The Rationale for the ‘Belt and Road’ Initiative

Abstract

This chapter is related to the economic rationale of the ‘Belt and Road’ initiative. One of the crucial aspects of the initiative is its broad impact on the real economy in China by fostering coordination of the developmental policy, stimulating infrastructure development, enhancing trade and investment, reinforcing financial market liberalization, and increasing cooperation between people. The BRI can be compared to the historical ‘Marshall plan,’ which was treated as a solution fostering economic growth and development in Europe after the Second World War. The chapter highlights some similarities and differences between the two initiatives. The BRI project is not only oriented on strengthening the domestic economy, but also at successfully implementing the ‘Going-Out’ strategy aimed at intensifying foreign trade and investments. The chapter also elaborates on some financial aspects of the BRI. Especially important are the means of financing the projects. Some special institutions were created, dedicated for supporting the initiative, like AIIB and Silk Road Fund, but many other ways of financing are described as well, like the private sector, Multinational Development Banks, and others. It is likely that the possibilities and the way in which the BRI will have to be funded in the future will be decisive for its success. The BRI is focused on participation of many countries in the initiative, and the cooperation is very important aspect of the project. Foreign participation enables to develop many infrastructure projects over a long distance such as railways, ports, bridges, and others, which would never be launched without the BRI. Despite many benefits, the initiatives trigger some adverse aspects as well such as the high debts, environmental problems, trade conflicts, and many others. Eventually it is essential that the BRI creates a ‘win-win’ cooperation for all participating countries.