Green Finance, Sustainable Development and the Belt and Road Initiative

Fanny M. Cheung, Ying-yi Hong, Fanny M. Cheung, Ying-yi Hong

• Publisher: Routledge
• Year: 2020
• eBook ISBN: 9781000296358
• Edition: 1
• Topic: Business
• Subtopic: Hospitality, Travel & Tourism Industry
• Index: Business

Can China's Belt and Road Initiative (BRI) promote sustainable development, alongside its primary aims of increasing commercial connectivity with China's partners?

In discussions of the BRI the focus has tended to be on the implications for infrastructure construction, connectivity, and economic diplomacy. Rather less attention has been paid to its potential impact on sustainability. The initiative has not only set principles to prevent climate change and promote sustainable development, but also pledged to align with the UN's environmental objectives. The contributors to this volume describe and evaluate the consequent policy coordination in the areas of green finance, green energy, and sustainable development in the Belt and Road regions. They examine both the challenges and opportunities of these projects, and the role that Hong Kong can play in supporting their assessment, finance, and implementation. With contributions from authors based in mainland China, Hong Kong, Australia, Qatar, the UK, and the US – with experience in corporate social responsibility, international finance, environmental policy, and international relations – this book presents a thorough and rigorous analysis of the green side of the BRI.

A valuable resource for scholars of the BRI and its many implications for China, its partners, and the development of sustainable infrastructure.

Section 1

BRI and national competitiveness

1Development in the Belt and Road Regions from a competitiveness perspective

The first lustrum review

Victor Zheng and Hua Guo

Introduction

Initiated by Chinese President Xi Jinping in 2013, the Belt and Road Initiative (BRI) – a grand strategy to promote regional and international cooperation, interaction, and development in different dimensions – celebrated its fifth anniversary in 2018. From the first day that the BRI was proposed until this moment, there has been a mixture of views, optimism, pessimism, or even observationism in different parts of the world. Some regard it as carrying economic-political-cultural threats and challenges (‘One belt, one road and many questions’ 14 May 2017; Mardell 2017); some see it as offering multidimensional development opportunities for common or mutual prosperity (‘Countries welcomed to join in mutual benefits of Belt, Road’ 4 September 2018; Liu and Dunford 2016). Although there is no dearth of reports and analyses from different views and perspectives to address the background, strategic consideration, and even China’s calculation (Cai 2017; ‘Embracing the BRI ecosystem in 2018’ 2018), little objective evaluation has been made of outcomes achieved, impacts brought, problems that have arisen, or better ways for seizing opportunities and reducing risks (Li and Schmerer 2017; Hillman 2018).

This chapter attempts to use the Global Competitiveness Index (GCI) to examine the first lustrum of overall development in the Belt and Road regions, especially to compare them with non-Belt and Road regions. Research light is also shed on exploring different sub-indices that reflect the various aspects of development and on explaining how economies or firms can best position themselves to tap various business and investment opportunities in a highly turbulent and fragile economic environment. It is hoped that some insightful policy implications or recommendations can be drawn from this research to further enhance economic development in the Belt and Road regions in the next lustrum.

Competitiveness as elixir of economic growth

Enter the 20th century; the search for sustainable growth has become an important topic not only in academia but also for policymakers, especially after two devastating world wars, the Great Depression, and the fight for independence of many former Western colonies. From Smith (1776) to Keynes (1936), and to so many scholars and policymakers, all hope to create wealth for their nations or to find the elixir for their country’s economic growth. Perfect competition, profit maximization, free market, investment and capital accumulation, regional integration, and international trade are considered key principles or theories that lay the foundation for energizing economic activities, productivities, and efficiencies (Rostow 1960; Barro and Sala-i-Martin 1995; Krugman 1995; Solow 2000; Armstrong and Taylor 2000; Siudek and Zawojska 2014).

With tremendous technological advancement and the end of the Cold War, the process of globalization has accelerated since the 1990s. Living in a highly globalized village, not only people but also economies or countries are getting closer and more interdependent. There is no individual person, firm, or economy that is like an island isolated from others and able to survive without interacting or trading with the rest of the world (Friedman 2006). A profound economic phenomenon is that whenever there is trade, basic theories such as comparative competitiveness or economy of scale are applied.

