China’s Foreign Minister At The Belt & Road Forum For International Cooperation: Analysis Of Wang Yi’s Statements, And The Impact On China FDI & ODI In 2021.

Op/Ed By Chris Devonshire-Ellis 

Chinese State Counceller and Foreign Minister Wang Yi gave the opening speech at this year’s meeting of the Advisory Council of the Belt and Road Forum for International Cooperation (BRF), held virtually in Beijing on Friday (December 18).  The Advisory Council and BRF is an international political and economical forum, attended by numerous foreign heads of state and government ministers, in addition to representatives from  130 countries and international institutions. Its stated aim is to build “a more open and efficient international cooperation platform; a closer, stronger partnership network; and to push for a more just, reasonable and balanced international governance system.”

We provide excerpts of his speech and comments on these as follows.

Belt & Road Initiative Resilience, Sustainable Development & Warnings Against Unilateralism

“Despite the impact of the pandemic this year, international cooperation on the Belt and Road Initiative (BRI) has continued to demonstrate strong resilience and vitality. Our cooperation has played an important role in helping countries fight the virus, stabilize the economy, and protect people’s livelihoods. It has also contributed to the implementation of the UN 2030 Agenda for Sustainable Development.

The world today is going through a pandemic and global changes, both unseen in a century. The life, safety and health of people around the world are under threat. With global industrial and supply chains disrupted and international trade and investment contracting, the world economy slipped into recession. Unilateralism and protectionism have been on the rise. Yet no matter how the situation may evolve, the international community’s need for the Belt and Road remains unchanged; partners’ support for the Belt and Road remains unchanged; and China’s resolve to advance Belt and Road international cooperation remains unchanged.”

Notes: Wang’s comments are at odds with most Western media, who have pointed to a slow-down in China’s overseas direct investment, and given rise to claims of a lack of sustainable capital being put into the BRI. Yet observing the new 2020 Foreign Investment Law and the previously announced “Dual Circulation Policy” the other side of the coin can be viewed: ODI is deliberately being decreased to allow China to transform itself into a consumer economy. Further comments about this can be seen here.   

In terms of unilateralism and protectionism, these are veiled criticisms of US Government policy, and especially the decision by the States to pull out of the CPTPP trade deal and raise tariffs on imported goods from China.   

The Health Silk Road

“President Xi Jinping has proposed making the Belt and Road a model of cooperation, health, recovery and growth. This has charted the course for Belt and Road international cooperation.

To make the Belt and Road a model of cooperation, we need to promote openness and win-win cooperation. Despite the onslaught of COVID-19 this year, BRI partners have convened 30-plus international video conferences under a dozen or so BRI multilateral platforms to coordinate policies and advance practical cooperation on finance, taxation, energy, green development, anti-corruption and other areas. The joint statement issued at the High-level Video Conference on Belt and Road International Cooperation sent a strong message of collectively fighting the virus, strengthening connectivity and promoting economic recovery, and reaffirmed to the world the strong confidence in Belt and Road international cooperation.

The BRI is an initiative that is completely open and above board. It has followed the principles of openness, inclusiveness and transparency, and of extensive consultation, joint contribution and shared benefits. It is a platform for economic cooperation, not a geopolitical tool. It is a chorus by BRI partners, not a solo show by China. We support Chinese and foreign companies in participating in cooperation projects in an open and transparent manner following market rules and the principle of fairness and sharing benefits and risks.

To make the Belt and Road a model of health, we need to further advance international cooperation against COVID-19. As the virus is still rampaging globally, countries face a daunting task of COVID-19 containment. For BRI partners, our immediate priority is to defeat the virus through solidarity and cooperation. This year, China and BRI partners have worked closely on COVID-19 control and advanced the development of a Health Silk Road. We have coordinated pandemic response measures, shared information and diagnostic and therapeutic experience, and provided each other with urgently needed medical supplies. Together, we have kept land, sea and air links open to facilitate the transportation of life-saving supplies and built a solid line of defense against the virus. Over eight million pieces of emergency medical supplies have been delivered by the China-Europe Railway Express, and over 1,700 tons of medical supplies from China have been delivered around the world through the Silk Road in the Air.

