Our Team Members with a wealth of expertise in Chinese affairs have been examining different areas of China-related business and today we launch the fifth in our series of reports on China focusing on the Belt and Road initiative (BRI).
The BRI is one of President Xi’s personal priorities, and was written into the Chinese constitution in 2017. It has firmly entered the fray of geopolitics, coming under a lot of scrutiny, and attracting both supporters and critics in the international community.
This month, it was reported that Italy was set to become the first G7 country to formally endorse the BRI. This has been received with sharp censure from Washington with the White House’s National Security Council calling the BRI “a made by China for China’s initiative” and adding that it was “sceptical that the Italian Government’s endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy’s global reputation in the long-run”.
Of course the US response does need to be seen in the context of the current trade war that is taking place between the US and China, and the wider concerns that the US and other major economies have over what they perceive to be China’s military and political ambitions dressed up as trade projects and technology. A case in point is that of Chinese telecoms giant Huawei and its plans for 5G technology around the world, which has been charged with fraud and IP theft by the US Department of Justice, and is now suing the US for blocking its technology. And in terms of the geopolitics, this increasing pressure on Huawei is causing something of a domino effect, with several other major economies expressing similar concerns and taking action, albeit less severe.
Italy’s move towards embracing the BRI will also likely cause alarm in Brussels and expose divisions within the EU on this matter. Member States like France and Germany are keen for more stringent screening of international investments and a more unified and aligned EU-wide approach to Chinese investment in particular. Other EU states like Portugal and Greece, who have seen and benefitted from billions of Euros of Chinese investment over recent years, take a more open and welcoming approach. And at PLMR we believe it important to note that UK Prime Minister Theresa May did not offer formal support to the BRI on her official visit to China last year.
Our report also comes in the wake of the annual session of China’s Parliament, where the Chinese Prime Minister Li Keqiang forecast slower growth of 6% – 6.5% this year, down from a target of around 6.5% in 2018, and warned that China faces a “tough struggle”. In terms of possible remedies, he announced plans to boost some domestic spending, cut nearly £227bn of cuts in taxes and other company fees, and crucially increase foreign firms’ access to China’s markets. China’s Government is trying to find the balance between export-led growth and moving more towards domestic consumption.
This matters to the rest of the world because slower growth in China would have a global impact, on exports, on the countries that produce and sell to China and the jobs supported through these relationships.
All of which brings the bigger picture of the BRI and the cross-border benefits it could bring if it was repositioned and reframed, into sharper focus.
Mo Hussein is Head of Campaigns and Public Affairs at PLMR and is a former Adviser to the British Prime Minister and Cabinet Members
You can read the full report here.