If one takes a country or economy as a basic unit, its level of competitiveness clearly determines its capability for generating income to its people. We may ask: ‘What is competitiveness?’ Porter (2005, xi) elaborated as follows:

Competitiveness is defined as the set of institutions, policies, and factors that determine the level of productivity. The level of productivity in turn, sets the sustainable level of prosperity that can be earned by an economy (and) a more competitive economy is one that is likely to grow at larger rates over the medium to long run.

Clearly, competitiveness is synonymous with productivity. If an economy has higher productivity, competitiveness is greater. A follow-up question is: ‘In what way can an economy raise its productivity?’ In his seminal work on this topic, Porter (1979, 1985, 1990) suggested that key elements such as ‘factor conditions’, ‘demand conditions’, ‘related and supporting industries’, and ‘firm strategy, structure, and rivalry’ are important in affecting an economy’s competitiveness. Later, he further elaborated each category of factors to include more detailed elements. For instance, for ‘factor conditions’, he pointed out that ‘human resources’, ‘physical resources’, ‘knowledge resource’, ‘capital resources’, and ‘infrastructure resources’ are basic. As such, one can see that competitiveness or productivity is a function of various factors like institutions, markets, and policies.

Therefore, if a country or economy improves its economic factors, it can inject development momentum. Then, its productivity can be raised. On the basis of Porter’s seminal idea, scholars around the globe have tried to use different formulas to calculate the competitiveness of an economy to better inform policymakers on how to enhance its strengths and avoid weaknesses. In 2004, because of the long-term involvement in the World Economic Forum’s research, Xavier Sala-i-Martin and Elsa Artadi developed an important index called the Global Competitiveness Index (GCI) by absorbing McArthur and Sachs’s (2001) Growth Competitiveness Index and Porter’s Business Competitiveness Index. They also included the World Economic Forum’s Executive Opinion Survey data (of leading business executives and entrepreneurs from over 100 countries) to balance the over-emphasizing of objective indicators but mostly neglecting subjective indicators, to make it more inclusive and comprehensive (McArthur and Sachs 2001; Porter 2001, 2005; Sala-i-Martin and Artadi 2004). Because this index can largely capture the overall performance of an economy, it has become highly influential since it started to be used in 2004.

Although some people are still sceptical about the development of the BRI, an irrefutable fact is that it promotes ‘five-connectivity’: policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bond. These are the bases for the strengthening of the economic growth of the countries/economies involved. Hence, one can reasonably argue that the BRI can enhance the competitiveness of the whole region. As this initiative is pushed forward, construction of infrastructure, free flow of economic factors, allocation of resources, and integration of markets are enhanced, so one can expect multidimensional potentials will be gradually released. In this chapter, we use the GCI to evaluate the economic performance in the past five years in the Belt and Road regions in comparison to the non-Belt and Road regions. We will see which part in the Belt and Road regions is doing better and will assess in which fields.

Methodology and data source

Before detailed discussion, it is necessary to sketch the methodology and data source for comparison and analyses. As mentioned, the World Economic Forum has published the GCI annually since 2004, by incorporating both MacArthur and Sachs’s (2001) and Porter’s (2001, 2005) indices under the expounding of Sala-i-Martin and Artadi (2004). As this index can reflect the growing need to take into account a more comprehensive set of factors that significantly influence an economy’s growth performance, it quickly became internationally renowned and influential.

Specifically, the GCI is calculated by a set of 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.¹ These 12 pillars are grouped into three domains according to their nature or functions: Basic Requirements, Efficiency Enhancers, and Innovation and Sophistication Factors. Basic Requirements are regarded as ‘factor-driven economies’ because they are for supporting basic economic development. They include institutions, infrastructure, macroeconomic environment, health, and primary education. Efficiency Enhancers are factors for improving economic performa...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Introduction
• Section 1 BRI and national competitiveness
• Section 2 Renminbi internationalization and green finance
• Section 3 Green energy, technology, and manufacturing
• Section 4 Green development and public-private partnership
• Index