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Implementing the B&R Initiative: China's Exploration and the Positioning of Beijing Released

2021-12-21 10:20:34

Recently, Implementing the B&R Initiative: China's Exploration and the Positioning of Beijing was published by Social Sciences Academic Press. The book analyses the division of labor and the positioning in the international trade between China and the countries along the Belt and Road in Southeast Asia and Central and Eastern Europe, and thereby identifies the competitive and complementary relationships in the bilateral trade, and looks into the measures that can unlock the trade and investment potential among China and different countries.

Among the countries along the Belt and Road in Southeast Asia, Singapore and Malaysia have a clear advantage in medium-high- and high-tech manufactured goods, with which China is more complementary than competitive. Compared to Thailand, China has a higher proportion of low-medium-tech manufactured exports, but a much lower proportion of medium-tech manufactured exports, suggesting that there is fierce competition between China and Thailand in low-medium- and medium-tech manufactured goods. Vietnam, Indonesia and the Philippines show a clear competitive advantage over China in low-tech manufactured goods, while China has a comparative advantage in the other four types of technology-intensive manufactured goods. In recent years, as the Chinese government has put in place incentive policies and funding support, China’s proportion of capital- and technology-intensive high-tech manufactured exports has increased year on year, gaining a comparative advantage over countries such as Thailand and Vietnam, but still lagging behind the developed countries such as Singapore. Meanwhile, China still maintains a comparative advantage in low-medium-tech manufactured exports that show growth momentum.

Among the countries along the Belt and Road in Central and Eastern Europe, China and Romania, with a highly similar export structure, compete with each other in various types of high-tech goods. As Central and Eastern European countries (CEECs) are highly dependent on the EU, China’s imports from CEECs are negligible compared to EU’s imports from those countries. Therefore, there remain many areas where the international trade between China and CEECs needs be developed in more diversified forms. In this sense, China is more complementary with CEECs in different types of high-tech manufactured goods, not just with Romania alone. Poland, the Czech Republic and Hungary have the largest proportion of medium- and high-tech manufactured exports and are also highly competitive at the international market, so they highly complement China in medium- and high-tech manufactured goods. The weakening of China’s advantage in low-tech manufactured goods as a result of the changes in its resources is also the case in CEECs.

Based on the above analysis, the book believes that China needs to adapt its measures to local conditions in international trade while adhering to the principle of mutual benefits and win-win results. For example, Singapore and Malaysia are ahead of China in both the overall technological level of exports and economic development. However, the labor costs in those countries are relatively high as a result of the scarcity of local natural resources and the strict regulations on minimum wages and labor taxes. Thus, China can export labor-intensive products to Singapore and Malaysia, including low- and low-medium-tech manufactured products to meet their needs in foreign trade. At the same time, considering that China’s rapidly advancing industrialization and modernization have generated great needs for foreign investment and technology, China can attract Singapore’s high-end manufacturing companies to invest and set up factories in China, thereby facilitating the development and upgrading of domestic advanced factors through higher-level cooperation. But in this process, China may weaken its competitive relationship with Vietnam and Indonesia through such measures as differentiated exports and investment environment improvement. China’s comparative advantage in labor-intensive products is gradually declining, while Vietnam, Indonesia, and the Philippines continue to enjoy the “demographic dividend” brought by the high proportion of young adults. To achieve dislocation competition, China can gradually transfer the low-end manufacturing industries to those countries in the process of regional integration, and at the same time increase its investment in those countries and outsource to them the relatively basic production links along the verticalized industry chains of its manufacturing industry. This is mutually beneficial as it not only saves China’s trade costs, but also creates a large number of local jobs. In addition, China can also help these countries speed up the construction of infrastructure such as railways, reducing the trade and transportation costs in the implementation of the Belt and Road Initiative.

The book proposes that China should fully expand its market share in Central and Eastern Europe. China is more complementary with CEECs in trade than Southeast Asian countries. Theoretically speaking, as for some CEECs with rich resources but slower growth rate, China can export to them capital- or technology-intensive products and import resource-intensive products. As for the CEECs at higher development level, China can cooperate with them in capital- and technology-intensive products, further diversify the trade structure, and actively encourage outstanding Chinese companies to invest in CEECs. China should pay attention to the diversity of CEECs, and well understand the features and complexity of each country. Building upon this, China can seek breakthroughs through the “16+1 cooperation” mechanism, identify the true interests of both parties through bilateral pragmatic talks, and advance the targeted cooperation based on the technological level and structure of the exports. Chinese government departments can actively promote the products to CEECs through commodity fairs, to facilitate those products to “go global”. Moreover, China should give full play to the competitive advantages of different types of technology-intensive products, which is conducive to the technology spillover and learning effects.

(Source: CCPIT/ chinatradenews.com.cn)