China's Belt and Road

The Initiative and Its Financial Focus

Xugang Yu, Cristiano Rizzi, Mario Tettamanti, Fabio E Ziccardi, Li Guo

• Publisher: WSPC
• Year: 2018
• ISBN:
  9789813239555
• Topic: Business
• Subtopic: Business Development
• Index: Business

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This book aims at illustrating the OBOR Initiative (also known as "Belt and Road Initiative" or BRI), its many facets, including its background, and how the Chinese government intends to develop this ambitious project. It describes in detail the role and involvement of Institutions (lenders, in particular) in the OBOR Initiative. It offers guidance on how interested parties can participate in the different projects connected to the Initiative. The views of the authors, on the main aspects of this Initiative, serve as suggestions to parties interested in taking part in this Initiative.

The book provides an exceptional amount of information about how projects connected to the BRI Initiative are financed and developed. The involvement of UBS clearly shows that financial institutions are interested in financing the Initiative.

There is a special focus on the relationship between China and the EU, because the scope of this Initiative is not only to boost trade relationships between the two regions but also create new opportunities for all the countries along the new Silk Road.

--> Contents:

• "Belt & Road Initiative" as a Continuation of China's Reform and Opening Up and as a Consequence of the Beijing Consensus (Xugang Yu)
• China and the "Belt and Road" Initiative: What Is It All About? (Xugang Yu and Cristiano Rizzi)
• The First Pillar of the B&R Initiative Funding: The Institutional Funding (Cristiano Rizzi and Mario Tettamanti)
• The Second Pillar of the OBOR Funding: The Private Sector (Mario Tettamanti)
• The Second Pillar of the B&R Initiative Funding: The Private Sector (Mario Tettamanti)
• Global Implications of the "B&R" Initiative and Its Impact on the EU Economy (Cristiano Rizzi and Mario Tettamanti)
• EU Infrastructure Priorities Connected to the B&R Initiative, and the Necessity for Coordinated Efforts with China in Developing the B&R Initiative (Cristiano Rizzi)
• Relations between China and Italy: The Development of Diplomatic Ties and the Impact of the B&R Initiative and a Brief Overview on the EU and Italian Rules Regulating Public Works (Cristiano Rizzi)
• The Impact of the B&R Initiative on the Development of International Law, Particularly of the Law of Carriage of Goods and of "International Business" (Fabio E Ziccardi)

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--> Readership: Policymakers, academics, professionals, undergraduate and graduate students interested in China's One Belt One Road Initiative, financial, China's outbound investment and China-EU relations. -->
Keywords:One Belt One Road;Infrastructure;Transportation;Outbound Investment;Merger and Acquisition;Funding;China-EU RelationsReview:0

CHAPTER 1

“Belt & Road Initiative” as a Continuation of China’s Reforms and Opening up and as a Consequence of the Beijing Consensus

Xugang Yu

Any circumstance hitting a limit will begin to change. Change will in turn lead to an unimpeded state, and then lead to continuity.

Laozi, Chinese Philosopher

Before illustrating the Belt & Road (B&R) Initiative in its many facets, this chapter aims at providing a clear picture of the background and of the opening-up policy China has adopted in the last part of its modern history, which has allowed not only the development of China but also the conceivement of the B&R Initiative which can be considered as a consequence of the opening up and also of the Beijing Consensus.

1.1The Formation of China’s Reform and Opening-up Policy

1.1.1Deng Xiaoping’s Enlightenment Works and His Rehabilitations: The Turning Point of Socialist China

Deng Xiaoping will always be remembered as one of the greatest Chinese politicians. Deng’s efforts in serving China was disturbed by many historical events, however, his legacy is of paramount importance to China. Without the guidance of Deng Xiaoping, China would have never achieved its goals. Although Deng had a troubled political career (he was rehabilitated more than once), he contributed enormously to the advancements in China.

It is necessary to retrace Deng’s experience in order to focus on all the events which have brought China forward to its present position at the international stage.

