About the author:
Maria Adele Carrai, Assistant Professor of Global China Studies, NYU Shanghai
Michele Bruni, Member of CAPP-Research Centre for the Analysis of Public Policies, Università degli Studi di Modena e Reggio Emilia; Author, China, the Belt and Road Initiative, and the Century of Great Migration
TIO: How will China adjust BRI to a post-pandemic world? And will the initiative continue to have important implications for the developing world?
Carrai: First of all, I would like to say a few words about how the pandemic impacted the Belt and Road Initiative (BRI). We saw a slowdown in many infrastructure projects all around the world, and even Tsinghua University at the beginning of the pandemic in 2020, said around 20% of BRI projects would be seriously affected by the pandemic, 40% would see a few adverse impacts, and another 30% or 40% would be somehow affected. It’s interesting because already, some projects had been stopped before, so some issues would have already started before the pandemic. In 2019, for example, Malaysia canceled a $20 billion East Coast Rail Link with China Communications Construction Company, but after the pandemic, there’s been a slowdown. Everything was hard to get, material, labor, etc.
But then according to the Secretary General of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), Peng Huagang, more than 600 projects had been completed despite the pandemic, and also new projects have been launched. And so that’s a positive sign.
But again, overall, we see a slowdown in these projects. Besides, if we look at trade, China has bounced back incredibly fast. People, the travel of people, however, remains very limited. I’m sure Dr. Bruni will have more about that. Basically, the number went down, not to zero, but to a very low number. And that’s an important indicator of the Belt and Road Initiative because one of its goals is people-to-people connectivity. And now with the current policy of zero-Covid and with travel restrictions, it’s hard for people to move. So, that’s the status and how the pandemic has affected the Belt and Road Initiative.
Moving forward, I can see three trends for the Belt and Road Initiative. One is better quality. We might see fewer, but better projects that focus more on sustainability, both socially and environmentally. This is a trend that already started before, but I think with even less money because China now has to face its domestic economic issues and an increasing unemployment rate. So, I think there would be less capital to devote to projects overseas, so the projects must be economically feasible with high quality.
The second aspect that I can see going forward, given the very insecure geopolitical environment, also with the Ukraine-Russia war, is that China has been less shy about its interests in securing the Belt and Road Initiative. Some of these ports and transport networks of the BRI might be used also to help secure the Initiative because China has a lot of interests and has invested a lot economically abroad. So, I think that might be the next move.
And then the last one is re-globalization. China is pushing very much for globalization, particularly regionalization in the Asia Pacific. During the pandemic, Chinese trade and investment in Asian region countries increased a lot. You have the RCEP, which is one of the largest trading blocs in the world. And I think the idea is that China wants to create a more integrated supply chain within the region and then expand it to the BRI. So, I think these are three important trends that will partly define the BRI moving forward.
TIO: Picking up on what you’ve said about demographic transition, Dr. Bruni, what will happen to the BRI plan in light of the demographic trend?
Bruni: Let’s start analyzing a megatrend that has been affecting the planet for almost three centuries, the Demographic Transition (DT), and its impact on China and the BRI. In essence, it is a process that brings a population from:
This process has been affecting populations across the world and China is no exception. In 1950, China was still in the first phase of the DT, a phase characterized by fast rejuvenation and increasing population growth rates which reached a record of 3% by the second half of the 1960s. Nevertheless, China successfully surpassed the first challenge posed by the DT, the education challenge. It did so by expanding in record time its physical and human educational infrastructure.
China entered and still finds itself in the second phase of the DT which is marked by the progressive decline in the population’s growth rate. During this phase, the working age population registers a rapid increase resulting in the second demographic challenge, the employment challenge. Through a pragmatic approach and effective reforms, China succeeded in creating a number of jobs necessary to face its massive increase in labor supply. Due to Covid-19’s negative impact on fertility, this phase will most probably end very soon and earlier than initially forecast.
Resolving the education and employment challenges in a timely manner was key to confronting the greatest demographic challenge of all, the poverty challenge, which China dealt with admirably.
