countries. (Source: UNCTAD Database) 73 Product structure of China’s imports from B&R countries. (Source: UNCTAD Database) 73 China’s trade balance with B&R countries. (Source: UNCTAD Database) 74 Product structure of China’s exports to the global market. (Source: UNCTAD Database) 74 Product structure of B&R countries’ exports to the global market. (Source: UNCTAD Database) 75 Direction of China’s exports to main sub-regions along the Belt and Road. (Note: “Other Countries” include Mongolia,

  List of Figures 

Fig. 3.17 Fig. 3.18 Fig. 3.19 Fig. 3.20 Fig. 3.21 Fig. 3.22 Fig. 3.23

Fig. 3.24 Fig. 3.25 Fig. 3.26 Fig. 3.27 Fig. 3.28

Fig. 3.29

Georgia and Timor-Leste (the same in the following figures). (Source: UNCTAD Database) Direction of China’s imports from main sub-regions along the Belt and Road. (Source: UNCTAD Database) China’s trade structure with ASEAN in 2014. (Source: UNCTAD Database) China’s trade structure with 15 West Asian countries in 2014. (Source: UNCTAD Database) China’s trade structure with 11 the former CIS countries in 2014. (Source: UNCTAD Database) China’s trade structure with 8 South Asian countries in 2014. (Source: UNCTAD Database) China’s trade structure with 17 Central and Eastern European countries in 2014. (Source: UNCTAD Database) China’s trade structure (TSI) with main sub-regions along the Belt and Road in 2014. (Note: TSI = (Import − Export)/ (Import + Export), −1