In May 1966, the Culture Revolution began, while Deng was the General Secretary of the Central Committee of the Communist Party of China (CPC) and also a Member of the Standing Committee of the Political Bureau of the Central Committee of CPC. From September 1966 to October 1967, Deng was “isolated” in his house in Zhongnanhai, then he was sent to Nanchang, Jiangxi Province, and during this period, his role was greatly diminished. In March 1973, Deng was rehabilitated as the Vice Premier of the State Council. On January 5, 1975, he was appointed as the Vice Chairman of the Central Military Commission of the CPC and the Chief of the General Staff of the Chinese People’s Liberation Army. On January 10, he was selected as the Vice Chairman of the Central Committee of the CPC and as a Member of the Standing Committee of the Political Bureau of the Central Committee of the CPC by the 2nd Plenary Session of the 10th Central Committee of the CPC; on January 17, he was appointed as the first Vice Premier of the State Council by the 1st Session of the 4th National People’s Congress (NPC).

On April 7, 1976, Deng Xiaoping was once again removed from all of his positions, but kept within the Party membership. On July 21, 1977, Deng was again rehabilitated by the 3rd Plenary Session of the 10th Central Committee of the CPC and he reassumed all his positions.

Before his second rehabilitation, Deng continued to study and prepare material, today considered as “enlightenment work,” which would have been useful for the reform and opening-up policy in the years to come.

An episode is of particular significance in Deng’s experience, which convinced the Chinese leader to follow the path of reforms. In November 1977, Shenzhen came into Deng Xiaoping’s view when he inspected Guangdong Province as the first stop after his comeback as the Chinese leader. It is necessary to give a brief background here:

On October 19, 1949, Shenzhen of Guangdong Province was liberated from the Guomindang government, but because of the tensions between the People’s Republic of China and the United Kingdom, the border between Hong Kong and Shenzhen was closed from 1951 onward. This situation, however, did not prevent the successive 20 years of four massive waves of stealing and incursions into Hong Kong from Shenzhen (counting around 1 million people) in 1957, 1961, 1972 and 1979. During this time, one of the main missions of the police was to prevent people from crossing the borders, and these actions were becoming increasingly fierce.¹

At this time, there were two villages on both sides of the Sino-British border, both named Luofang Village, one in Shenzhen, one in Hong Kong, separated by a river. The GDP of the Hong Kong Luofang was HKD 13,000, the other in Shenzhen was RMB 134 only; the income of Luofang villagers in Hong Kong was 100 times that of the villagers in Shenzhen.

Naturally, this situation came to Deng Xioaping’s attention, and during his visit to Guangdong Province on November 17, 1977, while the leaders of the Guangdong Committee of the CPC reported to him about the escaping or “transhumance” trend, Deng firmly said, “escaping to Hong Kong is mainly because life is not good and difference is too big”² and stressed that “something was wrong with our policy, and the armed forces could not control this kind of situation.” These statements shocked the reporters, and they got the sense that Deng Xiaoping was completely indifferent to this delicate and complex issue. These two sentences also puzzled the leaders of Guangdong Province: How should they deal with this situation? If it is not convenient using the armed forces (the police) to control this situation, in which manner could it be better managed? The answers to these questions can be found in the reforms China gradually adopted to solve the differences and transit the country toward a more just and harmonious society.

Deng Xiaoping realized that the only way to grant China a steady development was to introduce changes through gradual reforms and also open up to the outside world. China, under Deng’s guidance, chose Socialism, but a Socialism with Chinese characteristics, which Deng firmly believed was the most suitable model for his country. In one of his speeches, he affirmed, “Currently, although we are engaging in Socialism, … only until the middle period of next century, when we achieve the moderately developed countries’ level, we could say that we are really engaging in Socialism and we could self-confidently say that socialism excels capitalism.”³

This specific historical moment marked the time China started a period of reforms and gradually implemented the opening-up policy, leading the country to more prosperous shores.

