In 2016, ‘Belt and Road’ was among the most frequently-used buzzwords in Chinese media, a term strongly correlated to the topics mentioned. The Belt and Road Initiative, formerly One Belt, One Road, symbolizes how the lion intends to shake the world. In his speech at the Word Economic Forum in Davos in January 2017, the leader of the Communist Party of China (CCP), Mr. Xi Jinping emphatically advocated a liberal economic globalisation, environmental sustainability and abolition of protectionism. According to him, China will be a spearhead in defending economic globalization and promoting global economic development and opening-up. At the end of his speech, the president referred to the Belt and Road Initiative (BRI) which was launched in 2013 and pursues the goals of fostering cooperation, economic development and prosperity for all participating countries in a win-win manner. This initiative aims at nothing less than connecting Asia with Africa and Europe by establishing far-spreading transport infrastructure networks via land and sea, fostering trade, boosting economic integration and increasing cultural exchange.
Since its launch it has attracted much attention, especially concerning its political implications and obstacles. Besides these political discussions, figures of projects usually worth billions of dollars are circulating; yet, there are no papers examining the initiative based on economic theories and specifically focusing on the initiative’s true capability to increase economic development in participating countries. The common assessment is that huge transport and other infrastructure projects are beneficial for developing countries as they may boost trade and economic growth.
However, this simplistic assumption should not be accepted without evidence, as unproductive investments can have a huge negative impact on these economies; thus, this thesis will take a deeper look at the BRI’s economic characteristics and compare them to economic development theories as well as theories about the correlation of economic growth and transport infrastructure investments. In this way, it intends to clarify the potential impact on participating countries’ economic development.
Table of Contents
1 Introduction
2 Research method
3 Belt and Road Initiative (BRI)
3.1 Contributing factors to the emergence of the BRI
3.1.1 The ‘Go West’ strategy
3.1.2 The ‘Go Out’ strategy
3.1.3 The ‘China Dream’ and Xi Jinping’s new leadership
3.2 Revival of the Silk Road
3.3 Information on the Vision and Actions Plan and 13th Five Year Plan
3.4 Chinese financing of BRI
3.4.1 Asian Infrastructure Investment Bank (AIIB)
3.4.2 New Development Bank (BRICS Development Bank)
3.4.3 Silk Road Fund
3.4.4 Chinese policy banks
3.4.5 Chinese commercial banks
3.4.6 Infrastructure investment demand
3.4.7 Conclusion on Chinese BRI financing
3.5 China’s motivation for the BRI
3.5.1 Developing China’s western provinces
3.5.2 Overcapacity
3.5.3 Fostering exports and moving up the value chain
3.5.4 Renminbi internationalisation
3.5.5 Enhancing energy security
3.6 Risks and obstacles
3.6.1 Security risks
3.6.2 Unstable governments, lack of skills and China’s future leadership
3.6.3 Cooperation of all countries along the Belt and Road
3.6.4 Financial feasibility
3.6.4.1 China’s financial situation
3.6.4.2 Assumptions about the BRI project’s economic feasibility
3.6.4.3 Consequences for recipients
3.7 Conclusion on the BRI
4 BRI influence on economic development and economic growth of participating countries
4.1 BRI influence on economic development
4.1.1 Definition of economic development
4.1.2 Economic development theories
4.1.2.1 Economic development theories between the 50s and 90s
4.1.2.2 Paul Romer’s new growth theory
4.1.2.3 Theory of coordination failure and the big push theory
4.1.2.4 Conclusion on economic development theories
4.1.2.5 Belt and Road Initiative and economic development
4.2 BRI influence on economic growth through infrastructure
4.2.1 Transport infrastructure’s influence on economic growth
4.2.1.1 Macro- and micro-economic effects of increased transport infrastructure
4.2.1.2 Empirical evidence and requirements for economic growth
4.2.2 Economic profitability of Chinese infrastructure projects
4.2.3 Conclusion on BRI’s transport infrastructure
5 Conclusion
6 Limitations and further research
7 Appendix
8 Bibliography
Objectives and Topics
This master's thesis examines the Belt and Road Initiative (BRI) launched by China in 2013, with the primary objective of analyzing its economic characteristics and its true potential to foster economic development and growth in participating countries through large-scale infrastructure investments, rather than relying on simplistic assumptions of benefit.
- The economic motivations behind the BRI, including overcapacity, energy security, and currency internationalization.
- Theoretical frameworks of economic development and their applicability to the BRI model.
- The risks and obstacles to the initiative, such as financial feasibility, political instability, and security concerns.
- The specific impact of transport infrastructure projects on economic growth and development.