However, there is another demographic challenge that awaits China in the following decades: a parallel increase in the number of elderly people (which will become more than 30% of the total population) and a massive decline in the working age population (WAP).
When considering the impact of the DT on not only China but all BRI partner countries, we should remember that the process starts when a country reaches a certain level of socioeconomic development. Indeed, the DT initially only affected the countries that first experienced the Industrial Revolution during the 19th century. Consequently, the world’s countries are currently experiencing different stages of the DT with the most developed countries (and very soon China as well) having reached the last phase of the DT while the poorest countries are still in the first phase.
The result is an increasing demographic polarization in which there is simultaneously a group of countries where the WAP is declining and another group where the WAP is exploding. The countries of the former group will be inevitably affected by a growing and structural shortage of labor and those of the latter by a growing and structural surplus of labor.
The 65 partner countries of the BRI, which together make up more than 60% of the world population, are characterized by a demographic polarization even more pronounced than that of the planet as a whole. Therefore, I believe when discussing the future of the BRI, it is extremely important to consider not only the very clear impact of the DT, but also the way in which China could lead and coordinate the adoption of employment, labor, and especially migration policies that could deal with the last challenge created by the DT and in so doing transform the two opposite demographic problems that will affect the partner countries into an opportunity for all and for the Initiative as a whole.
TIO: Going back to the point about the newly promoted Partnership for Global Infrastructure and Investment, Dr. Carrai, what are the differences between this new infrastructure plan and the Build Back Better World (B3W) that President Biden promoted during last year’s G7 meeting as well as the EU’s Global Gateway plan?
Carrai: Actually, there’s been a transfer because there was the Build Back Better World that was launched last year. Then this year, at the last G7 meeting, the group launched the Partnership for Global Infrastructure and Investment, committing $600 billion to invest in infrastructure globally. So, this plan is newer; it is similar to the Belt and Road in a sense, but it is not fully defined. So essentially, you can include all sorts of projects under the G7 plan. One of the biggest differences between BRI and all the plans promoted in the West is that the latter are still in words, and so we will have to see how much real substantial commitment will run through the channels and materialize abroad. Another difference is that the G7 plan is a multilateral initiative. And so, you have G7 countries plus the European Union that will contribute, and this of course creates much more problems of coordination. For example, just in Europe, coordinating the members is already very difficult. Imagine bringing in seven or so countries that have some different views and different interests.
So that is a big difference because the Belt and Road Initiative has been very effective, because it was led by state-owned enterprises, by the Chinese state, and of course, even if the Chinese state doesn’t have full control over all its economic actors abroad, it offered these packages for the construction companies, so projects are often built very quickly.
These are something that the G7 initiative doesn’t have. The new global infrastructure and investment plan is basically just another branding of the B3W. It also incorporates the Blue Dot Network that was launched a few years ago. So, what we really see is this slow trajectory from declaration to some substantial economic commitment, right? But then again, we have to see how much of the money really will go into infrastructure projects.
Another difference, at least in terms of words that this Infrastructure Partnership of G7 is committed to, reflects, in some ways, Western values of democracy. So, they want to have this rules-based infrastructure project that respects rules, human rights, high standards, that in a way, is different, or it wants to be different. It focuses even more on these aspects. But as I discussed before, BRI focuses more on the quality infrastructure. Then of course China has this diplomatic principle of sovereignty and non-interference. So, China will be probably less concerned about what kind of regime they are doing business with, because the approach is partly different. But there is now an increasing focus on quality and rules, also because it’s in the interest of China to create more stable investment with rules and regulations rather than just chaotic deals.
TIO: Let’s elaborate a little bit on that. Right now, what we’re facing after the pandemic is that every country’s economy is suffering. This includes the United States and the member states of the G7. It’s obvious that financial issues will surely be a great challenge for all these countries given the current economic situation. Other than that, what are the biggest challenges that these countries will face in terms of the actual implementation of this plan?