1.1.2The Resolution of the 3rd Plenary Session of the 11th CPC Central Committee: Starting Point of China’s Reform and Opening-up Policy

Although Deng Xiaoping was rehabilitated, there was an erroneous notion still puzzling the country, the “Two Whatevers,”⁴ which was pursued by then Party Chairman Hua Guofeng after the death of Chairman Mao. Hua became Communist Party Chairman in September 1976, and he pursued the notion that “whatever policy decisions Mao had made must be firmly upheld and whatever instructions he had given must be followed unswervingly.” The statement first appeared in an editorial entitled Study the Documents Carefully and Grasp the Key Link, which was published simultaneously in the People’s Daily, the Liberation Army Daily and later in the monthly journal Hongqi or the “Red Flag.”⁵

The remarks, however, were replaced by the more pragmatic slogan given by Deng Xiaoping that “it doesn’t matter if a cat is black or white, as long as it catches mice.”

On April 10, 1977, although Deng Xiaoping was still not rehabilitated, he wrote to the Central Committee of CPC, bringing forward his theories using accurate and complete Mao Zedong Thoughts, to direct the Party’s work. Then he talked with comrades from the Party illustrating this issue. On May 24, 1977, he affirmed that the “Two Whatevers” principle was not accorded with Marxism; it was not “workable.” What comrade Mao Zedong had spoken was to be interpreted according to the time and situation he expressed himself. Comrade Mao Zedong himself had expressed several times that some of what he had said was wrong.⁶ And then there was a nationwide debate against the ideological principles of emancipating the mind and seeking truth from facts and bringing order out of chaos. On May 11, 1978, “Practice is the sole criterion for testing truth,” published in Guangming Daily, emphasized that the criterion for testing truth was only a social practice, and that the integration of practice and theory was one of the most fundamental principles of Marxism, which in fact criticized the wrong guideline of the “Two Whatevers.” The publication of this piece of article initiated a nationwide debate on the “truth criterion,” suppressed by Hua Guofeng, but led and supported positively by Deng Xiaoping and majority of the other central leaders. This debate broke through the tie of “Left” wrong thought for a long time and prepared in theory and in ideas for the convening of the 3rd Plenary Session of the 11th Central Committee of CPC, which was a pivotal meeting of the Central Committee of CPC.

From August 12 to August 18, 1977, the 11th National Congress of the CPC was held,⁷ which firmly and unequivocally decided to achieve the “four modernizations” of industry, agriculture, national defense, and science and technology in the new period.⁸

From November 10 to December 15, 1978, the “Central Working Conference” was held in Beijing. At the opening ceremony, Hua Guofeng announced a decision of the Central Political Bureau, putting forward the fundamental guiding principle of shifting the focus of all Party work to the four modernizations.⁹ At the closing session, Deng Xiaoping delivered a speech, i.e. Emancipate the Mind, Seek Truth from Facts and Unite as One in Looking to the Future. Deng Xiaoping affirmed, “when it comes to emancipating our minds, using our heads, seeking truth from facts and uniting as one in looking to the future, the primary task is to emancipate our minds. Only then can we, guided as we should be by Marxism–Leninism and Mao Zedong Thought, find correct solutions to the emerging as well as inherited problems, fruitfully reform those aspects of the relations of production and of the superstructure that do not correspond with the rapid development of our productive forces, and chart the specific course and formulate the specific policies, methods and measures needed to achieve the four modernizations under our actual conditions.” Emancipating the mind is a vital political task; now that the question of political lines has been settled, the quality of leadership given by the Party committee in an economic unit should be judged mainly by the unit’s adoption of advanced methods of management, by the progress of its technical innovation, and by the margins of increase of its productivity of labor, its profits, the personal income of its workers and the collective benefits it provides. The quality of leadership by Party committee in all fields should be judged with similar criteria. This would be of major political importance in the years to come. Without these criteria as its key elements, our politics would be empty and separated from the highest interests of both the Party and the people. Deng also has emphasized that “the whole Party must start to study Marxism–Leninism and Mao Zedong Thought and try to integrate the universal principles of Marxism with the concrete practice of China modernization drive.”¹⁰ Deng Xiaoping’s Theory is taking shape and can be defined as “a socialism with Chinese characteristics.” This Central Working Conference made preparations for the 3rd Plenary Session of the 11th Central Committee of CPC that immediately followed. In essence, this speech served as the keynote address for the 3rd Plenary Session.

From December 18 to December 22, 1978, the 3rd Plenary Session of the 11th Central Committee of CPC was held in Beijing.