Vaccines are the focus of international cooperation for the next stage. China has joined the COVAX initiative led by the WHO. Important progress has been made in phase III trials carried out by China’s vaccine companies and firms in BRI partner countries such as Russia, Egypt, Indonesia, Pakistan and the UAE. China will make vaccines a global public good when they become available for deployment. They will contribute to vaccine accessibility and affordability in developing countries and deliver benefits to BRI partners.

To make the Belt and Road a model of recovery, we need to promote parallel progress in COVID-19 response and economic and social development. China has established fast tracks with many countries, BRI partners in particular, and green lanes with interested parties to facilitate personnel flows and smooth delivery of goods.”

Notes: China has exponentially increased its ODI investments in global healthcare, equity investments and licensing during 2020. According to China Investment Research China’s spending in this sector has significantly increased in 2020. In Q3 alone it included 48 outbound investments in JV’s and drug research for a July-September total of US$2.503 billion, with an average investment size of US$52 million. It is a trend that will continue. China has put its money where its mouth is in terms of partnering overseas in healthcare and this can be expected to be a major driver of future BRI and global healthcare development. Concerning the China-Europe Railway Express, freight volumes between China and Europe doubled in 2020, and although this was partially in response to the closing of air corridors, increased efficiency and costs will ensure these routes remain their vitality. Handling and processing China-Europe freight is a major opportunity for logistics businesses, and especially those processing digital data and intelligence across borders.

BRI Infrastructure Projects

“Progress has been made in projects such as the Jakarta-Bandung high speed railway, the China-Laos railway, and the Budapest-Belgrade railway. The metro train in Lahore, a project under the China-Pakistan Economic Corridor, is now open to traffic. With rigorous containment measures in place, many Belt and Road projects have kept going with no layoffs. A stream of new projects have been launched. Against the backdrop of the global economic recession, China’s input into the Belt and Road has not decreased but kept a momentum of growth. In the first three quarters this year, China’s non-financial direct investment in countries along the Belt and Road increased by nearly 30% year-on-year. China has also taken an active part in the G20’s Debt Service Suspension Initiative (DSSI), ranking the first among G20 members in terms of deferral amount. We have provided support and help to the best of our ability for COVID-19 response and economic recovery in many of our BRI partners.

China is ready to continue advancing bilateral, trilateral and multilateral cooperation in various fields with all parties to build an open world economy, and maintain the smooth functioning of global industrial and supply chains. Not long ago, we signed the Regional Comprehensive Economic Partnership and announced our readiness to favorably consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. All this is testimony to China’s firm commitment to free trade.”

Notes: We have previously commented on many of the specific projects Wang mentioned, including the Jakarta-Bandung Railway, China-Laos Railway, the Budapest-Belgrade Railway;, and the Lahore Metro. Our comments on the CPTPP and RCEP free trade deals China has signed can be found here and here. Personally, I continue to find it extraordinary that through the development and active promotion of free trade agreements, it is the Communist Party of China who are modelling their foreign policy on capitalist models, while Washington, embarking on trade protectionism and withdrawing from regional free trade agreements has been behaving more as a Soviet era bloc.   

Additional Commitment To Digitization And Green Programs

“As we speak, world economic recovery is still facing many uncertainties. International logistics is facing an imbalance in supply and demand. We will continue to work with others to enhance the cooperation frameworks of fast tracks and green lanes, strengthen land, sea and air multi-modal transport, and further enhance the efficiency and quality of key international corridors.

To make the Belt and Road a model of growth, we need to unleash new drivers of the world economy. The BRI partners are actively developing Silk Road e-commerce, digital transport corridors, cross-border fiber optic cables for information transmission and the China-ASEAN Information Harbor. Multilateral platforms including the BRI International Coalition for Green Development, the BRI Green Investment Principles and the BRI Green Investment Fund are growing in depth and vitality.

Digital Silk Road is a priority area for BRI cooperation in the next stage. China has put forth the Global Initiative on Data Security designed to contribute to data security and development and cooperation of digital economy, and promote collective efforts toward a cyberspace featuring peace, security, openness and cooperation. Issues related to technology have been politicized by certain countries who are attempting to preserve their monopolistic position in high tech areas. Such moves are not constructive. What has happened shows that extensive consultation, joint contribution and shared benefits represents the right way toward better global digital governance.

