Shanghai's Greatest Opportunity: the Belt and Road Initiative

China’s President Xi Jinping first announced the Belt and Road Initiative (BRI) in 2013. After five years, it is now evident that the BRI is not just a series of one-time infrastructure projects or another outbound investment program, but a long-term strategic initiative that aims to open the world to China and to open China to the world. I believe the BRI will add momentum to China’s opening-up and ultimately establish an open, inclusive and balanced regional economic cooperation that benefits all.

Macroeconomic predictions indicate that global trade will soar in the coming decades. Its volume in 2050 is expected to be eight times that of 2010. As possibly the biggest continuous investment of all time, the BRI has the potential to be a major driver of global economic growth in the next 20 to 30 years. By 2025, BRI infrastructure projects worth roughly 1 trillion euro (US$1.16 trillion) are expected to be completed or in progress in about 90 BRI countries. This figure is likely to climb as more and more countries join the initiative. It is estimated that BRI will touch the lives of 70 percent of the global population.

The aspiration China explicitly attaches to the BRI is to share knowledge and create mutual business opportunities, to strengthen ties among countries in Asia, Europe, and Africa and beyond, and to foster trade, progress, and prosperity. This is the right signal at the right time. Today, we are witnessing a resurgence of protectionism all over the world. There are those who want to close the door on trade. They assume that doing so will protect local industry and prevent local jobs from being lost. But history refutes that assumption. Countries that have embraced openness and encouraged the free exchange of knowledge, goods, and services have thrived. Trade has improved quality of life for people all over the world; in China, it has helped lift millions of people out of poverty. The BRI has the potential to bring a world together that is being pulled apart by nationalism, protectionism, and distrust. However, to fully tap this potential, the BRI must be truly multilateral. Everyone involved must benefit.

The positive impact of the BRI is already visible. In 2017 alone, Chinese engineering, procurement, and construction companies posted new orders worth US$144 billion in 69 BRI countries and about US$265 billion worldwide — mainly for power plants, port facilities, industrial facilities, and rail systems.

Over the past decades, Shanghai has always been a forerunner in the opening-up of China and has made substantial progress in establishing itself as an international investment and trade center. The master plan for Shanghai calls for the city to become a leading international center for finance, trade and shipping as well as a global innovation hub by 2020. By 2040, Shanghai is expected to be an “excellent global city” — a city that can compete with any major metropolis in the world in terms of economy, finance, trade, logistics, science, technology, and culture.

Today, Shanghai stands for global trade and has the unique opportunity to play a leading role in the BRI as a BRI hub. By creating a business environment that is more open, flexible, efficient, transparent, and convenient, it can attract foreign companies and investors, and build an innovative digital ecosystem that supports BRI projects. In today’s connected world, no country and no company, no matter how big or powerful, can succeed alone. That’s why engaging more foreign companies, especially Multinational Companies (MNCs), is vital to this effort. With decades of business experience, they can provide valuable insights on local markets, regulations, and industries in BRI countries, and act as “bridge builders” for Chinese companies in their interaction with foreign suppliers, customers, and governments. Shanghai already has a long tradition of cooperating with MNCs, and many of them have established production sites, R&D centers, or even headquarters there.

Funds for BRI

The Asia-Pacific region alone requires an investment of US$1.7 trillion per year for over a decade to maintain its growth momentum, tackle poverty, and fight climate change.

Yet, traditional forms of infrastructure financing will not be able to meet this demand. In the long term, the financing of the BRI is unlikely to rely solely on the Chinese government, Chinese corporations, or financial institutions, but instead on investments from across the globe.

The internationalization of the renminbi is a key success factor for the financing of the BRI projects. Also, the complexities of the planned infrastructure financing cannot be managed by one entity alone. These are good reasons for making the business environment more attractive to foreign investors.

In the near term, BRI investments will continue to be focused on conventional infrastructure such as rail networks, power plants, ports, airports, and industrial parks in order to meet the most urgent needs of BRI countries. In the long term, however, digitalization will play an increasingly important role as China builds the “Digital Silk Road.”

The rationale here is to utilize digital technologies to drive the growth of traditional industries, to shape global e-commerce, and to set standards for global digital industries, both in B2C and B2B markets. The future will be digital along the Belt and Road. To fully tap this opportunity, a powerful and efficient ecosystem is needed to facilitate and accelerate the design and deployment of innovative digital solutions for infrastructure, manufacturing, finance, services, and other industries. This, too, is a major opportunity for Shanghai.

All in all, BRI is an invitation to the rest of the world to take part in the biggest infrastructure investment program of all time. To accomplish that, Chinese companies, companies in BRI countries, and multinational companies must benefit from cooperation — all three must win.

I call that a Triple Win. Shanghai can rely on Siemens to fully support this effort. We at Siemens are committed to making the BRI a success — for Shanghai and its enterprises, for companies in BRI countries, and for multinational companies like Siemens. We are committed to a Triple Win.