The conference marked the beginning of the “Reform and Opening-up” policy, and is widely seen as the moment when Deng Xiaoping became the most acclaimed leader of China replacing Hua Guofeng, who remained the nominal Chairman of the CPC until 1981. The meeting was a decisive turning point since post-1949 Chinese history, marking the beginning of the wholesale repudiation of Cultural Revolution policies, and set China on the course for nationwide economic reforms.

Before the plenum, demands for a repudiation of the Cultural Revolution increased, especially by those who were persecuted during that period. In October 1976, the radical Gang of Four was arrested, and the “Counterattack the Right-Deviationist Reversal-of-Verdicts Trend” campaign aimed against Deng was openly rejected, and Peng Dehuai, Tao Zhu, Bo Yibo and Yang Shangkun were rehabilitated.

Although Hua Guofeng, who succeeded “the great helmsman” in 1976, tried to carry on the Maoist rhetoric and to gain an authority like that of Mao, he also allowed the rehabilitation of many of Deng’s allies calling for economic reform. At the same conference, Deng said it was necessary to go over the ideological barriers.

Trying to distance from the Cultural Revolution practice which put politics before economy, the 3rd Plenary Session argued that extensive criticism campaigns against Lin Biao and the Gang of Four were to be abandoned in favor of a greater attention to economic issues. The “four modernizations” of industry, agriculture, national defense, and science and technology were considered as the Party’s key tasks for the new period. Former President Liu Shaoqi’s theory, that under socialism, mass class struggle came to an end, and it was necessary to develop relations of production in order to follow the growth of social forces, was openly endorsed, while Mao’s theory of continued revolution under socialism was abandoned. Changes in economic management were called for.

The 3rd Plenary Session of the 11th Central Committee decisively discarded the slogan “Take class struggle as the key link,” the “Left” political line which had become unsuitable in a socialist society, and made the strategic decision to concentrate instead on socialist modernization. The Party made efforts to set things right and started the all-round reform, which took economic development as the central task.

The new slogan was to “make China a modern, powerful socialist country before the end of this century.”

Also, as an important contribution, this plenary session brought out the bud of market economy: should uncompromisingly work according to the canon of economics, lay more stress on the rule of law and pay attention to handle ideological and political education and economic means together.¹¹

However, the most important decision taken by the Central Committee was the opening up to the outside world.

1.1.2.1Establishing Diplomatic Relations with the USA as of January 1, 1979

On December 15, 1978, the Joint Communique¹² of the United States of America and the People’s Republic of China was released in Washington and Beijing, announcing the following:

1.The United States of America and the People’s Republic of China have agreed to recognize each other and establish diplomatic relations as of January 1, 1979.

2.The United States of America recognizes the Government of the People’s Republic of China as the sole legal Government of China. Within this context, the people of the United States will maintain cultural, commercial and other unofficial relations with the people of Taiwan.

3.The United States of America and the People’s R...

Table of contents

• Cover
• Halftitle
• Series Editors
• Title
• Copyright
• Foreword
• Preface
• About the Authors
• Acknowledgments
• Contents
• Abbreviations and Acronyms
• Introduction
• Chapter 1 “Belt & Road Initiative” as a Continuation of China’s Reforms and Opening up and as a Consequence of the Beijing Consensus
• Chapter 2 China and the “Belt and Road” Initiative: What Is It All About?
• Chapter 3 The First Pillar of the B&R Initiative Funding: The Institutional Funding
• Chapter 4 The Second Pillar of the B&R Initiative Funding: The Private Sector
• Chapter 5 Global Implications of the “B&R” Initiative and Its Impact on the EU Economy
• Chapter 6 E U Infrastructure Priorities Connected to the B&R Initiative, and the Necessity for Coordinated Efforts with China in Developing the B&R Initiative
• Chapter 7 Relations between China and Italy: The Development of Diplomatic Ties and the Impact of the B&R Initiative and a Brief Overview on the EU and Italian Rules Regulating Public Works
• Chapter 8 The Impact of the B&R Initiative on the Development of International Law, Particularly of the Law of Carriage of Goods and of “International Business”
• Conclusion
• Appendix and Extra Contributions on the Belt and Road Initiative by UBS
• UBS — A First Mover in China
• Bibliography