Carrai: Coordination. They have to create a full system for cooperation. Because as I said, China is one country and is not that difficult to coordinate, because you have all the state-owned enterprises; the bank coordinates with the construction companies, and they all have this direct relationship with the government. In the G7’s case, first of all, you already have other initiatives. It’s not clear whether all this money, for instance, for the Global Gateway of the European Union, will be merged with the $600 billion. You already committed $300 billion for infrastructures in the developing world in a way to counter the BRI. Will this be merged with the G7 partnership or not? And really, in terms of implementation, and also the cost, it’s also a challenge because if you really want to keep these standards very high, it means that you have to have labor, and you have to have people that make sure that the standards are verified.
You have to have all these manpower thinking through how to implement this partnership. But another way they can do is just basically to include just random projects here and there, like what I saw also on the White House website, the project that has been included is a bit random. So, I don’t think there’s really coordination, but that’s just America. So, I think it would be difficult to really push the project forward. And you also have to coordinate with the bank. How will this money be managed? There’s a lot to think about. It’s not impossible, if there was a political will, nothing is impossible. And I think G7 could totally become a strong competitor to the BRI. But for now, I don’t see there is a political will or the interest necessary in investing aside from competing with China: because China is doing this now and we should do this as well.
It is so important to think strategically about how you build infrastructure. What kind of economic global value chain do you create, how to integrate a region like Africa to benefit Europe, etc. And if it’s done smartly, this can have huge benefits for Europe and the G7 countries. But again, I don’t know whether there is a political will or the resource to do this.
Bruni: If I can add something, there is also the fact that in our countries, governments change very often. It doesn’t mean that what has been approved today by a government will be approved by the next one. Suppose, for instance, Trump wins the election, which I believe is not impossible, would Washington follow the same path charted by Biden or not? It is the idea that China should not win, which I think underlines all these ideas. And I think another aspect of this political cycle is that governments rarely have a long-term vision. We can’t really have a 2050 plan. This is very difficult for us. Because we fight with each other. Just look at the European Union. It’s a mess, sadly.
Now it seems like we can come together for something. But fundamentally we are different, and we still stick to our own parochial national interests and add to that the different parties within a country. So, I completely agree with Dr. Carrai. And for infrastructure, for a plan like this, you must have a long-term vision and a long-term political will.
TIO: Last time when we were talking about the BRI vs the B3W, Dr. Carrai, you said that third-party countries are now in a better position to benefit from the competition between China and the United States because they now have more options. Now, Dr. Carrai, what is your perspective on how would people in the developing countries benefit from the BRI and the G7 infrastructure plan, if it’s implemented successfully?
Carrai: Before the BRI, a lot of countries didn’t have any options. In terms of Serbia, they wanted to build this highway. The European Union has never agreed on investing in the project because it didn’t make any sense to them, right? So, China came in and built it. Sometimes you still have economic spillover and benefits, but sometimes it is not the case. That said, I think that there is a possibility to have many different options. I think the developing world can be smart about it and identify what are their needs. The problem is that sometimes there is no capacity for this because there is a lot of corruption. So maybe you have a dictator that decides to build a completely useless infrastructure project to show off power, right?
But again, China now is moving more towards quality. And I think there will be less willingness to fund this kind of project, so there is going to be much more scrutiny and coordination.
Bruni: What about corruption? Would also corruption play a big role in this, who is getting the money from?
Carrai
Of course. But there are different ways of corruption. For example, in Africa’s projects, all the procurement goes to African companies. Another thing is that the donor, for example, the European countries, would sometimes have the idea that we do good to these developing countries. But I think that the different approach of China from which the Western countries should learn is that we’re not doing charity, we are benefiting from it. It’s a win-win. We also make profit. I think that’s a different attitude we still see in the West: “This poor country, we need to help them…We need to just waste this money in the rat holes...” The US officials said this in the past, referring to Africa. I think the mindset needs to change. This money is invested for good reasons and to plan good infrastructure projects that can also benefit the donor. Again, it’s not just charity. It is an investment.
TIO: Going back to your previous view, how then can the world benefit from the way China manages its migration flows along the BRI?
Bruni: Migrations have a very significant social, economic, and political impact on both departure and arrival countries. Moreover, while there are numerous success stories, an increasing number of tragic events connected to migration have taken place across the world, from the Mediterranean Sea to the Mexican-US border, from the routes crossing the Balkans to those across the African deserts and the forests of Southeast Asia.
