The Chinese business publication Caixin, with reference to Li Ruogu, has noted that support for the initiative is mainly in countries whose credit rating does not exceed BB. So who will become the main investor in the One Belt, One Road Initiative? Beijing’s One Belt, One Road Initiative is, in fact, a concept of development of trade and economic cooperation based on mutual benefit. Only this concept does not fit into the traditional understanding of a customs union, for example, NAFTA, the CIS Free Trade Zone or even the Trans-Pacific Partnership. Nations participating in the One Belt, One Road Initiative cannot be grouped either by geographical features, or by the level of development and structure of their economy. Countries in Europe, Central and East Asia, Africa and even Oceania are among the nations participating in the initiative.
In order for trade and economic cooperation between countries to develop in a uniformed format, they need to create comparable basic infrastructure: ports, transshipment stations, logistics centers, etc. That is why the countries with emerging markets are especially supportive of the One Belt, One Road Initiative, because they see it as a chance for them to create an infrastructure that is currently missing for further economic development.
The question is also who will implement these investments. Deputy chief of the Development Research Center of the State Council of the People's Republic of China, Wang Yiming, recently noted, according to the South China Morning post that the bulk of all the projects in the Belt and Road Initiative are being financed by major financial institutions — including the Asian Infrastructure Investment Bank, the New Development Bank of BRICS, the China Development Bank (CDB), the Export-Import Bank of China and the Silk Road Fund — and yet, the One Belt, One Road Initiative is still hugely underfunded, up to $500 billion a year.
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A way out of this situation could be the attraction of private investment. However, as ex-president of the Export-Import Bank of China, Li Ruogu noted, the diversity and the lack of transparency of the legislation in these countries in the field of market access, exchange rate policies and severe tax regimes may put off private investors.
However, private capital is traditionally reluctant to invest in infrastructure construction. This is a long-term investment, and their return is not easy to calculate. Therefore, the attractiveness for private investors is an internal problem for the participating countries, for the Belt and Road Initiative this won't be a problem, believes the director of Chongyang Institute for Financial Studies at Renmin University of China, Jia Jinjing.
“It is necessary to evaluate correctly what Li Ruogu said. He spoke about the state of the economies within countries. The key word here is internal. And the One Belt, One Road Initiative, in its essence, is an international, global initiative. And although this initiative was proposed by China, cooperation within this initiative doesn't necessarily need to go through China. Other countries can also cooperate directly with each other. In addition, the problem of lack of funds, over-lending, objectively all of this existed before the Belt and Road Initiative. This will not in any way interfere with the implementation of the initiative. On the contrary, the Belt and Road Initiative is, in part, there to gradually solve this problem,” he told Sputnik.
During the meeting held on Sunday in Tokyo, they spoke in defense of economic globalization and the principles of free trade. Taro Kono said that Japan is ready to cooperate with China within the framework of the One Belt, One Road Initiative. Previously, Japanese media had reported that Japan wanted China to cooperate with it on its own project for the development of road networks in Africa, primarily the construction of a transport corridor between Cameroon and the Republic of the Congo. Beijing stands to only benefits from this. The country will likely continue to actively attract strong economies to cooperate in the initiative to make it more solid, to share responsibility for the risks of the One Belt, One Road Initiative.
The views of Jia Jinjing do not necessarily reflect those of Sputnik.