Quanto è stretta la Via della Seta

Pubblicazioni Easternational

source: MF 02/11/17

If anyone had any doubts about the perseverance of the Chinese government to pursue the Belt and Road Initiative (also known as the New Silk Roads), the XIX congress of the Chinese Communist Party held in the recent days in Beijing should have totally dissipated them.
On 18 October during Xi Jinping opening speech, lasted three hours and a half, it can be found all the ingredients, which contributed to 'cook' the 'Belt and Road' dish.

1.    The Role of State-Owned Enterprises: far from the wave of privatizations of the 1990's, Xi suggested to strengthen and make them more efficient, but always keeping them under state control. And China's state-owned enterprises, from China Railway Construction Corporation and COSCO, to the major steel mills still owned by provincial governments, are actively involved in building the necessary infrastructure to complete the vision behind the BRI project. Of course, along with these enterprises, also the private ones will move, playing a secondary role and probably engaging less strategic projects. Although being the second violin they will be financed by the two Chinese 'policy banks': the Import-Export Bank of China and the China Development Bank (which exceeded the World Bank for the amount of development credits granted to the world).

2.    Opening up to trade: Xi again reaffirmed that China supports a world-wide open economy for trade and mutual investment, stating that China will do its best to ensure that foreign companies will receive a 'fair treatment' and an open access to China's market. At the same time, it is essential, through economic expansion, for China to go beyond its own borders. This has been going on for a while, but - Xi says – that now is required a more careful selection of the foreign investment. However, the Belt and Road investments will be a priority given that the project itself is defined by Xi as a priority. In other words: less speculative investments, more strategic investments. On this point since August the government had been clear with the publication of the 'black list' of sectors that should be avoided because too risky.

3.    Renminbi Convertibility: very few hints to a possible 'agenda' that lead to the full convertibility of the Chinese currency. On the other hand, with a full convertibility, it would be impossible to control the flows of incoming capital and, above all, the capital going out from China, making also more difficult to guide in a strategically and less speculative way the outgoing capital. This means that the government plans to maintain, at least in the near future, the ability to guide even the most important private investments (small mediums are in fact already unbundled) toward operations that meet the requirements of the Belt and Road. This will be supported by the ability of large state banks, and especially the two policy banks, to allocate substantial dollar or euro resources to projects in other countries.

Finally, Xi came out stronger from this Congress, with a large group of loyal followers in the renewed Politburo and the Belt and Road as his legacy for the world.

If the news from the 'China' side are positive for the continuation of the BRI project, what are the implications for Italy and, above all, for Europe, given the 'continental' implications we are talking about?

We only mention some implications to provide subjects for discussion:

1.    Given the strong competitiveness of the Chinese system regarding the construction of BRI infrastructures and projects, in areas such as South Asia, Africa and the Middle East but also the Balkans and Eastern Europe, could the European Union, which set its geopolitical strategy on economic expansion through a mix of investment and trade agreements, lose its importance in the countries affected by the BRI? How to react to this? Should institutions, such as the EBRD and the BEI, have more resources (and a new mandate)? Should be created a single European export credit agency with more resources instead of 27 national agencies?

2.    Coming back home (and for home again, I mean Europe - the minimum size to face the challenge), there are many regions that would benefit from major infrastructure investments, but individual countries - especially the economies of southern Europe - have budgetary constraints which often do not allow these investments. The BRI project does not have fixed percentages of funds allocated to certain countries, and although up to now the largest part has been directed in Central and South Asia, and Russia, is it possible that some of these funds may be directed to such infrastructures? Under what conditions? Should we consider the existence of reciprocity with China?

3.    Finally, given that the project will continue regardless of our will, it is also essential to dismantle all those non-tariff barriers that still hinder Italian exports not only in China but also in other countries along the new Eurasian transport lines. It is key also to overcome other obstacles to direct investment and to the participation of European companies in public procurement in the countries concerned. Italy can greatly benefit from this, it is the second largest exporter in the EU and with excellent experience abroad in the field of great projects. On the other hand, it was the same Xi to promise wider access to the Chinese market.

In conclusion, Belt and Road is here to stay. Instead of split up even within our countries, let's work together with other European partners and plan a strategy.

Link: https://www.milanofinanza.it/news-preview/quanto-e-stretta-la-via-della-seta-201711012138511196


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