At the same time, demographers, economists, and politicians seem to be unaware that the world is entering a phase dominated by unprecedented demographic polarization. Just to give some numbers, according to the zero-migration scenario of the World Population Prospect just published by the United Nations Department of Economic and Social Affairs, from 2020 to 2060 the WAP of Europe will decline by 138 million (-28%), that of the U.S. by 30 million (-14%), that of Japan by 28 million (-38%), and that of China by 133 million (-24%). In the very same period, the WAP of Africa will increase by 1,096 million (+143%), that of Afghanistan by 30 million (+141%), and that of Pakistan by 117 million (+87%).
To comprehend the economic and political implications of this situation, let’s imagine that over the 2020-2045 period the potential arrival countries (including North America, Europe, China and other eight Asian countries, and the Gulf countries) are cut off from the potential departure countries by an insurmountable wall. To keep the rate of employment (i.e., the ratio of employment to WAP) constant, the first group of countries would have to take around 375 million jobs away, while those of the second group would have to create 775 million jobs. Both solutions are not realistic, albeit for different reasons.
On the one hand, it is difficult to imagine that the countries of the first group will be able to replace the decline in labor supply through the adoption of active labor policies and increases in productivity even through the wholesale adoption of AI and robotization. This would most probably result in a decline in GDP, a situation normally defined as an economic crisis. On the other hand, it is impossible that the poor countries will be able to reach the growth in production required to create an additional number of jobs coherent with the growth of their labor supply. Therefore, the countries in the first group will not be able to proceed along their path of social development and economic growth, while those of the second will see unemployment and poverty increase enormously, fueling social and political unrest that could easily spill over into neighboring countries.
This situation does however suggest a win-win solution: the organization and co-management of migration flow coherent with the quantitative and qualitative needs of arrival countries. Additionally, due to economic fairness, arrival countries should finance the education and vocational training of future migrants in departure countries.
While the WAP of the BRI will increase by 340 million in the next 25 years, it will be the sum of a decline of around 185 million in the countries in the latter phases of the DT (including China whose WAP will decline by 133 million) and an increase of 525 million in the countries in the earlier phase of the DT.
Since China has a leading role in the BRI and the 5th area of cooperation of the Initiative regards the human factor, we could imagine China taking the lead in organizing labor exchanges between the countries with a structural shortage of labor and those with a structural excess of labor based on a correct evaluation of the quantitative and qualitative needs of the labor markets of potential arrival countries. This exchange could involve not only BRI partner countries but also other African and Latin American countries as well.
In the last 30 years, the Western world has taken a myopic attitude towards migrants. Based on wrong theoretical premises and unfounded prejudices, the European Union and the U.S. have tried to stop the arrival of badly needed workers with the only result being the deaths of tens of thousands of people and the waste of taxpayers’ money.
One could hope that Beijing could carefully consider the failure of the “wall policy” and adopt a “school and training centered policy.” A more enlightened, rational, and humane approach to migration would be beneficial to China as it would allow the country to proceed along its path of socio-economic development, allow the country to better support its increasing elderly population, and enhance the country’s international image. Indeed, this policy would boost China across the Global South as the labor market and economic situations of many poor countries would improve as it would reduce excess labor supply, boost education, and increase foreign exchange reserves from remittances, all of which could help achieve a process of sustained socio-economic development.
Finally, all this could help ensure international peace and stability which are more and more being threatened by the increasing economic inequality between countries. Additionally, a more sustainable geographical distribution of the world population could be beneficial to the environment.
In conclusion, a rational approach to migration is crucial not only for China and the BRI but for the planet.
This interview was conducted by Kang Yingyue, International Communications Officer of Taihe Institute.
Please note: The above contents only represent the views of the author, and do not necessarily represent the views or positions of Taihe Institute.
This article is from the July issue of TI Observer (TIO), which is a monthly publication devoted to bringing China and the rest of the world closer together by facilitating mutual understanding and promoting exchanges of views. If you are interested in knowing more about the July issue, please click here:
http://www.taiheinstitute.org/Content/2022/07-30/1834014430.html
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