China is committed to environment-friendly development and is actively involved in international cooperation on climate change. It has announced that it will strive to peak CO2 emissions before 2030 and achieve carbon neutrality before 2060. By 2030, China will lower its CO2 emissions per unit of GDP by over 65% from the 2005 level, increase the share of non-fossil fuels in primary energy consumption to around 25%, increase the forest stock volume by 6 billion cubic meters from the 2005 level, and bring its total installed capacity of wind and solar power to over 1.2 billion kilowatts. All this will catalyze the development of a green Silk Road.”

Notes: Wang emphasizes the need for continuing development of green solutions, underlining China’s recent statements it intends to cease carbon emissions by 2060. That is currently in contrast again with the United States, although President-elect Joe Biden has stated the US will rejoin the Paris Accord. Having China and the US in a green race as a competitive arena to illustrate who is the better global citizen is a healthy rivalry to have. China announced green standards for BRI projects would be implemented with immediate effect earlier this month.

Otherwise, Wang is again critical of the US in the digital field, where China’s 5G technology has been banned from installations at the behest of the United States under the pretext of security issues. That is probably an unsustainable position as inevitably competing technologies will need to talk to each other. How a US backed 5G network can interface with a Chinese one remains to be seen. The concern is that two differing technologies will widen the communication gap between East and West – co-incidentally just at the time that Asia as a whole overtook the West in terms of wealth.

China’s Fiscal Health

“Confronted by the most serious pandemic in a century, China has taken swift, resolute and extraordinary measures to contain the virus and ensure economic and social development. In the first three quarters, China’s economy resumed positive growth. Production and demand continue to pick up; employment is on the whole stable; fiscal and financial performance is steady; and market expectations have kept improving. China is expected to become the only major economy to register positive growth this year. It is estimated that China’s economy will contribute over one third to global growth.

The momentum of steady recovery of the Chinese economy is good news for the world. China will continue to deepen reform and expand opening-up. A growing China will help drive global growth more strongly and make greater contributions to global economic recovery.

The recently concluded Fifth Plenum of the 19th CPC Central Committee adopted the Recommendations for Formulating the 14th Five-Year Plan for Economic and Social Development and the Long-Range Goals for 2035, unveiling a blueprint for the next stage of China’s development. Guided by a deep understanding of the new development stage, China will apply the new development philosophy, and foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other.

The paradigm is aimed at promoting mutual openness and mutually reinforcing development between domestic and international circulations. It will fully unlock China’s market potential and facilitate greater opening-up. China has a population of 1.4 billion and a middle-income group exceeding 400 million. This year, the value of its domestic retail market will surpass 6 trillion US dollars. In the coming decade, total import of goods into China is estimated to top 22 trillion US dollars. The high-quality development of the Chinese economy will provide stronger impetus and create broader space for high-quality Belt and Road cooperation.”

Notes: The ‘Paradigm’ Wang refers to is impacted by new Foreign Investment Law and subsequent Negative List, which further liberalised the Chinese domestic market. Although EU negotiators have been discussing with China improvements on the current status of EU-China trade, and have targeted access to Chinese markets as an area on concern, it is interesting to note that in fact, German FDI into China increased to US$37.8 billion in 2020, up from US$21.6 billion in 2019, proof if needed that China’s market liberalisation has succeeded. This is further compounded by the ‘Dual Circulation Strategy’ and and it is of note that Wang specifically mentions China’s market potential and middle class consumer base. 

Summary

The penny may not have dropped in the West, but China is actively engaged in changing its economic and fiscal model to become a consumer based society. Now, more than ever, is the time to actively become engaged in selling products and services to China, and it is of profound importance for international companies to note that this is Chinese State Policy. Wang has essentially said that “Chinese consumers have money and they want to buy. Come and sell to them.”

Wang’s statements concerning China’s overall policy are fully consistent with the new foreign investment law, the most recently revised negative list and the dual circulation strategy. The Belt and Road Initiative is now 75% in place, and China’s attitude towards ODI and developing China as a consumer society is now changing and already underway. Chinese SOEs are increasingly taking minority equity positions in ODI deals, needing the research and technology, while in possession of a substantial global market. As I mentioned last week in the article China’s Belt & Road Initiative: Key Developments To Expect In 2021 Wang’s outlying again of China’s state policies spell great news for China investors. In many ways, the future for China investments has never looked so good and the playing field to get into the market so attractive. China’s policies will spur another boom in FDI into China in the coming years.

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