What is the rationale behind China's infrastructure investment under the Belt and Road Initiative

Abstract

This research presents a full picture of the rationale behind China's infrastructure investment under the Belt and Road Initiative (BRI), which was formally initiated in 2013. In this paper, we argue that the main reason for China to conduct infrastructure investment under BRI is to strategically respond to the emergence of the "New Normal," which pushes the country to sustain economic growth through further structural transformation. We come up with three relevant factors for why infrastructure projects under BRI could be conducive to structural transformation in China's economy, as it (1) provides a much better alternative to the existing poor logistic conditions and can create accessibility among regions, (2) enables the smooth flow of factor endowments of production that significantly reduce production costs, and (3) indirectly strengthens the influence of the debt provider's home currency. This paper also provides three theoretical pillars: the comparative advantage following (CAF) and defying (CAD) development strategies, the late development theory with antineoliberalism characteristics, and the new international division of labor, from which these three factors might potentially explain how BRI could enhance the structural transformation of this second-largest economy in the world.

Unlocking the myths of size expansion in China's large state‐owned enterprises: Theory and evidence

“…In particular, through imposing high taxes on these SOEs, the state is F I G U R E 1 Nominal decline in the total number of industrial SOEs, 1998-2018 Source: "State-owned enterprises," China Statistical Yearbook 1999-2019 able to accumulate the required capital for national industrial development such as the construction of high-speed railways, infrastructure investment, and so on. Therefore, catching-up and industrialization policies are much more easily undertaken through the help of large SOEs (Zou et al, 2022). The recent effort made by the central state to expand the investment of domestic large SOEs to foreign countries under the so-called one-belt one-road (OBOR) campaign also illustrates the relevance of how large SOEs play an important role in sustaining China's industrial development.…”

Impact of Belt and Road Initiative on Economic Growth

“…BRI aims to improve connectivity, reduce trade costs, and promote market integration through large infrastructure projects whereby the component of infrastructure dominates China's FDI in Belt and Road countries. According to the Ministry of Commerce, 51.6% of overseas project contracting agreements in 2016 came from Belt and Road economies, which was 36% more than the previous year (Zou et al, 2022). The Padma Rail Link in Bangladesh, the Peshawar-Karachi Motorway, the Hakla-Dera Ismail Khan Motorway, and a rail network to the Netherlands are among the projects.…”

“…The Padma Rail Link in Bangladesh, the Peshawar-Karachi Motorway, the Hakla-Dera Ismail Khan Motorway, and a rail network to the Netherlands are among the projects. According to Zou et al (2022), China invests in BRI infrastructure to adapt to the "New Normal". Hence, their study suggests BRI infrastructure projects could help China's economy through provides a better alternative to poor logistics and can create regional accessibility; it enables the smooth flow of production factor endowments, reducing production costs; and it indirectly strengthens the debt provider's home currency.…”

Globalization and environment: The roles of China

“…In particular, the benign impacts are found to come from imports from China, which help promote industrialization and urbanization in BRI economies, leading to better income distribution in the long run. The paper by Zou et al (2021) pays special attention to China's infrastructure investment under the BRI. The authors argue that the main reason for China to conduct infrastructure investment under the BRI is to strategically respond to the emergence of the "New Normal" in China, which aims to promote sustainable economic growth in China through further structural transformation.…”

“…The paper by Zou et al. (2021) pays special attention to China's infrastructure investment under the BRI. The authors argue that the main reason for China to conduct infrastructure investment under the BRI is to strategically respond to the emergence of the “New Normal” in China, which aims to promote sustainable economic growth in China through further structural transformation.…”