The Belt and Road Initiative: Opportunities for Private Businesses in the Western Provinces

2017-06-06

Held on May 14-15, 2017 in Beijing, The Belt and Road Forum brought together leaders from 29 different countries, as well as the heads of the United Nations, International Monetary Fund and World Bank, to discuss China’s Belt and Road Initiative. During the Forum, China President XI Jinping pledged 124 billion USD for what is being heralded as the New Silk Road. The Initiative aims to expand links between Asia, Africa, Europe and beyond through collaboration, integrated economic policies, connectivity and infrastructure projects.

The Initiative also has several domestic aims- chief among them is to develop Western China and connect the region with the global economy. During the Forum, Professor Wanjun JIANG, Dean of Peking University, Guanghua School of Management’s Xi'an branch campus, discussed his recent study on China’s undeveloped Western region (focusing primarily on the Shaanxi, Ningxia, Gansu, Qinghai, Xinjiang and Henan provinces) and the untapped potential and resources they will bring to the Initiative.

Further, he outlined the current obstacles that the region faces and core strategies needed to ensure sustainable development. ‘Government decision-makers and entrepreneurs in the Western provinces,” Prof. JIANG said, “should seize the opportunities created by the Belt and Road Initiative in order to leap forward in its economic and social development.”

The Belt and Road Initiative:  New Opportunities 

 

The Belt and Road Initiative, initially proposed by Chinese President XI Jinping in 2013, aims to build a New, Modern-Day Silk Road by improving physical (transportation networks, energy) and digital/telecommunications connectivity throughout Western China, Central Asia, Africa and Europe. The Initiative promotes policy coordination and facilitates trade, financial integration and people-to-people exchanges. Through economic and technological cooperation and the establishment of free trade zones, the Initiative has the potential to re- shape and revitalize the global economy.

For Chinese state-owned and private enterprises alike, the Belt and Road Initiative is an opportunity to integrate their resources and build global market share, as well as improve productivity and competitiveness. Infrastructure, global trade and capital access are among the Initiative’s key characteristics:

 

(1) Infrastructures:  The Initiative seeks to improve transport networks, communications and energy supply infrastructure to enhance global connectivity. This includes transport networks (railway, highway, airport, port, etc), energy supply (oil and gas pipeline, cross-border power supply networks and power-transmission routes), and communication infrastructure (cross-border optical cables, air (satellite) information channels).

(2) Global Trade:  The Initiative advocates for an open, equal and transparent business environment for enterprises through the reduction of trade barriers. It seeks to forge a better business environment by learning best practices for economic, social and administrative systems in developed regions in China and abroad.

(3) Capital Access:  The Initiative focuses on financial integration to improve capital access and lower the cost for local economic and social development.

I.  China’s Western Provinces: An Analysis of Strengths & Weaknesses

According to Prof. JIANG’s study, which was conducted primarily in Shaanxi, Ningxia, Gansu, Qinghai, Xinjiang and Henan provinces over the past three years, the Western region has two core strengths: geography and resources.

(1) Geography. China’s Western frontier is a key node for transportation, energy and communication networks. By relying on core cities along the Belt and Road routes and using key economic industrial parks as cooperation platforms, the region has the potential to serve as an Eurasian land bridge alongside two economic corridors: China-Mongolia-Russia and China-Central Asia-West Asia.

(2) Resources. China’s Western region is also resource rich in traditional energy and minerals, such as oil, natural gas, coal, ferrous and non-ferrous metals, precious metals, rare earth, as well as renewables such as solar and wind. It is also an untapped tourist destination with historical sites and unique landscapes, including the imperial ruins of the Zhou (1046-256 BC), Qin (221-207 BC), Han (202 BC -220), Sui (581-618) and Tang dynasties (618-907) and attractions like the Terracotta Warriors and Dunhuang Mogao caves.
 

At the same time, the Western region has two core weaknesses, which Prof. JIANG identified as a passive attitude and lack of management talent.  

(1) Passive Attitude. A considerable number of decision-makers in Western firms and the local government lack innovation and an entrepreneurial spirit. They resign themselves to the present situation and are accustomed to delaying and rejecting new ideas. By indulging in nostalgia about the past, rather than looking towards the future, they perpetuate an outdated business model; their passive attitude hinders reform.

(2) Shortage of Management Talent. In order to realize sustainable growth, policy-makers and entrepreneurs not only need to adopt a forward-looking vision, but also require strong organizational and leadership skills to execute strategy. China’s Western firms must grasp the current social and economic development trends and strategies to turn unsatisfied needs into potential markets. Currently, the talent needed to succeed in this way is in short supply in the region.


II. Overcoming Inertia & Addressing Disadvantages

Faced with this opportunity, policymakers in the Western provinces need to adapt a more forward-looking attitude to fully benefit from the opportunities available. Prof. JIANG recommends two suggestions with this aim in mind:  

(1) Leaders Must Lead. In China’s Western local government, as in business, leaders should take more pragmatic actions and bear the responsibility for continuing reform, in line with President XI Jinping’s request. The development of China’s western region can only be realized by hard work, increased efficiency and implementing creative solutions to address local realities.

(2) Enhance Capabilities with External Assistance. In order to address the shortage of management talent in the China’s western region, local officials need to improve their problem-solving skills. Universities like Peking University can here play a key role in educating innovative talents, fostering "The Belt and Road" think tank, as well as incubating innovative firms. Guanghua’s Xi’an branch campus offers degree programs and customized solutions in order to aid in that effort. The branch campus also serves as a platform for bridging faculty, alumni, and the management skills from the western provinces.

About Professor Wanjun JIANG

Professor Wanjun JIANG is the Dean of Peking University, Guanghua School of Management’s Xi’an branch campus and an Associate Professor of Finance. He is also the Vice Director of the school’s Center of Responsibility and Social Values. He was a Fulbright Scholar from 2004 to 2005 in Haas School of Business UC Berkeley. Prof. JIANG’s research focuses on sustainable development of Chinese enterprises and risk management, corporate social responsibility and Chinese enterprises’ overseas direct investment.