Excerpt from the Book
3.6.1 Security risks
As already mentioned, China’s BRI has not been welcomed by all countries in the region. India, especially, has a rather hostile stand against it and doubts in Russia about the BRI are rising, too. Besides disputes in the South China Sea and other general political difficulties, China is facing severe security risks in several BRI countries, particularly along the Belt. (Liu, 2017, n.p.) Looking at the Global Peace Index (GPI) 2017, compiled by the Institute for Economics & Peace, it becomes clear that most of the BRI area, especially Central and West Asia, is a tinder box. The average rank in the GPI of BRI countries in Central Asia is 104.2 out of 163; West Asian BRI countries rank 116.5 on average. Afghanistan and Pakistan stand out particularly, with a rank of 162 and 152, respectively. Internal conflicts, political terror, political instability and high accessibility of weapons are only a few factors that decrease the security level strongly. (IEP, 2017, n.p.) Ethnic, political and religious conflicts as well as terrorism and radicalism are widespread in several BRI countries. (Liu, 2017, n.p.) This brings two risks for China. It is a threat to the infrastructure, financially and physically, and secondly, China might import conflicts and terrorism onto its own ground.
Regarding imported terrorism, the Islamic State (IS) only recently pledged in a video that it will fight the Chinese government and will spread terror in China. The reason for this is just to be found in the key provinces for the Silk Road Economic Belt, Xinjiang. The conflict between the ethnic minority Muslim Uighurs in Xinjiang and the Chinese government is escalating rapidly. The Chinese government frequently musters its police forces to counter unrest. The increasingly repressive stand against Uighurs lets more and more Muslims fall into the IS’s hands.
Summary of Chapters
1 Introduction: Provides an overview of the Belt and Road Initiative as a pivotal Chinese policy and states the objective of critically evaluating its economic feasibility and potential for development.
2 Research method: Explains the choice of a qualitative narrative literature review to analyze the complex economic aspects of the BRI due to limited data availability.
3 Belt and Road Initiative (BRI): Details the emergence, domestic motivations, financing mechanisms, and significant risks associated with the initiative.
4 BRI influence on economic development and economic growth of participating countries: Analyzes the theoretical underpinnings of economic development and the empirical evidence regarding the correlation between transport infrastructure and economic growth.
5 Conclusion: Summarizes findings, arguing that the BRI is currently an infrastructure project driven by Chinese interests, lacking broad developmental impact and carrying significant risks for participating countries.
6 Limitations and further research: Discusses constraints due to scarce information from official Chinese sources and the complexity of assessing the initiative's long-term economic impacts.
7 Appendix: Provides detailed data tables on participating countries, including economic indicators and classifications.
8 Bibliography: Lists the academic sources, reports, and news articles used throughout the thesis.
Keywords
Belt and Road Initiative, China, Economic Development, Economic Growth, Infrastructure Investment, Financing, Overcapacity, Foreign Direct Investment, Risk Assessment, Silk Road, Transport Infrastructure, Political Economy, Renminbi Internationalization, Debt Sustainability, Economic Policy.
Frequently Asked Questions
What is the core focus of this master's thesis?
The thesis explores the Belt and Road Initiative (BRI) with a specific focus on its economic characteristics and its potential to actually foster economic development in participating countries, rather than taking the claimed "win-win" outcome for granted.
What are the primary themes discussed in the work?
The work covers China's domestic motivations for the BRI, such as tackling industrial overcapacity, the mechanisms and entities involved in financing these massive projects, and the various risks, including financial feasibility and security concerns in recipient nations.
What is the central research question?
The central question is whether the BRI serves as a viable strategy to foster economic development in participating countries, assessed through the lens of economic development theories and the actual impact of large-scale infrastructure investments.
Which scientific methodology does the author use?
The author employs a qualitative narrative literature review, as quantitative approaches are deemed impractical due to the relative novelty of the policy, data scarcity, and the inherent complexity of the economic factors involved.
What key aspects are covered in the main body of the text?
The main body examines China's motivation (e.g., Go West/Go Out strategies), the role of various funding entities (AIIB, Silk Road Fund, policy banks), theoretical perspectives on economic development, and empirical evidence regarding the link between infrastructure and growth.
Which keywords best characterize this research?
Key terms include Belt and Road Initiative, infrastructure investment, economic development, debt sustainability, overcapacity, and China's foreign policy.
How does the author evaluate the economic profitability of Chinese infrastructure projects?
The author references empirical studies, such as those analyzing road and rail projects, to highlight that many projects suffer from systematic cost underestimation and a lack of economic viability, often failing to generate the promised benefits.
What is the author's primary conclusion regarding the BRI?
The author concludes that the BRI is currently largely driven by China's own economic interests—such as exporting industrial overcapacity—rather than by altruistic development goals, and poses significant financial risks to smaller participating countries through debt accumulation.
- Quote paper
- Johannes Gmeiner (Author), 2017, Economic globalization with Chinese characteristics, Munich, GRIN Verlag, https://www.grin.com/document/438751
