A Study Of The Economic Impact Of China’s Belt And Road Initiative

Unveiled by Xi Jinping, President of the People’s Republic of China in September 2013, the Belt and Road Initiative reflects the Asian Powerhouse’s ambition to play a leading role on the world stage, through strengthening its economic and political influences. Focussing on infrastructure development, the Belt and Road Initiative has seen China partnering some 60 countries around the world, primarily in Asia and Europe, creating enormous opportunities for greater economic cooperation. It is estimated that the total investment under this initiative could amount to US$8 trillion.

The benefit of this initiative can be multiple folds. Let us first look at it from China’s point of view:

Drive Economic Growth of Western China

Projects have been rolled out to increase connectivity of the less developed western regions of China with the rest of the world, which will definitely drive economic activities and bridge the economic gap between developed and less developed regions in China. This will also help reduce the risk of social instability in Western China. Discuss it with your economics tutor in economics tuition the various benefits of international trade and economic cooperation. You can also consult your economics tutor on the possible disadvantages that international trade may bring about.

Create Business Opportunities for State Controlled Firms to Maintain Economic Growth

Large conglomerates combining strengths of various stated controlled companies are formed to represent China in the projects launched as part of the Belt and Road initiative. Long term returns generated from these investments will boost the financial performance of these companies and contribute to the overall Gross Domestic Product in China. The first a few years of Chinese President Xi Jinping’s ruling was marked by tremendous political reform, primarily to uproot corruption. Moving forward, I believe the Chinese government will focus more on economic reform and address the income inequity across different areas. Students have learned about income inequity from the economics tutor in economics tuition. What are the implications of income inequity on economic development of a country? You can approach your economics tutor for a better understanding on this issue or make it a case study in economics tuition.

Export Excess Capacity

It is also believed that the increased connectivity as a result of the Belt and Road Initiative will help address the excess capacity issue in China. With established partnership with some 60 countries in various parts of the world, it is easier for Chinese companies to export their products and services to other countries in case of insufficient domestic demand.

Looking from another perspective, it is believed that in undeveloped countries in Asia, Europe and Africa, the investment in infrastructure development is far from sufficient. According to experts of World Pensions Council, the amount of investment required for Asian countries is estimated at around $900 billion over the next decade, leaving out China. The Belt and Road Initiative serves to fill the gap. It has provided the undeveloped countries with the much-needed fund. Discuss with your economics tutor the importance of infrastructure development from the economic point of view. With guidance from your economics tutor in economics tuition, explain why the heightened emphasis on infrastructure in the Belt and Road Initiative.

Risk Control

The benefit of the Belt and Road Initiative is beyond anybody’s doubt. However, some have expressed their concerns. A report released by one of the world’s top rating agencies has highlighted Chinese banks’ lack of ability to control risks, as well as allocate resources efficiently. Therefore, it is still too early to quantify the benefit of China’s Belt and Road Initiative.

Linda Geng

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