Beyond trade and investment

Belt and Road Initiative has evolved with a greener and smarter international cooperation agenda

This year marks the 10th anniversary of the Belt and Road Initiative. Since its initiation in 2013, it has grown to be a grand geopolitical and geoeconomic initiative aimed at reviving the great ancient land and marine trade routes, mainly through commodity trading and infrastructure development in the host countries. Between 2015 and 2022, Chinese foreign direct investment in the countries involved in the initiative increased from $15 billion to nearly $21 billion, whereas the contracted amount of construction projects in these countries increased from $92 billion to nearly $130 billion. Meanwhile, the commodities trading between China and the participating countries also increased significantly, reaching a record high of $2.05 trillion in 2022. There is little doubt that the mission of the initiative in the first decade, defined as fostering and boosting global economic and trading partnerships, has been largely accomplished. Considering the majority of the participating countries are developing countries, the initiative has contributed significantly to the development of the Global South.

The world has witnessed dramatic changes in the past decade and is now faced with unprecedented challenges. The COVID-19 pandemic since 2020 and the following economic and financial havoc are disrupting developed and developing countries alike. Robust recoveries appear to be exceedingly difficult in many countries. In addition, climate change, food shortages, natural disasters and armed conflicts have made the prospect of achieving the 2030 Sustainable Development Goals set out by the United Nations increasingly austere. In facing these growing uncertainties and profound changes unseen in a century, the Chinese leadership has exhibited aspirations to further upgrade the Belt and Road Initiative into a full-fledged global development and cooperation agenda beyond trade and investment.

Even before the pandemic, such a reorientation was already underway. The policy narratives around promoting a "green BRI" first emerged in 2017, followed by dozens of government policies and guidelines published by various ministries. In these documents, the commercial and economic value was no longer viewed as the only criteria for the evaluation of the projects under the framework of the Belt and Road Initiative, but their environmental and social benefits were to be considered too. China commits to promoting high-quality projects, which can be smaller in size but more beautiful. As the initiative is now more often assessed on its contribution to local sustainability and social welfare, it has entered a new stage.

In this light, "green" and "smart" have emerged as the two central themes. For a green Belt and Road, two tasks are essential. First, China is accelerating its engagement with the green sectors in the participating countries, including renewable energy, green hydrogen and transitional minerals. In the past decades, Chinese projects have been based on the endowment of the host countries and seeking the most cost-effective options. As many green technologies are now matured and even cheaper than conventional ones, the endowment has changed dramatically and so has the Chinese approach. For example, in 2021 China announced it would stop financing overseas coal-fired power plants, as a result, wind and solar energy projects have become the largest project segment in the Belt and Road participating countries.

Second, the environmental performance of Chinese projects, particularly in the Global South, needs to be enhanced. It should be noted that managing the environmental footprint of large-scale infrastructure development is indeed a universal challenge. In most cases, the environmental costs or damages should not only be properly contained, but fairly distributed too among different stakeholders within the country. In this regard, a tough but implementable guideline is essential. Chinese ministries are tightening environmental standards in the past few years, whereas several industry associations are making detailed implementation handbooks for Chinese companies, particularly in the most environmentally sensitive sectors such as mining.

The initiative also aims to embed new technologies into specific project development. There are various "unorthodox" examples emerging in recent years, such as floating solar farms on the reservoirs of large dams, weather forecasting services for extreme or disaster prevention, or smarter logistic services to facilitate domestic or international trade. These new innovative and high-tech projects are rapidly transforming the landscape of the initiative beyond traditional labor-intensive infrastructure activities. Yet the term "smart" is certainly not confined to new technologies and services. It also refers to the development of human capacity. Just as Chinese telecommunication technologies have been helping many African communities to surpass the landline era and leap into the age of mobile communication in the past few decades, today Chinese technologies are also expected to assist (particularly young) people to enhance their creative capacities and productivity. Development, after all, is about facilitating learning.

Achieving a green and smart BRI 2.0 requires an even more inclusive and coordinated strategy of international cooperation. Entrepreneurship and international finance are both needed to complement Chinese State-owned enterprises and policy banks in the next stage. Organizations such as the Asian Infrastructure Investment Bank and the New Development Bank will certainly play a bigger role. Meanwhile, civil society groups and other external experts are needed to facilitate closer communication with the local communities and households, and to ensure that the transformation in the host countries is just and sustainable. An example of such an inclusive alliance is the Belt and Road Initiative International Green Development Coalition with over 150 public, private and civil society members. Meanwhile, the Global Development Initiative, which China proposed in 2021 as a parallel platform together with the Belt and Road Initiative, indicates there will be more effective coordination of Chinese development aid and international trade promotion in the coming decade.

Wang Yao is the director general of the International Institute of Green Finance of the Central University of Finance and Economics. Shen Wei is a senior research fellow of the Green BRI Center of the International Institute of Green Finance of the Central University of Finance and Economics. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.